Q2 2024 Exponent Inc Earnings Call
Good afternoon and welcome to the Exponent second quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Operator: 24 Earnings Conference Call All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note that this event is being recorded. I would now like to turn the conference over to Joni Konstantantelos, Managing Director, Riveron Consulting. Please go ahead.
After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded.
I would now like to turn the conference over to Joni Konstantelos, Managing Director, Riveron Consulting. Please go ahead.
Joni Konstantelos: Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's second quarter 2024 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.investors.exponent.com. 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 Richard Schlenker, Executive Vice President and Chief Financial Officer.
Joni Konstantelos: Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's second quarter 2024 financial results conference call.
Speaker Change: Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at www.investors.exponent.com
Speaker Change: This conference call is the property of Exponent and any taping or other reproduction is expressly prohibited without prior written consent.
Speaker Change: Joining me on the call today are Dr. Catherine Corrigan, President and Chief Executive Officer, and Richard Schlenker, Executive Vice President and Chief Financial Officer.
Joni Konstantelos: Before we start, I would like to remind you that the following discussion contains forward-looking statements, including, but not limited to, Exponent's 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 Exponent's periodic SEC filings, including those factors discussed under the Caption Risk Factor in Exponent's most recent Form 10-Q. The forward-looking statements and risks in 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 information, events, or circumstances.
Speaker Change: Before we start, I would like to remind you that the following discussion contains forward-looking statements including, but not limited to, Exponent's market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here.
Speaker Change: Additional information that could cause actual results to differ from forward-looking statements can be found in Exponent's periodic SEC filings, including those factors discussed under the Caption Risk Factor in Exponent's most recent Form 10-Q .
Speaker Change: The forward-looking statements and risks in 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.
Speaker Change: And now I will turn the call over to Dr. Catherine Corrigan, Chief Executive Officer. Catherine?
Catherine Ford Corrigan: Thank you, Joni, and thank you everyone for joining us today. I will start off by reviewing our second quarter 2024 business performance. Rich will then provide a more detailed review of our financial results and outlook, and we will then open the call for questions. We delivered net income growth of 14% and expanded EBITDA margin in the second quarter, reflecting the results of efforts to align our operating model with market demand. As expected, revenue growth moderated during the quarter due to ongoing headwinds in the consumer electronics and chemical sectors and a tough comparison against 20% growth in our reactive work last year.
Catherine Ford Corrigan: Thank you Joni and thank you everyone for joining us today. I will start off by reviewing our second quarter 2024 business performance. Rich will then provide a more detailed review of our financial results and outlook and we will then open the call for questions.
Rich: We delivered net income growth of 14% and expanded EBITDA margin in the second quarter, reflecting the results of efforts to align our operating model with market demand.
Rich: As expected, revenue growth moderated during the quarter due to ongoing headwinds in the consumer electronics and chemical sectors.
Catherine Ford Corrigan: Despite these challenges, our reactive business delivered mid-single-digit growth, fueled by demand across the transportation, utilities, and medical device sectors. Our proactive business continued to experience softness in consumer electronics, partially offset by modest year-over-year growth in the utility sector. Turning to our engagements in more detail, in our reactive work, we saw strong demand within transportation related to product liability and regulatory. These included evaluating the performance and safety implications of advanced driver assistance technologies and battery systems, as well as railway failure investigations. In life sciences, our team continued to leverage their expertise in engineering, manufacturing, and human factors to understand the root causes of medical device safety concerns.
Rich: And a tough comparison against 20% growth in our reactive work last year. Despite these challenges, our reactive business delivered mid-single-digit growth, fueled by demand across the transportation, utilities, and medical device sectors.
Rich: Our proactive business continued to experience softness in consumer electronics, partially offset by modest year-over-year growth in the utility sector.
Rich: Turning to our engagements in more detail, in our reactive work we saw strong demand within transportation related to product liability and regulatory matters.
Rich: These included evaluating the performance and safety implications of advanced driver assistance technologies and battery systems, as well as railway failure investigations.
Rich: In life sciences, our team continue to leverage their expertise in engineering, manufacturing, and human factors to understand the root causes of medical device safety concerns.
Catherine Ford Corrigan: The energy transition continued to be a driver as we advised clients facing infrastructure disputes involving wind, solar, and large-scale energy storage. During the quarter, we continued to see headwinds in the chemical sector as some clients paused near-term litigation work. Within our proactive services, engagements in the quarter were driven by our asset integrity work in the utility sector, for example, evaluating ignition risks and mitigations for electrical infrastructure, and in transportation, evaluating vehicle emissions technology.
Rich: The energy transition continued to be a driver, as we advised clients facing infrastructure disputes involving wind, solar, and large-scale energy storage. During the quarter, we continued to see headwinds in the chemical sector, as some clients paused near-term litigation work.
Rich: Within our proactive services, engagements in the quarter were driven by our asset integrity work in the utility sector, for example, evaluating ignition risks and mitigations for electrical infrastructure and in transportation, evaluating vehicle emissions technologies.
Catherine Ford Corrigan: While we continue to experience headwinds in the consumer electronics industry related to product life cycle timing and broader industry impacts, we are seeing more signs of stabilization. Our product development consulting activities began to recover modestly in the quarter and were encouraged by an uptick in human subject research engagement.
Speaker Change: While we continue to experience headwinds in the consumer electronics industry related to product life cycle timing and broader industry impacts, we are seeing more signs of stabilization.
Speaker Change: Our product development consulting activities began to recover modestly in the quarter and were encouraged by an uptick in human subject research engagements.
Catherine Ford Corrigan: Turning to our segments, Exponent's engineering and other scientific segment represented 84% of revenues before reimbursements in the second quarter. Revenues before reimbursements in this segment increased 4% driven by demand for Exponent services across the transportation and energy sector. Exponent's environmental and health segment represented 16% of revenues before reimbursements in the second quarter. Revenues before reimbursements in this segment decreased 4% due to ongoing headwinds in the chemical sector.
Speaker Change: Turning to our segments, exponents engineering and other scientific segments represented 84% of revenues before reimbursements in the second quarter.
Speaker Change: Revenues before reimbursements in this segment increased 4%, driven by demand for exponent services across the transportation and energy sectors.
