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Exponent, Inc. (EXPO)
F1Q08 Earnings Call
April 14, 2008 4:30 pm ET
Brinlea Johnson - The Blue Shirt Group
Michael R. Gaulke - Chairman of the Board, Chief Executive Officer
Richard L. Schlenker Jr. - Chief Financial Officer, Corporate Secretary
David Gold - Sidoti & Company
Tim McHugh with William Blair & Company
Previous Statements by EXPO
» Exponent Inc. Q4 2008 Earnings Call Transcript
» Exponent, Inc. Q3 2008 Earnings Call Transcript
» Exponent Inc. Q2 2008 Earnings Call Transcript
Good afternoon, ladies and gentlemen, and thank you for joining us on today’s conference call to discuss Exponent's first quarter 2008 results. Please note that this call is being simultaneously webcast on the investor relation 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 production 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 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 ended March 28, 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 would like to turn the call over to Mike Gaulke, Chairman and CEO of Exponent. Mike, please go ahead.
Michael R. Gaulke
Thank you for joining us today. We are pleased to report strong financial results for the first quarter of 2008. For the quarter, net revenues increased 15% over the same period last year, net income grew 26%, and earnings per share were $0.40.
During the quarter, we had strong performances in our electrical and semiconductors, thermal sciences, human factors, construction consulting, defense technology development, and mechanics and materials practices, in addition to our health group.
Project activity in the quarter included several of our core engineering practices working together to help a global consumer products manufacturer defend its design of a home appliance, which a major competitor claimed had infringed upon its intellectual property.
We continued to see strong demand for our product design consulting services from consumer electronics, battery technology, and medical device companies. These assignments typically include professionals from our electrical and semiconductors, thermal sciences, and mechanics and materials practices.
While Europe is still a small part of the firm’s total revenues, our health sciences group is experiencing strong growth from this geographic region. Several multi-national companies have retained us to help them comply with both EU and individual company regulations.
During the quarter, we continued the delivery of rapid deployment integrated surveillance systems and Markbots to the U.S. Army and renewed our contract with the rapid equipping force for another year of support in Iraq and Afghanistan. Additionally, we received a five-year follow-on contract from the Department of Defense to support their smart card program, as well as a contract to support the Natick Soldier Center, with the development of future force warrior technologies and demonstrations.
We started 2008 with strong hiring, increasing FTEs 7% year over year and positioning the company for future growth.
In summary, we are pleased with our results for the first quarter and remain optimistic that we are well-positioned to capture future growth opportunities. I’ll now turn the call over to Rich for a detailed discussion of our financial results.
Richard L. Schlenker Jr.
Thanks, Mike. As Mike discussed, we were pleased to begin the year with strong revenue growth and bottom line results. For the first quarter of 2008, total revenues increased 15% to $56.3 million. Revenues before reimbursements, or net revenues, as I will refer to them from here on, also increased 15% over the prior year to $52 million. Net income for the first quarter increased 26% to $6.3 million, or $0.40 per diluted share, as compared to $5.1 million or $0.31 per diluted share in 2007. This improvement is a result of leveraging our operating expenses, a slight improvement in utilization, and strong defense technology product sales. Additionally, EBITDAS increased 29% to $13.8 million in the first quarter of 2008.
Contributing to net revenue growth was a 7.6% increase in billable hours as compared to the first quarter of last year. This was the result -- this also benefited from a 7.2% increase in average full-time equivalent employees to 609 and utilization of 69.5%. We also realized an average bill rate increase of approximately 4.5% as a result of our annual pricing increase on January 1st.
Defense technology development net revenues were $3.5 million as compared to $2.2 million last year. This includes the delivery of RDISS and Markbots of $1.8 million in net revenues as compared to $500,000 last year.
Operating margin for the first quarter improved to 19.4% of net revenues from 16.4% in the same period last year. In the first quarter of 2008, our operating margin benefited from $1.3 million of incremental product sales, a slight improvement in utilization, and operating efficiencies. Operating margins also benefited from a $600,000 swing in deferred comp expense, which was offset by a $600,000 loss taken against miscellaneous income. This had no effect on the ultimate bottom line.