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Exponent Inc.$59.07($.32)(.54%)

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 Exponent Reports Fourth Quarter and Fiscal Year 2018 Financial Results
   Thursday, January 31, 2019 4:05:00 PM ET

MENLO PARK, Calif., Jan. 31, 2019 (GLOBE NEWSWIRE) -- Exponent, Inc. (Nasdaq:EXPO) today reported financial results for the fourth quarter and fiscal year ended December 28, 2018.

“2018 was another year of solid growth for Exponent. We posted high-single digit revenue growth, expanded our EBITDA1 margin and generated strong operating cash flow. We continued to see increased demand from several industries and geographies.  Exponent had strong demand for design consulting services as the consumer electronics industry continued to innovate and face manufacturability challenges.  Increasingly clients from the energy, mining and infrastructure sectors with technical and construction management issues on large capital projects engaged our inter-disciplinary teams to evaluate these claims. Our highly credentialed scientists were engaged to assess the increasing concerns regarding the impact of chemicals on human health and the environment. We expect continued strength in these areas as we move through 2019,” commented Dr. Catherine Corrigan, President and Chief Executive Officer.



“Our results reflect strong performance and positive momentum in several business areas, partially offset by a challenging year-over-year comparison due to the large human factors project, which concluded during the third quarter of 2018. While we do not anticipate another project of this scale, we expanded our human factors practice during the year and are currently engaged with a variety of clients in the consumer products industry. We have a unique market position, a diversified portfolio of clients and highly skilled professionals from multiple disciplines that will enable us to solve complex and critical issues on a global basis in 2019 and beyond,” continued Dr. Corrigan.

“Consistent with our ongoing commitment to return value to shareholders, we are pleased to announce the authorization of an additional $75 million in share repurchases and an increase in our quarterly cash dividend to $0.16,” stated Dr. Corrigan.

Fourth Quarter Financial Results

Total revenues in the fourth quarter of 2018 grew 4% to $92.1 million, as compared to $88.3 million in the same quarter of 2017. Revenues before reimbursements increased 3% to $85.3 million as compared to $82.7 million in the same period one year ago.

Net income was $16.0 million, or $0.30 per diluted share, in the fourth quarter of 2018, as compared to a net loss of $3.7 million, or $0.07 per diluted share, in the same period of 2017. During the fourth quarter of 2017, the Company recorded a one-time income tax expense of $16.5 million related to the new Tax Legislation2. Excluding this expense and recognizing the lower corporate tax rate, net income increased 25% in the fourth quarter of 2018, as compared to $12.8 million or $0.24 per diluted share for the same period last year.

EBITDA1 increased 4% to $22.6 million, as compared to $21.8 million in the fourth quarter of 2017.

Fiscal Year 2018 Financial Results

For fiscal year 2018, total revenues increased 9% to $379.5 million, as compared to $347.8 million in 2017. Revenues before reimbursements increased 8% to $354.6 million, as compared to $329.7 million in the prior year.

Net income for fiscal year 2018 was $72.3 million, or $1.33 per diluted share, as compared to $41.3 million, or $0.77 per diluted share, in 2017. For comparison purposes, excluding the one-time income tax expense of $16.5 million related to the new Tax Legislation2 recorded in the fourth quarter of 2017 and recognizing the lower corporate tax rate, fiscal year 2018 net income increased 25% as compared to $57.8 or $1.07 per diluted share in fiscal year 2017. As a reminder, in the first quarter of 2016, Exponent adopted a new accounting standard3 for the classification of tax adjustments associated with share-based awards. The tax benefit realized for fiscal year 2018 was $4.2 million, or $0.08 per diluted share, as compared to $6.5 million or $0.12 per diluted share in 2017.

EBITDA1 in fiscal year 2018 increased 11% to $96.9 million, as compared to $87.5 million the prior year.

For fiscal year 2018, net cash generated from operating activities was $91.2 million. During the year, Exponent paid $27.2 million in dividends, repurchased $27.9 million of common stock and ended the year with $208.6 million in cash, cash equivalents and short-term investments.  

