Q1 2021 Exponent Inc Earnings Call
Good day and welcome to the exponent first quarter and fiscal year 2021 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Whitney to Coca. Please go ahead ma'am.
Thank you operator, good afternoon, ladies and gentlemen, thank you for joining us on exponent first quarter fiscal year, 2020, one 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 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 export and 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 and exponent periodic SEC filings, including those factors discussed under the caption risk factors and external most recent form 10-Q.
Forward looking statements and risks and 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 and.
Now I will turn the call over to Dr. Catherine Corrigan, Chief Executive Officer Catherine.
Thank you Whitney and thank you everyone for joining us today.
I will start off by reviewing our first quarter of 2021 business performance and Rich will then provide a more detailed review of our financial results and outlook and we will then open the call for questions.
Our business continued to gain momentum driving strong quarterly results, which exceeded our prior expectations and the first quarter net revenue grew 10% and EBITDA margin increased 400 basis points from the prior year period. These results were bolstered by increased activity and human participants.
Studies and litigation projects as pandemic related restrictions were eased and vaccinations became more widely available exponent is winning new assignments daily and at the same time is gradually re engaging on projects that were paused due to corona virus restrictions and court closures.
The pandemic has altered many aspects of our lives, but one trends that has not abated is the growing complexity of our world.
Exponent continues to leverage its expertise to understand and enhance human machine interactions for technologies, including Wearables medical devices and advanced vehicles.
Exponent advisors industry and governments on their most pressing engineering and scientific challenges as society continues to raise expectations for safety health sustainability and reliability. These long term trends that existed prior to the pandemic are now only strengthening driving increased demand.
And for our services.
Exponent continued its work related to physiological monitoring through wearable technology platforms for the U S Army and Navy and expanded the engagement to include a coordinated effort in the department of defense.
Exponent is uniquely positioned to advise clients as they leverage technology to improve human health and to enhance human performance.
On the reactive side, we saw improvement in demand for exponent support and litigation matters as restrictions lift there was more confidence and court cases proceeding and we expect to see a return to normalized levels as the year progresses.
Exponent engineering and other scientific segment represented 81% of the company's net revenues and the first quarter net.
Net revenues and this segment increased 11% and the first quarter as compared to the prior year period.
Growth was driven by strong demand for exponent is proactive and reactive services across a broad range of industries and use cases.
In addition to the steady increase and litigation support and human participants studies, our multidisciplinary battery team continues to see demand for its solutions and electric vehicles and energy storage.
We're working on international Arbitrations, and integrity management Advisory services continued at strong levels.
Exponent is environmental and health segment represented 19% of the company's net revenues and the first quarter net.
Net revenues in this segment increased 7% in the first quarter as compared to the prior year period.
This segment also benefited from increased activity and litigation related projects and support of human participants studies.
And the chemical regulation and food safety practice continued to grow as exponent scientists evaluated the effects of chemicals and new products on human health and the environment.
Society continues to raise its standards for safety health sustainability, and reliability, which has fueled our growth for over 50 years.
I am incredibly proud of the way that exponent employees have continued to deliver value to our clients and to our shareholders over the last year while.
While a degree of uncertainty remains and our strong reputation and diversity of engineering and scientific disciplines and world class team of experts and the durability of our market drivers all position us to deliver long term value to our stakeholders.
I'll now turn the call over to rich to provide more detail on our first quarter 2021 results as well as discuss our outlook for the second quarter and the full year 2021.
Thank you Catherine and good afternoon, everyone let.
Let me start by saying all comparisons will be on a year over year basis, unless otherwise noted.
For the first quarter of 2021 total revenues and revenues before reimbursements or net revenues as I will refer to them from here on increased 10% to $116.5 million and 109 6 million respectively.
Compared to the first quarter of 2020.
The divestiture of our German entity, which clause, which closed in April of 2020 was.
One was a 1% headwind and the first quarter.
Net income for the first quarter increased 38 million or <unk> increased to $38 million or 58 cents per diluted share as compared to $26 3 million or <unk> 49 cents per diluted share.
