Exponent Inc
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Exponent Inc
Earnings Call Analysis
Q2-2024 Analysis
Exponent Inc
In the second quarter of 2024, Exponent experienced a notable period characterized by both growth and challenges. The company's total revenue was approximately flat at $140.5 million, while net revenues increased by 2% to $132.4 million compared to the same period in the previous year. Despite various headwinds, the company managed to align its operating model with market demand, leading to a remarkable net income growth of 14% to $29.2 million and an EBITDA margin expansion to 30.2% of net revenues.
Exponent's reactive business segment showed impressive mid-single-digit growth, buoyed by strong demand in the transportation, utilities, and medical sectors. This segment benefited from critical projects, including evaluations of advanced driver assistance systems, battery systems, and railway failure investigations. In contrast, the proactive business faced ongoing softness, particularly in the consumer electronics sector, though there was modest growth in the utility sector. This dual performance showcases Exponent's ability to adapt and thrive in varying market conditions.
Exponent’s EBITDA for the quarter increased by 8% to $39.9 million, resulting in a margin of 30.2% of net revenues, compared to 28.4% in the same period the previous year. This improvement was driven by an increase in utilization rates, which rose to 75% from 69% year-over-year. However, billable hours decreased by 2% primarily due to a reduction in machine learning data studies for consumer electronics clients. Despite this, the company strategically managed its headcount, resulting in a 9% decrease in average full-time equivalent employees over the past year.
Exponent's engineering and other scientific segment represented 84% of revenues before reimbursements and experienced a 4% increase, driven by demand across the transportation and energy sectors. Meanwhile, the environmental and health segment accounted for 16% of revenues but saw a 4% decrease due to persistent headwinds in the chemicals sector. These trends highlight the differing dynamics within Exponent's various business segments.
Throughout the quarter, Exponent continued to realign its operations to better fit market demands. This included selectively expanding capabilities and investing in corporate infrastructure. Despite external challenges, such as the headwinds in the chemicals sector and a tough comparison against strong previous year growth in reactive services, the company demonstrated agility. Furthermore, Exponent exercised an option to early extend the lease for its testing and engineering center in Phoenix, Arizona, locking in favorable pricing and signaling confidence in its growth trajectory.
For the full year 2024, Exponent has raised its revenue and margin expectations, forecasting revenues before reimbursements to grow in the low to mid-single digits and EBITDA to be 27.5% to 28% of revenues before reimbursements. The company anticipates headcount to grow sequentially by the end of the third quarter, with full-year utilization expected to be 70.5% to 72.5%, up from 69% in the previous year. Additionally, Exponent expects a 4% to 4.5% year-over-year increase in realized rates, indicating an optimistic view for sustained growth.
Exponent continues to explore AI-related projects, particularly in failure analysis and advanced driver assistance systems within transportation. The firm is developing test methodologies for these systems, which is part of their investment in their Phoenix facility. Additionally, Exponent leverages machine learning to address client problems, improving efficiencies in areas such as packaging durability. Although some aspects of AI integration are still emerging, these initiatives position Exponent at the forefront of technological advancement.
Despite facing significant challenges, Exponent has demonstrated robust financial performance and strategic adaptability in the second quarter of 2024. The company’s proactive adjustments and investments in technology promise continued growth and resilience. With an optimistic outlook for the remainder of the year and deliberate efforts in talent acquisition and operational alignment, Exponent is well-positioned to maintain its competitive edge and deliver sustained value to shareholders.
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Good afternoon, and welcome to the Exponent Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Joni Konstantelos, Managing Director, Riveron Consulting. Please go ahead.
Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's Second Quarter 2024 Financial Results Conference Call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at www.investor.exponent.com.
This conference call is the property of Exponent, and any taping or other reproduction is expressly prohibited without prior events. Joining me on the call today are Dr. Catherine Corrigan, President and Chief Executive Officer; and Rich Schlenker, Senior Vice President and Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements, including, 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, Chief Executive Officer.
Thank you, Joni, and thank you, everyone, for joining us today. I will start off reviewing our second quarter 2024 business performance, Rich will then provide a more detailed review of our financial results and outlook, and we will then open the call for questions. We delivered net income growth of 14% and expanded EBITDA margin in the second quarter, reflecting the results of efforts to align our operating model with market demand. As expected, revenue growth moderated during the quarter due to ongoing headwinds in the consumer [indiscernible] and chemical sectors and a tough comparison against [indiscernible] growth in our reactive work last year.
