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Charles River Associates (CRA) Reports Financial Results for the Second Quarter of 2023

Broad-based Contributions Drive Record Quarterly Revenue

CRA Increases Profit Guidance and Raises Lower End of Revenue Guidance for Full-year Fiscal 2023

Charles River Associates (NASDAQ: CRAI), a worldwide leader in providing economic, financial and management consulting services, today announced financial results for the fiscal second quarter ended July 1, 2023.

“Building on a strong start to the year, CRA delivered revenue growth of 8.6% year over year to $162.0 million, representing the highest quarterly revenue in the company’s history,” said Paul Maleh, CRA’s President and Chief Executive Officer. “This performance was driven by broad-based contributions across our portfolio. Seven of 11 practices grew year over year. Leading the way were four practices—Energy, Finance, Financial Economics, and Forensic Services—that each generated double-digit revenue growth, while our Antitrust & Competition Economics, Labor & Employment, and Life Sciences practices also grew. Our North American and international operations both grew in the second quarter, led by our international operations, which increased revenue by 18.6% year over year.”

Highlights for Second Quarter Fiscal 2023

  • Revenue grew 8.6% year over year to $162.0 million.
  • Utilization was 72%, and quarter-end headcount increased 12.5% year over year.
  • Net income decreased 18.3% year over year to $9.5 million, or 5.9% of revenue, compared with $11.6 million, or 7.8% of revenue, in the second quarter of fiscal 2022; non-GAAP net income decreased 2.5% year over year to $10.0 million, or 6.2% of revenue, compared with $10.3 million, or 6.9% of revenue, in the second quarter of fiscal 2022.
  • Earnings per diluted share decreased 14.6% year over year to $1.34 from $1.57 in the second quarter of fiscal 2022; non-GAAP earnings per diluted share increased 2.2% year over year to $1.42 from $1.39 in the second quarter of fiscal 2022.
  • Non-GAAP EBITDA increased 3.9% to $18.8 million, or 11.6% of revenue, compared with $18.1 million, or 12.1% of revenue, in the second quarter of fiscal 2022.
  • On a constant currency basis relative to the second quarter of fiscal 2022, revenue would have been higher by $0.1 million, while GAAP net income and earnings per diluted share would have remained unchanged. Non-GAAP net income, earnings per diluted share, and non-GAAP EBITDA would have remained unchanged.
  • CRA returned $5.5 million of capital to its shareholders, consisting of $2.5 million of dividend payments and $3.0 million for share repurchases of approximately 31,000 shares.

Management Commentary and Financial Guidance

“Through the first two quarters of fiscal 2023, on a constant currency basis relative to fiscal 2022, CRA generated total revenue of $318.0 million and non-GAAP EBITDA of $36.6 million, achieving a margin of 11.5%,” continued Maleh. “Reflecting the continued strength and quality of our business, we are raising the lower end of our revenue guidance and increasing our profit guidance. For full-year fiscal 2023, on a constant currency basis relative to fiscal 2022, we expect revenue in the range of $625.0 million to $640.0 million and non-GAAP EBITDA margin in the range of 11.0% to 11.7%. This new guidance compares with a prior revenue range of $615 million to $640 million and a prior non-GAAP EBITDA margin range of 10.8% to 11.5%. While we are pleased with CRA’s performance through the first half of the year, we remain mindful that uncertainties around global economic, business, health, and geopolitical conditions can affect our business.”

CRA does not provide reconciliations of its annual non-GAAP EBITDA margin guidance to GAAP net income margin because the Company is unable to estimate with reasonable certainty unusual gains or charges, foreign currency exchange rates, and the resulting effect of these items, and of equity awards, on CRA’s taxes without unreasonable effort. These items are uncertain, depend on various factors, and may have a material effect on CRA’s results computed in accordance with GAAP. A reconciliation between the historical GAAP and non-GAAP financial measures presented in this release is provided in the financial tables at the end of this release.

Quarterly Dividend

On August 3, 2023, CRA announced a quarterly cash dividend of $0.36 per common share, payable on September 8, 2023 to shareholders of record as of August 29, 2023. CRA expects to continue paying quarterly dividends, the declaration, timing and amounts of which remain subject to the discretion of CRA’s Board of Directors.

