Good day, and welcome to Exponent's Third Quarter Earnings Call. [Operator Instructions] 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 of fiscal year 2020 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 Factors 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, Chief Executive Officer.

Catherine?.

Thank you, Whitney, and thank you, everyone, for joining us today. We're pleased to report third quarter results that illustrate the sequential improvements we've seen across the business. For the third quarter, EBITDA margin expanded 60 basis points while net revenues declined 2% as compared to the same period last year.

While our results continue to be impacted by ongoing project delays due to business travel and physical distancing restrictions caused by the pandemic, we believe that our third quarter results demonstrate resilience in our model as well as our commitment to profitability.

Companies and governments alike are adopting new ways to conduct business from testing new procedures and protocols to designing next-generation products and navigating changing regulatory requirements. Clients continue to call on Exponent's multi-disciplinary teams for sound advice as they evolve, adapt and innovate.

Our engineers and scientists continue to support the advancement of complex technologies in many industries.

Some examples of this ongoing activity include autonomous and electric vehicles in the transportation industry, flexible displays and virtual reality in the consumer electronics industry and combination device and drug delivery systems in the life sciences industry.

Exponent has also been retained by a diverse set of clients to help in the response to the coronavirus. We continue to advise clients with respect to disinfectant products and procedures, COVID-19 testing, contact tracing and occupational health and safety.

We're pleased to have been recently selected by the United States Army and Navy to conduct a preliminary deployment of wearable technology platforms for COVID-19 risk monitoring and mitigation.

The goal of this program is to implement and utilize this approach to protect the health and safety of service personnel while collecting the necessary data to support a validation of the technologies.

Exponent is uniquely qualified to execute this program with our interdisciplinary team of experts in wearable technology, human factors, health sciences and data sciences. Exponent's engineering and other scientific segments represented approximately 80% of the company's third quarter and year-to-date net revenues.

Net revenues in this segment decreased approximately 3% in the third quarter and decreased approximately 4% in the first nine months as compared to last year. Clients continue to demand Exponent's interdisciplinary solutions for increasingly sophisticated systems and devices.

At the same time, our litigation support work continues to be impacted by the pandemic as assignments have been paused due to court-related delays. The number of trials is gradually increasing as court systems develop virtual and socially distant trial protocols. We also continued to experience some delays in human participant studies.

Exponent's work in integrity management advisory services for the utilities sector remains strong as clients focus on power reliability, in particular, due to fire safety concerns in the Western United States. Exponent's Environmental & Health segment represented approximately 20% of the company's third quarter and year-to-date net revenues.

Net revenues in this segment increased approximately 2% in the third quarter and approximately 3% year-to-date as compared to last year. This segment also experienced delays in litigation-related projects for the transportation and the oil and gas industries.

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, including emergency use registrations for disinfectants to prevent the spread of the coronavirus.

For clients who must meet health and safety regulations as they distribute products globally, our scientific and regulatory expertise in North America, Europe and Asia is invaluable.

The demand for Exponent's interdisciplinary solutions is durable, a society continues to raise its expectations for safety, health, sustainability and reliability and as technologies continue to increase complexity. The COVID-19 pandemic has contributed to increased complexity and has further challenged society's expectations for health and safety.

Despite any risks or uncertainties related to the pandemic that still may be ahead of us, the bar will continue to be raised.

Exponent is capitalizing on these persistent secular trends, and we remain focused on demonstrating our leadership through the same seriousness, intellectual rigor and fact-based analysis that we have employed for over 50 years.

These market drivers, combined with Exponent's world-class team of subject matter experts will fuel long-term growth and profitability. I'll now turn the call over to Rich to provide more detail on our third quarter financial results and to discuss business activity in the first three weeks of the fourth quarter.

Rich?.

Thanks, Catherine, and good afternoon, everyone. I will start by providing details of Exponent's financial results for the third quarter, and then we'll provide some insight into our expectations for the fourth quarter. Let me start by saying that all comparisons will be on a year-over-year basis unless otherwise specified.

For the third quarter of 2020, total revenues were down 3% to $98.7 million. Revenues before reimbursements or net revenues, as I will refer to them from here on, were down 2% to $93.5 million.

During the third quarter, our work for PG&E related to wildfires and integrity management of their electric power infrastructure was approximately 3.5% of net revenues. We expect this work for PG&E to continue in the fourth quarter at the same or slightly lower level.