Despite these challenges, our reactive business delivered mid-single-digit growth fueled by demand across the transportation, utilities and medicalized sectors. Our proactive business continued to experience softness in consumer electronics, partially offset by modest year-over-year growth in the utility sector. [indiscernible] to our engagements in more detail onactive work, we saw strong demand within transporting related to product liability and regulatory matters. These included evaluating the performance and safety implications of advanced driver assistance technologies and battery systems, as well as railway failure investigations.
In Life Sciences, our team continued to leverage their engineering, manufacturing and human facts to understand the root causes of medical device safety concerns. The energy transition continued to be a driver as we advised clients facing infrastructure disputes involve solar and large-scale energy storage. During the quarter, we continued to see headwinds [indiscernible] sector as some clients caused near-term litigation work. Within our proactive services, engagements in the quarter were driven by our asset integrity work in the utility sector.
For example, evaluating ignition risks and mitigations for electrical infrastructure and in transportation evaluating vehicle emissions technologies. While we continued to experience headwinds in consumer electronics industry related to product life cycle timing and broader industry impacts, we're seeing more signs of stabilization. Our product development consulting activities began to [indiscernible] in the quarter and were encouraged by an uptick in human subject research engagements.
Turning to our segments. Exponent's engineering and other scientific segment represented 84% of revenues before reimbursements in the second quarter. Revenues before reimbursements in this segment increased 4%, driven by demand for Exponent's services across the transportation and energy sectors. Exponent's environmental and health segment represented 16% of revenues before reimbursements in the second quarter.
Revenues before reimbursements in this segment decreased 4% due to ongoing headwinds in the chemicals sector. Looking ahead, accelerating transformation across industries will continue to create attractive market opportunities. From groundbreaking technology and data applications in life sciences, to renewables and infrastructure resilience in the energy sector and [indiscernible] automation of transportation. Exponent remains well positioned to support our clients with vital insights for current challenges while preparing the path towards the future.
Considering our encouraging performance in the first half of 2024 and the outlook for the remainder of the year, we are raising our full revenue and margin expectations. Rich will take us through the details of that. However, we still face headwinds in the chemical sector as well as tough comparisons based on unusually strong prior year growth in our reactive services.
Over the last several quarters, our incredible team has demonstrated agility in adapting to ongoing dynamics in both our consulting and our talent marketplaces. Going forward, we will continue to leverage and build upon our diversified portfolio of talent and capabilities as we flex to meet market demands.
I'll now turn the call over to Rich to provide more detail on our second quarter results as well as discuss our outlook for the [indiscernible] and third quarter and the full year 2024.
Thank you, Catherine, and good afternoon, everyone. Let me start by saying all comparisons will be on a year-over-year basis unless otherwise noted. For the second quarter of 2024, total revenue were approximately flat at $140.5 million. And revenues before reimbursements or net revenues, as I will refer to them from here on, increased 2% to $132.4 million as compared to the same period in 2023.
Net income for the second quarter increased to [ $29.2 ] million or $0.57 per diluted share as compared to $5.7 million or $0.50 per diluted share in the prior year period. The realized tax benefit associated with accounting for share-based awards in the second quarter of 2024 was $700,000 or $0.01 per diluted share, as compared to an immaterial impact in the second quarter of 2023. Inclusive of the tax benefit for share-based awards, Exponent's consolidated tax rate was 26.3% in the second quarter of '24 as compared to 29% in the same period 2023.
EBITDA for the quarter increased 8% to $39.9 million, producing a margin of 30.2% of net revenues as compared to $36.8 million or 28.4% of net revenues in the same period of 2023. This year-over-year [ income ] in margins was driven by an increase in utilization during the second quarter of 2024. Billable hours in the second quarter were approximately $381,000, a decrease of 2% year-over-year. This decrease was primarily related to the year-over-year decline in machine learning data studies for consumer electronics clients. The average technical full-time equivalent employees in the second quarter were [ 975], which is a decrease of 9% as compared to 1 year ago, as we have strategically aligned our resources with demand over the past year.
