Whitney Kukulka - The Blueshirt Group, IR Paul Johnston - CEO Rich Schlenker - EVP and CFO.

Tobey Sommer - SunTrust Joseph Foresi - Cantor Fitzgerald Tim McHugh - William Blair Randy Reece - Avondale Partners Marc Riddick - Sidoti.

Good day and welcome to the Exponent Fourth Quarter of Fiscal ‘16 Results Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Whitney Kukulka. Please go ahead..

Thank you, operator. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's fourth quarter and fiscal year 2016 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.com/investors.

This conference call is a property of Exponent and any taping or other reproduction is expressly prohibited without prior written consent. Joining me on the call today are Paul Johnston, 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 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 factors affecting operating results and market price stock in Exponent's most recent Form 10-K.

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. And now I will turn the call over to Paul Johnston, Chief Executive Officer. Paul..

Thank you. Thank you for joining us today for our discussion of Exponent’s fourth quarter and fiscal year 2016 results. Exponent’s fourth quarter and full year 2016 results were slightly better than our prior outlook. Net revenues increased 4% in the fourth quarter and net income was up 5%.

During the second half of 2016 we began to see an increase in demand especially for our expertise in the consumer products and construction industry sector. We are pleased that our fourth quarter results show year-over-year growth in revenue and profitability. For the fiscal year, net revenues were 299 million, a 1% increase from last year.

Although this is not the level of growth we like to see, it is slightly better than our prior outlook. Revenue growth was tempered by a challenging year-over-year comparison in the first half of the year and softness in a few industry sectors, especially in the oil and gas industry. 2016 net income was 47.5 million or $1.75 per diluted share.

In line with prior expectations, fourth quarter utilization improved to 68% bringing the full-year utilization to 70%. We made prudent staffing adjustments in a few select areas to rebalance capacity with client needs. Adjustments that we made to headcount during the second half of the year favored profitability and utilization over revenue growth.

While the resulting lower headcount created a headwind for year-over-year growth, we have seen modest improvements in utilization and are prepared to begin headcount growth in 2017 with a focus on practices with strong client demand.

Our engineering and other scientific segment is the largest part of our business representing 78% of Exponent’s 2016 net revenues. Net revenues in the segment grew 6% in the fourth quarter and 5% for the full year as compared to 2015.

During the quarter, demand for our reactive and proactive services in the consumer electronics industry remained strong. This industry represents approximately 12% of our business.

Last week you may have seen that Samsung announced that Exponent’s multidisciplinary team of engineers and scientists assisted them with the evaluation of the Galaxy Note 7 which led to a recall of the product. We presented our findings at a January 23 news conference hosted by Samsung in Seoul, Korea.

Exponent has extensive experience in battery technology assessment and we have done over 350 battery projects in the last two years. We continue to work with Samsung and other consumer product companies to evaluate lithium-ion battery technology for future products.

This exemplifies our opportunity to leverage our experience and reputation in reactive services in order to drive growth and development of our proactive services both domestically and overseas.

As we discussed in the third quarter, we are experiencing increased demand for our expertise in construction disputes for major international capital projects. Exponent is unique in being able to bring together experts in construction consulting and complex technologies in one integrated team.

While we have had this experience for several years, more recently we have added people in Hong Kong and expanded our marketing in Asia, which has resulted in this uptick in international business. Additionally, in our engineering and other scientific segment, we had several practices with notable growth.

The materials practice saw growth from the utilities industry in performing failure analyses of systems and providing proactive services in asset integrity management. The polymer science and materials chemistry practice has been heavily involved in battery work as I discussed earlier.

The human factors practice has been growing its user study services for the consumer products industry and the biomedical practice has realized growth and design consulting as well as product liability claim support. We are encouraged by the diversity of both proactive and reactive growth opportunities.

Despite softer market conditions in a few industry sectors in 2016, we are encouraged by our ability to increasingly capitalize on global demand and generate mid-single digit growth in our largest segment. The balance or 22% of Exponent’s 2016 net revenues was from our environmental and health segment.