Conference Call Information and Prepared CFO Remarks

CRA will host a conference call today at 10:00 a.m. ET to discuss its second-quarter 2023 financial results. To listen to the live call, please visit the “Investor Relations” section of CRA’s website at http://www.crai.com, or dial (877) 709-8155 or (201) 689-8881. An archived version of the webcast will be available on CRA’s website for one year.

In combination with this press release, CRA has posted prepared remarks by its CFO, Dan Mahoney, under “Quarterly Earnings” in the “Investor Relations” section on CRA’s website at http://www.crai.com. These remarks are offered to provide the investment community with additional background on CRA’s financial results prior to the start of the conference call.

About Charles River Associates (CRA)

Charles River Associates® is a leading global consulting firm specializing in economic, financial, and management consulting services. CRA advises clients on economic and financial matters pertaining to litigation and regulatory proceedings, and guides corporations through critical business strategy and performance-related issues. Since 1965, clients have engaged CRA for its unique combination of functional expertise and industry knowledge, and for its objective solutions to complex problems. Headquartered in Boston, CRA has offices throughout the world. Detailed information about Charles River Associates, a registered trade name of CRA International, Inc., is available at https://www.crai.com/. Follow us on LinkedIn, Twitter, and Facebook.

NON-GAAP FINANCIAL MEASURES

In this release, CRA has supplemented the presentation of its financial results calculated in accordance with U.S. generally accepted accounting principles or “GAAP” with the following financial measures that are not calculated in accordance with GAAP: non‑GAAP net income, non‑GAAP net income per share and non‑GAAP EBITDA. CRA believes that the non-GAAP financial measures described in this press release are important to management and investors because these measures supplement the understanding of CRA’s ongoing operating results and financial condition. In addition, these non-GAAP measures are used by CRA in its budgeting process, and the non-GAAP adjustments are made to the performance measures for some of CRA’s performance-based compensation.

As used herein, CRA defines non-GAAP EBITDA as net income before interest expense (net), income taxes, and depreciation and amortization further adjusted for the impact of certain items that we do not consider indicative of our core operating performance, such as non-cash amounts relating to valuation changes in contingent consideration, acquisition-related costs, foreign currency (gains) losses, net and related tax effects. Non-GAAP net income and non-GAAP net income per share also exclude non-cash amounts relating to valuation changes in contingent consideration, acquisition-related costs, foreign currency (gains) losses, net and related tax effects. This release also presents certain current fiscal period financial measures on a “constant currency” basis in order to isolate the effect that foreign currency exchange rate fluctuations can have on CRA’s financial results. These constant currency measures are determined by recalculating the current fiscal period local currency financial measure using the specified corresponding prior fiscal period’s foreign exchange rates. On a constant currency basis for the fiscal year-to-date period ended July 1, 2023 relative to the fiscal year-to-date period ended July 2, 2022, revenue and EBITDA would have been higher by $3.2 million and $1.1 million, respectively.

All of the non-GAAP financial measures referred to above should be considered in conjunction with, and not as a substitute for, the GAAP financial information presented in this release. EBITDA and the financial measures identified in this release as “non-GAAP” are reconciled to their GAAP comparable measures in the financial tables appended to the end of this press release. In evaluating these non-GAAP financial measures, note that the non-GAAP financial measures used by CRA may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

