Q4 2019 Earnings Call
Good day, and welcome to the exponents fourth quarter and fiscal year 2019 earnings call Todays conference is being recorded at this time I would like to turn the call over to Whitney.
Yeah.
Thank you operator, good afternoon, ladies and gentlemen.
Thank you for joining us on exponent fourth quarter in fiscal 2019 financial results Conference call. Please.
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 Flash investor.
This call.
This call is a property of exponent and any TB 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 branches flanker, Executive Vice President and Chief Financial Officer.
Before we start I would like to.
I remind you that following discussion contains forward looking statements, including but not limited to X Tony 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.
For some forward looking statements can be found an excellent periodic SBC filings, including those factors discussed under the caption risk factor.
Next on his most recent form 10-Q.
Forward looking statements in Reston. This conference call are based on current expectations as of today and Exxon It assumes.
No obligation to update or revise them, whether as a result of new developments or otherwise.
Now I will turn the call over to Dr., Kathleen core again, Chief Executive Officer Kathryn.
Thank you Whitney and good afternoon, everyone I will start off today by discussing our 2019 business performance.
Rich will then provide a more detailed review of our financial results and outlook for 2020, and we will open the call for questions.
The fourth quarter was exceptional and concluded a strong 2019 correct.
For the quarter and here, we achieved double digit revenue gross and <unk>.
Increased our EBITDA margin as compared to 2018.
For the 14 weeks fourth quarter of 2019 revenues grew 20% as compared to the 13 week quarter of 2018.
Earnings per share increased to 36 cents per share as compared to.
30 cents in 2018.
For the 53 week fiscal year 2019 revenues grew 10% as compared to the 52 week fiscal year 2018.
Earnings per share increased to $1.53 per share that's compared to $1.33 in 2000 date.
<unk>.
We continued our work for Pacific gas and electric to evaluate the integrity of their electric infrastructure and should help mitigate safety risks for customers and communities related to wildfires in.
In aggregate. This works contributed approximately 4% of revenues in the fourth quarter.
Her and full year.
We continue to anticipate that these projects will step down overtime.
Beyond P.G. any integrity management represents an opportunity for growth in the utility industry and the broader energy sector.
We capitalized on increased demand for both.
At the end reactive services related to energy storage as sustainability imperatives continue to drive the world towards renewable energy sources.
We expanded our portfolio of international arbitration engagements related to large capital projects in Asia, Australia, Europe, the middle East.
North America.
Excellent and differentiates itself in this marketplace by layering deep best in class engineering subject matter expertise with its construction delay and financial damages capabilities.
We diversified the scope of our human factors and products studies as we provided unique insights into.
The Operability usability and safety of human machine system.
During the quarter, our multi disciplinary battery chain whats called upon for a very rapid analysis related to a complex international trade secret dispute.
This project contributed more than 3% of revenues.
In the fourth quarter, but is substantially complete so we will not have a significant a significant contribution to ongoing revenues.
The combination of our expert team and holistic approach enabled this project to scale quickly and excellent example of the value that are highly differentiated approach provides.
To our clients.
Exponents engineering and other scientific segment represented 81% of the company's fourth quarter and 2019 net revenues net revenues in this segment grew approximately 21% in the 14 weeks fourth quarter and 11% in the 53 weeks fiscal year two.
Thousand 19 as compared to 2018.
This segments experienced broad based strength during the year with notable performances in its human factors thermal sciences structural engineering biomedical material Sciences polymer sciences and construction consulting practices.
An array of multinational companies across industries thought our scientific expertise and sound advice for their products. For example safety concerns regarding energy storage systems drove increased demand for risk assessments in the consumer products transportation utility and medical device industries.
Our scientists address reliability concerns with an in depth design, where do you have a new liquefied natural gas containment vessel.
Yeah on medical team is advising a client as it navigate the evolving European regulatory framework for medical devices.
Exponents environmental and health segment represented approximately.
Currently 19% of the company's fourth quarter and 2019 net revenues.
Net revenues in this segment increased 14% in a 14 week fourth quarter and 6% in the 53 week fiscal year 2019 as compared to 2018.
