Exponent, Inc.

Good day, and welcome to the Exponent's second quarter earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Joni Constantelos with Investor Relations. Please go ahead.

Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's second quarter 2023 financial results conference call. Please note that this call will 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 Lenker, 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 EXPONENT's 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 second quarter 2023 business performance. Rich will then try to provide a more detailed review of our financial results and outlook, and we will then open the call for questions. We delivered solid second quarter results, growing net revenues by 10% and expanding earnings per diluted share. We continue to demonstrate the strength of our diverse and ever-evolving services portfolio, which anticipates and adapts to our clients' critical needs throughout their product life cycles. Growth in the quarter was driven by robust demand for our reactive offerings. The proactive side saw increased demand in the chemicals and life sciences sectors, offset by some moderation in the electronics sector. Overall, our strategic mix of capabilities across industries and the product lifecycle performed well despite specific headwinds that I will discuss in a moment. Turning to our engagements in more detail, within our reactive services, we saw strong increased demand for our disputes and litigation-related work, with particular strength in the transportation, construction, and consumer products sectors. On the automotive side, we are fielding more and more questions about the design and performance of advanced driver assistance and battery systems in accident scenarios as these technologies become more complex and more prevalent in the fleet and the decisions made by artificial intelligence algorithms are challenged. We also saw increased product safety and recall related engagements as clients leveraged our expert insights to understand the root cause of issues with their products. The proactive side benefited from increased demand in the chemicals and life science sectors, driven in large part by regulatory engagements. This was offset by some moderation in the electronics industry, associated with the timing of client product releases, coupled with the disruption caused by the actions the industry has taken to reduce staff. These factors impacted data gathering activities and human subject research, as well as product development consulting. as products moved through their life cycles out of the development stage and into the refinement stage. While we expect these trends within electronics to persist over the next few quarters, we are optimistic about the longer term opportunities in this sector. We are well positioned given the increasing role of artificial intelligence in product innovation and performance with our capabilities in curating data to drive AI algorithms as well as our experience analyzing the physical consequences of AI-driven decisions. Our diverse portfolio of proactive offerings positions us well to capitalize on the complexities associated with next-generation designs and increasing expectations around safety, health, and the environment. Improved retention, as well as our accelerated recruiting efforts over the last year, drove a 15% increase in headcount year over year, which reflects the strength of our employee value proposition. While these investments in our talent are critical for our future growth, we remain diligently focused on aligning our resources with the growth of the business and future opportunities. Rich will share some additional color on our expected headcount growth in a few moments. Turning to our segments, exponents engineering and other scientific segment represented 83% of our net revenues in the second quarter. increasing 10% in the second quarter and 11% in the first half compared to the prior year. Growth in the quarter was driven by strong demand for exponents services across the transportation and construction sectors. Exponents environmental and health segment represented 17% of the company's net revenues in the second quarter. Net revenues in this segment increased 10% in the quarter and 4% in the first half compared to the prior year. Growth was driven by regulatory consulting around the impacts of chemicals on human health and the environment, as well as activity in the life sciences sector. As we move into the back half of the year, we remain focused on strengthening our client relationships, managing resources in line with the growth of the business, and meeting the dynamic needs of our clients. Overall, I am pleased to see the power of our diverse portfolio delivering solid growth through economic cycles as we address our clients' most complex challenges. I'll now turn the call over to Rich to provide more detail on our second quarter results, as well as discuss our outlook for the third quarter and the full year 2023.