Speaker Change: Exponent's environmental and health segment represented 16% of revenues before reimbursements in the second quarter. Revenues before reimbursements in this segment decreased 4% due to ongoing headwinds in the chemical sector. For more information visit www.FEMA.gov
Catherine Ford Corrigan: Looking ahead, accelerating transformation across industries will continue to create attractive market opportunities, from groundbreaking technology and data applications in life sciences to renewables and infrastructure resilience in the energy sector and electrification and automation of transportation. Exponent remains well positioned to support our clients with vital insights for current challenges while preparing the path toward the future. Considering our encouraging performance in the first half of 2024 and the outlook for the remainder of the year, we are raising our full-year revenue and margin expectations. Rich will take us through the details of that.
Speaker Change: Looking ahead, accelerating transformation across industries will continue to create attractive market opportunities.
Speaker Change: From groundbreaking technology and data applications in life sciences, to renewables and infrastructure resilience in the energy sector, and electrification and automation of transportation.
Speaker Change: Exponent remains well positioned to support our clients with vital insights for current challenges while preparing the path toward the future.
Speaker Change: Considering our encouraging performance in the first half of 2024 and the outlook for the remainder of the year, we are raising our full-year revenue and margin expectations.
Catherine Ford Corrigan: However, we still face headwinds in the chemical sector as well as tough comparisons based on unusually strong prior-year growth in our reactive services. However, over the last several quarters, our incredible team has demonstrated agility in adapting to ongoing dynamics in both our consulting and our talent marketplace. Going forward, we will continue to leverage and build upon our diversified portfolio of talent and capabilities as we flex to meet market demand. I'll now turn the call over to Rich to provide more detail on our second quarter results, as well as discuss our outlook for the second to third quarter and the full year 2020.
Speaker Change: Rich will take us through the details of that. However, we still face headwinds in the chemical sector, as well as tough comparisons based on unusually strong prior year growth in our reactive services.
Rich: Over the last several quarters, our incredible team has demonstrated agility in adapting to ongoing dynamics in both our consulting and our talent marketplaces.
Rich: Going forward, we will continue to leverage and build upon our diversified portfolio of talent and capabilities as we flex to meet market demands.
Rich: I'll now turn the call over to Rich to provide more detail on our second quarter results as well as discuss our outlook for the second to the third quarter and the full year 2024.
Richard L. Schlenker: Thank you, Catherine, and good afternoon, everyone. Let me start by saying that all comparisons will be on a year-over-year basis unless otherwise noted. For the second quarter of 2024, total revenues were approximately flat at $140.5 million, and revenues before reimbursements, or net revenues, as I will refer to them from here on, increased 2% to $132.4 million as compared to the same period in 2023. Net income for the second quarter increased to $29.2 million, or $0.57 per diluted share, as compared to $25.7 million, or $0.50 per diluted share, in the prior year period.
Richard L. Schlenker: The realized tax benefit associated with accounting for share-based awards in the second quarter of 2024 was $700,000, or one cent per diluted share, as compared to an immaterial impact in the second quarter of 2023. Inclusive of the tax benefit for share-based awards, Exponent's consolidated tax rate was 26.3% in the second quarter of 2024, as compared to 29% for the same period in 2023.
Rich: Thank you, Catherine, and good afternoon, everyone.
Rich: Let me start by saying all comparisons will be on a year-over-year basis unless otherwise noted.
Rich: For the second quarter of 2024, total revenues were approximately flat at $140.5 million.
Rich: And revenues before reimbursements, or net revenues, as I will refer to them from here on, increased 2% to $132.4 million, as compared to the same period in 2023.
Rich: Net income for the second quarter increased to $29.2 million or $0.57 per diluted share as compared to $25.7 million or $0.50 per diluted share in the prior year period.
Rich: The realized tax benefit associated with accounting for share-based awards in the second quarter of 2024 was $700,000, or one cent per diluted share, as compared to an immaterial impact in the second quarter of 2023.
Rich: Inclusive of the tax benefit for share-based awards, Exponent's consolidated tax rate was 26.3% in the second quarter of 2024, as compared to 29% for the same period in 2023.
Richard L. Schlenker: EBITDA for the quarter increased 8% to $39.9 million, producing a margin of 30.2% of net revenues as compared to 36.8 million or 28.4% of net revenues in the same period of 2023. This year over year increase in margins was driven by an increase in utilization during the second quarter of 2024. However, billable hours in the second quarter were approximately 381,000, a decrease of 2% year over year. This decrease was primarily related to a year-over-year decline in machine learning data studies for consumer electronics clients.
Rich: EBITDA for the quarter increased 8% to $39.9 million.
Rich: Producing a margin of 30.2% of net revenues as compared to 36.8 million or 28.4% of net revenues in the same period of 2023.
Rich: This year-over-year increase in margins was driven by an increase in utilization during the second quarter of 2024.
Rich: Billable hours in the second quarter were approximately 381,000.
Rich: A decrease of 2% year-over-year.
Rich: This decrease was primarily related to the year-over-year decline in machine learning data studies for consumer electronics clients.
Richard L. Schlenker: The average technical full-time equivalent employees in the second quarter were 975, which is a decrease of 9% as compared to one year ago, as we have strategically aligned our resources with demand over the past year. Utilization in the second quarter was 75%, up from 69% in the same period of 2023. As Catherine mentioned, our efforts to align our operating model to market demand while also selectively expanding our capabilities drove utilization back to a historical norm.
Rich: The average technical full-time equivalent employees in the second quarter were 975.
Rich: which is a decrease of 9% as compared to one year ago.
Rich: as we have strategically aligned our resources with demand over the past year.
Rich: Utilization in the second quarter was 75%, up from 69% in the same period of 2023.
Rich: As Catherine mentioned, our efforts to align our operating model to the market demand while also selectively expanding our capabilities drove utilization back to historical norms.
Richard L. Schlenker: The realized rate increase was approximately 4% for the second quarter as compared to the same period a year ago. In the second quarter, after adjusting for gains and losses and deferred compensation expense, compensation was approximately flat. Included in total compensation expense is a deferred compensation gain of $875,000 as compared to a gain of $4.1 million in the same period of 2023. As a reminder, gains and losses and deferred compensation are offset by miscellaneous income and have no impact on the bottom line.
Catherine Ford Corrigan: The realized rate increase was approximately 4% for the second quarter as compared to the same period a year ago.
Catherine Ford Corrigan: In the second quarter, after adjusting for gains and losses and deferred compensation expense, compensation was approximately flat.
Catherine Ford Corrigan: Included in total compensation expense is a deferred compensation gain of $875,000 as compared to a gain of $4.1 million in the same period of 2023.