Within this segment the.
Regulation on food safety practices continue to grow as exponent scientist devaluated, the effects of chemicals, and new products on human health and the environment.
We are monitoring the evolving worldwide situation with respect to health concerns surrounding the Corona virus.
Exponents Shanghai and.
On call offices are closed this week per the local governments requests but are currently scheduled to reopen next week.
These offices in aggregate represent approximately 3% of our revenues.
Our German entity provides structural design and inspection services, which are not.
Of strategic fit with Exxon is premium consulting offerings. The entity had 2019 revenues before reimbursements of approximately $4 million.
The entity will be divested this month.
The United Kingdom in Europe continued to be strategic grid geographic areas with significant growth opportunities.
As for pros proactive and reactive services with many industries.
Our chemical regulation and food safety practices already are recognized leader in the region and we continue to build our reputation as engineering and scientific experts for international dispute.
As we look ahead into Twentytwenty N b.
Beyond we will continue to leverage our core competencies as we deepened our client relationships expand our reputation internationally and bring new talent to the firm.
We are prepared to deliver in depth engineering and scientific insights into complex and evolving systems, such as automated and electric vehicles.
Medical devices consumer electronics and infrastructure.
Exponent is well positioned to advise its clients a society continues to raise the bar on safety health sustainability reliability and performance.
Rich will now provide a more detailed review of our financial performance and.
That's helpful.
Thanks Catherine.
I'd like to start by saying that all comparisons will be on a year over year basis, unless otherwise specified.
For the 14 week fourth quarter of 29 gene total revenues grew 20% to 110.1 million in.
News before reimbursements are net revenues is I would refer to them from here on also increased 20% due on 102.2 million as compared to the 13 week fourth quarter 2018.
Year over year quarter benefited 5% from the extra week, 3%.
From P., Judy and 3% from the trade secret engagement.
Net income for the fourth quarter was 19.1 million or 36 cents per diluted share as compared to 16 million or 30 cents per diluted share one year ago.
EBITDA.
For the quarter increased 22% to 27.7 million.
For the 53 week fiscal year 29 team.
Total revenues grew 10% to 417.2 million net income or net revenues also increased 10%.
391.4 million as compared to the 52 week fiscal year of 2018.
The additional we increased net revenues by approximately one in a quarter per cent for the year.
Net income for 2019 increased 14% to 82.
<unk> point, fivemillion or $1.53 cents per diluted share as compared to 72.3 million or and $1.33 cents per diluted share in 2018.
The tax benefit associated with accounting for share based awards.
For 2018 was $8.1 million or 15 cents per diluted share as compared to 4.2 million or eight cents per diluted share in 2018.
For the full year 29 team EBITDA increased 11% to 107.1.
10 million as compared to 96.9 million 9 million in 2018.
Billable hours in the fourth quarter increased 19% to 359000.
For the year billable hours increased 8% to 1 million 370.
6000.
The fourth quarters utilization was 69.5% off from 68% one year ago.
For the full year 2019 utilization was 72% down from 73% in 2018.
You'd want to see shouldn't decline for the full year due to a challenging comparison in the first half a year from the large human factors project that concluded in the third border of 28, Dean and the extra week in the fourth quarter, which included the new year's holiday and associated.
Occasions, reducing utilization for the fourth quarter by 200 basis points and the full year by 50 basis points.
For the full year 2020, we expect you'd wise, they shouldn't be 72% to 73%.
Good day.
Full time equivalent employees in the quarter increased 8% to 921.
Compared to the same period, one year ago.
For the full year after fees increased 7% to 901.
We expect sequential head count growth to be approximately one point.
Hi per cent per quarter.
The <unk> the realized rate increase was approximately 1% for the quarter and two and a half per cent for the year.
Were 2020, we expect the realized rate increase to be 2% to 3%.
For the quarter EBITDA margin increased 60 basis points to 27.1%.
Net revenues for the full year 2019, EBIT dollar you <unk> margin increased five basis points to 27.4%.
For the quarter compensation expense after adjusting for gains and losses in deferred compensation grew 18%.
