Exponent, Inc. (NASDAQ:EXPO) Q3 2023 Earnings Call Transcript

Josh Chan: Thanks for giving the color on the consumer electronics impact I guess, conceptually, if you did 8.5% growth in Q3 with $8 million headwind. And then I guess with the same amount of headwind, you’re now expecting mid-single-digit growth in Q4. So something else outside of consumer electronics slowing? Maybe could you talk about the demand outside of that sector, I guess?

Rich Schlenker: Yes. Maybe I’ll start off and Catherine can fill in. really, the difference, let’s say, there, pick your midpoint on that of a 3-point difference is really a combination of where the business was last year in the fourth quarter as what that level of hurdle was, which was pretty strong that the business was flowing out at that time, and just in the mix. I mean, last year, that headcount was very much ramping in the fourth quarter that utilization was holding together an extremely strong. So overall, I’d say we’re not seeing any material difference in other parts of the business. But Catherine, maybe you want to double-click on that.

Catherine Corrigan: Yes. No, thanks, Rich, and thanks, Josh, for that question. Look, there’s — again, I’ll refer to the portfolio. We have ebbs and flows in that when we go out and ask our folks about what they’re seeing, what’s the dispute landscape and what are the kinds of projects either flowing off or coming on. And when we do that and we compare to the fourth quarter of last year, we sort of come out where we are. But — when we look broadly just in terms of the business and what’s strong, I mean, transportation is a great example of an area that is very robust. When we think about the litigation around advanced driver assistance, we’re looking at inquiries we’re getting around electric vehicles. We look at what’s going on in Life Sciences. We look at our risk work in utilities we’re generally — I’m feeling good about where the portfolio is over the long term. We have to go with the ebbs and flows sort of on that quarter-to-quarter basis.

Josh Chan: And then on the staffing levels, given the little bit slower demand than expected, do you still expect to achieve this back to normal or desired utilization levels around the start of the year next year? Or does that time line get pushed out a little bit?

Rich Schlenker: Look, I think that we are — as we’ve made points here today, our objective is to bring our headcount in line with the demand in the environment. And as such, definitely begin to see an improvement in the utilization, we’re not complete with our plan and exact and ready to sort of give guidance around that level of granularity as it relates to the first quarter or next year, but are very much our focus is to see our utilization improve in 2024.

Operator: Next question comes from Andrew Nicholas from William Blair.

Andrew Nicholas: I want to take another shot at the consumer products commentary and maybe more so try to quantify which piece of that business. I think in your K you disclosed how much of revenue is tied to consumer or consumer products. Is this relatively widespread within what I think was kind of the 31% of mix number? Or is there a slice of this that’s down pretty drastically — just trying to kind of piece together all the moving parts here, if you could help me there.

Rich Schlenker: Yes. So it is focused primarily, it’s focused on the consumer electronics side. We’re not seeing a decline in the more general consumer products area. So it’s focused there. It’s predominantly in — or almost solely in the data collection human subject study area. So it’s very much around that, which are — and it is primarily focused around where the clients are in that product life cycle. But clearly, there’s been some impact from what clients have been going through organizationally in deciding which projects to continue and how to staff things and manage costs in the market turn. But this is consumer electronics, — the majority of it is in the data collection user study area and primarily about where they are in the product life cycle.