Good day and welcome to the Exponent Third Quarter of Fiscal 2019 Earnings 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 third quarter 2019 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 the property of Exponent, and any taping or other reproduction is expressly prohibited without prior written consent. Joining me on the call today are Dr. Catherine Corrigan, President and Chief Executive Officer; and Rich Schlenker, Executive Vice President and Chief Financial Officer.

Before we start, I would like to remind you that the following discussion contains forward-looking statements, including, but not limited to, 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 developments or otherwise. And now I will turn the call over to Dr. Catherine Corrigan, President and Chief Executive Officer.

Catherine?.

Thank you and good afternoon everyone. I will start off today by discussing our third quarter performance. Rich will then provide a more detailed review of our financial results and expectations for the rest of 2019 and then we will open the call for questions.

Exponent reported high single-digit net revenue growth during the third quarter representing continued execution driven by positive market trends, while lapping the large human factors study that concluded during the third quarter of 2018.

We are reiterating our prior revenue guidance for the full year, but as a result of our strong performance year-to-date, we are increasing our EBITDA margin outlook and remain confident in our continued execution this year and beyond.

Net revenues in the quarter grew 8% year-over-year to $95.5 million, net income increased 13% to $19.6 million and EBITDA increased 5% to $26 million. Our results demonstrate the market’s growing demand for world-class engineering and scientific advice.

We continued to grow our reactive services as clients called upon Exponent to answer the question, why did this happen? These questions ranged from why did the building collapse to why did the advanced driver assistance features not stop the car? Our proactive services also continued to expand as clients face the challenge of how to build safe and highly reliable products as their technologies grow in complexity.

We also continue to benefit from multifaceted and global regulatory frameworks. During the quarter, we continued our work for Pacific Gas and Electric to evaluate the integrity of their electric infrastructure and to help mitigate safety risks for customers and communities related to wildfires.

In aggregate, this work contributed approximately 4% of revenues in the third quarter. We anticipate these projects will continue, but they will step down over time. Our international arbitration work related to large capital projects expanded geographically as we had projects in Asia, Australia, Europe, the Middle East and North America.

Our human factors and products studies continued to provide unique insights into the operability, usability and safety of human machine systems across a diverse set of focused areas.

While we are not currently conducting an individual study of the same scale as our large human factors study of 2017 and 2018, we have expanded the portfolio of use cases and technologies that we are evaluating for this client and for other clients.

As we look forward, human factors is among the most exciting capabilities that will drive growth across multiple markets for Exponent. Exponent’s engineering and other scientific segment represented approximately 81% of the company’s third quarter and year-to-date net revenues.

Net revenues in this segment grew approximately 8% in the third quarter and in the first nine months as compared to last year. For the third quarter, this segment had noteworthy performances in its human factors, material sciences, polymer sciences, thermal sciences, biomedical and construction practices.

Clients continue to demand Exponent’s interdisciplinary solutions for increasingly sophisticated systems and devices. We are broadening our reach across the product life cycle, improving the safety and the performance of both new and existing technologies.

These engagements cover a breadth of industries that includes consumer products, energy, transportation, construction and life sciences. Exponent’s environmental and health segments represented approximately 19% of the company’s third quarter and year-to-date net revenues.

Net revenues in this segment grew 6% in the third quarter and 4% year-to-date as compared to last year. Within this segment, the chemical regulation and food safety practice continued to grow as Exponent’s scientists evaluated the effects of chemicals and new products on human health and the environment.

Our interdisciplinary teams of experts are earning Exponent’s increasing international recognition as a top engineering and scientific consulting firm. For large capital projects, we are uniquely positioned to provide experts from multiple engineering disciplines as well as construction delay and damages.

For clients who must meet health and safety regulations as they distribute products globally, our scientific and regulatory expertise in North America, Europe and Asia is invaluable. Exponent is capitalizing on long-term trends and we are confident in the future growth of the business.

Rich will now provide a more detailed review of our financial performance and business outlook..

Thanks, Catherine. Let me start by saying that all comparisons will be on a year-over-year basis unless otherwise specified. For the third quarter of 2019, total revenues were up 7% to $101.5 million. Revenues before reimbursements or net revenues, as I will refer to them from here on, were up 8% to $95.5 million.

