Good day, and welcome to Exponent's Third Quarter Fiscal Year 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Joni Konstantelos of Investor Relations. Please go ahead. Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us on Exponent's Third Quarter 2023 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. 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 third quarter 2023 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. During the third quarter, we once again delivered broad-based revenue growth and earnings, with our diversified portfolio of services supporting growth across nearly all industries we serve. The deliberate investments we've made to expand capabilities and stay ahead of the pace of innovation continue to pay off. Our ability to anticipate client needs throughout the product or asset or technology lifecycle is and will continue to be a significant differentiator for Exponent. Of course, uncertainty exists in the broader markets we serve, but our exceptional team of integrated experts and our expansive capabilities provide us the ability to remain nimble and adapt our business to align with these dynamic market trends. Turning to our third quarter in a bit more detail, growth in the quarter was driven by continued strong demand for our reactive services. Our proactive engagements were driven by increased demand in the chemicals and life sciences sectors, offset by continued moderation in the consumer electronics sector. Overall, I am pleased with the strength we are seeing across the majority of the business. Within our reactive services, we continue to see robust demand for domestic and international dispute-related offerings involving large capital projects in the energy, utilities, and transportation sectors, spanning various geographic regions. Additionally, consumer and automotive product liability and recall-related work increased in the quarter. Our proactive engagements were driven by increased demand for regulatory consulting work in the chemicals industry and engagements in the life sciences sector. This was offset by ongoing moderation in the consumer electronics industry, due in part to the timing of product lifecycles as well as ongoing macroeconomic headwinds. As a result, we saw declines in data collection and human subject research engagements, as well as product development consulting. While we do expect this moderation to continue, we are optimistic about the long-term market drivers in this sector, and we remain well positioned to support our clients as these challenges begin to abate in 2024. With regard to our segments, Exponent's engineering and other scientific segment represented 83% of our net revenues in the third quarter, increasing 8% in the third quarter and 10% for the first three quarters compared to the prior year. Growth in the quarter was driven by strong demand for Exponent services across the transportation, energy, and construction sectors. Exponent's environmental and health segment represented 17% of our net revenues in the third quarter, increasing 13% in the third quarter and 7% for the first three quarters compared to the prior year. Evolving regulatory requirements drove increased safety-related engagements, evaluating the impacts of chemicals on human health and the environment, and we also saw increased activity in the life sciences sector. As we close out the year, we remain focused on excellence in execution and expanding our differentiated capabilities to meet the dynamic needs of our clients. The investments I mentioned earlier will continue to be a priority to drive organic growth and development within Exponent and to foster the essential trust our clients place in our team of experts to address their most complex needs. Further, managing resources in line with the growth of the business remains top of mind. To that end, as we expected, full-time equivalent employees in the third quarter decreased 2.5% compared to the second quarter, as we continue to strategically align our resources with demand across the business. We are taking a two-pronged approach to ensuring our headcount is aligned with not only current demand, but also with the longer-term demand and opportunities we are seeing. First, we are focused on recruiting in areas of the business where resources are constrained, but where we see opportunity to meet current and future market demands. Second, we continue to focus on performance management to ensure that our retained consultants are on a strong development path that will contribute to the future growth of the firm. In summary, Exponent continues to position itself at the forefront of innovation as a trusted advisor to our clients across the product lifecycle. Market drivers, including the increasing complexities around safety, health, and the environment, remain strong and continue to drive opportunity across our business. We remain focused on expanding our capabilities, strengthening our relationships, and driving profitable growth and value for our shareholders. I'll now turn the call over to Rich to provide more detail on our third quarter results, as well as discuss our outlook for the fourth quarter and the full year 2023. 