Exponent, Inc. (NASDAQ:EXPO) Q4 2021 Earnings Conference Call February 3, 2022 4:30 PM ET
Joni Konstantelos – Investor Relations
Catherine Corrigan – President and Chief Executive Officer
Rich Schlenker – Executive Vice President and Chief Financial Officer.
Conference Call Participants
Andrew Nicholas – William Blair
Tobey Sommer – Truist Securities
Good day, and welcome to the Exponent Inc’s Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Joni Konstantelos. Please go ahead.
Thank you, operator. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent’s fourth quarter and fiscal year 2021 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, Chief Executive Officer. Catherine?
Thank you, Joni, and thank you everyone for joining us today. I will start off by reviewing our fourth quarter and fiscal year 2021 business performance. Rich will then provide a more detailed review of our financial results and our outlook for 2022. And we will then open the call for questions.
Our results for 2021 demonstrate the strength and resiliency of Exponent’s business model and our ability to grow as an organization. Despite a year marked with macro economic challenges and uncertainty.
For the full year 2021, net revenues grew 15%, while our EBITDA margin expanded over 340 basis points as compared to fiscal year 2020. We could not have realized this success without the exceptional performance of our multi-disciplinary team of engineers and scientists and all of the employees that support them.
Our team continues to deliver unique and innovative solutions as we broaden our client base and deepen our relationships. We saw strong demand across the business for Exponent’s diverse lines of service during the year, with growth driven largely by work for the utilities, consumer electronics, consumer products, life sciences and automotive sectors.
On the proactive side, our work related to human factors and machine learning data remained robust as did energy storage and asset integrity engagements, which are all expected to grow in 2022. On the reactive side, litigation work continued to recover and we saw increased demand related to product recalls and regulatory actions during the year.
We are excited about the evolving opportunities related to energy storage, advanced vehicles, consumer electronics and digital health, which we expect to deliver increasing impact over time as we execute our long-term strategy.
Turning to our engagements in more detail. Within our proactive business, demand for machine learning studies and user experience research spanning across various end markets remains strong. Growth in this area reflects increasing demand for objective data to inform product design and also benefited from greater accessibility of human participants and a renewed ability to conduct on-site work as COVID restrictions eased over the year.
In addition, we continue to assist our clients in consumer products and electronics as the demand for virtual and augmented reality work gains steam. Overall, our proactive engagements remain diverse as we respond to clients requests for even more curated and differentiated data to optimize product design and performance while also pairing deep engineering and science expertise with data analytics to increase safety and mitigate risk for our clients.
As we highlighted last quarter, our litigation related work continues to gradually rebound with indications that recovery will continue through 2022 as courts further adapt operating procedures to the coronavirus environment. Our risk and vulnerability work with utilities continued strong through the end of 2021 as we broaden the scope of our risk models which will support continued growth.
Overall, Exponent is well-positioned to capture these growth tailwinds, while also leveraging expansion into new end markets such as opportunities within the pharmaceutical space and increasing our brand recognition in the international arbitration arena.
A highly competitive job market in 2021 combined with a robust demand environment led to record high utilization rates during 2021, particularly in the back half of the year. Our diligent and disciplined execution against this backdrop resulted in exceptionally strong growth and profitability compared to the prior year that exceeded our expectations.
We expect utilization rates to moderate in 2022 as we continue to invest in adding to and developing our world-class engineering and scientific team. Our long-term focus remains the same, to build upon our differentiated position, to meet the evolving needs of our customers and the market.
Recruitment remains a top priority for Exponent. And we have begun to see the benefits from our focused recruiting efforts over the last few quarters. At the onset of the coronavirus pandemic we acted swiftly in the face of adversity to align our business to protect profitability. But as demand for our services increased in 2021 we accelerated our recruiting efforts in stride.
As we’ve onboarded and developed our record number of hires, we are seeing real-time improvement in our ability to support the momentum in new engagements while maintaining our margin profile. Our world-class team is the backbone of Exponent as we rely on them for their technical expertise to deliver unique and innovative solutions for our clients.
