EXPONENT INC

Previous wording

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included herein and with our audited consolidated financial statements and notes thereto for the fiscal year ended January 3, 2025, which are contained in our fiscal 2024 Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission on February 28, 2025 and amended on April 18, 2025 (our “2024 Annual Report”).

Current wording

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included herein and with our audited consolidated financial statements and notes thereto for the fiscal year ended January 2, 2026, which are contained in our fiscal 2025 Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission on February 27, 2026 (our “2025 Annual Report”).

Previous wording

This Quarterly Report on Form 10-Q contains certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995, and the rules promulgated pursuant to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended) that are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. When used in this document, the words “intend,” “anticipate,” “believe,” “estimate,” “expect” and similar expressions, as they relate to us or our management, identify such forward-looking statements. Such statements reflect the current views of us or our management with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance, or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Factors that could cause or contribute to such material differences include the possibility that the demand for our services may decline as a result of changes in general and industry specific economic conditions, the timing of engagements for our services, the effects of competitive services and pricing, the absence of backlog related to our business, our ability to attract and retain key employees, the effect of tort reform and government regulation on our business and liabilities resulting from claims made against us. Additional risks and uncertainties are discussed in our 2024 Annual Report under the heading “Risk Factors” and elsewhere in this report. The inclusion of such forward-looking information should not be regarded as a representation by the us or any other person that the future events, plans, or expectations we contemplated will be achieved. Due to such uncertainties and risks, you are warned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We do not intend to release publicly any updates or revisions to any such forward-looking statements.

Current wording

This Quarterly Report on Form 10-Q contains certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995, and the rules promulgated pursuant to the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended) that are based on the beliefs of our management, as well as assumptions made by and information currently available to our management. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. When used in this document, the words “intend,” “anticipate,” “believe,” “estimate,” “expect” and similar expressions, as they relate to us or our management, identify such forward-looking statements. Such statements reflect the current views of us or our management with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results, performance, or achievements could differ materially from those expressed in, or implied by, any such forward-looking statements. Factors that could cause or contribute to such material differences include the possibility that the demand for our services may decline as a result of changes in general and industry specific economic conditions, the timing of engagements for our services, the effects of competitive services and pricing, the absence of backlog related to our business, our ability to attract and retain key employees, the effect of tort reform and government regulation on our business and liabilities resulting from claims made against us. Additional risks and uncertainties are discussed in our 2025 Annual Report under the heading “Risk Factors” and elsewhere in this report. The inclusion of such forward-looking information should not be regarded as a representation by the Company or any other person that the future events, plans, or expectations we contemplated will be achieved. Due to such uncertainties and risks, you are warned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We do not intend to release publicly any updates or revisions to any such forward-looking statements.

Previous wording

Exponent, Inc. is an engineering and scientific consulting firm providing solutions to complex problems. Our 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, Inc. is an engineering and scientific consulting firm providing solutions to complex problems. Our interdisciplinary organization of scientists, 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

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.

Current wording

There have been no significant changes in our critical accounting estimates during the three months ended April 3, 2026, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2025 Annual Report.

Previous wording

During the third quarter of 2025, billable hours increased 4% to 376,000 as compared to 362,000 during the same period last year. Our utilization increased to 74% during the third quarter of 2025 as compared to 73% during the same period last year. Technical full-time equivalent employees increased by 3% to 976 during the third quarter of 2025 as compared to 949 during the same period last year due to our recruiting and retention efforts.

Current wording

During the first quarter of 2026, billable hours increased 6% to 399,000 as compared to 376,000 during the same period last year. Our utilization increased 1% to 76% as compared to 75% during the same period last year. Technical full-time equivalent employees increased 5% to 1,013 during the first quarter of 2026 as compared to 966 during the same period last year.

Previous wording

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billable hours and an increase in billing rates. During the third quarter of 2025, billable hours for this segment increased by 5% to 305,000 as compared to 291,000 during the same period last year. Utilization for this segment increased to 76% during the third quarter of 2025 as compared to 75% during the same period last year. The increase in revenues was 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. Technical full-time equivalent employees in this segment increased 4% to 775 during the third quarter of 2025 as compared to 745 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 billable hours and an increase in billing rates. Growth during the quarter was primarily driven by user research studies in consumer electronics and risk management in the utilities sector, along with reactive engagements in the energy and life sciences sectors. During the first quarter of 2026, billable hours for this segment increased by 9% to 327,000 as compared to 300,000 during the same period last year. Utilization for this segment increased to 77% during the first quarter of 2026 as compared to 76% during the same period last year. Technical full-time equivalent employees in this segment increased 7% to 814 during the first quarter of 2026 as compared to 762 for the same period last year.

Previous wording

The increase in revenues for our Environmental and Health 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 4% to 215,000 as compared to 223,000 during the same period last year. Utilization in this segment was 68% during the first nine months of 2025 and 2024. The increase in revenue was driven by increased regulatory consulting engagements in the chemicals industry. Technical full-time equivalent employees in this segment decreased by 4% to 202 during the first nine months of 2025 as compared to 211 during the same period last year.

