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EI

EXPONENT INC (EXPO)·Q2 2026 Earnings Summary

Executive Summary

  • Note: As of Nov 20, 2025, Exponent has reported Q2 fiscal 2025 (ended Jul 4, 2025); Q2 fiscal 2026 results are not yet available. This recap uses Q2 fiscal 2025 results and trends through Q3 fiscal 2025.
  • Q2 delivered net revenues of $132.9M and diluted EPS of $0.52, modestly above S&P Global consensus on both revenue and EPS; EBITDA margin was 27.8% amid lower utilization and higher other operating expenses tied to the Phoenix lease extension.
  • Management maintained full‑year FY25 revenue guidance in Q2, then raised FY25 margin guidance in Q3 to 27.4–27.65%, while announcing a $100M increase to the repurchase authorization—key positive catalysts into year‑end.
  • Mix improved in disputes/litigation (construction, automotive, medical devices) while environmental/health declined on chemical regulatory softness; early-stage traction in digital health, AI usability, distributed energy systems supports medium‑term growth.

What Went Well and What Went Wrong

What Went Well

  • Disputes work grew in construction, automotive and medical devices, supporting a resilient performance despite macro uncertainty. “Second quarter revenues were flat but exceeded expectations, reflecting our team’s disciplined execution and resilience.” — Dr. Catherine Corrigan
  • Early-stage momentum in digital health and AI usability; Exponent’s multidisciplinary expertise positions it to capture demand from safety‑critical AI integration across industries.
  • Rate realization remained strong (+5% YoY in Q2), reflecting premium positioning and differentiated interdisciplinary talent.

What Went Wrong

  • Utilization fell to 72.1% (from 75.1%), partly due to the July 4 timing and onboarding of new hires; billable hours declined 6% YoY.
  • Environmental & Health segment decreased 4% YoY in Q2, driven by lower proactive life sciences and chemical regulatory activity.
  • Chemical regulatory engagements faced delays amid EPA staffing turnover; management cited “wait and see” behavior and timing slowdowns at the regulator.

Financial Results

Quarterly progression

MetricQ1 2025Q2 2025Q3 2025
Total Revenue ($USD Millions)$145.507 $141.962 $147.120
Net Revenues ($USD Millions)$137.437 $132.868 $137.073
Diluted EPS ($USD)$0.52 $0.52 $0.55
EBITDA ($USD Millions)$37.538 $36.991 $38.837
EBITDA Margin % (of net revenues)27.3% 27.8% 28.3%

YoY comparison

MetricQ2 2024Q2 2025
Net Revenues ($USD Millions)$132.434 $132.868
Total Revenue ($USD Millions)$140.536 $141.962
Diluted EPS ($USD)$0.57 $0.52
EBITDA ($USD Millions)$39.937 $36.991
EBITDA Margin %30.2% 27.8%

Estimates vs Actuals (S&P Global)

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue Consensus Mean ($USD Millions)$130.824*$132.868
Primary EPS Consensus Mean ($USD)$0.516*$0.52
# of Revenue Estimates3*—
# of EPS Estimates3*—

Values with asterisk (*) retrieved from S&P Global.

Segment breakdown (mix)

Segment (% of Net Revenues)Q1 2025Q2 2025Q3 2025
Engineering & Other Scientific84% 85% 84%
Environmental & Health16% 15% 16%

Segment YoY growth (quarterly)

Segment YoY GrowthQ1 2025Q2 2025Q3 2025
Engineering & Other Scientific~Flat +1% +10%
Environmental & Health+2% −4% +9%

KPIs

KPIQ1 2025Q2 2025Q3 2025
Billable Hours (‘000)—359 —
Utilization %—72.1% —
Avg Technical FTEs—958 —
Realized Rate Increase YoY—+5% —
Stock-Based Compensation ($USD Millions)—$2.1 —
Cash & Equivalents ($USD Millions)$245.113 $231.801 $207.380

