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Date

Thursday, April 30, 2026 at 4:30 p.m. ET

Call participants

  • President and Chief Executive Officer — Catherine Ford Corrigan
  • Executive Vice President and Chief Financial Officer — Richard L. Schlenker
  • Incoming President — John Pye
  • Incoming Chief Financial Officer — Eric Anderson
  • Vice President, Investor Relations and Corporate Secretary — Joni Konstantelos

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Takeaways

  • Total Revenues -- $166.3 million, representing a 14% increase.
  • Net Revenues (Before Reimbursements) -- $151.8 million, up 10%.
  • Net Income -- $29.6 million, growing 11%.
  • Earnings Per Diluted Share -- 59¢, increasing 13% from 52¢.
  • EBITDA -- $43.1 million, up 15%, with a margin of 28.4% of net revenues versus 27.3% a year ago.
  • Billable Hours -- Approximately 399,000, an increase of 6%.
  • Average Technical Full-Time Equivalent Employees -- 1,013, up 5% through recruiting and retention efforts.
  • Utilization Rate -- 76%, up from 75%.
  • Realized Rate Increase -- Approximately 4%.
  • Compensation Expense (Adjusted for Deferred Comp) -- Up 9%, with stock-based compensation at $9.1 million compared to $8.2 million.
  • Other Operating Expenses -- $12.8 million, up 6%, driven by corporate infrastructure investments; includes $2.5 million in depreciation and amortization.
  • G&A Expenses -- $6.2 million, a 24% increase due to higher travel, meals, business development, recruiting, and people development activities.
  • Interest Income -- $1.7 million, decreased due to lower cash and lower interest rates.
  • Dividend Payments -- $16.6 million distributed to shareholders.
  • Share Repurchases -- $79 million of common stock repurchased at an average price of $68.09; the board approved an additional $50 million to the repurchase program, resulting in $67.7 million available as of April 3, 2026.
  • Tax Rate (Consolidated) -- 30.2%, up from 29.4%; negative tax impact of $900,000 from share-based awards compared to $500,000 previously.
  • Engineering and Other Scientific Segment -- 85% of net revenues, with segment revenues up 12%; main growth drivers were user research in consumer electronics, risk management in utilities, and reactive energy and life science engagements.
  • Environmental and Health Segment -- 15% of net revenues, with segment revenues up 2%, driven by regulatory consulting in chemicals.
  • Outlook: Q2 2026 -- Net revenues expected to grow in the high-single digits, EBITDA margin to be 27%–27.8% of net revenues; utilization forecasted at 72%–73%; realized rate increase guidance of 3%–3.5%.
  • Outlook: Full Year 2026 -- Net revenues expected to grow in the high-single digits, EBITDA margin guidance updated to 27.6%–28.1% of net revenues; technical FTEs expected to increase about 5%.
  • Stock-Based Compensation Guidance -- Expected to be $27.9 million–$28.4 million for 2026.
  • Capital Expenditures Guidance -- Forecasted at $12 million–$14 million.
  • Leadership Transition Announced -- John Pye to become president and Eric Anderson chief financial officer effective May 1, with Richard L. Schlenker continuing as executive vice president.
  • Board-Approved Share Buyback Expansion -- $50 million added, with $67.7 million total authorized as of April 3, 2026.

Summary

Exponent (EXPO +1.07%) reported double-digit revenue and EBITDA growth, attributing gains to increased demand for specialized consulting across consumer electronics, utilities, and life sciences, especially as artificial intelligence and infrastructure needs grew more complex. Both business segments achieved year-over-year growth, with the engineering and other scientific division outpacing the environmental and health segment in magnitude and breadth of projects. Management maintained high-single-digit growth and EBITDA guidance, with headcount and realized rate increases projected to support sustained expansion through 2026. Leadership transitions were positioned as strategic responses to accelerating market trends and technical complexities in client engagements.

  • Management highlighted a diversified project portfolio, with no individual engagement exceeding the materiality of historical large projects, and noted that approximately 20% of engagements generate 80% of revenue.
  • Segment commentary cited increasing complexity in automotive, consumer electronics, and chemical regulatory arenas due to AI, battery energy storage, and novel product architectures.
  • The company revealed that proactive and reactive opportunities in chemicals, utilities, and energy—driven by regulatory changes, infrastructure investment, and AI implementation—are expanding addressable markets.
  • Share repurchase activity was elevated in the prior four quarters, totaling $177 million or nearly 5% of shares, with additional buyback authorization reflecting management conviction.
  • Recruiting efforts target candidates from advanced academic and multidisciplinary backgrounds, with steady acceptance rates supporting guidance for continued technical hiring.