Exponent recognized a tax benefit from share based awards of $8 $8 million or 16 cents per share and the first quarter of 2021, which is the same as the one year ago period.
As a reminder, most of the of the stock awards are granted annually and March as part of our compensation program and released four years later on.
As such it is primarily a first quarter event for us.
The tax benefit for from share based awards is determined based on the change and the value between grant date and the issuance day.
EBITDA for the quarter increased 27% to 31 8 million producing a margin of 29% of net revenues, which is an increase of 400 basis points as compared to the first quarter of 2020.
Billable hours and the first quarter were 356000, and an increase of 2% year over year.
The German entity accounted for approximately 3% of billable hours and 1% of revenue and the first quarter of 2020.
Utilization and the first quarter was 75, 7%.
Up from 71, 4% and the same quarter of 2020.
Utilization and the quarter was ahead of our prior expectations as pandemic related restrictions were relaxed and vaccinations increased.
Which accelerated the timing of human participants studies and litigation support.
For the second quarter of 2021, we expect utilization to be 74% to 75% as compared to 64% and the second quarter of 2020.
The reason Q2's forecasted utilization is expected to be slightly below Q1, actuals is there will be more vacation days taken as we enter the summer and people are vaccinated.
For the full year 2021, we expect utilization to be 71% to 72% as compared to 67% for the full year 2020, we do expect vacations to be higher than normal and the back half of the year as people take vacations that.
And were deferred due to the pandemic.
Technical and fulltime equivalent employees and the quarter were 906, approximately flat sequentially and.
And a decrease of 3% as compared to the same period one year ago.
The year over year decline and Ftes was primarily due to the divestiture of the German entity, which accounted for 3% of our head count and the year ago period.
We expect.
Sequential head count to be approximately flat in Q2 and grow sequentially, 1% to 2% and Q3 and four as recruiting activities are strong.
The realized rate increased approximately 7% for the quarter. The realized rate increase included a 3% benefit from the divestiture of the German entity.
For the remainder of the year, we expect the year over year realized rate increase to be approximately two to two 5%.
As a result, the full year realized rate increase is expected to be 3% to 3.5%.
Compensation expense after adjusting for gains and losses and deferred compensation increased 7% and.
Included in total compensation expense is a gain and deferred compensation of $5 6 million as compared to and a loss of $14 6 million and the first quarter of 2020.
As a reminder, gains and losses and deferred compensation are offset and miscellaneous income and have no impact on the bottom line.
Stock based compensation expense and the quarter was $6 3 million as compared to $6 1 million a year ago.
We expect stock based compensation to be three nine to $4 4 million and each of the remaining quarters.
For the for the full year 2021 we expect stock based compensation to be 18 $5 million to $19 million.
Other operating expenses were down 6% to 7.7 million. The primary reason. These expenses declined is due to reduced activities and our offices.
Included in other operating expenses is depreciation expense of $1 7 million for the quarter.
For the second quarter, we expect other operating expenses to be $8 six to $8 8 million for.
For the full year 2021 we expect other operating expenses to be 34 to $34 5 million driven by a gradual return to our offices over the year.
We do believe our office environment provides long term value as it supports collaboration for our interdisciplinary teams and staff development.
This results in higher value for our clients and retention of our employees.
We anticipate associated expenses to be at historic levels as we exit the year.
G&A expenses were down 41% to $3 3 million for the quarter the decline and G&A expenses was primarily due to bad debt expense, we accrued for a potential pandemic losses, and the first quarter of 2020, which.
It was released and the fourth quarter of last year.
As as well as lower travel and meal expenses related to marketing and recruiting.
We expect G&A expenses to gradually scale as travel activities resume.
For the second quarter of 2021 we expect G&A expenses to be three six to $3 8 million.
For the full year 2021 we expect G&A expenses to be 16 point due to 16.8 million as a result of marketing and recruiting activities increasing during the year.