Net income for the third quarter decreased 8% to $18.1 million or $0.34 per diluted share as compared to $19.6 million or $0.36 in the same period last year. As a reminder, Exponent recognized a tax benefit from share-based awards of $1.7 million or $0.03 per share in the third quarter of 2019.

This is typically just a first quarter event, and as such, Exponent did not recognize a tax benefit in the third quarter this year. EBITDA for the third quarter was $26 million and produced a margin of 27.8% of net revenues, which is an increase of 60 basis points as compared to the same period last year.

For the first nine months of 2020, total revenues and net revenues decreased 3% to $296.7 million and $281.1 million, respectively. Year-to-date, net income decreased 4% to $60.7 million, and earnings per diluted share were $1.14 as compared to $63.3 million and $1.17 per diluted share.

Year-to-date, the tax benefit associated with accounting for share-based awards was $9.7 million as compared to $7.4 million in the same period last year. For the first nine months, EBITDA decreased 7% to $73.9 million and produced a margin of 26.3% of net revenues, which is a decrease of 120 basis points as compared to the same period last year.

Turning to some of the key metrics. Billable hours in the third quarter decreased 9% to 308,000. For the 9-month period, billable hours decreased 6% and to 955,000.

This year-over-year decrease is partly due to the divestiture of the German entity, which accounted for approximately 3% of billable hours and 1% of net revenues in the second and third quarter of 2019. For the third quarter, utilization was 66%, which is down six percentage points from the same period last year.

But this is a 2% increase over the second quarter of 2020. Year-to-date, utilization was 67%, down six percentage points from 73% last year. The decline in utilization in the quarter was primarily due to positive and some litigation support projects as a result of court closures, fewer user studies and lower testing activity.

We are pleased that utilization continues to improve sequentially as the first three weeks of October were in the low 70s. For the fourth quarter, after accounting for holidays and vacations, we expect utilization to be 63% to 65% as compared to 69.5% in the fourth quarter of 2019.

Technical full-time equivalent employees in the quarter were 901, down 1% year-over-year. This decline in FTEs was due to the divestiture of our German entity, which accounts for 3% of our head count in 2019. We continue to have normal rate of employee retention, and we'll focus hiring where there is strong demand and in areas of strategic growth.

In the fourth quarter, we expect sequential head count growth to be approximately 1%. The realized rate increase was approximately 6% for the quarter. The realized rate increase included 2% as a result of the divestiture of the German entity.

Additionally, the rate was higher as a result of lower user study and testing activities, which leverage more junior staff. For the fourth quarter, we expect our realized rate increase to be approximately 4% as the staff mix will be similar to last year.

For the quarter, compensation expense after adjusting for gains and losses in deferred compensation grew 2%. Included in the third quarter's total compensation expense is a gain in deferred compensation of $3.2 million as compared to a gain of $360,000 in the third quarter of 2019.

As a reminder, gains and losses in deferred compensation are offset in miscellaneous income and have no impact on the bottom line. Stock-based compensation expense in the quarter was $3.7 million as compared to $3.8 million last year. For the fourth quarter, stock-based compensation is expected to be $3.5 million to $3.8 million.

Other operating expenses decreased 6% to $7.8 million in the third quarter. Included in other operating expenses is depreciation expense of $1.7 million. The primary reason these expenses declined is we had reduced activities in our offices and labs. For the fourth quarter, other operating expenses are expected to be $8.4 to $8.7 million.

While we are uncertain when our employees will return to the office full time, we do believe our office environment provides long-term value as it supports collaboration of our interdisciplinary teams and staff development, which results in higher value for our clients and retention of employees.

In the third quarter, G&A expenses were $2.8 million, which is a year-over-year decrease of 48%. These lower expenses are primarily of the result of hosting our principles meeting virtually this year along with travel-related to marketing and recruiting being lower.

For the fourth quarter, we expect G&A expense to be $3.5 to $3.7 million as compared to $5.2 million in the fourth quarter of last year. Interest income was down $600,000 to $316,000 in the same period of 2019. The lower interest income is due to a steep decline in interest rates year-over-year.

For the fourth quarter, we expect interest income to be approximately $200,000. Miscellaneous income for the quarter after adjusting for deferred compensation was $695,000 as compared to $750,000 in the same period last year. For the fourth quarter, we expect miscellaneous income to be approximately $700,000.

Exponent's consolidated tax rate was 26.6% for the quarter as compared to 22.1% in the same period last year. As a reminder, the tax benefit of share-based awards is primarily a first quarter event. However, in the third quarter of 2019, Exponent realized $1.7 million as compared to 0 in this year's period.