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 third quarter of 2023, total revenues increased 4.8% to $133.3 million, and revenues before reimbursements or net revenues, as I will refer to them from here on, increased 8.5% to $125 million, as compared to the same period of 2022. This includes a decline of approximately $8 million in our consumer electronics business, which created a 6%-7% headwind as compared to the third quarter of 2022. Net income for the third quarter was $24.5 million, or $0.48 per diluted share, as compared to $24.4 million or $0.47 per diluted share in the prior year period. Exponent's consolidated tax rate was 27.9% in the third quarter, as compared to 27.0% for the same period in 2022. EBITDA for the quarter was $34.5 million, producing a margin of 27.6% of net revenues, as compared to $34.6 million or 30% of net revenues in the same period of 2022. This year-over-year decline in margins was anticipated as expenses normalized post-pandemic, and utilization was lower due to the growth in headcount. Billable hours in the third quarter were approximately 380,000, an increase of 4.1% year-over-year, which is significant considering the headwinds in electronics. The average technical full-time equivalent employees in the third quarter were 1,050, which is an increase of 9.6% as compared to one year ago. This was the result of successful recruiting efforts in the second half of 2022, coupled with improved retention in 2023. As Catherine mentioned, full-time equivalent employees decreased 2.5% compared to the second quarter of 2023, reflecting our progress on strategically aligning our resources with the current and long-term demand opportunities. Utilization in the third quarter was 70%, down from 73% in the same period of 2022. The realized rate increase was approximately 4.4% for the third quarter as compared to the same period a year ago. In the third quarter, after adjusting for gains and losses and in and deferred compensation expense, compensation expense increased 13.4%. Included in total compensation expense is a loss in deferred compensation of $2.8 million, as compared to a loss of $4.9 million in the third quarter of 2022. As a reminder, gains and losses in deferred compensation are offset to miscellaneous income and have no impact on the bottom line. Stock-based compensation expense in the third quarter was $4.9 million, as compared to $4.6 million in the prior year period. Other operating expenses in the third quarter were up 24.7% to $11 million, driven primarily by increased employee engagement at our offices. Included in other operating expenses is depreciation and amortization expense of $2.4 million for the third quarter. G&A expenses declined 10.6% to $6 million for the third quarter. This decrease was due to a reduction in the use of outsourced personnel and a smaller annual company meeting. Interest income increased to $1.9 million for the third quarter, driven by an increase in interest rates. Miscellaneous expenses, excluding deferred compensation loss, was approximately $1 million. During the quarter, capital expenditures were $3.3 million. We distributed $13.2 million to shareholders through dividend payments and repurchased $17 million in common stock. We ended the third quarter with $137.1 million in cash and cash equivalents. Turning to our outlook. For the fourth quarter of 2023, as compared to one year prior, we expect revenues before reimbursements to grow in the middle single digits, and EBITDA margin to be 26%-27% of revenue before reimbursements. For the full year of 2023, as compared to one year prior, we expect revenue before reimbursements to grow in the high single digits, and EBITDA margin to be 27.4%-27.8% of revenues before reimbursements. This assumes approximately the same headwinds of 6%-7% from consumer electronics business in the fourth quarter as we experienced in the third quarter. The full year margins remain at or above pre-pandemic levels. As Catherine mentioned, we are taking actionable steps to strategically align our resources with the current and long-term demand trends within our business through targeted recruiting and ongoing performance management. As a result, we expect our average technical full-time equivalent employees to decline sequentially 2% in the fourth quarter. We expect utilization in the fourth quarter to be 66%-68%, as compared to 69% in the same quarter last year. As a reminder, utilisation is seasonally lower in the fourth quarter due to more holidays and vacations compared to other quarters. Our expectations for full year utilization is in the range of 69%-69.5%, as compared to 73.8% in 2022. We still believe our long-term target of sustained mid-seventies utilization is achievable as we continue to strategically manage headcount and balance utilization based on market demands. We expect the 2023 year-over-year realized rate increase to be 4.75%-5.25%. For the fourth quarter, we expect stock-based compensation to be $4.5 million-$5 million. For the full year, we expect stock-based compensation to be $21.5-$22 million. For the fourth quarter, we expect other operating expenses to be $11.2-$11.7 million. For the full year, we expect other operating expenses to be $42-$42.5 million, as in-office activities continue to pick up. For the fourth quarter of 2023, we expect G&A expenses to be $6.6-$7 million. For the full year, we expect G&A expenses to