Interest income decreased approximately 850000 to 29000 and for the quarter lower interest income is due to a steep decline and interest rates for 2020. One we expect interest income to be approximately $25000 per.
Quarter on 100000 doors for the full year.
Miscellaneous income net of deferred compensation gain was 450000.
2021 we expect miscellaneous income to be approximately 750000 per quarter or $2.7 million for the full year.
Inclusive of the tax benefit for share based awards exponent consolidated tax rate was negative two 4% for the quarter as compared to negative nine 3% and the prior year period.
For 2020 one.
We expect our tax rate exclusive of any tax benefit for the remainder of the year to be approximately 27, 5%.
Moving to our cash flows operating cash flow was $1 3 million for the quarter.
As we pay prior year bonuses in March.
Capital expenditures were $2.5 million for the quarter.
In 2020, one we expect capex to be approximately $10 million.
And the net and the first quarter, we distributed $11.9 million to shareholders through dividend payments.
Today, we announced we will pay a 20 cent dividend and the second quarter as well.
As of quarter, and the company had $214 5 million and cash and short term investments.
Looking forward.
Based on strong demand for our services and the first quarter and the encouraging trends with coronavirus, we expect to maintain our positive momentum.
But recognize that there may be unevenness.
Along the way.
The year over year improvement and staff utilization and the lower than normal operating and G&A expenses.
Our resulting in significant margin improvements.
As a result of the positive momentum across our business and the easier year over year comparisons, we expect second quarter 2021 revenues before reimbursements.
The growth in the low Twenty's and.
And EBITDA margin to increase approximately 350 to 400 basis points as compared to the same period and 2020.
For the full year 2021, we expect revenues before reimbursements to grow and the high single digits to low double digits.
And EBITDA margin to be up approximately 100 to 130 basis points as compared to 2020.
We delivered another quarter of sequential improvements across the business and the first quarter and we are confident and our ability to continue to grow profitability.
I will now turn the call back to Catherine.
For closing remarks.
Thank you rich.
For more than 50 years exponent has been called upon to advise clients on the causes of failures.
As well as how to produce safer healthier and more sustainable and more reliable products and processes.
As our clients' needs evolve and increasing complexity our team of engineers and scientists positions itself ahead of the curve utilizing deep knowledge and multidisciplinary capabilities to deliver unique solutions.
Strong market drivers and a world class team exponent is primed to deliver long term growth.
Operator, we are now ready for questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
And press Star one to ask a question.
Our first question comes from Tobey Sommer true Securities.
Thank you My first question has to do with.
On the potential for global supply chain reconfiguration, and post pandemic, what youre hearing from customers and to the extent you are actively helping some achieved this kind of goal or expected. Thanks.
Yeah. Thanks, Tobey. So you know this is an area of concern across a number of our industries that we operate and right. If you think about the automotive side. If you think about the consumer electronics side in particular and.
And there is a you know the opportunity for us that we've been seeing that visa V and.
And you know consumer electronics in particular really relates to our presence in Asia and our ability to be on the ground for our clients and understanding what some of these you know supply chain impacts our and when when our clients and the U S are in a situation.
Were they really can't I can't have their folks traveling as much. So we are seeing them to some extent some some demand driver is around and it's you know being able to advise clients with respect to our Oh.
Qualification of suppliers to the extent that they are reorienting, our and you know we are able to help them and he says he understanding the quality implications on their product on some of the related data implications vs that'd be their products and the likelihood of a failure in terms of and you know monitoring and auditing types of.
Things and so that's primarily the area that we are seeing this is gonna be around the consumer electronics and consumer products area and our teams in Asia are being called in to to advise clients with regard to some of those impacts primarily around consumer electronics.
Thank you for that is what's the environment like for recruiting you did mention that the you're active and expect to be for the balance of the year. It has has it changed as a result of the pandemic and the.
The relative attractiveness of exponent and says as an employer.
Yeah. So we were very focused on the recruiting side right now on and you know, we we really pivoted and of course during the pandemic. We've we've been able to really take advantage of the virtual space from the standpoint of the way that we are.