Included in total compensation expense is a gain in deferred compensation of 4.4 million.
As compared to a contra expense.
End of 6.5 million in 2018.
As a reminder gains or losses in deferred compensation or offset and miscellaneous income and have no impact on the bottom line.
For the year.
Compensation expense increased 9% after adjusting for.
For gains and losses or gains in deferred compensation of 12.8 million as compared to a contra expense of 3.9 million in 2018.
Stock based compensation expense in the quarter was 3.9 million as compared to 3.4 million.
For the full year stock based compensation expense was 17.5 million as compared to 17 million in 2018.
For 2020, we expect stock based compensation to be six to 6.5 million for the first quarter.
And 3.7 to 4.2.
<unk> million in each of the remaining quarters.
Total of 18.5 to 19 million for the full year.
Other operating expenses increased 18% to 9.1 million in book in the fourth quarter and increased 10.
<unk> percent to 33 point 33.6 million for the full year.
Included in other operating expenses is depreciation expense of 1.9 million for the fourth quarter and 6.8 million for the full year.
For 2020, we expect other operating rigs.
Senses to be in the range of 8.5 to 9.5 million per quarter.
<unk> expenses increased 17% to 5.2 million in the quarter.
<unk> increased 17% for the full year 220.5 million.
29.
Gene expenses related to our by any old managers meeting were split between the third and fourth quarter.
We're 2020 DNA expenses are expected to be in the range of five to 5.5 million per quarter.
For 2019 the tax.
Benefit from share based awards was 8.1 million.
For 2020, we estimate.
Based on the current stock price.
Our tax benefit associated with share based awards will be approximately 6.5 million for the first quarter and full year.
The tax Ben.
Fit from share based awards is determined based on that the change in the value of those shares but between grant issue Wednesday.
Exponents consolidated tax rate was 28.6% for the quarter as compared to 27% in the same period one year.
Go.
For the full year ex brought its consolidated tax rate was 20.9% as compared to 22.6% in 2018.
For the full 420 20, we expect our tax rate to be approximately 5% for the first quarter.
And 22% for the for the full year.
Moving into our cash flow.
Operating cash flow was 56 million for the quarter and 108 million for the full year.
Capital expenditures were four.
Point 5 million for the quarter and 21.6 for the year.
This was unusually high as we developed our Boston area building.
In 2020, we expect capex to be eight to 10 million.
During the year, we'd just.
Distributed 34 million ensure to shareholders through dividend payments.
The company also utilized 22 million of cash to repurchase 342000 shares at an average price of $64.25.
As.
Yearend the company had $70.5 million available for stock repurchases under its current program.
The company ended the year with 232 million in cash and short term investments.
Today, we announced a 19% increase in our quarterly.
<unk> dividend from 16 cents to 19 cents.
As Katherine discussed weird divesting, our German entity.
The entities 29 gene revenues before reimbursements were approximately $4 million were 1% of the company's revenues.
The entity had 28 fulltime equivalent employees at the end of the year.
2019 was another strong year for exponent.
As we continue to execute on our strategy to capitalize on increasing technological complexity.
And the demand for a safer healthier and sustain wont world.
For fiscal year 2020, we expect the underlying business to grow in the high single digits, but.
To be.
But to be partially offset by.
One a one last week, which is approximately one in a quarter percent.
That's true the German entity, which is 1% and PGT worked stepping down by approximately 1% to 2%.
As a result, we expect revenues before reimbursements for the full year.
2020 to grow in the middle single digits as compared to 29 team.
2020, EBITDA margin is expected to expand 25 to 50 basis points as compared to 2019.
I will now turn the call back to Catherine for closing remarks.
Thanks threat.
Exponent has stood firmly at the forefront of engineering and scientific consulting throughout the technological advances up the last 50 years.
As innovation accelerates companies organizations and governments will continue to call on exponent to address concerns related to safety.
Well sustainability and reliability exponent is a clear leader with exceptional talent and a diverse portfolio of multinational clients. We look forward to sharing our progress throughout the year.
We'll now open the call to questions operator.
If you like this would question please signal.
