EXPONENT INC

Previous wording

Exponent is an engineering and scientific consulting firm providing solutions to complex problems. Exponent's interdisciplinary organization of scientists, physicians, engineers, and business consultants draws from more than 90 technical disciplines to solve the most pressing and complicated challenges facing stakeholders today. The firm leverages over 50 years of experience in analyzing accidents and failures to advise clients as they innovate their technologically complex products and processes, ensure the safety and health of their users, and address the challenges of sustainability.

Current wording

Exponent is an engineering and scientific consulting firm providing solutions to complex problems. Exponent's interdisciplinary organization of scientists, physicians, engineers, and business consultants draws from more than 90 technical disciplines to solve the most pressing and complicated challenges facing stakeholders today. The firm leverages over 55 years of experience in analyzing accidents and failures to advise clients as they innovate their technologically complex products and processes, ensure the safety and health of their users, and address the challenges of sustainability.

Previous wording

Net income increased 9% to $109,002,000 during 2024 as compared to $100,339,000 during 2023. Diluted earnings per share increased to $2.11 for 2024 as compared to $1.94 for 2023. The increase in profitability was due to our continued efforts to better align resources with demand. Net income and diluted earnings per share for 2024 and 2023 benefited from the excess tax benefit associated with stock-based awards. The excess tax benefit associated with stock-based awards decreased to $2,793,000 during 2024 as compared to $3,620,000 during 2023. The decrease in the excess tax benefit was due to a smaller increase in value of our common stock between the grant date and the release date for the restricted stock units released during 2024 as compared to 2023.

Current wording

Net income was $106,009,000 during 2025 as compared to $109,002,000 during 2024. Diluted earnings per share decreased to $2.07 for 2025 as compared to $2.11 for 2024. The decrease in profitability was due to an increase in other operating expenses associated with the extension of our land lease with the State of Arizona in June of 2024, an increase in general and administrative expenses driven by higher travel and meals related to a company-wide managers’ meeting, and a decrease in the tax benefit associated with stock-based awards. During 2025, we realized a negative tax impact associated with stock-based awards of $254,000 as compared to a positive tax benefit of $2,793,000 during 2024. 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 2025 as compared to 2024.

Previous wording

We remain focused on building our world-class engineering and scientific team to position Exponent at the forefront of innovation and meet the ever-changing needs of our clients and the market. We also remain focused on capitalizing on emerging growth areas, managing other operating expenses, generating cash from operations, maintaining a strong balance sheet and undertaking activities such as share repurchases and dividends to enhance shareholder value.

Current wording

We remain focused on building our world-class engineering and scientific team to position Exponent at the forefront of innovation and meet the ever-changing needs of our clients and the market. We also remain focused on capitalizing on emerging growth areas, managing other operating expenses, generating cash from operations, maintaining a strong balance sheet and undertaking activities such as share repurchases and dividends to enhance stockholder value.

Previous wording

We operate on a 52-53 week fiscal year with each year ending on the Friday closest to December 31 st. Fiscal period 2024 included 53 weeks of activity and ended on January 3, 2025. Fiscal period 2023 included 52 weeks of activity and ended on December 29, 2023. Fiscal period 2022 included 52 weeks of activity and ended on December 30, 2022. Fiscal period 2025 is 52 weeks and will end on January 2, 2026.

Current wording

We operate on a 52-53 week fiscal year with each year ending on the Friday closest to December 31 st. Fiscal period 2025 included 52 weeks of activity and ended on January 2, 2026. Fiscal period 2024 included 53 weeks of activity and ended on January 3, 2025. Fiscal period 2023 included 52 weeks of activity and ended on December 29, 2023. Fiscal period 2026 is 52 weeks and will end on January 1, 2027.

Previous wording

FISCAL YEARS ENDED January 3, 2025 ANDDecember 29, 2023

Current wording

FISCAL YEARS ENDED January 2, 2026 ANDJanuary 3, 2025

Previous wording

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billing rates and an increase in billable hours. Growth in this segment during 2024 was primary driven by demand for our services across the consumer products and utilities industries. In the consumer electronics sector we advised clients on projects related to digital health and wearables, such as advanced sensors in health applications and engagements in augmented and virtual reality. During 2024, billable hours for this segment increased by 1% to 1,199,000 as compared to 1,188,000 during 2023. Utilization for this segment increased to 75% for 2024 as compared to 70% for 2023 due to our continued efforts to align resources with demand. Technical full-time equivalent employees in this segment decreased 7% to 759 during 2024 as compared to 818 for 2023.