In a separate press release today, Exponent announced that its Board of Directors has authorized an additional $75 million in share repurchases, increasing the Company’s current authorization to approximately $92.5 million. The Company also announced an increase in its quarterly cash dividend from $0.13 to $0.16 to be distributed on March 22, 2019 and reiterated its intent to continue to pay quarterly dividends. 

Business Overview

Exponent’s engineering and other scientific segment represented approximately 80% of the Company’s fourth quarter and 2018 net revenues. Net revenues grew 4% in the fourth quarter and 8% in fiscal year 2018 as compared to 2017. For the quarter and year, this segment had noteworthy performances in its human factors, material science, thermal science, polymer science and mechanical engineering practices. The firm maintained its leadership in failure analysis as it was called upon throughout the year to determine what happened when a disaster occurs.  These events range from structural failures on major infrastructure to functional failures on nanoscale components.  Exponent also expanded its reputation as the go-to consultants for advice on creating more reliable products, especially in the area of battery technology. 

Exponent’s environmental and health segment represented approximately 20% of the Company’s fourth quarter and 2018 net revenues. Net revenues in this segment were approximately flat in the fourth quarter and grew 4% in fiscal year 2018, as compared to 2017. Growth for the year was driven by work in the chemical regulation and food safety practice, as the world focuses on human health and the environment.

Business Outlook

“Our outlook for the full year 2019 reflects positive momentum in a number of business areas, partially offset by a challenging year-over-year comparison due to the conclusion of the large human factors project. We expect revenues before reimbursements for the full year 2019 to grow in the mid- to high-single digits as compared to 2018. 2019 EBITDA1 margin is expected to decline by approximately 75 to 125 basis points, as compared to 2018,” commented Richard Schlenker, Executive Vice President and Chief Financial Officer.

“As expectations regarding human health, safety and the environment continue to grow in a world of increasing technological complexity, clients turn to Exponent for solutions. Our ability to attract and retain top engineers and scientists allows us to leverage our vast historical knowledge, and at the same time serve as thought leaders for the newest technologies.  These market drivers and our differentiated offering of elite inter-disciplinary teams has allowed us to grow through a variety of economic cycles during our 50-plus year operating history. Exponent is uniquely positioned to advise clients with increasingly complex needs across industries and geographies,” concluded Dr. Corrigan.

Today's Conference Call Information

Exponent will discuss its financial results in more detail on a conference call today, Thursday, January 31, 2019, starting at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time. The audio of the conference call is available by dialing (888) 394-8218 or (323) 701-0225. A live webcast of the call will be available on the Investor Relations section of the Company's website at www.exponent.com/investors . For those unable to listen to the live webcast, a replay of the call will also be available on the Exponent website, or by dialing (888) 203­1112 or (719) 457-0820 and entering passcode 1767771#.

Footnotes

1 EBITDA is a non-­GAAP financial measure defined by the Company as net income before income taxes, interest income, depreciation and amortization. EBITDAS is a non-­GAAP financial measure defined by the Company as EBITDA before stock-­based compensation. The Company regards EBITDA and EBITDAS as useful measures of operating performance and cash flow to complement operating income, net income and other GAAP financial performance measures. Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present and future operating results. Generally, a non­-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. These measures, however, should be considered in addition to, and not as a substitute or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP.  A reconciliation of the measures to GAAP is set forth below.

2 The Tax Cuts and Jobs Act (Tax Legislation) was enacted on December 22, 2017 and lowers U.S. corporate income tax rates as of January 1, 2018, implements a territorial tax system and imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries.

3 FASB Accounting Standard Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting, March 30, 2016.

About Exponent

Exponent is an engineering and scientific consulting firm providing solutions to complex problems. Exponent's inter-disciplinary organization of scientists, physicians, engineers, and business consultants draws from more than 90 technical disciplines to solve the most pressing and complicated challenges facing stakeholders today. The firm leverages over 50 years of experience in analyzing accidents and failures to advise clients as they innovate their technologically complex products and processes, ensure the safety and health of their users, and address the challenges of sustainability.