SAFE HARBOR STATEMENT

Statements in this press release concerning our future business, operating results and financial condition, including those concerning guidance on future revenue and non-GAAP EBITDA margin, the impact of exchange rate fluctuations on our financial results, our expectations regarding continued growth, our expectations regarding the payment of any future quarterly dividends and the level and extent of any purchases under our expanded share repurchase program, and statements using the terms “outlook,” “expect,” or similar expressions, are “forward-looking” statements as defined in Section 21 of the Exchange Act. These statements are based upon our current expectations and various underlying assumptions. Although we believe there is a reasonable basis for these statements and assumptions, and these statements are expressed in good faith, these statements are subject to a number of additional factors and uncertainties. Our actual revenue and non-GAAP EBITDA margin in fiscal 2023 on a constant currency basis relative to fiscal 2022 could differ materially from the guidance presented herein, and our actual performance and results may differ materially from the performance and results contained in or implied by the forward-looking statements made herein, due to many important factors. These factors include, but are not limited to, 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; our ability to attract and retain key employee or non-employee experts; the inability to integrate and utilize existing consultants and personnel; the decline or reduction in project work or activity; global economic conditions including less stable political and economic environments; the impact of epidemics or pandemics such as the COVID-19 pandemic; foreign currency exchange rate fluctuations; unanticipated expenses and liabilities; risks inherent in international operations; changes in tax law or accounting standards, rules, and regulations; our ability to collect on forgivable loans should any become due; and professional and other legal liability or settlements. Additional risks and uncertainties are discussed in our periodic filings with the Securities and Exchange Commission under the heading “Risk Factors.” The inclusion of such forward-looking information should not be regarded as our representation that the future events, plans, or expectations contemplated will be achieved. Except as may be required by law, we undertake no obligation to update any forward-looking statements after the date of this press release, and we do not intend to do so.

 

CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED

JULY 1, 2023 COMPARED TO JULY 2, 2022

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

Fiscal Quarter Ended

Fiscal Year-to-Date Period Ended

 

July 1,

 

As a % of

 

July 2,

 

As a % of

July 1,

 

As a % of

 

July 2,

 

As a % of

2023

Revenue

2022

Revenue

2023

Revenue

2022

Revenue

Revenues

$

161,965

 

 

100.0

%

 

$

149,102

 

 

100.0

%

$

314,810

 

 

100.0

%

 

$

297,484

 

 

100.0

%

Costs of services (exclusive of depreciation and amortization)

 

113,333

 

 

70.0

%

 

 

103,076

 

 

69.1

%

 

221,170

 

 

70.3

%

 

 

207,136

 

 

69.6

%

Selling, general and administrative expenses

 

29,846

 

 

18.4

%

 

 

27,963

 

 

18.8

%

 

58,218

 

 

18.5

%

 

 

53,780

 

 

18.1

%

Depreciation and amortization

 

2,872

 

 

1.8

%

 

 

3,050

 

 

2.0

%

 

5,815

 

 

1.8

%

 

 

6,026

 

 

2.0

%

Income from operations

 

15,914

 

 

9.8

%

 

 

15,013

 

 

10.1

%

 

29,607

 

 

9.4

%

 

 

30,542

 

 

10.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(1,616

)

 

-1.0

%

 

 

(468

)

 

-0.3

%

 

(2,187

)

 

-0.7

%

 

 

(676

)

 

-0.2

%

Foreign currency gains (losses), net

 

(686

)

 

-0.4

%

 

 

1,700

 

 

1.1

%

 

(1,214

)

 

-0.4

%

 

 

1,899

 

 

0.6

%

Income before provision for income taxes

 

13,612

 

 

8.4

%

 

 

16,245

 

 

10.9

%

 

26,206

 

 

8.3

%

 

 

31,765

 

 

10.7

%

Provision for income taxes

 

4,104

 

 

2.5

%

 

 

4,602

 

 

3.1

%

 

7,780

 

 

2.5

%

 

 

8,696

 

 

2.9

%

Net income

$

9,508

 

 

5.9

%

 

$

11,643

 

 

7.8

%

$

18,426

 

 

5.9

%

 

$

23,069

 

 

7.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.36

 

 

 

 

$

1.60

 

 

 

$

2.61

 

 

 

 

$

3.15

 

 

 

Diluted

$

1.34

 

 

 

 

$

1.57

 

 

 

$

2.56

 

 

 

 

$

3.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

6,983

 

 

 

 

 

7,263

 

 

 

 

7,051

 

 

 

 

 

7,311

 

 

 

Diluted

 

7,080

 

 

 

 

 

7,380

 

 

 

 

7,166

 

 

 

 

 

7,442

 

 

 

 

CRA INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED

JULY 1, 2023 COMPARED TO JULY 2, 2022

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

Fiscal Quarter Ended

 

Fiscal Year-to-Date Period Ended

 

July 1,

 

As a % of

 

July 2,

 

As a % of

 

July 1,

 

As a % of

 

July 2,

 

As a % of

2023

Revenue

2022

Revenue

2023

Revenue

2022

Revenue

Revenues

$

161,965

 