Net income for the third quarter increased 13% to $19.6 million or $0.36 per diluted share as compared to $17.5 million, or $0.32 per diluted share. For the third quarter, the tax benefit associated with accounting for share-based awards was $1.7 million or $0.03 per diluted share as compared to $100,000 or $0.0 per diluted share last year.

EBITDA for the quarter increased 5% to $26 million up from $24.8 million a year ago. For the first nine months of 2019, total revenues and net revenues increased 7% to $307.1 m and $289.2 million respectively.

Year-to-date net income increased 13% to $63.3 million and earnings per diluted share were $1.17 as compared to $56.2 million and $1.04 per diluted share. Year-to-date the tax benefit associated with accounting for share based awards was $7.4 million or $0.14 per diluted share as compared to $4.2 million or $0.08 per diluted share last year.

Year-to-date EBITDA increased 7% to $79.4 million as compared to $74.3 million. Billable hours in the third quarter increased 5.4% to 37,000. For the nine month period, billable hours increased 4.6% to 1,018,000. For the third quarter utilization was 71.6%, which is down from 73% in the same quarter last year.

Year-to-date utilization was 73% down from 74.8% last year. Utilization declined due to challenging year-over-year comparison due to large project that concluded in the third quarter last year.

For the full year 2019, we expect utilization to be 71% to 72%, which includes the impact of the large project and a 53rd week, which will be an extra week in the fourth quarter. This additional week will increase net revenues by approximately 5% for the fourth quarter and 1.25% for the year.

The additional week will include the 2020 New Year’s holiday and associated vacations, which will reduce utilization for the fourth quarter by 200 basis points and the full year by 50 basis points.

So for the fourth quarter, we expect a 4 percentage point to 5 percentage point decline in utilization from the third quarter due to additional holidays and vacations. We continue to expect our long-term utilization to increase as we build more critical mass in our offices and practices and grow our proactive services.

Technical full time equivalent employees in the quarter were 906, up 7.4% year-over-year. We expect FTEs to grow sequentially in the fourth quarter by approximately 1%. The realized rate increase was approximately 2.5% for the quarter. We expect a year-over-year realized rate increase of approximately 2% to 3% in the fourth quarter.

For the third quarter, EBITDA margin decreased 78 basis points to 27.2% of net revenue. Year-to-date, EBITDA margin has decreased 11 basis points to 27.5%. For the quarter, compensation expense after adjusting for gains and losses in deferred compensation grew 8%.

Included in the total compensation expense is a gain in deferred compensation of $360,000 as compared to a gain of $1.84 million in the third quarter of 2018. As a reminder, gains and losses in deferred compensation are offset in miscellaneous income and have no impact on the bottom line.

Stock-based compensation expense in the quarter was $3.8 million as compared to $3.6 million last year. We expect stock-based compensation to be approximately $3.7 million to $3.9 million in the fourth quarter. Other operating expenses increased 7% to $8.3 million in the third quarter.

Included in other operating expenses is depreciation expense of $1.7 million. For the fourth quarter, we expect other operating expenses to be in the range of $8.4 million to $8.6 million. G&A expenses were $5.5 million in the quarter, up 17%. G&A expenses are expected to be in the range of $5.4 million to $5.6 million in the fourth quarter.

As a remainder, expenses related to our biannual managers meeting are split between the third and fourth quarters and what has really driven the larger than normal increase in G&A expenses. Exponent’s consolidated tax rate was 22.1% for the quarter as compared to 27.2% in the same period last year.

Year-to-date, inclusive of the tax benefit for share-based awards, Exponent’s consolidated tax rate was 18.2% as compared to 21.2%. We expect consolidated tax rate to be approximately 27.5% in the fourth quarter and our full year tax rate to be approximately 20.6%. Moving to our cash flows. Year-t-date, operating cash flow was $52.3 million.

Capital expenditures were $4.5 million for the quarter. We expect CapEx to be $20 million to $$22 million in 2019. CapEx should return to approximately $6 million to $8 million annually after the completion of the new building in Boston.

