Exponent, Inc. (NASDAQ:EXPO) Q3 2020 Earnings Conference Call October 29, 2020 4:30 PM ET Company Participants Whitney Kukulka - IR Catherine Corrigan - President & CEO Rich Schlenker - EVP & CFO Conference Call Participants Sam England - Berenberg Bank Alexis Huseby - D.A. Davidson & Company Andrew Nicholas - William Blair Tobey Sommer - Truist Financial Operator Good day, and welcome to Exponent's Third Quarter Earnings Call. [Operator Instructions] At this time, I would like to turn the conference over t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to___________ Commission File Number 0-18655 EXPONENT, INC. (Exact name of registrant as specified in its charter) DELAWARE 77-0218904 (State or o ...

Exponent, Inc. (NASDAQ:EXPO) Q1 2020 Earnings Conference Call April 30, 2020 4:30 PM ET Company Participants Whitney Kukulka – Investor Relations Catherine Corrigan – President and Chief Executive Officer Rich Schlenker – Executive Vice President and Chief Financial Officer Conference Call Participants Tobey Sommer – SunTrust Trevor Romeo – William Blair Marc Riddick – Sidoti Alexis Huseby – D.A. Davidson Sam England – Berenberg Operator Good day and welcome to the Exponent’s First Quarter of Fiscal Year 20 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended January 3, 2020. OR ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to _________. Commission File Number 0-18655 EXPONENT, INC. | --- | --- | --- | --- | --- | |------------------------------------------------------------------------- ...

Exponent, Inc. (NASDAQ:EXPO) Q4 2019 Results Earnings Conference Call February 6, 2020 4:30 PM ET Company Participants Whitney Kukulka - Investor Relations Dr. Catherine Corrigan - President and CEO Rich Schlenker - Executive Vice President and CFO Conference Call Participants Drew Kootman - Cantor Fitzgerald Alexis Huseby - D.A. Davidson & Company Jasper Bibb - SunTrust Andrew Nicholas - William Blair Marc Riddick - Sidoti Operator Good day. And welcome to the Exponent Fourth Quarter and Fiscal Year 2019 E ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited financial statements for Q3 2019, reflecting revenue growth and the adoption of a new lease standard [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | September 27, 2019 | December 28, 2018 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $132,843 | $127,059 | +$5,784 | | Accounts receivable, net | $128,333 | $105,814 | +$22,519 | | Total current assets | $351,532 | $326,612 | +$24,920 | | Operating lease right-of-use assets | $23,715 | $0 | +$23,715 | | Total assets | $544,491 | $468,936 | +$75,555 | | Total current liabilities | $101,034 | $98,304 | +$2,730 | | Total liabilities | $187,212 | $155,027 | +$32,185 | | Total stockholders' equity | $357,279 | $313,909 | +$43,370 | - The company adopted a new lease accounting standard in 2019, resulting in the recognition of **$23.7 million in Operating lease right-of-use assets** and corresponding lease liabilities on the balance sheet[11](index=11&type=chunk)[30](index=30&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Statement of Income Summary (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | YoY Change | Nine Months 2019 | Nine Months 2018 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $101,548 | $95,302 | +6.6% | $307,085 | $287,380 | +6.9% | | Operating Income | $23,184 | $20,594 | +12.6% | $63,761 | $64,670 | -1.4% | | Net Income | $19,633 | $17,453 | +12.5% | $63,339 | $56,218 | +12.7% | | Diluted EPS | $0.36 | $0.32 | +12.5% | $1.17 | $1.04 | +12.5% | | Dividends per share | $0.160 | $0.130 | +23.1% | $0.480 | $0.390 | +23.1% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Nine Months Ended (in thousands) | Cash Flow Activity | September 27, 2019 | September 28, 2018 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $52,293 | $46,826 | +$5,467 | | Net cash used in investing activities | ($11,717) | ($21,958) | +$10,241 | | Net cash used in financing activities | ($34,437) | ($28,271) | -$6,166 | | Net increase (decrease) in cash | $5,784 | ($3,817) | +$9,601 | | Cash and cash equivalents at end of period | $132,843 | $120,977 | +$11,866 | - The increase in cash from operating activities was primarily driven by higher net income, while financing cash usage grew due to higher dividend payments[24](index=24&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) - The company adopted the new lease accounting standard (Topic 842), which materially impacted the balance sheet by recognizing **right-of-use (ROU) assets and lease liabilities**[30](index=30&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - Time and materials contracts constituted **84.9% of total revenues** for the first nine months of 2019, up from 83.3% in the prior year period[35](index=35&type=chunk) Segment