Q3 2019 Earnings Call
[laughter] Good day and welcome to the ex <unk> third quarter fiscal 2019 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Whitney Kukulka. Please go ahead.
Thank you operator, good afternoon, ladies and gentlemen, thank you for joining us on exponent third quarter 2019 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 Www Dot exponent dot com.
Josh Investor. This conference call is the properties exponent and then taping or other reproduction is expressly prohibited without prior written consent.
Joining me on the call today are Dr., Catherine core again, President and Chief Executive Officer, and Rich Linger Executive Vice President and 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 Exxon is 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 could differ from forward looking statements can be found in exponent periodic SBC filings, including those factors discussed under the caption risk factor in excellent most recent Form 10-Q .
Forward looking statements and risks in this conference call are based on current expectations as of today, an exit it assumes no obligation to update or revise them, whether as a result of new developments or otherwise.
And now I will turn the call over to Dr., Catherine Korigan, President and Chief Executive Officer Kathryn.
Thank you and good afternoon, everyone I will start off today by discussing our third quarter performance.
Rich will then provide a more detailed review of our financial results and expectations for the rest of 2019, and then we will open the call for questions.
Exponent reported high single digit net revenue growth during the third quarter, representing continued execution driven by positive market trends well lapping the large human factor study that concluded during the third quarter of 2018.
We are reiterating our prior revenue guidance for the full year, but as a result of our strong performance year to date, we are increasing our EBITDA margin outlook and remain confident in our continued execution this year and beyond.
Net revenues in the quarter grew 8% year over year to 95.5 million.
Net income increased 13% to 19.6 million as EBITDA increased 5% to 26 million.
Our results demonstrate the market's growing demand for a world class engineering and scientific advice.
We continue to grow our reacting to services as clients called upon exponent to answer the question why did that happen.
These questions ranged from why did the building collapsed.
To why did the advanced driver assistance features not stopped the car.
Our proactive services also continued to expand as clients face the challenge of how to build safe and highly reliable product. That's their technologies ROE when complexity. We also continued to benefit from multifaceted and global regulatory framework.
During the quarter, we continued our work for Pacific gas and electric to evaluate the integrity of their electric infrastructure and to help mitigate safety risks for customers and communities related to wildfires in aggregate. This works contributed approximately 4% of revenues in the third quarter.
We anticipate these projects will continue but they will step down over time.
Our international arbitration work related to large capital projects expanding geographically as we had projects in Asia, Australia, Europe , the Middle East and North America.
Our human factors on products studies continue to provide unique insights into the offerability usability and safety of human machine system across a diverse set of focus areas.
Well, we are not currently conducting an individual study of the same scale as our large human factor study of 2017 and 2018, we have expanded the portfolio of use cases and technologies that we are evaluating for this clients and for other clients as we look forward human factor.
This is among the most exciting capabilities that will drive growth across multiple markets for walnuts.
Exponents engineering and other scientific segment represented approximately 81%, it's up the company's third quarter and year to date net revenues.
Net revenues in this segment grew approximately 8% in the third quarter ended the first nine month as compared to last year.
For the third quarter. This segment had noteworthy performances in its human factors material Sciences polymer Sciences thermal sciences, biomedical and construction practices.
Clients continue to demand exponent interdisciplinary solutions for increasingly sophisticated systems and devices.
We are broadening our reach across the product lifecycle, improving the safety and the performance of both new and existing technologies.
These engagements cover a breadth of industries that includes consumer products energy transportation construction and life Sciences.
Exponents environmental and health segment represented approximately 19% of the company's third quarter and year to date net revenues.
Net revenues in this segment grew 6% in the third quarter and 4% year to date as compared to last year.
Within this segment, the chemical regulation and food safety practices continue to grow as exponent scientist evaluated the effects of chemicals, and new product on human health and the environment.
Our interdisciplinary teams of experts are earning exponentially increasing international recognition at the top engineering and scientific consulting firm.
For large capital projects, we are uniquely positioned to provide experts from multiple engineering disciplines as well as construction delay and damages.
Clients, who must meet health and safety regulations as they distribute products globally, our scientific and regulatory expertise in North America, Europe and Asia is invaluable.
Exponents is capitalizing on long term trends as we are confident in the future growth of the business.
Rich will now provide a more detailed review of our financial performance and business outlook.