Utilization in the second quarter was 75%, up from 69% in the same period of 2023. As Catherine mentioned, our efforts to align our operating model to the market demand while also selectively expanding our capabilities drove utilization back to historical norms. The realized rate increase was approximately 4% for the second quarter as compared to the same period a year ago. In the second quarter, after adjusting for gains and losses, and deferred compensation expense, compensation [indiscernible] by approximately flat. Included in total compensation expense is a deferred compensation gain of $875,000 as compared to a gain of $4.1 million in the same period of 2023.
As a reminder, gains and losses and deferred compensation are offset in miscellaneous income and have no impact on the bottom line. Stock-based compensation expense in the second quarter was $5.6 million as compared to $5.2 million in the prior year period. Other operating expenses in the second quarter were up 9% to $11.2 million, driven primarily by increased engagement at our offices and investment in our corporate infrastructure.
Included in other operating expenses is depreciation and amortization expense of $2.5 million for the second quarter. G&A expenses declined 9% to $6 million for the second quarter. This decrease was primarily due to decrease in travel and meals and bad debt expense. Interest income increased to $2.2 million for the second quarter, driven by an increase in interest rates. Miscellaneous income, excluding the deferred compensation gain, was approximately $800,000 in the second quarter.
During the quarter, capital expenditures were $1.1 million, and we distributed $14.2 million to shareholders through dividend payments. Turning to our outlook. For the third quarter, 2024 as compared to 1 year prior, we expect revenues before reimbursements to be approximately flat and EBITDA to be 26.5% to 27.5% of revenues before reimbursement.
As Catherine mentioned, we are raising our revenue and margin expectations for the full year 2024. For fiscal year 2024, we expect revenues before reimbursements to grow in the low to mid-single digits. And EBITDA to be 27.5% to 28% of revenues before reimbursements as compared to 27.7% for fiscal 2023.
Both our current and previous guidance are inclusive of the extra week in the fourth quarter, which occurs approximately every sixth year, which is estimated to contribute an additional 5% to net revenues in the fourth quarter or 1.25% for the year. We expect sequential revenue -- sequential growth in headcount by the end of the third quarter. The average technical full-time equivalent employees in the third quarter of 2024 will be approximately 1% less than in the second quarter.
As a result, average FTEs for the third quarter will be down approximately [ 8 ]% year-over-year. We expect headcount to grow sequentially in the fourth quarter, and year-over-year average FTEs in the fourth quarter to be down 4% to 5% on a year-over-year basis. We expect utilization in the third quarter to be 71% to 73% as compared to 70% in the same quarter last year. We expect the full year utilization to be 70.5% to 72.5% as compared to 69% in '23. We still believe our long-term target of sustained mid-70s utilization is achievable as we continue to strategically manage headcount and balance utilization based on margin [indiscernible]. We expect the 2024 year-over-year realized rate increase to be 4% to 4.5% for the third quarter and full year.
For the third quarter, we expect stock-based compensation to be $5.2 million to $5.5 million. For the full year, we expect stock-based compensation to be $23 million to $23.5 million. For the third quarter, we expect other operating expenses to be $12.5 million to $13 million. For the full year, we expect other operating expenses to be $46.75 million to $47.75 million. It should be noted that on June 19, 2024, we exercised an option to early extend the lease for our testing and engineering center in Phoenix, Arizona. Although our current lease doesn't expire until 2028, we wanted to lock in the pricing at this time.
Although we will not pay any higher rent until 2028, the lease accounting rules require us to recalculate the rent expense for the length of the new lease period. This resulted in an immediate increase in our noncash rent expense of $150,000 during the second quarter and an increase of $1.1 million during each of the third and fourth quarters. We are very excited to secure this facility as we believe it will continue to be an integral part of our growth. For the third quarter, we expect G&A expenses to be $5.5 million to $6 million. For the full year 2024, we expect G&A expenses to be $23.5 million to $24.5 million.
We expect interest income to be $2 million to $2.5 million per quarter for the remainder of 2024. In addition, we anticipate miscellaneous income to be approximately $500,000 to $700,000 for the third [indiscernible] of 2024 and $100,000 to $200,000 in the fourth quarter. This includes an expected sequential decrease in rental income in the third and fourth quarters due to the loss of a tenant in our Menlo Park building, which we own. For the remainder of 2024, we do not anticipate any additional tax benefit associated with share-based awards.