Exponent may be reached at (888) 656­EXPO, info@exponent.com , or www.exponent.com .

Forward Looking Statements

This news release contains, and incorporates by reference, certain "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995, and the rules promulgated pursuant to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended) that are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company's management. When used in this document and in the documents incorporated herein by reference, the words “intend,” "anticipate," "believe," "estimate," "expect" and similar expressions, as they relate to the Company or its management, identify such forward-­looking statements. Such statements reflect the current views of the Company or its management with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual results, performance, or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Factors that could cause or contribute to such material differences include the possibility that the demand for our services may decline as a result of changes in general and industry specific economic conditions, the timing of engagements for our services, the effects of competitive services and pricing, the absence of backlog related to our business, our ability to attract and retain key employees, the effect of tort reform and government regulation on our business, and liabilities resulting from claims made against us. Additional risks and uncertainties are discussed in our Annual Report on Form 10­K under the heading "Risk Factors" and elsewhere in the report. The inclusion of such forward-looking information should not be regarded as a representation by the Company or any other person that the future events, plans, or expectations contemplated by the Company will be achieved. The Company undertakes no obligation to release publicly any updates or revisions to any such forward-looking statements.

Source: Exponent, Inc.

EXPONENT, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
For the Quarters Ended December 28, 2018 and December 29, 2017 
(unaudited) 
(in thousands, except per share data) 
               
           
        Quarters Ended   Years Ended  
        December 28,   December 29,   December 28,   December 29,  
         2018     2017     2018     2017  
               
Revenues            
 Revenues before reimbursements $  85,269  $  82,718  $  354,639  $  329,664 
 Reimbursements      6,874     5,564     24,884     18,135 
  Revenues      92,143     88,282     379,523     347,799 
               
Operating expenses           
 Compensation and related expenses     46,376     52,842     215,052     210,289 
 Other operating expenses     7,742     7,578     30,599     29,544 
 Reimbursable expenses     6,874     5,564     24,884     18,135 
 General and administrative expenses     4,365     4,503     17,532     17,780 
          65,357     70,487     288,067     275,748 
  Operating income      26,786     17,795     91,456     72,051 
               
Other income, net            
 Interest income, net     938     422     2,751     1,294 
 Miscellaneous income, net    (5,765)    2,504     (890)    9,164 
          (4,827)    2,926     1,861     10,458 
  Income before income taxes    21,959     20,721     93,317     82,509 
Income taxes       5,923     24,426     21,063     41,204 
               
  Net income (loss)  $  16,036  $  (3,705) $  72,254  $  41,305 
               
Net income per share:          
 Basic    $  0.30  $  (0.07) $  1.37  $  0.78 
 Diluted    $  0.30  $  (0.07) $  1.33  $  0.77 
               
Shares used in per share computations:         
 Basic       52,839     52,726     52,906     52,724 
 Diluted       54,119     52,726     54,168     53,972 
               

 

EXPONENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, 2018 and December 29, 2017
(unaudited)
(in thousands)
        
        
      December 28,   December 29, 
       2018     2017  
   Assets    
Current assets:     
 Cash and cash equivalents $  127,059  $  124,794 
 Short-term investments    81,495     71,604 
 Accounts receivable, net    105,814     110,100 
 Prepaid expenses and other assets    12,244     9,011 
  Total current assets    326,612     315,509 
Property, equipment and leasehold improvements, net    46,103     35,014 
Goodwill     8,607     8,607 
Other assets     87,614     80,459 
     $  468,936  $  439,589 
        
   Liabilities and Stockholders' Equity    
Current liabilities:    
 Accounts payable and accrued liabilities $  12,283  $  14,741 
 Accrued payroll and employee benefits    76,855     70,064 
 Deferred revenues    9,166     8,302 
  Total current liabilities    98,304     93,107 
Other liabilities     55,256     56,102 
Deferred rent     1,467     1,292 
  Total liabilities    155,027     150,501 
        