While the market for engineering and scientific talent remains competitive, our ability to attract and retain talent is a key differentiator and driver of Exponent’s reputation. We are confident that we are well-positioned to build the critical mass required to support the future of Exponent.
Turning to our segments. Exponent’s engineering and other scientific segment represented 81% of our net revenues in the fourth quarter, increasing 8% in the fourth quarter and 17% during fiscal year 2021 as compared to the prior year period.
Growth during the quarter and full year remained broad-based with continued strong demand for Exponent services across the utilities, consumer electronics, consumer products, life sciences and automotive sectors.
Exponent’s environmental and health segment represented 19% of the company’s net revenues in the fourth quarter. Net revenues in this segment increased 5% for both the fourth quarter and full year 2021 compared to the same period in the prior year.
Growth in this segment, which saw less impact from business restrictions in 2020 was primarily driven by Exponent’s proactive safety related work evaluating the impacts of chemicals on human health and the environment.
For over 50 years Exponent has harnessed the power of technical excellence, objectivity and disciplinary diversity to help unravel the complexities of innovations as they become a reality.
Through new and emerging opportunities in automation, electric vehicles, digital health and more, we remain well positioned to advise our clients as society continues raising the bar on safety, health, sustainability, reliability and performance.
As we look ahead into 2022 and beyond, we will continue to leverage our core competencies as we deepen our client relationships, expand our reputation and bring new talent to the firm.
Overall, we remain optimistic about the strength of Exponent’s unique market position, adaptable business model and strong client relationships, and we are enthusiastic about the new opportunities before us in 2022.
I’ll now turn the call over to Rich to provide more detail on our fourth quarter and fiscal year 2021 results, as well as discuss our outlook for the first quarter and the full year 2022.
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 fourth quarter of 2021, total revenues increased 9.9% to $113.5 million and revenues before reimbursements or net revenues as I will refer to them from here on increased 7.2% to $104.3 million, as compared to the same period in 2020.
Net income for the quarter decreased to $20.4 million or $0.38 per diluted share, as compared to $21.8 million or $0.41 per diluted share in the prior year period. Excluding the tax benefit associated with accounting for share based awards, net income actually increased 5.1% and earnings per diluted share increased $0.02.
In the fourth quarter of 2021, the tax benefit was only $120,000 as compared to $2.6 million or $0.05 per diluted share in the fourth quarter of 2020. Inclusive of the tax benefit Exponent’s consolidated tax rate was 28.9% in the quarter as compared to 18.6% for the same period in 2020.
EBITDA for the quarter increased 6.6% to $30.2 million producing a margin of 28.9% of net revenues as compared to 29.1% in the fourth quarter of 2020. Billable hours in the quarter were 335,000, an increase of 5.4% year-over-year. Utilization in the quarter with 70%, up from 67% in the same period of 2020. Utilization was above expectations as head count growth has been trailing revenue growth.
We added 38 technical full-time equivalents in the fourth quarter. We averaged 921 FTEs in the quarter, which is an increase of 1% over the fourth quarter of 2020 and it’s up 4% sequentially from the third quarter of 2021. We remain focused on adding top talent to our world-class team.
The realized rate increase was approximately 2% for the quarter as compared to a year ago. The fourth quarter’s compensation expense after adjusting for gains and losses in deferred compensation increased 2.9% included in total compensation expense is a gain in deferred compensation of $4.7 million, as compared to a gain of $8.4 million in the same period of 2020.
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 $4 million, which was in line with the prior year period. Other operating expenses in the quarter were up 2.9% to $8.7 million driven primarily by increased activity at our offices as our employees gradually return.
Included in other operating expenses is depreciation expense of $1.5 million for the quarter. D&A expenses were up 191% to $4.7 million for the quarter. The fourth quarter of 2020 included a $1.2 million contract expense related to the reversal of a bad debt reserve for potential pandemic losses. The remaining increase in G&A expenses was primarily due to higher marketing and recruiting activities.
Interest income decreased $197,000 to $12,000 for the quarter, lower interest income is a result of a steep decline in interest rates. Miscellaneous income net of the deferred compensation was approximately $532,000 for the quarter. Moving to our cash flows. During the quarter we generated $54.2 million in cash from operations, and capital expenditures were $1.4 million.
