Q3 2020 Exponent Inc Earnings Call
Okay.
Please standby.
Good day, and welcome to exponents third quarter earnings call.
This call is being recorded.
At this time I would like to.
Turn the conference over to Whitney Kukulka. Please go ahead.
Thank you operator good.
Good day, ladies and gentlemen, thank you for joining us on exon Inc. third quarter fiscal year 2020 financial 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 slash investors.
This conference call is the property of exponent and any taping or other reproduction is expressly prohibited without prior written consent.
Joining me on the call today are Dr., Catherine Corrigan, President and Chief Executive Officer, and Rich Schlenker, 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 excellent 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 from forward looking statements can be found in export its periodic filings, including those factors discussed under the caption risk factor index going its most recent form 10-Q.
The forward looking statements and with this conference call are based on current expectations as of today and exponent 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., Catherine Corrigan Chief Executive Officer.
[music].
Thank you Whitney and thank you everyone for joining us today.
We're pleased to report third quarter results that illustrate the sequential improvements we've seen across the business.
For the third quarter EBITDA margin expanded 60 basis points, while net revenues declined 2% as compared to the same period last year.
Well our results continued to be impacted by ongoing project delays due to business travel and physical distancing restrictions caused by the pandemic, we believe that our third quarter results demonstrate resilience and our model as well as our commitment to profitability.
Companies and governments alike are adopting new ways to conduct business for testing new procedures and protocols to designing next generation products and navigating changing regulatory requirements clients.
Clients continue to call on X dollars multi disciplinary teams for sound advice that they evolve adapt and innovate.
Our engineers and scientists continue to support the advancement of complex technologies in many industries.
Some examples of this ongoing activity include autonomous or electric vehicles in the transportation industry flexible displays and virtual reality in the consumer electronics industry.
It's combination device in drug delivery systems in the life Sciences industry.
Export has also been retained by a diverse set of clients to help in the response to the Corona virus.
We continue to advise clients with respect to disinfectant products I procedures, cobot, 19 testing contact tracing and occupational health and safety.
We're pleased to have been recently selected by the United States Army and Navy to conduct a preliminary deployment of wearable technology platforms for COVID-19 risk monitoring and mitigation.
The goal of this program is to implement and utilize this approach to protect the health and safety of service personnel, while collecting the necessary data to support a validation of the technologies X.
Exponent is uniquely qualified to execute this program with our interdisciplinary team of experts in wearable technology Human factors Health Sciences and data Sciences.
Exports engineering and other scientific segment represented approximately 80% of the company's third quarter and year to date net revenues.
Revenues in this segment decreased approximately 3% in the third quarter and decreased approximately 4% during the first nine months as compared to last year.
Clients continue to demand excellence interdisciplinary solutions for increasingly sophisticated systems and devices.
At the same time litigation support work continues to be impacted by the pandemic assignments have been paused to do the court related delays.
The number of trials is gradually increasing exports systems developed virtual and socially dips that trial protocols.
We also continue to experience some delays in human participant studies.
Exponents work in integrity management advisory services for the utility sector remains strong as clients focus on color reliability in particular to the fire safety concerns in the western United States.
Exponents environmental and health segment represented approximately 20% of the company's third quarter and year to date net revenues.
Net revenues in this segment increased approximately 2% in the third quarter and approximately 3% year to date as compared to last year.
This segment also experienced delays in litigation related projects for the transportation and the oil and gas industries, but.
Within this segment, the chemical regulation and food safety practices continued to grow as exponent scientists evaluated the effects of chemicals, and new products, all human health and the environment, including emergency use registrations for different that goes to prevent the spread of the Corona virus.
For 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.
The demand for exponent interdisciplinary solutions is durable at society continues to raise its expectations for safety health sustainability and reliability and that's technologies continue to increased complexity.
The COVID-19 pandemic has contributed to increased complexity and has further challenged society's expectations for health and safety.
Despite any risks or uncertainties related to the pandemic that still may be ahead of us.
Bar will continue to be raised.
Exponent is capitalizing on these persistent secular trends as we remain focused on demonstrating our leadership through the same seriousness intellectual rigor and fact based analysis that we have employed for over 50 years. These.
