Exponent, Inc. (EXPO)
Q3 2008 Earnings Call
October 15, 2008 4:30 pm ET
Brinlea Johnson – Director, Blueshirt Group
Michael R. Gaulke - Chairman and Chief Executive Officer
Richard Schlenker, Jr. – Chief Financial Officer and Secretary
Tobey Sumner – SunTrust Robinson Humphrey
Joe Alkire – William Blair & Company
Joseph Foresi – Janey Montgomery Scott, LLC
[Brian Horrey – Arelian Partners]
Previous Statements by EXPO
» Exponent Inc. Q4 2008 Earnings Call Transcript
» Exponent Inc. Q2 2008 Earnings Call Transcript
» Exponent F1Q08 (Qtr End 3/28/08) Earnings Call Transcript
Please note that this call is being is simultaneously webcast on the Investor Relations section of the company’s corporate website at www.Exponent.com/Investors. This conference call is the property of Exponent and any taping or other reproduction is expressively prohibited without Exponent’s prior written consent.
Joining me on the call today are Mike Gaulke, Chairman and CEO, and Rich Schlenker, CFO of Exponent. Before we start I would like to remind you that the following discussion contains forward-looking statements including statements about Exponent’s market opportunities and future financial results that involve risks and uncertainties and that Exponent’s actual results may vary materially from those discussed here.
Additional information concerning factors that could cause actual results to differ from forward-looking statements can be found in Exponent’s periodic filings with the SEC including those factors discussed under the caption Factors Affecting Operating Results and Market Price of Stock in Exponent’s Form 10-Q for the quarter September 26th, 2008.
The forward-looking statements and risks stated 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’d like to turn the call over to Mike Gaulke, Chairman and CEO of Exponent.
Michael R. Gaulke
We’re pleased to report another good quarter of financial performance. For the quarter total revenues increased 20% over the same period last year and income grew 18% and earnings per share improved to $0.38. During the third quarter we saw strong performances from our electrical, thermal sciences, technology development, human factors, mechanics and materials and environmental practices in addition to our health group.
Project activity in the quarter included the electrical practice assisting a major computer manufacturer with an intellectual property matter. Our mechanics and materials and biomechanics practices worked together to help a pharmaceutical company with a potential recall of a drug delivery system. The role of our engineering practices assisted a major utility with an audit of maintenance procedures used in its gas distribution stations.
In our environmental practice we continued our work related to the Exxon-Valdes oil spill in Alaska and our health sciences group assisted a number of multinational clients with the new chemical registration and regulatory compliance requirements mandated under the EUs REACH program. During the quarter we continued the delivery of rapid development integrated surveillance systems to the US Army.
Additionally we received a new $9.3 million indefinite delivery, indefinite quantity contract for culvert denial systems which are designed to prevent insurgence from placing IADs in drainage culverts which run under roads in Iraq. The initial order under this contract is for $2.3 million of which we expect to realize approximately $750,000 of net revenue in the fourth quarter.
During the quarter we continued to hire in key areas in order to capitalize on market opportunities. FTEs increased more than 7% year-over-year. In summary we posted another strong quarter and believe we are well positioned for the future. Historically our business has not been materially impacted by major economic downturns and to date we have not seen any significant on our firm’s performance as a result of the current challenges some of our clients face.
However that doesn’t mean that we aren’t mindful of today’s overall economic environment and will continue to focus on delivering value to our clients. I will now turn the call over to Rich for a detailed discussion of our financial results.
Richard Schlenker, Jr.
As Mike discussed we were pleased with our third quarter results posting double digit revenue growth, improved utilization, higher operating margins and strong cash flow. For the third quarter of 2008 total revenues increased 20% to $58.7 million, revenue before reimbursements or net revenues as I will refer to them from here on increased 15% over the prior year to $51.8 million.
Net income for the third quarter of 2008 increased 18% to $5.9 million or $0.38 per diluted share as compared to $5 million or $0.31 per diluted share for the same period in 2007. For the third quarter of 2008 EBITDAS increased 21% to $12.4 million as compared to $10.3 million in the prior year. Our average full time equivalent employees in the third quarter were 629 an increase of 7.4% versus the third quarter of last year.
For the fourth quarter we anticipate a 3% to 4% sequential growth in FTEs as a result of a number of new hires starting in late September and early October and a good pipeline of exceptional candidates. Utilization for the third quarter improved to 68.6% from 67% in the same period of 2007. In the fourth quarter we expect utilization to be in the low 60s which is seasonally our slowest as a result of holidays and we also anticipate it will be impacted by an additional 14th week which includes New Years and the integration of our new staff.