For the third quarter of 2024, we expect our tax rate to be approximately 28% as a 27.9% in the same quarter 1 year ago. For the full year 2024, the tax rate is expected to be [indiscernible] -- 26.9% as compared to 25.1% in 2023. The increase in the tax rate is due to less tax benefit from share-based awards in the first quarter. In closing, we are pleased with the expanded profitability this quarter and remain focused on growing and maintaining the balance between our operating model and market demand. I will now turn the call back to Catherine for closing remarks.
Thank you, Rich. Excellent variety that abounds in products, technologies and regulations. In this environment of relentless innovation and safety-critical applications, we are focused on fueling the growth engines of the future through expanded capabilities, recruitment of top talent and development of our exceptional team. Looking forward, we will maintain our strategic position in cutting edge of innovation, [indiscernible] remains steadfast in our ability to deliver sustained profitability and long-term shareholder value. Operator, we are now ready for questions.
[Operator Instructions]
The first question comes from Andrew Nicholas with William Blair.
I wanted to first ask about kind of the second half outlook. It looks like you're expecting maybe a bit better growth than we had thought previously in the third and fourth quarter. And I'm just wondering what's driving that. Is it specific momentum and any specific is some increased optimism on the consumer product side? Is it increased visibility in conditions? Just any more color on what gives you more conviction in growth in the back half of the year, that would be great.
Yes. Yes. Thank you, Andrew. I'll start and Rich can, of course, add on here. But thinking about the electronics side, that is certainly part of the equation here. We're very pleased to have seen sequential improvements in the last -- really in Q1 and Q2 around our user research work and our machine learning data studies in electronics. We continue to be in close conversations with those -- with that client group and talking to them a lot about what the back half of the year looks like. We're getting some more visibility into Q3. We're seeing signs of that sort of continuing trend of some sequential improvement.
And on the other side of the house in electronics, that's more of the hardware related work and the product development consulting work. And this is another area where we've seen some upticks, some modest sort of improvement there. And so there is -- there are good signals coming from that side of the market. And so we're pleased with that. And that's certainly part of the equation. We are encouraged by the general outlook on the market drivers as well in our reactive business, when you look at the work we're doing in advanced driver assistance technologies. And other areas of automation and electrification and transportation and work around wearables that we're doing as well. This has given us some encouragement, I would say, as we look into the back half of the year.
Yes. I would just add, we clearly knew that, yes, there were some areas that we needed to work through relative to consumer electronics and still some headwinds in chemicals. But the biggest thing that we had a real question of trying to forecast is how strong we would -- where we would end up being able to come out relative to a really exceptional growth rate that we had last year in the reactive business.
Something we've been doing for 57, 58 years here now -- 57 years, I guess. And -- to be able to last year, the second quarter having reactive growth that was 20%. The third quarter being even higher than that into the low 20s and continuing to be in the high teens even in the fourth quarter. The fact that we realized that we had some plethora of good-sized jobs during that period of time and where -- what was that to mean for going forward. And I think we're very encouraged by the fact that we were able to grow on a year-over-year basis here in that area and this [indiscernible] not modest.
We don't even 6% growth there. We want to see it be better -- and -- but -- and we realized that the overall guidance performance of 2% net revenues in Q2 and flat in Q3 are not inspiring on the surface. But when you look at the market that we're in and the growth we've been getting over the last several. Last year's growth was not over negative circumstances the prior year. That had strong growth, too. So we're just very -- there's always timing. We're a public company. We know we're held accountable to the quarters. But the underlying demand that this is demonstrating is encouraging for the long term. We've got to work through these periods. But I think long term, we're very encouraged.
Very helpful. And then maybe as a follow-up to that commentary, if you could just talk to us a little bit about headcount and ambitions on the hiring front. It certainly seems like things are turning around and improving enough to want to lean back into headcount growth. If you could just talk about whether or not that aligns with how you're thinking about it or if you're hesitant to do that, absent maybe a multi-quarter, I would appreciate it.