Year-to-date, we distributed $25.2 million to shareholders through dividend payments and closed the period with $210 million in cash and short-term investments. Today, we announced a fourth quarter dividend payment of $0.16 and reiterated our intent to continue to pay quarterly dividends.

While the third quarter and first nine months of 2019 reflected some difficult year-over-year comparisons we are pleased with the strength of the business. We are also pleased that margins are only slightly down considering the completion of the large project and the biannual managers meeting.

As we look forward, we continue to expect revenue before reimbursements for the full year 2019 to grow in the high-single digits as compared to last year. We expect fourth quarter revenue growth in the low-to-mid-teens which includes the impact of the additional week in the fourth quarter of 2019.

Due to our strong performance year-to-date and expectations for continued positive momentum, we are increasing our EBITDA margin guidance for the full year 2019. We now expect EBITDA margin for the full year to be down approximately 25 basis points from the 27.3% achieved in 2018.

This includes EBITDA margin declining 25 basis points to 75 basis points in the fourth quarter as compared to the same period a year ago. I will now turn the call back to Catherine for closing remarks..

Thanks, Rich. For over 50 years, Exponent has focused on being ready to address our clients’ impending technological challenges. By leveraging our leadership position in failure analysis, our industry experience and the constant influx of the best and brightest talent from top universities, we position ourselves ahead of the curve.

We are prepared to advise our clients on the causes of failures as well as how to produce safer, healthier, sustainable and more reliable products and processes. These market drivers combined with Exponent’s world-class team will fuel long-term growth. We will now open the call to questions.

Operator?.

[Operator Instructions] We’ll take our first question today from Joseph Foresi with Cantor Fitzgerald. Please go ahead, sir..

My first question is just; maybe you can give us an update on any large projects that you still have either going on or in the pipeline and specifically color on PG&E both on the bankruptcy side and the continuing work and other some potential power outages on the West Coast?.

Yes. So we do expect Jo that the – the work with PG&E will continue as we said. It represented in aggregate about 4% of our revenue in the quarter. It’s clear to us that from an engineering and from a safety standpoint this client has some very challenging problems.

There’s tremendous public pressure obviously being brought to bear upon them with respect to their infrastructure. We’re not into the details of everything that we’re doing, but I think the good news is that we do have a long standing history of working on very tough issues with this client, issues that we are uniquely qualified to address.

And so while it’s – it’s difficult to really have a crystal ball on how that will step down over time. Their priorities can shift quite rapidly in a situation like this. It makes it difficult for us to predict, but, if the San Bruno explosion back a number of years ago with any indicator, we had a lot of acute activity following that event.

And then a level of ongoing work in the integrity management arena that, that continues to this day and really this area of integrity management I think represents an opportunities, really for growth across the industry. So we are very pleased with sort of where we are with regard to our technical capabilities and services for that industry.

And maybe, Rich, you can handle with regards to the bankruptcy issue..

Yes. As we’ve indicated before we have about $3 million of receivables outstanding that are pre-bankruptcy dollars. It turns out that, as we’ve indicated before, we anticipate being paid in full on all of that.

What we understand from the legal analysis of PG&E’s proposal for restructuring as well as the two alternative proposals that the judge is allowed to bring forward that under both, all three of those scenarios it is expected that the unsecured holders will be paid out in full. So we continue to anticipate that payment.

We do have about a 5% reserve on that just on it being on a conservative nature..

Got it. Okay. And then my second question is, as we look at, and I’m not asking for guidance for next year yet, although it’s about to sound that way. But if we look at next year’s trajectory for the business, you did a very good job of kind of filling the hole on margins this year.

How should we think about growth rates and margins as we head into 2020? Are we returning to the normal expansion from the exit-year levels on the margin side? Are we going back to sort of the mid-single digit growth rates? Anything to point out from a seasonality perspective? I know it’s early, but I’m just trying to get a sense of, because we’re going to have a pretty good fourth quarter, how that’s going to start to....

Yes. So look, we’re just initiating our annual process that we go through on our planning. We go out to each of our business units as well as our industry teams and are going through that planning process today as we speak.

But we’re still early on, so we’re not in a position to be able to give full guidance as it relates to 2020 and we’ll bring that forward when we have it at the conclusion of the fourth quarter. What I would say is that, look we are continuing to feel good about the market trends, our positioned in the market and what we’re building upon.