These market drivers combined with exponents world class team of subject matter experts will fuel long term growth and profitability.
I'll now turn the call over to rich to provide more detail on our third quarter financial results and to discuss business activity in the first three weeks of the fourth quarter rich.
Thanks, Catherine and good afternoon, everyone.
I will start by providing details on the exponent its financial results for the third quarter, and then Ah well provide some insight into our expectations for the fourth quarter.
Let me start by saying that all comparisons will be on a year over year basis, unless otherwise specified.
For the third quarter of 2020 total revenues were down 3% to 98.7 million.
Revenues before reimbursements or net revenues as I will refer to them from here on were down 2% to 93.5 million.
During the third quarter, our work for PGT related to wildfires in integrity management of their electric power infrastructure was approximately three and a half a percent of net revenues.
We expect this work for P., Janine Stichter junior in the fourth quarter or the same or slightly lower level.
Net income for the third quarter decreased 8% to 18.1 million or 34 cents per diluted share as compared to 19.6 million or 36 cents in the same period last year.
As a reminder, that's bought it recognized a tax benefit from share based awards of $1.7 million or three cents per share in the third quarter of 29 chain.
This is perfectly just a first quarter event and as such are just brought it did not recognize any tax benefit in the third quarter. This year.
EBITDA for the third quarter was $26 million, Yeah produced a margin of 27.8% of net revenues, which is an increase of 60 basis points as compared to the same period last year.
Well the first nine months of 2020.
Total revenues and net revenues decreased 3% to 296.7 million and 281.1 million respectively.
Year to date net income decreased 4% to $60.7 million and earnings per diluted share were $1.14 cents as compared to 63.3 million and one dollar and 17.
<unk> cents per diluted share.
Year to date, the tax benefit associated with accounting for share based awards was 9.7 million as compared to 7.4 million in the same period last year.
For the first nine months EBITDA decreased 7% to $73.9 million and produced a margin of 26.3% of net revenues.
Which is.
<unk> decreased about 120 basis points as compared to the same period last year.
Turning to some of the key metrics there.
Billable hours in the third quarter decreased 9% to 308000.
For the nine month period billable hours decreased 6%.
The 955000.
This year over year decrease is partly due to the divestiture of the German entity, which accounted for approximately 3% of billable hours and 1% of net revenues in the second and third quarter of 2019.
For the third quarter utilization was 66%, which is down six percentage points from the same period last year.
But this is a 2% increase over the second quarter of 2020.
Year to date utilization was 67% down six percentage points from 73% last year.
The decline in utilization in the quarter was primarily due to positive and some litigation support projects as a result of course closures viewer.
Fewer user studies and lower testing activity.
We are pleased that utilization continues to improve sequentially as the first three weeks of October we're in the low seventies.
For the fourth quarter after accounting for holidays, and vacations, we expect utilization to be 63% to 65% as compared to 69.5% in the fourth quarter of 29 chain.
[noise] technical full time equivalent employees in the quarter were 901 down 1% year over year. This.
This decline in F.G.'s was due to the divestiture of our German entity, which accounts for 3% of our headcount in 2019.
We continue to have normal rate of employee retention.
And we'll focus hiring where there is strong demand and in areas of strategic growth in.
In the fourth quarter, we expect sequential headcount growth to be approximately 1%.
The realized rate increase was approximately 6% for the quarter.
The realized rate increase included 2% as a result of the divestiture of the German entity.
Additionally, the rate was higher as a result of lower user study and testing activities, which leverage more junior staff.
For the fourth quarter.
We expect our realized rate increase to be approximately 4%.
As the staff mix will be similar to last year.
For the quarter compensation expense after adjusting for gains and losses in deferred compensation grew 2%.
Included in the third quarter's total compensation expense is a gain in deferred compensation of 3.2 million as compared to a gain of 360000 in the third quarter of 2019.
As a reminder gains and losses in deferred compensation are offset in miscellaneous income and have no impact on the bottom line.
Stock based compensation expenses in the quarter was 3.7 million as compared to 3.8 million last year.