Industry glossary

  • Net Revenues (Before Reimbursements): Revenue after deducting client-reimbursable expenses, reflecting consulting services' true economic value.
  • Technical Full-Time Equivalent Employees (FTEs): Metric representing the average number of consulting staff dedicated full-time to client projects.
  • Deferred Compensation: Non-cash compensation whose gains or losses are recorded for financial reporting but do not affect operating income or net income due to offsetting entries.

Full Conference Call Transcript

Joni Konstantelos: Thank you, operator. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent, Inc.'s first quarter 2026 financial results conference call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at investors.exponent.com. This conference call is the property of Exponent, Inc. and any taping or other reproduction is expressly prohibited without prior written consent. Joining me on the call today are Catherine Ford Corrigan, president and chief executive officer; Richard L. Schlenker, executive vice president and chief financial officer; John Pye, incoming president; and Eric Anderson, incoming chief financial officer.

Before we start, I would like to remind you that the following discussion contains forward-looking statements, including, but not limited to, Exponent, Inc.'s market opportunities and future financial results, that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in Exponent, Inc.'s periodic SEC filings, including those factors discussed under the caption Risk Factors in Exponent, Inc.'s most recent Form 10-K. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Exponent, Inc. assumes no obligation to update or revise them whether as a result of new developments or otherwise.

I will now turn the call over to Catherine Ford Corrigan. Catherine?

Catherine Ford Corrigan: Thank you, Joni, and thank you everyone for joining us today. I will start off by reviewing our first quarter 2026 business performance and strategic positioning. Richard will then provide a more detailed review of our financial results and outlook, and we will then open the call for questions. Exponent, Inc. delivered double-digit revenue growth in the first quarter, reflecting the strength of our multidisciplinary portfolio and demand for our specialized expertise across a range of industries. Growth was driven by user research studies for consumer electronics clients who are integrating artificial intelligence into their devices.

We are continuing to see diversification of this work not only across our client base, but also across the breadth of products and underlying technologies we support. Growth was also driven by risk management work for utility clients evaluating asset performance under extreme weather conditions. Reactive engagements also contributed to our growth, with increased dispute-related and failure analysis demand across construction projects, energy facilities, and medical devices. We saw increased activity from both domestic and international clients related to complex construction challenges and disputes. In energy, demand increased for work involving critical facilities where reliability, performance, and the consequences of failure are paramount. We also saw increased activity involving medical devices with scrutiny of product safety, quality, and performance.

Trends in energy demand, infrastructure risk, and technological innovation continue to support demand for our deep technical capabilities, reinforcing Exponent, Inc.'s essential role in helping clients navigate complex, high-stakes decisions. The integration of AI and other advanced technologies into performance-critical and physical systems, combined with the rising expectations for safety and reliability, is increasing reliance on Exponent, Inc.'s specialized expertise, both proactively and in response to failures. This is evident across a wide range of applications from automated vehicles that must interpret complex real-world environments to avoid collisions, to health-related devices such as automated insulin delivery systems where performance directly affects patient safety, to utility systems using AI to anticipate asset risk and prevent wildfires and other high-consequence hazards.

Engagements like these underscore the growing sophistication and interconnectedness of modern technologies as they move from concept to market. As a result, clients rely on Exponent, Inc. to evaluate failure modes, product performance, usability, and risk as they work to develop and deploy these systems quickly and responsibly. In these contexts, the question is no longer simply whether a system functions, but whether it can be trusted to perform reliably in high-stakes real-world conditions, raising the bar for performance across not just expected conditions, but also in edge cases, novel conditions, and complex interactions that fall outside of prior experience.

As clients accelerate development timelines, they increasingly rely on Exponent, Inc. not only for the systems themselves, but also for the underlying data, testing, and evaluation strategies that support them. This includes assessing training data and potential bias, evaluating system performance in both laboratory and in-the-wild environments, and supporting the reliability of adjacent infrastructure such as battery energy storage systems and data centers. Across these efforts, the common threads are rising technical complexity and the increasing consequences of failure. This is where Exponent, Inc. stands apart. Our teams combine expertise in engineering, data science, human factors, health, and the physical sciences to help clients navigate challenges that do not fit neatly within a single discipline.