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. Growth in this segment during 2025 was primary driven by demand for our risk management and asset integrity management services in the utilities industry and dispute-related services in the energy, automotive and medical device sectors. During 2025, billable hours for this segment decreased by 1% to 1,188,000 as compared to 1,199,000 during 2024. Utilization for this segment decreased to 74% for 2025 as compared to 75% for 2024. Technical full-time equivalent employees in this segment increased 2% to 771 during 2025 as compared to 759 for 2024.

Previous wording

The decrease in revenues from our Environmental and Health segment was due to a decrease in billable hours partially offset by an increase in billing rates. During 2024, billable hours for this segment decreased by 4% to 296,000 as compared to 307,000 during 2023. The decrease in billable hours was related to headwinds in the chemical and life sciences sectors. Utilization for this segment increased to 67% for 2024 as compared to 64% for 2023 due to our continued efforts to align resources with demand. Technical full-time equivalents decreased 9% to 208 during 2024 as compared to 229 for 2023.

Current wording

The decrease in revenues from our Environmental and Health segment was due to a decrease in billable hours partially offset by an increase in billing rates. The decrease in billable hours was due to a lower level of activity for our regulatory services in the chemical industry. During 2025, billable hours for this segment decreased by 5% to 280,000 as compared to 296,000 during 2024. Utilization for this segment decreased to 66% for 2025 as compared to 67% for 2024. Technical full-time equivalents decreased 3% to 202 during 2025 as compared to 208 for 2024.

Previous wording

The increase in compensation and related expenses during 2024 was due an increase in payroll expense, an increase in bonus expense and an increase in stock-based compensation. During 2024, payroll expense increased $3,771,000 due to the impact of our annual salary increase partially offset by a decrease in technical full-time equivalent employees. During 2024, bonus expense increased by $5,096,000 due to a corresponding increase in our bonus pool. Stock-based compensation increased $1,150,000 during 2024 due to an increase in unvested restricted stock unit grants. We expect 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 2025 was due to an increase in payroll expense, an increase in bonus expense, an increase in fringe benefits and a change in the value of assets associated with our deferred compensation plan. During 2025, payroll expense increased $4,866,000 and fringe benefits increased by $1,834,000 due to the impact of our annual salary increase and an increase in technical full-time equivalent employees. During 2025, bonus expense increased by $2,202,000 due to a corresponding increase in our bonus pool which is 33% of income before income taxes, interest income, bonus expense, and stock-based compensation. During 2025 deferred compensation expense increased $2,435,000 with a corresponding increase to other income, net as compared to 2024 due to a change in value of assets associated with our deferred compensation plan. This increase consisted of an increase in the value of plan assets of $17,363,000 during 2025 as compared to an increase in value of plan assets of $14,928,000 during 2024. We expect 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 was primarily due to an increase in occupancy expense of $3,437,000, an increase in information technology related expenses of $839,000 and an increase in depreciation expense of $773,000. 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 $2,316,000 during 2024. The remainder of the increase in occupancy expense was due to investments in our office and laboratory facilities. The increases in depreciation and information technology related expenses were due to continued investment in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent and continue to 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 was primarily due to an increase in occupancy expense of $1,552,000, an increase in computer-related expenses of $876,000 and an increase in technical materials of $454,000. The increase in occupancy expense was due to the extension of our land lease with the state of Arizona in June of 2024. The increases in computer-related expenses and technical materials were due to continued investment in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent and continue to make investments in our corporate infrastructure.

Previous wording

The amount of reimbursable expenses will vary from year to year depending on the nature of our projects. The increase in reimbursable expenses as compared to 2023 was due to an increase in proactive projects for the consumer electronics sector.

Current wording

The amount of reimbursable expenses will vary from year to year depending on the nature of our projects. The increase in reimbursable expenses as compared to 2024 was due to an increase in reimbursable expenses associated with user research projects.

Previous wording

The decrease in general and administrative expenses during 2024 was primarily due to a decrease in outside consulting expenses of $1,304,000, a decrease in travel and meals of $844,000 and a decrease in personnel expenses of $673,000. Outside consulting decreased primarily due to activity associated with content creation for our external website during 2023. The decrease in travel and meals was due to the decrease in technical full-time equivalent employees and a firm-wide principals' meeting which was held in 2023.We did not have any firm-wide meetings during 2024. The decrease in personnel expenses was due to lower relocation and recruiting costs. We expect general and administrative expenses to increase as we expand our business development and staff development initiatives.

Current wording

The increase in general and administrative expenses during 2025 was primarily due to an increase in travel and meals of $2,627,000. The increase in travel and meals was due to a company-wide managers' meeting held during 2025. We did not have any company-wide meetings during 2024. We expect general and administrative expenses to increase as we expand our business development and staff development initiatives.

