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 ~~October 1, 2021~~September 30, 2022


☐	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 other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

149 COMMONWEALTH DRIVE, MENLO PARK, California		94025
(Address of principal executive office)		(Zip Code)

~~(650)~~ (650) 326-9400

(Registrant’s telephone number, including area code)

~~Securities registered pursuant to Section 12(b) of the Act:~~

~~Title of each class~~		~~Trading Symbol~~		~~Name of each exchange on which registered~~
~~Common Stock, par value $0.001 per share~~		~~EXPO~~		~~Nasdaq Global Select Market~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes		☒		No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Yes		☒			No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes				No		☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	EXPO	Nasdaq Global Select Market

As of October ~~29, 2021,~~28, 2022, the latest practicable date, the registrant had 50,638,229~~52,111,508~~ shares of common stock outstanding.

EXPONENT, INC.

FORM 10-Q

TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION		3

Item 1.	Financial Statements (unaudited):	3

	Condensed Consolidated Balance Sheets as of ~~October 1, 2021~~September 30, 2022 and ~~January 1,~~December 31, 2021	3

	Condensed Consolidated Statements of Income ~~for~~For the Three and Nine Months Ended September 30, 2022 and October 1, 2021 ~~and October 2, 202~~0	4

	Condensed Consolidated Statements of Comprehensive Income ~~for~~For the Three and Nine Months Ended September 30, 2022 and October 1, 2021 ~~and~~ ~~October 2, 2020~~	5

	Condensed Consolidated Statements of Stockholders’ Equity ~~for~~For the Three and Nine Months Ended September 30, 2022 and October 1, 2021 ~~and October 2, 202~~0	6

	Condensed Consolidated Statements of Cash Flows ~~for~~For the Nine Months Ended September 30, 2022 and October 1, 2021 ~~and October 2, 202~~0	8

	Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3132

Item 4.	Controls and Procedures	3132

PART II – OTHER INFORMATION		33

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

	Signatures	35

- 2 -

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

EXPONENT, INC.

Condensed Consolidated Balance Sheets

~~October 1,~~September 30, 2022 and December 31, 2021 ~~and January 1, 2021~~

(in thousands, except par value)

(unaudited)


	October 1, 2021			January 1, 2021			September 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	229,785		$	197,525		$	148,443		$	297,687
Short-term investments		24,998			45,001
Accounts receivable, net of allowance for contract losses and doubtful accounts of $4,815 and $3,995 at October 1, 2021 and January 1, 2021, respectively		144,039			111,565
Accounts receivable, net of allowance for contract losses and doubtful accounts of $6,157 and $4,423 at September 30, 2022 and December 31, 2021, respectively								166,014			139,861
Prepaid expenses and other current assets		18,738			12,741			18,055			15,214
Total current assets		417,560			366,832			332,512			452,762

Property, equipment and leasehold improvements, net		60,082			59,823			64,289			59,971
Operating lease right-of-use assets		15,777			19,322			18,088			14,370
Goodwill		8,607			8,607			8,607			8,607
Deferred income taxes		42,561			40,539			50,501			46,546
Deferred compensation plan assets		92,048			83,731			83,722			99,962
Other assets		1,670			1,242			1,284			1,521
Total assets	$	638,305		$	580,096		$	559,003		$	683,739

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	21,443		$	16,327		$	31,825		$	24,504
Accrued payroll and employee benefits		87,179			83,194			84,938			103,552
Deferred revenues		12,192			11,800			15,791			19,762
Operating lease liabilities		5,604			5,987			5,363			5,164
Total current liabilities		126,418			117,308			137,917			152,982

Other liabilities		3,078			2,986			2,639			2,886
Deferred compensation plan liabilities		93,111			83,961			85,453			100,999
Operating lease liabilities		10,709			14,343			13,194			9,807
Total liabilities		233,316			218,598			239,203			266,674
Stockholders’ equity:
Common stock, $0.001 par value; 120,000 shares authorized; 65,707 shares issued at October 1, 2021 and January 1, 2021		66			66
Common stock, $0.001 par value; 120,000 shares authorized; 65,707 shares issued at September 30, 2022 and December 31, 2021								66			66
Additional paid-in capital		279,250			265,328			298,589			281,419
Accumulated other comprehensive income (loss)
Investment securities, available-for-sale		-			65
Accumulated other comprehensive loss
Foreign currency translation adjustments		(2,052	)		(1,997	)		(5,136	)		(1,983	)
		(2,052	)		(1,932	)
Retained earnings		468,578			421,809			518,631			478,370
Treasury stock, at cost; 13,595 and 13,903 shares held at October 1, 2021 and January 1, 2021, respectively		(340,853	)		(323,773	)
Treasury stock, at cost; 14,918 and 13,591 shares held at September 30, 2022 and December 31, 2021, respectively								(492,350	)		(340,807	)
Total stockholders’ equity		404,989			361,498			319,800			417,065
Total liabilities and stockholders’ equity	$	638,305		$	580,096		$	559,003		$	683,739

The accompanying notes are an integral part of these ~~unaudited~~Unaudited Condensed Consolidated Financial Statements.

- 3 -

EXPONENT, INC.

Condensed Consolidated Statements of Income

For the Three and Nine Months Ended September 30, 2022 and October 1, 2021 ~~and October 2, 2020~~

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended					Nine Months Ended
	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020		September 30, 2022			October 1, 2021		September 30, 2022			October 1, 2021
Revenues:
Revenues before reimbursements	$	108,467	$	93,499	$	330,514	$	281,082	$	115,143		$	108,467	$	351,231		$	330,514
Reimbursements		7,938		5,164		22,249		15,579		12,036			7,938		34,707			22,249
Revenues		116,405		98,663		352,763		296,661		127,179			116,405		385,938			352,763
Operating expenses:
Compensation and related expenses		64,138		62,419		210,491		180,541		62,779			64,138		189,982			210,491
Other operating expenses		8,017		7,839		23,848		23,736		8,822			8,017		25,742			23,848
Reimbursable expenses		7,938		5,164		22,249		15,579		12,036			7,938		34,707			22,249
General and administrative expenses		4,193		2,834		10,626		11,290		6,729			4,193		16,700			10,626
Total operating expenses		84,286		78,256		267,214		231,146		90,366			84,286		267,131			267,214
Operating income		32,119		20,407		85,549		65,515		36,813			32,119		118,807			85,549
Other income, net:
Interest income, net		13		316		54		1,496		638			13		834			54
Miscellaneous income (expense), net		257		3,915		11,579		3,096		(3,975	)		257		(17,926	)		11,579
Total other income, net		270		4,231		11,633		4,592		(3,337	)		270		(17,092	)		11,633
Income before income taxes		32,389		24,638		97,182		70,107		33,476			32,389		101,715			97,182
Income taxes		7,815		6,554		16,360		9,395		9,034			7,815		21,909			16,360
Net income	$	24,574	$	18,084	$	80,822	$	60,712	$	24,442		$	24,574	$	79,806		$	80,822
Net income per share:
Basic	$	0.47	$	0.35	$	1.54	$	1.16	$	0.47		$	0.47	$	1.54		$	1.54
Diluted	$	0.46	$	0.34	$	1.52	$	1.14	$	0.47		$	0.46	$	1.52		$	1.52
Shares used in per share computations:
Basic		52,618		52,316		52,597		52,383		51,492			52,618		51,934			52,597
Diluted		53,312		53,209		53,316		53,342		52,008			53,312		52,489			53,316
Cash dividends declared per common share	$	0.20	$	0.19	$	0.60	$	0.57	$	0.24		$	0.20	$	0.72		$	0.60

The accompanying notes are an integral part of these ~~unaudited~~Unaudited Condensed Consolidated Financial Statements

- 4 -

EXPONENT, INC.

Condensed Consolidated Statements of Comprehensive Income

For the Three and Nine Months Ended September 30, 2022 and October 1, 2021 ~~and October 2, 2020~~

(in thousands)

(unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020			September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Net income	$	24,574		$	18,084		$	80,822		$	60,712		$	24,442		$	24,574		$	79,806		$	80,822
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax		(266	)		550			(55	)		(1,052	)		(1,493	)		(266	)		(3,153	)		(55	)
Unrealized losses on available- for-sale investment securities arising during the period, net of tax		-			(129	)		(65	)		(172	)		-			-			-			(65	)
Comprehensive income	$	24,308		$	18,505		$	80,702		$	59,488		$	22,949		$	24,308		$	76,653		$	80,702

The accompanying notes are an integral part of these ~~unaudited~~Unaudited Condensed Consolidated Financial Statements

- 5 -

EXPONENT, ~~INC.~~INC

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2022 and October 1, 2021

(in thousands)

(unaudited)


	Three and Nine Months Ended October 1, 2021																						Three and Nine Months Ended September 30, 2022
	Common Stock				Additional paid-in			Accumulated other comprehensive			Retained			Treasury Stock									Common Stock				Additional paid-in			Accumulated other comprehensive			Retained			Treasury Stock
(In thousands)	Shares		Amount		capital			income (loss)			earnings			Shares			Amount			Total			Shares		Amount		capital			loss			earnings			Shares			Amount			Total
Balance at January 1, 2021		65,707	$	66	$	265,328		$	(1,932	)	$	421,809			13,903		$	(323,773	)	$	361,498
Balance at December 31, 2021																								65,707	$	66	$	281,419		$	(1,983	)	$	478,370			13,591		$	(340,807	)	$	417,065
Employee stock purchase plan		-		-		909			-			-			(12	)		114			1,023			-		-		961			-			-			(12	)		109			1,070
Amortization of unrecognized stock-based compensation		-		-		5,676			-			-			-			-			5,676			-		-		5,939			-			-			-			-			5,939
Purchase of treasury stock		-		-		-			-			-			79			(7,000	)		(7,000	)		-		-		-			-			-			1,273			(111,843	)		(111,843	)
Foreign currency translation adjustments		-		-		-			211			-			-			-			211			-		-		-			(1,660	)		-			-			-			(1,660	)
Grant of restricted stock units to settle accrued bonus		-		-		7,637			-			-			-			-			7,637			-		-		10,200			-			-			-			-			10,200
Settlement of restricted stock units		-		-		(3,269	)		-			(1,679	)		(322	)		(10,718	)		(15,666	)		-		-		(2,421	)		-			(1,392	)		(262	)		(9,091	)		(12,904	)
Unrealized loss on investments		-		-		-			(65	)		61			-			-			(4	)
Dividends and dividend equivalent rights		-		-		-			-			(21,856	)		-			-			(21,856	)		-		-		-			-			(25,737	)		-			-			(25,737	)
Net income		-		-		-			-			56,248			-			-			56,248			-		-		-			-			55,364			-			-			55,364
Balance at July 2, 2021		65,707	$	66	$	276,281		$	(1,786	)	$	454,583			13,648		$	(341,377	)	$	387,767
Balance at July 1, 2022																								65,707	$	66	$	296,098		$	(3,643	)	$	506,605			14,590		$	(461,632	)	$	337,494
Employee stock purchase plan		-		-		471			-			-			(5	)		47			518			-		-		492			-			-			(7	)		65			557
Exercise of stock options		-		-		658			-			-			(48	)		477			1,135
Amortization of unrecognized stock-based compensation		-		-		1,840			-			-			-			-			1,840			-		-		1,999			-			-			-			-			1,999
Purchase of treasury stock																								-		-		-			-			-			335			(30,783	)		(30,783	)
Foreign currency translation adjustments		-		-		-			(266	)		-			-			-			(266	)		-		-		-			(1,493	)		-			-			-			(1,493	)
Dividends and dividend equivalent rights		-		-		-			-			(10,579	)		-			-			(10,579	)		-		-		-			-			(12,416	)		-			-			(12,416	)
Net income		-		-		-			-			24,574			-			-			24,574			-		-		-			-			24,442			-			-			24,442
Balance at October 1, 2021		65,707	$	66	$	279,250		$	(2,052	)	$	468,578			13,595		$	(340,853	)	$	404,989
Balance at September 30, 2022																								65,707	$	66	$	298,589		$	(5,136	)	$	518,631			14,918		$	(492,350	)	$	319,800