Sourcing candidates you know, we we gain these candidates through a variety of channels and you know one of those is our university recruiting channel and we have been able and the virtual environment to reach a much broader spectrum of these candidates and a higher level of diversity of these candidates because of the way we can.
And run these these sort of virtual events as opposed to have to being and having to be and person on campus and so you know what we're seeing now is where and it's accelerating our recruiting process is that we've got you know we've been able to achieve a healthy pipeline of candidates and it's it's been interesting.
And as you know look people are attending and this environment, they're they've been in the pandemic there they're sort of reexamining their lives and they may be looking for new opportunities and and I think we're seeing more of that in terms of being able to capture folks who are maybe getting loose and the saddle from our.
Competitors as well you know, we've we've tried to accelerate our senior recruiting and you know. This is this is using the networks of our very senior leaders and a variety of spaces, whether that'd be environmental and whether that be on the health sciences side, and we've been able to take advantage of some of the.
Some of the disruption if you will with folks wanting to sort of make changes and so we're very focused on keeping our finger on the pulse of the various sources of candidates and so we're confident as we accelerate our activity through the second quarter and into the third and fourth quarter and we're gonna.
Be able to you know.
Get ourselves and you know accelerating net head count growth, which of course, we had moderated to some extent on 2020 because of our focus on and you know on profitability and being able to maintain the very exceptional talent that we have so we've got a very positive outlook on recruiting and we're finding it's as competitive as ever these folks.
And have lots of opportunity, but we are seeing that they are viewing exponent as you know one of their one of their top choices.
Thanks, and then from an expense perspective.
You mentioned real estate and your prepared remarks, and sort of ramping up.
Travel expenses is there a.
Is there a on a net basis any kind of cost difference in debt.
You see and the business exiting hopefully exiting the pandemic versus pre pandemic levels.
Yeah look I think at this point and time, we think that from a facility standpoint are the profile is going to be similar to what we were doing before I mean exponent is been able to pretty much year on year out.
Squeeze a little bit of better margin out of building critical mass and our and our locations and we expect to be able to continue to do that as we look forward over the next several years, but that's a path that we were on.
Being able to sharp space better collaborate more do those types of things when it comes to the you know do I expect.
Expect that we're going to see some lower level of travel expense I think we will see some are in that area as certain conferences or meetings were moved to a virtual environment. What we're working through at this time is is there going to be a net.
Cost savings or are those expenses going to be shifted into other forms of marketing and recruiting expense that allow us to continue to be more effective and that area. So I think that we're still evolving those areas.
And I definitely think there are some places where.
Less travel, we'll be more efficient and and actually more effective for our business, but we think that we also need to invest in and other forms of communication.
Can.
It will also enhance our position and the marketplace.
And then last question for me as courts throughput kind of slowed last year, we weren't sure whether all projects would sort of be deferred and or maybe.
Parties would would settle and what what is what's your perspective now on the degree to which some of those projects kind of went away or really just accumulated in.
For lack of a better word some sort of backlog.
Yeah, Yeah. Thanks, Toby you know I've been spending a fair bit of time engaged with our clients and on the litigation side. Both the you know the outside counsel as well as the in House Stokes.
Who make a lot of the decisions around.
And how they handle their litigation portfolios and and I would tell you you know they and they have not changed their posture around and it's kind of you know wanting to fight the battle on the merits of the case you know they they are really making their decisions and you know based on the based on the merits.
And I'm finding you know, we we didn't really see waves of settlements you know when when things started to decline in terms of the macroeconomic impact of course, you get a settlement you know you've got settlements here and there and at the end of the day you know the vast majority of these matters do settle.
But what tends to happen as they get they get fully worked up full expert reports and depositions and scale, you're almost to the courthouse steps before those settlements tend to happen and we really have seen you know that our clients are just as committed to you know to their cases as they have.
And you know, whether you're whether you're on the plaintiff's side or you're on the defendant side. They they've they've there's been a willingness for them to wait it out.