Pressing star one Oh your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function has turned off to allow your signal to reach our equipment you Press Star one ask your question.
Parts, just for a moment hello, everyone an opportunity to signal for questions.
We have a question from Joseph <unk> Cantor Fitzgerald.
Hi, This is drew coming on for Joe. Thanks for taking our question I just wanted to start out on the large projects I know you mentioned PG any around three 4% kinda tailing off in the battery project, which is like 3% pending.
But you're seeing.
What else are isn't the pipeline and where you guys see for next year.
Yeah.
Let me start off with a few quantitative things and then Ah, but Katherine make some comments as well. So look what are what we see on the large project sizes that are PGT was.
Hi, This particular work around wildfires fires and the electric integrity management system here that work was about 4% a quarter year over year about we're up about 3%. So we had about one presented that work in the fourth quarter of 2018, we do see.
That 4% stepping down.
Some here.
About a quarter of our work was related to a the investigations of the fires over the last few years.
And in support of their addressing issues in the litigation market in the regulatory.
Response to that or be due to the fact that they are closing in on a a a settlement related to that those issues well leased subside clearly they still have and integrity management a challenge ahead of them, a which we hope.
To be helping them on for years to calm. So that is why we actually see that will start to see a step down even here in the first quarter, you know that might be 1% to 2% or the company of our revenues. So you know it'll go maybe we'll see a 25% step down in that maybe a little bit more.
Hi here as we move forward, but I expect.
<unk> you know a majority of this work will continue for a long period of time as we continue to.
Provide value in the integrity management area as far as the trade secret a engagement that we.
Called that out it's very interesting project is care Katherine highlighted.
But it was also extremely fast burn you know we have lots of projects would come in might be a half a percent or even a percent that's a pretty bass burn.
But to engage in this one a ended up at that three per.
Sent level.
Maybe even a little more and the fact that that sort of peaked and then is Ah you know stepping down here into the first quarter. A was why we called that out a in particular I don't you know there isn't anything else.
In particular.
Is there a that we're focused on is Florida Sars being you know we've got lots of projects going on in the portfolio.
Historically, we've called out as things that ever approach than that 4% to 6% level, we had something very fast burn here a in this quarter that was that we called out and because it's quite.
Resting but other than that we don't really have a anything to add into that.
Yes, I rely on that you.
I was just going to add you know over the long term just just really echoing what rich said you know the <unk>. The outlook you know broadly over the long term really hasn't changed obviously, they're a number of opportunities.
He is that we continue to see in the marketplace, whether it's around I mean, rich mentioned integrity management with even broader opportunities.
Around the utility and the industry beyond TG any we've talked about our international disputes sector, we've got growing marketing market recognition, there and you know I'm very.
Pleased with what we've been able to do on the life Sciences side, Yeah, both industrial as well as our legal work our work related to human factor as you know where technology is changing fast. So yeah. I mean, there there are headwinds around you know these large engagements that they're often can be in a portfolio like ours, but fundamentally those market drivers are there.
And you know they're going to continue to be there.
Very helpful. Perfect and then just wanted to ask about any cadence changes that we should expect I know for Q a strong one Q was a little lighter. So just curious as we get into 2020, how we should be thinking about.
Yes so.
You are correct.
The first quarter, a it tends to be the strongest just because of the number of work days you know when you look at when we talk about work days, we're just really talking about the core how many holidays and vacations are scheduled in two that are that particular quarters.
So the first quarter, we'll we'll definitely be the strongest a we'll see a little bit of shifted difference I think the fourth of July holiday falls into the second quarter. This year, just based on timing of the date in our fiscal year shift.
So you have a little bit of noise around between the second and third quarters.
And then a then obviously we fall back into.
The fourth quarter next year, which will have continued to have both the ER the Christmas holiday week as well as the new year's holiday week as part of it.
Even though will be dropping a the you know sort of down to 13 weeks. It's.
So includes those so you know we Ah that's sort of how the when you step through it from a workday standpoint.
Perfect. Thank you.
Your next question comes from Elecsys husband.
Hey, David Southern company.
I have her anhydrous congratulations on a strong enter the year.