As compared to the same period last year, net revenues were down 1% in the fourth quarter and declined 11% for the full year. It should be noted that the segment actually grew in the fourth quarter before adjusting for foreign exchange for consolidated financial statements purposes.

The food and chemicals practice expanded as it assisted clients with regulatory issues around the world. The year-over-year net revenue decline in 2016 in this segment was driven by the completion of a major project in the third quarter of 2015 as well as the reduced spending in the oil and gas and industrial chemicals industry.

Challenges remain in the market but they are not unique to Exponent and we are not seeing any significant changes to the competitive environment. Our highly skilled professionals, multidisciplinary teams, and geographic reach combined to help Exponent earn engagement and increase brand recognition from US and internationally.

We continue to be retained to investigate many significant accidents and product recalls, and evaluate reliability, safety, human health and environmental impacts of increasingly complex technologies, products business, and the global environment.

Turning to our dividends and repurchase activity, in 2016, Exponent paid 18.8 in dividends, repurchased 24.5 million of common stocks and ended the year with 174 million in cash. Today, we announced an increase in our quarterly dividend from $0.18 to $0.21 per share and reiterated our intent to continue to pay quarterly dividend.

We believe that our ongoing share repurchase plan coupled with our increased quarterly dividend indicate our confidence in the company's long-term financial position and reflect our commitment to delivering shareholder value. Now I'll turn the call over to Rich for a detailed review of our financial performance and business outlook..

Thanks Paul. For the fourth quarter of 2016 total revenues were $77 million, up 5% from one year ago. Revenues before reimbursements or net revenues as I will refer to them from here on were $72.8 million, up 4% compared to the same quarter of 2015.

Our revenue growth in the fourth quarter was reduced by 0.8% for translating foreign currency for consolidated financial statements. Net income for the fourth quarter increased 5% to $10.4 million or $0.39 per diluted share as compared to $9.9 million or $0.36 per share in the same quarter last year.

EBITDA for the quarter was 18.2 million, a 5% increase as compared to the same period of 2015. For fiscal year ’16, total revenues increased slightly to $315.1 million from $312.8 million in the prior year. Net revenues were $299.2 million, a 1% increase from 2015.

Our underlying growth was 4% excluding the 2.6% impact of the major project completed in the third quarter of 2015 and the 0.7% impact from translating foreign currency for consolidated financial statements.

In the first quarter of 2016, Exponent early adopted a new accounting standard for the classification of tax adjustments associated with share-based awards which was applied prospectively. While this was primarily a first quarter event, there was a nominal impact in the subsequent quarters.

In fiscal year 2016, the realized tax benefit was $4.8 million or $0.18 per diluted share. Including the tax benefit, net income was 47.5 million, an increase of 9% as compared to 43.6 million in 2015. For comparison purposes, excluding the tax benefit, net income would have been $42.7 million in 2016 representing a decrease of 2% year over year.

Earnings per diluted share increased to $1.75 inclusive of the $0.18 per share benefit as compared to $1.60 in 2015. For the full year, EBITDA was $74.6 million, down 2% over 2015. For the fourth quarter, billable hours increase 3.8% to 270,000 as compared to the same period in 2015.

For the full year, billable hours declined by 0.6% to 1.1 million as compared to one-year ago. Utilization for the fourth quarter was 68% as compared to 66% in the same quarter of 2015. As a reminder, we have seasonality in our business related to sequential increases from quarter to quarter in holidays and vacation.

The New Year's holiday fell in 2017 giving us approximately 1.5 percentage point benefit in the fourth quarter utilization, which is attributable to one more work day in the fourth quarter of 2016 as compared to 2015.

We expect the utilization for the first quarter of 2017 to be down approximately 2 percentage points from the 74% we achieved in the first quarter of last year. Based on an additional holiday and a manager's meeting in March, both of which we did not have in 2016. For the full-year 2016, utilization with 70% down from 72% last year.