Thanks Catherine.
Let me start by saying that all comparisons will be on a year over year basis, unless otherwise specified.
Third quarter of 29 teen total revenues were up 7% to one on 1.5 million.
Revenues before reimbursements for net revenues as I will refer to them from Iran, Rub, 80% 95.5 million.
Net income for the third quarter increased 13% to 19 point sixmillion or 36 cents per diluted share as compared to 17.5 million or 32 cents per diluted share.
For the third quarter, the tax benefit associated with accounting for share based awards was $1.7 million worth three cents per diluted share as compared to $100000 or zero cents per diluted share last year.
EBITDA for the quarter increased 5% to 26 million.
Up from 24.8 million a year ago.
For the first nine months of 29 team.
Revenues and net revenues increased 7%.
307.1 million and 289.2 million respectively.
Year to date net income increased 13% to 63 point Threemillion.
Earnings per diluted share were $1.17 cents as compared to 56.2 million and one darn four cents per diluted share.
Year to date.
The tax benefit associated with accounting for share based awards was $7.4 million or 14 cents per diluted share as compared to 4.2 million or eight cents per diluted share last year.
Year to date, EBITDA increased 7% to 79.4 million as compared to 74.3 million.
No more hours in the third quarter increased 5.4% to 37000.
For the nine month period billable hours increased 1.6% to 1.018 million.
For the third quarter.
Utilization was 71.6%, which is down from 73% in the same quarter last year.
Year to date utilization was 73%.
From 74.8% last year.
Utilization decline due to challenging year over year comparison due to large project that concluded in the third quarter last year.
For the full year 2019, we expect utilization to be 71% to 72%.
Which includes the impact of the large project and a 50 threerd week, which will be an extra week in the fourth quarter.
This Additionally, we will increase not revenues by approximately 5% for the fourth quarter.
And one in a quarter percent for the year.
The additional week will include the 2020, new year's holiday and associated vacations, which will reduce utilization for the fourth quarter by 200 basis points and a four year by 50 basis points.
So for the fourth quarter, we expect a border five percentage point decline in utilization from the third quarter.
To the additional holidays and vacations.
We continue to expect our long term utilization to increase as we build more critical mass and our offices and practices and grow our proactive services.
Dr Go fulltime equivalent employees in the quarter were 906 up 7.4% year over year.
We expect after you used to grow sequentially.
In the fourth quarter by approximately 1%.
The realized rate increase was approximately 2.5% for the quarter.
We expect a year over year realized rate increase of approximately 2% to 3% in the fourth quarter.
For the third quarter EBITDA margin.
Decreased 78 basis points to 27.2% of net revenues.
Year to date EBITDA margin has decreased 11 basis points to 27.5%.
For the quarter compensation expense after adjusting for gains and losses in deferred compensation grew 8%.
Included in the total compensation expense is a gain and deferred compensation of 360000 as compared to a gain of 1.84 million in the third quarter of 2018.
As a reminder gains and losses in deferred compensation are offset and miscellaneous income and have no impact on the bottom line.
Stock based compensation expense in the quarter was 3.8 million as compared to 3.6 million last year.
We expect stock based compensation to be approximately 3.7 to 3.9 million in the fourth quarter.
Other operating expenses increased 7% to 8.3 million and third quarter.
Included in other operating expenses is depreciation expense of 1.7 million.
For the fourth quarter, we expect other operating expenses to be in the range.
8.4 to 8.6 million.
Jim <unk> expenses were 5.5 million in the quarter up 17%.
DNA expenses are expected to be in the range of $5.4 million to $5.6 million in the fourth quarter.
As a reminder expenses related to our biennial managers meeting our split between the third and fourth quarters and our what has really driven the larger than normal increase in DNA expenses.
Thanks, Brian its consolidated tax rate was 22.1% for the quarter as compared to 27.2% and the same period last year.
Year to date inclusive tax benefit of share based awards X bonnets consolidated tax rate was 18.2% as compared to 21.2%.
We expect consolidated tax rate to be approximately 27.5% in the fourth quarter and our full year tax rate to be approximately 20.6.
Percent.
Moving to our cash flows year to date operating cash flow was 52.3 million.
Capital expenditures were 4.5 million for the quarter.
We expect caps that capex to be 20 to 22 million and 29 team.