 

100.0

%

 

$

149,102

 

 

100.0

%

 

$

314,810

 

 

100.0

%

 

$

297,484

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

9,508

 

 

5.9

%

 

$

11,643

 

 

7.8

%

 

$

18,426

 

 

5.9

%

 

$

23,069

 

 

7.8

%

Adjustments needed to reconcile GAAP net income to non-GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash valuation change in contingent consideration

 

16

 

 

%

 

 

 

 

%

 

 

36

 

 

%

 

 

 

 

%

Acquisition-related costs

 

 

 

%

 

 

32

 

 

%

 

 

22

 

 

%

 

 

203

 

 

0.1

%

Foreign currency (gains) losses, net

 

686

 

 

0.4

%

 

 

(1,700

)

 

-1.1

%

 

 

1,214

 

 

0.4

%

 

 

(1,899

)

 

-0.6

%

Tax effect on adjustments

 

(165

)

 

-0.1

%

 

 

324

 

 

0.2

%

 

 

(304

)

 

-0.1

%

 

 

319

 

 

0.1

%

Non-GAAP net income

$

10,045

 

 

6.2

%

 

$

10,299

 

 

6.9

%

 

$

19,394

 

 

6.2

%

 

$

21,692

 

 

7.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.44

 

 

 

 

$

1.41

 

 

 

 

$

2.75

 

 

 

 

$

2.96

 

 

 

Diluted

$

1.42

 

 

 

 

$

1.39

 

 

 

 

$

2.70

 

 

 

 

$

2.91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

6,983

 

 

 

 

 

7,263

 

 

 

 

 

7,051

 

 

 

 

 

7,311

 

 

 

Diluted

 

7,080

 

 

 

 

 

7,380

 

 

 

 

 

7,166

 

 

 

 

 

7,442

 

 

 

 

CRA INTERNATIONAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED

JULY 1, 2023 COMPARED TO JULY 2, 2022

(IN THOUSANDS)

 

 

Fiscal Quarter Ended

 

Fiscal Year-to-Date Period Ended

 

July 1,

 

As a % of

 

July 2,

 

As a % of

 

July 1,

 

As a % of

 

July 2,

 

As a % of

2023

Revenue

2022

Revenue

2023

Revenue

2022

Revenue

Revenues

$

161,965

 

 

100.0

%

 

$

149,102

 

 

100.0

%

 

$

314,810

 

 

100.0

%

 

$

297,484

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

9,508

 

 

5.9

%

 

$

11,643

 

 

7.8

%

 

$

18,426

 

 

5.9

%

 

$

23,069

 

 

7.8

%

Adjustments needed to reconcile GAAP net income to non-GAAP net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash valuation change in contingent consideration

 

16

 

 

%

 

 

 

 

%

 

 

36

 

 

%

 

 

 

 

%

Acquisition-related costs

 

 

 

%

 

 

32

 

 

%

 

 

22

 

 

%

 

 

203

 

 

0.1

%

Foreign currency (gains) losses, net

 

686

 

 

0.4

%

 

 

(1,700

)

 

-1.1

%

 

 

1,214

 

 

0.4

%

 

 

(1,899

)

 

-0.6

%

Tax effect on adjustments

 

(165

)

 

-0.1

%

 

 

324

 

 

0.2

%

 

 

(304

)

 

-0.1

%

 

 

319

 

 

0.1

%

Non-GAAP net income

$

10,045

 

 

6.2

%

 

$

10,299

 

 

6.9

%

 

$

19,394

 

 

6.2

%

 

$

21,692

 

 

7.3

%

Adjustments needed to reconcile non-GAAP net income to non-GAAP EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

1,616

 

 

1.0

%

 

 

468

 

 

0.3

%

 

 

2,187

 

 

0.7

%

 

 

676

 

 

0.2

%

Provision for income taxes

 

4,269

 

 

2.6

%

 

 

4,278

 

 

2.9

%

 

 

8,084

 

 

2.6

%

 

 

8,377

 

 

2.8

%

Depreciation and amortization

 

2,872

 

 

1.8

%

 

 

3,050

 

 

2.0

%

 

 

5,815

 

 

1.8

%

 

 

