CRA International (CRAI) 2 Nov 232023 Q3 Earnings call transcript

Good day, everyone, and welcome to Charles River Associates Third Quarter 2023 Conference Call. Please note that today's call is being recorded. The company's earnings release and prepared remarks from CRA's Chief Financial Officer are posted on the Investor Relations section of CRA's website at crai.com. With us today are CRA's President and Chief Executive Officer; Paul Maleh; Chief Financial Officer, Dan Mahoney; and Chief Corporate Development Officer, Chad Holmes. And at this time, I would like to turn the call over to Mr. remarks. opening his for Maloney Thank you, Dan. Please go ahead.

financial results or any statements John, XX the statements you, outlook on of revenue margin CRA, and the call, terms good that of in Section are forward-looking note the future future and EBITDA non-GAAP Please using or everyone. including terms Act. the business, condition operating defined and statements made Exchange expect, guidance similar those concerning morning, including Thank statements other during as conference this

Information contained changes for statements many materially to in forward-looking services our general results Actual these current implied expectations is result due demand economic industry-specific and differ management's in performance important as a based factors, and conditions. from may in uncertain. or statements on those including expressed is of the inherently these of and level

is reports these reports, report today's Additional quarterly and including factors XX-Q SEC. most and periodic on recently our information included filed annual filed with on in XX-K CRA's the in regarding Form Form release

obligation update this any of after date the call. undertakes to CRA forward-looking statements no

will release refer remarks reconciliations measures Everyone currency of encouraged measures Paul GAAP call. and to on some currency I report. basis. on his CFO these the non-GAAP a it Additionally, we their constant non-GAAP presented will basis measures refer constant to for a financial now measures is descriptions comparable and to of and this over to and measures on related today's financial certain to Paul? calculation of for presented turn EBITDA

and revenue the in history quarter XXXX. by profit uncertainties, relative of the prior CRA's of highs was period. decline Against an revenue, for in we profitability departure established morning, past we X the you to increased as over third quarter, X.X% CRA for in same quarters the expansion. macroeconomic from years, a company unusual of revenue at growth The us delivering revenue record X the good joining non-GAAP the income Thank which today. and Dan, third new well growth of fiscal each revenue of everyone. in Thanks, achieved the from our lack of $XXX.X million new up revenue backdrop and as fiscal our growth while long quarterly highs net EPS established multiples In EBITDA, have measured for

its The return ability to to cash and to has strong shareholders. to strength substantial flows the of allowed in generate business value-creating growth capital invest CRA and

and a from strong, opportunities have see growth Moreover, contributions efforts our portfolio pursuits. in serve. we services balanced competitive inorganic resulted organic position and markets in offered, the many Our in terms remains resident growth geography of we and

of As we share. on such, CRA's continue long-term the per with maximizing execute our plan will to objective value

fiscal in third exceptional XXXX, the to attrition quarter historical higher at While history our new fiscal has on speed will a Utilization in the of represented XX% demonstrated to portfolio of to our performance, a due low second and services of detail. surprisingly main in consultant project first factors: bump I below experience greater rates. levels we count X lower originations. discuss and journey. factors XXXX our both Similar quarters and continue experience of head came

year-over-year. As head quarter a surged consultant count consequence, our XX.X% third

economic in employee attrition historically when XXXX we below movements. year-to-date even Our rates limited falling related uncertainty experienced in significantly XXXX is and the covered low, lockdowns

percentage be the end necessary, points alignment, further of we team mid consulting of assembled, we the management attrition. Any focused but services. By to realized head supply count year, demand year-over-year. increase and remain balancing disciplined high hiring the have with of pleased the against will to if forecast we for our are by the We labor through on single-digit

future of flow has lead good barometer the business. side, project On our our served a expansion demand in always as

X% example, from while revenue by approximately by XXXX For XXXX, XX% lead approximately grew fiscal through flow grew per year, the year. during per period fiscal project

consecutive quarter CRA's This lead our double-digit third fourth year-over-year. the growth of of For fiscal XXXX, quarter project increased by flow. projected flow in the marks lead XX%

flow conversion during revenue-producing strong fall the into While to the below third was rate lead those of the expectations. quarter, continue assignments leads new

run clients a into As projects. more uncertainty. lead good evidence in on of third conversion short result, the that originations believe losing projects we it see quarter, project new examination for disrupted our remains in year-over-year. the frequently flow little project strong competitors. We new indicator term X% even long lead of start Instead, projects a the an that is of the we are during if Based are economic appears services delaying the demand declined our to by composition,

at I X practice results largest that delivering and our practices revenue of of expanded level. Life XX and to was Turning year-over-year practices, Services Sciences, growth. the pleased our Forensic X double-digit

We double-digit operations. international growth our also generated revenue from

year-over-year our companies investors In life and sciences Energy expansion. technology independent with practices third and CRA's XX.X% the driving Our support quarter, continued practice engagements the emerging to from operators, the management transition. grew energy advanced energy consulting on utilities, services system energy