For the fourth quarter stock based compensation is expected to be 3.5 to 3.8 million.
Other operating expenses decreased 6% to $7.8 million in the third quarter.
Included in other operating expenses depreciation expense of $1.7 million.
The primary reason these expenses declined as we had reduced activities at our offices in labs.
For the fourth quarter other operating expenses are expected to be $8.4 million to $8.7 million.
Well, we are uncertain when our employees will return to the office full time, we do believe our office environment provides long term value as it supports collaboration of our interdisciplinary teams and staff development, which re.
Results in higher value for clients and retention of employees.
In the third quarter DNA expenses were $2.8 million, which is a year over year decrease of 48%.
These lower expenses are primarily a result of huh.
Hosting our principals meeting virtually this year.
Along with travel related to marketing and <unk> recruiting being lower.
For the fourth quarter, we expect GNS expenses to be 3.5 to 3.7 million.
As compared to 5.2 million in the fourth quarter of last year.
Interest income was down $600000 to 316000 in the same period.
2019.
The lower interest income is due to a steep decline in interest rates year over year.
So the fourth quarter, we expect interest income to be approximately 200000.
Miscellaneous income for the quarter after adjusting for deferred compensation was $695000 as compared to $750000 in the same period last year.
For the fourth quarter, we expect miscellaneous income to be approximately $700000.
It's fun, it's consolidated tax rate was 26.6% for the quarter.
As compared to 22.1 in the same period last year.
As a reminder, the tax benefit of share based awards is primarily a first quarter event. However in the third quarter of 2019 exponent realise $1.7 million as compared to zero in this year's period.
Year to date includes a tax benefit of share based awards ex front, it's consolidated tax rate was 13.1, 13.4% as compared to 18.1%.
For the fourth quarter, we expect our consolidated tax rate to be approximately 27.5%.
Moving onto the cash flows.
In the third quarter operating cash flow was $28.2 million year to date operating cash flow was $62.4 million.
Capital expenditures were $1.2 million for the quarter.
Accounts receivables had have improved throughout the year and at the end of the quarter was up at 110900 $10 million.
Additionally, in the beginning of the fourth quarter, we received the remaining balance of the PGT accounts receivables related to the bankruptcy.
Year to date, we distributed $29.9 million to shareholders through dividend payments.
Repurchased $40 million in common stock at an average price of $62 or 91 cents and closed the period with $207.7 million in cash and short term investments and no debt.
Now turning to our expectations for the fourth quarter and full year.
Well, we continue to see improvement across the business and have increased confidence in our ability to forecast our fourth quarter results.
There remains uncertainty with regard to the course of the pandemic and related restrictions.
As a reminder, 13 week fourth quarter of this year, well compare with a 14 week fourth quarter of 2019.
As a result, we will experience an 8% to 9% year over year revenue headwind due to the five less working days in the quarter. This year.
Further.
Due to the impact of continued business travel in physical distancing restrictions caused by the COVID-19 pandemic.
And the very strong performance in the first three weeks of October of last year.
When our utilization within the high Seventys as compared to the low Seventys this year in October.
Net revenues for the first three weeks of the fourth quarter of 2020 declined approximately 5% to 7% year over year.
Assuming the activity levels of the first three weeks of the quarter continue and considering the impact of five less working days, we anticipate revenues before reimbursements to decline, 12% to 15% in the <unk>.
Corridor.
As we and we expect EBITDA margin declined 250 to 350 basis points from the 27.1% achieved in the fourth quarter of 2019.
This would result in a middle single digit decline in net revenues and a 125 to 175 basis point decline in EBITDA margin for the 52 week fiscal year 2020, as compared to the 53 week fiscal year 29.
Jane.
Well there are opportunities for near term improvement there could also be further reductions to our revenues in the short term due to the continued uncertainty.
That's probably it has remained profitable despite the 6% decline in UTI and 2% decline in net revenues in the quarter.
We ended the quarter with $207.7 million in cash no debt.
Exponent has a sustainable business model and intends to continue our quarterly cash dividend payments and share repurchase program.
The fundamentals of our business remained strong and we continue to operate in a position of financial strength.
