EXPONENT INC

Exponent, Inc. is a science and engineering consulting firm that provides solutions to complex problems, drawing from more than 90 technical disciplines and leveraging over 55 years of experience in analyzing accidents and failures. The company serves clients in the chemical, construction, consumer products, energy, food, beverage and nutrition, government, life sciences, insurance, manufacturing, technology, industrial equipment, transportation and other sectors of the economy. During 2025, Exponent provided services representing approximately 21% ¹, 20% ², 16% ³ and 11% ⁴ of revenues to clients in the consumer products industry, energy and utilities industries, transportation industry and chemical industry, respectively.

The marketplace for Exponent's services is fragmented and the company faces different sources of competition in providing various services. In each of its practices, Exponent believes that the principal competitive factors are technical capability and breadth of services, ability to deliver services on a timely basis, professional reputation and knowledge of litigation and regulatory processes. The company believes that the barriers to entry are low and that for many of its technical disciplines, competition is increasing.

Exponent generates revenue primarily from professional fees earned on consulting engagements, fees earned for the use of its equipment and facilities, as well as reimbursements for outside direct expenses associated with the services that are billed to its clients. Substantially all of the company's engagements are service contracts performed under time and material or fixed-price billing arrangements. For time and material contracts, revenue is generally recognized as the services are performed, and for fixed-price service engagements, revenue is recognized based on the relationship of incurred labor hours at standard rates to the estimate of total labor hours at standard rates expected to be incurred over the term of the contract. The company's standard rates for professionals range from $225 ⁵ to $1,375 ⁶ per hour.

Exponent currently operates 17 practices in two reportable operating segments: Engineering and Other Scientific, and Environmental and Health. The Engineering and Other Scientific segment includes 13 practices: Biomechanics, Biomedical Engineering & Sciences, Civil & Structural Engineering, Construction Consulting, Data Sciences, Electrical Engineering & Computer Science, Human Factors, Materials Science & Electrochemistry, Mechanical Engineering, Metallurgical & Corrosion Engineering, Polymers & Chemistry, Thermal Sciences, and Vehicle Engineering. The Environmental and Health segment includes four practices: Chemical Regulation & Food Safety, Ecological & Biological Sciences, Environmental & Earth Sciences, and Health Sciences.

The Engineering and Other Scientific segment generated revenues of $493,893,000 ⁷ in 2025, representing 84.9% ⁸ of total revenues, compared to $469,544,000 ⁹ in 2024. The Environmental and Health segment generated revenues of $88,121,000 ¹⁰ in 2025, representing 15.1% ¹¹ of total revenues, compared to $88,970,000 ¹² in 2024. The increase in revenues for the Engineering and Other Scientific segment was due to an increase in billing rates partially offset by a decrease in billable hours, with growth primarily driven by demand for risk management and asset integrity management services in the utilities industry and dispute-related services in the energy, automotive and medical device sectors. The decrease in revenues from the Environmental and Health segment was due to a decrease in billable hours partially offset by an increase in billing rates, with the decrease in billable hours due to a lower level of activity for regulatory services in the chemical industry.

On February 1, 2024, the Company's Board of Directors authorized $61,600,000 ¹³ for the repurchase of the Company's common stock. On October 30, 2025, the Company's Board of Directors announced approval of $100,000,000 ¹⁴ for the repurchase of the Company's common stock. The Company's repurchase authorizations have no expiration date. During the quarter ended January 2, 2026, the company repurchased 355 ¹⁵ shares at an average price of $70.57 ¹⁶ per share. The company also declared cash dividends of $1.20 ¹⁷ per common share in 2025, compared to $1.12 ¹⁸ in 2024.

Total revenues for fiscal year 2025 were $582,014,000 ¹⁹, compared to $558,514,000 ²⁰ in fiscal 2024, representing an increase of 4.2% ²¹. Net income was $106,009,000 ²² in 2025, compared to $109,002,000 ²³ in 2024. Diluted earnings per share decreased to $2.07 ²⁴ for 2025 as compared to $2.11 ²⁵ for 2024. Operating income was $119,787,000 ²⁶ in 2025, compared to $119,557,000 ²⁷ in 2024. Net cash provided by operating activities was $131,730,000 ²⁸ in 2025, compared to $144,537,000 ²⁹ in 2024.