~~- 6 -~~

~~EXPONENT, INC.~~

~~Condensed Consolidated Statements of Stockholders’ Equity~~

~~(in thousands)~~

~~(unaudited)~~

Three and Nine Months Ended October 2, 2020

Common Stock

Additional
paid-in

Accumulated
other
comprehensive

Retained

Treasury Stock

(In thousands)

Shares

Amount

capital

income (loss)

earnings

Shares

Amount

Total

Balance at January 3, 2020

65,707

$
66

$
244,935

$
(1,760
)

$
384,668

13,951

$
(277,658
)

$
350,251

Employee stock purchase plan

-

-

774

-

-

(13
)

131

905

Exercise of stock options

-

-

454

-

-

(114
)

1,174

1,628

Amortization of unrecognized stock-based
compensation

-

-

5,758

-

-

-

-

5,758

Purchase of treasury stock

-

-

-

-

-

636

(40,049
)

(40,049
)
Foreign currency translation adjustments

-

-

-

(1,602
)

-

-

-

(1,602
)
Grant of restricted stock units to settle accrued bonus

-

-

8,645

-

-

-

-

8,645

Settlement of restricted stock units

-

-

(1,460
)

-

(4,538
)

(376
)

(9,265
)

(15,263
)
Unrealized loss on investments

-

-

-

(43
)

-

-

-

(43
)
Dividends and dividend equivalent rights

-

-

511

-

(20,802
)

-

-

(20,291
)
Net income

-

-

-

-

42,628

-

-

42,628

Balance at July 3, 2020

65,707

$
66

$
259,617

$
(3,405
)

$
401,956

14,084

$
(325,667
)

$
332,567

Employee stock purchase plan

-

-

405

-

-

(7
)

74

479

Amortization of unrecognized stock-based
compensation

-

-

1,691

-

-

-

-

1,691

Foreign currency translation adjustments

-

-

-

550

-

-

-

550

Unrealized loss on investments

-

-

-

(129
)

-

-

-

(129
)
Dividends and dividend equivalent rights

-

-

-

-

(10,045
)

-

-

(10,045
)
Net income

-

-

-

-

18,084

-

-

18,084

Balance at October 2, 2020

65,707

$
66

$
261,713

$
(2,984
)

$
409,995

14,077

$
(325,593
)

$
343,197

The accompanying notes are an integral part of these ~~unaudited~~Unaudited Condensed Consolidated Financial Statements.

- 76 -

EXPONENT, ~~INC.~~INC

Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2022 and October 1, 2021 ~~and October 2, 2020~~

(in thousands)

(unaudited)

Nine Months Ended

October 1,
2021

October 2,
2020

Cash flows from operating activities:

Net income

$
80,822

$
60,712

Adjustments to reconcile net income to net cash provided by
   operating activities:

Depreciation and amortization of property, equipment and
   leasehold improvements

4,943

5,176

Amortization of premiums and accretion of discounts on short-term
   investments

(11
)

(150
)
Provision for contract losses and doubtful accounts

1,197

2,890

Stock-based compensation

15,239

13,326

Deferred income tax provision

(2,020
)

(2,505
)
Changes in operating assets and liabilities:

Accounts receivable

(33,671
)

7,284

Prepaid expenses and other current assets

(4,878
)

(8,439
)
Change in operating leases

(472
)

(331
)
Accounts payable and accrued liabilities

5,784

311

Accrued payroll and employee benefits

3,053

(12,507
)
Deferred revenues

392

(3,320
)
Net cash provided by operating activities

70,378

62,447

Cash flows from investing activities:

Capital expenditures

(5,437
)

(4,144
)
Purchase of short-term investments

(34,994
)

-

Maturity of short-term investments

55,000

35,000

Net cash provided by investing activities

14,569

30,856

Cash flows from financing activities:

Payroll taxes for restricted stock units

(15,666
)

(15,263
)
Repurchase of common stock

(7,000
)

(40,049
)
Exercise of stock-based payment awards

2,675

3,013

Dividends and dividend equivalents rights

(32,775
)

(29,936
)
Net cash used in financing activities

(52,766
)

(82,235
)
Effect of foreign currency exchange rates on cash and cash equivalents

79

128

Net change in cash and cash equivalents

32,260

11,196

Cash and cash equivalents at beginning of period

197,525

176,436

Cash and cash equivalents at end of period

$
229,785

$
187,632


	Three and Nine Months Ended October 1, 2021
	Common Stock				Additional paid-in			Accumulated other comprehensive			Retained			Treasury Stock
(In thousands)	Shares		Amount		capital			income (loss)			earnings			Shares			Amount			Total
Balance at January 1, 2021		65,707	$	66	$	265,328		$	(1,932	)	$	421,809			13,903		$	(323,773	)	$	361,498
Employee stock purchase plan		-		-		909			-			-			(12	)		114			1,023
Amortization of unrecognized stock-based compensation		-		-		5,676			-			-			-			-			5,676
Purchase of treasury stock		-		-		-			-			-			79			(7,000	)		(7,000	)
Foreign currency translation adjustments		-		-		-			211			-			-			-			211
Grant of restricted stock units to settle accrued bonus		-		-		7,637			-			-			-			-			7,637
Settlement of restricted stock units		-		-		(3,269	)		-			(1,679	)		(322	)		(10,718	)		(15,666	)
Unrealized gain on investments		-		-		-			(65	)		61			-			-			(4	)
Dividends and dividend equivalent rights		-		-		-			-			(21,856	)		-			-			(21,856	)
Net income		-		-		-			-			56,248			-			-			56,248
Balance at July 2, 2021		65,707	$	66	$	276,281		$	(1,786	)	$	454,583			13,648		$	(341,377	)	$	387,767
Employee stock purchase plan		-		-		471			-			-			(5	)		47			518
Exercise of stock options						658									(48	)		477			1,135
Amortization of unrecognized stock-based compensation		-		-		1,840			-			-			-			-			1,840
Foreign currency translation adjustments		-		-		-			(266	)		-			-			-			(266	)
Dividends and dividend equivalent rights		-		-		-			-			(10,579	)		-			-			(10,579	)
Net income		-		-		-			-			24,574			-			-			24,574
Balance at October 1, 2021		65,707	$	66	$	279,250		$	(2,052	)	$	468,578		$	13,595		$	(340,853	)	$	404,989

The accompanying notes are an integral part of these ~~unaudited~~Unaudited Condensed Consolidated Financial Statements.

- 7 -

EXPONENT, INC.

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2022 and October 1, 2021

(in thousands)

(unaudited)


	Nine Months Ended
	September 30, 2022			October 1, 2021
Cash flows from operating activities:
Net income	$	79,806		$	80,822
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment and leasehold improvements		5,224			4,943
Amortization of premiums and accretion of discounts on short-term investments		-			(11	)
Provision for contract losses and doubtful accounts		2,112			1,197
Stock-based compensation		16,072			15,239
Deferred income tax provision		(3,955	)		(2,020	)
Changes in operating assets and liabilities:
Accounts receivable		(28,265	)		(33,671	)
Prepaid expenses and other current assets		(7,583	)		(4,878	)
Change in operating leases		(132	)		(472	)
Accounts payable and accrued liabilities		5,140			5,784
Accrued payroll and employee benefits		(11,211	)		3,053
Deferred revenues		(3,971	)		392
Net cash provided by operating activities		53,237			70,378
Cash flows from investing activities:
Capital expenditures		(9,108	)		(5,437	)
Purchase of short-term investments		-			(34,994	)
Maturity of short-term investments		-			55,000
Net cash (used in) provided by investing activities		(9,108	)		14,569
Cash flows from financing activities:
Payroll taxes for restricted stock units		(12,904	)		(15,666	)
Repurchase of common stock		(142,195	)		(7,000	)
Exercise of stock-based payment awards		1,627			2,675
Dividends and dividend equivalents rights		(37,084	)		(32,775	)
Net cash used in financing activities		(190,556	)		(52,766	)
Effect of foreign currency exchange rates on cash and cash equivalents		(2,817	)		79
Net change in cash and cash equivalents		(149,244	)		32,260
Cash and cash equivalents at beginning of period		297,687			197,525
Cash and cash equivalents at end of period	$	148,443		$	229,785

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

- 8 -

EXPONENT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

Exponent, Inc. (referred to as the “Company” or “Exponent”) is an engineering and scientific consulting firm that provides solutions to complex problems. The Company operates on a 52-53 week fiscal year ending on the Friday closest to the last day of December.

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission. Accordingly, they do not contain all the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments which are necessary for the fair presentation of the condensed consolidated financial statements have been included and all such adjustments are of a normal and recurring nature. The operating results for the three and nine months ended ~~October 1, 2021~~September 30, 2022 are not necessarily representative of the results of future quarterly or annual periods. The following information should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2021, which was filed with the U.S. Securities and Exchange Commission on February ~~26, 2021.~~25, 2022.

The unaudited condensed consolidated financial statements include the accounts of Exponent, Inc. and its subsidiaries, which are all wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Items subject to such estimates and assumptions include accounting for revenue recognition and estimating the allowance for contract losses and doubtful accounts. Actual results could differ from those estimates.

Note 2: Revenue Recognition

Substantially all of the Company’s engagements are performed under time and materials or fixed-price arrangements. For time and materials contracts, the Company utilizes the practical expedient under Accounting Standards Codification 606 – Revenue from Contracts with Customers, which states that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value of the entity’s performance completed to date (for example, a service contract in which an entity bills a fixed amount for each hour of service provided), then the entity may recognize revenue in the amount to which the entity has a right to invoice.

The following table discloses the percentage of the Company’s revenue generated from time and materials contracts:


	Three Months Ended						Nine Months Ended
	September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Engineering & Other Scientific		64	%		62	%		63	%		62	%
Environmental and Health		14	%		16	%		16	%		17	%
Total time and materials revenues		78	%		78	%		79	%		79	%

Three Months Ended

Nine Months Ended

October 1,
2021

October 2,
2020

October 1,
2021

October 2,
2020

Engineering & Other Scientific

62
%

59
%

62
%

62
%
Environmental and Health

16
%

19
%

17
%

20
%
Total time and materials revenues

78
%

78
%

79
%

82
%

- 9 -

For fixed-price contracts, the Company recognizes revenue over time because of the continuous transfer of control to the customer. The customer typically controls the work in process as evidenced either by contractual termination clauses or by the Company’s rights to payment for work performed to date to deliver services that do not have an alternative use to the Company. Revenue for fixed-price contracts is recognized based on the relationship of incurred labor hours at standard rates to the Company’s estimate of the total labor hours at standard rates it expects to incur over the term of the contract. The Company believes this methodology achieves a reliable measure of the revenue from the consulting services it provides to its customers under fixed-price contracts given the nature of the consulting services the Company provides.

