EXPONENT INC (EXPO)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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”).

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 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.

Business Overview

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.

CRITICAL ACCOUNTING ESTIMATES

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.

RESULTS OF CONSOLIDATED OPERATIONS

Executive Summary

Revenues for the second quarter of 2026 increased 21% to $171,612,000 as compared to $141,962,000 during the same period last year. Revenues before reimbursements for the second quarter of 2026 increased 12% to $148,860,000 as compared to $132,868,000 during the same period last year. Our proactive work experienced strong growth in the quarter, led by demand for user research studies as clients accelerate the development of AI-enabled products across an increasingly diverse range of hardware form factors and applications, with engagements continuing to expand in scope, scale and complexity. This work includes a large study that represented approximately 4% of our net revenues during the quarter. Proactive activity was also supported by increased risk management and

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infrastructure-related engagements in the utility sector. Reactive work grew, with strong demand for our dispute-related expertise from the consumer products, chemicals, and transportation industries.

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.

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 3, 2026

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.

Three Months Ended July 3, 2026 compared to Three Months Ended July 4, 2025

Revenues

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.

The increase in revenues for our Environmental and Health segment was due to an increase in billable hours and an increase in billing rates. Growth in this segment was driven by engagements evaluating the impacts of chemicals on human health and the environment. During the second quarter of 2026, billable hours for this segment increased by 3% to 70,000 as compared to 68,000 during the same period last year. Utilization for this segment increased to 66% during the second quarter of 2026 as compared to 65% during the same period last year. Average technical full-time equivalent employees in this segment were flat at 202 during the second quarter of 2026 and 2025.

Compensation and Related Expenses

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The increase in compensation and related expense during the second quarter of 2026 was due to an increase in payroll expense and an increase in bonus expense partially offset by a change in the value of assets associated with our deferred compensation plan. During the second quarter of 2026 payroll expense increased by $4,849,000 due to the impact of our annual salary increase and an increase in technical full-time equivalent employees. During the second quarter of 2026, bonus expense increased by $2,990,000 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 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. 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

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.

Reimbursable Expenses

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.

General and Administrative Expenses

The increase in general and administrative expenses was primarily due to an increase in

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2024 and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2025.

OVERVIEW

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

CRITICAL ACCOUNTING ESTIMATES

In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheet. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. On a regular basis we evaluate our assumptions, judgments and estimates and make changes accordingly. We believe that the assumptions, judgments and estimates involved in accounting for revenue recognition and estimating the allowance for contract losses and doubtful accounts have the greatest potential impact on our consolidated financial statements, so we consider these to be our critical accounting policies. We discuss below the assumptions, judgments and estimates associated with these policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results. For further information on our critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.

Revenue recognition. We derive our revenues primarily from professional fees earned on consulting engagements, fees earned for the use of our equipment and facilities, as well as reimbursements for outside direct expenses associated with the services that are billed to our clients.

Substantially all of our engagements are service contracts performed under time and material or fixed-price billing arrangements. For time and material and fixed-price service projects, revenue is generally recognized as the services are performed. For substantially all of our fixed-price service engagements, we recognize revenue based on the relationship of incurred labor hours at standard rates to our estimate of the total labor hours at standard rates we expect to incur over the term of the contract. Our estimate of total labor hours we expect to incur over the term of the contract is based on the nature of the project and our past experience on similar projects. We believe this methodology achieves a reliable measure of the revenue from the consulting services we provide to our customers under fixed-price contracts.

Management judgments and estimates must be made and used in connection with the revenues recognized in any accounting period. These judgments and estimates include an assessment of the estimate as to the total effort required to complete fixed-price projects.

Estimating the allowance for contract losses and doubtful accounts. We make estimates of our ability to collect accounts receivable and our unbilled but recognized work-in-process. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us or for disputes with customers that affect our ability to fully collect our accounts receivable and unbilled work-in-process, we record a specific allowance to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers we recognize allowances for contract losses and doubtful accounts taking into consideration factors such as historical write-offs, customer concentration, customer creditworthiness, current and forecasts of future economic conditions, and aging of amounts due.

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The following table sets forth, for the periods indicated, the percentage of revenues of certain items in our consolidated statements of income and the percentage increase (decrease) in the dollar amount of such items year to year:

EXECUTIVE SUMMARY

Revenues and revenues before reimbursements for 2025 increased 4% as compared to the prior year. Growth during 2025 was driven by our dispute-related services reflecting the essential role our engineers and scientists play when systems do not perform as expected. Across the energy sector, we continued to see strong demand in engagements spanning hydroelectric facilities, wild-fire related losses, battery energy storage systems, and wind and solar projects. In transportation, we saw increased failure analysis work tied to electrification and battery systems in commercial vehicles, as customers addressed performance, safety, and reliability challenges. We 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 our specialized expertise. Exponent is uniquely positioned to support clients with rigorous and independent insights across the full product lifecycle.

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

We remain focused on building our world-class engineering and scientific team to position Exponent at the forefront of innovation and meet the ever-changing needs of our clients and the market. We also remain focused on capitalizing

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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 YEAR ENDED January 2, 2026

Our revenues consist of professional fees earned on consulting engagements, fees for use of our equipment and facilities, and reimbursements for outside direct expenses associated with the services performed that are billed to our clients.

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

During 2025 billable hours decreased 2% to 1,468,000 as compared to 1,495,000 during 2024. Our utilization was 73% for both 2025 and 2024. Technical full-time equivalent employees increased 1% to 973 for 2025 as compared to 967 for 2024.

FISCAL YEARS ENDED January 2, 2026 AND January 3, 2025

Revenues

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

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

Revenues are primarily derived from services provided in response to client requests or events that occur without notice and engagements are generally terminable or subject to postponement or delay at any time by our clients. As a result, backlog at any particular time is small in relation to our quarterly or annual revenues and is not a reliable indicator of revenues for any future periods.

Compensation and Related Expenses

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