be $25.1-$25.5 million. We expect interest income to be approximately $1.8 million for the fourth quarter. In addition, we expect miscellaneous income to be approximately $750,000 in the fourth quarter. For the remainder of 2023, we do not anticipate any additional tax benefit from share-based awards. So the year-over-year tax benefit associated with share-based awards are expected to be $2.4 million lower than they were in 2022, which is a $0.05 per diluted share impact to EPS. For the fourth quarter 2023, we expect our tax rate to be approximately 28.2%, as compared to 26.2% in the same quarter a year ago. For the full year of 2023, the tax rate, inclusive of the tax benefit from share-based awards, is expected to be 25.7%, as compared to 22.6% in 2022. In closing, we continue to be confident in the strength of the business and our ability to drive further profitable growth. I will now turn the call back to Catherine for closing remarks. Thank you, Rich. For many years, Exponent has been a trusted advisor in supporting our clients throughout the product lifecycle. As the complexities of innovation create new challenges, Exponent will leverage our world-class team of experts and diversified services portfolio to guide our clients through the dynamic changes in their industries. We remain confident in our ability to drive long-term profitability and value for our shareholders. Operator, we are now ready for questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Tobey Sommer from Truist. Please go ahead. Thank you. What sort of run rate do you think that the company may be on in terms of billable headcount growth as you exit the fourth quarter into next year? Yeah, I anticipate that we will end the year with a headcount that puts us right around, you know, give or take, around 1,025, is where we'll end the year at. I would expect that hopefully that puts us in a good position, you know, to be able to grow throughout 2024. You know, we are still in our planning phase. We're sort of in the middle of that part, where our business units are working on their 2024 plans, and, you know, the executive team will be meeting with each of those business units later on this quarter. Our expectations is based on the demand environment that we have across a number of our industries that will set us up in a good position to be able to really grow in those areas where the demand is increasing. Thanks. Catherine, the company doesn't often miss expectations. I was wondering if you could describe the changes in demand throughout the quarter, whether it was just sort of a bit at a time in each of the months, and into perhaps October as well, or was there sort of an episode or a month at which many things changed and then sort of levelled off from there? Yeah, thanks, Tobey. You know, it's important to sort of look at this from a portfolio perspective. When I do that, you know, we're very much focused in terms of the headwinds in the consumer electronic sector, as Rich described. Even more granularly, you know, around some of that human subject type of work that we've been doing around data collection, machine learning, and things like that. It's very much related to the product life cycle timing that we've been seeing, you know, and also by some of those macroeconomic headwinds. I think the, you know, as I look across the business, what I'm seeing is a portfolio that is performing well and as designed, because what we've done is really design a portfolio that is diverse across industries, right? We're seeing growth in just about every one of those other industries, whether that's transportation, which is very strong, you know, whether that's the life sciences side, whether that's the energy side or the construction side. You know, and, you know, being up 8.5% despite the headwinds, you know, I think really exemplifies the strength of that portfolio. And, you know, being able to, you know, deliver profitability that's, you know, at or above where we were pre-pandemic without, you know, with all of those expenses layered back in. You know, it is a focused area where there's some, some moderation. And, you know, we expect that to continue in Q4, but we also are seeing some nice activity in the pipeline. You know, we've got requests coming in for scopes of work and proposals, and so that pipeline is filling. And that's why we feel like, you know, these headwinds are going to start to abate, you know, once we hit Q1 of 2024, and then progress even further into 2024. Yeah, and Tobey, I'd just add a little bit of granularity onto those numbers. I, you know, as I mentioned there, we had about an $8 million headwind. I think we thought that that would probably be, you know, closer to $6 million in July, when we put together the quarter. And in addition to that, we thought that would be slightly less, again, in the fourth quarter. Instead of holding at that level, we, based on what we understood of timing of some projects coming in, we expected those projects to start in Q4, that are now going to come in in the first quarter, at least that's what we expect now. So, those, you know, that provided that additional sort of headwind in the fourth quarter. Thanks. Thanks for that. And if I could follow up on what you said about sort of visibility into new projects as