The decrease in utilization was due to the impact of the major project which ended in the third quarter of 2015 and softening in a few industry sectors. For the full-year 2017, we expect utilization to be flat to slightly up, which includes the impact of the managers meeting and the extra holiday in the first quarter.

Technical full-time equivalent employees in the fourth quarter were 758, which is down from 760 in the same quarter of 2015. For the full year, FTEs were up 1.7% to 764. We ended the year with approximately 752 FTEs. For 2017, we expect quarterly sequential headcount growth to be approximately 1% from a base of 752.

We will continue to selectively recruit top talent in many of our disciplines to meet current demand and position the company for future growth. In the fourth quarter, the realized bill rate increase was approximately 2% year over year, partially offset by 0.8% for translating foreign currency for consolidated financial statements.

For the full-year 2016 the realized bill rate increase was approximately 2.5%, partially offset by 0.7% for translating foreign currency.

For the full-year 2017, we expect the realized bill rate increase to be approximately 2% to 2.5%, and the impact of translating foreign currency for consolidated financial statements to be approximately 0.3% based on current rates.

EBITDA margin for the fourth quarter was 25 % of net revenue, a marginal improvement from 24.9% in the same period last year. For the year, EBITDA margin was 24.9%, down approximately 90 basis points as compared to 25.8 % last year but better than are our expectations.

We expect EBITDA margins for the full-year 2017 to decline approximately 25 to 75 basis points as compared to 2016. EBITDA margins in the first quarter of 2017 will be down approximately 200 to 250 basis points as compared to the same period last year because of the additional holiday and the cost of the managers meeting.

For the fourth quarter, compensation expense after adjusting for gains and losses in deferred compensation increased by approximately 4% as compared to the same period last year. Included in total compensation expenses is a gain in deferred compensation of $1 million which is approximately the same as one-year ago.

As a reminder, gains and losses in deferred compensation are offset in miscellaneous income and have no impact on the bottom line. For fiscal year 2016, compensation expense increased 2.5% after adjusting for gains in deferred compensation of $3.9 million as compared to a loss of $300,000 in the prior year.

Stock-based compensation expense was $2.7 million in the fourth quarter and $13.3 million in fiscal 2016, up 10% and 3% respectively.

For the full-year of 2017, we expect stock-based compensation to be between $13.5 million and $14 million with approximately 5 to 5.5 million being expensed in the first quarter and 2.7 to 3 million in each of the remaining quarters Other operating expenses were $7.2 million in the fourth quarter and 28.4 million for the full year, up 3% and 5% respectively.

Included in other operating expenses is depreciation expense of $1.6 million for the fourth quarter and 6.1 million for the full year. For 2017, other operating expenses are expected to be in the range of 7.4 to 7.8 million per quarter.

G&A expenses decreased approximately 9% to $4.1 million in the fourth quarter and increased 1% to 15.5 million for the full year. For 2017, G&A expenses are expected to be 4.5 to 5 million in the first two quarters due to the manager's meeting and 4 to 4.5 million in the final two quarters.

Our fourth quarter tax rate was 38.1% as compared to 38.4% in the fourth quarter of last year. Our fiscal year 2016 tax rate was 31.3% compared to 38.7% in 2015. Our 2016 tax rate benefited from the adoption of the new accounting standards which is primarily a first quarter event for Exponent.

For comparison purposes, exclusive of the tax benefit, our tax rate would have been 38.3% for the year. Future tax benefits from new accounting standards will depend on gains realized when stock awards are distributed. Currently, we expect 2017 tax rates to be comparable to 2016 levels.

Operating cash flow was $29.7 million for the fourth quarter and 66.9 million for the full year. Capital expenditures were 1.3 million for the fourth quarter and 14.4 million for the year. The capital expenditures included the purchase of a warehouse in the third quarter of 2016, which we previously leased and is adjacent to our headquarters.

