10-Q 1 expo-20240329.htm 10-Q 10-Q
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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 March 29, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to___________

Commission File Number 0-18655

EXPONENT, INC.

(Exact name of registrant as specified in its charter)

 

delaware

 

77-0218904

(State or 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) 326-9400

(Registrant’s telephone number, including area code)

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 April 26, 2024, the latest practicable date, the registrant had 50,670,271 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 March 29, 2024 and December 29, 2023

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income for the Three Months Ended March 29, 2024 and March 31, 2023

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 29, 2024 and March 31, 2023

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 29, 2024 and March 31, 2023

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 29, 2024 and March 31, 2023

 

7

 

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

 

 

PART II – OTHER INFORMATION

 

27

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

 

 

 

 

 

Item 1A.

 

Risk Factors

 

27

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

27

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

27

 

 

 

 

 

Item 5.

 

Other Information

 

27

 

 

 

 

 

Item 6.

 

Exhibits

 

29

 

 

 

 

 

 

 

Signatures

 

30

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

EXPONENT, INC.

Condensed Consolidated Balance Sheets

March 29, 2024 and December 29, 2023

(in thousands, except par value)

(unaudited)

 

 

March 29,
2024

 

 

December 29,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

168,665

 

 

$

187,150

 

Accounts receivable, net of allowance for contract losses and doubtful accounts
   of $
6,302 and $5,281 at March 29, 2024 and December 29, 2023, respectively

 

 

162,885

 

 

 

167,360

 

Prepaid expenses and other current assets

 

 

20,773

 

 

 

25,022

 

Total current assets

 

 

352,323

 

 

 

379,532

 

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net of accumulated depreciation and
   amortization of $
106,162 and $104,011 at March 29, 2024 and December 29, 2023,
   respectively

 

 

74,503

 

 

 

75,318

 

Operating lease right-of-use assets

 

 

24,145

 

 

 

24,600

 

Goodwill

 

 

8,607

 

 

 

8,607

 

Deferred income taxes

 

 

52,224

 

 

 

53,824

 

Deferred compensation plan assets

 

 

113,844

 

 

 

101,169

 

Other assets

 

 

3,759

 

 

 

3,727

 

Total assets

 

$

629,405

 

 

$

646,777

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

23,926

 

 

$

22,125

 

Accrued payroll and employee benefits

 

 

68,285

 

 

 

111,773

 

Deferred revenues

 

 

16,106

 

 

 

21,709

 

Operating lease liabilities

 

 

5,814

 

 

 

6,302

 

Total current liabilities

 

 

114,131

 

 

 

161,909

 

 

 

 

 

 

 

 

Other liabilities

 

 

3,580

 

 

 

3,426

 

Deferred compensation plan liabilities

 

 

116,005

 

 

 

103,398

 

Operating lease liabilities

 

 

21,378

 

 

 

21,959

 

Total liabilities

 

 

255,094

 

 

 

290,692

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.001 par value; 120,000 shares authorized; 65,707 shares
   issued at March 29, 2024 and December 29, 2023

 

 

66

 

 

 

66

 

Additional paid-in capital

 

 

335,014

 

 

 

321,448

 

Accumulated other comprehensive loss

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(3,187

)

 

 

(2,977

)

Retained earnings

 

 

588,570

 

 

 

574,082

 

Treasury stock, at cost; 15,033 and 15,134 shares held at March 29, 2024 and December 29, 2023, respectively

 

 

(546,152

)

 

 

(536,534

)

Total stockholders’ equity

 

 

374,311

 

 

 

356,085

 

Total liabilities and stockholders’ equity

 

$

629,405

 

 

$

646,777

 

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

- 3 -


 

EXPONENT, INC.