Exponent is focused on capitalizing on emerging growth areas, including demand for its dispute-related services reflecting the essential role its engineers and scientists play when systems do not perform as expected. Across the energy sector, the company continues to see strong demand in engagements spanning hydroelectric facilities, wild-fire related losses, battery energy storage systems, and wind and solar projects. In transportation, the company saw increased failure analysis work tied to electrification and battery systems in commercial vehicles, as customers addressed performance, safety, and reliability challenges. The company also saw increased demand from domestic and international clients related to complex construction challenges and disputes. Proactive engagements were led by risk management and asset integrity projects in the utilities sector and regulatory consulting in the life-sciences sector.

As artificial intelligence and other advanced technologies become increasingly embedded in complex and performance-critical systems, rising societal expectations for safety and reliability continue to drive demand for Exponent's specialized expertise. The company is uniquely positioned to support clients with rigorous and independent insights across the full product lifecycle. The company also continues to look for new markets for its various technical disciplines in response to competitive forces in the marketplace.

The company expects compensation expense, excluding the change in value of deferred compensation plan assets, to increase as it selectively adds new talent and adjusts compensation to market conditions. The company expects other operating expenses to grow as it selectively adds new talent and continues to make investments in its corporate infrastructure. The company expects general and administrative expenses to increase as it expands its business development and staff development initiatives.

The company expects to continue its investing activities, including capital expenditures. The increase in capital expenditures during 2025 as compared to 2024 was due to an increase in investment in corporate infrastructure. The company expects to continue to improve its information systems and other internal systems and controls to manage growth.

The company expects to continue to use cash reserves to repurchase common stock under its stock repurchase programs, pay dividends, procure facilities and equipment or strategically acquire professional service firms that are complementary to its business. The company's Board of Directors has declared quarterly dividends since March 2013. The company's intent to continue to pay quarterly dividends and to repurchase its shares is subject to capital availability and periodic determinations by the Board of Directors.

The company faces headwinds from the unpredictable and reactive nature of its business, as revenues are primarily derived from services provided in response to client requests or events that occur without notice, and engagements are terminable or subject to postponement or delay at any time by clients. As a result, backlog at any particular time is small in relation to quarterly or annual revenues and is not a reliable indicator of revenues for any future periods. The company also faces risks from competition, as the barriers to entry are low and competition is increasing for many of its technical disciplines.

The company faces risks from regulatory uncertainty, deregulation or reduced regulatory enforcement, as well as tort reform, which could reduce demand for its services. The company also faces risks from the adoption of artificial intelligence technologies, which may reduce demand for its services, change client expectations, and introduce new operational, legal, and regulatory risks. The company's international operations create special risks including currency fluctuations, burdensome regulatory requirements, and geopolitical risks.

The unpredictable and reactive nature of Exponent's business creates uneven performance, as revenues are primarily derived from services provided in response to client requests or events that occur without notice, and engagements are terminable at any time, resulting in backlog that is small in relation to quarterly or annual revenues and not a reliable indicator of future revenues. The company faces risks from the loss of a large client, as it derived approximately 21% ³⁰, 20% ³¹, 16% ³² and 11% ³³ of revenues from clients in the consumer products, energy and utilities, transportation, and chemical industries, respectively, during 2025. Tort reform could significantly reduce demand for the company's litigation support consulting services, which represent a significant concentration in several practices. The company also faces risks from the adoption of AI technologies, which may reduce demand for services, change client expectations, and render some existing service offerings less valuable or obsolete. Failure to attract and retain key employees, particularly highly qualified technical and managerial personnel, could materially adversely affect the business, as the company employed 1,212 ³⁴ full-time, part-time and intermittent employees as of January 2, 2026, including 949 ³⁵ engineering and scientific staff.

Management's message emphasizes that Exponent remains focused on building its world-class engineering and scientific team to position the company at the forefront of innovation and meet the ever-changing needs of clients and the market. The company also remains 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. Management noted that growth during 2025 was driven by dispute-related services reflecting the essential role the company's engineers and scientists play when systems do not perform as expected, with strong demand across the energy sector and increased failure analysis work in transportation tied to electrification and battery systems.