The following table discloses the percentage of the Company’s revenue generated from fixed price contracts:


	Three Months Ended						Nine Months Ended
	September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Engineering & Other Scientific		21	%		21	%		20	%		20	%
Environmental and Health		1	%		1	%		1	%		1	%
Total fixed price revenues		22	%		22	%		21	%		21	%

Three Months Ended

Nine Months Ended

October 1,
2021

October 2,
2020

October 1,
2021

October 2,
2020

Engineering & Other Scientific

21
%

21
%

20
%

17
%
Environmental and Health

1
%

1
%

1
%

1
%
Total fixed price revenues

22
%

22
%

21
%

18
%

Deferred revenues represent amounts billed to clients in advance of services provided. During the third quarter of ~~2021, $4,517,000~~2022, $6,343,000 of revenues were recognized that were included in the deferred revenue balance at July ~~2, 2021.~~1, 2022. During the first nine months of ~~2021, $7,724,000~~2022, $14,215,000 of revenues were recognized that were included in the deferred revenue balance at ~~January 1,~~December 31, 2021.

Reimbursements, including those related to travel and other out-of-pocket expenses, and other similar third- party costs such as the cost of materials and certain subcontracts, are included in revenues, and an equivalent amount of reimbursable expenses are included in operating expenses. Any mark-up on reimbursable expenses is included in revenues before reimbursements. The Company reports revenues net of subcontractor fees for certain subcontracts where the Company has determined that it is acting as an agent because its performance obligation is to arrange for the provision of goods or services by another party. The total amount of subcontractor fees not included in revenues because the Company was acting as an agent were ~~$1,219,000~~$6,996,000 and ~~$347,000~~$1,219,000 during the third quarter of ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$9,923,000~~$18,040,000 and ~~$7,718,000~~$9,923,000 during the ~~first~~ nine months of 2022 and 2021, ~~and 2020,~~ respectively.

- 10 -

Note 3: Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including ~~available-for-sale fixed income~~money market securities, trading fixed income and equity securities held in its deferred compensation plan and the liability associated with its deferred compensation plan. There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2022 and October 1, ~~2021 and October 2, 2020.~~2021. Any transfers between fair value measurement levels would be recorded on the actual date of the event or change in circumstances that caused the transfer. The fair value of these certain financial assets and liabilities was determined using the following inputs at ~~October 1, 2021:~~

September 30, 2022:

Fair Value Measurements at Reporting Date Using

(In thousands)

Total

Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets

Money market securities ⁽¹⁾

$
76,579

$
76,579

$
0

$
0

Fixed income available for sale securities ⁽²⁾

24,998

0

24,998

0

Fixed income trading securities held in deferred
compensation plan ⁽³⁾

24,789

24,789

0

0

Equity trading securities held in deferred compensation
plan ⁽³⁾

79,490

79,490

0

0

Total

$
205,856

$
180,858

$
24,998

$
0

Liabilities

Deferred compensation plan ⁽⁴⁾

105,342

105,342

0

0

Total

$
105,342

$
105,342

$
0

$
0


	Fair Value Measurements at Reporting Date Using
(In thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market securities (1)	$	51,794	$	51,794	$	-	$	-
Fixed income trading securities held in deferred compensation plan (2)		33,772		33,772		-		-
Equity trading securities held in deferred compensation plan (2)		60,807		60,807		-		-
Total	$	146,373	$	146,373	$	-	$	-
Liabilities
Deferred compensation plan (3)		94,502		94,502		-		-
Total	$	94,502	$	94,502	$	-	$	-

⁽¹⁾

(1)

Included in cash and cash equivalents on the Company’s unaudited condensed consolidated balance sheet.

(2)

Included in ~~short-term investments~~prepaid expenses and other current assets and deferred compensation plan assets on the Company’s unaudited condensed consolidated balance sheet.

(3)

Included in accrued payroll and employee benefits and deferred compensation plan liabilities on the Company’s unaudited condensed consolidated balance sheet.

⁽³⁾

~~Included in prepaid expenses and other current assets and deferred compensation plan assets on the Company’s unaudited condensed consolidated balance sheet.~~

⁽⁴⁾	~~Included in accrued payroll and employee benefits and deferred compensation plan liabilities on the Company’s unaudited condensed consolidated balance sheet.~~

- 11 -

The fair value of these certain financial assets and liabilities was determined using the following inputs at ~~January 1,~~December 31, 2021:


	Fair Value Measurements at Reporting Date Using
(In thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Money market securities (1)	$	101,581	$	101,581	$	-	$	-
Fixed income trading securities held in deferred compensation plan (2)		25,275		25,275		-		-
Equity trading securities held in deferred compensation plan (2)		84,067		84,067		-		-
Total	$	210,923	$	210,923	$	-	$	-
Liabilities
Deferred compensation plan (3)		110,379		110,379		-		-
Total	$	110,379	$	110,379	$	-	$	-

Fair Value Measurements at Reporting Date Using

(In thousands)

Total

Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets

Money market securities⁽¹⁾

$
51,442

$
51,442

$
0

$
0

Fixed income available for sale securities ⁽²⁾

45,001

0

45,001

0

Fixed income trading securities held in deferred
compensation plan ⁽³⁾

26,274

26,274

0

0

Equity trading securities held in deferred compensation
plan ⁽³⁾

62,473

62,473

0

0

Total

$
185,190

$
140,189

$
45,001

$
0

Liabilities

Deferred compensation plan ⁽⁴⁾

88,977

88,977

0

0

Total

$
88,977

$
88,977

$
0

$
0

(1)

Included in cash and cash equivalents on the Company’s unaudited condensed consolidated balance sheet.

(2)

Included in prepaid expenses and other current assets and deferred compensation plan assets on the Company’s unaudited condensed consolidated balance sheet.

(3)

Included in accrued payroll and employee benefits and deferred compensation plan liabilities on the Company’s unaudited condensed consolidated balance sheet.

⁽¹⁾	~~Included in cash and cash equivalents on the Company’s unaudited condensed consolidated balance sheet.~~

⁽²⁾	~~Included in short-term investments on the Company’s unaudited condensed consolidated balance sheet.~~

⁽³⁾	~~Included in prepaid expenses and other current assets and deferred compensation plan assets on the Company’s unaudited condensed consolidated balance sheet.~~

⁽⁴⁾	~~Included in accrued payroll and employee benefits and deferred compensation plan liabilities on the Company’s unaudited condensed consolidated balance sheet.~~

~~Fixed income available-for-sale~~Money market securities as of ~~January 1,~~September 30, 2022 and December 31, 2021 represent obligations of the United States Treasury. Fixed income and equity trading securities represent mutual funds held in the Company’s deferred compensation plan. See Note 6 for additional information about the Company’s deferred compensation plan.

Cash and cash equivalents ~~and short-term investments~~ consisted of the following as of ~~October 1, 2021:~~September 30, 2022:


			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated		Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value		Cost		Gains		Losses		Fair Value
Classified as current assets:
Cash	$	153,206	$	0	$	0	$	153,206	$	96,649	$	-	$	-	$	96,649
Cash equivalents:
Money market securities		76,579		0		0		76,579		51,794		-		-		51,794
Total cash equivalents		76,579		0		0		76,579		51,794		-		-		51,794
Total cash and cash equivalents		229,785		0		0		229,785		148,443		-		-		148,443
Short-term investments:
U.S. Treasury and agency securities		24,998		0		0		24,998
Total short-term investments		24,998		0		0		24,998
Total cash, cash equivalents and short-term investments	$	254,783	$	0	$	0	$	254,783

- 12 -

Cash and cash equivalents ~~and short-term investments~~ consisted of the following as of ~~January 1,~~December 31, 2021:


	Amortized		Unrealized		Unrealized		Estimated		Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value		Cost		Gains		Losses		Fair Value
Classified as current assets:
Cash	$	146,083	$	0	$	0	$	146,083	$	196,106	$	-	$	-	$	196,106
Cash equivalents:
Money market securities		51,442		0		0		51,442		101,581		-		-		101,581
Total cash equivalents		51,442		0		0		51,442		101,581		-		-		101,581
Total cash and cash equivalents		197,525		0		0		197,525	$	297,687	$	-	$	-	$	297,687
Short-term investments:
U.S. Treasury and agency securities		44,993		8		0		45,001
Total short-term investments		44,993		8		0		45,001
Total cash, cash equivalents and short-term investments	$	242,518	$	8	$	0	$	242,526

At ~~October 1, 2021~~September 30, 2022 and ~~January 1,~~December 31, 2021, the Company did not have any assets or liabilities valued using significant unobservable inputs.

The following financial instruments are not measured at fair value on the ~~Company’s~~Company's unaudited condensed consolidated balance sheet at ~~October 1, 2021~~September 30, 2022 and ~~January 1,~~December 31, 2021, but require disclosure of their fair values: accounts receivable, other assets and accounts payable. The estimated fair value of such instruments at ~~October 1, 2021~~September 30, 2022 and ~~January 1,~~December 31, 2021 approximates their carrying value as reported on the Company’s unaudited condensed consolidated balance sheet.

~~There were no other-than-temporary impairments or credit losses related to available-for-sale securities during the three and nine months ended October 1, 2021 and October 2, 2020.~~

Note 4: Net Income Per Share

Basic per share amounts are computed using the weighted-average number of common shares outstanding during the period. Diluted per share amounts are calculated using the weighted-average number of common shares outstanding during the period and, when dilutive, the weighted-average number of potential common shares from the issuance of common stock to satisfy outstanding restricted stock units and the exercise of outstanding options to purchase common stock using the treasury stock method.

The following schedule reconciles the shares used to calculate basic and diluted net income per share:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Shares used in basic per share computation		52,618		52,316		52,597		52,383		51,492		52,618		51,934		52,597
Effect of dilutive common stock options outstanding		245		331		239		351		202		245		202		239
Effect of dilutive restricted stock units outstanding		449		562		480		608		314		449		353		480
Shares used in diluted per share computation		53,312		53,209		53,316		53,342		52,008		53,312		52,489		53,316

~~- 13 -~~

~~Common stock options to purchase~~There were no ~~0 and 40,000 shares were~~equity awards excluded from the diluted per share calculation for the three ~~months ended October 1, 2021~~ and ~~October 2, 2020, respectively, due to their anti-dilutive effect. Common stock options to purchase 0 and 34,139 shares were excluded from the diluted per share calculation for the~~ nine months ended September 30, 2022 and October 1, ~~2021 and October 2, 2020, respectively, due to their anti-dilutive effect.~~2021.

Note 5: Stock-Based Compensation

Restricted Stock Units

Restricted stock unit grants are designed to attract and retain employees, and to better align employee interests with those of the Company’s stockholders. For a select group of employees, up to ~~40%~~40% of their annual bonus is settled with fully vested restricted stock unit awards. Under these fully vested restricted stock unit awards, the holder of each award has the right to receive one share of the Company’s common stock for each fully vested restricted stock unit four years from the date of grant. Each individual who receives a fully vested restricted stock unit award is also granted a matching number of unvested restricted stock unit awards. Unvested restricted stock unit awards are also granted for select new hires and promotions. These unvested restricted stock unit awards generally cliff vest four years from the date of grant, at which time the holder of each award will have the right to receive one share of the Company’s

- 13 -

common stock for each restricted stock unit award provided the holder of each award has met certain employment conditions. In the case of retirement at 59½ years or older, all unvested restricted stock unit awards will continue to vest, provided that the holder of each award does all consulting work through the Company and does not become an employee for a past or present client, beneficial party or competitor of the Company.