For the year, we repurchased $24.5 million of common stock for 491,000 shares at an average price of $49.78. We have $57.3 million available for future repurchases. In 2016, we also distributed $18.8 million to shareholders through dividend payment.

Today, we announced an increase in our quarterly dividend to $0.21 per share for the first quarter of 2017. We ended the year with $174 million of cash and short term investments.

Looking ahead to fiscal 2017, we expect to achieve modest topline growth due to the adjustment in headcount during the second half of 2016 and market conditions in a few sectors.

As a result, we expect fiscal year 2017 revenues before reimbursements to grow in the low-to-mid single digits and EBITDA margin to decline approximately 25 to 75 five basis points as compared to 2016.

Although market conditions have tempered our underlying growth over the past three quarters, we remain confident in our long-term expectations for revenue growth to return to the high-single to low-double digits which will also enable us to continue to improve our margins. I will now turn the call back to Paul for closing remarks..

Thank you, Rich. As we look to 2017, we are focused on the same long-term financial goals, producing organic revenue growth, increasing earnings per share and maintaining a strong balance sheet.

As products continue to become more technologically complex and the Consumer Product Safety Commission escalates enforcement, we are increasingly called upon to assist clients proactively in evaluating their products and reactively to investigate consumer safety events and potential product recall.

We believe our brand is growing globally as illustrated by the high profile engagements by Toyota on unintended acceleration, by Honda on airbag, by Samsung of the Note 7 and several others on international construction disputes. We have a diversified portfolio of clients, a world-class team of highly skilled professionals.

Exponent is uniquely positioned to capitalize on the increasing technological complexity of products as well as society’s heightened focus on product safety, human health and environmental issues.

We believe that our share repurchase program and ongoing quarterly dividend payments are clear signs of our commitment to deliver long-term shareholder value. We look forward to updating you on our progress as we move through 2017. Operator we are now ready for questions..

[Operator Instructions] We are going to take our first question from Tobey Sommer with SunTrust..

I wanted to ask a question about the guidance for growth versus the long-term growth rate, which you clearly endorsed is still how you look at things over time.

I understand that you had some big projects end and some transition happened recently, but do you need a significant change in the market to get back up to the long-term growth rate? Or just some kind of more time to hire more people and kind of build the engine of growth? Thanks..

Yeah, thanks Tobey. A couple of things on that, I think that we do need some time and the time is because we had to do a bit of a reset for the middle of 2016 as we've described and sort of adjusting from headcount. So we kind of took it sort of a little bit of step back in order to kind of move forward from there.

And so that you know that does until you pass through that time period and get the growth in our headcount back going again this year as Rich described sort of sequentially 2% per quarter so that we're acting each quarter on a larger base of headcount. So I think there is some time required for that to happen.

With regard to the business climate, I mean I think there are a few things that need to settle into place. Clearly, we've talked quite a lot about oil and gas, oil and gas is a very important industry sector for us and something that clearly had a downturn. Given the current political climate, there is some promise around that.

But obviously these things take a little bit of time to come through. We see the same sort of situation for example with the infrastructure area. So in summary, it is time, but I think there are two, a couple of strengthening industry factors that would help us do that..

Okay. Thanks. That's helpful. That makes sense. Wanted to ask you about your product business oriented towards government and defense. Has the market for that changed or if there was demand for the service that you provided in years past, is that a role that Exponent could easily try to fill again? Thanks..

So we were not looking to fill that unless there were different circumstances.

So just to recap on the circumstances that allowed us to play a significant role there, during the time that we had combat troops in Iraq and Afghanistan, the US Army had a Rapid Equipping Force, which was designed to have a much more commercial level engagement with business in terms of providing support in what I'll call a much more favorable rapid contractual way.

So the result was that rather than being in a cost plus fixed fee and bidding on long term projects, there was a situation where we could effectively receive commercial terms and we were operating in a way that would help insert technology to help save the lives of our troops, because they were, most of the casualties were around IEDs and there were a lot of technology ideas to help reduce those casualties.