In the fourth quarter, we distributed $10.4 million to shareholders through dividend payments. Turning to the full year results. For the fiscal year 2021, total revenues increased 16.6% to $466.3 million and net revenues increased 14.9% to $434.9 million, as compared to the fiscal year 2020.
Net income for the year increased 22.5% to $101.2 million or a $1.90 per diluted share, as compared to $82.6 million or a $1.55 per diluted share in 2020. The tax benefit associated with accounting for share based awards for 2020 was $10 million or $0.19 per diluted share, as compared to $12.3 million or $0.23 per diluted share in 2020.
Inclusive of the tax benefit for share based awards, Exponent’s consolidated tax rate was 19.6% for the full year as compared to 14.8% in 2020. For the year, EBITDA increased $29.5 to $132.3 million producing a margin of 30.4% of net revenues, which is an increase of 340 basis points as compared to 2020.
Billable hours for the year 2021, we’re $1,405,000, an increase of 10.4% year-over-year. Utilization for the full year was 75.1%, up from 67.1% during fiscal 2020. Utilization for the full year was above expectations as we experience broad-based demand and trailing headcount growth.
Average technical full-time equivalent employees for the year declined 1% to 900, as compared to the average in 2020. At the onset of the coronavirus pandemic, we acted swiftly in the face of uncertainty to align our business to protect profitability. As demand for our services increased we accelerated our recruiting efforts. But there is a delay in onboarding when you are recruiting PhDs directly out of school.
While the job market for engineers and scientists remains highly competitive, we persist in our ability to attract world-class talent. While we experience higher than normal turnover in April through August, we have had nominal activities since. The realized rate increase was approximately 4.5% for the year 2021.
The year-over-year rate benefited from the divestiture of our German entity in April of 2020 and increase machine learning human and human factor studies travel and lab usage as we return to more normal demand. Compensation expense after adjusting for gains and losses and deferred compensation increased 9.2%, included in total compensation expense is a gain in deferred compensation of $14.7 million as compared to a gain of $8.1 million in 2020.
Stock-based compensation expense in 2021 was $19.3 million, which is up 11.5%, compared to 2020. Other operating expenses were up 1.1$ to $32.6 million included in other operating expenses is depreciation expense of $6.5 million for the full year. G&A expenses were up 18.6% to $15.3 million in 2021. The increase in G&A expenses was primarily due to higher marketing and recruiting activities as we are returning to the market.
Interest income decreased approximately $1.6 million to $66,000 for the full year. Lower interest income is the result of a steep decline in interest rates. Miscellaneous income net of deferred compensation was approximately $2.1 million for 2021. Moving to our cash flows during fiscal 2021, we generated $124.6 million in cash from operation and capital expenditures were $6.8 million.
For the full year, we distributed $50.2 million to shareholders through dividend payments and share repurchases. As a fiscal year-end, the company had $297.7 million in cash in short-term investment.
Turning to our outlook for the first quarter and full year 2022. We expect first quarter 2022 revenues before reimbursements to grow in the mid to high single digits, and EBITDA margin to decrease 50 to 125 basis points as compared to the same period in 2021.
For the full year 2022, we expect revenues from before reimbursements to grow in the mid to high single digits and EBITDA margin to decrease 200 to 250 basis points as compared to 2021. We ended 2021 with 919 technical full-time equivalent employees.
During 2022, we expect quarterly sequential FTE growth of 1% to 2%. As a result, we expect year-over-year FTE growth in the first quarter to be 2% to 3%, and the full year to be 4% to 6%.
We are having success in accelerating our recruiting and are pleased that our turnover has normalized. The increased headcount will likely lead to a slightly lower utilization in the second through fourth quarters as compared to the same period in 2021, when we were understaffed.
We expect utilization in the first quarter to be 75% to 77%, as compared to 76% in the same quarter last year. We expect the full year utilization to be 73% to 74% as compared to 75% in 2021. We continue to believe that as we build critical mass in our offices and practices and increase our proactive work, our average utilization will be sustained in the mid 70s.