Capex should return to approximately six to 8 million annually. After the completion of the new building in Boston.
Year to date, we distribute distributed 25.2 million to shareholders through dividend payments and close the period with 210 million in cash and short term investments.
Today, we announced a fourth quarter dividend payment of 16 cents and reiterated our intent to continue to pay quarterly dividends.
Well, the third quarter and first nine months of 2019 reflected some difficult year over year comparisons. We are pleased with the strength of the business. We're also pleased that margins are only slightly down considering the completion of the large project and the buyer.
Ill managers meeting.
As we look forward, we continue to expect revenues before reimbursements for the full year 2019 to grow in the high single digits as compared to last year.
We expect fourth quarter revenue growth in the low to mid teens, which includes the impact to the additional weak in the fourth quarter of 2019.
Due to our strong performance year to date and expectations for continued positive momentum, we're increasing our EBITDA margin guidance for the full year 2019.
We now expect EBITDA margin for the full year to be down approximately 25 basis points from the 27.3% achieved in 2018.
This includes EBITDA margin declining 25 to 75 basis points in the fourth quarter as compared to the same period a year ago.
I will now turn the call back to Catherine for closing remarks.
Thanks Rich.
Over 50 years exponent has focused on being ready to address our clients impending technological challenges.
By leveraging our leaders its leadership position in failure analysis, our industry experience and to the constant influx of the best and brightest talent from top universities, we position ourselves ahead of the curve.
We are prepared to advise our clients on the causes a failures as well as how to produce safer healthier sustainable and more reliable products and processes.
These market drivers combined with Exxon its world class team will fuel long term growth.
We will now open the call for questions operator.
If you would like to ask a question. Please signal that pressing star one on your telephone keypad at this time.
We'll take our first question today from Joseph foresee with Cantor Fitzgerald. Please go ahead Sir.
My first question is just maybe can you give us update on any large projects that you still have.
Hi, there going on or in the pipeline and specifically color on PG any.
Both on the bankruptcy side and the continuing work I know there was some.
Potential power outages.
On the West Coast.
Yes, so we do expect show that the.
The work with TG any will continue as we said it represented in aggregate about 4% of our revenue in the quarter.
It's clear to us that from an engineering and from a safety standpoint.
This client has some very challenging problems, there's tremendous public pressure, obviously being brought to bear upon them, but with respect to their infrastructure.
You know work, we're not into the details of everything that we're doing but I think the good news is that we do have a longstanding history of working on very tough issues with this clients.
Issues that we are uniquely qualified to address.
And so while it's difficult to really have a crystal ball on how that will step down over time, you know their priorities can shift quite rapidly in situations like this it makes it difficult for us to predict but.
If if the San Bruno explosion explosion back a number of years ago as any indicator we had a lot of acute activity. Following that event and then a level of ongoing work in the integrity management Arena that continues to this day and really this area of integrity management I think represents an.
Opportunities it really for growth across the industry. So we.
We're very pleased with sort of where we are with regard to our technical capabilities and services for that industry and may be rich you can handle with regard to the bankruptcy issue.
Yes on the as we've indicated before we have about $3 million of receivables outstanding debt or pre bankruptcy dollars.
It turns out that as we've indicated before we anticipate being paid in full on all of that what we understand from the legal analysis.
Ginnies proposal for restructuring as well as the two alternative proposals are the judges allowed to bring forward that under both all three of those scenarios and is expected that the unsecured.
Oh holders will be paid out in full so we continue to.
Anticipate that payment, we do have about a 5% reserve on not just on it being on a conservative nature.
Got it Okay and then my second question is as we look at and I'm not asking for guidance for next year, yet, although it's about to sound that way.
If we look at next years.
Trajectory for the business you did a very good job of kind of filling the hole on margins this year.
How should we think about.
Growth rates and.
Margins as we head into 2020 are we returning to the normal expansion from the exit your levels on the margin side are we going back to sort of all the mid single digit growth rates any thing to point out from a seasonality perspective, I know, it's early but I'm just trying to get a sense of.
Because we're going to.
Fourth quarter, how that's going to start to yeah.
Yeah. So.
Ill look where we're just initiating our annual process that we go through on our planning we go out to each of our business units as well as our industry teams and our are going through that planning process today.
As we speak.