Condensed Consolidated Statements of Income

For the Three Months Ended March 29, 2024 and March 31, 2023

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 29,
2024

 

 

March 31,
2023

 

Revenues:

 

 

 

 

 

 

Revenues before reimbursements

 

$

137,207

 

 

$

128,705

 

Reimbursements

 

 

7,726

 

 

 

11,604

 

Revenues

 

 

144,933

 

 

 

140,309

 

Operating expenses:

 

 

 

 

 

 

Compensation and related expenses

 

 

90,327

 

 

 

84,181

 

Other operating expenses

 

 

10,531

 

 

 

9,561

 

Reimbursable expenses

 

 

7,726

 

 

 

11,604

 

General and administrative expenses

 

 

5,636

 

 

 

5,843

 

Total operating expenses

 

 

114,220

 

 

 

111,189

 

Operating income

 

 

30,713

 

 

 

29,120

 

Other income, net:

 

 

 

 

 

 

Interest income, net

 

 

2,626

 

 

 

1,770

 

Miscellaneous income (loss), net

 

 

7,084

 

 

 

4,648

 

Total other income (loss), net

 

 

9,710

 

 

 

6,418

 

Income before income taxes

 

 

40,423

 

 

 

35,538

 

Income taxes

 

 

10,281

 

 

 

6,414

 

Net income

 

$

30,142

 

 

$

29,124

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.57

 

Diluted

 

$

0.59

 

 

$

0.56

 

Shares used in per share computations:

 

 

 

 

 

 

Basic

 

 

51,006

 

 

 

51,132

 

Diluted

 

 

51,419

 

 

 

51,682

 

Cash dividends declared per common share

 

$

0.28

 

 

$

0.26

 

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

- 4 -


 

EXPONENT, INC.

Condensed Consolidated Statements of Comprehensive Income

For the Three Months Ended March 29, 2024 and March 31, 2023

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 29,
2024

 

 

March 31,
2023

 

Net income

 

$

30,142

 

 

$

29,124

 

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation
   adjustments, net of tax

 

 

(210

)

 

 

460

 

Comprehensive income

 

$

29,932

 

 

$

29,584

 

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

 

 

 

- 5 -


 

EXPONENT, INC

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 29, 2024 and March 31, 2023

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 29, 2024

 

 

 

Common Stock

 

 

Additional
paid-in

 

 

Accumulated
other
comprehensive

 

 

Retained

 

 

Treasury Stock

 

 

 

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

earnings

 

 

Shares

 

 

Amount

 

 

Total

 

Balance at December 29, 2023

 

 

65,707

 

 

$

66

 

 

$

321,448

 

 

$

(2,977

)

 

$

574,082

 

 

 

15,134

 

 

$

(536,534

)

 

$

356,085

 

Employee stock purchase plan

 

 

-

 

 

 

-

 

 

 

450

 

 

 

-

 

 

 

-

 

 

 

(7

)

 

 

68

 

 

 

518

 

Amortization of unrecognized stock-based
   compensation

 

 

-

 

 

 

-

 

 

 

4,026

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,026

 

Purchase of treasury shares

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71

 

 

 

(5,466

)

 

 

(5,466

)

Foreign currency translation adjustments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(210

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(210

)

Grant of restricted stock units to settle accrued
   bonus

 

 

-

 

 

 

-

 

 

 

10,846

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,846

 

Settlement of restricted stock units

 

 

-

 

 

 

-

 

 

 

(1,797

)

 

 

-

 

 

 

(720

)

 

 

(159

)

 

 

(4,279

)

 

 

(6,796

)

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

41

 

 

 

 

 

 

 

 

 

(6

)

 

 

59

 

 

 

100

 

Dividends and dividend equivalent rights

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,934

)

 

 

-

 

 

 

-

 

 

 

(14,934

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,142

 

 

 

-

 

 

 

-

 

 

 

30,142

 

Balance at March 29, 2024

 

 

65,707

 

 

$

66

 

 

$

335,014

 

 

$

(3,187

)

 

$

588,570

 

 

 

15,033

 

 

$

(546,152

)

 

$

374,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2023

 

 

 

Common Stock

 

 

Additional
paid-in

 

 

Accumulated
other
comprehensive

 

 

Retained

 

 

Treasury Stock

 

 

 

 

(In thousands)

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

earnings

 

 

Shares

 

 

Amount

 

 

Total

 

Balance at December 30, 2022

 

 

65,707

 

 

$

66

 

 

$

301,002

 

 

$

(3,587

)

 

$

528,810

 

 

 

15,064

 

 

$

(505,539

)

 

$

320,752

 

Employee stock purchase plan

 

 

-

 

