EXPONENT INC

Previous 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.

Current wording

There have been no significant changes in our critical accounting estimates during the six months ended July 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

Net income increased 11% to $29,569,000 during the first quarter of 2026 as compared to $26,650,000 during the same period last year. Diluted earnings per share increased to $0.59 per share during the first quarter of 2026 as compared to $0.52 during the same period last year. 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.

Current wording

Net income increased 11% to $29,395,000 during the second quarter of 2026 as compared to $26,553,000 during the same period last year. Diluted earnings per share increased to $0.60 per share during the second quarter of 2026 as compared to $0.52 in the same period last year.

Previous 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.

Current wording

During the second quarter of 2026, billable hours increased 9% to 390,000 as compared to 359,000 during the same period last year. Our utilization increased to 74% during the second quarter of 2026 as compared to 72% during the same period last year. Average technical full-time equivalent employees increased 6% to 1,012 during the second quarter of 2026 as compared to 958 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. 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.

Current wording

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billable hours, increase in billing rates and an increase in revenues from reimbursements associated with user research projects. Growth during the quarter was driven by user research studies in consumer electronics and risk management in the utilities industry, along with reactive engagements across the consumer products, chemicals, and transportation industries. During the second quarter of 2026, billable hours for this segment increased by 10% to 320,000 as compared to 291,000 during the same period last year. Utilization for this segment increased to 76% during the second quarter of 2026 as compared to 74% during the same period last year. Average technical full-time equivalent employees in this segment increased 7% to 810 during the second quarter of 2026 as compared to 756 for 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 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.

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 second quarter of 2026 was primarily due to an increase in computer-related expenses of $354,000 and an increase in occupancy expense of $270,000. The increase in computer-related expenses and occupancy expenses were 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 $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.

Current wording

The increase in general and administrative expenses was primarily due to an increase in personnel expenses of $498,000, an increase in travel and meals of $246,000, and several other individually insignificant increases. The increase in personnel expenses was primarily due to an increase in relocation expenses. The increase in travel and meals was due to an increase in client and business development activities. 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 corporate operating expenses was due to the change in value of assets associated with our deferred compensation plan. During the first quarter of 2026, deferred compensation expense increased by $8,198,000 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. 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.

Current wording

The decrease in corporate operating expenses during the second quarter of 2026 as compared to the same period last year was primarily due to a decrease in deferred compensation expense. During the second quarter of 2026, deferred compensation expense decreased by $5,180,000, with a corresponding decrease 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 plans. During the second quarter of 2026, the value of plan assets increased by $11,783,000 as compared to an increase of $16,963,000 during 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. 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.

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. During the first six months of 2026, billable hours for this segment decreased by 2% to 141,000 as compared to 144,000 during the same period last year. Utilization in this segment was flat at 68% during the first six months of 2026 and 2025. Average technical full-time equivalent employees in this segment decreased by 1% to 200 during the first six months of 2026 as compared to 203 during the same period last year.

Previous wording

The increase in compensation and related expenses during the first quarter of 2026 was due to an increase in payroll, an increase in bonuses and the change in the value of assets associated with our deferred compensation plan. During the first quarter of 2026, payroll expense increased by $4,158,00 due to an increase in technical full-time equivalent employees and the impact of annual salary increases. During the first quarter of 2026, bonus expense increased by $2,938,000 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 the first quarter of 2026, deferred compensation expense increased by $8,198,000 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. 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.

Current wording

The increase in compensation and related expenses during the first six months of 2026 was due to an increase in payroll, an increase in bonuses and the change in the value of assets associated with our deferred compensation plans. During the first six months of 2026, payroll expense increased by $9,008,000 due to an increase in technical full-time equivalent employees and the impact of annual salary increases. During the first six months of 2026, bonus expense increased by $5,928,000 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 the first six months of 2026, deferred compensation expense increased by $3,018,000 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 $10,645,000 during the first six months of 2026 as compared to an increase in the value of plan assets of $7,627,000 during the same period last year.

Previous 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.

Current wording

The increase in operating income for our Engineering and Other Scientific segment during the first six months of 2026 as compared to the same period last year was due to an increase in utilization. The increase in operating income for our Environmental and Health segment during the first six months of 2026 was 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, 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.

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 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.