The value of these restricted stock unit awards is determined based on the market price of the Company’s common stock on the date of grant. The value of fully vested restricted stock unit awards issued is recorded as a reduction to accrued bonuses. The portion of bonus expense that the Company expects to settle with fully vested restricted stock unit awards is recorded as stock-based compensation during the period the bonus is earned. The Company recorded stock-based compensation expense associated with accrued bonus awards of ~~$2,525,000~~$2,606,000 and ~~$2,035,000~~$2,525,000 during the three months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ respectively. For the nine months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ the Company recorded stock-based compensation expense associated with accrued bonus awards of ~~$7,723,000~~$8,133,000 and ~~$5,876,000,~~$7,723,000, respectively. The value of the unvested restricted stock unit awards granted is recognized on a straight-line basis over the shorter of the four-year vesting period or the period between the grant date and the date the award recipient turns 59½. If the award recipient is 59½ years or older on the date of grant, the value of the entire award is expensed upon grant. The Company recorded stock-based compensation expense associated with the unvested restricted stock unit awards of ~~$1,654,000~~$1,787,000 and ~~$1,519,000~~$1,654,000 during the three months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ respectively. The Company recorded stock-based compensation expense associated with the unvested restricted stock unit awards of ~~$6,967,000~~$7,315,000 and ~~$6,922,000~~$6,967,000 during the nine months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ respectively.

Stock Options

Stock options are granted for terms of ten years and generally vest ~~25%~~25% per year over a four-year period from the grant date. Unvested stock option awards will continue to vest in the case of retirement at 59½ years or older, provided that the holder of each award does all consulting work through the Company and does not become an employee for a past or present client, beneficial party or competitor of the Company. The value of the unvested stock option awards granted is recognized on a straight-line basis over the shorter of the four-year vesting period or the period between the grant date and the date the award recipient turns 59½. If the award recipient is 59½ years or older on the date of grant, the value of the entire award is expensed upon grant. The Company recorded stock-based compensation expense associated with stock option grants of ~~$186,000~~$212,000 and ~~$173,000~~$186,000 during the three months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ respectively. The Company recorded stock-based compensation expense associated with stock option grants of ~~$549,000~~$623,000 and ~~$528,000~~$549,000 during the nine months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ respectively.

~~- 14 -~~

The Company uses the Black-Scholes option-pricing model to determine the fair value of options granted. The determination of the fair value of stock option awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate and expected dividends.

The Company used historical exercise, forfeiture, and post-vesting expiration data to estimate the expected term of options granted. The historical volatility of the Company’s common stock over a period of time equal to the expected term of the options granted was used to estimate expected volatility. The risk-free interest rate used in the option-pricing model was based on United States Treasury zero-coupon issues with remaining terms similar to the expected term of the options. The dividend yield assumption considers the expectation of continued declaration of dividends, offset by option holders’ dividend equivalent rights.

The Company accounts for forfeitures of stock-based awards when they occur. All stock-based payment awards are recognized on a straight-line basis over the requisite service periods of the awards.

- 14 -

Note 6: Deferred Compensation Plans

The Company maintains nonqualified deferred compensation plans for the benefit of a select group of highly compensated employees. Under these plans, participants may elect to defer up to ~~100%~~100% of their compensation. Company assets that are earmarked to pay benefits under the plans are held in a rabbi trust and are subject to the claims of the Company’s creditors. As of ~~October 1, 2021,~~September 30, 2022 and ~~January 1,~~December 31, 2021 the invested amounts under the plans totaled ~~$104,279,000~~$94,579,000 and ~~$88,747,000,~~$109,342,000, respectively, and are recorded in prepaid expenses and other current assets and deferred compensation plan assets on the Company’s unaudited condensed consolidated balance ~~sheet.~~sheets. These assets are classified as trading securities and are recorded at fair value with changes recorded as adjustments to miscellaneous income (expense), net.

As of ~~October 1, 2021,~~September 30, 2022 and ~~January 1,~~December 31, 2021 vested amounts due under the plans totaled ~~$105,342,000~~$94,502,000 and ~~$88,977,000,~~$110,379,000, respectively, and are recorded within accrued payroll and employee benefits and deferred compensation plan liabilities on the Company’s unaudited condensed consolidated balance ~~sheet.~~sheets. Changes in the liability are recorded as adjustments to compensation expense. During the three months ended September 30, 2022, the Company recognized a reduction to compensation expense of $4,925,000 as a result of changes in the market value of the trust assets with the same amount being recorded as a loss in miscellaneous income (expense), net. During the three months ended October 1, 2021, the Company recognized a reduction to compensation expense of ~~$258,000. The change in compensation expense was recorded due to~~$258,000 as a result of changes in the market ~~valve~~value of the trust assets with the same amount being recorded as ~~an expense~~a loss in miscellaneous income (expense), net. During the nine months ended September 30, 2022, the Company recognized a reduction in compensation expense of $20,884,000 as a result of changes in the market value of the trust assets with the same amount being recorded as a loss in miscellaneous income (expense), net. During the ~~three~~nine months ended October ~~2, 2020,~~1, 2021, the Company recognized additional compensation expense of ~~$3,220,000~~$9,997,000 as a result of changes in the market value of the trust assets with the same amount being recorded as income in miscellaneous income (expense), net. During the nine months ended October 1, 2021, the Company recognized additional compensation expense of $9,997,000 as a result of changes in the market value of the trust assets with the same amount being recorded as income in miscellaneous income, net. During the nine months ended October 2, 2020, the Company recognized a reduction to compensation expense of $399,000. The change in compensation expense was recorded due to changes in the market value of the trust assets with the same amount being recorded as expense in miscellaneous income, net.

Note 7: Supplemental Cash Flow Information

The following is supplemental disclosure of cash flow information:


	Nine Months Ended						Nine Months Ended
(In thousands)	October 1, 2021			October 2, 2020			September 30, 2022		October 1, 2021
Cash paid during period:
Income taxes	$	16,481		$	9,370		$	24,349	$	16,481
Non-cash investing and financing activities:
Unrealized loss on short-term investments	$	(65	)	$	(172	)	$	-	$	(65	)
Vested stock unit awards issued to settle accrued bonuses	$	7,637		$	8,645		$	10,200	$	7,637
Accrual for capital expenditures as of period end	$	368		$	322		$	846	$	368
Right-of-use asset obtained in exchange for operating lease obligations	$	792		$	1,802		$	8,090	$	792

~~- 15 -~~

Note 8: Accounts Receivable, Net

At ~~October 1, 2021~~September 30, 2022 and ~~January 1,~~December 31, 2021, accounts receivable, net, was comprised of the following:


	October 1,			January 1,			September 30,			December 31,
(In thousands)	2021			2021			2022			2021
Billed accounts receivable	$	102,812		$	80,298		$	110,428		$	102,028
Unbilled accounts receivable		46,042			35,262			61,743			42,256
Allowance for contract losses and doubtful accounts		(4,815	)		(3,995	)		(6,157	)		(4,423	)
Total accounts receivable, net	$	144,039		$	111,565		$	166,014		$	139,861

The Company maintains allowances for estimated losses over the remaining contractual life of its receivables resulting from the inability of customers to meet their financial obligations or for disputes that affect the Company’s ability to fully collect amounts due. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations or aware of a dispute with a specific customer, a specific allowance is recorded to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other

- 15 -

customers the Company recognizes allowances for doubtful accounts based upon historical write-offs, customer concentration, customer creditworthiness, current economic conditions, aging of amounts due and future expectations.

A reconciliation of the beginning and ending amount of the allowance for contract losses and doubtful accounts is as follows (in thousands):


Balance at December 31, 2021	$	4,423
Provision for contract losses and doubtful accounts		2,112
Write-offs		(378	)
Balance at September 30, 2022	$	6,157

Balance at January 1, 2021

$
3,995

Provision for contract losses and doubtful accounts

1,197

Write-offs

(377
)
Balance at October 1, 2021

$
4,815

Note 9: Segment Reporting

The Company has two reportable operating segments based on two primary areas of service. The Engineering and Other Scientific segment is a broad service group providing technical consulting in different practices primarily in engineering. The Environmental and Health segment provides services in the areas of environmental, epidemiology and health risk analysis. This segment provides a wide range of consulting services relating to environmental hazards and risks and the impact on both human health and the environment. Our Chief Executive Officer, the chief operating decision maker, reviews revenues and operating income for each of our reportable segments, but does not review total assets in evaluating segment performance and capital allocation.

Segment information for the three and nine months ended September 30, 2022 and October 1, 2021 ~~and October 2, 2020~~ follows:

Revenues


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Engineering and Other Scientific	$	97,100	$	79,230	$	288,848	$	236,239	$	107,403	$	97,100	$	321,168	$	288,848
Environmental and Health		19,305		19,433		63,915		60,422		19,776		19,305		64,770		63,915
Total revenues	$	116,405	$	98,663	$	352,763	$	296,661	$	127,179	$	116,405	$	385,938	$	352,763

~~- 16 -~~

Operating Income


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(In thousands)	October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020			September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Engineering and Other Scientific	$	36,676		$	25,952		$	108,646		$	73,400		$	39,385		$	36,676		$	117,907		$	108,646
Environmental and Health		5,851			6,449			21,265			20,751			6,378			5,851			21,059			21,265
Total segment operating income		42,527			32,401			129,911			94,151			45,763			42,527			138,966			129,911
Corporate operating expense		(10,408	)		(11,994	)		(44,362	)		(28,636	)		(8,950	)		(10,408	)		(20,159	)		(44,362	)
Total operating income	$	32,119		$	20,407		$	85,549		$	65,515		$	36,813		$	32,119		$	118,807		$	85,549

Certain operating expenses are excluded from the Company’s measure of segment operating income. These expenses include ~~the~~ costs associated with ~~our~~its human resources, finance, information technology, and business development groups; the deferred compensation expense/benefit due to the change in value of assets associated with ~~our~~its deferred compensation plan; stock-based compensation associated with restricted stock unit and stock option awards; and the change in ~~our~~its allowance for contract losses and doubtful accounts.

- 16 -

Capital Expenditures


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Engineering and Other Scientific	$	563	$	594	$	1,981	$	2,061	$	870	$	563	$	3,050	$	1,981
Environmental and Health		57		22		136		103		48		57		104		136
Total segment capital expenditures		620		616		2,117		2,164		918		620		3,154		2,117
Corporate capital expenditures		778		1,005		3,086		2,140		1,172		778		6,387		3,086
Total capital expenditures	$	1,398	$	1,621	$	5,203	$	4,304	$	2,090	$	1,398	$	9,541	$	5,203

Certain capital expenditures associated with the Company’s corporate cost centers and the related depreciation are excluded from the Company’s segment information.

Depreciation and Amortization


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Engineering and Other Scientific	$	1,089	$	1,043	$	3,074	$	3,248	$	1,108	$	1,089	$	3,301	$	3,074
Environmental and Health		49		48		141		141		41		49		124		141
Total segment depreciation and amortization		1,138		1,091		3,215		3,389		1,149		1,138		3,425		3,215
Corporate depreciation and amortization		507		598		1,728		1,787		574		507		1,799		1,728
Total depreciation and amortization	$	1,645	$	1,689	$	4,943	$	5,176	$	1,723	$	1,645	$	5,224	$	4,943

~~NaN~~One client comprised ~~15%~~16% and 15% of the Company’s revenues during the three months ended September 30, 2022 and October 1, ~~2021.~~2021, respectively. The same client comprised ~~13%~~15% and 13% of the ~~Company’s~~Company's revenues during the nine months ended September 30, 2022 and October 1, ~~2021. NaN other single client comprised more than 10% of the Company’s revenues during the three and nine months ended October 1, 2021.~~2021, respectively.~~NaN single client comprised more than 10% of the Company’s revenues during the three months and nine months ended October 2, 2020.~~

Note 10: Leases

The Company determines if an arrangement is a lease at the inception of the arrangement. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and long-term operating lease liabilities in the Company’s condensed consolidated balance sheet. The Company does not have any finance leases as of ~~October 1, 2021.~~September 30, 2022.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

~~- 17 -~~

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The amortization of operating lease ROU assets and the change in operating lease liabilities is disclosed as a single line item in the condensed consolidated statements of cash flows.