I will now turn the call back to Catherine for closing remarks.
Thanks Rich.
As rich stated we are encouraged by the influx of new work and the resulting increase in utilization of our staff.
Exponents interdisciplinary teams are delivering unique solutions to industry and government and society increases its focus on safety health sustainability and reliability.
These market drivers has spurred I growth for over 50 years, and we are confident they will continue to support our future growth.
In the near term, we are pleased to be sharing our scientific and regulatory knowledge on health and safety issues related to the novel Corona virus.
Lastly, I want to share with you how impressed I am like how our employees have adapted to life during the pandemic.
Our caring for their families and communities and also caring for our clients, who all need them during this difficult time.
As a firm we remain focused on three things the.
The health and safety of our people.
Demonstrating leadership by continuing to solve our clients' most pressing problems.
And delivering value to shareholders.
Operator, we're ready for questions.
Thank you if you would like to signal with questions. Please press star one.
Touchtone telephone if you join us today using a speakerphone. Please make sure new function is turned off to why your signal to reach our equipment again star one if you would like to ask questions.
And our first question comes from seeing in England with Berenberg Bank.
Then we can't hear you you must be muted.
We're having a problem was in line.
I can't hear in either.
Good Sam England. Your line is open go ahead. Please.
Hi, guys can you may now.
Yeah.
Yes, it's that's one I just wondered what you're saying with regards to.
Incoming inquiries that Tonight, and then from clients.
I'm, sorry, I could I could you repeat that Sam I didnt quite catch it.
Sorry, I think that the line can you hear me now.
Yes.
Oh.
But anymore.
Karen Sir your line is open.
Hi, guys I'll try and come on that yet I think my lines, not I'll try and dial back in.
And our next question comes from Elecsys have speed with D.A. Davidson and company.
Hi, Catherine high rates good afternoon.
I like that.
So I just wanted to go over a couple of the pieces of guidance that you provided can you put that 8% to 9% reduction in the fourth quarter sort of into context as compared to that original guidance of a 1.25% production I mean, just doing quick math and please tell me if I'm wrong, a it seems more like a 2% hit.
For the entire year. So could you just tell us how to think about that.
Hi, Yeah, if you're referring to are the gains that we received as we added the 50 Threerd week last year.
The difference there is that last year, what was added to the to the fourth quarter. In particular was the addition of a of the week that had the January onest holiday in it.
So that is a week that is heavy with the holiday and vacation in it and contributed.
You know at a lower level when you take a look at what happens now to the fourth quarter is that we are losing.
Our sliding back or would fell back into the year, we're losing the first week of October in.
In to the fourth quarter that is five fully productive work days.
We have so when we look at what when we look at the fourth quarter on a year over year basis, we still have the the last to the last weeks of December including a day it the new year's holiday in there that.
Didn't change what we lose a is that first week and when you take a look at the fact that that leaves us with.
With about yes, what was 60. Some work days then you take five off of that that's how you get a little over 8%.
Okay on the difference in and we've definitely that doesn't make sense.
And on your utilization expectations for the fourth quarter. A you know 14. The first few weeks of October in the low seventies could you talk me through what you're thinking and guiding to utilization more like 63, 65% for the fourth quarter.
Yes, so that utilization of 63% to 65% is a consistent and in.
In line with a the equivalent of the low seventys utilization in the beginning in the fourth quarter. The only difference in that is that we.
End up having six holidays in probably three to four if equivalent vacation days taken as we move into November and December of the year. So that's what draws that youd be equivalent utilization down to that 63% to 65% level.
Okay. That's really helpful. Thanks, and one last one if I could just some of the sort of cadence of litigation totally returning what you said in your prepared remarks, you have any sense of sort of the present volume of litigation activity that you're seeing on a month to month basis as compared to the same period last year.
Yeah. Thanks to like says where we're not back to where we were last year and when we look just at the litigation side of the house.
But what I would say is that there has been a sort of a progressive and gradual improvement it varies a lot since since the beginning of the pandemic it varies a bit across industries. So for example on the automotive side, and it's sort of consumer products and product liability side.