Catherine Ford Corrigan: As a reminder, gains and losses and deferred compensation are offset in miscellaneous income and have no impact on the bottom line.
Richard L. Schlenker: Stock-based compensation expense in the second quarter was $5.6 million, as compared to $5.2 million in the prior year period. Other operating expenses in the second quarter were up 9% to $11.2 million, driven primarily by increased engagement at our offices and investment in our corporate infrastructure. Included in other operating expenses is depreciation and amortization expense of $2.5 million for the second quarter. DNA expenses declined 9% to $6 million for the second quarter.
Catherine Ford Corrigan: Stock-based compensation expense in the second quarter was $5.6 million, as compared to $5.2 million in the prior year period.
Catherine Ford Corrigan: Other operating expenses in the second quarter were up 9% to $11.2 million, driven primarily by increased engagement at our offices and investment in our corporate infrastructure.
Catherine Ford Corrigan: Included in other operating expenses is depreciation and amortization expense of $2.5 million for the second quarter.
Catherine Ford Corrigan: G&A expenses declined 9% to $6 million for the second quarter. This decrease was primarily due to decrease in travel and meals and bad debt expense.
Richard L. Schlenker: This decrease was primarily due to a decrease in travel and meals and bad debt. Interest income increased to $2.2 million for the second quarter, driven by an increase in interest rates. Miscellaneous income, excluding the deferred compensation gain, was approximately 800,000 in the second quarter. During the quarter, capital expenditures were $1.1 million, and we distributed $14.2 million to shareholders through dividend payments. Turning to our outlook.
Catherine Ford Corrigan: Interest income increased to $2.2 million for the second quarter, driven by an increase in interest rates.
Catherine Ford Corrigan: Miscellaneous income, excluding the deferred compensation gain, was approximately $800,000 in the second quarter.
Catherine Ford Corrigan: During the quarter, capital expenditures were $1.1 million and we distributed $14.2 million to shareholders through dividend payments.
Richard L. Schlenker: For the third quarter 2024, as compared to one year prior, we expect revenues before reimbursements to be approximately flat, and Eva Dawe to be 26.75 to 27.5% of revenues before reimbursement. As Catherine mentioned, we are raising our revenue and margin expectations for the full year 2024. For fiscal year 2024, we expect revenues before reimbursements to grow in the low to mid single digits and EBITDA to be 27.5 to 28% of revenues before reimbursements as compared to 27.7% for fiscal 2023.
Catherine Ford Corrigan: Turning to our outlook, for the third quarter, 2024, as compared to one year prior, we expect revenues before reimbursements to be approximately flat.
Catherine Ford Corrigan: And EBITDA to be 26.75 to 27.5% of revenues before reimbursements.
Speaker Change: As Catherine mentioned, we are raising our revenue and margin expectations for the full year 2024.
Catherine Ford Corrigan: For fiscal year 2024, we expect revenues before reimbursements to grow in the low to mid-70s.
Speaker Change: single digits and EBITDA to be 27.5 to 28 percent of revenues before reimbursements as compared to 27.7 percent for fiscal 2023.
Richard L. Schlenker: Both our current and previous guidance is inclusive of the extra week in the fourth quarter, which occurs approximately every six years, which is estimated to contribute an additional 5% to net revenues in the fourth quarter or 1.25% for the year. We expect sequential revenue and sequential growth in headcount by the end of the third quarter. The average number of full-time equivalent employees in the third quarter of 2024 will be approximately 1% less than in the second quarter.
Speaker Change: Both our current and previous guidance are inclusive of the extra week in the fourth quarter, which occurs approximately every six year.
Speaker Change: which is estimated to contribute an additional 5% to net revenues in the fourth quarter or 1.25% for the year.
Speaker Change: We expect sequential growth in headcount by the end of the third quarter.
Speaker Change: The average technical full-time equivalent employees in the third quarter of 2024 will be approximately 1% less than in the second quarter.
Richard L. Schlenker: As a result, average FTEs for the third quarter will be down approximately 8% year over year. We expect headcount to grow sequentially in the fourth quarter, and year-over-year average FTEs in the fourth quarter to be down 4-5% on a year-over-year basis.
Speaker Change: As a result, average FTEs for the third quarter will be down approximately 8% year-over-year.
Speaker Change: We expect headcount to grow sequentially in the fourth quarter and year-over-year average FTEs in the fourth quarter to be down 4-5% on a year-over-year basis.
Richard L. Schlenker: Utilization in the third quarter to be 71 to 73% as compared to 70% in the same quarter last year. We expect the full year utilization to be 70.5 to 72.5% as compared to 69% in 2023. We still believe our long-term target of sustained, Mid-70s utilization is achievable as we continue to strategically manage headcount and balance utilization based on market demand.
Speaker Change: We expect utilization in the third quarter to be 71 to 73% as compared to 70% in the same quarter last year.
Speaker Change: We expect the full year utilization to be 70.5% to 72.5% as compared to 69% in 2023.
Speaker Change: We still believe our long-term target of sustained mid-70s utilization is achievable as we continue to strategically manage, headcount, and balance utilization based on market demands.
Richard L. Schlenker: 2024 year over year realized rate increase to be 4 to 4.5% for the third quarter and full year. For the third quarter, we expect stock-based compensation to be 5.2 to 5.5 million. For the full year, we expect stock-based compensation to be $23 to $23.5 million. For the third quarter, we expect other operating expenses to be $12.5 to $13 million. For the full year, we expect other operating expenses to be $46.75 to $47.75 million. It should be noted that on June 19, 2024, we exercised an option to early extend the lease for our testing and engineering center in Phoenix, Arizona.
Speaker Change: We expect...
Speaker Change: The 2024 year-over-year realized rate increase to be 4 to 4.5 percent for the third quarter and full year.
Speaker Change: For the third quarter, we expect stock-based compensation to be $5.2 to $5.5 million.
Speaker Change: For the full year, we expect stock-based compensation to be $23 to $23.5 million.
Speaker Change: For the third quarter, we expect other operating expenses to be $12.5 to $13 million.
Speaker Change: For the full year, we expect other operating expenses to be $46.75 to $47.75 million.
Speaker Change: It should be noted that on June 19th, 2024, we exercised an option to early extend the lease for our testing and engineering center in Phoenix, Arizona.
Richard L. Schlenker: Although our current lease does not expire until 2028, we wanted to lock in the pricing at this time. Although we will not pay any higher rent until 2028, the lease accounting rules require us to recalculate the rent expense for the length of the new lease period. This resulted in an immediate increase in our non-cash rent expense of $150,000 during the second quarter and an increase of $1.1 million during each of the third and fourth quarters. We are very excited to secure this facility as we believe it will continue to be an integral part of our growth.