Yes. Thanks, Andrew. So we are absolutely in recruiting mode. But it is strategic based on the areas of the market where we see the key growth opportunities. And this has always been our philosophy, as you know, that we target our recruiting in those areas because it's those individuals as they develop, [ 2 ] true engines of growth for the future.
And so we're getting through some of the ripples in head count, and we've been able to balance that to get our utilization back where we would like it to be, and we are hiring. We are coming into the fall recruiting season at the universities. That is a really important time of year for us, not the only time of year that we hire new PhDs, but it's a really important one. And so we are already those engines are running and we are interviewing in those key areas, vehicle automation and batteries and sensor technology. And over on the health side, toxicologists and epidemiologists, these are all areas of disciplines where we need those growth engines. So for sure, we are in that mode.
Yes. I think it's -- it's always -- you got to turn it back around. It's recruiting PhDs and that is a longer game. And we didn't let up on that, keeping our market recognition and doing those things. But it's there -- that was there. I just -- it's important for all to remember. We got ourselves into it. But the last year, in the second quarter, headcount growth year-over-year in Q2 of 2023 was 15%. And yes, that came from low turnover and high acceptance rates and lots of other things, but we were there.
We did need to gradually make an adjustment to that, which we've tried to do in a prudent way as Catherine described, in the performance management and moderating recruiting. But that led to, I think, a really sort of healthy place that we are now where we came down [ 9 ]% off of that. But we didn't take it all back. We are -- and I think with that 75% utilization in the second quarter, which is slightly better than first quarter when you adjust for holidays and vacations. There's more holidays and vacations in the second quarter than first and then it takes another a couple of points step down in the third quarter and then again in the fourth because of the timing of holidays, admissions but the equal utilization in Q2 means it's a slight tick up in utilization.
Now that came because the head count was slightly down. But overall, I think it's getting into a good balance and gives ourselves a position where our business units can be more comfortable leaning into the recruiting and hiring process.
The next question is from Josh Chan with UBS.
Maybe on the headcount topic, -- how do you feel like your Q4 projected exit rate will position you for any growth that you expect in 2025? I guess you're exiting the year possibly in low 70s utilization already. So just kind of curious how you're thinking about head count versus growth going into next year again.
Yes. First of all, I'll address the utilization part of that because, obviously, you're trying to keep that model. I think what we're expecting is utilizations that are, give or take, around what we're guiding here in the third quarter. Adjusted for what we have in additional vacations and holidays that occur in the fourth quarter. That's what we would expect. And yes, it's lower, but it's because only of that a judge.
So we're not -- we're expecting that. Secondly, on the exit, I would expect us to be, again, having momentum moving in the sequential growth area. We'll have to see where that's progressing, how far we've gotten along on that and where we are in our 2025 planning that we'll do this where it's just going to get started on here this fall about where we are because we've still got a lap within Q2 that have stepped down. And based on those sequential step downs at this time, I'm not prepared to predict that it will -- where it will be relative to -- it will still be a little bit down year-over-year early in the year because of still trying to catch up or will we have brought that even or up.
I think we need a few more months to be able to see what we've got lined up to come out of the year and what we've got lined up for early acceptances into 2025, and we probably won't have that until we get into the fourth quarter.
Perfect. And maybe my second question is on the Q3 growth guidance. Is there any reason why growth slows down in Q3 versus Q2? I know that you mentioned the reactive comp gets a little tougher, but I wonder if there's any other reasons behind the slightly more moderate growth in Q3 than.
Yes. It really is about -- well, first of all, I think it is 2 things. One, it is the comp comparison here. If you -- if you look at what we did, I talked about the fact that Q3's growth rate in reactive business was in the low 20s -- growth rate a year ago in the third quarter versus 2022 -- there. And overall, as a company, we grew 10%, including the fact that we had a 5% drop in consumer electronics as an overall business. So that area had a negative 5%. So ex consumer electronics a year ago, we had that sort of 15%.
So very strong, a lot of litigation stuff, a lot of other activity were very, very strong in that period. So those comparisons -- in addition to that, we do have a few good projects that we had in a couple of areas in the second quarter that are stepping down in the third quarter. And so we have a little bit of headwind, a little bit of step off of those activities, and we've accounted for that we provided as well.
[Operator Instructions] The next question is from Tobey Sommer with Truist.
