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EI

EXPONENT INC (EXPO)·Q3 2026 Earnings Summary

Executive Summary

  • Q3 FY26 (ended Oct 3, 2025) delivered 8.0% y/y revenue growth to $147.12M and diluted EPS of $0.55; EBITDA was $38.84M with EBITDA margin of 28.3% of net revenues . Demand was led by dispute-related (reactive) work across energy, transportation, life sciences, and construction, with utilization improving to 74% and billable hours up 4% .
  • Versus S&P Global consensus, results were modestly below on both revenue ($147.12M vs $148.50M*) and EPS ($0.55 vs $0.5902*) for Q3 FY26. Sequentially, revenue and EPS rose from Q2 ($141.96M, $0.52) .
  • Guidance: Management maintained FY25 revenue guidance and raised FY25 EBITDA margin guidance to 27.4%–27.65% (from 26.5%–27.0% previously). Q4 FY25 outlook calls for low-to-mid single-digit net revenue growth (headwind from returning to 13-week quarter) and EBITDA margin of 26%–27% .
  • Capital return: Board increased repurchase authorization by $100M and declared a $0.30 dividend payable Dec 19, 2025—supporting shareholder returns and confidence in the business .

Note: Values marked with an asterisk (*) are from S&P Global consensus estimates. Values retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Reactive work accelerated: management cited ~18% y/y growth in reactive engagements in Q3, with proactive approximately flat; utilization ticked up to 74% and realized pricing increased ~6% .
    • Diversified demand and AI positioning: “Exponent delivered a strong third quarter… Increasing demand for dispute-related work… Proactive engagements were led by risk management… in utilities and regulatory consulting in chemicals… As artificial intelligence is increasingly integrated into safety-critical systems, Exponent is helping clients navigate risk and innovate responsibly.” — CEO Dr. Corrigan .
    • Margin guidance raised for FY25, reflecting solid utilization and rate realization; EBITDA margin guided to 27.4%–27.65% (from 26.5%–27.0%) .

  • What Went Wrong

    • Consumer electronics softness persisted in proactive work (offsetting some gains elsewhere), though management noted improving trends into Q4 .
    • Expense pressure: G&A increased 44% y/y in Q3, driven largely by a firm-wide managers’ meeting; other operating expenses also rose with higher IT and depreciation .
    • Non-operating headwind: interest income declined (lower rates), and rental income fell due to a lost tenant—pressuring other income vs prior year .

Financial Results

Quarterly trajectory (FY26 year-to-date)

MetricQ1 FY26 (Apr 4, 2025)Q2 FY26 (Jul 4, 2025)Q3 FY26 (Oct 3, 2025)
Total Revenues ($USD Millions)$145.51 $141.96 $147.12
Revenues before reimbursements ($USD Millions)$137.44 $132.87 $137.07
EBITDA ($USD Millions)$37.54 $36.99 $38.84
EBITDA Margin (% of net revenues)27.3% 27.8% 28.3%
Net Income ($USD Millions)$26.65 $26.55 $28.04
Diluted EPS ($)$0.52 $0.52 $0.55

Year-over-year comparison for the current quarter

MetricQ3 FY25 (Sep 27, 2024)Q3 FY26 (Oct 3, 2025)
Total Revenues ($USD Millions)$136.28 $147.12
Revenues before reimbursements ($USD Millions)$125.09 $137.07
EBITDA ($USD Millions)$35.77 $38.84
EBITDA Margin (% of net revenues)28.6% 28.3%
Net Income ($USD Millions)$26.04 $28.04
Diluted EPS ($)$0.50 $0.55

Actual vs S&P Global consensus (Q3 FY26)

MetricActualS&P ConsensusSurprise
Total Revenues ($USD Millions)$147.12 $148.50*-$1.38M (-0.9%)
Diluted EPS ($)$0.55 $0.5902*-$0.040 (-6.8%)

Note: Values marked with an asterisk (*) are from S&P Global consensus estimates. Values retrieved from S&P Global.

Segment revenue breakdown (Q3 FY26 vs Q3 FY25)

SegmentQ3 FY25 ($M)Q3 FY26 ($M)YoY
Engineering & Other Scientific$115.24 $124.02 +7.6%
Environmental & Health$21.04 $23.10 +9.8%
Total Revenues$136.28 $147.12 +8.0%

Key KPIs (Q3 FY26)

KPIQ3 FY25Q3 FY26
Billable hours362,000 376,000
Utilization73% 74%
Technical FTEs949 976

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenues before reimbursements growthFY2025Low single digits Low single digits Maintained
EBITDA margin (% of net revenues)FY202526.5%–27.0% 27.4%–27.65% Raised
Net revenues growthQ4 FY2025n/aLow–mid single digits; high single-digit to low double-digit when adjusted for extra week in Q4’24 New
EBITDA margin (% of net revenues)Q4 FY2025n/a26%–27% New
Effective tax rateQ4 FY2025n/a~28% (vs 24.7% prior-year Q4) New
Dividend per shareQ4 FY2025$0.30 (Q2/Q3 declarations) $0.30 payable Dec 19, 2025 Maintained
Share repurchase authorizationOngoing$61.6M remaining as of 10/3/25 +$100M increase (in addition to $21.6M available) Increased