Revenues for Nine Months Ended (in thousands) | Segment | September 27, 2019 | September 28, 2018 | YoY Change | | :--- | :--- | :--- | :--- | | Engineering and Other Scientific | $250,134 | $231,980 | +7.8% | | Environmental and Health | $56,951 | $55,400 | +2.8% | | **Total Revenues** | **$307,085** | **$287,380** | **+6.9%** | - On October 17, 2019, the Board of Directors declared a quarterly cash dividend of **$0.16 per share**[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2019 financial results, highlighting revenue drivers, net income growth, and key client projects [Results of Operations - Three Months Ended](index=23&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended) Q3 2019 vs Q3 2018 Performance (in thousands) | Metric | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $101,548 | $95,302 | +6.6% | | Revenues before reimbursements | $95,506 | $88,714 | +8.0% | | Net Income | $19,633 | $17,453 | +12.0% | - Growth was driven by strong demand in biomedical engineering, chemical regulation, construction consulting, and other scientific practices[90](index=90&type=chunk) - A project for an electric utility client, focused on infrastructure integrity and wildfire risk mitigation, contributed approximately **4% of revenues** before reimbursements in Q3 2019[90](index=90&type=chunk) - The effective tax rate decreased from **27.2% to 22.1%** year-over-year, primarily due to a significant increase in the excess tax benefit from stock-based awards[104](index=104&type=chunk) [Results of Operations - Nine Months Ended](index=26&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended) Nine Months 2019 vs 2018 Performance (in thousands) | Metric | Nine Months 2019 | Nine Months 2018 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $307,085 | $287,380 | +6.9% | | Engineering & Other Scientific Revenue | $250,134 | $231,980 | +7.8% | | Environmental & Health Revenue | $56,951 | $55,400 | +2.8% | - Compensation and related expenses increased by **10.0%** primarily due to higher payroll from an increased number of employees and salary adjustments[108](index=108&type=chunk) - The effective tax rate for the nine-month period decreased to **18.1% from 21.2%** in the prior year, driven by a larger excess tax benefit from stock-based awards[117](index=117&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 27, 2019, the company held **$210.0 million in cash, cash equivalents, and short-term investments**, deemed sufficient for near-term liquidity needs[118](index=118&type=chunk) - Net cash from operations increased to **$52.3 million** for the first nine months of 2019, up from $46.8 million in the prior year, mainly due to higher net income[118](index=118&type=chunk)[119](index=119&type=chunk) - Capital expenditures increased due to construction costs for a new office and laboratory facility in Natick, Massachusetts[120](index=120&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) - The company uses **EBITDA** and **EBITDAS** as key non-GAAP measures to evaluate operating performance[127](index=127&type=chunk) Reconciliation of Net Income to EBITDA and EBITDAS (in thousands) | Metric | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $19,633 | $17,453 | $63,339 | $56,218 | | EBITDA | $25,968 | $24,810 | $79,394 | $74,255 | | EBITDAS | $29,812 | $28,382 | $92,979 | $87,860 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations on its investment portfolio and foreign currency exchange rates - Primary market risks are interest rate fluctuations on its portfolio of cash and investments, and foreign currency exchange rate changes[132](index=132&type=chunk)[133](index=133&type=chunk) - The main foreign currency exposures are to the **British Pound, the Euro, and the Chinese Yuan**, which the company does not hedge[133](index=133&type=chunk)[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of September 27, 2019[138](index=138&type=chunk) - **No material changes** in internal control over financial reporting occurred during the third quarter of 2019[139](index=139&type=chunk) [PART II – OTHER INFORMATION](index=32&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no involvement in any material legal proceedings - Exponent is **not currently involved** in any material legal proceedings[141](index=141&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) Details key business risks including client dependency, talent retention, cybersecurity, and international operations - The business is unpredictable as it is primarily reactive to client requests, making **backlog an unreliable indicator** of future revenue[143](index=143&type=chunk) - Success is highly dependent on **attracting and retaining qualified technical and managerial personnel** in a competitive market[145](index=145&type=chunk) - A client's