Our expectations over the long-term continue to be that we can grow the business in the high-single to low-double digit growth. As we look at 2020, we will clearly have immediately a 1.25% headwind from having that extra week in 2019, the 53rd week that we won’t have next year will provide that.

In addition to that, as Catherine has just gone over about 4% of our work is tied into the wildfire and integrity management work for PG&E, and at this point in time we don’t know what level that will likely to step down to but we could end up with a little bit of headwind related to that work stepping down.

But overall at least right now we’ve – we feel good about where our business is and we’ll be able to provide more color when we get to the fourth quarter earnings announcement..

Got it. Okay. And then the last one for me, you talked about high-single digits versus low single digits and maybe you could just qualify for us.

What opportunities you have in front of you, like autonomous driving or other areas that would take you from that high-single digit to that low-double digit area code and maybe you could just crystallize for us where the demand would come from if that did indeed take place? Thanks..

Yes. So Jo, I mean there are a number of areas of strengths that I think we – that we expect are going to sort of drive the growth or fuel the growth that we’re talking about. Now you’ve heard me talk about human factors. This is one of our most exciting capabilities that we have.

We are expanding what we’re doing with regard to the types of technologies that we’re addressing from a Human Factors perspective. And one of the most exciting things there is really that it goes across quite a few industries. We’ve got the top talent in that area.

Work in consumer electronics, in consumer products more broadly this goes over into opportunities around life sciences and medical devices. We are seeing demand on the transportation side with everything we’re doing around advanced driver assistance and autonomy as you’ve mentioned.

We’re getting traction to some extent in oil and gas and in utilities with regard to Human Factors. Even when you’re thinking about things like worker fatigue and optimizing the human performance side of that.

So this is as we use our industry teams to really penetrate at a client level into those spaces, Human Factors is very much what I call at the tip of the sphere. It’s something that we can really use to get into those markets. Another area that I’ll point to that where we use that tip of the spear approach is batteries.

This is something that we’ve been traditionally strong in on the electronic side. But there’s more traction coming with regards to transportation. There’s more traction coming with regard to grid scale, storage in the utility space. So that’s another area where we really have opportunities to penetrate more broadly across industries.

And then of course, the international disputes, the geographic expansion there. We are in engagements that truly are global and around the world. Our reputation, we were not a name in this space two years ago at all. We have scratched the surface, but there remains quite a bit of opportunity and we’re very focused on the recruiting side there.

Being able to bring the premium expertise to the marketplace on construction delay around the engineering side, and then of course around the damages side. So those are things that I really see as drivers of that growth going forward..

Thank you..

Our next question comes from Alexis Huseby with D.A. Davidson. Please go ahead..

Hi, Catherine and Rick, thanks for taking my question.

So just jumping back to PG&E and thanks for the more information on that, I was wondering if you were able to provide us with a bit more of a specific timeline for an expectation on a step down in revenue contribution from that?.

No. Look, we’re not able to do that. What we can say is that it’s a quite a dynamic situation we work on for a number of different groups on a variety of issues related to not only the failure analysis sort of acute situation, but a number of different things related to integrity management going forward.

So we have a very flexible and dynamic work environment with them. And it’s just a little bit hard to tell where that will go. What we know from the past as Catherine said before is that historically the tail has been long.

When we move into not just doing the analysis of the event but really start to help clients and in particular this client, look at how to manage that risk going forward..

Got it. Okay, thanks. And then we’ve talked high level in the past about events like Brexit being essential. Benefit or opportunity to the company due to an increased regulatory uncertainty or changes.

And with it coming into effect in a couple of weeks, I was wondering if you were seeing that come into fruition at all?.

Yes. So we are monitoring, of course, the situation, I’ll talk about dynamic situations that is certainly one of them. In the near-term, it’s certainly conceivable that the regulatory framework could become more complex as a result of this. Are there more filings that will be required around that? We don’t exactly know what those details are.

We do know that our clients are clearly monitoring it. They’re asking us about it. We’re prepared for it. We continue to focus in that area of the business on bringing a global offering to our clients in that space, which we are, prepared to do with or without Brexit.