As these technologies continue to evolve, we expect demand for Exponent, Inc.'s independent, multidisciplinary expertise to continue to grow. I will now turn the call over to Richard for more detail on our first quarter results as well as discuss our outlook for the second quarter and the full year.

Richard L. Schlenker: Thank you, Catherine, and good afternoon, everyone. Let me start by saying all comparisons will be on a year-over-year basis unless otherwise noted. For the first quarter of 2026, total revenues increased 14% to $166.3 million, and revenues before reimbursements, or net revenues as I will refer to them from here on, increased 10% to $151.8 million as compared to the same period in 2025. Net income for the first quarter increased 11% to $29.6 million as compared to $26.7 million a year ago, and earnings per diluted share increased 13% to 59¢ as compared to 52¢ in the prior-year period.

During the quarter, we realized a negative tax impact associated with accounting for share-based awards of $900 thousand, as compared to $500 thousand in 2025. The change in the tax impact associated with share-based awards was due to the difference of the value of the common stock between the grant date and the release date for the restricted stock units. Inclusive of the tax impact from share-based awards, Exponent, Inc.'s consolidated tax rate was 30.2% in 2026 as compared to 29.4% for the same period in 2025. EBITDA for the quarter increased 15% to $43.1 million, producing a margin of 28.4% of net revenues as compared to $37.5 million, or 27.3% of net revenues, in 2025.

Billable hours in the quarter were approximately 399 thousand, an increase of 6% year over year. Average technical full-time equivalent employees in the quarter were 1,013, which is an increase of 5% as compared to one year ago. This increase was due to our recruiting and retention efforts. Utilization in the first quarter was 76%, up from 75% in the same period of 2025. The realized rate increase was approximately 4% as compared to the same period a year ago. In the first quarter, compensation expense after adjusting for gains and losses in deferred compensation increased 9%.

Included in total compensation expense is a loss in deferred compensation of $1.1 million as compared to a loss of $9.3 million in the same period of 2025. As a reminder, gains and losses in deferred compensation are offset in miscellaneous income and have no impact on the bottom line. Stock-based compensation expense in the quarter was $9.1 million as compared to $8.2 million in the prior-year period. Other operating expenses in the quarter were up 6% to $12.8 million due to investments in our corporate infrastructure. Included in other operating expenses is depreciation and amortization expense of $2.5 million. G&A expenses increased 24% to $6.2 million for the first quarter.

The increase in G&A expenses was primarily due to increases in travel and meals associated with business development, recruiting, and people development activities. Interest income decreased to $1.7 million for the first quarter, driven by a decrease in cash and lower interest rates. Regarding capital allocation, during the quarter, capital expenditures were $2.5 million. We distributed $16.6 million to shareholders through dividend payments and repurchased $79 million of common stock at an average price of $68.09. Additionally, our board approved a $50 million increase in our current stock repurchase program. This is in addition to the $17.7 million available for repurchases as of April 3, 2026, and reflects our conviction in Exponent, Inc.'s long-term growth trajectory.

Turning to our segments, Exponent, Inc.'s engineering and other scientific segment represented 85% of revenues before reimbursements in the first quarter. Revenues before reimbursements in this segment increased 12% in the quarter. Growth during the quarter was driven by user research studies in consumer electronics and risk management in the utility sector, along with reactive engagements in energy and life science sectors. Exponent, Inc.'s environmental and health segment represented 15% of revenues before reimbursements in the first quarter. Revenues before reimbursements in this segment increased 2% for the first quarter. Growth in this segment was driven primarily by regulatory consulting in the chemicals industry.

Turning to our outlook for the second quarter, as compared to one year prior, we expect revenues before reimbursements to grow in the high-single digits and EBITDA to be 27% to 27.8% of revenues before reimbursements. For fiscal year 2026, we are maintaining our revenue and margin guide. We expect revenues before reimbursements to grow in the high-single digits and EBITDA to be 27.6% to 28.1% of revenues before reimbursements. We expect our average technical full-time equivalent employees to increase approximately 5% year over year in 2026 and 4% to 5% for the full year 2026 as compared to 2025.

