Q3 2013 Earnings Call
October 16, 2013 4:30 pm ET
Erica Abrams - Co-Founder and Managing Director
Paul R. Johnston - Chief Executive Officer, President and Director
Richard L. Schlenker - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Secretary
Timothy McHugh - William Blair & Company L.L.C., Research Division
Jeffrey Rossetti - Janney Montgomery Scott LLC, Research Division
Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division
Previous Statements by EXPO
» Exponent, Inc. Discusses Q3 2013 Results (Webcast)
» Exponent, Inc. (EXPO) Management Discusses Q2 2013 Results - Earnings Call Transcript
» Exponent Management Discusses Q1 2013 Results - Earnings Call Transcript
Thank you. Good afternoon, ladies and gentlemen, and thank you for joining us on today's conference call to discuss Exponent's third quarter 2013 results. Please note that this call is being 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 any other reproduction is expressly prohibited without Exponent's prior written consent.
Joining me on the call today are Paul Johnston, President and Chief Executive Officer; and Rich Schlenker, Executive Vice President and Chief Financial Officer with 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 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 captions Factors Affecting Operating Results and Market Price of Stock in Exponent's Form 10-Q for the September quarter of 2013. 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 would like to turn the call over to Paul Johnston, President and Chief Executive Officer of Exponent. Paul, please go ahead.
Paul R. Johnston
Thank you for joining us today for our discussion of Exponent's third quarter of fiscal year 2013 results.
As our press release indicates, we posted another solid quarter of revenue and EBITDA performance, which were better than expected. Net revenues increased 5% to $70.1 million. Total revenues increased 3% to $75.2 million. Net income increased 8% to $11.1 million or $0.79 per diluted share. EBITDA also increased 8% to $18.8 million.
We continue to see high single-digit growth from our underlying business, which was partially offset by a reduction in the work from our major assignments, as well as lower revenues from our defense business. However, the tail-off in the work from our major assignments was slower than anticipated, which resulted in higher-than-expected revenue utilization and profitability for the quarter.
During the quarter, we had notable performances in our polymer sciences, mechanical engineering, biomedical engineering, construction consulting and chemical regulation and food safety practices. We continue to see strong demand for our engineering and scientific consulting services to answer the question, "What really happened?" when our clients are faced with a litigation matter, an insurance claim, a potential product recall or a regulatory enforcement.
We are also seeing more demand from clients who want in-depth knowledge so they can make their products and processes more reliable. Again, we are pleased to have delivered a solid third quarter.
Now Rich will provide a more detailed review of our third quarter financial performance.
Richard L. Schlenker
Thanks, Paul. We're pleased to have delivered another quarter of good financial results. Revenues before reimbursements, or net revenues as I will refer to them from here on, were $70.1 million, up 5.1% from $66.7 million in the same period of 2012. Total revenues for the quarter were $75.2 million, up 2.6% as compared to $73.3 million 1 year ago. Net income for the third quarter was $11.1 million or $0.79 per share as compared to $10.2 million or $0.72 per share 1 year ago.
Our diluted share count decreased to 14 million from 14.2 million in the same period last year as a result of our ongoing repurchase program. EBITDA for the third quarter was $18.8 million, an increase of 8% over $17.4 million 1 year ago. EBITDA margin for the quarter was 26.8% of net revenue, which is an increase of 75 basis points over the same period in 2012.
In our Defense Technology Development business, net revenues for the quarter were $2.9 million, which is down from $4.4 million in the third quarter of last year. Defense product sales were 0 in the third quarter and are expected to be the same in the fourth quarter. As a reminder, this will result in a $2 million lower net revenues from product sales as last year had $2 million and this year, again, we're expecting it to be 0.
Utilization in the third quarter was 72% as compared to 74% in the third quarter of 2012, reflecting a step-down in a few major assignments and a decline in our defense business. Year-to-date, utilization is 73%. We expect 2013 full year utilization to be approximately 71%, and the fourth quarter to be in the mid-60s as a result of our seasonally low fourth quarter.