We’re ensuring that we have the ability to execute on the client needs in that way and to the extent that there is an additional regulatory framework that emerges from this, there could be – there could be more opportunity.

We certainly haven’t seen any kind of material effects at this point with regard to any changes in that business on the regulatory side..

Okay. That makes sense.

And then I was hoping, just lastly if you had any more granular breakout of this – the impact on third quarter utilization coming from vacation time versus the biannual meeting?.

Yes, I mean, our vacation – the biennial meeting probably had 0.5% impact on the utilization, 0.5% to 1% in that range that had an impact stepping down from the second quarter to the third quarter. The remainder of the change is related to the vacation and holiday changes..

Great. Thank you. That’s good detail..

And our next question comes from Andrew Nicholas with William Blair. Please go ahead..

Hi, good afternoon. In both press release and your prepared remarks you mentioned on multiple occasions deposits, momentum internationally particularly with respect to disputes. I just wanted to drill in on that a little bit.

I was hoping maybe you could talk a little bit more about your plans to capitalize on that opportunity, what it might mean in terms of hiring plans internationally and then maybe if you could provide a little bit more color on the competitive environment there and how you plan to differentiate your services versus the competition in the international disputes?.

Yes, so thanks for that. We are definitely building on our international reputation as I mentioned. And this is, it’s very much focused on – it has been very much focused on the engineering and disputes side as you mentioned. Although there is more recently traction around in the life sciences and medical device arena as well, so I’m happy about that.

But with regard to your question about, sort of the competitive landscape and how we’ll differentiate ourselves? We already have and we’ll continue to do that.

And the way that we have done that is by bringing not only the construction delay and damages expertise to the party but what we are also bringing is the deep engineering subject matter expertise. And that is something that is completely unique in this marketplace.

The competitors in that space, whether that’s in FDI, whether that’s in Quora, and others as well, they are not able to bring that depth and of engineering expertise. So actually what happens is that the customer’s law firm needs to go out to say, a local university for a professor or something like that.

They’re not able to have that coordinated and integrated work product from their expert advisors. And that is something that we have found in a number of these engagements to be a true differentiator for us and something that this marketplace is very hungry for.

Not only just that you can do one-stop shopping and find all of your experts in one place, but there is in fact an additional advisory service that we’re providing by integrating all of this together. So it really does become an exciting area and we are focused on building that brick-by-brick with bringing the talent into the organization.

We have a small London operation. We are focused on bringing top talent into that area with boots on the ground that is a small but multidisciplinary office. We in Singapore as well, which is a focus for these particular international arbitrations and we’re able to leverage our Hong Kong facility in order to sort of deliver in that geographic region.

So as far as the geography and as far as the disciplines are concerned we’re very much focused on really meeting the needs of that marketplace in a differentiated way..

Great. That’s very helpful, appreciate that. And then maybe one more from me.

Just wanted to ask about your expectation for headcount growth in the next few quarters and maybe into 2020 given the amount of demand you’re seeing in the market?.

Yes. So what we indicated in my comments was that we expected that head count growth would be – sequentially grow about 1% into the fourth quarter. That tends to be a quarter that the net growth is a little bit slower just in the sense that we don’t hire that many people in late November and the December time frame.

As we – again a very important part of our planning process is going to our business units, getting their business development plan, matching that with what resources that they’re going to need from a specialty headcount growth, geographic headcount growth to put that together. So at this point in time we don’t have that yet.

But what I would say is our expectations continue to be that headcount will grow over time in the 4% to 7% range that’s what we think is a very healthy headcount growth that can support our ability to grow the business in that high single to low double digit overall growth rate..

Great, thank you..

And our next question comes from Tobey Sommer with SunTrust. Please go ahead..

Thank you.

Could you describe the progress you’re making on some of your more recent sales strategies and go-to market approach in recent years and kind of assess where we are and what impact those strategies have had versus prospectively what kind of impacts they may have in the future?.

Sure, yes. So, in addition to plant doing our planning process in the fall around our internal business units, we are also very focused right now on the business development planning process for our industry teams. And this is going across electronics and utilities, life sciences as well as oil and gas and emerging transportation technologies.