Thanks, Phil access.
So I was hoping you could talk us through some of the puts and takes that we're seeing that led to the higher than expected utilization in the fourth quarter and so did that entirely come from greater than expected work from P.D. any in the rapid analysis.
We project and was not able to offset impacts for the holidays entirely.
Yeah, So I mean rich rich highlighted a couple of the area. It's already I mean, there really was a broad based level of activity in Q4 that really did go beyond those large engagements you know I think about the.
Can add a we're doing on the human factor side, you know something we've been talking about for a long time, you know that continue to be a strong in the fourth quarter the portfolio around the user studies the user experience work that we're doing you know we're seeing we're seeing demand there that goes across.
You know an increasing number in different types of product lines.
We're seeing that you know go into areas around to 'em micro mobility area, it's around virtual reality I'm thinking about health monitoring thinking about fitness monitoring you know we've really despite the D.
Large project you know that we talked about last year coming off we've really kind of diversified that portfolio and so we're looking to continue to do that but that's certainly drove you know quite a bit of activity as did the portfolio around the international disputes work you know this.
You can use initially that that work was focused primarily in the engineering and construction sector that that remains the case, but where we're seeing some diversification with regard to that both in terms of the clients as well as the types of matters. So not just construction related just.
Do you expect it sort of a product based type of dispute whether that's a dispute between a and OEM that had a supplier. For example, I'm. You know you have that you have contractual disputes that relate to intellectual property I'm. You know so there are a there are different areas that we're finding that demand Dan.
And where we're able to really really compete well in that marketplace because of the differentiated engineering expertise that we're able to <unk> to bring to the table. So still very much scratching the surface of that market, but really you know in the fourth quarter you know the back half of that year, we're seeing an increase in that activity.
Well.
Okay. So it really does sound like a broad based demand benefited the quarter. So could you also ah hardly any financial impact from the German divestiture aside from removing that 4 million from forecast for Tony Tony.
Yeah again due to the fact that the.
The this area is is small I mean, we will get a you know this entity was a little less profitable than the company as a whole ER. So you know you might get a small bump in the margins related to that but that's that's sort of the primary part there. This.
The entity was probably you know in 2019, let's you know just a little bit shy of where where we were so that's going to definitely help help the margins, maybe it's 10 basis points or something maybe a little more.
Okay, Great and then just last question. So the cash calls right now it's pretty significant.
I know you've expressed the long term goal and the passive getting that balance a 50 $50 million to $70 million. So aside from the recent increasing the dividend what are some of the near term plants for the cash should should we be expecting to see continued share repurchases or or something else.
But I definitely should expect <unk>, we will continue.
To be a in the market on the share repurchases are just as we were a in the fourth quarter, where we were able to pick up a shares at that point in time. So we are continuing to be.
I have that program.
Look yeah, we've it's not that we don't we haven't stopped looking.
Or opportunities.
Yeah, it's strategic opportunities that can be an acquisition, but Ah you know our track record Ah Ah doesn't come through to say that a you know a is that you can expect that the short term, but are we continue to look for opportunities would define a.
That smaller tuck in acquisition that can provide to seed for growth or other opportunities that come along but look we're gonna primarily a use the dividends and repurchases over time or to return value to shareholders.
Great. Thank you congratulations again.
Thanks Alexia.
Your next question comes from Tobey Sommer Suntrust.
Hey, good afternoon. This is a jasper viv on for Tobey I was hoping you could update us on your new industry focused team approach and a whether you've seen that strategy maybe improve your go to market.
Yeah, yeah. Thanks.
Ah Jasper so I I mean, I really couldn't I do continue to believe that there's sort of multi pronged approach that we've got is helping to to support the growth that we're seeing you know where a couple of areas of focus you know we're broadening existing relationships.
You know very much focused on client.
Relationship development looking for those opportunities to sell a broader range of services I mean, I think that if you look at the teaching example, it's just one example of how we've been able to use utilize our.
You know our existing client relationship to really brought in our service I'm going to that client based on you know went.