Year-to-date, inclusive of the tax benefit of share based awards, Exponent's consolidated tax rate was 13.1 -- 13.4% as compared to 18.1%. For the fourth quarter, we expect our consolidated tax rate to be approximately 27.5%. Moving on to the cash flows. In the third quarter, operating cash flow was $28.2 million.

Year-to-date, operating cash flow is $62.4 million. Capital expenditures were $1.2 million for the quarter. Accounts receivables have improved throughout the year and at the end of the quarter was at $110 million.

Additionally, in the beginning of the fourth quarter, we received the remaining balance of the PG&E accounts receivables related to the bankruptcy.

Year-to-date, we distributed $29.9 million to shareholders through dividend payments, repurchased $40 million in common stock at an average price of $62.91 and closed the period with $207.7 million in cash and short-term investments and no debt. Now turning to our expectations for the fourth quarter and full year.

While we continue to see improvement across the business and have increased confidence in our ability to forecast our fourth quarter results, there remains uncertainty with regard to the course of the pandemic and related restrictions. As a reminder, 13-week fourth quarter of this year will compare with a 14-week fourth quarter of 2019.

As a result, we will experience an 8% to 9% year-over-year revenue headwind due to the five less working days in the quarter this year.

Further, due to the impact of continued business, travel and physical distancing restrictions caused by the COVID-19 pandemic and the very strong performance in the first three weeks of October last year when our utilization was in the high 70s as compared to the low 70s this year in October, net revenues for the first three weeks of the fourth quarter of 2020 declined approximately 5% to 7% year-over-year.

Assuming the activity levels of the first three weeks of the quarter continue and considering the impact of five less working days, we anticipate revenues before reimbursement to decline 12% to 15% in the quarter. As we -- and we expect EBITDA margin to decline 250 to 350 basis points from the 27.1% achieved in the fourth quarter of 2019.

This would result in a middle single-digit decline in net revenues and 125 to 175 basis point decline in EBITDA margin for the 52-week fiscal year 2020 as compared to the 53-week fiscal year 2019.

While there are opportunities for near-term improvement, there could also be further reductions to our revenues in the short term due to the continued uncertainty. Exponent has remained profitable despite the 6% decline in UT and 2% decline in net revenues in the quarter. We ended the quarter with $207.7 million in cash, no debt.

Exponent has a sustainable business model and intends to continue our quarterly cash dividends, payments and share repurchase program. The fundamentals of our business remains strong, and we continue to operate in a position of financial strength. I will now turn the call back to Catherine for closing remarks..

the health and safety of our people, demonstrating leadership by continuing to solve our clients' most pressing problems and delivering value to shareholders. Operator, we're ready for questions..

[Operator Instructions] And our first question comes from Sam England with Berenberg Bank..

Sam, we can't hear you. You must be muted. Or we're having a problem with the line..

I can't hear him either..

Again, Sam England, your line is open. Go ahead, please..

Hi, guys.

Can you hear me now?.

Yes..

Yes.

So much just wondered what you're seeing with regards to incoming inquiries at the moment from clients?.

I'm sorry, could you repeat that, Sam, I didn't quite catch it..

All right. I think that's the line back.

Can you hear me now?.

Yes..

I'll try and come on at the end. I think my line is bad. I'll try and dial back in..

And our next question comes from Alexis Huseby with D.A. Davidson & Company..

Hi, Catherine. Hi, Rich. Good afternoon..

Hi, Alexis..

So I just wanted to go over a couple of the pieces of guidance that you provided. Could you put that 8% to 9% reduction in the fourth quarter sort of into context as it compares to that original guidance of a 1.25% reduction? I mean just doing some quick math, and please tell me if I'm wrong. It seems more like a 2% hit for the entire year.

So could you just tell us how to think about that?.

Yes. If you're referring to the gains that we received as we added the 53rd week last year, the difference there is that last year, what was added to the fourth quarter, in particular, was the addition of a -- the week that had the January one holiday in it.

So that is a week that is heavy with the holiday and vacation in it and contributed at a lower level. When you take a look at what happens now to the fourth quarter is that we are losing or sliding back would felt back into the year, we're losing the first week of October into the fourth quarter. That is five fully productive workdays that we have.

So when we look at what -- when we look at the fourth quarter on a year-over-year basis, we still have the last weeks of December, including the New Year's holiday in there, that doesn't change what we lose is that first week.

And when you take but look at the fact that, that leaves us with about what was 60-some work days and you take five off of that, that's how you get a little over 8%..