We’re focused on defining the services and the capabilities that we can bring across industries as well as across to clients within an industry. So I mentioned before the sort of tip of the spear approach with certain of our capabilities.

And lately I’ve been pleased with what I’m seeing with regard to being able to win early work with a new client, let’s say in the battery space. That’s an offering that tends to be kind of at the tip of our spear and then being able to spread out with regard to emerging transportation and autonomous vehicles.

You know, that the tip of the spear can be laser safety and LIDAR related work. And so this approach of being able to get in with that small engagement and then expand that across that client and that industry is one that I am seeing progress in. I mean I’m encouraged by the long-term opportunities that we’ll see here.

I think that our managers meeting was an opportunity really to put some energy around this. We spent a great deal of time at the managers meeting, focused on our marketplace, the capabilities that we’re delivering to that marketplace. And it’s that team of managers as you know that that is our sales force.

So as I went around and touched base with consultants in these key markets, both on the industrial side as well as the legal side, I’m feeling very positive when I hear their perspectives on the different capabilities that we have. I think they all walked out of there better educated on our opportunities to cross sell.

So there’s a lot of energy around this in the company. It’s our job, obviously, to execute and we’ve got to do that client by client and we’ve got to do that meeting by meeting. And these relationships take time to develop, but I do think that we’re seeing that there’s a positive outlook from my perspective in terms of what we’re doing here..

Okay. This is kind of a follow up question I think to one that was asked previously. But if you ever had a reactive work and I’m thinking of the P&G example here specifically that has then led to proactive work within the same industry and you’ve been around for awhile or active in many industries and have long histories.

So I thought there may be situations or examples that that maybe you could point out to us..

Yes, yes, absolutely. So this is – the answer is a resounding yes. There are many examples. And this can be an important part of the sales process. The one very public example that I will talk about is the Samsung Galaxy Note 7. This was an example of a serious collection of battery related issues. It was very public.

It was a huge reputational hit on the part of Samsung. And what we saw across the industry in electronics and even into other industry was a heightened concern because of the problems that Samsung had encountered with their product.

It was very heightened concern around batteries, around the electronic controls, around overheating related issues, around charging issues. And so, that drove a substantial increase in demand around proactive services related to safety and performance of batteries that that we continue to capitalize on across industries.

And so failure is a great motivator for trying to really come up with ways to improve, whether that’s reliability, whether that’s performance, et cetera.

So that is a pathway that we routinely try to leverage and I think really gives us a unique position in the marketplace because who better to help you move – moving forward than the ones who figured out why it happened in the first place..

I mean, Tobey, this has been everything from clients and the appliances white goods area, having fires in their – may it be in a refrigerator or washer dryer situation that led then to an audit of their not – their process of design into their manufacturing processes, into their maintenance modes and things of that type.

It goes over into – all the way back to the utility work that we did for PG&E on the gas line explosion here in San Bruno. That is led to the integrity management work that we’ve done over the last five, six, seven years with them related to that infrastructure and looking at it.

So at some times it is a matter of that client boring in and trying to make those improvements. We see this in the refinery industry where there’s an incident at one of our oil and gas clients refining operations.

If it turns out that they identify an issue there, then they bring us in to go and help them identify, if those issues might occur at other operations that they have not only around the U.S. but globally.

So these have definitely failure analysis and our reputation there and our entries into clients have led to these opportunities on the more proactive side..

Right. I guess it would seem that the utility industry might be right for a new kind of best practice to go with managing their assets to failure.

With respect to your geographic expansion that you have already talked about, what areas did you expand into geographically and how big a geographic footprint could you expand into? So what’s kind of the ongoing opportunity?.

So why don’t I start off there and then let to Catherine pick it up. Look today we’re growing internationally in two different ways. One is what we’ve got in, what I’ll call boots on the ground. So in Hong Kong and in Shanghai, we’ve got offices there.

These offices were originally put in place to serve our consumer electronics clients and other consumer products clients, who are having products manufactured in Asia and assisting them into developing more reliable and safe products out of that. That is expanded in Hong Kong to include a work related to litigation or arbitration work and such.

Today, in Asia, we do have a couple of people in Singapore as well as Catherine has indicated that are focused around these capital project, international arbitrations, that are related to that.

