EXPONENT INC

Previous wording

There have been no significant changes in our critical accounting estimates during the six months ended July 4, 2025, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Annual Report.

Current wording

There have been no significant changes in our critical accounting estimates during the nine months ended October 3, 2025, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 Annual Report.

Previous wording

Revenues for the second quarter of 2025 increased 1% to $141,962,000 as compared to $140,536,000 during the same period last year. Revenues before reimbursements for the second quarter of 2025 increased slightly to $132,868,000 as compared to $132,434,000 during the same period last year. Our failure analysis expertise drove increased dispute-related activities in the construction, automotive and medical device sectors. Proactive engagements were led by risk management work in the utilities sector, offset by softer demand in chemical regulatory work.

Current wording

Revenues for the third quarter of 2025 increased 8% to $147,120,000 as compared to $136,279,000 during the same period last year. Revenues before reimbursements for the third quarter of 2025 increased 10% to $137,073,000 as compared to $125,085,000 during the same period last year. Increasing demand for dispute-related work drove growth in reactive engagements across the energy, transportation, life sciences and construction sectors. Proactive engagements were led by risk management and asset integrity projects in the utilities sector and regulatory consulting in the chemical sector, offset by lower activity in consumer electronics.

Previous wording

The increase in compensation and related expenses during the second quarter of 2025 was due to a change in the value of assets associated with our deferred compensation plan, an increase in payroll expenses from the impact of our annual salary adjustments and an increase in fringe benefits. During the second quarter of 2025, deferred compensation expense increased by $16,088,000 with a corresponding increase to other income, net, as compared to the same period last year, due to the change in value of assets associated with our deferred compensation plan. This increase consisted of an increase in the value of plan assets of $16,963,000 during the second quarter of 2025 as compared to an increase of $875,000 during the same period last year. During the second quarter of 2025 payroll expenses increased $1,003,000 and fringe benefits increased $809,000 due to the impact of our annual salary increase partially offset by a decrease in technical full-time equivalent employees. We expect our compensation expense, excluding the change in value of deferred compensation plan assets, to increase as we selectively add new talent and adjust compensation to market conditions.

Current wording

The increase in compensation and related expenses during the third quarter of 2025 was due to an increase in payroll expenses, an increase in bonus expense and an increase in fringe benefits. Payroll expense increased by $3,513,000 and fringe benefits increased by $1,117,000 during the third quarter of 2025 due to impact of our annual salary adjustments and an increase in technical full-time equivalent employees. Bonus expense increased $1,604,000 during the third quarter of 2025 due to a corresponding increase to our bonus pool. Included in compensation and related expenses is a gain in the value of assets associated with our deferred compensation plan of $7,005,000 and $7,157,000 for the three months ended October 3, 2025 and September 27, 2024, respectively. The same amount is recorded as a gain in miscellaneous income, net. We expect our compensation expense, excluding the change in value of deferred compensation plan assets, to increase as we selectively add new talent and adjust compensation to market conditions.

Previous wording

Other operating expenses include facilities-related costs, technical materials, computer-related expenses and depreciation and amortization of property, equipment and leasehold improvements. The increase in other operating expenses during the second quarter of 2025 was primarily due to an increase in occupancy expense of $692,000 and an increase in computer-related expenses of $128,000. Our land lease with the State of Arizona was extended on June 19, 2024. This extension resulted in additional non-cash rent expense of approximately $939,000 during the second quarter of 2025. This increased level of rent expense will continue through the extended lease term ending in January of 2043 with adjustments in 2033 and 2038 based on the consumer price index. The increase in computer-related expenses was due to continued investments in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent and make investments in our corporate infrastructure.

Current wording

Other operating expenses include facilities-related costs, technical materials, computer-related expenses and depreciation and amortization of property, equipment and leasehold improvements. The increase in other operating expenses during the third quarter of 2025 was primarily due to an increase in technical materials of $179,000, an increase in information technology related expenses of $170,000 and an increase in depreciation expenses of $143,000. These increases were due to continued investment in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent and make investments in our corporate infrastructure.

Previous wording

Certain operating expenses are excluded from our measure of segment operating income. These expenses include the costs associated with our human resources, legal, finance, information technology, and business development groups; the deferred compensation expense/benefit due to the change in value of assets associated with our deferred compensation plan; stock-based compensation associated with restricted stock unit and stock option awards; and the change in our allowance for contract losses and doubtful accounts.

Current wording

Certain operating expenses are excluded from our measure of segment operating income. These expenses include the costs associated with our human resources, legal, finance, information technology, and business development groups; the deferred compensation expense/benefit due to the change in value of assets associated with our deferred compensation plan; stock-based compensation associated with restricted stock unit and stock option awards; and the change in our allowance for contract losses and doubtful accounts. The increase in corporate operating expenses was due to the costs associated with our company-wide managers meeting during the third quarter of 2025. We did not have any company-wide meetings during the third quarter of 2024.