Previous wording

The increase in operating income for our Engineering and Other Scientific segment during 2024 as compared to 2023 was due to an increase in revenues and an increase in utilization. The increase in revenues was due to an increase in billing rates and an increase in billable hours driven by demand for our services across the consumer products and utilities industries. The increase in utilization was due to our efforts to align resources with demand. The increase in operating income for our Environmental and Health segment was due to an increase in utilization due to our efforts to align resources with demand.

Current wording

The increase in operating income for our Engineering and Other Scientific segment during 2025 as compared to 2024 was due to an increase in revenues. The increase in revenues was due to an increase in billing rates, partially offset by a reduction in billable hours. The increase in operating income for our Environmental and Health segment was also due to an increase in billing rates, partially offset by a reduction in billable hours.

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. The increase in corporate operating expenses was due to an increase in stock-based compensation and an increase in the provision 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 expenses was due to an increase in travel and meals due to a company-wide managers' meeting held during 2025, an increase in deferred compensation expense due to a change in value of assets associated with our deferred compensation plan, an increase in stock-based compensation and an increase in corporate support expenses.

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 an increase in interest income of $2,851,000 due to an increase in cash and cash equivalents.

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 the change in value of assets associated with our deferred compensation plan. During 2025, rental income decreased by $1,856,000 due to the loss of a tenant in our Silicon Valley facility. The decrease in interest income of $694,000 was due to a decrease in interest rates. During 2025, deferred compensation expense increased $2,435,000 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.

Previous wording

The excess tax benefit associated with stock-based awards decreased to $2,793,000 during 2024 as compared to $3,620,000 during 2023. The decrease in the excess tax benefit was due to a smaller increase in the value of our common stock between the grant date and the release date for the restricted stock units released in 2024 as compared to restricted stock units released in 2023. Excluding the impact of the excess tax benefit, the effective tax rate would have been 27.9% and 28.8% for 2024 and 2023, respectively. The decrease in our effective tax rate, excluding the impact of the excess tax benefit, was primarily due to a re-measurement that reduced the value of our deferred tax assets in connection with relocating one of our offices to a location designated as tax exempt for all state and local taxes during 2023.

Current wording

During 2025, we realized a negative tax impact associated with stock-based awards of $254,000 as compared to a positive tax benefit of $2,793,000 during 2024. 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 2025 as compared to restricted stock units released in 2024. Excluding the impact of the excess tax benefit, the effective tax rate would have been 27.9% for both 2025 and 2024.

Previous wording

We financed our business in 2024 through available cash and cash flows from operating activities. We invest our excess cash in cash equivalents. As of January 3, 2025, our cash and cash equivalents were $258,901,000 as compared to $187,150,000 at December 29, 2023. We believe our existing balances of cash and cash equivalents will be sufficient to satisfy our working capital needs, capital expenditures, outstanding commitments, stock repurchases, dividends and other liquidity requirements over at least the next 12 months.

Current wording

We financed our business in 2025 through available cash and cash flows from operating activities. We invest our excess cash in cash equivalents. As of January 2, 2026, our cash and cash equivalents were $221,930,000 as compared to $258,901,000 at January 3, 2025. We believe our existing balances of cash and cash equivalents will be sufficient to satisfy our working capital needs, capital expenditures, outstanding commitments, stock repurchases, dividends and other liquidity requirements over at least the next 12 months.

Previous wording

The decrease in net cash used in investing activities during 2024 as compared to 2023 was due to a decrease in capital expenditures primarily due to leasehold improvements during 2023 associated with our office and lab space in Philadelphia.

Current wording

The increase in net cash used in investing activities during 2025 as compared to 2024 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 decrease in net cash used in financing activities during 2024 as compared to 2023 was primarily due to a decrease in repurchases of our common stock, a reduction in payroll taxes for restricted stock units, and an increase in exercise of stock-based payment awards, partially offset by an increase in dividends.

Current wording

The increase in net cash used in financing activities during 2025 as compared to 2024 was primarily due to an increase in repurchases of our common stock.

Previous wording

We lease office, laboratory, and storage space in 13 states and the District of Columbia, as well as in China, Germany, Hong Kong, Ireland, Singapore, Switzerland, and the United Kingdom under non-cancellable operating lease arrangements that expire at various dates through 2033. On June 19, 2024, we entered into an agreement with the State of Arizona to extend our land lease for 15 years beginning on January 17, 2028. We are currently obligated to make payments under the lease of $1,009,000 per year, which obligation will continue at that level until January 16, 2028. Beginning on January 17, 2028, our payments under the lease will increase to approximately $6,183,000 per year for the 15-year extension term with adjustments to the annual rent payment in 2033 and 2038 based on the consumer price index. As a result of this extension, we added an additional right-of-use asset in exchange for an operating lease liability of $48,683,000 during the second quarter of 2024. As of January 3, 2025, the value of our obligations under operating leases was $81,477,000. See Note 12 of our Notes to Consolidated Financial Statements for additional information regarding our lease obligations. The value of our non-cancellable unconditional purchase obligations was not material at January 3, 2025.

