Exponent forecasts 2026 net revenue growth of 10%–11% as it raises EBITDA margin outlook to 28%–28.3%

• “Exponent delivered a strong third quarter with double-digit growth in revenues and earnings, reflecting continued demand for our specialized integrated engineering and scientific expertise,” said CEO Catherine Corrigan, highlighting that “user research continued to be a strong contributor to our growth” and that disputes, failure analysis and product safety work grew “across chemicals, consumer products and transportation.” (CEO & Director Catherine Corrigan)
• Corrigan tied demand to product complexity: “Technology is advancing rapidly, becoming more deeply embedded in physical products and systems and interacting with people in increasingly complex and consequential ways,” adding that clients increasingly need to know “how it performs when people actually use it in the real world.” (CEO & Director Corrigan)
• On AI-related positioning, President John Pye said, “In total, we estimate that AI is a direct element of roughly 15% to 20% of our business this year,” and framed the pull-through as AI moves from theory to work: “questions that were hypothetical a year ago are becoming real projects.” (President John Pye)
• CFO Eric Anderson summarized quarterly performance with: “For the third quarter of 2026, total revenues increased 18% to $173.7 million and… net revenues… increased 12% to $153.1 million,” and added, “Diluted earnings per share increased 16% to $0.64 per share.” (Chief Financial Officer Eric Anderson)

Outlook

• “For the fourth quarter of 2026… we expect net revenues to grow 8% to 10% and EBITDA to be 26.3% to 26.8% of net revenues,” Anderson said. (Chief Financial Officer Anderson)
• “For the full year of 2026, we are raising our net revenue and margin guidance,” Anderson said, specifying “net revenue growth of 10% to 11% and EBITDA to be 28% to 28.3% of net revenues as compared to 27.6% in 2025.” (Chief Financial Officer Anderson)
• Compared with the prior quarter’s call, management again increased full-year targets; in Q2, Anderson said, “For 2026, we are raising our full year guidance… net revenues to grow 9% to 10% and EBITDA to be 27.8% to 28.1% of net revenues.” (Chief Financial Officer Anderson)

Financial Results

• Anderson reported profitability and operating leverage: “Net income for the third quarter increased 10% to $30.9 million,” and “EBITDA for the quarter increased 16% to $45 million, producing a margin of 29.4% of net revenues.” (Chief Financial Officer Anderson)
• Capacity and pricing indicators were described as: “Billable hours in the third quarter were approximately $405,000,” “utilization in the third quarter was 76.7%,” and “the realized rate increase during the third quarter was approximately 4%.” (Chief Financial Officer Anderson)
• Segment mix was stable, with different growth rates: “Engineering and Other Scientific… represented 85% of net revenues… increased 13%,” while “Environmental and Health… represented 15%… increased 3%.” (Chief Financial Officer Anderson)
• On capital return and cash-driven income headwinds, Anderson said, “We did not repurchase any of our common stock during the third quarter of 2026,” while “interest income decreased to $668,000… driven by a decrease in cash,” and “we distributed $14.7 million to shareholders through dividend payments.” (Chief Financial Officer Anderson)