 

 

-

 

 

 

517

 

 

 

-

 

 

 

-

 

 

 

(6

)

 

 

63

 

 

 

580

 

Amortization of unrecognized stock-based
   compensation

 

 

-

 

 

 

-

 

 

 

4,205

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,205

 

Foreign currency translation adjustments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

460

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

460

 

Grant of restricted stock units to settle accrued
   bonus

 

 

-

 

 

 

-

 

 

 

10,497

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,497

 

Settlement of restricted stock units

 

 

-

 

 

 

-

 

 

 

(1,741

)

 

 

-

 

 

 

(1,009

)

 

 

(178

)

 

 

(7,170

)

 

 

(9,920

)

Exercise of stock options

 

 

-

 

 

 

-

 

 

 

22

 

 

 

 

 

 

 

 

 

(8

)

 

 

78

 

 

 

100

 

Dividends and dividend equivalent rights

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(13,942

)

 

 

-

 

 

 

-

 

 

 

(13,942

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,124

 

 

 

-

 

 

 

-

 

 

 

29,124

 

Balance at March 31, 2023

 

 

65,707

 

 

$

66

 

 

$

314,502

 

 

$

(3,127

)

 

$

542,983

 

 

$

14,872

 

 

$

(512,568

)

 

$

341,856

 

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

 

 

 

- 6 -


 

EXPONENT, INC.

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 29, 2024 and March 31, 2023

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 29,
2024

 

 

March 31,
2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

30,142

 

 

$

29,124

 

Adjustments to reconcile net income to net cash used in
   operating activities:

 

 

 

 

 

 

Depreciation and amortization of property, equipment and
   leasehold improvements

 

 

2,324

 

 

 

1,988

 

Provision for contract losses and doubtful accounts

 

 

1,279

 

 

 

892

 

Stock-based compensation

 

 

7,340

 

 

 

7,063

 

Deferred income tax provision

 

 

1,600

 

 

 

1,725

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

3,196

 

 

 

(3,842

)

Prepaid expenses and other current assets

 

 

(2,193

)

 

 

(7,777

)

Change in operating leases

 

 

(614

)

 

 

(774

)

Accounts payable and accrued liabilities

 

 

2,577

 

 

 

(2,271

)

Accrued payroll and employee benefits

 

 

(29,616

)

 

 

(28,564

)

Deferred revenues

 

 

(5,603

)

 

 

(4,267

)

Net cash provided by (used in) operating activities

 

 

10,432

 

 

 

(6,703

)

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(1,482

)

 

 

(5,668

)

Net cash used in investing activities

 

 

(1,482

)

 

 

(5,668

)

Cash flows from financing activities:

 

 

 

 

 

 

Payroll taxes for restricted stock units

 

 

(6,796

)

 

 

(9,920

)

Repurchase of common stock

 

 

(5,466

)

 

 

-

 

Exercise of stock-based payment awards

 

 

618

 

 

 

680

 

Dividends and dividend equivalents rights

 

 

(15,583

)

 

 

(14,500

)

Net cash used in financing activities

 

 

(27,227

)

 

 

(23,740

)

Effect of foreign currency exchange rates on cash and cash equivalents

 

 

(208

)

 

 

302

 

Net decrease in cash and cash equivalents

 

 

(18,485

)

 

 

(35,809

)

Cash and cash equivalents at beginning of period

 

 

187,150

 

 

 

161,458

 

Cash and cash equivalents at end of period

 

$

168,665

 

 

$

125,649

 

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

- 7 -


 

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 months ended March 29, 2024 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 December 29, 2023, which was filed with the U.S. Securities and Exchange Commission on February 23, 2024 and amended on April 17, 2024.

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.

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

 

 

 

March 29,
2024

 

 

March 31,
2023

 

Engineering & other scientific

 

 

64

%

 

 

64

%

Environmental and health

 

 

16

%

 

 

16

%

Total time and materials revenues

 

 

80

%

 

 

80

%

 

 

 

 

 

 

 

 

 

- 8 -


 

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

 

 

 

March 29,
2024

 

 

March 31,
2023

 

Engineering & other scientific

 

 

19

%

 

 

19

%

Environmental and health

 

 

1

%

 

 

1

%

Total fixed price revenues

 

 

20

%

 

 

20

%

 

 

 

 

 

 

 

 

Deferred revenues represent amounts billed to clients in advance of services provided. During the first quarter of 2024, $7,956,000 of revenues were recognized that were included in the deferred revenue balance at December 29, 2023. During the first quarter of 2023, $8,566,000 of revenues were recognized that were included in the deferred revenue balance at December 30, 2022.