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY26)Current Period (Q3 FY26)Trend
AI/technology initiativesEarly-stage traction in digital health, AI usability, distributed energy; resilient multi-disciplinary positioning AI increasingly integrated into safety-critical systems; Exponent supports responsible innovation (across automotive, utilities, life sciences, consumer) Increasing breadth/adoption
Demand mix: reactive vs proactiveQ1/Q2: reactive dispute work strength; proactive softer in chemicals/CE Reactive +~18% y/y; proactive ~flat; improvement expected in studies (e.g., life sciences) into Q4 Reactive outpacing; proactive improving
Pricing (rate realization)Noted market-driven rate strength ~6% realized rate in Q3; expected to normalize to ~3%–3.5% longer-term as hiring ramps and mix shifts Near-term strong; normalizing
Utilization / headcountQ1: closing y/y headcount gap ; Q2: recruiting activity supports growth Utilization 74%; headcount growth plan ~4%–6% for 2026 Improving
Regulatory / legalChemical regulatory softness noted in Q2 Chemical regulatory consulting strong; enforcement backdrop supportive; limited impact from federal shutdown; 2%–3% federal exposure Positive
Macro/calendar effects53rd/extra weeks affect 2024 comps Q4 FY25 is 13-week vs 14-week prior-year; ~7% revenue headwind on y/y workdays Headwind for Q4 y/y comps
Non-operating items—Interest income down on lower rates; rental income down due to tenant loss Mild headwind

Management Commentary

  • “Exponent delivered a strong third quarter, achieving double digit net revenue growth… Increasing demand for dispute-related work… Proactive engagements were led by risk management and asset integrity projects… As artificial intelligence is increasingly integrated into safety-critical systems, Exponent is helping clients navigate risk and innovate responsibly.” — Dr. Catherine Corrigan, CEO .
  • “We are maintaining our revenue guidance and raising our margin guidance for the full year… Our conviction in Exponent’s long-term growth trajectory remains steadfast, as reflected in the Board… increase [to] our share repurchase authorization.” — Richard Schlenker, CFO .
  • On demand mix and pricing: “Billable hours… increased 4%… utilization 74.1%… realized rate increase ~6%… driven by… premium position and interdisciplinary expertise.” — CFO .
  • On AI breadth: Exponent is “actively engaged in early-stage initiatives tied to transformative technologies… [AI] delivered via specialized hardware and integrated into safety-critical systems… balanced across reactive and proactive work.” — CEO .

Q&A Highlights

  • 2026 hiring: Planning ~4%–6% headcount growth, aligned to growth areas (digital health, autonomous vehicles, energy) .
  • AI penetration: Hard to size precisely; meaningful across industries and lifecycle stages; both reactive (failures/disputes) and proactive (design, validation) work .
  • Demand mix: Reactive +~18% y/y in Q3; proactive approximately flat—with chemical regulatory growth and improving studies work into Q4 .
  • Regulatory environment: Global frameworks (e.g., chemicals) continue to raise the bar; isolated delays at agencies, but enforcement remains strong; opportunity to recruit talent from agencies .
  • Federal exposure and shutdown: ~2%–3% of revenue; minimal near-term impact; steady into Q4 barring extended disruptions .
  • Rate realization outlook: ~6% realized in Q3; expect normalization to ~3%–3.5% as hiring increases and mix shifts .
  • Calendar headwind: Q4 FY25 vs Q4 FY24 impacted by fewer workdays (~7% headwind); utilization seasonally lower (68%–70%) .

Estimates Context

How actuals compared to S&P Global consensus and potential estimate implications:

MetricQ1 FY26Q2 FY26Q3 FY26
Revenue consensus ($M)144.47*144.94*148.50*
Revenue actual ($M)145.51 141.96 147.12
Rev surprise+0.7%-2.1%-0.9%
EPS consensus ($)0.5468*0.5778*0.5902*
EPS actual ($)0.52 0.52 0.55
EPS surprise-4.9%-10.0%-6.8%
  • Q3 FY26 slight misses on both revenue and EPS suggest near-term estimate fine-tuning; however, stronger-than-expected margin execution (raised FY25 margin guidance) and improving proactive/studies pipeline could support medium-term EPS trajectory despite Q4 calendar headwinds .

Note: Values marked with an asterisk (*) are from S&P Global consensus estimates. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Reactive (dispute-related) momentum and better utilization/pricing are offsetting proactive softness in consumer electronics; chemical regulatory and studies work are improving into Q4 .
  • Despite modest Q3 misses vs S&P consensus, management raised full-year margin guidance to 27.4%–27.65%, underscoring execution on rate and utilization — a positive for earnings quality and cash generation .
  • Q4 comparisons face a structural workday headwind (13 weeks vs 14 last year) and seasonally lower utilization; position for optics pressure on y/y growth even if underlying demand is solid .
  • Capital returns remain robust (new $100M repurchase authorization; $0.30 dividend), supporting downside protection and EPS accretion amid steady cash flow .
  • AI-related safety-critical and human-machine work broadens Exponent’s opportunity set across industries (auto, utilities, life sciences, consumer), bolstering medium-term growth durability .
  • Watch rate realization normalization (toward ~3%–3.5%) and reacceleration of proactive work as hiring ramps; both will influence 2026 margin mix .
  • Near-term trading: balanced setup — raised margin guide and buyback support vs modest Q3 miss and Q4 calendar headwind; medium term favors the thesis as reactive strength meets a recovering proactive funnel .