Exponent(EXPO) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (unaudited) The unaudited condensed consolidated financial statements for Q1 2025 present flat revenues, a decline in net income and operating cash flow, and balance sheet changes, with accompanying notes providing essential financial context Condensed Consolidated Balance Sheets As of April 4, 2025, the balance sheet shows a decrease in total assets and liabilities, primarily due to reduced cash and accrued payroll, while total stockholders' equity increased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 4, 2025 | January 3, 2025 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $245,113 | $258,901 | | Total current assets | $432,796 | $446,881 | | Total assets | $763,239 | $777,270 | | Liabilities & Equity | | | | Total current liabilities | $130,272 | $163,183 | | Total liabilities | $321,831 | $356,202 | | Total stockholders' equity | $441,408 | $421,068 | Condensed Consolidated Statements of Income For Q1 2025, revenues remained flat, but net income and diluted earnings per share decreased significantly, largely due to a negative swing in miscellaneous income, while the quarterly dividend per share increased Q1 2025 vs. Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 (ended Apr 4) | Q1 2024 (ended Mar 29) | Change | | :--- | :--- | :--- | :--- | | Revenues | $145,507 | $144,933 | +0.4% | | Operating Income | $44,432 | $30,713 | +44.7% | | Net Income | $26,650 | $30,142 | -11.6% | | Diluted EPS | $0.52 | $0.59 | -11.9% | | Dividends per share | $0.30 | $0.28 | +7.1% | - The significant increase in operating income year-over-year is primarily due to a $15,600 thousand decrease in compensation expense related to the change in value of deferred compensation plan assets, which is offset in 'Other income (loss), net'[9][79] Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q1 2025 decreased to $27,596 thousand from $29,932 thousand in Q1 2024, reflecting lower net income partially offset by a positive foreign currency translation adjustment Comprehensive Income (in thousands) | Component | Q1 2025 (ended Apr 4) | Q1 2024 (ended Mar 29) | | :--- | :--- | :--- | | Net income | $26,650 | $30,142 | | Foreign currency translation adjustments | $946 | $(210) | | Comprehensive income | $27,596 | $29,932 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased by $20,340 thousand during Q1 2025, driven by net income, partially offset by dividends and treasury stock purchases - Key changes in stockholders' equity for Q1 2025 include: net income of $26,650 thousand, dividends of $15,800 thousand, and treasury stock purchases of $5,025 thousand[15] Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased in Q1 2025 due to working capital changes, while cash used in financing activities fell due to lower stock repurchases, with cash and cash equivalents ending at $245,113 thousand Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 (ended Apr 4) | Q1 2024 (ended Mar 29) | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,274 | $10,432 | | Net cash used in investing activities | $(1,754) | $(1,482) | | Net cash used in financing activities | $(20,049) | $(27,227) | | Net decrease in cash | $(13,788) | $(18,485) | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide critical context to the financial statements, detailing revenue sources, segment performance, stock compensation, and a significant long-term lease extension, along with a subsequent dividend declaration - In Q1 2025, 82% of the company's revenue was generated from time and materials contracts, compared to 80% in Q1 2024[28] Segment Revenues (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Engineering and Other Scientific | $122,135 | $121,471 | | Environmental and Health | $23,372 | $23,462 | | Total revenues | $145,507 | $144,933 | - The company extended its land lease in Arizona to January 2043, resulting in additional non-cash rent expense of approximately $1,085 thousand during Q1 2025[63][80] - On May 1, 2025, the Board of Directors declared a cash dividend of $0.30 per share[66] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a slight increase in quarterly revenues to $145,507 thousand, offset by a 12% decrease in net income to $26,650 thousand, attributed to higher operating expenses and a reduced tax benefit, while affirming focus on talent, expense control, and capital returns Executive Summary Revenues for Q1 2025 increased slightly to $145,507 thousand, while net income decreased 12% to $26,650 thousand, primarily due to higher operating expenses and a lower tax benefit, with growth in certain sectors offset by easing demand in consumer electronics - Revenues increased slightly to $145,507 thousand in Q1 2025, while net income decreased 12% to $26,650 thousand[72][73] - Growth drivers included dispute-related activities in chemicals, transportation, and utilities, while the consumer electronics sector saw an expected easing[72] Results of Operations Total revenues grew 0.4%, with operating income increasing 44.7% to $44,432 thousand, largely due to a $15,600 thousand deferred compensation adjustment, despite rising other operating expenses from a lease extension and IT spending - Billable hours decreased 4% to 376,000, while utilization remained flat at 75% year-over-year[75] - Compensation expenses decreased 16.0% primarily due to a $15,600 thousand change in the value of assets in the deferred compensation plan, which had an offsetting loss in 'Other income, net'[78][79] - Other operating expenses increased 14.9%, mainly from a $1,100 thousand non-cash rent expense for the Arizona land lease extension and a $336 thousand increase in computer-related expenses[80] Liquidity and Capital Resources The company ended Q1 2025 with $245,113 thousand in cash, with net cash from operations at $7,274 thousand, and significant future commitments including an extended Arizona land lease with annual payments increasing to approximately $6,200 thousand starting in 2028 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,274 | $10,432 | | Net cash used in investing activities | $(1,754) | $(1,482) | | Net cash used in financing activities | $(20,049) | $(27,227) | - The company's Arizona land lease was extended, with annual payments increasing from $1,000 thousand to approximately $6,200 thousand beginning in January 2028[94] Non-GAAP Financial Measures The company uses non-GAAP measures EBITDA and EBITDAS to evaluate performance, with EBITDA for Q1 2025 at $37,538 thousand, representing 27.3% of revenues before reimbursements, a decrease from the prior year due to higher stock-based compensation and occupancy expense EBITDA Reconciliation and Margin (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $26,650 | $30,142 | | EBITDA | $37,538 | $40,121 | | EBITDAS | $45,717 | $47,461 | | EBITDA as a % of revenues before reimbursements | 27.3% | 29.2% | Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on cash and foreign currency risk from international operations, which it manages through investment policy and without derivative instruments, having experienced no significant impact from currency fluctuations to date - The company has interest rate risk associated with its cash and cash equivalents, managed via an investment policy with short maturities[102] - Foreign currency risk exists from operations denominated in British Pound, Euro, Chinese Yuan, and Hong Kong Dollar, with the company not using foreign exchange contracts to hedge this exposure[103][106] Controls and Procedures As of April 4, 2025, management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of April 4, 2025[107] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[108] PART II – OTHER INFORMATION Legal Proceedings The company is not currently involved in any material legal proceedings - Exponent is not engaged in any material legal proceedings[109] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes from risk factors as previously discussed in the Company's 2024 Annual Report[110] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 65,000 shares of common stock for approximately $5,025 thousand, with $89,300 thousand remaining available for repurchase under existing programs Common Stock Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Total Value (in thousands) | | :--- | :--- | :--- | :--- | | March 1 to April 4 | 65,000 | $77.31 | $5,025 | | Total | 65,000 | $77.31 | $5,025 | - As of April 4, 2025, approximately $89,300 thousand remained available for repurchase under the company's stock repurchase programs, which have no expiration dates[111] Defaults Upon Senior Securities Not applicable - Not applicable[112] Mine Safety Disclosures Not applicable - Not applicable[113] Other Information No directors or officers of the company adopted, modified, or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement during the first fiscal quarter of 2025 - None of the Company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the fiscal quarter[114] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - The report includes CEO and CFO certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350, as well as Inline XBRL documents[115]