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 $2,747,000 and $5,751,000 during the first quarter of 2024 and 2023, respectively.

- 9 -


 

Note 3: Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including 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 months ended March 29, 2024 and March 31, 2023. 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 financial assets and liabilities was determined using the following inputs at March 29, 2024 (in thousands):

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

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)

 

$

55,402

 

 

$

55,402

 

 

$

-

 

 

$

-

 

Fixed income trading securities held in deferred
   compensation plan
(2)

 

 

44,669

 

 

 

44,669

 

 

 

-

 

 

 

-

 

Equity trading securities held in deferred compensation
   plan
(2)

 

 

83,466

 

 

$

83,466

 

 

 

-

 

 

 

-

 

Total

 

$

183,537

 

 

$

183,537

 

 

$

-

 

 

$

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan (3)

 

 

129,139

 

 

 

129,139

 

 

 

-

 

 

 

-

 

Total

 

$

129,139

 

 

$

129,139

 

 

$

-

 

 

$

-

 

(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.

The fair value of these certain financial assets and liabilities was determined using the following inputs at December 29, 2023 (in thousands):

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

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)

 

$

54,686

 

 

$

54,686

 

 

$

-

 

 

$

-

 

Fixed income trading securities held in deferred
   compensation plan
(2)

 

 

36,788

 

 

 

36,788

 

 

 

-

 

 

 

-

 

Equity trading securities held in deferred compensation
   plan
(2)

 

 

78,399

 

 

 

78,399

 

 

 

-

 

 

 

-

 

Total

 

$

169,873

 

 

$

169,873

 

 

$

-

 

 

$

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Deferred compensation plan (3)

 

 

116,564

 

 

 

116,564

 

 

 

-

 

 

 

-

 

Total

 

$

116,564

 

 

$

116,564

 

 

$

-

 

 

$

-

 

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

- 10 -


 

(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.

Money market securities as of March 29, 2024 and December 29, 2023 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 consisted of the following as of March 29, 2024 (in thousands):

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Estimated

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Classified as current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

113,263

 

 

$

-

 

 

$

-

 

 

$

113,263

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market securities

 

 

55,402

 

 

 

-

 

 

 

-

 

 

 

55,402

 

Total cash equivalents

 

 

55,402

 

 

 

-

 

 

 

-

 

 

 

55,402

 

Total cash and cash equivalents

 

$

168,665

 

 

$

-

 

 

$

-

 

 

$

168,665

 

 

 

Cash and cash equivalents consisted of the following as of December 29, 2023 (in thousands):

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Estimated

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Classified as current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

132,464

 

 

$

-

 

 

$

-

 

 

$

132,464

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market securities

 

 

54,686

 

 

 

-

 

 

 

-

 

 

 

54,686

 

Total cash equivalents

 

 

54,686

 

 

 

-

 

 

 

-

 

 

 

54,686

 

Total cash and cash equivalents

 

$

187,150

 

 

$

-

 

 

$

-

 

 

$

187,150

 

 

 

At March 29, 2024 and December 29, 2023, 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 unaudited condensed consolidated balance sheet at March 29, 2024 and December 29, 2023, but require disclosure of their fair values: accounts receivable, other assets and accounts payable. The estimated fair value of such instruments at March 29, 2024 and December 29, 2023 approximates their carrying value as reported on the Company’s unaudited condensed consolidated balance sheets.