The Company leases office, laboratory, and storage space in 13 states and the District of Columbia, as well as in China, Hong Kong, Singapore, Switzerland, and the United Kingdom. Leases for these office, laboratory, and storage facilities have terms generally ranging between one and ten ~~years.~~years. Some of these leases include options to extend or terminate the lease, none of which are currently included in the lease term as the Company has determined that exercise of these options is not reasonably certain.

- 17 -

The Company has a Test and Engineering Center on 147 acres of land in Phoenix, Arizona. The Company leases this land from the state of Arizona under a 30-year lease agreement that expires in January of 2028 and has options to renew for ~~2 15-year~~twofifteen-year periods. As of ~~October 1, 2021,~~September 30, 2022, the Company has determined that exercise of the renewal options is not reasonably certain and thus the extension is not included in the lease term.

The Company’s equipment leases are included in the ROU asset and liability balances, but are not material.

The Company leases excess space in its Silicon Valley ~~facility.~~and Natick facilities. Rental income of ~~$624,000~~$739,000 and ~~$750,000~~$624,000 was included in other income for the three months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ respectively. Rental income of ~~$2,030,000~~$2,157,000 and ~~$2,611,000~~$2,030,000 was included in other income for the nine months ended September 30, 2022 and October 1, 2021, ~~and October 2, 2020,~~ respectively.

The components of lease expense included in other operating expenses on the condensed consolidated statements of income were as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Operating lease cost	$	1,635	$	1,706	$	4,896	$	5,162	$	1,681	$	1,635	$	5,247	$	4,896
Variable lease cost		246		280		793		882		274		246		913		793
Short-term lease cost		68		146		319		434		194		68		425		319

Supplemental cash flow information related to operating leases was as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
(In thousands)	October 1, 2021		October 2, 2020		October 1, 2021		October 2, 2020		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,566	$	1,508	$	5,381	$	5,522	$	1,518	$	1,566	$	5,083	$	5,381

Supplemental balance sheet information related to operating leases was as follows:


	October 1, 2021	January 1, 2021	September 30, 2022	December 31, 2021
Weighted Average Remaining Lease Term	4.2 years	4.5 years	4.3 years	4.1 years
Weighted Average Discount Rate	4.1%	4.2%	4.0%	4.2%

~~- 18 -~~

Maturities of operating lease liabilities as of ~~October 1, 2021:~~September 30, 2022:


	Operating			Operating
(In thousands)	Leases			Leases
2021 (excluding the nine months ended October 1, 2021)		1,581
2022		5,805
2022 (excluding the nine months ended September 30, 2022)					1,413
2023		4,067			5,885
2024		2,355			4,178
2025		1,539			3,296
2026		1,531			3,084
2027		1,466			2,589
2028					162
Total lease payments	$	18,344		$	20,607
Less imputed interest		(2,031	)		(2,050	)
Total lease liability	$	16,313		$	18,557

- 18 -

Note 11: Contingencies

The Company is a party to various legal actions from time to time and may be contingently liable in connection with claims and contracts arising in the normal course of business, the outcome of which the Company believes, after consultation with legal counsel, will not have a material adverse effect on its financial condition, results of operations or liquidity. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from current expected results. All legal costs associated with litigation are expensed as incurred.

Note 12: Subsequent Events

On October ~~28, 2021,~~27, 2022, the Company’s Board of Directors announced a cash dividend of ~~$0.20~~$0.24 per share of the Company’s common stock, payable December ~~17, 2021,~~23, 2022, to stockholders of record as of December ~~3, 2021. The Company expects to continue paying quarterly dividends in the future, subject to declaration by the Company’s Board of Directors.~~9, 2022.

- 19 -

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 1,~~December 31, 2021, which are contained in our fiscal ~~2020~~2021 Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission on February ~~26, 2021~~25, 2022 (our ~~“2020~~“2021 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 ~~the Company’s~~our management, as well as assumptions made by and information currently available to ~~the Company’s~~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 ~~the Company~~us or ~~its~~our management, identify such forward-looking statements. Such statements reflect the current views of ~~the Company~~us or ~~its~~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, ~~the Company’s~~our actual results, performance, ~~achievements,~~ or ~~actions~~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 global economic downturn, the COVID-19 pandemic (including factors relating to measures implemented by governmental authorities or by us to promote the safety of our employees, vendors and clients; other direct and indirect impacts on our business and the businesses of our clients, vendors and other partners; impacts which may, among other things, adversely affect our clients’ ability to utilize our services at the levels they have previously; disruptions of access to our facilities or those of our clients or third parties; and increased and potentially significant economic uncertainty and volatility, including credit and collectability risks and potential disruptions of capital and credit markets), 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 this Quarterly 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~~us or any other person that the future events, plans, or expectations we contemplated ~~by the Company~~ 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. ~~The Company does~~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 that provides solutions to complex problems. Our multidisciplinary team of scientists, engineers and business consultants brings together more than 90 different technical disciplines to solve complicated issues facing industry and business today. Our services include analysis of product development, product recall, regulatory compliance, and the discovery of potential problems related to products, people, property and impending litigation.

CRITICAL ACCOUNTING ESTIMATES

There have been no significant changes in our critical accounting estimates during the nine months ended ~~October 1, 2021,~~September 30, 2022, as compared to the critical accounting estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2020~~2021 Annual Report.

- 20 -

RESULTS OF CONSOLIDATED OPERATIONS

Executive Summary

Revenues for the third quarter of ~~2021~~2022 increased ~~18%~~9% to ~~$116,405,000~~$127,179,000 as compared to ~~$98,663,000~~$116,405,000 during the same period last year. Revenues before reimbursements for the third quarter of ~~2021~~2022 increased ~~16%~~6% to ~~$108,467,000~~$115,143,000 as compared to ~~$93,499,000~~$108,467,000 during the same period last year.

During the third quarter of ~~2021,~~2022, our ~~reactive business further benefitted from the acceleration~~proactive engagements within consumer products and transportation remained a key driver of ~~litigation throughput in~~ our ~~court systems,~~performance as demand for our work related to virtual reality, wearable technologies, and atenergy storage increased. At the same time, our ~~proactive engagements, such as user and machine learning data studies, remained a key driver of~~

~~- 20 -~~

~~growth. Our work~~reactive business continued to ~~be robust~~benefit from an increase in litigation activity and ~~diverse, with climate vulnerability assessments with utilities, risk assessments in chemicals, ongoing energy storage-related~~a diversified portfolio of product safety- and recall-related work, ~~and projects~~particularly in the ~~automotive and consumer products industries.~~life sciences space.

Net income ~~increased 36%~~decreased 1% to ~~$24,574,000~~$24,442,000 during the third quarter of ~~2021~~2022 as compared to ~~$18,084,000~~$24,574,000 during the same period last year. Diluted earnings per share increased to ~~$0.46~~$0.47 per share as compared to ~~$0.34~~$0.46 in the same period last year. The increases in net income and diluted earnings per share were primarily due to the 16% increase in revenues before reimbursements and slower growth in compensation and related expenses and other operating expenses.

We remain focused on selectively adding top talent and developing the skills necessary to expand our market position and providing clients with in-depth scientific research and analysis to determine what happened and how to prevent failures or exposures in the future. 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 shareholder value.

~~COVID-19 Update~~

We responded quickly and carefully to address the unprecedented challenges created by the pandemic. We have successfully adapted and will continue to evolve our business development, recruiting and operational approaches, yielding benefits both during and after this crisis. We have accelerated our sharing of in-depth scientific and regulatory knowledge through webinars and thought leadership pieces, which has fostered new client relationships and projects. We have shifted all recruiting activities online, allowing us to reach a more geographically expansive set of candidates. The health and safety of our team remain top priorities, and therefore we have leveraged our internal expertise to establish protocols that allow us to safely continue laboratory activities and resume human participant studies. Our business continuity plan and robust infrastructure have empowered productive remote work. Our leadership team has responded with enhanced internal communications to encourage increased connectivity across the firm.

We are pleased that the Company has been able to address the majority of our clients’ needs with a mostly remote workforce. The relaxation of business restrictions in June 2020 allowed us to resume laboratory testing, inspections, and human participant studies for clients in non-essential industries. Field inspections of sites and products have increased due to lifting of travel restrictions.

We are pleased to be sharing our scientific and regulatory knowledge on health and safety issues related to the novel coronavirus through webinars and thought leadership pieces. We continue to advise clients with respect to COVID-19 testing, contract tracing, and occupational health and safety.

Overview of the Three Months Ended ~~October 1, 2021~~September 30, 2022

During the third quarter of ~~2021,~~2022, billable hours increased ~~13%~~5% to ~~348,000~~365,000 as compared to ~~308,000~~348,000 during the same period last year. Our utilization ~~increased~~decreased to ~~76%~~73% during the third quarter of ~~2021~~2022 as compared to ~~66%~~76% during the same period last year. Technical full-time equivalent employees ~~decreased 2%~~increased 8% to ~~883~~958 during the third quarter of ~~2021~~2022 as compared to ~~901~~883 during the same period last year. We continue to selectively hire key talent to expand our capabilities.

Three Months Ended ~~October 1, 2021~~September 30, 2022 compared to Three Months Ended October ~~2, 2020~~1, 2021

Revenues


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Engineering and Other Scientific	$	97,100		$	79,230			22.6	%	$	107,403		$	97,100			10.6	%
Percentage of total revenues		83.4	%		80.3	%					84.5	%		83.4	%
Environmental and Health		19,305			19,433			-0.7	%		19,776			19,305			2.4	%
Percentage of total revenues		16.6	%		19.7	%					15.5	%		16.6	%
Total revenues	$	116,405		$	98,663			18.0	%	$	127,179		$	116,405			9.3	%

~~- 21 -~~

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billable hours and an increase in billing rates. During the third quarter of ~~2021,~~2022, billable hours for this segment increased by ~~17%~~6% to ~~275,000~~291,000 as compared to ~~236,000~~275,000 during the same period last year. Utilization for this segment ~~increased~~decreased to ~~78%~~76% during the third quarter of ~~2021~~2022 as compared to ~~65%~~78% during the same period last year. ~~Growth during the quarter~~The increase in billable hours was ~~broad-based, with continued strong~~driven by an increase in demand for our services across ~~a number of industries and use cases, which includes a steady increase in litigation support, human participant studies for~~ the consumer products, ~~industry, work with wearable technologies, as well as asset integrity~~utilities, and ~~risk management engagements for utilities. On~~automotive sectors. Utilization during the ~~automotive side, we have further progressed our work supporting advanced driver assistance systems and the implementation~~second quarter of ~~safety frameworks for advanced vehicles and energy storage.~~2021 was historically strong. Technical full-time equivalent employees in this segment ~~decreased 3%~~increased 10% to ~~675~~742 during the third quarter of ~~2021~~2022 as compared to ~~693~~675 for the same period last ~~year.~~year due to our recruiting and retention efforts.

