# Exponent Inc: Form 10-Q for the period ended Jul 4, 2025

- Company: [Exponent Inc](/companies/expo.md) (CIK 851520)
- Form: 10-Q
- Filed: 2025-08-08
- Accepted by EDGAR: Aug 8, 2025, 16:00 ET
- Period: 2025-07-04
- Accession: 0000950170-25-105799
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/851520/000095017025105799/expo-20250704.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/851520/000095017025105799/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-07-04.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-04-05 to 2025-07-04 | $142.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2025-01-04 to 2025-07-04 | $287.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2025-04-05 to 2025-07-04 | $17.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2025-01-04 to 2025-07-04 | $61.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-04-05 to 2025-07-04 | $10.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2025-01-04 to 2025-07-04 | $21.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-04-05 to 2025-07-04 | $26.6m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2025-01-04 to 2025-07-04 | $53.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-04-05 to 2025-07-04 | $0.52 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2025-01-04 to 2025-07-04 | $1.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-04-05 to 2025-07-04 | $0.52 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2025-01-04 to 2025-07-04 | $1.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-04-05 to 2025-07-04 | 51,502,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2025-01-04 to 2025-07-04 | 51,587,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2025-01-04 to 2025-07-04 | $43.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2025-01-04 to 2025-07-04 | $4.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2025-01-04 to 2025-07-04 | $31.6m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2025-01-04 to 2025-07-04 | $32.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-07-04 | $231.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-07-04 | $425.7m | us-gaap:AssetsCurrent |
| Total assets | at 2025-07-04 | $759.4m | us-gaap:Assets |
| Current liabilities | at 2025-07-04 | $135.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-07-04 | $331.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-07-04 | $427.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,080 characters.

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”).

### Forward-Looking Statements

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.

### Business Overview

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.

### CRITICAL ACCOUNTING ESTIMATES

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

### RESULTS OF CONSOLIDATED OPERATIONS

### Executive Summary

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

- 20 -

Net income decreased 9% to $26,553,000 during the second quarter of 2025 as compared to $29,227,000 during the same period last year. Diluted earnings per share decreased to $0.52 per share during the second quarter of 2025 as compared to $0.57 in the same period last year. The decrease in profitability was due to an increase in compensation expense associated with our annual salary adjustments, an increase in other operating expenses associated with the extension of our land lease with the State of Arizona and a decrease in the tax benefit associated with stock-based awards. During the second quarter of 2025, the tax impact associated with share-based awards was immaterial as compared to a tax benefit of $726,000 recognized during the same period last year.

We remain focused on building our world-class engineering and scientific team to position us 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.

### Overview of the Three Months Ended July 4, 2025

During the second quarter of 2025, billable hours decreased 6% to 359,000 as compared to 381,000 during the same period last year. Our utilization decreased to 72% during the second quarter of 2025 as compared to 75% during the same period last year. Technical full-time equivalent employees decreased 2% to 958 during the second quarter of 2025 as compared to 975 during the same period last year.

### Three Months Ended July 4, 2025 compared to Three Months Ended June 28, 2024

### Revenues

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Engineering and other scientific | $120,980 | $118,477 | 2.1% |
| Percentage of total revenues | 85.2% | 84.3% |  |
| Environmental and health | 20,982 | 22,059 | -4.9% |
| Percentage of total revenues | 14.8% | 15.7% |  |
| Total revenues | $141,962 | $140,536 | 1.0% |

The increase in revenues for our Engineering and other scientific segment was due to an increase in billing rates offset by a decrease in billable hours. The increase in revenues was driven by demand for our dispute related services in the construction, automotive, and medical device sectors. During the second quarter of 2025, billable hours for this segment decreased by 5% to 291,000 as compared to 306,000 during the same period last year. Utilization for this segment decreased to 74% during the second quarter of 2025 as compared to 77% during the same period last year. Technical full-time equivalent employees in this segment decreased 1% to 756 during the second quarter of 2025 as compared to 765 for the same period last year.

The decrease in revenues for our Environmental and health segment was due to a decrease in billable hours partially offset by an increase in billing rates. The decrease in revenues was due to lower levels of activity for proactive projects in the life sciences sector and our chemical regulatory services. During the second quarter of 2025, billable hours for this segment decreased by 9% to 68,000 as compared to 75,000 during the same period last year. Utilization for this segment decreased to 65% during the second quarter of 2025 as compared to 68% during the same period last year. Technical full-time equivalent employees in this segment decreased 4% to 202 as compared to 210 during the same period last year.

