Exponent, Inc.

Good day, and welcome to the Exponent Incorporated Quarter 1 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Joni Constantelos. Please go ahead.

Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's first quarter 2024 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 investors.exponent.com. 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. Katherine Corrigan, President and Chief Executive Officer, and Rich Flanker, 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, Exponent's 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 EXCELINT 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 first quarter 2024 business performance. Rich will then provide a more detailed review of our financial results and outlook, and we will then open the call for questions. Exponent's unparalleled reputation and decades-long expertise in failure analysis drove better-than-expected results in the first quarter. Despite a slow start, our reactive business grew in the mid-teens, driven by robust failure analysis and dispute-related work spanning a wide spectrum of industries. Partway through the quarter, we experienced accelerated activity across a number of substantial engagements, contributing to our strong results in the quarter. These matters required active, real-time regulatory and safety-related insights to inform decision-making, and our exceptionally well-qualified team surged to meet time-sensitive regulatory enforcement deadlines. While many of these matters will continue in the second quarter, we do not expect the same level of activity. In our proactive business, excluding consumer electronics, which continues to experience cyclical impacts, we achieved year-over-year growth driven by strong activity in the transportation and utilities sectors. Turning to our engagements in more detail, in our reactive services within transportation, we continue to see robust activity in automotive product liability and regulatory matters. For example, evaluating the performance and safety implications of advanced driver assistance technologies and battery systems. In life sciences, our experts are advising clients on the root causes of safety concerns related to medical devices and diagnostics, leveraging multidisciplinary approaches that include expertise in material science, manufacturing, human factors, and health sciences. In the energy industry, our failure analysis expertise continues to be leveraged across a range of projects from traditional oil and gas to renewables. More broadly, we are playing an increasing role in helping clients navigate the challenges of an ongoing and ever-evolving energy transition. Clients around the world rely on exponent in renewables disputes involving wind, solar, and large-scale energy storage, including technology performance challenges and life expectancy of infrastructure investments. During the quarter, we did see ongoing budget constraints with some clients, particularly in the chemical sector. We continue to see some of these clients causing litigation work in the near term. However, we did see an uptick in momentum during the quarter, and we expect that activity to return to normalized levels. Within our proactive services, we saw strong demand in transportation, evaluating vehicle emissions issues, as well as in the utilities sector, advising clients on asset integrity and risk mitigation. We continue to see strong demand in the chemical sector for our regulatory work, evaluating the impacts of chemicals on human health and the environment. Headwinds in the consumer electronics sector persisted due in part to the timing of product life cycles, as well as broader impacts in the industry. And as a result, human subject research engagements decreased year over year. Excluding consumer electronics, proactive revenues were up low single digits in the quarter. Our ongoing efforts to align resources with demand, coupled with our strategic investments in the growth areas of the business, contributed to 75% utilization in the first quarter. I am grateful to our world-class team, which responded with agility to the surge in client demand that we experienced in the quarter. As always, we will continue to closely monitor the market and focus on developing our top-tier talent while broadening our capabilities and continuously adapting to an evolving landscape. Turning to our segments, exponents engineering and other scientific segments represented 84% of revenues before reimbursements in the first quarter. Revenues before reimbursements in this segment increased 8% for the first quarter, driven by demand for exponent services across the energy, vehicle, and medical device sectors. Exponents environmental and health segment represented 16% of revenues before reimbursements in the first quarter. Revenues before reimbursements in this segment increased 1% for the first quarter. Work in this sector was primarily driven by regulatory engagements for the chemicals industry. Looking ahead, we have raised our revenue and margin expectations for the full year 2024. However, we still face consumer electronics and macro headwinds, as well as a high hurdle rate for year-over-year comparisons due to the significant growth of our reactive business in 2023. Over the last few quarters, we've demonstrated the commitment and agility needed to adapt to challenging dynamics in both our consulting and talent marketplaces. Our first quarter results reflect this agility as well as the strength of our fundamental market drivers. In this dynamic environment, we maintain an emphasis on advancing new business development, strategically investing in growth opportunities, while aligning our resources and costs with anticipated demand. As we look to the future, our value proposition is as strong as ever, and I am confident in our ability to accelerate and drive long-term revenue growth in the high single to low double digits. I'll now turn the call over to Rich to provide more detail on our first quarter results as well as discuss our outlook for the second quarter and the full year 2024.