That was a fairly unique circumstance and we knew when that was coming to an end. Obviously, we announced that well in advance, really of the close of 2014 we're talking about.

And we did not then and do not now think that we have an interest in our business model to contract with the government on a cost plus fixed fee basis to deliver products to the military..

Thank you. Just two other questions for me.

For your guidance on a segment level for growth, could you give a little color as to how that may shake out, relative to the overall company's revenue growth? And then closing out for me, could you discuss tax reform and the potential benefit to your cash flows? How that may look at this point, given we are still waiting for a lot of details, of course?.

Yeah. We don't give guidance to you on a segment by segment basis, but what I would say is that clearly, the engineering area continued to have solid growth here, not up to the level we wanted, but good middle single digit growth at the tail end of this past year, even with some of the impact from oil and gas, a little bit of IP in that area.

So I would expect that that area will continue to be growing at those levels, be stronger. I think the environmental and health area is more challenged, because more of its business was made up in the oil and gas area and the impact with some of the changes going on in the industrial chemicals area.

So I think we will find that our environmental and health will be a little bit more challenged in the short term from then our engineering segment which is much more diversified in its industry basis.

As it relates to the taxes, clearly aside from the tax benefit we just got, which is just reconciling what was happening already on a cash basis to what was happening on accrual basis that when we adopted a new accounting standard, leaving that aside, Exponent pays a full freight on taxes. As I mentioned, our underlying tax rate is still up over 38%.

So any movement 5%, 10%, 15%, whatever it may be, that is a movement in federal tax rate would be clearly very beneficial to Exponent based on our current tax structure. I think that we would be looking at a 10% change in the tax rate would probably generate somewhere between 12% and 15% improvement in -- 10% and 15% improvement in our earnings..

We next move to Joseph Foresi with Cantor Fitzgerald..

Hi.

I was wondering on the Samsung work, how big can that project get, and could we be facing another large client issue?.

Joe, so what I would say about that retention is that it's not -- has not been and is not and at the moment, we certainly don't foresee that it will get back in the range that it will ever be in the range that what we -- when we called out three large projects plus the work we did for the military.

So if you recall that as some of those very large projects that we called out ran in the 4% to 5% of the company's revenues and we alerted the investors to that because it was out of the ordinary.

What we always say is that we typically have a number of ongoing projects that are up to let's say 2% of revenue that wouldn't be out of the ordinary It could be 1% or something in that range.

Those kinds of projects we have on a fairly regular basis and it's only when they get above 2%, 2.5%, that we kind of single them out as being something extraordinary. So Samsung is not in that category of being above that threshold..

Got it.

And then, maybe we can just get an update, if you can quantify for us as a percentage of revenue, maybe the consumer and construction, so the positives versus the oil and gas which I know you gave before, but just as an update, just how big are those as parts of your revenue at this point?.

Yes. So we are -- in the consumers area here, just one second, just one sec, I had that. So construction in total, because it cuts across a broad set of industries doesn’t end up coming in at the highest numbers there, but consumer products tends to run in the low-teens for us as an overall part..

Okay.

And then the oil and gas, as an update, how big is oil and gas?.

About 5% of our revenues..

Okay.

And is it safe to say that these businesses are running low double digits as far as growth rates are concerned right now?.

Yes..

Okay. And then the last one for me, just I think you may have talked about utilization being down in 1Q, but I'm wondering how does utilization look for the totality of 2017? And just following up on an earlier question, any thoughts on what the Trump administration can mean for you outside of taxes? Thanks..

Yeah. As I indicated in my comments, we expect that the full year utilization will be -- come out to be flat to slightly up. So our expectation is that utilization overall in the back three quarters would be for that nine month period of time, would be, have to be slightly above where we were in 2016..

Joe, with regard to the emerging policy directions and so forth of the Trump administration, I mean I think we're still in a mode where from our standpoint, we do see his direction being favorable to the oil and gas industry, which we think should help us. We also think that if the infrastructure areas progress as proposed, that would help as well.