We expect the 2022 year-over-year realized rate increase to be approximately 3%. For the first quarter of 2022 we expect stock-based compensation to be $7 to $7.3 million. And each of the remaining quarters to be $4.4 million to $4.9 million. For the full year 2022, we expect stock-based compensation to be $19.5 million to $21 million.
For the first quarter, we expect other operating expenses to be $8.2 million to $8.6 million. For the full year we expect other operating expenses to be $34.4 million to $35 million, as we gradually return to our offices.
We believe our office environment provides long-term value as it supports collaboration for our interdisciplinary teams and staff development, which results in higher value for our clients and retention of our employees. D&A expenses will also gradually scale as recruiting, business development and travel activities increase.
For the first quarter of 2022, we expect G&A expenses to be $4.3 million to $4.6 million. For the full year 2022, we expect G&A expenses to be $22.2 million to $22.8 million. These expenses include an in-person managers meeting at the end of September. While this meeting cost approximately $1.5 million, we think it is valuable to bring our team together especially after such a long period of physical separation.
We expect interest income to be approximately $20,000 per quarter. In addition, we anticipate miscellaneous income to be approximately $500,000 per quarter. For 2022, we estimate based on the current stock price that our tax benefit associated with share based awards will be approximately $5.3 million for the first quarter and full year.
As a reminder, we had $10 million of tax benefit from share based awards in 2021. So, the difference will reduce net income by $4.7 million and earnings per diluted share by $0.09 per share. The tax benefit from share based awards is determined based on the change in value of the share based awards between grant and issuance state.
For 2022, we expect our tax rate inclusive of the tax benefit from share based awards to be approximate exclusive, I meant, exclusive of the taxpayers to be 27.5% of 2021. For the first quarter of 2022, we expect our tax rate inclusive of the tax benefit associated with share-based awards to be approximately 11.2%, as compared to a negative 2.4% in the same quarter a year ago.
For the full year of 2022, the tax rate is expected to be 23.4%, as compared to 19.6% in 2021. CapEx for the full year 2022 is expected to be approximately $10 million. We are pleased to have delivered another strong quarter and fiscal year 2021. And we remain confident in our ability to continue to grow profitably.
I will now turn the call back to Catherine for closing remarks.
Thank you, Rich. Exponent has uniquely positioned itself over the past five decades as an industry leader with exceptional talent and a diverse portfolio of offerings. Our fourth quarter and fiscal 2021 results exemplify Exponent’s resilient business model and financial strength even in the face of uncertainty and macroeconomic challenges. Ultimately driving strong profitability and long-term value for our shareholders.
As we set our sights on the year ahead, we remain disciplined in developing our exceptional talent ensuring that we are ahead of the curve and well-positioned in the marketplace to solve the growing list of our clients most complex problems.
Operator, we are now ready for questions.
Thank you. [Operator Instructions]. Our first question today comes from Andrew Nicholas of William Blair.
Hi. Good afternoon. Thanks for taking my questions. My first one is just on the margin guidance, a bunch of different things that you mentioned throughout your prepared remarks in the press release. I just want to ask if there’s any way to kind of walk through some of the puts and takes there. How much is pre-pandemic costs coming back online versus compensation pressures versus — I think you mentioned the slower onboarding of new hires negatively impacting utilization. Is there any way, Rich, that you could kind of piece those pieces back together or anyone that I didn’t mention that are worth noting?
Yes. So, I’ll go ahead and try to put together a few building blocks on that. So, the first thing is that we indicated that we expected utilization to drop anywhere from 110 to 200 basis points. The decline in utilization has about for every 1% drop in utilization that’s about a 50 basis point decline in the margin on that. So if you pick the middle point of the range between 73% and 74% then you’re talking about 150 to 160 basis points just in the middle of that range, I’m sorry, I said 150. It’s 75 to 80 basis point of that decline is based on utilization coming down. So you’re looking at that impact on the margin. Beyond that it is primarily the increased cost is coming back from expenses coming back into the system through as we return to the office and we return out on the road engaging with clients and marketing and bringing recruits in for interviews versus doing everything virtually.