Q&A

• Joshua Chan, UBS: asked if Q3 utilization strength was structural or calendar-related; Chief Financial Officer Anderson said, “It wasn’t really a structural calendar type thing. It was really just broad-based demand across the business,” and added a large study “represented 4% of revenues in the second quarter… stepped down to 2.5%… [and] we were expecting it to drop below 2%.” (Chief Financial Officer Anderson)
• Chan, UBS: asked how AI exposure has evolved; President Pye pointed to growth across “all of those layers,” and Chief Financial Officer Anderson said, “I don’t have a number to give you, but it wasn’t something close to 0.” (President Pye; Chief Financial Officer Anderson)
• Andrew Nicholas, William Blair: pressed on utilization’s implications for hiring and pricing; Corrigan said, “we’re absolutely pushing that recruiting effort,” while noting, “we will obviously have more to say about things like pricing and specific headcount growth.” (CEO & Director Corrigan)
• Nicholas, William Blair: asked for proactive vs. reactive growth; Anderson said, “on the proactive side, it grew in the… high teens and the reactive side in the high single digits.” (Chief Financial Officer Anderson)
• Tobey Sommer, Truist: asked how fast a large project winds down; Anderson answered, “we expect to wind down to under 1% of revenues in the fourth quarter.” (Chief Financial Officer Anderson)
• Sommer, Truist: probed reactive AI opportunities; Pye said ADAS-related reactive work “is not a future-looking expectation. That’s here right now,” Corrigan added “the medical device arena” as “the next kind of… ramp,” and Schlenker cited “construction disputes related to AI systems” and “significant events… fires… at data centers around the world.” (President Pye; CEO & Director Corrigan; Executive VP Richard Schlenker)
• Sommer, Truist: asked about AI firms and model behavior showing up in disputes; Pye said Exponent’s exposure is “more on the earlier stages,” while Schlenker pointed to “actual product liability suits… [and] actual regulatory investigations” in autonomous vehicles. (President Pye; Executive VP Schlenker)
• Sommer, Truist: asked where hiring will concentrate; Corrigan listed “human factors,” “biomechanics,” “thermal scientists,” “polymer folks,” “metallurgists,” and “energy storage” experience, plus continued senior hiring in Environmental and Health “when you think about things like PFAS.” (CEO & Director Corrigan)
• Tomohiko Sano, JPMorgan: asked why Q4 growth moderates vs Q3; Anderson said, “on a sequential basis, it’s not really moderating,” tying it to seasonal utilization and adding, “we’ve got a tough comparable.” (Chief Financial Officer Anderson)
• Sano, JPMorgan: asked how Environmental and Health reaccelerates; Corrigan said the focus is “recruiting and in particular, senior recruiting,” adding, “those principles… continue to ramp.” (CEO & Director Corrigan)
• Sano, JPMorgan: asked about buyback pace vs investment/M&A; Anderson said, “Our philosophy on that hasn’t changed,” citing dividends, opportunistic repurchases “when there’s pullbacks,” and “evaluate opportunities for maybe a small acquisition.” (Chief Financial Officer Anderson)

Sentiment Analysis

• Analysts’ tone was slightly skeptical around sustainability of utilization, Q4 moderation, and segment growth, as reflected in questions like “what’s driving that moderation?” and whether utilization suggests “lean a little bit further into pricing in ’27.” (Tomohiko Sano, JPMorgan; Andrew Nicholas, William Blair)
• Management tone was positive and confident on demand and positioning, using statements such as “we are raising our net revenue and margin guidance” and “we are well positioned to finish 2026 on a strong note,” while acknowledging areas still in planning, including “more to say about things like pricing.” (Chief Financial Officer Anderson; CEO & Director Corrigan)
• Versus the prior quarter, the tone stayed confident but shifted toward reinforcement after Investor Day, with Corrigan saying, “This quarter’s results reinforce the answers,” while Q2 leaned more on describing trend drivers and a large study’s benefit. (CEO & Director Corrigan)

Quarter-over-Quarter Comparison

• Q3 placed heavier emphasis on Investor Day framing and “the convergence of technology, infrastructure and humans,” while Q2 focused more on how “proactive work experienced strong growth… led by demand for user research studies.” (CEO & Director Corrigan)
• Guidance language tightened upward again in Q3: “we are raising our net revenue and margin guidance,” after Q2’s “we are raising our full year guidance.” (Chief Financial Officer Anderson)
• Large-study contribution visibly stepped down from Q2, when Anderson said it “represented approximately 4% of net revenues,” to Q3 commentary that it was “2.5% of revenues” and expected “under 1%… in the fourth quarter.” (Chief Financial Officer Anderson)
• Environmental and Health segment growth decelerated from Q2’s “increased 9%” to Q3’s “increased 3%,” alongside management’s stated focus on senior hiring to expand capacity. (Chief Financial Officer Anderson; CEO & Director Corrigan)

Risks and Concerns

• Seasonality and comparables remain a planning factor, with Anderson noting fourth-quarter utilization is “seasonally lower… due to more holidays and vacations,” and Q4 growth reflecting “a tough comparable.” (Chief Financial Officer Anderson)
• Business mix and project timing risk were implied through the wind-down of a large engagement, with Anderson stating the project is expected to fall to “under 1% of revenues in the fourth quarter.” (Chief Financial Officer Anderson)
• Execution risk in Environmental and Health was addressed through investment in senior talent, with Corrigan saying, “We’ve brought on some principal level folks… They continue to ramp.” (CEO & Director Corrigan)

Final Takeaway

Exponent’s management described Q3 as broad-based demand-driven, with user research and dispute/failure analysis contributing to “double-digit growth” and utilization strength, while also positioning AI as a meaningful component of current work (“roughly 15% to 20%”). The company raised full-year 2026 net revenue growth and EBITDA margin guidance, and framed Q4 growth as supported by continued robust activity despite a tougher prior-year comparison and typical holiday-driven utilization seasonality. Management also emphasized recruiting—particularly senior hiring in Environmental and Health—as a key lever to sustain growth across expanding, higher-consequence client problems.

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