Speaker Change: Although our current lease does not expire until 2028, we wanted to lock in the pricing at this time.
Speaker Change: Although we will not pay any higher rent until 2028, the lease accounting rules require us to recalculate the rent expense for the length of the new lease period.
Speaker Change: This resulted in an immediate increase in our non-cash rent expense of $150,000 during the second quarter and an increase of $1.1 million during each of the third and fourth quarters.
Speaker Change: We are very excited to secure this facility as we believe it will continue to be an integral part of our growth.
Richard L. Schlenker: For the third quarter, we expect G&A expenses to be $5.5 to $6 million. For the full year 2024, we expect G&A expenses to be between $23.5 and $24.5 million. We expect interest income to be between $2.5 million and $3.5 million per quarter for the remainder of 2024. In addition, we anticipate miscellaneous income to be approximately $500,000 to $600,000 for the third quarter of 2024 and $100,000 to $200,000 in the fourth quarter. This includes an expected sequential decrease in rental income in the third and fourth quarters due to the loss of a tenant in our Menlo Park building, which we own.
Speaker Change: For the third quarter, we expect G&A expenses to be $5.5 to $6 million.
Speaker Change: For the full year 2024, we expect G&A expenses to be $23.5 to $24.5 million.
Speaker Change: We expect interest income to be $2 to $2.5 million per quarter for the remainder of 2024.
Speaker Change: In addition, we anticipate miscellaneous income to be approximately $500,000 to $600,000 for the third quarter of 2024 and $100,000 to $200,000 in the fourth quarter.
Speaker Change: This includes an expected sequential decrease in rental income in the third and fourth quarters due to the loss of a tenant in our Menlo Park building, which we own.
Richard L. Schlenker: For the remainder of 2024, we do not anticipate any additional tax benefit associated with share-based awards. For the third quarter of 2024, we expect our tax rate to be approximately 28% as compared to 27.9% in the same quarter one year ago. For the full year 2024, the tax rate is expected to be 26.7 to 26.9% as compared to 25.1% in 2023. The increase in the tax rate is due to a lower tax benefit from share-based awards in the first quarter.
Speaker Change: For the remainder of 2024, we do not anticipate any additional tax benefit associated with share-based awards.
Speaker Change: For the third quarter of 2024, we expect our tax rate to be approximately 28% as compared to 27.9% in the same quarter one year ago.
Speaker Change: For the full year 2024, the tax rate is expected to be 26.7% to 26.9% as compared to 25.1% in 2023.
Speaker Change: The increase in the tax rate is due to less tax benefit from share-based awards in the first quarter.
Richard L. Schlenker: In closing, we are pleased with the expanded profitability this quarter and remain focused on growing and maintaining the balance between our operating model and market demand. I will now turn the call back to Catherine for her closing remarks.
Speaker Change: In closing, we are pleased with the expanded profitability this quarter and remain focused on growing and maintaining the balance between our operating model and market demand.
Speaker Change: I will now turn the call back to Catherine for closing remarks.
Catherine Ford Corrigan: Exponent thrives in the complexity that abounds in products, technologies, and regulations. In this environment of relentless innovation and safety-critical applications, we are focused on fueling the growth engines of the future through expanded capabilities, the recruitment of top talent, and the development of our exceptional team. Looking forward, we will maintain our strategic positioning on the cutting edge of innovation and remain steadfast in our ability to deliver sustained profitability and long-term shareholder value. Operator, we are now ready for questions. We will now begin with the questions.
Speaker Change: Thank you, Rich.
Speaker Change: Exponent thrives in the complexity that abounds in products, technologies, and regulations.
Catherine Ford Corrigan: In this environment of relentless innovation and safety-critical applications, we are focused on fueling the growth engines of the future through expanded capabilities, recruitment of top talent, and development of our exceptional team.
Speaker Change: Looking forward, we will maintain our strategic positioning on the cutting edge of innovation and remain steadfast in our ability to deliver sustained profitability and long-term shareholder value. Operator, we are now ready for questions.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Andrew Nicholas with William Blair. Please go ahead.
Operator: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Andrew Nicholas with William Blair. Please go ahead.
Andrew Owen Nicholas: Hi, good afternoon. Thank you for taking the time to answer my questions. I wanted to first ask about kind of the second half outlook. It looks like you're expecting maybe a bit better growth than we had thought previously in the third and fourth quarters. And I'm just wondering, you know, what's driving that? Is it Specific momentum in any specific practice? Is it some, Transcription by Trans-Expert at Fiverr.com
Andrew Owen Nicholas: Hi, good afternoon. Thank you for taking my questions.
Andrew Owen Nicholas: I wanted to first ask about kind of second half outlook. It looks like you're expecting maybe a bit better growth than we had thought previously in the third and fourth quarter. And I'm just wondering, you know, what's driving that? Is it?
Andrew Owen Nicholas: [inaudible]
Speaker Change: Unknown Speaker 0.30 Okay. So, is it increased optimism on the consumer product side? Is it increased visibility in consistent conditions? Just any more color on what gives you more conviction and growth in the back half of the year.
Catherine Ford Corrigan: Yeah, yeah, thank you, Andrew. I'll, I'll start, and Rich can, of course, add on here, but thinking about the electronic side, that is certainly part of the equation here. You know, we're very pleased to have seen sequential improvements in the last, you know, really in Q1 and Q2 around our user research work and our machine learning data studies in electronics. You know, we continue to be in close conversations with those in that client group and talking to them a lot about what the back half of the year looks like. We're getting some more visibility into Q3.
Rich: Yeah, yeah, thank you, Andrew. I'll, I'll start and Rich can, of course, add on here, but thinking about the electronic side, that is certainly part of the equation here. You know, we're very pleased to have seen.
Speaker Change: sequential improvements in the last, you know, really in Q1 and Q2 around our user research work and our machine learning data studies in electronics.
Speaker Change: We continue to be in close conversations with that client group and talking to them a lot about what the back half of the year looks like. We're getting some more visibility into Q3, so we're seeing signs of that sort of continuing trend of some sequential improvement.
Catherine Ford Corrigan: We're so we're seeing signs of that sort of continuing trend of some sequential improvement, and on the other side of the house in electronics, that's more of the hardware-related work and the product development consulting work. And this is another area where we've seen, you know, some, some uptick, some modest sort of improvement there. And so there are, you know, good signals coming from that side of the market.