But we're still early on so we're not in a position to be able to give a full guidance as it relates to 2020 and we'll bring that forward. When we have it at the conclusion of the fourth quarter, what I would say is that look.
We are continuing to feel.
Good about a them market trends our position in the market and what we're building upon a you know our expectations over the long term continue to be that we can grow the business in the high single to low double digit growth.
As we look at 2020, we will clearly.
Had immediately one in a quarter percent head win.
I'm, having that extra week in 2019, the 50 Threerd week that we won't have next year, we'll provide that.
In addition to that as Katherine has just gone over about 4% of our work is tied into the wildfire and integrity management work for be Jenny.
And at this point in time, we don't know what level that will likely to step down too.
You know, we could end up with a little bit a headwind related to that work stepping down, but overall or at least right. Now. We've you know we feel good about where our businesses and.
We'll be able to provide more color when we get to the fourth quarter earnings announcement.
Got it Okay and then the last one from me you talked about high single digits versus low single digits, maybe you could just.
Qualify for us what opportunities.
You have in front of you like autonomous driving or other areas that would take you from that high single digit to that low.
Double digit area code in and maybe you could just crystallized for us where.
The demand would come from if that did indeed take place. Thanks.
Yes, so Joe I mean, there there are a number of areas of strength that I think we that we expect are going to kind of started drives the growth or fuel the growth that we're talking about now you've heard me talk about human factors.
This is one of our most exciting capabilities that we have.
We are expanding what we are doing with regard to the types of technologies that were addressing from a human factors perspective.
One of the most exciting things there is really that it goes across quite a few industries. We've got the top talent in that area.
Work in consumer electronics in consumer products more broadly this goes over into opportunities around life Sciences and medical devices.
We are seeing demand on the transportation side with everything we're doing around advanced driver assistance and autonomy. As you mentioned a you know we're getting traction to some extent in oil and gas and in the utilities with regard to human factors you know, even when you're thinking about things like worker fatigue and optimizing.
The human performance side of that so this is as we as we use our industry teams to really penetrate at a client level into those spaces human factors is very much what I call at the tip of the sphere, it's something that we can really use ticket into those markets another area that.
I'll point to that that where we use that tip of the sphere approaches is batteries.
This is something that we've been traditionally strong in on the electronic side.
But theres more traction coming with regard to transportation Theres more traction coming with regard to grid scale storage in the utility space. So that's another area, where we really have opportunities to penetrate more broadly across industries and then of course the international dispute the G.
Graphic expansion there we are in engagements that truly our global and around the world.
Our reputation we were we were not a name in this space two years ago at all we have scratched the surface.
But there remains quite a bit of opportunity and we're very focused on the recruiting side, there I'm being able to.
You know bring the premium expertise to the marketplace on construction delay around the engineering side, and then of course around the damages side.
So those are things that I really see as you know drivers of that growth going forward.
Thank you.
Our next question comes from Elecsys, you speak with D.A. Davidson. Please go ahead.
Hi, guys and congrats thanks for taking my question. So just is.
Jumping back to the Pts and thanks for more information on that I was wondering if you were able to provide us a bit more of a specific timeline for an expectation on a on a step down in revenue contribution from that.
No look the we're not able to do that what we can say is that it's a quite a dynamic situation. We work on a for a number of different groups or on a variety of issues related to not.
On the failure analysis sort of acute situation, but a number of different things.
Related to integrity management going forward.
So.
We have a very flexible on dynamics.
Work environment with them.
And it's just a little bit hard to tell where that will go what we know from the past it as Katherine said before is that historically the tail has been long a when we move into not just doing the analysis of the event, but really start.
To help clients and in particular this client look at how to.
Manage that risk going forward.
Got it okay. Thanks, and then we've we've talked high level in the past about events like Brexit big potential benefit or opportunity to the company due to an increase that regulatory uncertainty or changes and you know with it with it coming.
Into effect a couple of weeks I was wondering if you were seeing that come into fruition at all.
Yes. So you know we are monitoring of course, the situation I talk about dynamic situation that is certainly one of them.
In the near term.
It's certainly conceivable that the regulatory framework could become more complex as a result of this you know are there more filings that will be required around that we don't exactly know what those details are we do know that our clients are clearly monitoring it they're asking us about it we're prepared for it.
We continue to focus in that area of the business.