### Compensation and Related Expenses

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Compensation and related expenses | $97,474 | $79,466 | 22.7% |
| Percentage of total revenues | 68.7% | 56.5% |  |

- 21 -

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

### Other Operating Expenses

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Other operating expenses | $12,072 | $11,185 | 7.9% |
| Percentage of total revenues | 8.5% | 8.0% |  |

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

### Reimbursable Expenses

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Reimbursable expenses | $9,094 | $8,102 | 12.2% |
| Percentage of total revenues | 6.4% | 5.8% |  |

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

### General and Administrative Expenses

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| General and administrative expenses | $6,145 | $6,039 | 1.8% |
| Percentage of total revenues | 4.3% | 4.3% |  |

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

### Operating Income

- 22 -

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Engineering and other scientific | $42,942 | $43,765 | -1.9% |
| Environmental and health | 7,020 | 7,259 | -3.3% |
| Total segment operating income | 49,962 | 51,024 | -2.1% |
| Corporate operating expense | (32,785) | (15,280) | 114.6% |
| Total operating income | $17,177 | $35,744 | -51.9% |

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

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 during the second quarter of 2025 as compared to the same period last year was primarily due to an increase in deferred compensation expense. During the second quarter of 2025, deferred compensation expense increased $16,088,000, with a corresponding increase to other income, net, as compared to the same period last year, due to the change in value of assets associated with our deferred compensation plan. This increase consisted of an increase in the value of plan assets of $16,963,000 during the second quarter of 2025 as compared to an increase in the value of plan assets of $875,000 during the same period last year.

### Other Income, Net

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Other income / (loss), net | $19,638 | $3,938 | 398.7% |
| Percentage of total revenues | 13.8% | 2.8% |  |

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

### Income Taxes

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Income taxes | $10,262 | $10,455 | -1.8% |
| Percentage of total revenues | 7.2% | 7.4% |  |
| Effective tax rate | 27.9% | 26.3% |  |

- 23 -

During the second quarter of 2025, the tax impact associated with stock-based awards was immaterial as compared to a tax benefit of $726,000 during the same period last year. Excluding the tax impact, the effective tax rate would have been 27.8% during the second quarter of 2025 as compared to 28.2% during the same period last year. The One Big Beautiful Bill Act was enacted on July 4, 2025. The impact of this legislation on our current and deferred tax positions was not material.

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

### Revenues

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Engineering and other scientific | $243,115 | $239,948 | 1.3% |
| Percentage of total revenues | 84.6% | 84.1% |  |
| Environmental and health | 44,354 | 45,521 | -2.6% |
| Percentage of total revenues | 15.4% | 15.9% |  |
| Total revenues | $287,469 | $285,469 | 0.7% |

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

The decrease in revenues for our Environmental and health segment was due to a decrease in billable hours partially offset by an increase in billing rates. The decrease in revenues was due to a lower level of activity for proactive projects in the life sciences sector. During the first six months of 2025, billable hours for this segment decreased by 5% to 144,000 as compared to 152,000 during the same period last year. Utilization in this segment was flat at 68% during the first six months of 2025 and 2024. Technical full-time equivalent employees in this segment decreased by 5% to 203 during the first six months of 2025 as compared to 214 during the same period last year.

### Compensation and Related Expenses

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Compensation and related expenses | $173,377 | $169,793 | 2.1% |
| Percentage of total revenues | 60.3% | 59.5% |  |

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

### Other Operating Expenses

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Other operating expenses | $24,167 | $21,716 | 11.3% |
| Percentage of total revenues | 8.4% | 7.6% |  |

- 24 -

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

### Reimbursable Expenses

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Reimbursable expenses | $17,164 | $15,828 | 8.4% |
| Percentage of total revenues | 6.0% | 5.5% |  |

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

### General and Administrative Expenses

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| General and administrative expenses | $11,152 | $11,675 | -4.5% |
| Percentage of total revenues | 3.9% | 4.1% |  |

The decrease in general and administrative expenses was primarily due to a decrease in legal fee of $543,000 and a decrease in bad debt expense of $293,000. The decrease in bad debt expense was due to a decrease in our allowance for bad debt. We expect general and administrative expenses to increase as we expand our business development and staff development initiatives.

### Operating Income

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Engineering and other scientific | $88,055 | $92,396 | -4.7% |
| Environmental and health | 15,718 | 15,495 | 1.4% |
| Total segment operating income | 103,773 | 107,891 | -3.8% |
| Corporate operating expense | (42,164) | (41,434) | 1.8% |
| Total operating income | $61,609 | $66,457 | -7.3% |

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

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.

### Other Income, Net

- 25 -

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Other income (loss), net | $12,966 | $13,648 | -5.0% |
| Percentage of total revenues | 4.5% | 4.8% |  |

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

### Income Taxes

*(In thousands, except percentages)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 | Percent Change |
| --- | ---: | ---: | ---: |
| Income taxes | $21,372 | $20,736 | 3.1% |
| Percentage of total revenues | 7.4% | 7.3% |  |
| Effective tax rate | 28.7% | 25.9% |  |

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

### LIQUIDITY AND CAPITAL RESOURCES

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.

