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Exponent, Inc. (EXPO)

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Exponent Inc. (EXPO)

Q4 2008 Earnings Call

February 4, 2009 4:30 pm ET

Executives

Brinlea Johnson – Director, Blueshirt Group

Michael R. Gaulke – Chairman and Chief Executive Officer

Richard Schlenker, Jr. – Chief Financial Officer and Secretary

Analysts

David Gold – Sidoti & Co., LLC

Tobey Sommer – SunTrust Robinson Humphrey

Joseph Foresi – Janney Montgomery Scott

Timothy McHugh William Blair & Company

Operator

Welcome to the Exponent Fourth Quarter 2008 Earnings Conference Call. (Operator Instructions) This conference is being recorded today on Wednesday, the 4th of February, 2009. We'll now turn the conference over to Ms. Brinlea Johnson with Blueshirt Group, please go ahead ma'am.

Presentation

Brinlea Johnson

Good afternoon ladies and gentlemen and thank you for joining us on today’s conference call to discuss Exponent's Fourth Quarter and Fiscal Year 2008 results. Please note that this call is being simultaneously Web cast 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 conditions and future financial results that involve risks and uncertainties and that Exponent’s actually results may vary materially than those discussed here.

Additional information containing 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 January 02, 2009.

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. Mike, please go ahead.

Michael Gaulke

Thank you, and thank you all for joining us today. We are pleased to report another good quarter of financial performance. For the 14 week fourth quarter of 2008, revenue before reimbursements increased 10% over the 13 week fourth quarter of last year. Bonnett income in the fourth quarter was down slightly over the same period last year when we had unusually high product sales.

Our earnings per diluted share improved to $0.34 versus $0.33 last year. Fourth quarter concluded a strong 2008 for Exponent, where revenue before reimbursements increased 13% over the prior year to $206 million. Net income in 2008 increased 14% and earnings per diluted share increased to $1.47 from $1.25 in the prior year.

Throughout 2008 we continued to selectively hire new talent and benefited from our electrical technology development, mechanics and materials and human factors practices, in addition to our health sciences group. We made significant progress in several of our strategic growth areas including health sciences consulting, product design consulting, energy consulting, and defense technology development.

In health sciences consulting, we had significant growth in our U.K. operations where we continued to expand our offering in performing risk assessment of pesticides and biocides, as well as the development of dossiers for regulatory compliance. Additionally, we are excited about several new hires for the health group in both the U.K. and U.S.

In product design consulting, we continued to expand our client portfolio of consumer electronics manufacturers, as well as the key suppliers to this industry, in particular battery technology companies. Exponent’s extensive experience in failure analysis has allowed us to develop a unique position in helping these companies solve their most challenging technical problems throughout the product life cycle.

In energy we were able to expand our capabilities in engineering management consulting. This team of consultants, combined with our subject area experts helped a major utility assess and improve their maintenance processes. We believe we are well positioned to assist utilities as they work to improve the efficiency of both plant and transmission operations.

In defense technology development we continued to expand our core consulting offering. During the fourth quarter of 2008, we started on a project to develop a vehicle mounted round penetrating radar system to detect buried improvised explosive devices. We continued our work to develop innovative application modules and personal area network technologies capable of supporting the future warrior technology integration program. We continued our support of the U.S. Army’s rapid equipping force in Iraq and Afghanistan. We also completed significant product orders for video surveillance systems and covert denial systems.

In summary, we are pleased with our results for the fourth quarter and fiscal year of 2008. We believe the progress we made during 2008 has positioned us well for long-term future growth. Considering these unusually difficult economic times we are cautiously optimistic about our prospects for 2009. I will now turn the call over to Rich for a detailed discussion of our results.

Richard Schlenker, Jr.

Thanks Mike. As Mike discussed, we were pleased to report a good fourth quarter and complete the full year with double-digit growth in revenue and net income. Before I walk through the details, I want to remind you that the fourth quarter of 2008 had 14 weeks, as compared to 13 weeks in 2007. This additional week resulted in 2008 being a 53 week year versus a 52 week year in 2007.

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