The ~~slight decrease~~increase in revenues for our Environmental and Health segment was due to ~~a decrease~~an increase in ~~realized~~billable hours and an increase in billing rates. ~~Billable~~Excluding the impact of foreign exchange, revenues for this segment increased 7.3% during the third quarter of 2022. During the third quarter of 2022, billable hours for this segment increased by 1% to ~~73,000 during the third quarter of 2021~~74,000 as compared to ~~72,000~~73,000 during the same period last year. Utilization ~~for~~in this segment ~~increased~~decreased to ~~68%~~66% during

- 21 -

the third quarter of ~~2021~~2022 as compared to ~~67%~~68% during the same period last year. ~~Our chemical regulation and food safety practice continued~~The increase in revenues was due to ~~grow as~~expansion of our ~~scientists evaluated the effects of chemicals and new products on human~~ health ~~and the environment. This growth was offset by a~~data science work. The decrease in ~~demand for services~~utilization was due to investments in recruiting and marketing in our ~~health sciences practice.~~Health Practice. Technical full-time equivalent employees in this segment ~~were 208~~increased 4% to 216 during ~~both~~ the third quarter of ~~2021~~2022 as compared to 208 during the same period last year due to our recruiting and ~~2020.~~retention efforts.

Compensation and Related Expenses


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Compensation and related expenses	$	64,138		$	62,419			2.8	%	$	62,779		$	64,138			-2.1	%
Percentage of total revenues		55.1	%		63.3	%					49.4	%		55.1	%

The ~~increase~~decrease in compensation and related expenses during the third quarter of ~~2021~~2022 was due to ~~an increase in payroll expense, an increase in fringe benefits, and an increase in bonus expense partially offset by~~ a change in the value of assets associated with our deferred compensation ~~plan. Payroll expense increased $885,000 during the third quarter of 2021 due to the impact of our annual salary adjustments~~plan, partially offset by ~~a decrease in technical full-time equivalent employees. Fringe benefits increased by $338,000 during the third quarter of 2021 due to~~ an increase in payroll ~~taxes. Bonus expense increased by $3,857,000 during the third quarter of 2021 due to a corresponding increase to our bonus pool, which is 33% of income before income taxes, interest income, bonus~~ expense and ~~stock-based compensation.~~an increase in fringe benefits. During the third quarter of ~~2021,~~2022, deferred compensation expense decreased ~~$3,478,000~~by $4,667,000 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 plan. This decrease consisted of a decrease in the value of plan assets of ~~$258,000~~$4,925,000 during the third quarter of ~~2021~~2022 as compared to ~~an increase~~a decrease in the value of plan assets of ~~$3,220,000~~$258,000 during the same period last year. Payroll expense increased by $2,690,000 and fringe benefits increased by $307,000 during the third quarter of 2022 due to the impact of our annual salary adjustments and an increase 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


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Other operating expenses	$	8,017		$	7,839			2.3	%	$	8,822		$	8,017			10.0	%
Percentage of total revenues		6.9	%		7.9	%					6.9	%		6.9	%

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 third quarter of ~~2021~~2022 was primarily due to an increase in ~~information technology expenses~~occupancy expense of ~~$221,000. The~~$400,000, an increase in information technology related expenses ~~was~~of $253,000, and an increase in office expenses of $132,000. The increases in occupancy expenses and office expenses were due to growth in technical full-time equivalent employees and the transition back to our offices from a fully remote work environment. The increases in information technology related expenses were due to continued ~~investments~~investment in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent, make

~~- 22 -~~

investments in our corporate infrastructure, and transition our workforce back to our offices as COVID-19 ~~pandemic-related~~pandemic related business restrictions are lifted.

Reimbursable Expenses


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Reimbursable expenses	$	7,938		$	5,164			53.7	%	$	12,036		$	7,938			51.6	%
Percentage of total revenues		6.8	%		5.2	%					9.5	%		6.8	%

- 22 -

The amount of reimbursable expenses will vary from quarter to quarter depending on the nature of our projects. The increase in reimbursable expenses during the third quarter of ~~2021~~2022 was primarily due to an increase in project-related travel and other project-related expenses as COVID-19 pandemic-related business and travel restrictions eased.

General and Administrative Expenses


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
General and administrative expenses	$	4,193		$	2,834			48.0	%	$	6,729		$	4,193			60.5	%
Percentage of total revenues		3.6	%		2.9	%					5.3	%		3.6	%

The increase in general and administrative expenses ~~during the third quarter of 2021~~ was primarily due ~~a contribution~~ to ~~an endowed scholarship fund of $250,000,~~ an increase in travel and meals of ~~$202,000, an increase in bad debt of $181,000, an increase in employee relocation of $135,000,~~$1,710,000, an increase in outside consulting expense of ~~$109,000, and~~$485,000, an increase in ~~insurance premiums~~recruiting expenses of ~~$91,000.~~167,000, and several other individually insignificant increases. The increase in travel and meals was due to a firm-wide managers' meeting held during the third quarter of 2022 and the continued easing of COVID-19 pandemic-related business and travel restrictions. The increase in outside consulting expense was due to several ongoing projects associated with investments in our corporate infrastructure. The increases in recruiting expenses was due to the increase in technical full-time equivalent employees. We expect general and administrative expenses to increase as we selectively add new talent, expand our business development and staff development initiatives, and increase travel and meal expenses as COVID-19 ~~pandemic-related~~pandemic related business restrictions ~~are lifted.~~phase out.

Operating Income


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Engineering and Other Scientific	$	36,676		$	25,952			41.3	%	$	39,385		$	36,676			7.4	%
Environmental and Health		5,851			6,449			-9.3	%		6,378			5,851			9.0	%
Total segment operating income		42,527			32,401			31.3	%		45,763			42,527			7.6	%
Corporate operating expense		(10,408	)		(11,994	)		-13.2	%		(8,950	)		(10,408	)		-14.0	%
Total operating income	$	32,119		$	20,407			57.4	%	$	36,813		$	32,119			14.6	%

~~- 23 -~~

The increase in operating income for our Engineering and Other Scientific segment during the third quarter of ~~2021~~2022 as compared to the same period last year was due to an increase in ~~revenues.~~revenues partially offset by an increase in expenses. The increase in revenues was ~~due to an increase in billable hours and an increase in billing rates. Growth during the quarter was broad-based, with continued strong~~driven by demand for our services across ~~a number of industries and use cases, which includes a steady increase in litigation support, human participant studies for~~ the consumer products, ~~industry, work with wearable technologies, as well as asset integrity~~utilities, and ~~risk management engagements for utilities. On the~~ automotive ~~side, we have further progressed our work supporting advanced driver assistance systems and the implementation of safety frameworks for advanced vehicles and energy storage.~~

sectors. The ~~decrease~~increase in operating income for our Environmental and Health segment ~~during the third quarter of 2021 as compared to the same period last year~~ was due to ~~a slight decrease in revenues before reimbursements and~~ an increase in ~~compensation and related costs for our health sciences practice. The slight decrease in revenues for our health sciences practice was due to a decrease in realized billing rates.~~revenues. The increase in ~~compensation and related costs for~~revenues was driven by expansion of our health sciences practice was due to our continued investment in the pharmaceutical industry which we believe is a significant opportunity to leverage our multidisciplinary approach across the full product life cycle.data science work.

- 23 -

Certain operating expenses are excluded from ~~our~~the Company’s measure of segment operating income. These expenses include the costs associated with our human resources, 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.

The decrease in corporate operating expenses during the third quarter of ~~2021~~2022 as compared to the same period last year was primarily due to a decrease in deferred compensation expense partially offset by an increase in ~~fringe benefits and increases in~~the costs associated with our human resources, finance, information technology and business development groups. During the third quarter of ~~2021,~~2022, deferred compensation expense decreased ~~$3,478,000,~~$4,667,000, 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 plan. This decrease consisted of a decrease in the value of plan assets of ~~$258,000~~$4,925,000 during the third quarter of ~~2021~~2022 as compared to ~~an increase~~a decrease in the value of plan assets of ~~$3,220,000~~$258,000 during the same period last year. During the third quarter of 2020 we claimed an employee retention credit for $538,000 under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). This credit was excluded from fringe benefits in our measure of segment operating income. There was no CARES Act credit claimed during the third quarter of 2021.

Other Income, Net


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Other income, net	$	270		$	4,231			-93.6	%	$	(3,337	)	$	270			-1335.9	%
Percentage of total revenues		0.2	%		4.3	%					-2.6	%		0.2	%

~~- 24 -~~

rates.

Income Taxes


	Three Months Ended									Three Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Income taxes	$	7,815		$	6,554			19.2	%	$	9,034		$	7,815			15.6	%
Percentage of total revenues		6.7	%		6.6	%					7.1	%		6.7	%
Effective tax rate		24.1	%		26.6	%					27.0	%		24.1	%

The increase in income tax expense was due to a decrease in the excess tax benefit associated with stock-based awards. There was no excess tax benefit associated with stock-based awards during the third quarter of 2022. The excess tax benefit associated with stock-based awards was $1,066,000 during the third quarter of ~~2021 as compared to $0 during the same period last year.~~2021. Excluding the impact of the excess tax benefit, the effective tax rate would have been 27.4% during the third quarter of ~~2021 as compared to 26.6% during the same period last year.~~2021.

Nine Months Ended ~~October 1, 2021~~September 30, 2022 compared to Nine Months Ended October ~~2, 2020~~1, 2021

~~Revenues~~

Nine Months Ended

(in thousands, except percentages)

October 1,
2021

October 2,
2020

Percent
Change

Engineering and Other Scientific

$
288,848

$
236,239

22.3
%
Percentage of total revenues

81.9
%

79.6
%

Environmental and Health

63,915

60,422

5.8
%
Percentage of total revenues

18.1
%

20.4
%

Total revenues

$
352,763

$
296,661

18.9
%

Revenues

- 24 -


	Nine Months Ended
(in thousands, except percentages)	September 30, 2022			October 1, 2021			Percent Change
Engineering and Other Scientific	$	321,168		$	288,848			11.2	%
Percentage of total revenues		83.2	%		81.9	%
Environmental and Health		64,770			63,915			1.3	%
Percentage of total revenues		16.8	%		18.1	%
Total revenues	$	385,938		$	352,763			9.4	%

The increase in revenues for our Engineering and Other Scientific segment was due to an increase in billable hours and an increase in billing rates. During the first nine months of ~~2021,~~2022, billable hours for this segment increased by ~~15%~~4% to ~~838,000~~874,000 as compared to ~~730,000~~838,000 during the same period last year. Utilization for this segment ~~increased~~decreased to ~~79%~~77% during the first nine months of ~~2021~~2022 as compared to ~~66%~~79% during the same period last year. Growth was driven by ~~strong~~ demand for ~~our~~Exponent’s services across a broad range of industries and use cases. In addition to the steady increase in litigation support and human participant studies, our multidisciplinary battery team continued to see demand for its solutions in electric vehicles and energy storage. Our work in international arbitrations and integrity management advisory services continued at strong levels. Technical full-time equivalent employees in this segment ~~decreased 4%~~increased 6% to ~~682~~725 during the first nine months of ~~2021~~2022 as compared to ~~707~~682 for the same period last ~~year. The decrease in technical full-time equivalent employees was~~year due ~~in part~~ to ~~the divestiture of~~ our ~~German subsidiary in April of 2020.~~recruiting and retention efforts.