Previous wording

Other income, net, consists primarily of changes in the value of assets associated with our deferred compensation plan, interest income earned on available cash, cash equivalents and short-term investments, and rental income from leasing space in our Silicon Valley and Natick facilities. The increase in other income, net, was primarily due to a change in the value of assets associated with our deferred compensation plan partially offset by a decrease in rental income. During the second quarter of 2025, deferred compensation expense increased $16,088,000, with a corresponding increase to other income, net, as compared to the same period last year, due to the change in value of assets associated with our deferred compensation plan. This increase consisted of an increase in the value of plan assets of $16,963,000 during the second quarter of 2025 as compared to an increase in the value of plan assets of $875,000 during the same period last year. During the second quarter of 2025, rental income decreased by $641,000 due to the loss of a tenant in our Silicon Valley facility.

Current wording

Other income, net, consists primarily of changes in the value of assets associated with our deferred compensation plan, interest income earned on available cash, cash equivalents and short-term investments, and rental income from leasing space in our Silicon Valley and Natick facilities. The decrease in other income, net, was primarily due to a decrease in rental income and a decrease in interest income partially offset by an increase in a gain on foreign exchange. During the third quarter of 2025, rental income decreased by $516,000 due to the loss of a tenant in our Silicon Valley facility. The decrease in interest income of $247,000 was due to a decrease in interest rates. The increase in the gain on foreign exchange of $451,000 was due to an increase in the value of assets denominated in currencies that are not our functional currency.

Previous wording

Six Months Ended July 4, 2025 compared to Six Months Ended June 28, 2024

Current wording

Nine Months Ended October 3, 2025 compared to Nine Months Ended September 27, 2024

Previous wording

The increase in revenues for our Engineering and other scientific segment was due to an increase in billing rates partially offset by a decrease in billable hours. The increase in revenues was driven by demand for our dispute related services in the construction and automotive sectors. During the first six months of 2025, billable hours for this segment decreased by 5% to 591,000 as compared to 620,000 during the same period last year. Utilization for this segment decreased to 75% during the first six months of 2025 as compared to 77% during the same period last year. Technical full-time equivalent employees in this segment decreased 2% to 759 during the first six months of 2025 as compared to 775 for the same period last year.

Current wording

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billing rates partially offset by a decrease in billable hours. During the first nine months of 2025, billable hours for this segment decreased by 2% to 896,000 as compared to 911,000 during the same period last year. Utilization for this segment decreased to 75% during the first nine months of 2025 as compared to 76% during the same period last year. The increase in revenues was driven by demand for Exponent's risk management and asset integrity management services in the utilities industry and dispute-related services in the energy, automotive and medical device sectors. Technical full-time equivalent employees in this segment decreased slightly to 764 during the first nine months of 2025 as compared to 765 for the same period last year.

Previous wording

The increase in compensation and related expenses during the first six months of 2025 was due to an increase in payroll expense, an increase in stock-based compensation, and an increase in fringe benefits. Payroll expense increased by $1,252,000 and fringe benefits increased by $534,000 during the first six months of 2025 due to the impact of our annual salary adjustments partially offset by the decrease in technical full-time equivalent employees. Stock-based compensation expense increased $759,000 during the first six months of 2025 due to an increase in unvested restricted stock unit grants. We expect our compensation expense, excluding the change in value of deferred compensation plan assets, to increase as we selectively add new talent and adjust compensation to market conditions.

Current wording

The increase in compensation and related expenses during the first nine months of 2025 was due to an increase in payroll expenses, an increase in bonus expense, an increase in fringe benefits and an increase in stock-based compensation. Payroll expense increased by $4,757,000 and fringe benefits increased by $1,652,000 during the first nine months of 2025 due to the impact of our annual salary adjustments. Bonus expense increased by $2,294,000 during the first nine months of 2025 due to a corresponding increase to our bonus pool. Stock-based compensation expense increased by $420,000 during the first nine months of 2025 due to an increase in unvested restricted stock unit grants. Included in compensation and related expenses is a gain in the value of assets associated with our deferred compensation plan of $14,632,000 and $14,299,000 for the first nine months ended October 3, 2025 and September 27, 2024, respectively. The same amount is recorded as a gain in miscellaneous income, net. We expect our compensation expense, excluding the change in value of deferred compensation plan assets, to increase as we selectively add new talent and adjust compensation to market conditions.