Speaker Change: And on the other side of the house in electronics, that's more of the hardware related work and the product development consulting work. And this is another area where we've seen, you know, some, some upticks, some modest sort of
Catherine Ford Corrigan: and Catherine Corrigan
Catherine Ford Corrigan: And so we're pleased with that. And that's certainly part of the equation. You know, we are encouraged by the general outlook on the market drivers as well. Our reactive business, when you look at the work we're doing in advanced driver assistance technologies and other areas of automation and electrification and transportation and, you know, work around wearables that we're doing as well. You know, this has given us some, some, you know, encouragement, I would say, as we look into the back half of the year. Yeah.
Catherine Ford Corrigan: And so we're pleased with that. And that's, you know, certainly part of the equation. You know, we are encouraged by the the general outlook on the market drivers as well in our reactive business, when you look at the work we're doing in advanced driver assistance technologies.
Catherine Ford Corrigan: and other areas of automation and electrification and transportation and you know work around wearables that we're doing as well you know this has given us some some you know encouragement I would say you know as we look into the back half of the year
Richard L. Schlenker: Yeah, I would just add, you know, we, we clearly knew that, yes, there were some areas that we needed to work through relative to the consumer electronics and still some headwinds in chemicals. But the biggest thing that we had a real, you know, question of trying to forecast is how strong we would, how, where we'd end up being able to come out relative to a really exceptional growth rate that we had last year in the reactive business, you know, something we've been doing for 57, 58 years here now, 57 years, I guess, and to be able to last year, you know, the second quarter, having reactive growth that was 20%, the third quarter, being even higher than that into the low 20s and continuing to be in the high teens, even in the, in the fourth quarter, you know, the fact that we, you know, we realized that we had some, a plethora of good sized jobs during that period of time. And where, what was that to mean for going forward?
Speaker Change: Yeah, I would just add, you know, we, we clearly knew that, yes, there were, you know, some areas that we needed to work through relative to the consumer electronics and still some headwinds in chemicals.
Speaker Change: But the biggest thing that we had a real, you know, question of trying to forecast.
Speaker Change: is how strong we would, where we'd end up being able to come out relative to a really exceptional growth rate that we had last year in the reactive business. You know, something we've been doing for 57, 58 years here now.
Speaker Change: 57 years, I guess, and
Speaker Change: To be able to last year, you know, the second quarter, having reactive growth that was 20% the third quarter, being even higher than that into the low 20s and continuing to be in the high teens, even in the in the fourth quarter.
Speaker Change: You know, the fact that we, you know, we realized that we had some
Speaker Change: plethora of good-sized jobs during that period of time. And what was that to mean for going forward? And I think we're very encouraged by the fact that we were able to grow on a year-over-year basis here in that area in the second quarter. Not modest, you know, we don't, even 6% growth there, we want to see it be better. And we realized that the overall performance of 2% net revenues in Q2 and flatting Q3 are not, you know, inspiring on the surface.
Richard L. Schlenker: And I think we're very encouraged by the fact that we were able to grow on a year over year basis here in that area in the second quarter, not modest, you know; we don't even have 6% growth there. We want to see it be better. And, but, we realized that the overall guidance here, performance of 2% net revenues in Q2 and flatting Q3 are not, you know, inspiring on the surface, but when you look at the market that we're in, and the growth we've been getting over the last several years, and last year's growth was not due to negative circumstances the prior year. That had strong growth too.
Speaker Change: But when you look at the market that we're in,
Speaker Change: And the growth we've been getting over the last several years, and last year's growth was not over.
Catherine Ford Corrigan: So we're just very, you know, timing. It's, you know, we're a public company. We know we're held accountable for the quarters, but the underlying demand that this is demonstrating is encouraging for the long term. We've got to work through these periods, but I think, long term, we're very encouraged.
Speaker Change: negative circumstances the prior year. That had strong growth too. So we're just very, you know, there's always timing. It's, you know, we're a public company. We know we're held accountable to the quarters.
Speaker Change: But the underlying demand that this is demonstrating is encouraging for the long term. We've got to work through these periods, but I think long term we're very encouraged.
Andrew Owen Nicholas: Very helpful, thank you. And then maybe, as a follow-up to that commentary, if you could just talk to us a little bit about headcount and ambitions on the hiring front. It certainly seems like things are turning around and improving enough to want to lean back into headcount growth. If you could just kind of talk about whether or not that aligns with how you're thinking about it, or if you're hesitant to do that, absent maybe a multi-quarter recovery, I would appreciate it. Thank you
Speaker Change: Very helpful. Thank you. And then maybe as a follow up to that commentary, if you could just talk to us a little bit about headcount.
Speaker Change: and Ambitions on the hiring front certainly seems like.
Speaker Change: Things are turning around and improving enough to want to lean back into headcount growth. If you could just kind of talk about whether or not that aligns with how you're thinking about it, or if you're hesitant to do that.
Speaker Change: Absent maybe a multi-quarter recovery. I would appreciate it. Thank you.
Catherine Ford Corrigan: Yeah, thanks, Andrew. So we are absolutely in recruiting mode, but it is strategic based on the areas of the market where we see, you know, the key growth opportunities. And, and this has always been our philosophy, as you know, that we target our recruiting in those areas because, you know, it's those individuals as they develop who truly are the engines of growth for the future. And so, you know, we are still getting through some of the ripples in headcount, and we've been able to balance that to get our utilization back where we would like it to be.
Speaker Change: Yeah, thanks, Andrew. So we are we are absolutely in in recruiting mode, but it is strategic based on the areas of the market where we see
Speaker Change: Unknown Speaker 2013-2014
Speaker Change: those
Speaker Change: [inaudible]
Catherine Ford Corrigan: And we are hiring, you know; we are coming into the fall recruiting season at universities. That is a really important time of year for us. Not the only time of year that we hire new PhDs, but it's a really important one. And so we are already those engines are running, you know, and we are interviewing in those key areas, you know, vehicle automation and batteries and sensor technology and, over on the help side, toxicologists and epidemiologists. These are all areas of the discipline where we need those growth engines. So, for sure, we are in that mode. Yeah, I think it is.
Speaker Change: to get our utilization back where we would like it to be.
Speaker Change: And we are hiring, you know, we are coming into the fall recruiting season.
Speaker Change: at the universities. That is a really important time of year for us, not the only time of year that we hire new PhDs, but it's a really important one.