The increase in revenues for our Environmental and Health segment was due to an increase in billable hours and an increase in our realized billing ~~rates.~~rate. Excluding the impact of foreign exchange, revenues for this segment increased 4.3% during the first nine months of 2022. During the first nine months of ~~2021,~~2022, billable hours for this segment increased by 3%2% to ~~232,000~~236,000 as compared to ~~225,000~~232,000 during the same period last year. Utilization in this segment ~~was 70%~~decreased to 69% during the first nine months of ~~2021 and 2020.~~2022 as compared to 70% during the same period last year. This segment ~~also~~ benefited from increased activity in litigation-related projects and support of human participant studies. The chemical regulation and food safety practice continued to grow as our scientists evaluated the effects of chemicals and new products on human health and the environment. This growth was partially offset by a decrease in demand for services in our health sciences practice. Technical full-time equivalent employees in this segment increased by 2%4% to ~~211~~219 during the first nine months of ~~2021~~2022 as compared to ~~206~~211 during the same period last ~~year.~~year due to our recruiting and retention efforts.

Compensation and Related Expenses


	Nine Months Ended									Nine Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Compensation and related expenses	$	210,491		$	180,541			16.6	%	$	189,982		$	210,491			-9.7	%
Percentage of total revenues		59.7	%		60.9	%					49.2	%		59.7	%

The ~~increase~~decrease in compensation and related expenses during the first nine months of ~~2021~~2022 was due to a change in the value of assets associated with our deferred compensation plan partially offset by an increase in payroll expense, an

~~- 25 -~~

increase in fringe benefits, and an increase in bonus expense. During the first nine months of ~~2021,~~2022, deferred compensation expense ~~increased $10,396,000~~decreased $30,881,000 with a corresponding ~~increase~~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 plan. This ~~increase~~decrease consisted of a decrease in the value of plan assets of $20,884,000 during the first nine months of 2022 as compared to an increase in the value of plan assets of $9,997,000 during the ~~first nine months of 2021 as compared to a decrease in the value of plan assets of $399,000 during the~~ same period last year. Payroll expense increased ~~$2,718,000~~$7,157,000 during the first nine months of ~~2021~~2022 due to the increase in technical full-time equivalent employees and the impact of our annual salary ~~adjustments partially offset by a decrease in technical full-time equivalent employees.~~adjustments. Fringe benefits increased by ~~$2,501,000~~$1,366,000 during the first nine months of ~~2021~~2022 due to ~~an employee retention credit for $2,097,000 that we claimed under~~ the ~~CARES Act~~increase in technical full-time equivalent employees and the impact of our annual salary adjustments. Bonus expense increased by $1,210,000 during the first nine months of ~~2020. There was no CARES Act credit claimed during the first nine months of 2021. Bonus expense increased by $14,257,000 during the first nine months of 2021~~2022 due to a corresponding increase to our bonus pool which is equal to 33% of income before income taxes, interest income, bonus expense, and stock-based compensation. 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

Nine Months Ended

(in thousands, except percentages)

October 1,
2021

October 2,
2020

Percent
Change

Other operating expenses

$
23,848

$
23,736

0.5
%
Percentage of total revenues

6.8
%

8.0
%

- 25 -


	Nine Months Ended
(in thousands, except percentages)	September 30, 2022			October 1, 2021			Percent Change
Other operating expenses	$	25,742		$	23,848			7.9	%
Percentage of total revenues		6.7	%		6.8	%

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 nine months of 2022 was primarily due to an increase in occupancy expense of $763,000, an increase in information technology related expenses of $578,000 and an increase in depreciation expense of $281,000. The increase in occupancy expenses was due to growth in technical full-time equivalent employees and the transition back to our offices from a fully remote work environment. The increases in information technology related expenses and depreciation expense were due to continued investment in our corporate infrastructure. We expect other operating expenses to grow as we selectively add new talent, make investments in our corporate infrastructure, and transition our workforce back to our offices as COVID-19 pandemic-related business restrictions are lifted.

Reimbursable Expenses


	Nine Months Ended									Nine Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Reimbursable expenses	$	22,249		$	15,579			42.8	%	$	34,707		$	22,249			56.0	%
Percentage of total revenues		6.3	%		5.3	%					9.0	%		6.3	%

The amount of reimbursable expenses will vary from quarter to quarter depending on the nature of our projects. The increase in reimbursable expenses during the first nine months of ~~2021~~2022 was primarily due to an increase in project-related travel and other project-related expenses as COVID-19 business and travel restrictions eased.

General and Administrative Expenses


	Nine Months Ended									Nine Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
General and administrative expenses	$	10,626		$	11,290			-5.9	%	$	16,700		$	10,626			57.2	%
Percentage of total revenues		3.0	%		3.8	%					4.3	%		3.0	%

The ~~decrease~~increase in general and administrative expenses ~~during the first nine months of 2021~~ was primarily due to ~~a decrease in bad debt expense of $1,184,000 and a decrease~~an increase in travel and meals of ~~$724,000.~~$3,303,000, an increase in outside consulting expense of $1,050,000, an increase in recruiting expenses of $562,000, an increase in marketing and business development expenses of $268,000 and several other individually insignificant increases. The decrease in bad debt was due to additional reserves we booked to our allowance for doubtful accounts during the first nine months of 2020 as a result of the economic uncertainty associated with the COVID-19 pandemic. The decreaseincrease in travel and meals was due to a firm-wide managers' meeting held during the third quarter of 2022 and the continued easing of COVID-19 pandemic-related business and travel ~~restrictions put~~restrictions. The increase in ~~place~~outside consulting expense was due to several ongoing projects associated with investments in our corporate infrastructure. The increase in recruiting expense was due to the ~~COVID-19 pandemic. These decreases were offset by an~~ increase in ~~insurance premiums of $322,000, an increase in charitable contributions of $200,000, an~~technical full-time equivalent employees. The increase in marketing and business development ~~of $108,000 and other increases~~expenses was due to an increase in ~~general and administrative expenses.~~our business development activities. We expect

~~- 26 -~~

general and administrative expenses to increase as we selectively add new talent, expand our business development and staff development initiatives, and increase travel and meal expenses as COVID-19 ~~pandemic-related~~pandemic related business restrictions ~~are lifted.~~phase out.

Operating Income

Nine Months Ended

(in thousands, except percentages)

October 1,
2021

October 2,
2020

Percent
Change

Engineering and Other Scientific

$
108,646

$
73,400

48.0
%
Environmental and Health

21,265

20,751

2.5
%
Total segment operating income

129,911

94,151

38.0
%
Corporate operating expense

(44,362
)

(28,636
)

54.9
%
Total operating income

$
85,549

$
65,515

30.6
%

- 26 -


	Nine Months Ended
(in thousands, except percentages)	September 30, 2022			October 1, 2021			Percent Change
Engineering and Other Scientific	$	117,907		$	108,646			8.5	%
Environmental and Health		21,059			21,265			-1.0	%
Total segment operating income		138,966			129,911			7.0	%
Corporate operating expense		(20,159	)		(44,362	)		-54.6	%
Total operating income	$	118,807		$	85,549			38.9	%

The increase in operating income for our Engineering and Other Scientific segment during the first nine months of ~~2021~~2022 as compared to the same period last year was due to an increase in ~~revenues.~~revenues partially offset by an increase in expenses. The increase in revenues was due to an increase in billable hours and an increase in billing rates. Growth was driven by strong demand for Exponent’s services across a broad range of industries and use cases. In addition to the steady increase in litigation support and human participant studies, our multidisciplinary battery team continued to see demand for its solutions in electric vehicles and energy storage. Our work in international arbitrations and integrity management advisory services continued at strong levels.

The ~~increase~~decrease in operating income for our Environmental and Health segment ~~during the first nine months of 2021 as compared to the same period last year~~ was due to ~~an increase~~investments in ~~revenues. The increase in revenues was due to an increase in billable hours~~recruiting and an increase in billing rates. This segment also benefited from increased activity in litigation-related projects and support of human participant studies. The chemical regulation and food safety practice continued to grow as our scientists evaluated the effects of chemicals and new products on human health and the environment. This growth was partially offset by a decrease in demand for servicesmarketing in our ~~health sciences practice.~~Health Practice.

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, 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~~decrease in corporate operating expenses during the first nine months of ~~2021~~2022 as compared to the same period last year was primarily due to ~~an increase~~a decrease in deferred compensation expense ~~and~~partially offset by an increase in ~~fringe benefits.~~the costs associated with our human resources, finance, information technology and business development groups. During the first nine months of ~~2021,~~2022, deferred compensation expense ~~increased $10,396,000,~~decreased $30,881,000, with a corresponding ~~increase~~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 plan. This ~~increase~~decrease consisted of a decrease in the value of plan assets of $20,884,000 during the first nine months of 2022 as compared to an increase in the value of plan assets of $9,997,000 during the ~~first nine months of 2021 as compared to a decrease in the value of plan assets of $399,000 during the~~ same period last year. During the first nine months of 2020 we claimed an employee retention credit for $2,097,000 under the CARES Act. This credit was excluded from fringe benefits in our measure of segment operating income. There was no CARES Act credit claimed during the first nine months of 2021.

Other Income, Net


	Nine Months Ended									Nine Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			Percent Change			September 30, 2022			October 1, 2021			Percent Change
Other income, net	$	11,633		$	4,592			153.3	%	$	(17,092	)	$	11,633			-246.9	%
Percentage of total revenues		3.3	%		1.5	%					-4.4	%		3.3	%

~~- 27 -~~

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~~decrease 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 interest income, a change~~an increase in the realized ~~gain/loss~~gain on foreign exchange and ~~a decrease~~an increase in ~~rental~~interest income. During the first nine months of ~~2021,~~2022, other income, net, ~~increased $10,396,000~~decreased $30,881,000 with a corresponding ~~increase~~decrease to deferred compensation expense, as compared to the same period last year, due to a change in the value of assets associated with our deferred compensation plan. This ~~increase~~decrease consisted of a decrease in the value of the plan assets of $20,884,000 during the first nine months of 2022 as compared to an increase in the value of the plan assets of $9,997,000 during the ~~first nine months of 2021 as compared to a decrease in the value of the plan assets of $399,000 during the~~ same period last year. During the first nine months of ~~2021,~~2022, other income, net, ~~decreased~~increased by ~~$1,309,000~~$1,218,000 as compared to the same period last year due to a change in the realized gain/loss on foreign exchange. This ~~decrease~~increase consisted of a realized gain on foreign exchange of $776,000 during the first nine months of 2022 as compared to a realized loss on foreign exchange of $442,000 ~~during the first nine months of 2021 as compared to a realized gain on foreign exchange of $867,000~~ during the same period last year. During the first nine months of ~~2021~~2022, interest income ~~decreased~~increased by $1,442,000 as compared to the same period last year due to lower interest rates for our cash equivalents and short-term investments. During the first nine months of 2021 rental income decreased $580,000$780,000 as compared to the same period last year due to an increase in ~~our vacancy rate.~~interest rates.

Income Taxes

- 27 -

Nine Months Ended

(in thousands, except percentages)

October 1,
2021

October 2,
2020

Percent
Change

Income taxes

$
16,360

$
9,395

74.1
%
Percentage of total revenues

4.6
%

3.2
%

Effective tax rate

16.8
%

13.4
%


	Nine Months Ended
(in thousands, except percentages)	September 30, 2022			October 1, 2021			Percent Change
Income taxes	$	21,909		$	16,360			33.9	%
Percentage of total revenues		5.7	%		4.6	%
Effective tax rate		21.5	%		16.8	%

The excess tax benefit associated with stock-based awards was ~~$9,889,000~~$6,040,000 during the first nine months of ~~2021~~2022 as compared to ~~$9,670,000~~$9,889,000 during the same period last year. Excluding the impact of the excess tax benefit, the effective tax rate would have been ~~27.0%~~27.5% during the first nine months of ~~2021~~2022 as compared to ~~27.2%~~27.0% during the same period last year. The increase in our effective tax rate, excluding the impact of the excess tax benefit, was due primarily to an increase in non-deductible officer compensation.