These may take a little time to develop, but we do think that they’re in a positive direction for Exponent’s business. In the short term, that's a little bit of a challenge because there's obviously a considerable amount of uncertainty on the regulatory side and uncertainties sometimes means that projects get stalled a little bit.

So from that standpoint, I'd say I think we see some positives and some negatives, but I think overall, we see that as being sort of reasonably balanced. The other thing is the recent issue with regard to immigration. We do have a number of people at the firm who are on H-1B visas.

However, we don't have any of those people from any of the seven countries that were identified. So in terms of the, what I’ll call the business impact, it has not been something that has directly affected us in that way. .

We next move to Tim McHugh with William Blair..

Yes, thanks. I guess first, just talking about profit margins. Is it the manager's meeting, or why with revenue growing, it seems like at a pace that's faster than the compensation growth you saw last year, and I would assume you'll see this year.

So why, what's the pressure on margins as we think about 2017?.

Yeah. There are two things overall. One is broader based and that is, if we're going to see revenues only growing in the low to mid-single digits, I think that's a difficult level of growth to be able to realize margin improvement.

We've discussed before that cost growing in that middle single digit range without really squeezing cost out is difficult there. So we view that it -- clearly we've always seen that when we're growing above the high single digit to low double digit, we've expanded margins every time.

We've been able to do it at lower levels, but I think as an overall model, it becomes difficult at those lower rates. In addition to that, we have a managers' meeting, which is about half of our staff that we are having. We didn't have it in 2016. We're having it actually in the first quarter of 2017 here at the end of March, beginning of April.

And as such, that will be an increased cost of probably a little over $1 million let's say. Overall, it's not, we have over 400 people come do it. It's not hugely over cost per person, but at the end of the day, it's something that we really find is valuable for us to do every couple of years and we get a lot out of it.

It's just when we have that year-over-year comparison, it's more challenging..

Okay. And I guess I didn't hear any mention of intellectual property this quarter.

Is that less of a headwind, or is it just small enough that it's not something you guys called out?.

I actually think, it’s both. It's fairly small and there's a little bit more of that’s come in lately, but it's pretty small..

Okay. And then lastly, maybe the comment about international, I get obviously why haven’t you won some high-profile work there.

Is that a signal though about how you think about growth, and where you want to try and put resources the next couple years? Are we going to see you be more aggressive internationally, or is it still one where just status quo in terms of the existing pace of investment?.

So I think that in the past year, we have been increasing our overseas investment.

Still relatively modest, but adding people to Hong Kong as I mentioned in my remarks is a part of that that's very focused on international Arbitrations and so forth, but we're also trying to bring some new engineering talent into the UK and that is focused more on consumer products safety issues in Europe where we're very well positioned here in the United States.

And I think our international reputation, we do have some of these international clients, multinational clients that actually would like us to have some resources to assist them, more resources in Asia and also more resources in Europe.

So I do expect we'll be moving in that direction, but we're not planning on moving so aggressively that we have a lot of expense ahead of the revenue, but we absolutely do think we will be adding resources to both of those areas..

We next move to Randy Reece with Avondale Partners..

Good afternoon.

When you talk about low to mid-single-digit revenue growth, should I interpret that as 1% to 5%, or 2% to 4%? Do you have something precisely in mind, or how should I interpret that?.

Yes. Low to mid for us means 1% to 5% at the broadest range.

I think based on some of the other metrics, we have laid in there, I think that it is more likely somewhere in the middle of that range is where we fall closer too, but we're somewhere, it’s probably not out of, hopefully not out at the lower extreme and with some positive things hopefully moving to the upper side, but clearly definitely more in the middle..

And as the year goes on, with the consumer electronic work, do you have enough overall that has been stirred up, in terms of combination of proactive and reactive work? Were you going to continue to have momentum in that business through the year, or is there a point in the year where you think that the comparisons will get more difficult?.

No, I think the momentum on that area should continue. Our comment about much of this specific area is not the only thing we do, but there's a lot that's driven by battery storage issues by lithium ion battery technology. I mentioned how many cases we've done in the last, how many projects we've had in the last two years.