Okay. The difference in weeks, definitely does make sense.

And on your utilization expectations for the fourth quarter, if we're seeing the first two weeks of October in the low 70s, could you talk me through what you're thinking, guiding to utilization more like 63% to 65% for the full quarter?.

Yes. So that utilization of 63% to 65% is consistent and in line with the equivalent of the low 70s utilization in the beginning of the fourth quarter. The only difference in that is that we end up having six holidays and probably three to four equivalent vacation days taken as we move into November and December of the year.

So that's what draws the equivalent utilization down to that 63% to 65% level..

Okay. That's really helpful. And one last one, if I could.

Just on the sort of cadence of litigation clearly returning, what you said in your prepared remarks, do you have any sense of sort of the percent volume of litigation activity that you're seeing on a month-to-month basis as compared to the same period last year?.

Yes. Thanks, Alexis. We're not back to where we were last year when we look just at the litigation side of the house. But what I would say is that there has been sort of a progressive and gradual improvement. It varies since the beginning of the pandemic. It varies a bit across industries.

So for example, on the automotive side and sort of consumer products and product liability side, it's a bit slower than, say, the toxic tort side. One reason for that is because on the product side, they're very much dependent on the ability to travel, the ability to do inspections, etc.

Now what we're seeing in terms of that activity in the third quarter, is -- has progressively improved compared to the second quarter. So there is good progress, but it is not back to the old that we sort of think about as our typical run rate. On the toxic tort side, I think that slope is a bit higher.

This is an area where there's less dependence on sort of the travel and the product inspection. Now going forward, there's obviously still quite a bit of uncertainty. But we're seeing the -- we're seeing some things happening that I think are also good drivers, which is, for example, expert depositions.

It is fairly routine now for us to be doing those virtually. That was a bit of a new thing three months ago. People were still getting used to it, and now it's become fairly routine. So that's something that's contributing to the progress we're seeing. We have had some actual jury trials in person that have gone forward.

They're obviously under health and safety protocols. That is happening very gradually, but we are starting to see that. So it won't be the flip of a switch, but definitely some sequential and progressive improvements there in terms of the litigation business..

Okay. Understood. Thank you both..

And the next question comes from Sam England with Berenberg Bank..

Hi, guys. Hopefully, you can hear me this time. I just wondered if you see any more -- I just wondered if you're seeing any more government opportunities opening up as a result of the pandemic. I know it's a smaller portion of revenues for you guys, but you mentioned the U.S. Army and Navy projects.

So I just wondered if you're seeing anything else potentially coming through on the government side?.

Yes. I mean the Army and Navy work we highlighted specifically, and we're very excited about. This is work that, I think, represents not only the ability to engage with the government on COVID-19 and the wearable technology, but really reflects an -- a bigger opportunity broadly in the commercial space around wearables and health in general.

And so we're really pleased to be talking about that. This is something that we've been able to do on commercial terms with the government. The government work that we've typically done has been work that we've been able to do on those kinds of terms. And so there are potentially some other opportunities down the horizon, I don't know.

There could be opportunities that spring from these Army and Navy projects. Some uncertainty there, but it's really the ability to do that work on commercial terms that has become attractive to us. So I don't know, Rich, if you want to sort of add more color on that issue..

Yes. I think that I know that our health teams will and our team here that really can do human factors and user studies are definitely engaged with a number of parties. There's going to be a an incredibly high demand for post-market surveillance of how people are doing relative to vaccines that are going to be implemented.

It's probably in the early stages to a number of our government entities that are there. And so we'll -- we're going to have to see what opportunities can be generated both off of monitoring people now pre-vaccine and being able to monitor them later. But no guarantees at this point in time, but opportunities that could exist..

Okay. Great. And then I know you've mentioned in the past sort of the opportunities on the supply chain side as well, particularly in Asia. I just wondered as those markets sort of recovering and faring a lot better with the pandemic in the U.S.

and Europe, whether there's more opportunities in Asia maybe than you've seen in the past?.

Yes. So with regard to Asia, we have seen definite upticks there. In particular, we're seeing a trend, Sam, that is around our client base in the U.S.

And not only just their ability to travel now during the pandemic, but they're sort of looking to the future in terms of whether they will really need to have their folks doing as much travel over to Asia to be able to monitor the quality coming out of their factories and their supply chain and things like this.

And so what we're finding is we have a real advantage in terms of our boots on the ground in Asia and our ability to team with our clients, so instead of them needing to actually travel and be on the ground over there that we can really engage with them with our folks who are already there. So we're seeing that now during the pandemic.