Current wording

The increase in revenues for our Environmental and Health segment was due to an increase in billing rates partially offset by a decrease in billable hours. Growth in this segment was primarily driven by regulatory consulting in the chemical industry. During the first quarter of 2026, billable hours for this segment decreased by 5% to 72,000 as compared to 76,000 during the same period last year. Utilization in this segment decreased to 69% during the first quarter of 2026 as compared to 72% during the same period last year. Technical full-time equivalent employees in this segment decreased 2% to 199 during the first quarter of 2026 as compared to 204 during the same period last year.

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 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.

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 quarter of 2026 was primarily due to an increase in occupancy expense of $388,000 and an increase in computer-related expenses of $255,000. The increase in occupancy expense was due to an increase in facility repairs and maintenance. 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.

Previous wording

The amount of reimbursable expenses will vary from quarter to quarter depending on the nature of our projects.

Current wording

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

Previous wording

The increase in general and administrative expenses was primarily due to an increase in travel and meals of $2,053,000 and an increase in personnel expenses of $169,000. The increase in travel and meals was due to a company-wide managers' meeting held during the third quarter of 2025 and the increase in technical full-time equivalent employees. We did not have any company-wide meetings during the third quarter of 2024. The increase in personnel expenses was primarily due a higher relocation costs. We expect general and administrative expenses to increase as we 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 $548,000 and several other individually insignificant increases. The increase in travel and meals was due to an increase in client and business development activities and an increase in recruiting-related activities associated with the increase in technical full-time equivalent employees. We expect general and administrative expenses to increase as we selectively add new talent and expand our business development and staff development initiatives.

Previous 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.

Current wording

The increase in operating income for our Engineering and Other Scientific segment during the first quarter of 2026 as compared to the same period last year was due to an increase in net revenues and an increase in utilization. The decrease in operating income for our Environmental and Health segment during the first quarter of 2026 was due to a decrease in utilization.

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

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.

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 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.

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 increase in other income, net, was primarily due to the change in value of assets associated with our deferred compensation plan partially offset by a decrease in interest income. During the first quarter of 2026, other income, net, increased by $8,198,000 with a corresponding increase to deferred compensation expense as compared to the same period last year, due to the change in value of assets associated with our deferred compensation plan. During the first quarter of 2026, the value of plan assets decreased by $1,138,000 as compared to a decrease of $9,336,000 during the same period last year. During the first quarter of 2026 interest income decreased by $996,000 due to a decrease in interest rates and lower average cash equivalent balances.

Previous 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.

Current wording

During the first quarter of 2026, we realized a negative tax impact associated with stock-based awards of $896,000 as compared to a negative tax impact of $469,000 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 quarter of 2026 as compared to the first quarter of 2025. Excluding the negative tax impact, our consolidated tax rate was 28.0% in the first quarter of 2026, as compared to 28.2% for the same period in 2025.

Previous wording

We believe our existing balances of cash, cash equivalents, and cash generated from operations 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 twelve months.

Current wording

We believe our existing balances of cash, cash equivalents, short-term investments and cash generated from operations 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

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.

Current wording

We financed our business during the first three months of 2026 through available cash. As of April 3, 2026, our cash and cash equivalents were $118,553,000 as compared to $221,930,000 at January 2, 2026.

Previous 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.

Current wording

The increase in net cash used in investing activities during the first three months of 2026, 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 nine 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 three months of 2026, as compared to the same period last year, 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.

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.

Previous wording

We expect to continue our investing activities, including capital expenditures. Furthermore, cash reserves may be used to repurchase shares of common stock under our stock repurchase programs, pay dividends, or strategically acquire professional service firms that are complementary to our business.

Current wording

We expect to continue our investing activities, including capital expenditures. Furthermore, cash reserves may be used to repurchase common stock under our stock repurchase programs, pay dividends, procure facilities and equipment or strategically acquire professional service firms that are complementary to our business.

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 $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.

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 $128,212,000 were recorded as a long-term liability on our unaudited condensed consolidated balance sheet at April 3, 2026. Vested amounts due under the plans of $18,272,000 were recorded as a current liability on our unaudited condensed consolidated balance sheet at April 3, 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 April 3, 2026, invested amounts under the plans of $126,511,000 were recorded as a non-current asset on our unaudited condensed consolidated balance sheet. As of April 3, 2026, invested amounts under the plans of $17,697,000 were recorded as other current assets 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 nine months ended October 3, 2025 and September 27, 2024:

Current wording

The following table is a reconciliation of EBITDA and EBITDAS to the most comparable GAAP measure, net income, for the three months ended April 3, 2026 and April 4, 2025:

Previous wording

The decrease in EBITDA as a percentage of revenues before reimbursements during the third quarter of 2025 as compared to the same period last year was primarily due to an increase in 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 third quarter of 2024. The decrease was partially offset by an increase in billing rates and an increase in utilization.

Current wording

The increase in EBITDA as a percentage of revenues before reimbursements, during the first quarter of 2026 as compared to the same period last year, was primarily due to an increase in net revenues and an increase in utilization.