Exponent(EXPO) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements for the second quarter and first half of 2025 Condensed Consolidated Balance Sheets Total assets slightly decreased to $759.4 million, while stockholders' equity increased due to a reduction in total liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 4, 2025 | January 3, 2025 | | :--- | :--- | :--- | | Total current assets | $425,651 | $446,881 | | Total assets | $759,430 | $777,270 | | Total current liabilities | $134,969 | $163,183 | | Total liabilities | $331,654 | $356,202 | | Total stockholders' equity | $427,776 | $421,068 | Condensed Consolidated Statements of Income Revenues grew modestly in Q2 and H1 2025, but net income declined year-over-year due to higher operating expenses Key Financial Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $141,962 | $140,536 | +1.0% | $287,469 | $285,469 | +0.7% | | Operating Income | $17,177 | $35,744 | -51.9% | $61,609 | $66,457 | -7.3% | | Net Income | $26,553 | $29,227 | -9.1% | $53,203 | $59,369 | -10.4% | | Diluted EPS | $0.52 | $0.57 | -8.8% | $1.03 | $1.15 | -10.4% | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased while cash used in financing activities rose significantly, driven by increased stock repurchases Cash Flow Summary for the Six Months Ended (in thousands) | Cash Flow Category | July 4, 2025 | June 28, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $43,496 | $58,771 | | Net cash used in investing activities | $(4,028) | $(2,628) | | Net cash used in financing activities | $(67,517) | $(39,829) | | Net change in cash and cash equivalents | $(27,100) | $16,112 | - The significant increase in cash used for financing activities was primarily due to repurchases of common stock, which rose to $32.7 million in H1 2025 from $5.7 million in H1 2024[29] Notes to Unaudited Condensed Consolidated Financial Statements These notes detail accounting policies, revenue recognition, and segment data, providing crucial context to the financial statements - The company's revenue is primarily generated from time and materials contracts, which accounted for 80% of total revenues in the first six months of 2025, consistent with the prior year[38] Segment Revenues for the Six Months Ended (in thousands) | Segment | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Engineering and other scientific | $243,115 | $239,948 | +1.3% | | Environmental and health | $44,354 | $45,521 | -2.6% | | Total revenues | $287,469 | $285,469 | +0.7% | - Changes in the market value of deferred compensation plan assets resulted in a $17.0 million increase in compensation expense and a corresponding gain in miscellaneous income for Q2 2025, significantly impacting reported operating income[58] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes financial results, highlighting modest revenue growth offset by lower net income due to rising expenses Results of Operations Segment performance analysis shows a decline in billable hours and utilization, with operating income impacted by deferred compensation and lease costs Q2 2025 vs Q2 2024 Segment Revenue Performance (in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Engineering and other scientific | $120,980 | $118,477 | +2.1% | | Environmental and health | $20,982 | $22,059 | -4.9% | | Total revenues | $141,962 | $140,536 | +1.0% | - Key operational metrics declined in Q2 2025 compared to Q2 2024: - Billable hours decreased by 6% to 359,000 - Utilization decreased to 72% from 75% - Technical full-time equivalent employees decreased by 2% to 958[83] - Compensation and related expenses increased 22.7% in Q2 2025, primarily due to a $16.1 million YoY increase in deferred compensation expense, which is linked to market value changes of plan assets and offset in 'Other income, net'[86][87] Liquidity and Capital Resources The company maintains strong liquidity with $231.8 million in cash, despite a decrease from significant share repurchases and dividends Cash Flow Summary for H1 2025 (in thousands) | Category | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $43,496 | $58,771 | | Net cash used in investing activities | $(4,028) | $(2,628) | | Net cash used in financing activities | $(67,517) | $(39,829) | - The company extended its Arizona land lease, which will increase annual lease payments from approximately $1.0 million to $6.2 million beginning in January 2028[114] Non-GAAP Financial Measures EBITDA and EBITDAS are presented as key non-GAAP performance metrics, both showing a decline in Q2 2025 compared to the prior year Reconciliation of Net Income to EBITDA and EBITDAS (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $26,553 | $29,227 | $53,203 | $59,369 | | 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 | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on its cash equivalents and foreign currency risk from its international operations - The company's primary foreign currency exposures are to the British Pound, Euro, Chinese Yuan, and Hong Kong Dollar[122] - As of July 4, 2025, the company had net assets denominated in non-functional currencies of approximately $3.4 million and does not use foreign exchange contracts to hedge its currency exposures[124][125] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[126] PART II – OTHER INFORMATION Legal Proceedings The company reports that it is not currently engaged in any material legal proceedings - Exponent is not engaged in any material legal proceedings[128] 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 - There were no material changes from risk factors as previously discussed in the Company's 2024 Annual Report[129] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 365,000 shares for $27.6 million in Q2 2025, with $61.6 million remaining under its repurchase authorization Share Repurchases for the Three Months Ended July 4, 2025 | Period | Total Shares Purchased (thousands) | Average Price Paid Per Share | Approximate Dollar Value Remaining for Repurchase (thousands) | | :--- | :--- | :--- | :--- | | April 5 to May 2 | 102 | $74.94 | $81,610 | | May 3 to May 30 | - | - | $81,610 | | May 31 to July 4 | 263 | $75.95 | $61,610 | | Total | 365 | $75.66 | $61,610 | Other Information This section discloses the adoption of a Rule 10b5-1 trading plan by the company's President and CEO for potential stock sales - On May 15, 2025, CEO Catherine Ford Corrigan adopted a Rule 10b5-1 trading plan for the sale of 16,128 shares, expiring on August 30, 2026[134]