We do expect that, that can also be a longer-lasting trend as well. So I think that's become a good opportunity for us to continue to build the relationships, particularly in that consumer electronics space is where we're seeing that..

Okay. Great. Thanks so much..

You're welcome..

Thank you. Our next question comes from Andrew Nicholas with William Blair..

Hi. Good afternoon..

Hi.

How're you doing?.

Good. Good.

First question, I just wanted to ask, if we were to return to an environment where business restrictions were a little bit more stringent, assuming -- hopefully not, but assuming higher case count and broader COVID concerns accelerate, do you think the impact of the business would be similar to what you saw in March and April? Or do you think prior experience working under these conditions -- I know, Catherine, you mentioned virtual expert testimony is becoming more common.

Wondering if that could translate to higher trough in utilization a second time around?.

Yes. Yes, thanks for that question. When I reflect back on the kinds of adaptations that we've been able to make between our employees, personally, our infrastructure in terms of IT platforms, just our -- how used we've gotten to being able to communicate virtually, the things that we're doing around digital marketing.

I think we would be far better prepared this time around and much less surprised and much able -- very much able to not be immune to the impact of that because clearly, if we get back to a situation where, for example, our folks are not permitted into the laboratories because of government restrictions, that clearly isn't something that any adaptation on our part is necessarily going to change.

But the adaptations we've seen around litigation, you mentioned the expert depositions, those can continue to happen. The other piece that we can't control as much as travel restrictions, but one thing we have trended up on consistently over the last six months is our technology and our protocols around remote inspection capabilities.

So in our laboratories, we can stream video from our scanning electron microscope to multiple locations around the globe. We can have remote experts providing instruction to that microscope operator on how to manipulate the specimen in the microscope.

We can do remote viewing of our human participant studies so our clients don't have to travel and be on site.

And in addition to that, for our participant work, we have used our expertise to develop the kinds of protocols, expertise in material science and disinfection that allows us to know how to safely disinfect products between one subject and the next subject, understanding of all of the occupational health issues with physical distancing and use of PPE effectively that have allowed us to reengage in our participant work.

And so we would be we would be, I think, better positioned in the event of what could be increasing surges of COVID-19 that we're seeing around the world. And it would be, I think, a very different picture this time around with another wave than it was with the first wave..

Yes. I would just add to that from the client side, I think, yes, clients have work increased in that demand from clients because sure, some restrictions came off and such.

But I really believe that what we've seen from June to today is not a big change that much over that period in the change in restrictions but more clients figuring out how to get back to work that they've got to move toward the next product launch that they need to continue to advance technologies that litigation, a lot of times is related to long-term exposure, doesn't have to do with an event that's occurring today.

And those matters continue to flow in and just benching them all isn't going to work. They're not going to be in a position to properly respond in the future.

So I think clients were back on their heels, trying to pause in April and May, began to engage at different levels in June, learned a lot over the following three months and are in much better positions to move through this.

No one's going to be able to do it the same, but I think they're going to be in a much better position to continue their business as well..

That's very helpful color for each of you. And then for my follow-up, I just wanted to ask about EBITDA margins expanded year-over-year despite the decline in net revenue. I think that exceeded the modeling framework you outlined on last quarter's call.

So with that in mind, I was hoping you could speak to one, where those costs came in below expectations in the period. And then second, if there are any expense or spending items you've cut back on in the current environment that could prove to be more permanent in nature. It sounds like office space wouldn't fall into that bucket.

But are there any other items you could see cutting back on longer term? Thanks..

Yes. So relative to the quarter and margins being a little bit better than what we had put forward in the model, look, I think it was sort of across the categories that we saw that on. We ended up with a little bit lower head count growth than maybe we were expecting. Let's just call that 1%.

We did end up being able to sustain a lower other operating expenses. That's not a huge one.

But probably that big difference still remains in the G&A category, where we are, as Catherine indicated, increasing our virtual marketing and virtual recruiting activities, but -- and such, but there still the cost as you compare that to being out on the road is not as high.

We -- the big thing on a quarter on this quarter was really moving entirely from a manager's meeting a year ago to a principal's meeting this year being a virtual event that really helped us out as well. So those things contributed. As we look going forward, there's not really any particular area that we see as something that we're going to take out.

Do I think we're going to do more in some of our online and virtual marketing and now those activity? Sure. But I think we really believe that being in person with clients is really important, just as we believe that being able to be in person with our colleagues is important in the long-term relationships that you build.