inability to pay for services poses a risk, with **$3.0 million in pre-bankruptcy accounts receivable** from PG&E Corp outstanding[149](index=149&type=chunk)[150](index=150&type=chunk) - The company faces risks from potential **security breaches** of its operating systems, which could disrupt operations and lead to data disclosure[160](index=160&type=chunk) - International operations create special risks, including **currency fluctuations, regulatory hurdles, and compliance with laws like the FCPA and GDPR**[165](index=165&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company provides an update on its stock repurchase program, noting no shares were repurchased in Q3 2019 - The company did **not repurchase any of its common stock** during the third quarter of 2019[179](index=179&type=chunk) - As of September 27, 2019, the company had **$92,462,000 remaining** under its authorized stock repurchase programs[179](index=179&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including CEO and CFO certifications - Exhibits filed include **certifications from the Chief Executive Officer and Chief Financial Officer**[184](index=184&type=chunk)[185](index=185&type=chunk)

Exponent, Inc. (NASDAQ:EXPO) Q3 2019 Earnings Conference Call October 17, 2019 4:30 PM ET Company Participants Whitney Kukulka – Investor Relations Catherine Corrigan – President and Chief Executive Officer Rich Schlenker – Executive Vice President and Chief Financial Officer Conference Call Participants Joseph Foresi – Cantor Fitzgerald Alexis Huseby – D.A. Davidson Andrew Nicholas – William Blair Tobey Sommer – SunTrust Sam England – Berenberg Operator Good day and welcome to the Exponent Third Quarter of ...

Exponent, Inc. (NASDAQ:EXPO) Q2 2019 Earnings Conference Call July 18, 2019 4:30 PM ET Company Participants Whitney Kukulka – Investor Relations Catherine Corrigan – President and Chief Executive Officer Rich Schlenker – Executive Vice President and Chief Financial Officer Conference Call Participants Joseph Thompson – SunTrust Drew Kootman – Cantor Fitzgerald Tim McHugh – William Blair Sam England – Berenberg Marc Riddick – Sidoti Operator Good day, and welcome to the Exponent’s Second Quarter of Fiscal 20 ...

Exponent, Inc. (NASDAQ:EXPO) Q1 2019 Earnings Conference Call April 18, 2019 4:30 PM ET Company Participants Whitney Kukulka - Investor Relations Catherine Corrigan - President and Chief Executive Officer Richard Schlenker - Executive Vice President and Chief Financial Officer Paul Johnston - Executive Chairman Conference Call Participants Timothy McHugh - William Blair & Company L.L.C., Tobey Sommer - SunTrust Robinson Humphrey Joseph Foresi - Cantor Fitzgerald Securities Samuel England - Berenberg Capital ...

[Part I](index=4&type=section&id=PART%20I) [Business](index=4&type=section&id=Item%201.%20Business) Exponent is a science and engineering consulting firm with two operating segments serving diverse industries - Exponent is a science and engineering consulting firm with a multidisciplinary team covering over **90 technical disciplines**[11](index=11&type=chunk) - The company operates through two reportable segments: **Engineering and Other Scientific**, and **Environmental and Health**, with 18 distinct practices[15](index=15&type=chunk) - Key client industries in fiscal 2018 were consumer products (**27% of revenue**), transportation (**16%**), and energy/utilities (**15%**)[13](index=13&type=chunk) - As of December 28, 2018, the company employed 1,122 staff, including 886 engineering and scientific personnel, of whom **584 hold a Ph.D., Sc.D., or M.D.**[63](index=63&type=chunk) [Services](index=4&type=section&id=Item%201.%20Business%23Services) The company's services are structured within its Engineering and Environmental & Health segments - The Engineering and Other Scientific segment provides a wide range of services, including biomechanics, structural analysis, electrical engineering, human factors, materials science, mechanical engineering, and vehicle analysis[15](index=15&type=chunk)[17](index=17&type=chunk) - The Environmental and Health segment focuses on chemical regulation, food safety, ecological sciences, environmental and earth sciences, and health sciences, addressing risks to human health and the environment[18](index=18&type=chunk) - The company is actively engaged in emerging technology areas, including **Advanced Driver Assistive Systems (ADAS)**, automated vehicles, and evaluating fire risks of lithium-ion batteries[31](index=31&type=chunk)[48](index=48&type=chunk) [Competition](index=12&type=section&id=Item%201.