Exponent, Inc.

Good day and welcome to the Exponent Inc.' 's fourth quarter and fiscal year 2021 financial results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joni Constantelos. Please go ahead.

Thank you, Operator. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's fourth quarter and fiscal year 2021 financial results conference call. Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website at www.exponent.com backslash investors. This conference call is the property of Exponent and any taping or other reproduction is expressly prohibited without prior written consent. Joining me on the call today are Dr. Catherine Corrigan, President and Chief Executive Officer, and Rich Schlenker, Executive Vice President and Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements including, but not limited to, exponents market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in exponents periodic SEC filings including those factors discussed under the caption Risk Factor in Exponent's most recent Form 10-Q. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Exponent assumes no obligation to update or revise them, whether as a result of new developments or otherwise. And now I will turn the call over to Dr. Katherine Corrigan, Chief Executive Officer. Katherine?

Thank you, Joni, and thank you, everyone, for joining us today. I will start off by reviewing our fourth quarter and fiscal year 2021 business performance. Rich will then provide a more detailed review of our financial results and our outlook for 2022, and we will then open the call for questions. Our results for 2021 demonstrate the strength and resiliency of Exponent's business model and our ability to grow as an organization, despite a year marked with macroeconomic challenges and uncertainty. For the full year 2021, net revenues grew 15%, while our EBITDA margin expanded over 340 basis points as compared to fiscal year 2020. We could not have realized this success without the exceptional performance of our multidisciplinary team of engineers and scientists and all of the employees that support them. Our team continues to deliver unique and innovative solutions as we broaden our client base and deepen our relationships. We saw strong demand across the business for Exponent's diverse lines of service during the year, with growth driven largely by work for the utilities, consumer electronics, consumer products, life sciences, and automotive sectors. On the proactive side, our work related to human factors and machine learning data remained robust, as did energy storage and asset integrity engagements, which are all expected to grow in 2022. On the reactive side, litigation work continued to recover and we saw increased demand related to product recalls and regulatory actions during the year. We are excited about the evolving opportunities related to energy storage, advanced vehicles, consumer electronics, and digital health, which we expect to deliver increasing impact over time as we execute our long-term strategy. Turning to our engagements in more detail, Within our proactive business, demand for machine learning studies and user experience research spanning across various end markets remains strong. Growth in this area reflects increasing demand for objective data to inform product design and also benefited from greater accessibility of human participants and a renewed ability to conduct on-site work as COVID restrictions eased over the year. In addition, we continue to assist our clients in consumer products and electronics, as the demand for virtual and augmented reality work gains steam. Overall, our proactive engagements remain diverse as we respond to clients' requests for even more curated and differentiated data to optimize product design and performance, while also pairing deep engineering and science expertise with data analytics to increase safety and mitigate risk for our clients. As we highlighted last quarter, our litigation-related work continues to gradually rebound, with indications that recovery will continue through 2022 as courts further adapt operating procedures to the coronavirus environment. Our risk and vulnerability work with utilities continued strong through the end of 2021 as we broadened the scope of our risk models, which will support continued growth. Overall, Exponent is well positioned to capture these growth tailwinds while also leveraging expansion into new end markets, such as opportunities within the pharmaceutical space, and increasing our brand recognition in the international arbitration arena. The highly competitive job market in 2021, combined with a robust demand environment, led to record high utilization rates during 2021, particularly in the back half of the year. Our diligent and disciplined execution against this backdrop resulted in exceptionally strong growth and profitability compared to the prior year that exceeded our expectations. We expect utilization rates to moderate in 2022 as we continue to invest in adding to and developing our world-class engineering and scientific team. Our long-term focus remains the same, to build upon our differentiated position to meet the evolving needs of our customers and the market. Recruitment remains a top priority for Exponent, and we have begun to see the benefits from our focused recruiting efforts over the last few quarters. At the onset of the coronavirus pandemic, we acted swiftly in the face of adversity to align our business to protect profitability. But as demand for our services increased in 2021, we accelerated our recruiting efforts in stride. As we've onboarded and developed our record number of hires, we are seeing real-time improvement in our ability to support the momentum in new engagements while maintaining our margin profile. Our world-class team is the backbone of Exponent, as we rely on them for their technical expertise to deliver unique and innovative solutions for our clients. While the market for engineering and scientific talent remains competitive, our ability to attract and retain talent is a key differentiator and driver of Exponent's reputation. We are confident that we are well positioned to build the critical mass required to support the future of Exponent. Turning to our segments, exponents engineering and other scientific segment represented 81% of our net revenues in the fourth quarter, increasing 8% in the fourth quarter and 17% during fiscal year 2021 as compared to the prior year period. Growth during the quarter and full year remained broad-based with continued strong demand for exponent services across the utilities, consumer electronics, consumer products, life sciences, and automotive sectors. Exponent's environmental and health segment represented 19% of the company's net revenues in the fourth quarter. Net revenues in this segment increased 5% for both the fourth quarter and full year 2021 compared to the same period in the prior year. Growth in this segment, which saw less impact from business restrictions in 2020, was primarily driven by Exponent's proactive safety-related work, evaluating the impacts of chemicals on human health and the environment. For over 50 years, Exponent has harnessed the power of technical excellence, objectivity, and disciplinary diversity to help unravel the complexities of innovations as they become reality. Through new and emerging opportunities in automation, electric vehicles, digital health, and more, we remain well positioned to advise our clients as society continues raising the bar on safety, health, sustainability, reliability, and performance. As we look ahead into 2022 and beyond, we will continue to leverage our core competencies as we deepen our client relationships, expand our reputation, and bring new talent to the firm. Overall, we remain optimistic about the strength of Exponent's unique market position, adaptable business model, and strong client relationships, and we are enthusiastic about the new opportunities before us in 2022. I'll now turn the call over to Rich to provide more detail on our fourth quarter and fiscal year 2021 results, as well as discuss our outlook for the first quarter and the full year 2022.