Previous wording

Other operating expenses include facilities-related costs, technical materials, computer-related expenses and depreciation and amortization of property, equipment and leasehold improvements. The increase in other operating expenses during the first six months of 2025 was primarily due to an increase in occupancy expense of $1,684,000 and an increase in computer-related expenses of $463,000. Our land lease with the State of Arizona was extended on June 19, 2024. This extension resulted in additional non-cash rent expense of approximately $2,024,000 during the first six months of 2025. This increased level of rent expense will continue through the extended lease term ending in January of 2043 with adjustments in 2033 and 2038 based on the consumer price index. The increase in computer-related expenses was due to continued investments in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent and make investments in our corporate infrastructure.

Current wording

Other operating expenses include facilities-related costs, technical materials, computer-related expenses and depreciation and amortization of property, equipment and leasehold improvements. The increase in other operating expenses during the first nine months of 2025 was primarily due to an increase in occupancy expense of $1,770,000, an increase in computer-related expenses of $634,000 and an increase in depreciation expense of $345,000. Our land lease with the State of Arizona was extended on June 19, 2024. This extension resulted in additional non-cash rent expense of approximately $2,024,000 during the first nine months of 2025. This increased level of rent expense will continue through the extended lease term ending in January of 2043 with adjustments in 2033 and 2038 based on the consumer price index. The increase in information technology related expenses and depreciation expense was due to continued investments in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent and make investments in our corporate infrastructure.

Previous wording

The increase in general and administrative expenses was primarily due to an increase in travel and meals of $318,000 and an increase in personnel expenses of $136,000 partially offset by a decrease in legal fees of $382,000. We expect general and administrative expenses to increase as we selectively add new talent and expand our business development and staff development initiatives.

Current wording

The increase in general and administrative expenses was primarily due to an increase in travel and meals of $2,378,000 partially offset by a decrease in legal fees of $519,000. The increase in travel and meals was due to a company-wide managers' meeting held during the third quarter of 2025. We did not have any company-wide meetings during the first nine months of 2024. We expect general and administrative expenses to increase as we add new talent and expand our business development and staff development initiatives.

Previous wording

The decrease in operating income for our Engineering and other scientific segment during the second quarter of 2025 as compared to the same period last year was due to a decrease in utilization and an increase in other operating expenses associated with the extension of our land lease with the State of Arizona. The decrease in operating income for our Environmental and health segment during the second quarter of 2025 was due to a decrease in utilization.

Current wording

The increase in operating income for our Engineering and Other Scientific segment during the first nine months of 2025 as compared to the same period last year was due to an increase in revenues partially offset by an increase in other operating expenses associated with the extension of our land lease with the State of Arizona. The increase in revenues was primarily due to an increase in billing rates. The increase in operating income for our Environmental and Health segment was also due to an increase in billing rates.

Previous wording

Certain operating expenses are excluded from our measure of segment operating income. These expenses include the costs associated with our human resources, finance, information technology, corporate and business development groups; the deferred compensation expense/benefit due to the change in value of assets associated with our deferred compensation plan; stock-based compensation associated with restricted stock unit and stock option awards; and the change in our allowance for contract losses and doubtful accounts.

Current wording

Certain operating expenses are excluded from our measure of segment operating income. These expenses include the costs associated with our human resources, finance, information technology, corporate and business development groups; the deferred compensation expense/benefit due to the change in value of assets associated with our deferred compensation plan; stock-based compensation associated with restricted stock unit and stock option awards; and the change in our allowance for contract losses and doubtful accounts. The increase in corporate operating

Previous wording

Other income, net, consists primarily of changes in the value of assets associated with our deferred compensation plan, interest income earned on available cash, cash equivalents and short-term investments, and rental income from leasing space in our Silicon Valley and Natick facilities. The decrease in other income, net, was primarily due to a decrease in rental income partially offset by a change in the value of assets associated with our deferred compensation plan. During the first six months of 2025, rental income decreased by $1,293,000 due to the loss of a tenant in our Silicon Valley facility. During the first six months of 2025, deferred compensation expense increased $485,000 with a corresponding increase to other income, net, as compared to the same period last year, due to the change in value of assets associated with our deferred compensation plan. This increase consisted of increase in the value of plan assets of $7,627,000 during the first six months of 2025 as compared to an increase in the value of plan assets of $7,142,000 during the same period last year.

Current wording

Other income, net, consists primarily of changes in the value of assets associated with our deferred compensation plan, interest income earned on available cash, cash equivalents and short-term investments, and rental income from leasing space in our Silicon Valley and Natick facilities. The decrease in other income, net, was primarily due to a decrease in rental income partially offset by a decrease in a loss on foreign exchange. During the first nine months of 2025, rental income decreased by $1,809,000 due to the loss of a tenant in our Silicon Valley facility. The decrease in the loss on foreign exchange of $380,000 was due to a change in the value of assets denominated in currencies that are not our functional currency.