In addition to that as I indicated, we are going to have a manager’s meeting which we haven’t had since 2019, and that will fold back and have an impact as well. So those are the major impacts to what we’re having. Around the rate increase, we believe that, again, that we can — the bill rate or pricing increases are going to be equivalent to what we need to do on the compensation increases in the marketplace and for our staff. So, our expectation is to be able to manage that on a equal basis. So we don’t see that as being what’s having an impact on the margins.
That’s really helpful. I guess and my follow-up, Catherine you mentioned, the court systems gradually improving over the course of 2022 or that was your current expectation? Is there any way to kind of quantify where the court systems are today relative to maybe full capacity? Just trying to get a sense for what that means in terms of kind of a year over year improvement in throughput as that gets better and better to the extent that it’s not already pretty close?
Yes. Thanks Andrew. The reality is that over the course of 2020 and then through 2021 like I said, we continued to see this improvement. To the point where right now, we’re maybe at 90% to 95% to sort of where I would put it for you. We’re not at 50, right? We’re sort of at nine-tenths of the way or greater. I would say to in terms of reflecting a difference if you were to go back to 2019 for example, sort of the last normal full year of activity. With omicron, there was a — there’s been a period of time where we’ve seen a number of delays come back in. So there’s a bit of lumpiness to it still. As we have these waves we could still see more of that. But what we’ve seen in the courts themselves is that they have been consistently trending toward being able to have more in-person trials. They’re figuring it out how to manage with masking and social distancing and with technology and things like that. Such that, if I were going to use my crystal ball when we’re talking to you next year at this time, I think it — I expect it to be relatively normal by then. Now of course, my crystal ball is not perfect. But based on what we’ve seen and just the improvements in what the courts are doing, I think it’s realistic for us to sort of think that way about it.
Great. That’s also very helpful. And then maybe if I could squeeze one more in just kind of going back to the recruiting environment specifically. I understand and Rich you made mention of this that you believe you can pass on compensation increase costs in the form of higher bill rates. But when we’re talking about recruiting specifically, is that is higher initial comp enough to kind of seal the deal when there’s a potential higher picking between a bunch of different options? Is it potentially shifting some sort of balance between cash or salary and stock-based comp? Or what are what are other ways that you can differentiate yourselves versus potential other options for these highly sought after new hires. And maybe how you think about meeting your hiring goals with all those things in mind? Thank you.
Yes. Thanks. I mean, you did a good job of articulating some of the just some of the — just some of the parameters that go into the competitive nature of that job market. What we need to do to close the deal with our new hires is highly variable across our disciplines, and even across our geographies. In electrical engineering and silicon valley, it might be very different than an environmental scientist in the Midwest. What we’re finding is that we have always had a competitive marketplace in those areas where the science and engineering talent is highly sought after. And so, we are finding that we need to differentiate ourselves not only on the financial components of the compensation, which include the base salary, which include the bonus opportunities and things like that. But more importantly, differentiating ourselves with regard to the career path that these consultants have. They are able to come and work for us and get an extraordinary breadth and depth of experience within their discipline that can go across quite a few industries. And a career path in consulting where they from day one are going to be developing and have the opportunity to invest in their professional development and in that career path. And so, that is a tremendous focus for us as we’re bringing on new talent to really differentiate ourselves in that way and capture that group of talented individuals that very much have the fire in the belly around being consultants, as opposed to going into industry and being very focused in a particular area.
So, we are seeing in certain areas certainly that our clients are pushing the envelope on base salaries and other aspects of the compensation, but the good news on that is that we’re able to pass those — that on in the form of pricing to our clients. And so, we’re able to be in a scenario where the increases in our wages and our base salaries are commensurate with the increases in bill rates that we’re able to pass on.
Great. Thanks. Great position to be in. Appreciate it.
[Operator Instructions] Our next question comes from Tobey Sommer of Truist Securities.
Thank you. My first question would be where does the company sit in its portfolio projects with respect to large projects versus the range of what might be considered normal?