%20Business%23Competition) The company operates in a fragmented and competitive market, differentiating on technical capability and reputation - The marketplace is fragmented, and the company believes barriers to entry are low, resulting in **increasing competition**[60](index=60&type=chunk)[62](index=62&type=chunk) - Key competitive factors include technical capability, breadth of services, timely delivery, professional reputation, and knowledge of litigation/regulatory processes[61](index=61&type=chunk) [Executive Officers](index=13&type=section&id=Item%201.%20Business%23Executive%20Officers) The executive team consists of experienced leaders with advanced degrees in science and engineering - Dr. Catherine Ford Corrigan was named **Chief Executive Officer in May 2018**, succeeding Dr. Paul R. Johnston, who became Executive Chairman of the Board[67](index=67&type=chunk)[68](index=68&type=chunk) - The executive team comprises individuals with extensive experience within the company and the industry, holding advanced degrees (primarily Ph.D.s) in various engineering and scientific fields[66](index=66&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) Key business risks include service unpredictability, talent retention, client concentration, and cybersecurity threats - Business is unpredictable and reactive, with engagements being terminable at any time, making **backlog an unreliable indicator** of future revenue[80](index=80&type=chunk) - Success is highly dependent on attracting and retaining key technical and managerial personnel in a competitive labor market[82](index=82&type=chunk) - The company faces risks from client concentration and financial instability, with the bankruptcy of PG&E noted for its **$6.0 million in outstanding receivables**[84](index=84&type=chunk)[86](index=86&type=chunk) - International operations expose the company to risks including currency fluctuations, regulatory burdens, and compliance with laws like the **FCPA and GDPR**[102](index=102&type=chunk) - Cybersecurity is a risk, as security breaches could disrupt operations and lead to unauthorized disclosure of confidential client or employee data[98](index=98&type=chunk)[99](index=99&type=chunk) [Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved comments from regulatory staff - None[116](index=116&type=chunk) [Properties](index=20&type=section&id=Item%202.%20Properties) The company owns and leases various office, laboratory, and testing facilities across the US and internationally - The company owns its **153,738 sq. ft. Silicon Valley facility** and an adjacent 27,000 sq. ft. warehouse in Menlo Park, CA[117](index=117&type=chunk) - A new **60,480 sq. ft. building** is under construction on 2.9 acres of land purchased in Natick, Massachusetts during Q1 2018[119](index=119&type=chunk) - Aggregate lease expense for all leased properties in fiscal 2018 was **$7,488,000**[120](index=120&type=chunk) [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - Exponent is not engaged in any material legal proceedings[121](index=121&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[123](index=123&type=chunk) [Part II](index=21&type=section&id=PART%20II) [Market for Common Equity, Stockholder Matters, and Issuer Purchases](index=21&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on NASDAQ under 'EXPO' with an active share repurchase program in place - The company's common stock is traded on the NASDAQ Global Select Market under the symbol **'EXPO'**[124](index=124&type=chunk) - On January 31, 2019, the Board of Directors authorized an additional **$75,000,000** for the repurchase of the Company's common stock[126](index=126&type=chunk) Share Repurchases for Q4 2018 (in thousands, except price per share) | Period | Total Shares Purchased | Average Price Paid | Remaining Authorization | |---|---|---|---| | Sep 29 - Dec 28, 2018 | 562 | $49.63 | $17,462 | [Selected Financial Data](index=23&type=section&id=Item%206.%20Selected%20Financial%20Data) A five-year summary of financial data highlights steady growth in revenues, net income, and total assets Selected Financial Data (2014-2018, in thousands, except per share data) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | |---|---|---|---|---|---| | **Revenues** | $379,523 | $347,799 | $315,076 | $312,832 | $304,704 | | **Operating Income** | $91,456 | $72,051 | $61,911 | $68,933 | $63,549 | | **Net Income** | $72,254 | $41,305 | $47,480 | $43,599 | $40,701 | | **Diluted EPS** | $1.33 | $0.77 | $0.87 | $0.80 | $0.74 | | **Cash Dividends per Share** | $0.52 | $0.42 | $0.36 | $0.30 | $0.25 | | **Total Assets** | $468,936 | $439,589 | $403,744 | $387,507 | $365,299 | | **Total Stockholders' Equity** | $313,909 | $289,088 | $273,346 | $262,804 | $244,288 | [Management's Discussion and Analysis (MD&A)](index=23&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenues grew 9% in 2018, with net income surging 75% primarily due to a lower U.S. corporate tax rate - Revenues for 2018 **increased 