*(In thousands)*

|  | Six Months Ended July 4, 2025 | June 28, 2024 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $43,496 | $58,771 |
| Net cash used in by investing activities | (4,028) | (2,628) |
| Net cash used in financing activities | (67,517) | (39,829) |

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

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.

- 26 -

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

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

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.

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.

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

As permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was serving, at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

### Non-GAAP Financial Measures

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.

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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 4, 2025 and June 28, 2024:

*(In thousands, except percentages)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Six Months Ended July 4, 2025 | June 28, 2024 |
| --- | ---: | ---: | ---: | ---: |
| Revenues before reimbursements | $132,868 | $132,434 | $270,305 | $269,641 |
| EBITDA | $36,991 | $39,937 | $74,529 | $80,058 |
| EBITDA as a % of revenues before reimbursements | 27.8% | 30.2% | 27.6% | 29.7% |

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

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

*(In thousands)*

|  | Three Months Ended July 4, 2025 | June 28, 2024 | Six Months Ended July 4, 2025 | June 28, 2024 |
| --- | ---: | ---: | ---: | ---: |
| Net income | $26,553 | $29,227 | $53,203 | $59,369 |
| Add back (subtract): |  |  |  |  |
| Income taxes | 10,262 | 10,455 | 21,372 | 20,736 |
| Interest income, net | (2,344) | (2,231) | (5,058) | (4,857) |
| Depreciation and amortization | 2,520 | 2,486 | 5,012 | 4,810 |
| EBITDA | 36,991 | 39,937 | 74,529 | 80,058 |
| Stock-based compensation | 5,246 | 5,577 | 13,426 | 12,917 |
| EBITDAS | $42,237 | $45,514 | $87,955 | $92,975 |

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## Market risk

As filed, 2,901 characters.

We are exposed to interest rate risk associated with our balances of cash and cash equivalents. We manage our interest rate risk by maintaining an investment portfolio primarily consisting of debt instruments with high credit quality and relatively short average effective maturities in accordance with our investment policy. The maximum effective maturity of any issue in our portfolio is 3 years and the maximum average effective maturity of the portfolio cannot exceed 12 months. If interest rates were to instantaneously increase or decrease by 100 basis points, the change in the fair market value of our portfolio of cash equivalents would not have a material impact on our financial statements. We do not use derivative financial instruments in our portfolio. There have not been any material changes during the period covered by this Quarterly Report on Form 10-Q to our interest rate risk exposures, or how these exposures are managed. Notwithstanding our efforts to manage interest rate risk, there can be no assurances that we will be adequately protected against the risks associated with interest rate fluctuations.

We have foreign currency risk related to our revenues and expenses denominated in currencies other than the U.S. dollar, primarily the British Pound, the Euro, the Chinese Yuan, and the Hong Kong Dollar. Accordingly, changes in exchange rates may negatively affect the revenues and net income of our foreign subsidiaries as expressed in U.S. dollars.

At July 4, 2025, we had net assets of approximately $10.8 million with a functional currency of the British Pound, net assets of approximately $2.7 million with a functional currency of the Chinese Yuan, net assets of approximately $1.7 million with a functional currency of the Hong Kong Dollar, and net assets of approximately $1.7 million with a functional currency of the Singapore Dollar associated with our operations in the United Kingdom, China, Hong Kong, and Singapore, respectively.

We also have foreign currency risk related to foreign currency transactions and monetary assets and liabilities denominated in currencies that are not the functional currency. We have experienced and will continue to experience fluctuations in our net income as a result of gains (losses) on these foreign currency transactions and the remeasurement of monetary assets and liabilities. At July 4, 2025, we had net assets denominated in the non-functional currency of approximately $3.4 million.

We do not use foreign exchange contracts to hedge any foreign currency exposures. To date, the impacts of foreign currency exchange rate changes on our consolidated revenues and consolidated net income have not been significant. However, our continued international growth increases our exposure to exchange rate fluctuations and as a result such fluctuations could have a significant impact on our future results of operations.

## Controls and procedures

As filed, 1,714 characters.

(a) Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that, as of July 4, 2025, the Company’s disclosure controls and procedures were effective.

We review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis, to improve our controls and procedures over time and to correct any deficiencies that we may discover in the future. Our goal is to ensure that our senior management has timely access to all material financial and non-financial information concerning our business. While we believe the present design of our disclosure controls and procedures is effective to achieve our goal, future events affecting our business may cause us to significantly modify our disclosure controls and procedures.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three-month period ended July 4, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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## Risk factors

As filed, 147 characters.

There have been no material changes from risk factors as previously discussed under the heading “Risk Factors” in the Company’s 2024 Annual Report.

Filed Aug 8, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-105799. Last ingested by Listed: Nov 6, 2026, 16:44 ET. No prices; not investment advice.