And that's what I've seen and and just kind of pushed the dates and but what we see now is the dates are becoming real and you know the reality of bringing a jury in four and in person trial and even the summer or the fall of this year is very real and that is pushing and.
Pushing demand back toward us for things like the preparation of expert reports and doing these steep analyses and and preparing for depositions and so you know that's been that that's been a part of the driver really here for the activity and the quarter on where we continue to see this improvement and you know matters that are being built and brought.
Back to life, if you will.
Thank you very much.
Welcome.
Our next question comes from Andrew Nicholas William Blair.
Hi, good afternoon.
Andrew I was hoping.
You could speak to the outperformance that you saw on the quarter relative to your guidance and.
Where in particular.
The upside and then somewhat relatedly when you look at that outperformance is there any way to.
To describe how much of it was a function of maybe pent up demand flowing into the pipeline.
Versus what might otherwise be described as it's more normal course of business and I realize that debt.
Maybe a difficult thing to ascertain but just curious if you have any thoughts on on pent up versus first normal course. Thanks.
Yeah, let me start off on on this one.
And I look I think when when we provided the guidance are about the first quarter are at that time clearly we were in the process and we had a number of human participants studies that clients had been coming to us wanting to get ready.
And <unk> to go when are the restrictions came down and went vaccinations increased.
And I you know we can all remember back to what our January was like it was not that long ago. We you know and we were all coming off a pretty you know devastating sort of time over the post holidays.
And but things really you know vaccinations were starting we just didn't know.
How quickly we would see the positive.
Positive impacts of that in and it turns out debt very quickly early and in February.
Those restrictions the numbers started to go down and and we were able to really let go and and go full bore for the last you know eight nine weeks of the quarter on our human participants studies on activities. So that was one area debt.
And really made a difference.
I think in that area, Oh, I've talked to the team I would say yeah, maybe a 30 day activity was some work that might've been done and an earlier quarter and a late third early and the fourth quarter, but the other two thirds.
Of it being activity that really wouldn't have occurred until the first quarter on at the earliest so the majority of the work is is work that's new and it wouldn't have been occurring until this time and.
And the product lifecycle and and going from there.
Yeah. This is an area that we you always probably let's call altogether, yes, 6% of you know.
And 5% to 7% of our revenues and in the corner.
And total just to give you a sense and there was some of it going on in January interest accelerated a really and in February and continued on.
On the litigation support side again, we if you remember back we saw a good push on that in the fourth quarter that really led to a very strong fourth quarter that we had was the people realizing that Oh vaccinations were gonna work coming up.
The court dates would probably begin to firm up and activity really started to move forward on depositions and expert reports and all that activity those slowed a little bit in the late December and all the way through January but really picked back up again a really.
Late January and the beginning of February on those activities.
And we've continued to see.
A higher level of new engagements a year over year. So we're getting plenty of new engagements go and coming in and and I would say that again. This is a majority of the work is work we would have been doing and the in the first quarter and pushing through.
But you have that top off a part of that level of work might be 10, and 20% of what we're doing and that area that might've been deferred and pushed out but it's starting to come off. So again you know this is an area that Oh litigation overall is.
50% of what we do and yeah, we're seeing a little bit of that work being added on the top but the majority of it.
Being work, that's we would've expected and we continue to get when we were and the pentair deep.
Deep and the and the restrictions.
Really helpful color. Thank you, maybe as a follow up to that and and with your answer as context or a precursor I was hoping you could maybe.
Walk through and a little bit more detail, how you're thinking about the revenue cadence throughout the remainder of the year. If I look at the implied guide for the second half it seems like you're baking in a consistent sequential step down through year end and and so I'm wondering if there's anything else to call out besides.
You know typical seasonality and indications, where it's just you know maybe being a bit conservative given how much uncertainty there is and in the world at large.
Yeah. So.
So I think it's it's a lot of those factors.
First of all clearly we have easier comparison in Q2 and Q3.
And then we have and the fourth quarter as I, just mentioned a moment ago, the the fourth quarter our Utah.