you go into 2024. How i f you could describe how much visibility and how much insight you have into customer planning and sort of looking out over the horizon, to the extent your customers involve you in that, to just kind of give us a sense for how you can construct a view for 2024 in that consumer electronics area that did demonstrate a little bit of softness. Yeah, and look, I mean, across the business, Tobey, there, there's quite a bit of variability in that. I mean, you can imagine the reactive work that we do has, you know, a lot less visibility. You know, but even on the proactive side, you know, that sort of product development consulting can often be driven by things like early field failures, for example. And so there is a, you know, there's a piece of that, that the client is not necessarily able to foresee as they're moving into their product launch, let's say. So, you know, that can limit our ability to sort of see what that pipeline looks like. And that, you know, even on the machine learning and the human data collection side, again, they are often, you know, they're iterating in that product life cycle based on aspects of that, that they may or may not be able to visualize themselves, right? I think what I'm really trying to say is that they're, you know, we do the best we can to sort of understand where the client is heading, and of course, we're in dialogue with them, but there is an element of the type of work that we do that is driven, you know, through some level of uncertainty. Understood. Switching gears, I just have two more questions, and I'll get back in the queue. In your business, could you talk to the PFAS opportunity and what you see there? I'm curious what the composition of your project book looks like relative to large projects. A question that I often ask about on these calls to assess whether there's sort of upside large project risk or represents a neutral or downside risk. Thank you. Yeah, thanks, Tobey. And, maybe I'll cover the PFAS, and then I can let Rich cover the large project piece. So, you know, we absolutely are continuing to see increased activity around forever chemicals. You know, we talked about PFAS, these perfluorinated substances. And, you know, it kind of starts at the original, you know, the original chemical manufacturers. But then what we're seeing is that the issues are cascading down into the supply chain. So, you know, these chemicals are used in consumer products, in clothing, in food packaging, in, you know, in various other applications, you know, in carpeting and Teflon pans, and, you know, you name it, it's there. And so what we're seeing is really that cascade down into that, you know, into that supply chain, and we're seeing it in the reactive sense around the litigation environment. So what is the impact on the environment? We're seeing it in the regulatory arena when we talk about that type of work in the chemicals industry. And we're also seeing it more proactively, even earlier in the product life cycle, when you think about product stewardship. Clients who need to evaluate potential substitutions for PFAS in their products, and they're looking at those sorts of things, and we're seeing those engagements. So, definitely a great opportunity to bring that interdisciplinary team together of our health scientists, our environmental scientists, our exposure chemists, and our materials scientists, to really help clients in that area. Yeah, Tobey, in relation to the large projects, we don't have any projects today that, you know, historically, we've talked about large projects when they've been in that 4%-5% range. And really, our portfolio in this past quarter has been made up of projects that are, you know, 2% or less in what we're doing. So that fits into the normal portfolio. Some of those will, you know, they're part of a litigation matter, and they'll end in the quarter, and something else will grow up to that level, or a couple projects will replace that. But it's more of a much more of a normal portfolio of projects at this point in time. Thank you very much. The next question comes from Josh Chan from UBS. Please go ahead. Hi, good afternoon, Catherine and Rich. Thanks for giving the color on the consumer electronics impact. I guess conceptually, you know, if you did 8.5% growth in Q3 with the $8 million headwind, and then I guess with the same amount of headwind, you're now expecting mid-single-digit growth in Q4. So is something else outside of consumer electronics slowing? Maybe could you talk about the demand outside of that sector, I guess? Yeah. Maybe I'll start off, and Catherine can fill in. Really, you know, the difference, let's say there of pick your midpoint on that, of a three-point difference is really a combination of, you know, you know, where the business was last year in the fourth quarter as what that level of hurdle was, which was pretty strong, that the business was flowing at that time, and just the mix. I mean, that last year that headcount was very much ramping in the fourth quarter, that utilization was holding together and extremely strong. So, you know, overall, I'd say we're not seeing any material difference in other parts of the business. But Catherine, maybe you wanna double-click on that. Yeah. Yeah, no, thanks, Rich, and thanks, Josh, for