I was interested in getting your updated perspective on AI-related projects, maybe how often that is coming up in your new business and how it might compare to 2, 3, 4 quarters ago, if it's increasing or decreasing. What expectation is for the relevance of that as a topic and driver for your business?
Yes. Thanks, Toby. So we continue to see AI coming in, in different ways. We've talked about some of these before. One is our traditional failure analysis work, but oriented toward a system that is making decisions using artificial intelligence. So this is our advanced driver assistance technologies and transportation. That is an area that continues to grow as the questions of whether you equipped your vehicle with that transition into even more complex question of did your vehicle systems perform properly now that they had it.
And we're seeing early signs of encouraging trends around testing in that area. We have been developing some very novel test methodologies that are drawing business around [indiscernible] the side for that. And this is part of our investment in our Phoenix facility that Rich mentioned. So we're seeing it there. We're still fairly early in the curve around the medical device side of questions around AI in terms of the reactive business.
But that is, I think, coming. This is the wearable that is -- or the glucose monitoring system or what have you, that is making decisions about health-related aspects using an artificial intelligence algorithm. There are also places where we are seeing more and more opportunities to leverage machine learning in the way that we solve problems for clients. So they come to us with a question about the durability of their packaging during shipping, and we can use machine learning to take massive amounts of data about the exposure of that packaging during its journey and make decisions about what testing that packaging needs to be exposed to in order to be robust in that application.
So creating great efficiencies for our clients. So we're using the tools and developing the tools to answer the questions. And then there are also, of course, just the fundamental questions about the algorithms themselves. And software as a medical device and areas like that. So still relatively early days on some of those more proactive areas, but I am encouraged by the continued development of our capabilities and our increasing use of machine learning in our applications to solve problems.
Yes. I think 1 other -- 1 or 2 other things to add on there. I really think that the real questions that are coming back and increasingly coming back around our studies are really about help us benchmark and understand how our health applications algorithms are and applications are performing versus a medical device or versus a gold standard in what they're doing. And what we need to do -- what the client we can do to help the client in gathering enough data in the training and doing it. So benchmark and then augment so that you can continue to get that improvement out of it.
Is it improved the hardware and the sensor? Or is it improved the algorithm, machine learning tool that you're doing there. So that's a big area. And the other one, and we've been deep in that one in multiple clients, multiple applications. The other one is really as our clients in the utility sector are building and relying upon risk models here to make decisions about the reliability and the decision of when to shut power off in their systems in extreme weather events. And what is happening is we're able to gather with -- help them in validating the data and the algorithms here so that they can build more robust and reliable decision models in that environment.
In your conversations with customers when you're hearing from senior consultants. What are you hearing about any impact that global elections are having? And I guess I cater the question a bit more towards proactive is my assumption, but I'll let you respond because we've already had globally some surprise snap elections with unanticipated outcomes and now we're in the middle of our own relatively new election process.
Yes. Thanks, Toby. Certainly, always paying attention to these sorts of things. Historically, the company has not -- there hasn't been a time when we've seen significant swings with administrations changing and things of that nature. Of course, changes of administration around the globe can absolutely have an impact on regulatory frameworks. And -- but we find that they don't change overnight. And we also find that even efforts to perhaps ease on regulation tend to be counterbalanced over time with society's increasing expectations around safety, health and the environment.
And we're also able to because of different parts of the portfolio, let's say, there is deep pullback in regulations and there's more building of pipelines. That can increase some of our opportunities on the reactive side around construction disputes, whereas if you're driving more higher bars in regulation, then we get more work around our chemicals area and human exposure and things of that nature. So we've found there to be a balancing aspect and it hasn't been any different so far. But another question -- related question that we're getting asked and absolutely tracking is the potential impact of the Chevron decision by the Supreme Court, the Chevron case in overturning that case, it really empowers regulated entities to challenge some of the regulations based on how they're grounded in science and in engineering.
And so look, we haven't seen a step change or anything like that, but we're tracking closely. We're engaged with our clients and wouldn't be surprised to see increasing questions over time about the scientific foundations of these regulations. And when regulations get complicated and there are those kinds of questions and there about health and safety in the environment, we're we'll certainly be well positioned to capitalize on that. But again, no material change in a step function kind of way.
I appreciate you leading right into Chevron because that's where I was going next.
This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.