Previous wording

During the first six months of 2025, we realized a negative tax impact associated with stock-based awards of $485,000 as compared to a positive tax benefit of $1,672,000 during the same period last year. The change in the tax impact associated with stock-based awards was due to the change in the difference of the value of our common stock between the grant date and the release date for the restricted stock units released during the first six months of 2025 as compared to the same period last year. Excluding the tax impact, the effective tax rate would have been 28.0% during the first six months of 2025 and 2024.

Current wording

During the first nine months of 2025, we realized a negative tax impact associated with stock-based awards of $354,000 as compared to a positive tax benefit of $2,204,000 during the same period last year. The change in the tax impact associated with stock-based awards was due to the change in the difference of the value of our common stock between the grant date and the release date for the restricted stock units released during the first nine months of 2025 as compared to the same period last year. Excluding the impact of the excess tax benefit, the effective tax rate would have been 27.9% during the first nine months of 2025 as compared to 28.3% during the same period last year.

Previous wording

We financed our business during the first six months of 2025 through available cash. As of July 4, 2025, our cash and cash equivalents were $231,801,000 as compared to $258,901,000 at January 3, 2025.

Current wording

We financed our business during the first nine months of 2025 through available cash. As of October 3, 2025, our cash and cash equivalents were $207,380,000 as compared to $258,901,000 at January 3, 2025.

Previous wording

The increase in net cash used in investing activities during the first six months of 2025, as compared to the same period last year, was due to an increase in capital expenditures. The increase in capital expenditures was due to an increase in investment in our corporate infrastructure.

Current wording

The increase in net cash used in investing activities during the first nine months of 2025, as compared to the same period last year, was due to an increase in capital expenditures. The increase in capital expenditures was due to an increase in investment in our corporate infrastructure.

Previous wording

The increase in net cash used in financing activities during the first six months of 2025, as compared to the same period last year was due to an increase in repurchases of our common stock.

Current wording

The increase in net cash used in financing activities during the first nine months of 2025, as compared to the same period last year was due to an increase in repurchases of our common stock.

Previous wording

We maintain a nonqualified deferred compensation plan for the benefit of a select group of highly compensated employees. Vested amounts due under the plan of $117,555,000 were recorded as a long-term liability on our unaudited condensed consolidated balance sheet at July 4, 2025. Vested amounts due under the plan of $17,386,000 were recorded as a current liability on our unaudited condensed consolidated balance sheet at July 4, 2025. Our assets that are earmarked to pay benefits under the plan are held in a rabbi trust and are subject to the claims of our creditors. As of July 4, 2025, invested amounts under the plan of $114,929,000 were recorded as a long-term asset on our unaudited condensed consolidated balance sheet. As of July 4, 2025, invested amounts under the plan of $17,386,000 were recorded as a current asset on our unaudited condensed consolidated balance sheet.

Current wording

We maintain a nonqualified deferred compensation plan for the benefit of a select group of highly compensated employees. Vested amounts due under the plan of $123,124,000 were recorded as a long-term liability on our unaudited condensed consolidated balance sheet at October 3, 2025. Vested amounts due under the plan of $19,158,000 were recorded as a current liability on our unaudited condensed consolidated balance sheet at October 3, 2025. Our assets that are earmarked to pay benefits under the plan are held in a rabbi trust and are subject to the claims of our creditors. As of October 3, 2025, invested amounts under the plan of $121,437,000 were recorded as a long-term asset on our unaudited condensed consolidated balance sheet. As of October 3, 2025, invested amounts under the plan of $19,252,000 were recorded as a current asset on our unaudited condensed consolidated balance sheet.

Previous wording

The following table is a reconciliation of EBITDA and EBITDAS to the most comparable GAAP measure, net income, for the three and six months ended July 4, 2025 and June 28, 2024:

Current wording

The following table is a reconciliation of EBITDA and EBITDAS to the most comparable GAAP measure, net income, for the three and nine months ended October 3, 2025 and September 27, 2024:

Previous wording

The decrease in EBITDA as a percentage of revenues before reimbursements during the three and six months ended July 4, 2025 as compared to the same periods last year was primarily due to a decrease in utilization, an increase in payroll expense from annual salary adjustments, an increase in occupancy expense associated with the extension of our land lease with the State of Arizona and a decrease in rental income due to the loss of a tenant in our Silicon Valley facility.

Current wording

The decrease in EBITDA as a percentage of revenues before reimbursements during the first nine months of 2025 as compared to the same period last year was primarily due to an increase in payroll expense from annual salary adjustments, an increase in occupancy expense associated with the extension of our land lease with the State of Arizona and an increase in general and administrative expenses driven by higher travel and meals related to the company-wide managers' meeting held during the third quarter of 2025. We did not have any company-wide meetings during the first nine months of 2024.