- 11 -


 

Note 4: Net Income Per Share

Basic per share amounts are computed using the weighted-average number of shares of common stock outstanding during the period. Diluted per share amounts are calculated using the weighted-average number of shares of common stock outstanding during the period and, when dilutive, the weighted-average number of potential shares of common stock 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

 

(In thousands)

 

March 29,
2024

 

 

March 31,
2023

 

Shares used in basic per share computation

 

 

51,006

 

 

 

51,132

 

Effect of dilutive common stock options
   outstanding

 

 

164

 

 

 

213

 

Effect of dilutive restricted stock units
   outstanding

 

 

249

 

 

 

337

 

Shares used in diluted per share
   computation

 

 

51,419

 

 

 

51,682

 

 

Common stock options to purchase 100,833 shares were excluded from the diluted per share calculation for the three months March 29, 2024 due to their anti-dilutive effect. Common stock options to purchase 14,835 shares were excluded from the diluted per share calculation for the three months March 31, 2023 due to their anti-dilutive effect.

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% 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 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 $3,314,000 and $2,858,000 during the three months ended March 29, 2024 and March 31, 2023, 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

- 12 -


 

stock-based compensation expense associated with the unvested restricted stock unit awards of $3,707,000 and $3,981,000 during the three months ended March 29, 2024 and March 31, 2023, respectively.

Stock Options

Stock options are granted for terms of ten years and generally vest 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 $319,000 and $224,000 during the three months ended March 29, 2024 and March 31, 2023, respectively.

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.

- 13 -


 

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% 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 March 29, 2024 and December 29, 2023, the invested amounts under the plans totaled $128,135,000 and $115,187,000, 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. These assets are classified as trading securities and are recorded at fair value with changes recorded as adjustments to miscellaneous income (loss), net.

As of March 29, 2024 and December 29, 2023, vested amounts due under the plans totaled $129,139,000 and $116,564,000, respectively, and are recorded within accrued payroll and employee benefits and deferred compensation plan liabilities on the Company’s unaudited condensed consolidated balance sheets. Changes in the liability are recorded as adjustments to compensation expense. During the three months ended March 29, 2024, the Company recognized additional compensation expense of $6,267,000 as a result of changes in the market value of the trust assets with the same amount being recorded as income in miscellaneous income (loss), net. During the three months ended March 31, 2023, the Company recognized additional compensation expense of $3,918,000 as a result of changes in the market value of the trust assets with the same amount being recorded as income in miscellaneous income (loss), net.

Note 7: Supplemental Cash Flow Information

The following is supplemental disclosure of cash flow information:

 

 

Three Months Ended

 

(In thousands)

 

March 29,
2024

 

 

March 31,
2023

 

Cash paid during period:

 

 

 

 

 

 

Income taxes

 

$

1,102

 

 

$

1,263

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Vested stock unit awards issued to settle accrued bonuses

 

$

10,846

 

 

$

10,497

 

Accrual for capital expenditures

 

$

164

 

 

$

1,210

 

Right-of-use asset obtained in exchange for operating lease obligations

 

$

1,103

 

 

$

-

 

 

 

Note 8: Accounts Receivable, Net

At March 29, 2024 and December 29, 2023, accounts receivable, net, was comprised of the following:

 

 

March 29,

 

 

December 29,

 

(In thousands)

 

2024

 

 

2023

 

Billed accounts receivable

 

$

106,582

 

 

$

128,052

 

Unbilled accounts receivable

 

 

62,605

 

 

 

44,589

 

Allowance for contract losses and doubtful accounts

 

 

(6,302

)

 

 

(5,281

)

Total accounts receivable, net

 

$

162,885

 

 

$

167,360

 

 

 

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 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.

- 14 -


 

 

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 29, 2023

 

$

5,281

 

Provision for contract losses and doubtful accounts

 

 

1,279

 

Write-offs

 

 

(258

)

Balance at March 29, 2024

 

$

6,302

 

 

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 months ended March 29, 2024 and March 31, 2023 follows:

 

Revenues

 

 

Three Months Ended

 

(In thousands)

 

March 29,
2024

 

 

March 31,
2023

 

Engineering and Other Scientific

 

$

121,471

 

 

$

117,048

 

Environmental and Health

 

 

23,462

 

 

 

23,261

 

Total revenues

 

$

144,933

 

 

$

140,309

 

 

 

Operating Income

 

 

Three Months Ended

 

(In thousands)

 

March 29,
2024

 

 

March 31,
2023

 

Engineering and Other Scientific

 

$

48,631

 

 

$