It's a bit slower than say the toxic tort side. One reason for that is because on the product side, they're very much dependent on the ability to travel the ability to do inspections et cetera, now what we're seeing in terms of that activity.
The third quarter is has progressive we improved compared to the second quarter. So there is good progress, but it is not back to the level that we sort of think.
Think about it it's our typical run rate on the toxic towards side, you know I think that that that slope is a bit higher. This is an area, where there's less dependent on sort of the travel and the product inspection.
You know not going forward, there's obviously still quite a bit of uncertainty that we're you know we're seeing the we're seeing some things happening that I think are also good driver switches. For example expert depositions you know it is fairly routine now for us to be doing those virtually you know that was a theaters.
In saying three months ago people were still getting used to it.
And now it's become fairly routine and so that's something that's contributing to the progress we're seeing.
We have had some actual jury trials in person that have gone forward. You know there are obviously under under health and safety protocols that is happening very gradually but we are starting to see that so you know it won't be a lumpy the flip a switch.
Definitely some sequential and progressive improvements there in terms of the litigation.
Okay understood. Thank you both.
Thanks.
And the next question will come from Sam, England with Berenberg Bank.
Hi, guys I feel you can pay me this time.
I just wanted to go down anymore [laughter], great I, just wanted to get saying any more government opportunities I think off as a result, I'm kind of it kind of it.
A smaller portion of revenues for you guys, but you mentioned the U.S. Army and Navy projects. So I just wondered if you're seeing anything else potentially coming through on the government side.
Yeah, I mean, the the army and Navy work, we highlighted specifically and we're very excited about you know this is work that I think represents you know not only and the ability to engage with the government on co that my team and the wearable technology, but really reflects.
Yeah. It reflects an opportune a bigger opportunity broadly in the commercial space around Wearables and health in general and so we're really pleased to be talking about that you know this is something that we've been able to do on commercial terms with the governments you know that the government work that we've typically done in house then.
Work that we've been able to do on those kinds of churn.
And so you know there are potentially some other opportunities down the horizon I don't know that there could be opportunities that spring from these army and Navy projects you know some uncertainty there, but you know it's really the ability to do that work on commercial terms that has become attractive to us. So.
No rich if you want to sort of add more color on that issue.
Yeah, I think that you know I know that our health team as well you know and you know our it team here that really can do a human factors and user studies. There are definitely engaged with a number of parties are there.
It's going to be a a incredibly high demand for you know post market surveillance of of how people are doing relative to Oh vaccines that are going to be you know a implemented you know it's probably in the early stages.
To a number of our you know government and it you know entities that are there and so will you know we're going to have to.
See what opportunities can be generated both off of monitoring people now pre vaccine and being able to monitor on lighter, but no guarantees a at this point in time, but opportunities that could exist.
Okay, Great and then I know you mentioned in the past so the opportunities on the supply chain side as well, particularly filled in Asia I trying to decide is market sort of recovering and flaring a lot better with the pandemic than the U.S. and Europe, but yeah that more opportunities in Asia and they do then you'd seen in the past.
Yeah, So with regard to Asia, you know we have seen a definite upticks. There in particular, you know we're seeing a trend Sam that is around our client base in the U.S. and you know not only just their ability to travel now during the pandemic.
But they are sort of looking to the future in terms of whether they were really need really need to have their folks doing as much travel over to Asia to be able to monitor the quality coming out of their factories and their supply chain and things like that and so what we're finding is we had a.
A real advantage in terms of our boots on the ground in Asia, and our ability to team with our clients. So instead of them needing to a you know actually travel and be on the ground over there that we can't really engaged with and with our folks who are already there. So we're seeing that now during the pandemic.
Ah you know, we do expect that back to also be a you know a longer lasting trend as well. So I think that's the kinda good Dan good opportunity for us to continue to build the relationships, particularly in that consumer electronic space is where we're seeing that.
Okay, great. Thanks very much.
You're welcome.
Thank you. Our next question will come from Andrew Nicholas with William Blair.
Hi, good afternoon.
Hi, how are you doing.
Good. Good first question I just wanted to ask you. If you were to return to an environment, where business restrictions were a little bit more stringent you know assuming.