On bringing a global offering to our clients in that space, which we are prepared to do with or without Brexit. We've been we're ensuring that we have the has the ability to execute on the client needs in that way and to the extent that there's been a.
Additional regulatory framework that emerges from that there could be there could be more opportunity. We certainly haven't seen any kind of material effect at this point with regard to any changes in that business over on the regulatory side.
Okay that makes sense.
I was hoping that it just lastly, if you had any more granular breakout of the impact on third quarter utilization coming from vacation time versus the the bi annual meeting.
Yeah, I mean are our vacation the Miami on meeting a probably had.
You know a half a percent impact on the utilization.
Half percent <unk> percent in that range did had an impact stepping down from the second quarter due to the third quarter or the remainder of the change is related to the the vacation and holiday that changes.
Great. Thank you thats good detail.
And our next question comes from Andrew Nicholas with William Blair. Please go ahead.
Hi, good afternoon.
In the press release in your prepared remarks, you mentioned on multiple occasions deposits momentum internationally, particularly with respect to disputes.
I just wanted to drilling on that a little bit I was hoping maybe you could talk little bit more by your plans to capitalize on that opportunity what it might mean in terms of hiring plans internationally and then maybe if you could provide a little bit more color on the competitive environment, there and how you plan to differentiate your services versus the competition.
In international disputes.
Yeah. So thanks for that we are we are definitely building on our international reputation as I mentioned and this is it's very much focused on it has been very much focused on the engineering and just each side as you mentioned, although you know there.
More recently traction around.
The life Sciences, and medical device arena as well, so I'm happy about that but with regard to your question about sort of the competitive landscape and how we will differentiate ourselves.
We already have and will continue to do that and the way that we have done that is by bringing not only the construction delay and damages expertise to the party but.
But what we are also bringing his deep deep engineering subject matter expertise and that is something that is completely unique in this marketplace.
You know the competitors in that space, whether that's in FDI, whether that's an end Cora and others as well they are not able to bring that depth and breadth of engineering expertise still actually what happens is that the customer the law firm needs to go out to say.
Local university for a professor or something like that they are not able to have that coordinated and integrated work products from their expert.
Advisers and that is something that we have found in a number of these engagements to be a true differentiator for us and something that this marketplace is very hungry for.
Not only just that you can do one stop shopping and find all of your experts in one place, but theres infection and additional advisory service that we're providing by integrating all of this together. So it really does become a an exciting area and we are focused on.
Building that brick by brick with the with bringing the talent into the organization I'm. You know we have a we have a small London operation. We are focused on bringing top talent into a into that area with boots on the ground that is a small but multi disciplinary office we.
You know in Singapore, as well, which is a focus for these particular international arbitration.
And were able to leverage our Hong Kong facility in order to sort of deliver in that geographic regions. So you know as far as that geography and as far as disciplines are concerned we're very much focused on you know really really meeting the needs of that marketplace in a differentiated way.
Great. That's very helpful. Appreciate that and then maybe one more for me.
Just wanted to ask about your expectation for head count growth in the next few quarters.
And maybe into 2020 given.
The amount of demand you're seeing in the market.
Yes so.
Well, we indicated in the in there my comments was that we expected that head count growth would be a sequentially grow about 1% ended the fourth quarter.
That tends to be a quarter that the net growth is a little bit slower, but just in a sense that we don't know higher that many people in late November into the December timeframe.
As we again, a very important part of our planning process is going to our business units getting their business development plan matching that would what resources that they're going to need from.
Specialty head count growth by geographic head count growth to put that together. So at this point in time, you don't we don't have that yet.
But what I would say is our expectations continue to be that head count will grow.
Overtime in the 4% to 7%.
Thanks.
That's what we think is a very healthy I head count growth that can support our ability to grow the business in that high single to low double digit overall growth right.
Great. Thank you.
And our next question comes from Tobey Sommer with Suntrust. Please go ahead.
Thank you could you describe.
The progress you're making on some of your more recent.
Sales strategies and go to market approach in recent years and.
Kind of assess where we are and what impact those strategies that had versus.
Prospectively, what kind of impacts they may have in the future.
Sure. Yes. So you know in addition to flat doing our planning process in the fall around our our internal business units. We're also very focused right now on the business development planning process for our industry teams and this is going across.