- 28 -

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 12twelve months. ~~However, we continue to monitor the impact of the COVID-19 pandemic on our cash flows and on the credit and financial markets.~~

Nine Months Ended

(in thousands)

October 1,
2021

October 2,
2020

Net cash provided by operating activities

$
70,378

$
62,447

Net cash provided by investing activities

14,569

30,856

Net cash used in financing activities

(52,766
)

(82,235
)


	Nine Months Ended
(in thousands)	September 30, 2022			October 1, 2021
Net cash provided by operating activities	$	53,237		$	70,378
Net cash (used in) / provided by investing activities		(9,108	)		14,569
Net cash used in financing activities		(190,556	)		(52,766	)

We financed our business during the first nine months of ~~2021~~2022 through available cash. ~~We invest~~As of September 30, 2022, our ~~excess~~ cash inand cash equivalents ~~and short-term investments. As of October 1, 2021, our cash, cash equivalents and short-term investments~~ were ~~$254,783,000~~$148,443,000 as compared to ~~$242,526,000 as of January 1,~~$297,687,000 at December 31, 2021.

Generally, our net cash provided by operating activities is used to fund our ~~day-to-day~~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~~employee related expenditures, leased facilities, taxes, and general operating expenses including marketing and travel.

The increase in net cash ~~provided by operating~~used in investing activities during the first nine months of ~~2021,~~2022, as compared to the ~~same period last year, was primarily due to an increase in net income partially offset by changes in operating assets and liabilities.~~

~~- 28 -~~

~~The decrease in~~ net cash provided by investing activities during the same period last year, was due to a decrease in the maturity of short-term investments partially offset by a decrease in the purchase of short-term investments and an increase in capital expenditures due to an increase in investment in our corporate infrastructure.

The increase in net cash used in financing activities during the first nine months of ~~2021,~~2022, as compared to the same period last year, was due to an increase in ~~the purchase of short-term investments partially offset by an increase in the maturity of short-term investments.~~

~~The decrease in net cash used in financing activities during the first nine months of 2021, as compared to the same period last year, was due to a decrease in~~ repurchases of our common stock ~~partially offset by~~and an increase in dividends ~~paid.~~partially offset by a reduction in payroll taxes for restricted stock units.

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.

For a summary of our commitments to make future payments under contractual obligations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in our 2020 Annual Report. There have been no material changes in our contractual obligations since January 1, 2021.

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 ~~$93,111,000~~$85,453,000 were recorded as a long-term liability on our unaudited condensed consolidated balance sheet at ~~October 1, 2021.~~September 30, 2022. Vested amounts due under the plan of ~~$12,231,000~~$9,049,000 were recorded as a current liability on our unaudited condensed consolidated balance sheet at ~~October 1, 2021. Company~~September 30, 2022. 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 ~~October 1, 2021,~~September 30, 2022, invested amounts under the plan of ~~$92,048,000~~$83,722,000 were recorded as a long-term asset on our unaudited condensed consolidated balance sheet. As of ~~October 1, 2021,~~September 30, 2022, invested amounts under the plan of ~~$12,231,000~~$10,857,000 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.

- 29 -

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~~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.

~~- 29 -~~

The following table shows EBITDA (determined as shown in the reconciliation table below) as a percentage of revenues before reimbursements for the three ~~and nine~~ months ended September 30, 2022 and October 1, ~~2021 and October 2, 2020:~~2021:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(in thousands, except percentages)	October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020			September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Revenues before reimbursements	$	108,467		$	93,499		$	330,514		$	281,082		$	115,143		$	108,467		$	351,231		$	330,514
EBITDA	$	34,021		$	26,011		$	102,071		$	73,787		$	34,561		$	34,021		$	106,105		$	102,071
EBITDA as a % of revenues before reimbursements		31.4	%		27.8	%		30.9	%		26.3	%		30.0	%		31.4	%		30.2	%		30.9	%

- 30 -

The ~~increase~~decrease in EBITDA as a percentage of revenues before reimbursements during the third quarter of ~~2021~~2022 as compared to the same period last year was primarily due to the ~~16%~~decrease in utilization and an increase in ~~revenues before reimbursements and slower growth in compensation and related expenses and~~ other operating and general and administrative expenses. ~~During~~Our utilization decreased to 73% during the third quarter of ~~2021, our reactive business further benefitted from the acceleration of litigation throughput in our court systems, and at~~2022 as compared to 76% during the same time, our proactive engagements, such as user and machine learning data studies, remained a key driver of growth. Our work continued to be robust and diverse, with climate vulnerability assessments with utilities, risk assessments in chemicals, ongoing energy storage-related work, and projects in the automotive and consumer products industries. The slower growth in compensation and related expensesperiod last year. Utilization during the third quarter of 2021 was historically strong. Other operating and general and administrative expenses increased during the third quarter of 2022 due to an increase in travel and meals associated with a ~~decrease~~firm-wide managers' meeting held during the third quarter of 2022 and the continued easing of COVID-19 pandemic-related business and travel restrictions, an increase in technical full-time equivalent ~~employees. Due to~~employees, investments in our ~~recruiting efforts, hiring has picked up over the last few months despite the competitive market for engineering~~corporate infrastructure, and ~~scientific talent. As such we expect compensation~~an increase in marketing and ~~related expenses to increase.~~ business development activities.

The slower growth in other operating expenses was primarily due to the continued business restrictions associated with the COVID-19 pandemic. We expect other operating expenses to increase as COVID-19 pandemic-related business restrictions are eased.

~~The increase~~decrease in EBITDA as a percentage of revenues before reimbursements during the first nine months of ~~2021~~2022 as compared to the same period last year was primarily due to ~~the 18% growth~~a decrease in ~~revenues before reimbursements, slower growth~~utilization and an increase in ~~compensation and related expenses and~~ other operating ~~expenses,~~ and ~~a decrease in~~ general and administrative expenses. The increase in revenues was due to broad-based strength across the business as pandemic-related restrictions eased, which supported a robust level of new assignments as well as ongoing work. The slower growth in compensationOther operating and ~~related~~general and administrative expenses increased during the first nine months of ~~2021 was~~2022 due to an increase in travel and meals associated with a ~~decrease~~firm-wide managers' meeting held during the third quarter of 2022 and the continued easing of COVID-19 pandemic-related business and travel restrictions, an increase in technical full-time equivalent ~~employees. Due to~~employees, investments in our ~~recruiting efforts, hiring has picked up over the last few months despite the competitive market for engineering~~corporate infrastructure, and ~~scientific talent. As such we expect compensation~~an increase in marketing and ~~related expenses to increase. The slower growth in other operating expenses and the decrease in general and administrative expenses were primarily due to the~~ business and travel restrictions associated with the COVID-19 pandemic. We expect other operating expenses and general and administrative expenses to increase as COVID-19 pandemic-related business restrictions are eased.development activities.

The following table is a reconciliation of EBITDA and EBITDAS to the most comparable GAAP measure, net income, for the three and nine months ended September 30, 2022 and October 1, 2021:


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
(in thousands)	October 1, 2021			October 2, 2020			October 1, 2021			October 2, 2020			September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Net income	$	24,574		$	18,084		$	80,822		$	60,712		$	24,442		$	24,574		$	79,806		$	80,822
Add back (subtract):
Income taxes		7,815			6,554			16,360			9,395			9,034			7,815			21,909			16,360
Interest income, net		(13	)		(316	)		(54	)		(1,496	)		(638	)		(13	)		(834	)		(54	)
Depreciation and amortization		1,645			1,689			4,943			5,176			1,723			1,645			5,224			4,943
EBITDA		34,021			26,011			102,071			73,787			34,561			34,021			106,105			102,071
Stock-based compensation		4,365			3,726			15,239			13,326			4,605			4,365			16,072			15,239
EBITDAS	$	38,386		$	29,737		$	117,310		$	87,113		$	39,166		$	38,386		$	122,177		$	117,310

- 3031 -

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate risk associated with our balances of cash and cash ~~equivalents and short-term investments.~~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 ~~three~~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 ~~and short-term investments~~ 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 ~~October 1, 2021,~~September 30, 2022, we had net assets of approximately ~~$9.5~~$14.4 million with a functional currency of the British Pound, net assets of approximately ~~$3.7~~$3.4 million with a functional currency of the Chinese Yuan, and net assets of approximately ~~$8.5~~$5.5 million with a functional currency of the Hong Kong Dollar associated with our operations in the United Kingdom, China, and Hong Kong, 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 ~~October 1, 2021,~~September 30, 2022, we had net assets denominated in the non-functional ~~currencies~~currency of approximately ~~$4.0~~$8.3 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 ~~material.~~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.

Item 4. Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures

~~(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 ~~October 1, 2021,~~September 30, 2022, 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.

~~- 31 -~~

(b)

Changes in Internal Control over Financial Reporting

~~(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 ~~October 1, 2021~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

- 32 -

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Exponent is not engaged in any material legal proceedings.

Item 1A. Risk Factors

There have been no material changes from risk factors as previously discussed under the heading “Risk Factors” in the Company’s ~~2020~~2021 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on the Company’s repurchases of the Company’s common stock for the three months ended ~~October 1, 2021~~September 30, 2022 (in thousands, except price per share):


	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (1)
July 2 to July 29		-	$	-		-	$	106,611
July 30 to August 26		-		-		-	$	106,611
August 27 to September 30		334		92.04		334	$	75,828
Total		334	$	92.04		334	$	75,828

Total
Number
of Shares
Purchased

Average
Price
Paid Per
Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Programs

Approximate
Dollar Value
of Shares That
May Yet Be
Purchased
Under the
Programs ⁽¹⁾

July 3 to July 30

-

$
-

-

$
68,455

July 31 to August 27

-

-

-

$
68,455

August 28 to October 1

-

-

-

$
68,455

Total

-

$
-

-

$
68,455

(1)

On May 29, 2020, the Company’s Board of Directors announced $45,000,000 for repurchase of the Company’s common stock. On February 22, 2022, the Company’s Board of Directors announced an additional $150,000,000 for repurchase of the Company’s common stock. These repurchase programs have no expiration dates.

⁽¹⁾Repurchases of the Company’s common stock were affected pursuant to a repurchase program authorized by the Company’s Board of Directors.

On January 31, 2019, the Company’s Board of Directors announced $75.0 million for the repurchase of the Company’s common stock. On May 29, 2020, the Company’s Board of Directors announced an additional $45.0 million for the repurchase of the Company’s common stock. These repurchase programs have no expiration date.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

- 33 -

Item 6. Exhibits

(a)

Exhibit Index


~~(a)~~ 31.1	~~Exhibit Index~~

~~31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a – 14(a) under the Securities Exchange Act of 1934.

31.2	Certification of Chief Financial Officer pursuant to Rule 13a – 14(a) under the Securities Exchange Act of 1934.

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

- 34 -

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		EXPONENT, INC.
		(Registrant)

Date: November ~~5, 2021~~4, 2022
		/s/ Catherine Ford Corrigan
		Catherine Ford Corrigan, Ph.D., Chief Executive Officer


		/s/ Richard L. Schlenker ~~Jr.~~
		Richard L. Schlenker, ~~Jr.,~~ Chief Financial Officer

- 35 -

Balance at January 1, 2021	$	3,995
Provision for contract losses and doubtful accounts		1,197
Write-offs		(377	)
Balance at October 1, 2021	$	4,815