Speaker Change: And so we are already, those engines are running.
Speaker Change: And we are interviewing in those key areas, you know, vehicle automation and batteries and sensor technology and.
Speaker Change: Over on the health side, you know, toxicologists and epidemiologists, these are all areas of, you know, disciplines where we need those, those growth engines. So for sure, we are in that mode.
Richard L. Schlenker: Yeah, I think it's, you know, it's always, you know, you got to turn it back around. You know, it's recruiting PhDs. And that is a longer game.
Speaker Change: Yeah, I think it's, you know, it's always, you know, you got to turn it back around. You know, it's recruiting in PhDs. And that is a longer game.
Speaker Change: And, you know, we didn't let up on that, keeping our market recognition and doing those things, but it's there, that was there.
Speaker Change: You know, I just, you know, it's important for us to remember, you know, we got ourselves into it. But the last year in the second quarter,
Richard L. Schlenker: And, you know, we didn't let up on that, keeping our market recognition and doing those things, but it's there that was there. Headcount growth year over year in Q2 of 2023 was 15%. And yes, you know, that came from low turnover and high acceptance rates and lots of other things, but we were there. We did need to gradually make an adjustment to that, which we've tried to do in a prudent way.
Speaker Change: Headcount growth year-over-year in Q2 of 2023 was 15%.
Speaker Change: And yes, you know, that came from low turnover and high acceptance rates and lots of other things, but we, we were there. We did need to gradually make an adjustment to that, which we've tried to do in a prudent way.
Richard L. Schlenker: As Catherine described in performance management and moderating recruiting, but that led to, I think, a really sort of healthy place that we are now where we came down 9% off of that. But we didn't take it all back.
Speaker Change: As Catherine described in the performance management and moderating recruiting, but, you know, that led to, I think, a really sort of healthy place that we are now.
Richard L. Schlenker: We are built in, I think, with that 75% utilization in the 2nd quarter, which is slightly better than the 1st quarter. When you adjust for holidays and vacations, there are more holidays and vacations in the 2nd quarter than the 1st, and then it takes another couple of points step down in the 3rd quarter. And then again in the 4th because of the timing of holidays and vacations, but that equal utilization in Q2 means it's a slight tick up in utilization.
Catherine Ford Corrigan: where we came down 9% off of that.
Catherine Ford Corrigan: but we, you know, we didn't take it all back. We are built in, I think, with that 75% utilization in the second quarter, which is.
Speaker Change: Slightly better than first quarter when you adjust for holidays and vacations. There's more holidays and vacations in the second quarter than the first. And then it takes another, you know, a couple points step down in the third quarter. And then again in the fourth because of the timing of holidays and vacations.
Speaker Change: But that equal utilization in Q2 means it's a slight tick up.
Speaker Change: in utilization. Now, that came because the headcount was slightly down, but overall I think it's getting into a good balance and gives ourselves a position where our business units can be more comfortable leaning into the recruiting and hiring process.
Richard L. Schlenker: Now that came because the headcount was slightly down. But overall, I think it's getting into a good balance and gives us a position where our business units can be more comfortable leaning into the recruiting and hiring process.
Joshua K. Chan: The next question is from Josh Chan with UBS. Please go ahead.
Speaker Change: Thank you very much.
Speaker Change: The next question is from Josh Chan with UBS. Please go ahead.
Joshua K. Chan: Hi, good afternoon. Thanks for taking my questions.
Joshua K. Chan: Hi, good afternoon. Thanks for taking my questions. Maybe on the headcount topic,
Richard L. Schlenker: Maybe on the headcount topic, how do you feel like your Q4 projected exit rate will position you for any growth that you expect in 2025? I guess you're exiting the year possibly in the low 70s utilization already. So just kind of curious how you're thinking about headcount versus growth going into next year.
Speaker Change: How do you feel like your Q4 projected exit rate will position you for any growth that you expect in 2025? I guess you're exiting the year possibly in low 70s utilization already.
Speaker Change: So just kind of curious how you're thinking about headcount versus growth going into next year again.
Richard L. Schlenker: Yeah, first of all, I'll address the utilization part of that because obviously you're trying to keep that model. I think what we're expecting is utilization that is give or take around what we're guiding here in the third quarter adjusted for what we have in additional vacations and holidays that occur in the fourth quarter. That's what we would expect from it. Yes, it's lower, but it's, it's because only of that adjustment.
Speaker Change: Yeah, first of all, I'll address the the utilization, you know, part of that, because obviously that you're trying to keep that model, you know, I think what we're.
Catherine Ford Corrigan: Expecting is Utilizations that are give or take around what we're guiding here in the third quarter adjusted for
Speaker Change: What we have in additional vacations and holidays that occur in the in the fourth quarter. That's what we would expect.
Richard L. Schlenker: So we're not, you know, we're expecting that. Secondly, on the exit, I would expect us to be again have momentum moving in the sequential growth area. We will have to see where that's progressing, how far we've gotten along on that, and where we are in our 2025 planning that will do this. We're just going to get started on here this fall to see where we are, because we've still got a lap where we were in Q1 and Q2 that have stepped down.
Speaker Change: Yes, it's lower, but it's because only of that adjustment. So we're not, you know, we're expecting that. Secondly,
Speaker Change: On the exit, I would expect us to be, again, having momentum moving in the sequential growth area.
Speaker Change: We'll have to see where that's progressing, how far we've gotten along on that, and where we are in our 2025 planning that we'll do this, we're just going to get started on here this fall, about where we are, because we've still got a lap where we were in Q1 and Q2 that have stepped down, I'm based on those sequential step downs.
Richard L. Schlenker: I'm based on those sequential step downs at this time, but I'm not prepared to predict that it will where it'll be relative to, you know, it will still be a little bit down year over year early in the year because we are still trying to catch up, or will we have brought that even or up? I think we need, you know, we need a few more months to be able to see what we've got lined up for the year and what we've got lined up for early acceptances into 2025, and we probably won't have that until we get into the fourth quarter.
Speaker Change: At this time, I'm not prepared to predict that it will, you know, where it'll be relative to, you know, it will still be a little bit down year over year early in the year because of still trying to catch up or will we have brought that even or up? I think.
Joshua K. Chan: Okay, perfect. Thanks for that, Kalaraj.
Speaker Change: We need, you know, we need a few more months to be able to see what we've got lined up to come out of the year and what we've got lined up for early acceptances into 2025. And we probably won't have that until we get into the fourth quarter.