that question. You know, look, there's again, I'll refer to the portfolio. You know, we have ebbs and flows in that when we go out and we, you know, we ask our folks about what they're seeing, you know, what's the dispute landscape and what are the kinds of projects either, you know, flowing off or coming on, you know, and when we do that, and we compare to the fourth quarter of last year, you know, we sort of come out where we are. But when we look broadly, just in terms of the business and what's strong, I mean, transportation is a great example of an area that is very robust. When we think about the litigation around advanced driver assistance, we're looking at inquiries we're getting around electric vehicles. You know, we look at what's going on in life sciences, we look at our risk work in utilities. You know, we're generally I'm feeling good about where the portfolio is over the long term. You know, we have to go with the ebbs and flows, sort of in that quarter-to-quarter basis. Okay, that's, that's helpful. Thank you. And then on the staffing levels, given the little bit slower demand than expected, do you still expect to achieve this back to normal or desired utilization levels around the start of the year, next year? Or does that timeline get pushed out a little bit? Look, I think that, as we've made points here today, our objective is to bring our headcount in line with the demand in the environment, and as such, definitely begin to see an improvement in the utilisation. You know, we're not complete with our plan and ready to sort of give guidance around that level of granularity as it relates to the first quarter or next year. Very much our focus is to see our utilisation improve in 2024. Great. Thank you both for your time. The next question comes from Andrew Nicholas, from William Blair. Please go ahead. Hi, good afternoon. Thanks for taking my questions. I want to take another shot at the consumer products commentary and maybe more so try to quantify which piece of that business. I think in your K, you disclose how much of revenue is tied to consumer products. Is this relatively widespread within what I think was kind of the 31% of mix number, or is there a slice of this that's down pretty drastically? Just trying to kind of piece together all the moving parts here, if you could help me there. Yeah. So, it is focused primarily. It's focused on the consumer electronic side. We're not seeing a decline in the more general consumer products areas. So it's focused there. It's predominantly in, or almost solely in the data collection, human subject study area. So it's very much around that, which and it is primarily focused around where the clients are in that product life cycle. But clearly, there's been some impact from what clients have been going through organizationally in deciding which projects to continue and how to staff things and manage costs in the market turn. But this is consumer electronics, the majority of it is in the data collection user study area, and primarily about where they are in the product life cycle. Okay. Thanks, Rich. And then maybe for my follow-up on margin. Can you help me bridge the gap in terms of kind of the revenue guide down versus the margin guide down? It looks like, you know, you're still kind of high single digit expectation for full year and 2023 on the top line, which I realize that's below what you were at before at the midpoint, but still within that full year range, and yet, you know, guidance for margins is below the prior range, if I'm not mistaken. Is there any other kind of outsized expenses that have come through since you last spoke with us, or anything else to call out? Or is it just a function of the fact that you're kind of hanging in there with, you know, fixed costs and people in the consumer products business, the expectation that that comes back around at some point next year? Yeah. So look, it is, it's almost, it's all driven by that, you know, being a few million dollars less in the revenue line. You know, we are, we're hitting on about where we expected the level of staffing to be. So we had indicated where we thought we would make some adjustments in that and did it. The fact that we have slightly lower revenues has led to slightly lower utilization. And, you know, the leverage you get out of that is quite high. So it is really just about, as I indicated, you know, if you take a look at this, at the last quarter, if, you know, if that $8 million was only $6 million-$6.5 million, which is sort of what I would've expected in this third quarter, you know, probably $1 million of that would've flowed to the margin line and you would've, you know, you would've been on the upper half of our EBITDA margin. The same goes for the fourth quarter. You know, we are expecting probably about $3 million more of revenues in that quarter, would've ended up with us $3 million or $4 million. That would've put us up in the high single digits, let's say. had us hitting that range, and as such, you would've ended up seeing, you know, $2 million more in EBITDA and, in return, gotten yourself, you know, another 50-80 basis points. Makes sense. Thanks, Rich. Thanks, Catherine. This concludes our question and answer session, and the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.