9%** year-over-year, and revenues before reimbursements increased 8%, driven by increased billable hours and billing rates[139](index=139&type=chunk) - Net income for 2018 **increased 74.9% to $72.3 million**, and diluted EPS rose to $1.33 from $0.77 in 2017, significantly impacted by U.S. tax legislation[138](index=138&type=chunk)[141](index=141&type=chunk) - Strong growth was noted in the human factors, materials & corrosion engineering, thermal sciences, polymer science & materials chemistry, mechanical engineering, and chemical regulation & food safety practices[140](index=140&type=chunk) - Total billable hours **increased by 5%** to 1,274,000 in 2018, while utilization decreased slightly to 73% from 75% in 2017[147](index=147&type=chunk) [Results of Operations](index=26&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Results%20of%20Operations) Revenue growth of 9.1% and a significantly lower effective tax rate drove a 74.9% increase in 2018 net income - The effective tax rate dropped to **22.6% in 2018 from 49.9% in 2017**, with the 2017 rate including a one-time expense of $16.5 million from new U.S. tax legislation[158](index=158&type=chunk)[159](index=159&type=chunk) Revenue by Segment (2018 vs. 2017, in thousands) | Segment | 2018 | 2017 | % Change | |---|---|---|---| | Engineering and Other Scientific | $306,265 | $277,603 | 10.3% | | Environmental and Health | $73,258 | $70,196 | 4.4% | | **Total Revenues** | **$379,523** | **$347,799** | **9.1%** | Key Expense and Income Changes (2018 vs. 2017) | Item | 2018 (% of Rev) | 2017 (% of Rev) | % Change (Dollar) | |---|---|---|---| | Compensation & Related | 56.7% | 60.5% | 2.3% | | Operating Income | 24.0% | 20.7% | 26.9% | | Provision for Income Taxes | 5.5% | 11.8% | (48.9)% | | Net Income | 19.0% | 11.9% | 74.9% | [Liquidity and Capital Resources](index=33&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Liquidity%20and%20Capital%20Resources) Operations are financed by cash flows, with liquidity deemed sufficient for the upcoming year - Cash, cash equivalents, and short-term investments totaled **$208.5 million** at the end of 2018, up from $196.4 million at the end of 2017[172](index=172&type=chunk) - Significant investing activities in 2018 included a **$5.2 million land purchase** in Natick, MA, and $5.3 million in associated construction costs[176](index=176&type=chunk) - As of December 28, 2018, the company had total contractual commitments of **$43.1 million**, including $30.8 million in operating leases and $12.3 million in purchase obligations[180](index=180&type=chunk) Summary of Cash Flows (in thousands) | Activity | 2018 | 2017 | 2016 | |---|---|---|---| | Net cash provided by operating activities | $91,188 | $67,838 | $66,946 | | Net cash used in investing activities | $(25,820) | $(17,722) | $(27,443) | | Net cash used in financing activities | $(62,500) | $(41,261) | $(49,166) | [Non-GAAP Financial Measures](index=36&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%23Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP measures like EBITDA and EBITDAS to evaluate its operating performance - **EBITDA as a percentage of revenues before reimbursements** increased to 27.3% in 2018, compared to 26.5% in 2017 and 24.9% in 2016[186](index=186&type=chunk) Reconciliation of Net Income to EBITDA and EBITDAS (in thousands) | Metric | 2018 | 2017 | 2016 | |---|---|---|---| | Net Income | $72,254 | $41,305 | $47,480 | | Add: Income taxes | $21,063 | $41,204 | $21,642 | | Add: Deprec. & Amort. | $6,292 | $6,285 | $6,131 | | Subtract: Interest income, net | $(2,751) | $(1,294) | $(683) | | **EBITDA** | **$96,858** | **$87,500** | **$74,570** | | Add: Stock-based comp. | $16,993 | $16,155 | $13,333 | | **EBITDAS** | **$113,851** | **$103,655** | **$87,903** | [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to market risks from interest rate fluctuations and foreign currency exchange - The company is exposed to interest rate risk on its portfolio of cash, cash equivalents, and short-term investments, though a **100 basis point change** would not have a material impact[190](index=190&type=chunk)[191](index=191&type=chunk) - Foreign currency risk exists from revenues and expenses denominated in British Pounds, Euros, and Chinese Yuan, with net assets in these currencies each at approximately **$5.4 million**[192](index=192&type=chunk)[193](index=193&type=chunk) - The company **does not use derivative financial instruments** or foreign exchange contracts to hedge its market risks[191](index=191&type=chunk)[195](index=195&type=chunk) [Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the financial statements and data found in Item 15 - The required financial statements and supplementary data are located in Part IV, Item 15 of this Form 