Opportunity that that presented itself in the marketplace. So I think there's there's real evidence there that this approach to client management is working and you know the life Sciences area is another place in particular over this past year and in the back half of the year, where we are seeing increasing.
Proactive work you know, we've got a tighter regulatory framework going on that's driving that we're doing design consulting I you know our chemistry offering offerings are crossing over into the medical device area. The health monitoring that I mentioned earlier you know what's the real question is whether something is a.
Device or a consumer product he stays and so yeah. We when we look at these trends in the marketplace.
I really do think that our team is that we've pulled together with a focus on you know sort of broadening our range of services within industry focus.
That's really has helped us to take advantage out these.
Of these trends in the marketplace, whether that's a tightening regulatory environment or or trends in the technology. You know one of the things. We're doing is very much focused on a broader marketing of our capabilities. So we want to reach a wider set in order to get new clients. In addition to expanding our existing client relationships.
So we do this through a number of channels. We do this through our publications. We do this through our thought leadership. We do these this three presentations at conferences professional committee appointments and things like that and so we've been very active in that area I'm getting our folks on the podium presentations at the right.
Ases and really looking to leverage our contacts in the marketplace. So yeah. We still are we're still early in the process I do like what I'm seeing and I think that you know that what we're seeing is helping to support the the results that we've got and you know in 2020, we're gonna be continuing with a focus around accountability with regard.
To my marketing activities and the development of our client relationship.
Thanks, and then just as the larger PG any engagement begins a step down I was wondering if you've seen more incoming inquiries from others. You totally is looking for similar kind of work.
Yeah. So we are we are for sure out in the marketplace I'm having.
Being discussions around integrity management, not just in the utility sector, but really more more broadly in the energy sector. Because it's applicable you know beyond just utilities. So this is again a great example, as an area where we are we're doing the publications, we arent doing the thought leadership.
We are.
Leveraging our contacts in the industry to get opportunities to talk to the right people and to really have an opportunity to you know described the offering and how how that can provide value to the clients. So we're we're engaged in that process. It is across.
Process, you know the development of those relationships takes time, but we are we're optimistic that they are say I'm you know, there's an opportunity for us with this kind of capability.
Oh, that's great. Thanks again.
Sure.
Our next question comes from Andrew Nick with William Blair.
Hi, good afternoon, thanks for taking my questions.
First I just wanted to dig a little bit more on the margin expansion guidance I'm I know you mentioned there being some uplift from the divestiture of the German business, but just curious what are the other drivers.
That and what could potentially.
Have you to lower or high end of that guidance.
Yes so.
The the other contributor to that or other than leveraging the cost side is really a de improve it seeing an improvement in utilization. So as we as I mentioned a yard.
Our guidance is the utilization will be somewhere from 72 that we achieved this year up to 73%. So we think that a the opportunity is to improve that utilization a along that curve and have that contributed to it.
Great.
And then moved one for me just curious I know that you end up reporting this in the K, but any any color you can provide on revenue growth, whether it's in the quarter or for the full year between the U.S. and international and and this international continues to be you know a top priority in an area of major growth I'm I'm just curious if.
It's fair for us to expect head count growth to be more concentrated internationally as well. Thank you.
Yeah. So I don't have the exact numbers to share on this call today, but what I can say is that what we're seeing internationally is a in 22.
20, or that you know that growth is probably similar to what we saw in the company overall, but I don't think but I do think that what we'll continue to see you know it was slightly had what we'll continue to see is that international outpaces.
The the.
The rest of the organization you know we have a conscious effort going on to expand engineering in Europe a weve.
Got a good a seat of that initiated in our London office and expect to continue to expand attic sensibly a we.
On a new capabilities in Asia. This past year, a with a seed down in Singapore did really support is in the international arbitration area.
And you know we continue to think.
That age overall, well you don't might be changing challenging.
The short run here with the grown a virus, but is an important place for our clients that are developing product a in that environment. So we think that a international I has many prongs to it proactive reglet proactive work.
Both on design consulting for industries that need that clearly in the regulatory consulting area.
Continued intensification there.
That environment, only got more complex with Brexit, you know and complex environments or.