We expect utilization in the second quarter to be 72% to 73% as compared to 72% in the same quarter last year. We continue to expect the full-year utilization to be 72.5% to 73% as compared to 72.5% in 2025. We expect year-over-year realized rate increases to be 3% to 3.5% for the second quarter and full year. For the second quarter of 2026, we expect stock-based compensation to be $6.5 million to $6.7 million. For the full year 2026, we expect stock-based compensation to be $27.9 million to $28.4 million. We continue to believe that our stock-based compensation program effectively attracts, motivates, and retains our top talent.

For the second quarter, we expect other operating expenses to be $12.8 million to $13.3 million. For the full year, we expect other operating expenses to be $53 million to $53.5 million. For the second quarter, we expect G&A expenses to be $7.2 million to $7.7 million. For the full year, we expect G&A expenses to be $28.5 million to $29.5 million. We expect interest income to be $700 thousand to $900 thousand per quarter during 2026. In addition, we anticipate miscellaneous income to be approximately $300 thousand per quarter for the remainder of 2026. For the remainder of 2026, we do not expect any additional tax benefit or loss associated with share-based awards.

For the second quarter of 2026, we expect our tax rate to be approximately 28% as compared to 27.9% in the same quarter one year ago. For the full year 2026, the tax rate is expected to be 28.5% as compared to 28% in 2025. Capital expenditures for the full year 2026 are expected to be $12 million to $14 million. In closing, we are pleased with our performance this quarter and remain confident in the strength of our business. I will now turn the call back to Catherine for closing remarks.

Catherine Ford Corrigan: Thank you, Richard. Exponent, Inc. is well positioned to support the evolving needs of our clients as innovation accelerates and systems grow more complex, particularly as artificial intelligence becomes more deeply embedded in the world. These trends continue to drive demand for our differentiated multidisciplinary expertise, independent evaluation, and trusted insight. Altogether, supported by our exceptional talent and unique position in the marketplace, we remain focused on helping clients navigate their most complex challenges while delivering long-term value for our shareholders. Before opening the call for questions, I would like to introduce incoming president, John Pye, and our incoming chief financial officer, Eric Anderson. John Pye will assume the role of president effective tomorrow, May 1.

A 25-year veteran of the firm, John has played a central role in advancing our capabilities and innovation agenda, helping Exponent, Inc. address increasingly complex client challenges as technologies evolve and systems become more sophisticated. John?

John Pye: Thank you, Catherine. As a first timer here, let me start by saying how honored and excited I am to step into this role, particularly at such a time of broad opportunity for the firm. Looking across the markets we serve, there is accelerating innovation, there is increasing technical complexity, and there are expectations that are only rising around safety, around health, and around the environment. So much so that I cannot imagine a better time to be an engineer or a scientist, and I cannot imagine a better place to do that than here with my Exponent, Inc. colleagues. When our clients call us with their most challenging issues, they get our deep technical credibility.

They get our multidisciplinary approach, and we put those together to help them navigate the challenges of emerging technologies and complex systems of systems, all while staying grounded in delivering real-world impact. I am excited to work with my partners on this call, Catherine, Richard, and you, Eric, as well as our entire leadership team, and continue to advance our capabilities in supporting the firm's long-term growth.

Catherine Ford Corrigan: Thank you, John. Eric Anderson will assume the role of chief financial officer also effective tomorrow, May 1. Eric combines rigorous financial discipline with a deep understanding of our strategy and operations. Before I turn to Eric, however, I want to take a moment to thank Richard for his many years of outstanding service as chief financial officer. Richard will continue to play an important role as executive vice president advancing Exponent, Inc.'s strategic priorities while remaining actively engaged with investors. We are grateful for his continued leadership and support. With that, I will now turn the call to Eric.

Eric Anderson: Thank you, Catherine. I am honored to step into this role as Exponent, Inc.'s chief financial officer and excited about the opportunity to work alongside our leadership team. I have been a part of this incredible company for over 20 years as part of the finance organization, working closely with our consulting team. I look forward to continuing to support Exponent, Inc.'s long-term growth objectives, strong operating model, and disciplined execution. I am also excited to engage more with the investment community as we move forward.

Catherine Ford Corrigan: Thank you, Eric. Operator, we are now ready for questions.

Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. At this time, we will pause momentarily to assemble a roster. We have the first question from the line of Tomohiko Sano from JPMorgan. Go ahead.

Tomohiko Sano: Hi, everyone. Thank you for taking my questions. I would like to ask you about the macro trends, such as accelerations of AI innovation and rising energy demand impacting the nature of your projects, client base, and competitive positioning. Compared to the traditional engagements, are you seeing changes in the required expertise or the complexity of projects in Q1? And could you provide any more color for the second quarter and after, please?

Catherine Ford Corrigan: Thank you, Tomo. The macro trends you mentioned really are driving growth of the business in a number of different dimensions. We mentioned the energy sector. This is one place where we are seeing our engagements evolve across all modalities of technology, from the traditional oil and gas issues that we see, through to wind power to solar power, and starting to look at things like small modular nuclear reactors. You can imagine the different kinds of risk models, proactive as well as reactive work, and the expertise that is required for that type of work. We are also seeing that play into our data center offerings.

These are places where the innovation around the cooling systems is crucial, which involves our thermal scientists. We are seeing issues around corrosion, on the materials and metallurgy side. There are challenges connecting to power and the governance and specifications around that. AI is fundamentally that driver that is pushing on energy, and we are seeing both reactive as well as proactive projects. Another place where there is a real opportunity for even more highly specialized expertise is in robotics. This is a place where it would be wonderful to hear from John, as he has been active in growing our robotics efforts across military and other clients.

John, would you share a few thoughts about that opportunity to specialize around robotics?

John Pye: Thanks, Catherine, and good to hear from you again, Tomo. Robotics have been around a long time, but what is interesting and novel now is that physical AI is being applied to the robotic system. Those robotic systems are not just in factories on assembly lines, but they are in and amongst people, interacting with them in our warehouses and our homes, and maybe the biggest category is automated vehicles that are on our streets. There is opportunity there for a number of our disciplines Catherine mentioned. You have our human factors side where the robots are interacting with people and understanding intent and location. You have our biomechanics pulled in as the interaction becomes physical.

You have our data sciences as systems interpret the world around them and try to make decisions. It really pulls on the entire organization across the entire stack that Catherine mentioned, from the power that drives the data center that runs the algorithm that powers the robotic system. We could not be more excited for what is happening there as those opportunities come our way.

Tomohiko Sano: Thank you. And just one more, and then congratulations everyone on the new roles. This transition to a new president and CFO along with the changes to the board appears to mark an important new chapter for Exponent, Inc. Could you elaborate on why now is the right time for this leadership and governance refresh? What is the significance of this timing, and how do you see that positioning the company for future growth and transformation, please?

Catherine Ford Corrigan: Thank you, Tomo. The timing is strategic with regard to how we are evolving the team because we see the macro trends that you mentioned in your first question—the increases in the penetration of artificial intelligence into physical systems, which is really where Exponent, Inc. lives. These are physical systems that are high performance, high reliability, high risk, and high consequence. The opportunity we see around these systems is from cradle to grave: proactively building the datasets to train them, through the hardware that delivers them, to the consequences of them being in the wild. There is enormous opportunity, and this evolution of leadership reflects that in order to accelerate what the company is doing.

We have been demonstrating our ability to execute and capitalize on those opportunities for the last few quarters, and we intend to continue building on that. We must build the talent base around it, widen our competitive moat, and enhance our differentiation. With both John and Eric’s deep experience with the company—John on the technical and innovation side, Eric on the financial side—and with Richard continuing and becoming even more engaged on the governance side, we believe this positions us extremely well to capitalize on all of these trends we are talking about.

Operator: Thank you. We have our next question from the line of Andrew Nicholas from William Blair. Please go ahead.

Andrew Nicholas: Hi, good afternoon. I appreciate you taking my question, and congratulations to everyone on the call in their new roles. I wanted to touch on, Catherine, your comment on consumer electronics. Specifically, I think you mentioned seeing diversification or broadening of some of that demand across client types and products. Could you spend a little bit more time fleshing that out? And then, if possible, what does that broadening do to your conviction in continued growth in that part of your business?