10-K[197](index=197&type=chunk) [Changes in and Disagreements with Accountants](index=38&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with the company's accountants on financial disclosure are reported - None[198](index=198&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls, procedures, and internal controls over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the fiscal year 2018[200](index=200&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 28, 2018, based on the COSO 2013 framework[201](index=201&type=chunk) - KPMG LLP, the independent registered public accounting firm, audited and provided an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting[199](index=199&type=chunk)[220](index=220&type=chunk) [Other Information](index=38&type=section&id=Item%209B.%20Other%20Information) No other information is reported for this item - None[203](index=203&type=chunk) [Part III](index=38&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=38&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Required information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[205](index=205&type=chunk) [Executive Compensation](index=39&type=section&id=Item%2011.%20Executive%20Compensation) Required information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[207](index=207&type=chunk) [Security Ownership and Related Stockholder Matters](index=39&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Required information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[208](index=208&type=chunk) [Certain Relationships, Related Transactions, and Director Independence](index=39&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Required information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[209](index=209&type=chunk) [Principal Accounting Fees and Services](index=39&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Required information is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[210](index=210&type=chunk) [Part IV](index=40&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=40&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section includes the consolidated financial statements, auditor's report, and a list of exhibits [Report of Independent Registered Public Accounting Firm](index=41&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules%23Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued unqualified opinions on both the consolidated financial statements and internal controls - KPMG LLP issued an **unqualified (clean) opinion**, stating the financial statements are presented fairly in all material respects and conform with U.S. GAAP[220](index=220&type=chunk) - KPMG also opined that the Company maintained **effective internal control** over financial reporting as of December 28, 2018[220](index=220&type=chunk) [Consolidated Financial Statements](index=43&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules%23Consolidated%20Financial%20Statements) The financial statements detail strong 2018 performance with $379.5 million in revenue and $72.3 million in net income Consolidated Statement of Income Highlights (FY 2018, in thousands) | Line Item | Amount | |---|---| | Revenues | $379,523 | | Operating Income | $91,456 | | Net Income | $72,254 | | Diluted EPS | $1.33 | Consolidated Balance Sheet Highlights (As of Dec 28, 2018, in thousands) | Line Item | Amount | |---|---| | Cash and cash equivalents | $127,059 | | Total Current Assets | $326,612 | | Total Assets | $468,936 | | Total Liabilities | $155,027 | | Total Stockholders' Equity | $313,909 | Consolidated Statement of Cash Flows Highlights (FY 2018, in thousands) | Line Item | Amount | |---|---| | Net cash provided by operating activities | $91,188 | | Net cash used in investing activities | $(25,820) | | Net cash used in financing activities | $(62,500) | [Notes to Consolidated Financial Statements](index=49&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules%23Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, the impact of tax legislation, and risks from the PG&E bankruptcy - The company adopted the new revenue recognition standard (ASU 2014-09) in fiscal 2018 with **no material cumulative effect adjustment**[267](index=267&type=chunk) - The 2017 Tax Cuts and Jobs Act resulted in a one-time income tax expense increase of **$16.5 million in 2017**[300](index=300&type=chunk) - As a subsequent event, PG&E filed for bankruptcy on Jan 29, 2019, posing an uncertain collectability risk to **$6.0 million in accounts receivable**[350](index=350&type=chunk) - On Jan 31, 2019, the Board declared a quarterly dividend of $0.16 per share and authorized an additional **$75 million for share repurchases**[349](index=349&type=chunk) - One client accounted for **12% of revenues in 2018** and 14% in 2017[338](index=338&type=chunk)