This is a technology that is involved in not just consumer electronics, but all kinds of consumer products. It's also something that's involved in some medical devices. It's certainly something that's involved in the automotive area, the transportation area, aircraft. It’s involved in power tools.

I mean it goes on and on and I think one of the things that was pretty noticeable about the challenges that Samsung had with the Note 7 is, there is a very sophisticated company that still ran into significant problems with two suppliers and it's a wake-up call to not just people in the consumer electronics industry, but to people more broadly.

So we think this is going to continue to be an area of special interest for, not a matter of a few quarters, but certainly for years..

Finally, the way the calendar falls this year, should we expect it to be similarly favorable for fourth quarter utilization because we end up with New Year's Day on a Monday?.

So this year will mirror other than in the first quarter than it will be similar for the fourth quarter of 2016..

Our next question comes from Marc Riddick with Sidoti..

Hi. Good evening. Wanted to get a sense of the mix of expertise required with some of the more recent business, and what you were looking for going forward. Particularly, are some of these engagements maybe utilizing more of your senior people than maybe it might have historically? And what type of mix you foresee as far as recruitment for 2017..

Yeah. No. I mean I think the recent consumer electronics work for example uses a very good distribution across the ranks of our firm. Certainly, there are some very senior consultants engaged in that, but there's a lot of analysis, evaluation, lab work and so forth.

It's a pretty comprehensive set of work we do and also spans across quite a number of our practices and disciplines. So we feel that that is pretty well balanced and isn't tilting too much of the firm one way versus another way..

Okay.

And then maybe as far as recruitment expectations for 2017 in that regard?.

Yeah. I mean look, our recruitment is, the majority of the people we hire tend to be in, at the closer to the entry level. They tend to be in the stronger recruiting that's done out of the universities in the engineering and other scientific segment. So we continue to do that. Our main growth model is to hire bright people primarily out of Ph.D.

programs, but not exclusively at the entry level and grow them up to get to the -- for the principal or equivalent of partner kind of level. We selectively are certainly looking for some senior people and we will continue to do that.

They’re of course much more difficult to find, but we will continue to focus on bringing some level of talent in at the most senior level..

Okay.

So it's fair to characterize it as being similar to where your views may have been on that mix three, six months ago, not much is changing a lot?.

Yes. I think that’s correct..

Okay, good. One of the other things I want to touch on is the construction area.

You made mention of that, as far as a call out, and I wondered if you could give a little bit of an update there, both with maybe if that was part of some of the hiring in Hong Kong, maybe where you see that going, and where that practice is both, I guess it's smaller here in the States if I remember correctly, but if you could give a little bit of an update in that regard, that would be great..

Yeah. So what we've found is that that there are a lot of, considerable number of major capital projects obviously worldwide, whether they be in Asia or Australia or essentially, these are large capital projects that global companies are involved in. And often, there are significant cost overruns and delays and so forth associated with them.

These are typically pretty complex projects. They could be major oil and gas development, development of special port facilities, they can be mining related.

There's a variety of these kinds of projects and what where we have a unique play here is that these kinds of projects typically involved people with experience in construction, scheduling delay claims and so forth.

But these are technically very complex projects and the result of that has been that there is substantial reach back to our staff here in the United States with expertise in material science, mechanical engineering, structural engineering, various kinds of different facilities and that's what is being come fairly exciting from that standpoint as we get ourselves better known in that businesses which was largely started here from the international standpoint by some projects we've had for many years out of London, but we haven't traditionally had much out of Hong Kong or Singapore.

And that I think is where we're seeing more connections to clients. That’s the sort of the international part that’s kind of a bit new. We continue to do a fair amount of construction consulting and scheduling projects and various things within the United States for various kinds of programs here..

And ladies and gentlemen, it appears there are no further questions in the queue. At this time, we do thank you for your participation in today's conference. You may now disconnect..