6,026

 

 

2.0

%

Non-GAAP EBITDA

$

18,802

 

 

11.6

%

 

$

18,095

 

 

12.1

%

 

$

35,480

 

 

11.3

%

 

$

36,771

 

 

12.4

%

 

CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

 

 

July 1,

 

December 31,

2023

2022

Assets

 

 

 

Cash and cash equivalents

$

14,271

 

$

31,447

Accounts receivable and unbilled services, net

 

213,095

 

 

194,987

Other current assets

 

27,352

 

 

22,426

Total current assets

 

254,718

 

 

248,860

 

 

 

 

Property and equipment, net

 

42,443

 

 

45,582

Goodwill and intangible assets, net

 

101,785

 

 

101,510

Right-of-use assets

 

90,627

 

 

96,725

Other assets

 

61,485

 

 

58,240

Total assets

$

551,058

 

$

550,917

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Accounts payable

$

22,909

 

$

27,584

Accrued expenses

 

107,173

 

 

155,864

Current portion of lease liabilities

 

16,386

 

 

15,972

Revolving line of credit

 

80,000

 

 

Other current liabilities

 

12,522

 

 

17,705

Total current liabilities

 

238,990

 

 

217,125

Non-current portion of lease liabilities

 

97,938

 

 

106,008

Other non-current liabilities

 

11,344

 

 

16,630

Total liabilities

 

348,272

 

 

339,763

 

 

 

 

Total shareholders’ equity

 

202,786

 

 

211,154

Total liabilities and shareholders’ equity

$

551,058

 

$

550,917

 

CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

Fiscal Year-to-Date Period Ended

 

July 1,

 

July 2,

2023

2022

Operating activities:

 

 

 

Net income

$

18,426

 

 

$

23,069

 

Adjustments to reconcile net income to net cash used in operating activities, net of effect of acquired businesses:

 

 

 

Non-cash items, net

 

15,200

 

 

 

14,193

 

Accounts receivable and unbilled services

 

(16,415

)

 

 

(36,549

)

Working capital items, net

 

(82,190

)

 

 

(79,525

)

Net cash used in operating activities

 

(64,979

)

 

 

(78,812

)

 

 

 

 

Investing activities:

 

 

 

Purchases of property and equipment, net

 

(1,282

)

 

 

(2,067

)

Consideration paid for acquisition, net

 

(570

)

 

 

(10,185

)

Net cash used in investing activities

 

(1,852

)

 

 

(12,252

)

 

 

 

 

Financing activities:

 

 

 

Issuance of common stock, principally stock options exercises

 

 

 

 

341

 

Borrowings under revolving line of credit

 

105,000

 

 

 

70,000

 

Repayments under revolving line of credit

 

(25,000

)

 

 

 

Tax withholding payments reimbursed by shares

 

(2,009

)

 

 

(975

)

Cash dividends paid

 

(5,230

)

 

 

(4,636

)

Repurchase of common stock

 

(23,577

)

 

 

(22,630

)

Net cash provided by financing activities

 

49,184

 

 

 

42,100

 

 

 

 

 

Effect of foreign exchange rates on cash and cash equivalents

 

471

 

 

 

(1,545

)

 

 

 

 

Net decrease in cash and cash equivalents

 

(17,176

)

 

 

(50,509

)

Cash and cash equivalents at beginning of period

 

31,447

 

 

 

66,130

 

Cash and cash equivalents at end of period

$

14,271

 

 

$

15,621

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

Increase (decrease) in accounts payable and accrued expenses for property and equipment

$

376

 

 

$

(184

)

Excise tax on share repurchases

$

(200

)

 

$

 

Right-of-use assets obtained in exchange for lease obligations

$

190

 

 

$

2,020

 

Supplemental cash flow information:

 

 

 

Cash paid for taxes

$

6,218

 

 

$

7,532

 

Cash paid for interest

$

2,178

 

 

$

452

 

Cash paid for amounts included in operating lease liabilities

$

11,077

 

 

$

10,584

 

 

Contacts

Dan Mahoney

Chief Financial Officer

Charles River Associates

617-425-3505

Nicholas Manganaro

Sharon Merrill Associates, Inc.

crai@investorrelations.com

617-542-5300

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