Richard L. Schlenker: And maybe my second question is on the Q3 growth guidance. Is there any reason why growth slows down in Q3 versus Q2? I know that you mentioned reactive comp gets a little tougher, but I wonder if there's any other reasons behind the slightly more moderate growth in Q3 than Q2.
Speaker Change: Okay, perfect. Thanks for that, Kalarich. And maybe my second question is on the Q3 growth guidance.
Richard L. Schlenker: Thank you.
Speaker Change: Is there any reason why growth slows down in Q3 versus Q2? I know that you mentioned the reactive comp gets a little tougher, but I wonder if there's any other reasons behind the slightly more moderate growth in Q3 than in Q2. Thank you.
Richard L. Schlenker: Yeah, it really is about, well, first of all, I think it is two things. One, it is the comparison here. If you look at what we did, I talked about the fact that Q3's growth rate in reactive business was in the low 20s percent growth rate a year ago in the third quarter versus 2022 there. And overall, as a company, we grew 10 percent, including the fact that we had a 5 percent drop in consumer electronics as an overall business.
Speaker Change: Yeah, it really is about, well, first of all, I think it is two things. One, it is the comparison here. If you, if you look at what we did, I talked about the fact that Q3's
Speaker Change: [inaudible]
Richard L. Schlenker: So that area had a negative 5 percent. So X consumer electronics a year ago, we had that sort of 15 percent. So very strong, a lot of litigation stuff, a lot of other activities that were very, very strong in that period. So those comparisons. In addition to that, we do have a few good projects that we had in a couple of areas in the second quarter that are stepping down in the third quarter. And so we have a little bit of headwind, a little bit of a step back from those activities. And we've accounted for that in the guidance that we provided as well. Thanks.
Speaker Change: including the fact that we had a 5% drop in consumer electronics as an overall business.
Speaker Change: So that area had a negative 5%, so X.
Speaker Change: Consumer Electronics, a year ago, we had that sort of 15%. So very strong, a lot of litigation stuff, a lot of other activities that were very, very strong in that period, so those comparisons.
Speaker Change: In addition to that, we do have a few, you know,
Speaker Change: saw good projects that we had in a couple of areas in the second quarter that are stepping down in the third quarter. And so we have a little bit of headwind, you know, a little bit of step off of those activities and we've accounted for that in the guidance that we've provided as well.
Joshua K. Chan: Thanks for the call there, and congratulations.
Speaker Change: Thanks for the call there and congratulations.
Operator: Again, if you have a question, please press star then 1. The next question is from Tobey Sommer with Truist. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Again, if you have a question, please press star then 1. The next question is from Tobey Sommer with Truist. Please go ahead.
Tobey O'Brien Sommer: Thanks. I was interested in getting your updated perspective on AI-related projects, maybe how often that is coming up in your new business, and how it might compare to, you know, two, three, four quarters ago, if it's increasing or decreasing, and what your expectation is for the relevance of that as a topic and driver for your business.
Tobey O'Brien Sommer: Thanks. I was interested in getting your updated perspective on AI-related projects, maybe how often that is coming up in your new business.
Tobey O'Brien Sommer: and how it might compare to, you know, two, three, four quarters ago, if it's increasing or decreasing, and what your expectation is for the relevance of that as a topic and driver for your business.
Catherine Ford Corrigan: Yeah, thanks, Toby. So we continue to see AI coming in, in different ways. You know, we've talked about some of these before. One is our traditional failure analysis work, but oriented toward a system that is making decisions using, you know, artificial intelligence. So this is our advanced driver assistance technologies in transportation. That is an area that continues to grow as the questions of, you know, whether you equipped your vehicle with that transition into even more complex questions of whether your vehicle systems perform properly now that they have it.
Speaker Change: Yeah, thanks, Toby. So we continue to see AI coming in, in different ways. You know, we've talked about some of these before.
Speaker Change: One is...
Speaker Change: Our traditional failure analysis work, but oriented toward.
Speaker Change: a system that is making decisions using, you know, artificial intelligence. So this is our advanced driver assistance technologies and transportation. That is an area that continues to grow as the questions.
Speaker Change: whether you equipped your vehicle with that, transition into even more complex question of did your vehicle systems perform properly now that they had it? And we're seeing...
Catherine Ford Corrigan: And we're seeing... You know, early signs of encouraging trends around testing in that area. We have been developing some very novel test methodologies that are drawing business around the litigation side for that. And, you know, this is part of our investment in our Phoenix facility that that Rich mentioned. So we're seeing it there.
Speaker Change: You know early signs of encouraging trends around testing in that area. We have been Developing some very novel test methodologies that are drawing, you know business around that the litigation side for that And you know, this is part of our part of our investment in our Phoenix facility that that rich mentioned So we're seeing it there We're still fairly early in the curve around the medical device Side of questions around AI in terms of the reactive business
Catherine Ford Corrigan: We're still fairly early in the curve around the medical device side of things in terms of the reactive business. But that is, I think, coming. This is the wearable that is, or the glucose monitoring system, or what have you that is making decisions about health-related aspects using an artificial intelligence algorithm. There are also many.
Speaker Change: Unknown Speaker But that is, I think, humming, this is, you know, the the wearable that is or the glucose monitoring system or what have you that is making decisions.
Speaker Change: about health-related aspects using an artificial intelligence algorithm.
Catherine Ford Corrigan: We are seeing more and more opportunities to leverage machine learning in the way that we solve problems for clients. So they come to us with a question about the durability of their packaging during shipping, and we can use machine learning to take massive amounts of data about the exposure of that packaging during its journey and make decisions about what testing that packaging needs to be exposed to in order to be robust in that application, so creating great efficiencies for our clients.
Speaker Change: places where we are seeing more and more opportunities to leverage machine learning.
Speaker Change: in the way.
Speaker Change: In the way that we solve problems for clients, so they come to us with a question about the durability of their packaging during shipping, and we can use machine learning.
Speaker Change: to take massive amounts of data about the exposure of that packaging during its journey and make decisions about what testing that packaging needs to be exposed to in order to be robust in that application, so creating great efficiencies for our clients. So we're using the tools and developing the tools to answer the questions.
Catherine Ford Corrigan: So we're using the tools and developing the tools to answer the questions. And then there are also, of course, just the fundamental questions about the algorithms themselves and software as a medical device and areas like that. So still relatively early days on some of those more proactive areas. But I am encouraged by the continued development of our capabilities and our increasing use of machine learning in our applications to solve problems.