Electronics and utilities life Sciences, as well as oil and gas then emerging transportation technologies.
We were focused on defining the services and the capabilities that we can bring across industries as well as across two clients within an industry. So I you know I mentioned before the sort of tip of the fear approach with certain of our capabilities and lately.
I've been pleased with what I'm seeing with regard to being able to win early work with a new clients, let's say in the battery space, that's an offering that tends to be kind of at the tip of our C or and then being able to spread out with regard to.
Emerging transportation and autonomous vehicles that tip of the sphere can be laser safety and light our related work and so this this approach of being able to get in with that small engagement and then.
Expand that across that client and that industry is one that I am seeing progress and I mean, I'm encouraged by the long term opportunities that will see here I think that our managers meeting wasn't opportunities really to put some energy around staff we see.
It's a great deal of time asset managers meeting focused on you know our marketplace the capabilities that we're delivering to that marketplace and it's that team as managers as you know that that is our salesforce. So as I went around and touched base with concern.
Maintenance in in these key markets both on the industrial side as well as the legal side I'm feeling very positive when I hear their perspectives on the different capabilities that we have I think they all walked out of there better educated on our opportunities to cross sell so there's a lot of energy around this in the.
In the company, it's our job obviously to execute and we've got to do that client by client and we've got to do that meeting by meeting and these relationships takes time to develop.
But I do think that we're seeing.
That that there so theres a positive outlook from my perspective in terms of what we're doing here.
Okay.
This is kind of a follow up question I think to one that was asked previously but if you ever had.
Reactive work and I'm thinking of the PNG example, here.
Specifically that has then led to proactive work within.
The same industry and you've been around for a while are active in many industries and have been have long history. So I thought there may be.
Situations or examples that that maybe you could point out to us.
Yeah, Yeah, absolutely. So this is the answer is a resounding yes. There are many examples and this is this can be as an important part of the sales process. You know the one very public example that I will talk about is the Samsung Galaxy note seven I'm you know this was an example of.
Have a serious collection of battery related issues. It was very public it was a huge reputation all hits on the part of Samsung and what we saw across the industry in electronics and even into other industry with a with a heightened concern.
Because of the problems that Samsung had encountered a with their with their product. It was very heightened concern around batteries around the electronic controls around overfeeding related issues around charging issues and so that drove a substantial increase in demand around.
Proactive services related to safety and performance of batteries that that we continue to capitalize on you know across industries and so you know failure or failure is a great motivator for trying to really come up with ways to improve whether that's reliability, whether that's for sure.
Formants et cetera, so that is a that as a pathway that we routinely tried to leverage and I think really gives us a unique position in the marketplace, because who better to help you move moving forward than the ones to figure it out why it happened in the first place I mean Tobey. This is a you know this has been everything from.
Clients in the appliances are white goods area.
Being buyers in there.
You know maybe at a refrigerator a washer dryer situation that led by then to a you know and audit of they're not they're they're process of design.
Into their manufacturing processes into their maintenance.
Modes and things of that type it goes.
Over into all the way back to the utility work that we did for PGD on the gas line explosion here in San Bruno.
That is led to the integrity management work that we've done over the last.
567 years with them related to that infrastructure and looking at it. So I had some time is that it is a matter of that client boring in and trying to make those improvements we see this.
In the refinery industry, where there's an incident at one of our oil and gas clients refining operations. If it turns out they identify an issue. There then they bring ascend to go and and help them identify if those issues might occur at other operations that they.
I have.
Not only around the U.S., but globally. So far. These you know have definitely failure analysis on our reputation there and our entries into client I have led to these opportunities on the more proactive side.
Right and I guess.
Would seem that the utility industry might be right for a new kind of best practice to go with managing their assets to failure.
With respect to your geographic expansion that you see that you have already talked about.
What areas did you expand into geographically and.
How big a geographic footprint.
Could you expand into so what it with what's kind of the ongoing opportunity.
So what are they start off there and then let Katherine pick it up look.
Today.
You know we're growing internationally in two different ways. One is what we've got in what I'll call boots on the ground. So you know in Hong Kong and and Shanghai. We've got offices. There are these offices were originally put in place to serve our consumer electronic.
Six clients and other consumer products clients robbing products manufactured in our in Asia in assisting them in into developing more reliable and safe products out of that that has expanded in Hong Kong do include a work related to litigation or arbitration work and such.