I do think we'll do more video interviews. I think we found them to be quite effective. It will be less of a burden on our candidates who have to travel to us.

So there are -- but we're also getting out and reaching out to a much more diverse set of candidates that are all over because we've moved to this virtual model, and it allows us to provide presentations and engagement all over with a very diverse group.

So we don't see that there is a material change in our cost model going forward, but I think there will be shifts in where some of that spending goes as we evaluate. It's been a short period of time. We've got to look at these areas and look on the return on investment that we're getting out of them..

That's helpful. Thanks a lot..

And our next question comes from Tobey Sommer with Truist Financial..

Thanks. I wanted to drill in this something that has been talked about a little bit, but maybe from a different angle. You talked about your internal improvements of being able to work in the current environment.

How has -- how much ports in the throughput associated with them improved? And has there been some ebb and flow perhaps more recently with COVID cases picking up and in the geographies where that has happened? Is there sort of a relationship that you've been able to perceive as cases rise and decrease over the last bunch of months?.

Yes. Thanks, Tobey, we are tracking -- most of the work that we do trial-wise is going to be in the state court system, right? And so it's very dependent on what's going on in that particular geography.

And so there is indeed ebb and flow associated with that because the quarter is going to be less likely to move forward with an in-person jury trial in an area where the case counts are increasing. And the opposite would be true in areas where the case counts are relatively low, and they'd be more likely.

So we've had a few go-forward we've actually had a situation where one of our experts is kind of testifying in a trial where they've rented out like an 18,000 square foot conventional portion in order to be able to do it. So they're finding some creative ways. But they're for sure going to be constrained by what's going on locally.

I will tell you though, I mean, there the backups that occur in the court system are very motivating. And the judges are pushing parties to move forward and to move settlement negotiations forward and things like that, doing anything they can to sort of move the process along.

But it's important, I think, to understand from the standpoint of our business, probably -- I mean, in my personal experience in 20 years of doing this, I would say, a low single-digit percentage of the cases actually go to trial.

So it's not so much the ability to have the jury trial as it is the court being willing to set the date and then that's going to drive the work back several months. So what's driving some of what we're seeing now, we've still got a lot of trials that are being pushed, but maybe they're in the first quarter of next year.

And there's enough likelihood that these will go that it's driving activity that's three months or more in advance of that. So it's almost the outlook of the trial being on the calendar and being really there that is starting to cause the activity to pick up..

And did you have any further questions, Sir?.

Yes, I did. Thank you. That was helpful, Catherine. With respect to bill rates, we're only a couple of months away from flipping the calendar.

Can you talk to us about what you expect bill rate trends to be? And maybe also comment about whether the court throughput in this experience this year has impacted your realized bill rate increases and potential there or if you see that kind of unphased by this year's event?.

Yes. So sort of the -- I'll take the latter question first because it's a little bit ties into this year's performance and forward.

As far as the not having the court dates there, any impact that had to let's say, senior people who might be more likely to testify not being there, I think that was offset by some of the lower rate people and testing and studies and things.

So the overall mix still lean to the positive side or the higher side on the overall rate that we realized here in the third quarter. And I think the balance of what we would expect in the same environment if we were looking forward.

As far as rates, look, we are just sort of in the first third of our planning phase for next year, we do run that through the fourth quarter. Catherine and I have not yet sat down with each of the business units. We'll be doing that over the next two months as we pull together and work on the plans there.

And a big part of that is sitting with them and making sure that we understand the market, what they're looking at there and where we should be putting pricing.

But the one thing I would say is that regardless of how difficult of an environment there is out there for all of us, the demand for top engineers and scientists in the world continues to grow. It continues to be competitive to hire the top people out of the top universities. That does not -- we've seen it before. The best people are in high demand.

And I think our clients understand that. And they also understand that Exponent is an environment where our people are growing.

If anything, our people have done more publishing and more thought leadership pieces and more certifications this year in trying to be productive with their nonbillable time that their credentials and position in the marketplace, I think, are elevated, not just by the work that they've done.

So I think that those sort of demands in the marketplace for the type of people we hire, the answers we're delivering will allow us to continue to increase pricing, but we're not -- or no fools. We understand the strain that our clients are under. It is different in different industries.

We need to find that balance, so we do want to sit and listen to where that is and find that right balance.

And some of that's going to be us communicate -- reminding our client how sort of a rare resource these top talented people are and how much they did grow over the last year to be able to demonstrate the value that they can deliver going forward..

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day..