Exponent, Inc.

Good afternoon, everyone, and welcome to the Exponent Inc. Q3 2024 Earnings Conference Call. All participants will be in a 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 and then one using a touchtone telephone. To withdraw your questions, you may press star and two. Results to note, today's event is being recorded. At this time, I'd like to turn the floor over to Joni Constantelos, Managing Director with Riveron. Please go ahead.

Thank you. Good afternoon, ladies and gentlemen. Thank you for joining Xtonin's third 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 www.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 Slinker, Executive Vice President and Chief Financial Officer. Before we start, I'd 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 third 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. We are pleased with the alignment of our operating model with market demand, which drove 6% net income growth and expanded EBITDA margin in the third quarter. This marks the third consecutive quarter of increased utilization year over year as we continue our commitment to efficient resource management. As expected, revenues before reimbursements were flat in the quarter. Our proactive business returned to year over year growth driven by a healthy rebound in consumer electronics. But this was largely offset by persistent headwinds in the chemical sector and an exceptionally high benchmark of over 20% growth in our reactive services last year. The inherent strength of our diversified portfolio continued to provide stability in a dynamic operating environment. Turning to our engagements in more detail. Proactive engagements in the quarter were driven by increased user experience studies and product development consulting in the consumer electronics sector, as well as risk-related work in utilities. Clients in electronics turned to Exponent for our breadth of expertise across the product lifecycle, whether that is curating machine learning training data at the development stage, adding novel features to existing products, or addressing performance issues when incorporating more sustainable materials. We are capitalizing on the increased use of wearable sensors in health applications, which is driving opportunities at the intersection of electronics and life sciences. These healthcare-related applications are not only driving growth, but are also serving to diversify our portfolio and to mitigate future challenges related to product lifecycle timing. In the utilities sector, our growth was driven by asset integrity management engagements, advising our clients on the resilience of their infrastructure as they face increased regulatory scrutiny and challenges related to climate change. Activity in our reactive work continues to moderate from the exceptionally high growth in the prior year, driven by several significant litigation projects which have since been completed. Engagements in the quarter included product liability and regulatory consulting in the transportation industry, including performance and safety evaluations of advanced driver assistance technologies and battery systems. In energy, we consulted on infrastructure disputes involving wind, solar, and large-scale energy storage. During the quarter, we continued to see headwinds in the chemicals sector, consistent with the significant restructuring occurring among several major companies in this space. This resulted in some clients moderating near-term litigation budgets, as well as regulatory work. While the year-over-year comparisons in our reactive services are challenging, our leading market position endures, grounded in our deep failure analysis roots. Clients continue to seek our advice for the most complex regulatory, safety, and performance challenges across a diverse array of industries and technologies, supporting stability and long-term growth potential. Turning to our segments, Exponents engineering and other scientific sectors represented 84% of revenues before reimbursements in the third quarter. Revenues before reimbursements in this segment increased 2%, driven by demand for exponent services across the consumer electronics and utilities sectors. Exponents environmental and health segment represented 16% of revenues before reimbursements in the third quarter. Revenues before reimbursements in this segment decreased 6% due to headwinds in the chemicals and life sciences sectors. This year, we have made significant strides to strategically align our resources to market demand. We have executed this plan over the last several quarters, and it has resulted in a robust utilization rate of 75% for the first nine months of 2024. Considering this progress, we are raising our margin guidance while maintaining our revenue guidance for the full year. While our headcount was lower than anticipated in the third quarter, we will continue our focus on strategic recruitment efforts, anticipating sequential headcount growth in each quarter of 2025 to meet market demand. As we close out the year, we are diligently focused on delivering exceptional service for our clients' current needs while preparing to solve their future challenges. We continue to build upon our multidisciplinary expertise as the increasing expectations for safety, health, and the environment drive our business forward. While macroeconomic conditions are never certain, Exponent is strengthened by the breadth and depth of our increasingly diverse portfolio, which allows us to navigate challenges while pursuing future growth opportunities. Looking into next year, we remain encouraged about market trends as we continue to expand our offerings to meet the evolving needs of our clients. I'll now turn the call over to Rich to provide more detail on our third quarter results, as well as discuss our outlook for the fourth quarter and the full year 2024.