Stockholders' equity:    
 Common stock    66     66 
 Additional paid-in capital    227,283     210,230 
 Accumulated other comprehensive (loss) income    (2,853)    (2,029)
 Retained earnings    342,024     303,990 
 Treasury stock, at cost    (252,611)    (223,169)
   Total stockholders' equity    313,909     289,088 
  $  468,936  $  439,589 
     

 

EXPONENT, INC. 
Tax Legislation (1) 
For the Quarter and Year Ended December 29, 2017
(unaudited)
(in thousands)
         
       
      Quarter Ended   Year Ended  
      December 29,   December 29,  
       2017     2017  
         
Net Income (loss)  $  (3,705) $  41,305 
 Impact of Tax Legislation     16,507     16,507 
  Net Income excluding the impact of      
  of Tax Legislation (1)  $  12,802  $  57,812 
         
 Divided by average diluted shares used in the       
 calculation of diluted earnings (excluding the       
 impact of Tax Legislation) per share     54,002     53,972 
         
  Diluted earnings per share excluding      
  the impact of Tax Legislation (1)  $  0.24  $  1.07 
         
Diluted shares used in the calculation of diluted      
earnings per share     52,726     53,972 
 Impact of Tax Legislation     1,276     - 
         
  Diluted shares used in the  calculation      
  of diluted earnings per share excluding the     
  impact of Tax Legislation (1)     54,002     53,972 
         
         
         
(1) The Tax Cuts and Jobs Act (Tax Legislation) was enacted on December 22, 2017 and lowers U.S. corporate income tax rates as of January 1, 2018, implements a territorial tax system and imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The estimated impact of Tax Legislation to the Company was an increase in income tax expense of $16,507,000 in the fourth quarter of 2017.The Company has significant domestic deferred tax assets primarily associated with its deferred compensation plan and stock-based compensation program, which were previously valued at the federal corporate tax rate of 35%.  The Company’s deferred tax assets were re-measured at the lower enacted corporate tax rate of 21% which contributed $15,137,000 to the estimated increase in income tax expense associated with the Tax Legislation.  The Company also has foreign earnings that were subject to the mandatory repatriation tax.  The total mandatory repatriation tax, net of the benefit of the Company’s foreign tax credits, contributed $1,370,000 to the estimated increase in income tax expense associated with the Tax Legislation.  Management believes that presenting the Company’s results excluding Tax Legislation is meaningful as excluding this item increases the comparability of period-to-period results.  Net income and diluted earnings per share excluding the impact of Tax Legislation are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies.
         

 

EXPONENT, INC. 
EBITDA and EBITDAS (2) 
For the Quarters Ended December 28, 2018 and December 29, 2017
(unaudited)
(in thousands)
              
          
        Quarters Ended   Years Ended 
        December 28,   December 29,   December 28,   December 29, 
         2018     2017     2018     2017  
              
Net Income (loss)   $  16,036  $  (3,705) $  72,254  $  41,305 
              
Add back (subtract):          
              
 Income taxes      5,923     24,426     21,063     41,204 
 Interest income, net     (938)    (422)    (2,751)    (1,294)
 Depreciation and amortization    1,582     1,523     6,292     6,285 
              
  EBITDA (2)      22,603     21,822     96,858     87,500 
              
 Stock-based compensation    3,388     3,427     16,993     16,155 
              
  EBITDAS (2)  $  25,991  $  25,249  $  113,851  $  103,655 
              
              
              
(2) EBITDA is a non-GAAP financial measure defined by the Company as net income before income taxes, interest income, depreciation and amortization.  EBITDAS is a non-GAAP financial measure defined by the Company as EBITDA before stock-based compensation.  The Company regards EBITDA and EBITDAS as useful measures of operating performance and cash flow to complement operating income, net income and other GAAP financial performance measures.  Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present and future operating results.  Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.  These measures, however, should be considered in addition to, and not as a substitute or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP.
              

 

exponent.jpg

Source: Exponent, Inc.


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