Yes. Thanks Tobey. I would — where we were in that portfolio is that we’ve — I think that isn’t a dominating factor at this point in time. While we continue to do, it’s well known that we’re doing a lot of work for Pacific Gas and Electric around their electric utility infrastructure. That work is still remains to be. As we’ve discussed before, 4% to 5% of the portfolio, but it is a very a much more diverse set of projects that we’re doing in that area today of how we’re helping the client from assessing its historical infrastructure to developing a risk models to understand where it should be making its priorities relative to redevelopment as well as power shutdowns and things of that type. And then, it moves all the way forward to our construction project management services that fit into those replacement programs into the future. So it is a lot around — let’s say around that particular area. But what we’re doing is become very diversified versus where we were a few years ago, which was very deep and centered in the investigation of what happened. And you can see now that that has spread out to be both looking back and looking forward in what we’re able to accomplish there.
We do continue to have again a good portfolio of these machine learning and human factor studies. But again in that area the portfolio is very much diversified as well, not only have the projects within a particular client maybe not become as large or dominating where we’ve got a broader portfolio within some of our largest clients, but we’re also diversifying the clients that we’re with. So we feel, let’s say, as compared to where we were a couple of years ago. Right now in the fourth quarter the concentration was more diversified.
Thank you. And then, Catherine, I wanted to revisit something. And I’m going to — I might not get the jargon correct. But in your tenure prior to assuming the CEO role you were initiated a go-to-market strategy that was a little bit different, it was a little more designed around industry groups and sort of a more proactive approach of sharing. Where do we sit in that and I apologize if I did in fact watch [ph] the jargon?
No, no, not at all. It is focused around our proactive offerings as opposed to the legal side of what we do. And so, as we sit right now that proactive portfolio is roughly 50% of the business. And we’re very focused on a number of different industry sectors where the goal is to really define a set of flagship services that we offer in that industry that we can then leverage to both deepen and broaden our client relationships. There’s a lot of work we do in this area around client relationship management and really putting that client relationship at the center of what we do and ensuring that we’re able to, A, penetrate into new target clients, but also B, be able to broaden within our existing clients with new services.
And so, what we’ve seen is that our work in these initiatives is really helping to drive growth on the proactive side of the business, particularly in a time where the litigation side of the business is still recovering from the effects of the coronavirus. The proactive side probably grew in the mid to high 20% this past year. And so, we’re driving that growth through these industry initiatives. Consumer electronics is a focus. Our utilities initiative is a focus, Rich talked a bit about that just now. The life sciences is a focus for that, as well as the advanced vehicle area. Those are four particular areas of focus. And so what we’ve seen is that through these processes that we’ve implemented and the kind of collaboration that we get across practices in the firm is that we’ve been able to deepen our existing client relationships, but also bring in new clients using those flagship services and really working on how we spread the relationship, so within a given client a given client organization we have many sort of sub clients if you will.
We’re working with the safety team. We’re working with the product development team. We’re working with the risk team. We’re working with the quality team, et cetera. And so, I really do believe that our broad marketing efforts along with our client relationship management efforts have helped to really drive growth through these industries on the proactive side of the business.
Thanks. Appreciate that. If I could just follow up on my first question. Has there been any traction broadly in the utility industry for sort of replicating some of the projects that you’ve done with your — with that named utility customer out west?
Yes, there is. This is — these relationships take significant time to build. But there is considerable traction particularly among the investor-owned utilities in California. The state regulatory environment has become more and more — the bar has gone up is the way I would put it with regard to the need for these utilities to quantify the risks associated with their assets. And this is a particular area that has allowed us to penetrate into some additional target utilities. So it’s relatively early days for those, but we continue to gain traction. And as Rich was talking about this idea of diversifying the engagements is a key action for us here. And we’re particularly pleased with some of the work around climate vulnerability that we have been able to do with this cohort of investor-owned utilities. And so, we will we will continue to do this over time. But very good news that we have been able to target and gain traction in a more diverse client base.
As there are no further questions, that now concludes Exponent Inc’s fourth quarter and fiscal year 2021 financial results conference call. We thank you for your participation. You may now disconnect.