Current wording

We lease office, laboratory, and storage space in 12 states and the District of Columbia, as well as in China, Hong Kong, Switzerland, and the United Kingdom under non-cancellable operating lease arrangements that expire at various dates through 2033. On June 19, 2024, we entered into an agreement with the State of Arizona to extend our land lease for 15 years beginning on January 17, 2028. We are currently obligated to make payments under the lease of $1,009,000 per year, which obligation will continue at that level until January 16, 2028. Beginning on January 17, 2028, our payments under the lease will increase to approximately $6,183,000 per year for the 15-year extension term with adjustments to the annual rent payment in 2033 and 2038 based on the consumer price index. As of January 2, 2026, the value of our obligations under operating leases was $82,834,000. See Note 12 of our Notes to Consolidated Financial Statements for additional information regarding our lease obligations. The value of our non-cancellable unconditional purchase obligations was not material at January 2, 2026.

Previous wording

We maintain nonqualified deferred compensation plans for the benefit of a select group of highly compensated employees. Vested amounts due under the plans of $112,646,000 were recorded as a long-term liability on our consolidated balance sheet at January 3, 2025. Vested amounts due under the plans of $14,976,000 were recorded as a current liability on our consolidated balance sheet at January 3, 2025. Company assets that are designated to fund the benefits under the plans are held in a rabbi trust and are subject to the claims of our creditors. As of January 3, 2025, invested amounts under the plans of $110,259,000 were recorded as a non-current asset on our consolidated balance sheet. As of January 3, 2025, invested amounts under the plans of $17,578,000 were recorded as other current assets on our consolidated balance sheet.

Current wording

We maintain nonqualified deferred compensation plans for the benefit of a select group of highly compensated employees. Vested amounts due under the plans of $128,645,000 were recorded as a long-term liability on our consolidated balance sheet at January 2, 2026. Vested amounts due under the plans of $16,061,000 were recorded as a current liability on our consolidated balance sheet at January 2, 2026. Company assets that are designated to fund the benefits under the plans are held in a rabbi trust and are subject to the claims of our creditors. As of January 2, 2026, invested amounts under the plans of $123,454,000 were recorded as a non-current asset on our consolidated balance sheet. As of January 2, 2026, invested amounts under the plans of $16,061,000 were recorded as other current assets on our consolidated balance sheet.

Previous wording

Regulation G, conditions for use of Non-Generally Accepted Accounting Principles (“Non-GAAP”) financial measures, and other SEC regulations define and prescribe the conditions for use of certain Non-GAAP financial information. Generally, a Non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We closely monitor two financial measures, EBITDA and EBITDAS, which meet the definition of Non-GAAP financial measures. We define EBITDA as net income before income taxes, interest income, depreciation and amortization. We define EBITDAS as EBITDA before stock-based compensation. We regard EBITDA and EBITDAS as useful measures of operating performance and cash flow to complement operating income, net income and other GAAP financial performance measures. Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present and future operating results. These measures are used to evaluate our financial results, develop budgets and determine employee compensation. These measures, however, should be considered in addition to, and not as a substitute or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. A reconciliation of the Non-GAAP measures to the nearest comparable GAAP measure is set forth below.

Current wording

Regulation G, conditions for use of Non-Generally Accepted Accounting Principles (“Non-GAAP”) financial measures, and other SEC regulations define and prescribe the conditions for use of certain Non-GAAP financial information. Generally, a Non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We closely monitor two financial measures, EBITDA and EBITDAS, which meet the definition of Non-GAAP financial measures. We define EBITDA as net income before income taxes, interest income, depreciation and amortization. We define EBITDAS as EBITDA before stock-based compensation. We regard EBITDA and EBITDAS as useful measures of operating performance to complement operating income, net income and other GAAP financial performance measures. Additionally, management believes that EBITDA and EBITDAS provide meaningful comparisons of past, present and future operating results. These measures are used to evaluate our financial results, develop budgets and determine employee compensation. These measures, however, should be considered in addition to, and not as a substitute for or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. A reconciliation of the Non-GAAP measures to the nearest comparable GAAP measure is set forth below.