Speaker Change: And then there are also, of course, just the fundamental questions about
Speaker Change: The algorithms themselves and, you know,
Speaker Change: software as a medical device and areas like that. So
Speaker Change: Still relatively early days on some of those more proactive areas, but I am encouraged by, you know, the continued development of our capabilities and our increasing use.
Richard L. Schlenker: Yeah, I think one other, one or two other things to add on there. I really think that the real questions that are coming back and increasingly coming back around our studies are really about helping us benchmark and understand how our health applications, algorithms, and applications are performing versus a medical device or versus a gold standard in what they're doing. And what we need to do, what the client, what we can do to help the client in gathering enough data in the training and doing it.
Catherine Ford Corrigan: Unknown Executive, Catherine Corrigan
Speaker Change: The real questions that are coming back and increasingly coming back around our studies
Speaker Change: are really about...
Speaker Change: Help us benchmark and understand
Speaker Change: How are our health applications, algorithms, and applications performing versus a medical device or versus a gold standard in what they're doing?
Richard L. Schlenker: So, benchmark and then augment so that you can continue to get that improvement out of it. Is it improving the hardware and the sensor, or is it improving the algorithm and the machine learning tool that you're doing there? So, that's a big area. And the other one, and we've been deep in that one with multiple clients, multiple applications. The other one is really as our clients in the utility sector are building and relying upon risk models here to make decisions about the reliability and the decision of when to shut power off in their systems during extreme weather events. And what is happening is we're able to gather and help them in validating the data and the algorithms here so that they can build more robust and reliable decision models in that environment.
Speaker Change: data in the training and doing it. So benchmark and then augment.
Speaker Change: so that you can continue to get that improvement out of it. Is it improve the hardware and the sensor, or is it improve the algorithm machine learning tool that you're doing there? So that's a big area. And the other one, and we've been deep in that one in multiple clients, multiple applications.
Speaker Change: The other one is really, as our clients in the utility sector are building and relying upon risk models.
Speaker Change: here to make decisions about, you know, the reliability and the decision of when to shut power off in their systems in extreme weather events.
Speaker Change: What is happening is we're able to gather, help them in validating the data and the algorithms here so that they can build more robust and reliable decision models in that environment.
Tobey O'Brien Sommer: Thank you very much. In your conversations with customers and when you're hearing from senior consultants, what are you hearing about any impact that global elections are having? I guess I'm catering the question a bit more towards proactive, my assumption, but I'll let you respond because we've already had some surprise snap elections with unanticipated outcomes globally, and now we're in the middle of our own relatively unusual election process.
Speaker Change: Thank you very much. In your conversations with customers and when you're hearing from senior consultants,
Speaker Change: What are you hearing about any impact that global elections are having? And I guess I cater the question a bit more towards...
Speaker Change: Proactive is my assumption but I'll let you respond because we've already had globally some surprise snap elections with unanticipated outcomes and now we're in the middle of our own relatively unusual election process.
Catherine Ford Corrigan: Yeah, yeah, thanks, Toby. You know, certainly always paying attention to, you know, these sorts of things. Historically, the company has not, you know, there hasn't been a time when we've seen significant swings, you know, with administrations changing and things of that nature. Of course, you know, changes in administration around the globe can absolutely have an impact on regulatory frameworks. And, but we find that they don't change overnight. And we also find that even efforts to perhaps ease regulation tend to be counterbalanced over time with society's increasing expectations around safety, health, and the environment.
Speaker Change: Yeah, yeah, thanks, Toby. You know, certainly always paying attention to, you know, these sorts of things. Historically, the company has not
Tobey O'Brien Sommer: There hasn't been a time when we've seen.
Speaker Change: Significant swings, you know, with administrations changing and things of that nature, of course, you know, changes of administration around the globe can absolutely have an impact on regulatory frameworks.
Speaker Change: But we find that they don't change overnight.
Speaker Change: And we also find that even even efforts to perhaps ease on regulation, you know, tend to be counterbalanced over time with society's increasing expectations around safety, health and the environment. And we're also able to.
Catherine Ford Corrigan: And we're also able to, you know, because of different parts of the portfolio, let's say there is a deep pullback in regulations, and there's more building of pipelines, that can increase some of our opportunities on the reactive side around construction disputes. Whereas if you're driving, you know, higher bars in regulation, then we get more work around our chemicals area and human exposure and things of that nature.
Speaker Change: you know, because of different parts of the portfolio, you know, let's say there is a deep pullback in regulations, and there's more building of pipelines, you know, that can increase
Speaker Change: Some of our opportunities on the reactive side around construction disputes.
Speaker Change: [inaudible]
Catherine Ford Corrigan: So we've found there to be a balancing aspect there. And, you know, it hasn't been any different so far. But another question, related question that we're getting asked and absolutely tracking is the potential impact of the Chevron decision by the Supreme Court. The Chevron case, in overturning that case, it really empowers regulated entities to challenge some of the regulations based on how they're grounded in science and in engineering. And so, look, we haven't seen a step change or anything like that, but we're tracking closely.
Speaker Change: And, you know, it hasn't been any different so far. But another question, related question, that we're getting asked and absolutely tracking is the.
Speaker Change: A potential impact of the Chevron decision by the Supreme Court. The Chevron case, in overturning that case, it really empowers regulated entities.
Speaker Change: to challenge some of the regulations based on how they're grounded in science and in engineering. And so, look, we haven't seen a step change or anything like that, but we're tracking closely. We're engaged with our clients and.
Catherine Ford Corrigan: We're engaged with our clients and wouldn't be surprised to see increasing questions over time about the scientific foundations of these regulations and when regulations get complicated and there are those kinds of questions and they're about health and safety and the environment, we're, we'll certainly be well positioned to capitalize on that, you know, but again, no material change in a step function kind of way.
Speaker Change: Wouldn't be surprised to see increasing questions over time about the scientific foundations of these regulations and
Speaker Change: When regulations get complicated, and there are those kinds of questions, and they're about health and safety and the environment, we're
Speaker Change: We'll certainly be well positioned to capitalize on that, you know, but again, no, no material change in a step function kind of way.
Tobey O'Brien Sommer: I appreciate you leading right into Chevron because that's where I was going next. Thank you very much. You're welcome.
Speaker Change: I appreciate you leading right into Chevron because that's where I was going next. Thank you very much. You're welcome.
Operator: This concludes our question and answer session, and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: This concludes our question and answer session and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.