Really not been assuming higher case counts in broader code that concerns accelerate you see.
The impact the business would be similar to what you saw in March and April or do you think prior experience working under these conditions I know Katherine you mentioned virtual expert testimony is becoming more common wondering if that could translate to higher.
Higher troughs.
In utilization the second time or.
Yeah, Yeah. Thanks for that question.
When I reflect back on the kinds of adaptation is that we've been able to make between our employees personally our infrastructure in terms of like XI platform with just are.
How use we've gotten to being able to communicate virtually the things that we're doing around digital marketing you know I think we would be far better prepared this time around and much less surprised on and and much able to you know very much able to you know not.
The immune to the impact of that because clearly you know if we if we get back to a situation where you know for example, our folks are not permitted into the laboratories because of government restriction.
You know that that clearly isn't something that any adaptation on our part is necessarily going to change, but the adaptations. We've seen around litigation you mentioned the expert depositions those can continue to happen and the other piece that we can't control as much as travel restrictions, but one thing we have trended up on.
On the consistently over the last six months is our technology and our protocols around remote inspection capabilities. So and our laboratories. You know we can stream video from our scanning electron microscope to multiple locations around the globe. We can have remote experts providing instruction to that.
Matt microscope, operator on how to manipulate the specimen and the microscope, we can do remote viewing of our human participant studies and so our clients don't have to travel in D. on site. So and then in addition to that for a participant work we have used our expert.
Peace to develop the kinds of protocols, you know expertise in material science and disinfection that allows us to know how to safely disinfecting products between one subject in the next subject I'm understanding about what the occupational health issues with physical distancing on and use of <unk>.
He effectively that has allowed us to reengage in our participant work and so we would be we would be I think better positions in the US and tells you know what could be increasing searches October 19 that we're seeing around the world that it would be I think a very different picture you know this time around.
Around with another way of saying it was with the first place.
Yeah, I would just add to that from a from the client side or you know I think yes.
Clients have you know work increased a in that demand from clients because sure. Some restrictions came off and such but I I really believe that what we've seen from June to today.
He is not a big change that much over that period and the change in restrictions, but more clients figuring out how to get back to work that they've got to move towards the next product launch that they need to continue to advance technologies.
The litigation a you know a lot of times is related to long term exposure is does it have to do with a an event thats occurring today.
And and knows matters continue to flow in and dress benching them, all a isn't going to work or they're not going to be in a position to properly respond in the future. So I think you know clients were back on their heels are trying a pause in April and May.
They began to engage at different levels in June a learned a lot over the following three months and and are in much better positions.
To move through this not no no no no one's going to be able to do it the same but I think they're going to be in a much better position to continue their business as well.
Our virtual marketing and virtual recruiting activities.
But.
And such but they're still the cost as you compare that to being out on the road.
Is not as high we.
The big the Big thing on a quarter on this quarter was really moving entirely from a managers meeting a year ago to a principals meeting this year being.
Hey, virtual event that really helped us out as well so those things contributed as we look going forward.
Theres not really.
Any particular area that we see as something that we're going to take out.
So I think we're going to do.
Do more and in some of our online and virtual marketing and do those activity sure, but I think we really believe that.
Being.
In person with clients is really important just as we believe that being able to be in person with our colleagues is important in the long term relationships that you build.
Yes, I do think we'll do more video interviews I think we found them to be quite effective.
Will be less of a burden on our candidates who have to travel to us.
So there are but we're also getting out and reaching out to a much more diverse set of candidates.
That are all over because we've moved to this virtual model and it allows us to provide presentations and engagement.
All over.
With a very diverse groups so.
We don't see that there is a material change in our cost model going forward, but I think there will be.
Shifts in where some of that spending goes as we evaluate its been a short period of time, we've got to look at these areas and look on the return on investment that we're getting out of them.
That's helpful. Thanks, a lot.
And our next question comes from Tobey Sommer with tourist financial.
Thanks, I wanted to drill into so for me, it's been talked about a little bit, but maybe from a different angle.
You talked about your internal improvements being able to work in the current environment.
Who knows.