Today in Asia, we do have a couple of people in Singapore as well as Katherine has indicated.
That are focused around these capital a project.
International arbitration that are related to that those.
We view is that on a on the ground basis, we will see on not only as clients continue to find the right place to manufacture products over in Asia.
Movement occur, but we will also continue to see that there are more disputes that are being held.
In Singapore, and Hong Kong, as well and we will grow along with that.
What we also seen us over in the UK, primarily our growth not only to support the regulatory environment around chemicals in the environment and such but also as was described we are expanding into the engineering disciplines now again still a smaller.
Operations, but growing.
There and we expect that London is going to be one of the leading places for our engineering practice, because it will cover proactive services around Europe . We're we're out working as Katherine described in the life Sciences, a medical device industry as they bring products to market and helping them as we do.
Set of our work boots on the ground, we actually push that over into the low teens.
As a percentage of our business when we add on the draw of our experts that are here in the U.S. we've got worldwide.
Recognized experts that are brought in on these engineering disciplines to form these teams to bring them together, we actually expect that demand to continue to grow as well and it will grow faster as we get even getting better.
Expertise on the ground in in Europe , and in Asia, because as the right people are on the ground, who our lead sales. They will end up drawing those experts that we have here in the you asked to these global matters.
Thank you very much.
And our next question comes from Sam, England with Sprint and Burke. Please go ahead.
Hi, guys edged helps me the fast one could you talk a little bit more about some of them. Okay. So having success in with battery technology outside it said mobile devices and how big the opportunity is in mobile devices that fees other areas the battery technology.
Yeah. So one of the big areas, Sam that has really increased traction over the last.
Couple of quarters has then in the transportation space, specifically around micro mobility, So think scooters.
I think electric bicycle.
These are the transportation logistics providers I'm sort of getting into the hardware business.
And it has created.
Fair bit of demand, both reactively as well as proactively and you know it gets back to Toby's question about how do the reactive opportunities create pathways for proactive work. This is another great example of that specifically in the battery space. So you know these.
Scooters, our our run around all day, there abused in the city and they come back to the.
Charging place late at night, and they're all lined up and you know, there's a fire, let's say and there could be a variety of reasons for that and so we'll go in and we'll be able to handle the root cause analysis for that and also be able to.
Engage proactively with this client in a preventive sense.
To try to ensure that that that's sort of mode of failure is not something that they are going to see.
And so you know microgram ability as a good one another one is around large scale energy storage. So you know, they're increasing numbers of utilities that are utilizing large scale batteries in order to you know it to sort of broaden their capabilities around there.
Our electrical delivery and so the you know these large scale batteries create new issues, but the fundamental the fundamental physical principles and this is where our people are so strong are the same in that large scale battery as they are in that small.
Ill battery in that you know in that mobile phones for example, and so we've been able to really leverage the expertise that we have at that small scale into being able to do both reactive as well as proactive work you know there have been incidence related to these.
These large scale a battery storage facilities, we've been engaged in those and that has in fact led to safety related.
You know design reviews, and functional safety reviews, and things like that so we we hope again to really use this battery capability at that tip of the C or so to speak in multiple industries to be able to sort of drive more of that more of that industrial work, Yeah, I think you're you're seeing it even in.
A data centers, where a what the fire safety people lab determined is now that.
More and more battery backup in.
And batteries that are in these server farms in an environment.
They're realizing the risk that they run in these very large facilities.
When the load of batteries batteries continues to increase in those environment. So are there are some new standards that have come out now or in development and other jurisdictions that are impacting that just give you a.
Yeah. It it's now touching on to everywhere.
Great. Thanks.
Excellent on capital allocation, just wondered if there's any change in plans that whether we should expect any.
The buybacks in the rest of the year.
Yeah again.
We continue to have a.
The open our repurchase program, we obviously have not done any activity in the first nine months of the year.
That doesn't mean, we won't do some in the fourth quarter.
We are trying to on average at least be buying back what we're putting out there is no guarantee of the exact timing of that fitting into an exact calendar year and such but.
But we are continued you see that as a way that we're going to return value to shareholders.
And.
That continues to be open for the fourth quarter.
And it appears there no further questions in the queue at this time. So this will conclude today's call we'd like to thank you for your participation and you may now disconnect.