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 a change in the value of assets associated with our deferred compensation plan partially offset by a decrease in interest income. During the first six months of 2026, deferred compensation expense increased by $3,018,000 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. During the first six months of 2026, the value of plan assets increased by $10,645,000 as compared to an increase of $7,627,000 during the same period last year. During the first six months of 2026, interest income decreased by $2,624,000 due to a decrease in interest rates and lower average cash equivalent balances.

Previous 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.

Current wording

During the first six months of 2026, we realized a negative tax impact associated with stock-based awards of $843,000 as compared to a negative tax impact of $485,000 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 2026 as compared to the same period last year. Excluding the negative tax impact, our consolidated tax rate was 28.0% in the first six months of 2026 and 2025.

Previous 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.

Current wording

We financed our business during the first six months of 2026 through available cash. As of July 3, 2026, our cash and cash equivalents were $66,629,000 as compared to $221,930,000 at January 2, 2026. The decrease in cash and cash equivalents was primarily due to an increase in repurchases of our common stock. During the first six months of 2026, we repurchased $146,138,000 of our common stock as compared to $32,680,000 during the same period last year.

Previous wording

Generally, our net cash provided by operating activities is used to fund our day to day operating activities. First quarter operating cash requirements are generally higher due to payment in the first quarter of our annual bonuses accrued during the prior year. Our largest source of operating cash flows is collections from our clients. Our primary uses of cash from operating activities are for employee related expenditures, leased facilities, taxes, and general operating expenses.

Current wording

Generally, our net cash provided by operating activities is used to fund our day-to-day operating activities. First quarter operating cash requirements are generally higher due to payment in the first quarter of annual bonuses accrued during the prior year. The largest source of operating cash flows is collections from our clients. Our primary

Previous 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.

Current wording

The increase in net cash used in investing activities during the first six 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 three months of 2026, as compared to the same period last year, was primarily due to an increase in repurchases of our common stock.

Current wording

The increase in net cash used in financing activities during the first six months of 2026, as compared to the same period last year was primarily due to an increase in repurchases of our common stock. During the first six months of 2026, we repurchased $146,138,000 of our common stock as compared to $32,680,000 during the same period last year.

Previous 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.

Current wording

We lease office, laboratory, and storage space in 13 states and the District of Columbia, as well as in China, Germany, 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 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.

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 $127,839,000 were recorded as a deferred compensation plan liability on our unaudited condensed consolidated balance sheet at July 3, 2026. Vested amounts due under the plans of $18,609,000 were recorded as an accrued payroll and employee benefits on our unaudited condensed consolidated balance sheet at July 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 July 3, 2026, invested amounts under the plans of $122,823,000 were recorded as a non-current asset on our unaudited condensed consolidated balance sheet. As of July 3, 2026, invested amounts under the plans of $19,274,000 were recorded as other current assets on our unaudited condensed consolidated balance sheet.

Previous wording

Regulation G, Conditions for Use of Non-Generally Accepted Accounting Principles ("Non-GAAP") Financial Measures, and other U.S. Securities and Exchange Commission (“SEC”) rules and regulations define and prescribe the conditions for use of 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, net interest income, depreciation and amortization. We define EBITDAS as EBITDA before stock-based compensation. The Company regards 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.

Current wording

Regulation G, Conditions for Use of Non-Generally Accepted Accounting Principles ("Non-GAAP") Financial Measures, and other U.S. Securities and Exchange Commission (“SEC”) rules and regulations define and prescribe the conditions for use of 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 net interest income, income taxes, depreciation and amortization. We define EBITDAS as EBITDA before stock-based compensation. The Company regards 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,

Previous 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:

Current 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 3, 2026 and July 4, 2025:

Previous wording

The following table shows EBITDA (determined as shown in the reconciliation table above) as a percentage of revenues before reimbursements for the three months ended April 3, 2026 and April 4, 2025:

Current wording

The following table shows EBITDA (determined as shown in the reconciliation table below) as a percentage of revenues before reimbursements for the three and six months ended July 3, 2026 and July 4, 2025:

Previous 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.

Current wording

The increase in EBITDA as a percentage of revenues before reimbursements during the three and six months ended July 3, 2026 as compared to the same periods last year was primarily due to an increase in net revenues and an increase in utilization.