Good for our business. So are we will try to take advantage of that.
And then we've got the international arbitration opportunities that we're you know today, beating a expertise a lot of that coming from here from the U.S.
He knows clients internationally, but over time expect that we'll have a more boots on the ground a in those locations.
Great. Thanks, a lot.
Our next question comes from Marc Riddick from Sidoti.
Hi, good evening.
Hi, Mark Mark.
Wanted to see if there were any if there's some targeted areas that maybe we don't hear very much about generally that that you're seeing sort of begin to you know grow some green shoots if you will than in some areas that could provide.
But some some good opportunity for you going forward that maybe you know that we don't generally get to talk about when and if that is.
You know if the go to market approach that you're working on no that's helping to uncover maybe future opportunities as well or somebody other targets is from from the go to market strategy second yeah, yes.
So I mean, I will bring up automated vehicles and I I know that that's an area. We talk about in terms of you know product complexity, but I. You know this is that I highlighted because this is an industry where you know we are we are historically no and so as far out reactive services, you know around litigation and around product recall and defect.
Investigation, and so I'm you know I think the sort of go to market strategy around industry team. This is something that as I look look forward into 2020, I'm you know I I am optimistic about a you know with the with the engagements that we've had so far I'm that that industry really is starting to.
So I'm really see the value around to the the work that we do in a proactive sense because of a experience on the reactor outside so so that is an area you know that I would highlight another one that we don't maybe talk about quite as much in and you know. This this is relatively early but you know.
There's there are a you know move when you talk about health monitoring you talk about fitness monitoring I'm. You know these are things that relate to safety and you know, we think about wearables and things of that nature or the ability to bring in not only the user experience, which were very strong in and has been.
Strong end, but bringing in you know the bio mechanics side of that to look to add an extra dimension to what we're doing around safety, what we're doing around performance relative to sort of sports and recreation. I mean. This is this is not a large area right now, but I you know I see it on the horizon is something that we are doing.
<unk> leadership, and we are looking to establish ourselves more broadly we think that's an industry that is poised for growth and a and an area that we and you know that we should be operating in and so that would be another example.
Is there sort of atop customer.
Cool or customer group that tends to maybe lead more than others as far as discovering new Oh, you know new opportunities that that that you'd think kind of sort of either whether them kind of discovering distinction kinda, leaving you in that direction or vice versa are there any particular key.
The customer verticals that we should be thinking about it as far as being the general usual catalyst or what we might be seeing going forward. Thanks.
Yeah, I think that you know look <unk> clearly a we play you know we're not doing original research for.
Customers. It does a as you say take our clients need to be going in a week can do is a complement their teams as they explore on the edges.
But there outside and you know clearly what we also need as areas that.
Her pushing that limit or you know with ER, we get there with artificial intelligence and and as such that are coming into the vehicles as Katherine said that environment is very much a change in a push ER and Ah I think we've got a it's a good example of where we are the.
The same goes into medical area or where the clients are really trying to do a you'll find the next solutions that can come in devices or drugs.
But that.
Exponent is able to bring.
Phd level are thought to these areas.
A battery technology, where are we gonna go next there how do we get there on energy storage absolutely our clients are our leading or in some of these areas. The suppliers are of that sometimes we're working with that client that's a buyer of that technology, but.
Each of these areas, what's great about exponent is that we every year or bring in about 20% new people.
Yeah. So we go out I know, we're hiring you know 20% of our staff in new each year from top universities, who have done.
The Unreason Phd research for the last five years undone in the next talk then the next areas of technology and science and we do that we're bringing that end, yes. The reason that we get an out of 7% last years, we have about 13% turnover, but that influx.
Of that Nexgen technologist is very important to see eating our continue the ability to be I had the curb with our clients because a lot of the research. Our people are doing may not even be applicable for.
Several years coming into industry, but.
When it does we have those people who have that experience and how it applies to our clients needs in a in in industrial world. So that's a little bit on that topic.
Thanks, so much appreciate it.
Oh, no further questions in the Q.
Thank you ladies and gentlemen, this concludes todays teleconference. You may now disconnect.
[laughter].