Utilization was actually pretty pretty strong Oh, no. It was a good utilization quarter, we had seen a little bit.
And the head count as well.
And we had a very strong and rate realization in that period.
Just on the mix of work.
Based on positive realization on on projects and the rate realization was definitely the strongest of the year. So we do view that Q4 is a very different comp.
Paris and for Us on as we as we move forward to that.
So we're not expecting to see as larger and we're expecting to see a small rate realization when we get to the fourth quarter just because of the unusual strong rate last during that period, we think utilization on.
Underlying might be a little bit stronger than it was last year and the fourth quarter, but we realize that vacations are gonna be pressing on us at that period of time, and we're taking that into accounts, it's likely we're going to see a few extra day was less productivity from people.
Paul and the fourth quarter of this year and over the summer I as well as our people are taking vacation and doing a little bit of catching up on that.
And so that is why at this point and time and the uncertainties that are out there. We have a you know accounted for that and you're right. It is a low yeah, our expectation for year over year growth and the fourth quarter on the top line is low because of all.
Those factors, but it's not because you don't we don't see the business getting back to a normal growth rate I as we go into 2020. Two are we think that this strong recruiting that we're doing right now hiring phds and all that it takes time delay.
Back in you know, we'll start to see the results of that and the fourth quarter, but a lot of that don't fall into the first quarter on next year and beyond where we can get that head count year over year growth back up into that 4% to 7% range as we go into 2020, two where we can see good right.
The increases as we go into the you know this demand environment that we're all in and we're seeing inflation and we're seeing.
Good GDP growth and all of that we think that will lead to us.
Again being able to realize a good rate increase as we go into 2020, two and as I indicated earlier, we expect the utilization this year to be and that 71% to 72% a range and we expect over time that that can gradually grow into the mid seventies.
And over the next four to five years. So we think that there is room to be able to improve things as we get through the year and set ourselves up well.
As we go into 2020, two and beyond.
Mike.
Very helpful color. Thank you.
Our next question comes from Marc Riddick Sidoti.
Hey, good afternoon.
Hi, Mark and Mark.
So I wanted to sort of piggyback on that and I really appreciate it the way you kind of laid out and how the cadence worked out around the recovery and and and positive performances that you saw both on the litigation side and and and the user study portion and I was wondering if you sort of take a similar does at what you may be.
I mean, what's the with automated vehicles and in some of those types of efforts given the the focus on what would maybe coming as far as increase a day men and and our production and that space.
Yeah, Thanks, Mark and you know that the automotive and area and advanced vehicles and in particular are definitely an important driver for US right now and this is this is actually but it hits both the proactive as well as the reactive side of the business and you know theres been an uptick.
Sort of in a in a regulatory activity around advanced vehicles, we are seeing demand around sort of safety frameworks and.
And as as the various you know manufacturers have advanced vehicles and automated vehicles are on.
And additionally, the actual deployment and so you saw on the roadways, and that's really where exponent comes in and when it gets sort of out of the lab and out of the out of the test environment and you actually get into the realities of a 4000 pound vehicle being driven by a computer and you know what 70 miles per hour and what the safety implications.
But that are so we're seeing that kind of and you know.
Demand on the proactive side and also around the electric vehicle piece, you know you've seen and all kinds of pledges are recently, you know and general Motors fleet and it's gonna be electric by 2030, and and others are I think you're right.
It's a pleasure it up and you know and.
You know sorts of statements and so we are seeing that our battery expertise on the transportation side is and increasing demand you know as as the industry and ramps up its manufacturing of batteries to meet the demand in the marketplace and to kind of meet the regulatory drive.
Or is that are pushing in that direction. There are all kinds of challenges that I mean, if you remember back to the Samsung Galaxy note seven phone and all of those challenges came through and they ramped up manufacturing and so you know there's there's opportunity that we're seeing and their engagements that we are seeing around you know quality and performance and.
And reliability of those systems and then also crash worthiness stepped out of the system and see how vehicle fires are a concern.