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenues YoY growthFY 2025Low single digits Low single digits (maintained) Maintained
EBITDA Margin % (of net revenues)FY 202526.25–27.0% 26.50–27.0% Raised
EBITDA Margin % (of net revenues)FY 202526.50–27.0% 27.4–27.65% Raised
Net Revenues YoY growthQ3 2025—Up mid‑single digits New
EBITDA Margin % (of net revenues)Q3 2025—26.75–27.75% New
Net Revenues YoY growthQ4 2025—Low–mid single digits; adjusted high single‑digit to low double‑digit due to extra week in Q4’24 New
EBITDA Margin % (of net revenues)Q4 2025—26.0–27.0% New
Stock‑based compensation ($)Q3 2025—$5.3–$5.5M New
Stock‑based compensation ($)FY 2025—$23.5–$24.0M New
Other operating expenses ($)Q3 2025—$12.5–$13.0M New
Other operating expenses ($)FY 2025—$49.5–$50.5M New
G&A expenses ($)Q3 2025—$7.5–$8.0M New
G&A expenses ($)FY 2025—$24.8–$25.5M New
Interest income ($)H2 2025—$2.0–$2.2M per quarter New
Misc income ($)H2 2025—~$0.2M per quarter New
Tax rateQ3 2025—~28% New
Tax rateFY 2025—~28.5% New
Capex ($)FY 2025—$10–$12M New
DividendQ3 2025—$0.30 per share (Sep 19 pay date) New
DividendQ4 2025—$0.30 per share (Dec 19 pay date) New
Share Repurchase AuthorizationQ4 2025$21.6M remaining +$100M additional authorization Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q3 2025)Current Period (Q2 2025)Trend
AI usability & human‑machine interactionQ1: early-stage work in sensors & electronics; regulatory support; consumer electronics easing . Q3: AI increasingly integrated into safety‑critical systems across industries .Encouraged by early‑stage work in digital health and AI usability; human‑machine interaction in safety‑critical domains (medical devices, vehicles) Strengthening
Supply chain/tariffs—; Q3: lower activity in consumer electronics, improving into Q4 .Tariff uncertainty causing delays in chemical regulatory engagements; broader supply chain complexity seen as long‑term opportunity Mixed/near‑term caution
Regulatory/legalQ1: regulatory support led proactive work . Q3: chemicals regulatory engagements up .EPA staffing/turnover slowing decisions; medical device regulatory demand remains intact Mixed
Consumer electronicsQ1: easing due to client product lifecycle timing . Q3: lower activity but improving demand into Q4 .Not a Q2 driver; focus on disputes/utilities risk work Recovering
Energy/utilities & wildfireQ1: utilities risk management cited . Q3: utilities risk management and asset integrity drove growth .Expanding wildfire mitigation work; advanced quantitative risk models for system hardening & shutoff strategies Strengthening
Disputes/litigationQ1: disputes in chemicals/transportation/utilities . Q3: disputes in energy, automotive, medical devices .Litigation/disputes up 7% YoY (reactive); increasingly novel/complex technical issues Strengthening

Management Commentary

  • “Second quarter revenues were flat but exceeded expectations… momentum in early-stage work related to digital health, AI usability, and distributed energy systems.” — Dr. Catherine Corrigan, CEO
  • “EBITDA margin decreased primarily due to the decrease in utilization and increase in other operating expenses largely associated with the Phoenix land lease renewal… and a decrease in miscellaneous income due to the loss of a tenant in our Menlo Park facility.” — Richard Schlenker, CFO
  • “We are returning to headcount growth… expect at year end that headcount will be approximately 4% higher than at the start of the year.” — CFO
  • “As AI is increasingly integrated into safety‑critical systems… our teams are at the forefront of addressing… complex technical and human‑machine challenges.” — CEO (Q3 commentary underscores medium‑term positioning)

Q&A Highlights

  • Utilization drivers: ~300bps decline YoY—about half due to July 4 timing, half due to onboarding hires and normalization after elevated prior‑year utilization.
  • Tariff/regulatory impacts: chemical regulatory work saw “wait and see” delays; medical device regulatory demand remained resilient with sophisticated lab testing and advisory work.
  • Reactive vs proactive: both grew ~1% YoY; disputes work within reactive up ~7% YoY, offset by step‑down in larger regulatory matters.
  • 2026 prelim thoughts: starting 2026 with ~4% headcount growth, rate realization normalizing to ~2.5–3.5%, utilization foundation ~72%—setting up for healthier algorithmic growth.

Estimates Context

  • Q2 actuals were modest beats: net revenues $132.9M vs S&P Global consensus $130.8M*, and diluted EPS $0.52 vs $0.516*—driven by strong disputes work and solid rate realization despite lower utilization.
  • With FY25 margin guidance raised in Q3 to 27.4–27.65%, consensus margin expectations likely need upward adjustment; revenue trajectory maintained low single digits due to calendar headwind (return to 52‑week year).
  • Consensus depth was limited (# of estimates = 3*)—magnifying the impact of operational signals (utilization, rate realization, headcount trajectory) on forward estimate revisions. Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat: modest revenue/EPS beats with strong disputes demand and premium rate realization; monitor normalization of utilization into H2.
  • Margin trajectory improved: FY25 EBITDA margin guidance raised twice by Q3; near‑term catalysts include Q4 guide and buyback capacity.
  • Secular growth vectors: early‑stage AI usability, digital health, and distributed energy systems align with Exponent’s failure analysis and human‑machine expertise.
  • Watch regulatory timing: EPA‑related chemical regulatory delays represent near‑term friction; medical device regulatory work remains robust.
  • Utilization and headcount: returning to headcount growth with utilization ~72% target—sets the stage for an improved “growth algorithm” in 2026.
  • Capital returns: consistent $0.30 quarterly dividend and expanded $100M buyback authorization support TSR and downside protection into year‑end.
  • Trading setup: narrative skew positive on margin/repurchases; monitor Q4 demand (consumer electronics recovery) and expense cadence (managers meeting) for near‑term EPS prints.