Catherine Ford Corrigan: Thanks, Andrew. There are a few broad categories of products where we are seeing diversification. One is health-related products. This has been an important part of the growth we are seeing in user research and human–machine interaction engagements where algorithms need to be benchmarked against ground truth. We are being asked by clients who want to deploy these technologies and hardware in clinical trials of a new device or a new drug to provide independent, objective advice on the best platforms and how to ensure that what the device is telling us is high-quality data. There are all the human–machine interaction aspects of that as well.

Another important category is devices that are taking on novel form factors for the delivery of artificial intelligence. It is no longer just your phone or your tablet. We are talking about glasses, virtual reality and augmented reality systems, and unique hardware that does not have screens but still needs to have high-quality interaction with the human, whether through video, audio, and so forth. These may not be health-related, but they are novel devices that need to perform and ensure that the training datasets will drive the algorithm in the right way. Another category is all the hardware associated with that—think of it as the data center stack.

There is everything from the chip to the rack, all the way up to the full system that is essential in the lifecycle of AI. We are all seeing the demand on compute that hyperscalers and others are facing, including the power requirements. These underpin the diversification we are talking about, and we believe it will continue. There is a push around innovation and speed to get that next feature and technology, and that speed of innovation, in addition to all of the safety, health, and risk implications, really make this a perfect area for Exponent, Inc.

Andrew Nicholas: Thank you. That is super helpful. For my follow-up, I wanted to ask about the talent environment. Obviously, headcount growth year over year in the quarter was quite good, and you expect that to continue throughout the remainder of this year. Is it any harder in this environment to attract talent given the overlap between what you are doing and what a lot of the fastest-growing companies in the world are focused on with artificial intelligence? And I think part of the reason for the question is that you raised the amount of share-based compensation you expect to pay this year. Is there any through line between those two themes?

Richard L. Schlenker: Thanks for the question, Andrew. It has always been a highly competitive market to go to top universities and pursue the top quartile—at times even the top 10%—of the PhD class. That talent has many opportunities, and it remains competitive. Exponent, Inc., as Catherine and John outlined, comes at this with a multidisciplinary approach. It is not about writing a better algorithm than our clients. We are not competing with clients at their core; we are helping them understand the human interaction, the compute that is necessary to have systems perform at the highest level, and all the consequences around that. That allows us to be very active in recruiting across adjacencies.

We absolutely need to understand the algorithms—why did a car decide not to stop, or to turn left instead of right?—which comes down to analyzing sensors and software. We can play in that area, but it is about analysis rather than writing the best code. It will remain competitive, but we believe we are doing very well. Our acceptance rate on offers is as high as it has ever been, and that has been the case over the last year or two. We are feeling good about our ability to attract the people we want. We are always replenishing—bringing in 150 to 200 new people a year—adding talent that has been doing research in advanced areas using the newest tools.

They have experimented with and used AI and machine learning in their disciplines, which helps us stay on top of our game. We feel pretty good about our ability to attract talent and move forward.

Operator: Thank you. Participants, if you wish to ask a question, you may press star and 1. We have our next question from the line of Joshua Chan from UBS. Please go ahead.

Joshua Chan: Hi. Good afternoon, and congrats, everybody, on their new roles as well. On the consumer market improvement, could you talk about the durability of these projects? In the past, consumer has been a bit more cyclical, so I am wondering about the pace of improvement here and the durability of this growth tailwind from consumer. Thank you.

Richard L. Schlenker: We have definitely seen a gradual step up in the level of activity. We anticipated that early last year in 2025. If you remember, even in Q1 or Q2 we were talking about clients beginning to develop their projects and discussing their road maps. That really played out as anticipated in the late third quarter and into the fourth quarter. That momentum and those developments have continued into the first quarter and are continuing into the second quarter and beyond. Each client will be at a different point in the product lifecycle, so there will be some cycles. We went through an extreme back in 2023; we do not see that as we look across clients today.

I cannot predict every quarter or where there might be slight step-downs followed by acceleration, but directionally everything points to the implementation of these algorithms and AI in physical systems. As they progress, what Exponent, Inc. is seeing—and what we are all reading about—is that those systems require much higher reliability. They need stronger curated datasets and testing against gold standards. Those are the things our clients are doing today and will continue developing in the future. The applications they go after will become more sophisticated. We saw this 5 to 10 years ago: fingerprints and facial recognition, then AR and VR, then health applications as clients gained confidence and tackled regulated areas.