For both our gas powered vehicles as well as electric vehicles, but that you know that the ways that you've put them out on the safety implications are very different just because there are different propulsion system. So you know we're seeing it there we're seeing litigation work around advanced driver assistance systems. So this is not a fully automated vehicle, but this is.
The technology, that's being deployed in the fleet now it's been in the fleet you know emergency braking.
Lane, keeping kinds of technologies adaptive cruise control.
They they these are places where the litigation profiles are increasing on the plaintiffs and the plaintiffs' bar is is very aggressive as they have always been around vehicle safety and so you know we have taken and made investments to position ourselves ahead of the curve on this and and are really developing the.
Cutting edge testing capabilities around these systems, you know and really digging into the data around limit performance on these systems and so you know the automotive arena, both proactively and Reactively.
Driving some of the existing demand.
Demand that we've seen and this past quarter, but also you know we believe it's going to continue on through 2020, one and beyond as these technologies continue to be you know and get closer and closer to actual deployment and then once they're deployed and managing debt that challenge and so their performance and failure analysis and <unk>.
Like that once they're they're out on a relative.
Okay. That's really helpful. Thank you and then I was wondering from from a regulatory standpoint.
Is there a general timeframe of framework that you you tend to see for for new technologies.
And technologies like this and when it comes to I guess, maybe on the state and local level.
And involvement and sort of and what type of is this the type of thing that you can sort of see coming and for ever.
And I prepare yourself for it and and then type in various jurisdictions might be.
First one's on your doorstep.
Yeah, you know the regulatory environment is is a key driver right and and you hit the nail on the head. When you mentioned you know, it's not only a federal level, but there's a state and the local level right. Because the you know it's at the state level, where they have to you know the states to do licensing for advanced.
For human drivers right well, how do you decide if you are upstate and if you're at that state level. There are huge questions around how you determine if a if and automated vehicles should be quote unquote licensed to be on the public roadways, right and and the pathway towards that is something that that could be different you know state by state.
And so you know this is an area, where exponent and can really help and and we would be we would be aiming you know and have been assisting them and you know that the industry more so than going after the states themselves necessarily as clients and but we're trying to really add.
Actualize getting the vehicle on the road way and and what that actually means in terms of what the vehicle needs to demonstrate how do you demonstrate safety, how safe is safe and not <unk>.
<unk> is the real question that the whole community is manufacturers is really trying to answer and really trying to trying to get ahead of the regulators. So that you can demonstrate to the regulators that you've got the best practices and that that's definitely an area of focus for us now.
Okay, and then I just wanted one more and I promise I'll be done.
Can you talk a little bit about the expansion of the Wearables.
Within the D O D and and sort of how that came to be and and was there something that sort of accelerated that pace or how should we think about that opportunity moving forward.
Yeah, Yeah. So that's you know that's an opportunity where the original work was you know we were doing and at the army level, we were doing it at the Navy level, but now what's happening is that we are and it was focused really very exclusively on COVID-19 related you know proximity monitoring and contact tracing.
And now what we're seeing because of what we've been able to deliver in those engagements is more of a more of a converged solution across and you know as a joint program across the department of defense.
And we're looking at.
That sensor data from the wearable and from a variety of different angles in terms of you know the security of the data the hardware itself and.
And the ability of the sensors to detect physiologic signs and you know the data flow and architecture are our important issues here on the human factors issues associated with the display you know how you how you manage all of those kinds of things and and you know wanting to get all of that information.
On to the wearable device and a way that is robust and reliable and provides information about you know sort of health and also readiness and.
And you know in the sense of the armed forces and so you know it's about taking it sort of out of the laboratory out of the experimental sort of condition and being able to manage manage it operationally and sort of optimize that that data flow to provide real insights.
And to what the data are telling you and so that's really where the expansion has come through and it's sort of a you know a converged solution that goes across as a joint program and in the department of defense.
That's great. Thank you very much.
Youre welcome.
With no more questions and the queue and we will be and in the call.
Ladies and gentlemen. This concludes today's teleconference. You may now disconnect.