Those what we view is that on the ground basis, we will see not only as clients continue to find the right place to manufacture products over in Asia that movement occur, but we will also continue to see that there are more disputes that are being held in Singapore and Hong Kong as well and we will grow along with that.

What we also have seen is over in the UK primarily our growth not only to support the regulatory environment around chemicals in the environment and such, but also as was described, we are expanding into the engineering disciplines now, again still small operations, but growing there.

And we expect that London is going to be one of the leading places for our engineering practice because it will cover proactive services around Europe where we’re out working as Catherine described in the life sciences and medical device industry as they bring products to market and helping them as we do here in the U.S., but it also is a hub for about 80%, probably the international arbitrations that go on come in that market place.

So we need to have a core group on the ground. So that today is still – overall, Asia and Europe is still less than 10% of our work of boots on the ground. We actually pushed that over into the low teens as a percentage of our business.

When we add-on the draw of our experts that are here in the U.S., we’ve got world-wide recognized experts that are brought in on these engineering disciplines to form these teams to bring them together. We actually expect that demand to continue to grow as well.

And it will grow faster as we gave and get better expertise on the ground in Europe and in Asia because as the right people are on the ground, who are our lead sales, they will end up drawing those experts that we have here in the U.S. to these global matters..

Thank you very much..

And our next question comes from Sam England with Berenberg. Please go ahead..

Hi, guys. Just a couple for me.

The first one, could you talk a little bit more about some of the markets you’re having success in with battery technology, outside of mobile devices and how big the opportunity is in mobile devices versus other areas for battery technology?.

Yeah. So one of the big areas, Sam, that has really increased traction over the last couple of quarters has been in the transportation space, specifically around micro mobility, so think scooters, think electric bicycle. These are the transportation logistics providers sort of getting into the hardware business.

And it has created a fair bit of demand both reactively as well as proactively. And it gets back to Tobey’s question about how do the reactive opportunities create pathways for proactive work. This is another great example of that, specifically in the battery space.

So these scooters are run around all day, they’re abused in the city and they come back to the charging place late at night and they’re all lined up and there’s a fire, let’s say, and there could be a variety of reasons for that.

And so, we’ll go in and we’ll be able to handle the root cause analysis for that and also be able to engage proactively with this client in a preventative sense to try to ensure that that sort of mode of failure is not something that they’re going to see. And so, micro mobility is a good one. Another one is around large scale energy storage.

So, there are increasing numbers of utilities that are utilizing large scale batteries in order to – to sort of broaden their capabilities around their electrical delivery. And so these large scale batteries create new issues, but the fundamental – the fundamental physical principles.

And this is where our people are so strong, are the same in that large scale battery as they are in that small scale battery in that mobile phone, for example. And so, we’ve been able to really leverage the expertise that we have at that small scale into being able to do both reactive as well as proactive work.

There have been incidents related to these large scale battery storage facilities. We’ve been engaged in those and that has in fact led to safety-related design reviews and functional safety reviews and things like that.

So we hope, again, to really use this battery capability at that tip of the spear, so to speak, in multiple industries to be able to sort of drive more of that – more of that industrial work..

Yeah, I think you’re seeing it even in data centers where what the fire safety people have determined is now that more and more battery backup and batteries that are in these server farms and environment, they’re realizing the risks that they run in these very large facilities when the load of batteries continues to increase in those environment.

So there are some new standards that have come out and are in development in other jurisdictions that are impacting that. To just give you a – it’s now touching us everywhere..

Great, thanks.

And then the next one on the capital allocation just wondered if there’s any sort of change in plans there, whether we should expand any further buybacks in the rest of the year?.

You know again we continue to have an open repurchase program. We obviously have not done any activity in the first nine months of the year. That doesn’t mean we won’t do some in the fourth quarter. We are trying to on average at least be buying back what we’re putting out.

There is no guarantee of the exact timing of that fitting into an exact calendar year or such. But we continue to see that as a way that we’re going to return value to shareholders. And that continues to be open for the fourth quarter..

And it appears there are no further questions in the queue at this time. So this will conclude today’s call. We’d like to thank you for your participation and you may now disconnect..