We think the long-term direction is very positive, especially as these integrate into the robotic world of automated vehicles and humanoids in the home, in retail environments, and everywhere humans interact.

Joshua Chan: Thanks for the color, Richard. On the repurchase side of things, could you talk about the decision to repurchase that amount in Q1 and your willingness to continue to be aggressive on buybacks around similar levels?

Richard L. Schlenker: We have always had conviction around letting cash build up and having an incremental amount we repurchase every year, while being more aggressive on pullbacks. We believe the company has a very strong future, producing strong profitability and cash flow, which should result in good future performance. As such, on this pullback, over the last four quarters the company bought back approximately $177 million of stock, almost 5% of our shares. We feel good about that, and that is why the board has given us additional authorization as we move forward.

Operator: You are welcome. Thank you. We have our next question from the line of Tobey Sommer from Truist. Please go ahead.

Tobey Sommer: I was wondering if you could update us on the portfolio of larger projects that the firm has and, reflecting upon prior substantial projects that were points of discussion over time, whether anything about AI or changes in the marketplace would change the scope of large projects going forward.

Richard L. Schlenker: Exponent, Inc. has a very diverse portfolio of projects ongoing—we do about 10,000 projects a year. Roughly 20% of those make up 80% of our revenue, which is really traditional. We have had large projects that typically range in the 1% to 2% of revenues; that is a very large project for us. At times, we have had a few projects where the size reached 4% or 5% of revenues, and we called those out when they rose to that level. Those included the unintended acceleration issues for Toyota back in the early 2010s, PG&E’s gas line explosion in San Bruno and the work that followed, and the Camp Fire and analysis around wildfires for PG&E.

As we have moved forward, we have large pieces of work, but none that elevate to that level. The portfolio continues to diversify, and the multidisciplinary nature of our firm continues to grow.

Catherine Ford Corrigan: I can add on how AI changes the scope of engagements. In automotive product liability, for example—our dispute-related work—that is moving from questions like whether an airbag deployed timely enough to protect occupants, which was a narrower set of issues, to today’s complexity where an AI algorithm makes decisions about braking or steering inputs. Tracing that decision through the algorithm and the associated testing across different scenarios, or comparing products, becomes a much more complex matrix of tests. Where you might have run one test before, now you are running five or 10 to cover multiple scenarios with different systems. Another place we see it is in intellectual property matters.

The complexity of products that contain AI algorithms—whether in wireless communications equipment or surgical robotics—drives not only the level of expertise needed but also the complexity of claims and the depth of research required. We always have a diversity of project sizes, but these are examples of how incorporating AI into the physical world increases complexity and therefore scope.

Tobey Sommer: Thanks. If I could ask about two industry verticals: chemicals—what is the current and forecast state of demand there? And also the energy and utility sector, which, based on data center demand and other demand, seems to need to come to market with more supply at an atypical pace. With nuclear being involved again, what is the future of the energy and utility outlook from Exponent, Inc.’s perspective?

Catherine Ford Corrigan: In chemicals, we have both reactive and proactive work. On the proactive side, this is a lot of regulatory work. Regulatory frameworks continue to become more complex and are relying more heavily on complex simulation technologies in lieu of animal testing. Being able to utilize high-end, sophisticated models is an area where we are well positioned, as technologies evolve—for example, assessing mRNA technologies and testing pesticides and other complex environments for the regulatory side. Think of chemicals like PFAS, where regulatory complexity is increasing. The PFAS environment also drives dispute-related work, whether related to OEM chemical manufacturers or entities using PFAS in their products—consumer products, electronics—and the drive to find substitutes for chemicals that perform so well.

We see continued growth opportunity there. On the energy and utility side, the drive for more energy is intense. We are near the limits of available energy, and there is a push to expand to run data centers and deliver the required compute. We are seeing data center operators building their own gas-powered turbines to secure power without tapping the utility. This drives disputes as infrastructure investments are made. We are seeing challenges with backup power systems, including battery energy storage, where we are well positioned. It is also driving more inquiries about proactive risk modeling from utilities. Novel sources of power generation create unanticipated failure modes, and we are helping clients understand and quantify those risks.

In both chemicals and energy/utilities, we are seeing growth opportunities across proactive and reactive engagements.

Operator: You are welcome. Thank you. Ladies and gentlemen, that concludes the question-and-answer session. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.