Pellet courts in the Throughputs associated with them improved and has there been some all been flow perhaps.
More recently we've.
Current cases picking up and.
In the geography is where that is happening is there sort of a relationship that.
We've been able to perceive as cases right.
Decrease over the last bunch limits.
Yes, Thanks Toby.
We are we are tracking court.
No sense of work that we do try alliance is going to be in the state Court system.
Right and so it's very dependent on what's going on in that particular geography.
And so you know there is there anything deed ebb and flow associated with that because the court is going to be less likely.
To move forward with an in person jury trial in an area where that were the case counts are increasing and you know the opposite would be true in areas, where the case counts are relatively low on and may be more likely I'm. So you know we had a few go forward.
You know, we've we've actually had a situation where you know one of our one of our experts is going to be testifying in a trial, where they rented out like an 18000 square foot conventional.
Portion in order to be able to do it so they're finding some creative ways, but there for sure are going to be going to be constrained by whats going on locally I will tell you, though I mean there.
The backups that occur in the court system are very motivating and the judges you know are are pushing parties.
And to move forward and to move settlement negotiations forward and things like that doing anything they can to sort of move the process along.
But it's important I think to understand from the standpoint of our business.
Probably I mean, my personal experience in 20 years of doing this I would say a low single digit percentage of the cases actually go to trial. So it's not so much the ability to have the jury trial as it is the court being willing to set the date.
And then that's going to drive the work back several months. So what were said what's driving some of what we're seeing now you know we've still got a lot of trials that are being pushed but maybe there in the first quarter of next year.
And there's enough likelihood that these will go that it's driving activity that's three months or more you know in advance of that so it's almost the.
The outlook of the trial being on the calendar and being really there that is starting to you know a coffee activity to pick up.
Yes.
Did you have any further questions Sir.
Yes. It did thank you that was helpful. Kathryn.
With respect to the.
Bill rates were only a couple a.
A couple of months away from flipping the calendar it can you.
Talk to us about what you expect bill rate trends to be in.
And maybe also comment about.
Whether the the court throughput in this experience this year has.
The impact to your.
Realized bill rate increases the potential there or if you see that kind of on phase bye bye.
This year's event.
Yes so.
Certainly the I'll take the latter question first because it it little bit.
Ties into this year's performance and board.
As far as the not having me court dates.
There.
Any impact that had to let's say senior people, who might be more likely to testify not being there.
I think that was offset by some of the lower rate.
People and testing and studies and things so the the overall mix still lean to the positive side.
Are the higher side on the overall rate that we realized here.
Here in the in the third quarter and I think the balance of of what we would expect in the same environment.
If we were.
Looking forward.
As far as rates.
We are.
Just is sort of in the first third of our of our planning phase for next year, we do run that.
Through the fourth quarter.
Kathryn and I have not yet set down with each of the business units will be doing that over the next two months.
As we pulled together.
And in our work on the plans there in a big part of that is sitting with them and and making sure that we understand the market, whereas what they're what they're looking at there and where we should be putting pricing, but the one thing I would say.
Is that regardless of how difficult of an environment. There is out there for for all of us.
The demand.
For top engineers and scientists in the world continues to grow.
It continues to be competitive.
The higher the top people out of the top universities that does not you know we've seen it before the best people are in high demand and.
I think our clients understand that and they also understand that exponent is an environment, where our people are growing if anything our people have done more publishing and more thought leadership pieces in Morse certifications this year in trying to be.
Productive with their non billable time that their credentials and position in the market place I think are elevated not just by the work that they've done so I think that those sirna demands in the market place for that.
From people, we hire the answers were delivering will allow us to continue to increase pricing, but we're not.
Yes, or no fools, we understand the strain that are our clients are gone are under it is different in different industries, we need to find that balance. So we do want to sit and listen to where that is and find that right balance and some of that's going to be honest.
Communicate reminding our client of how it's sort of a rare resource these.
These top talented people are and how much they did grow over the last year to be able to.
Demonstrate the value that they can deliver going forward.
Thank you very much.
Thank you that does conclude today's conference. We do thank you for your participation have an excellent day.
Yes.