Electric For could its plan the integrated Bermuda how working will which is Company away fuel example, island from resource on oil. decarbonize consider CRA with

the the recently result and transition. CRA market wholesale of to For trade in the energy engagement utility, different should an operate whether Amarin, company completed a a as Illinois, evaluate

nuclear the Finally, strategy developer, an markets. leadership assisted commercialization company's a with the development American North CRA reactor power advanced for of

in sciences and a industry. sciences unique policy competition and perspective consulting issues provides life on work strategy the life Our

the of sued had transaction For in FTC states the the practice the example, some and prevent. Amgen's acquisition a to assisted with of that quarter, third successful Verizon, defense

oncology, the third while to X% in for regulatory legal quarter recent grew our services opportunity considerable the X Revenue the to case number with year-over-year, more on consulting, focused declined in and in Within against CRA's XX% trends cancer. perform the filings of work continue projects the we within the in market. regulatory the practices from core drug respect the were X% of mix quarter services, of judgments third legal quarter. legal during up declined areas antibody the backdrop conjugates Total With strategy of treatment year-over-year.

led the was and Economics, Our the way practices. Intellectual unemployment Forensic Services year-over-year property revenue Financial in growth joined and by labor practice

practice called various digital to to upon leverage of expert misconduct. Services kinds deep witness be Forensic competencies The continues and to investigate its

by remediate a response matters. example, alleged services evidence. For cases, related that of the on called largest were producers incident of employees behalf claims of as of one one to we and was testify of In confidential expect the been devices, regularly forensic from spoliation to clients our our is investigate number stolen electronic file resurgence providers of Driven by on part and services had but a investigate attacks, secure. experts world's ransomware regarding service in retained practice such in and information transfer only data as third-party of departing theft marked from to not help cyber directly, of

clients potentially situation the to future. be to behind They clients in precisely back and left their corporate to needed which to notified identify on who data the hundreds of help that Our swiftly those actor any be human determine found threat clients CRA had their could was whether doors themselves and of employees traded payroll which publicly a systems. this assess corporate in cloud-based leader exploited called compromised resources in had of

computing, covering advise industries, and valuation vehicles, software, electronics, cloud and multiple services a broad robotics. arbitration to high-stakes continues practice property on of range including intellectual matters electric consumer financial CRA's litigation

practice trade property systems. example, analysis provider The provided products major in testimony of expert intellectual which a an economic rights. block in a ordering of unlawful a and investigations For infringe arbitration and commissions, a online fast international seen complaints work increase CRA has to the to chain to and seek between commercial related found importation U.S. food also

marketing portfolios. with risk users. the CRA consumer pricing servicing across predictive client internal directed develop fairness failed capabilities analysis is client third-party the understand helping is legal analysis -- of evaluating its working monitor of risk practice discriminatory platform and analyze the to a for small the economics monitor in and the machine and to legal Similarly, media range risk used analyze basis. of business for financial financial of of the products analysis lending bank underwriting, to the models inadvertent its helping counsel assisting learning risk a performed ending models. effects a social The to fair client and CRA's fairness range to to to and is and large on loans ongoing the of discrimination The a at an in

employment employment complex practice to for facing employment proactive advice. seeking a and issues clients labor The and leading be resource continues

X discrimination claims. case Labor During the and leisure as and industries, state across wage Standards critical mediation hour third clients engaged and were including assessments for finance, quarter, Fair on multiple entitled California entering [indiscernible] a Act energy Federal early partner experts claims. CRA

the adverse testimony Jonathan background matter in alleged with treatment example, Gurion Professor a the supported For expert checks. practice criminal involving of

Additionally, in pay adjustments. CRA pay ensure pay corrections potential retained practices payment regulatory compliance and experts identifying internal are as well auditing equity, as equity companies assist regularly to to

XXXX, past premier practice totaled I slowest each like and during third Worldwide to decrease during practice, since dramatic was quarters a the and XXXX. the antitrust-related the to and the the X revenue down Antitrust of dealmaking start fiscal year with first quarterly for X Finally, of the record of the & trillion to period compared landscape. provider levels posting performance months would headwinds M&A consistent quarters affecting X-month first period. remains services. Competition past the discuss This was which merger year of of Economics consulting the CRA's ago broader quarter relative X activity the XXXX, After slightly XX% of X M&A in since $X ago

and decreased The quarter quarter worldwide second the making XXXX the with slowest deal compared since for XXXX third marked XXXX. third quarter XX% of of

million year the to EBITDA EBITDA. total $XXX,XXX fiscal a million incorporate adjustments and These full at currency revenue a XXXX, currency achieving on our relative constant margin $XX fiscal of XXXX X to non-GAAP first of Turning Through to results to and contributed $X.X basis quarters $XXX.X million, XX.X%. constant revenue CRA of which guidance. of generated

profit lingering market, year. Given revenue date across uncertainty and are our for the broader the to we our reducing results the and guidance

future the that, in the our the reported year of for currency constant rates guidance a during to $XXX the XXXX. Chad? on call full relative which fiscal expectations on With from fourth few for XX.X%. constant from and XXXX, range $XXX,XXX a EBITDA exchange This XX.X% account of reported basis of million basis shave to to updated $X.X margin fiscal For quarter approximately Chad we may turn revenue Dan current of comments. dollar, then $XXX and additional I'll currency to U.S. in EBITDA our range the a million into revenue the fiscal and market's takes million expect non-GAAP to XXXX over

quarter the the $XX everyone. $XX.X our capital borrowings with of revolving concluded Hello, million Paul. during Thanks, update net revolving figures $XX resulting I cash quarter. on you facility. our the of million quarter million. These a payments borrowings of to under during under our credit want debt our million reduce of reflect credit to facility, deployment in We $X.X and

million. shareholders, cash $X.X consisting of expenditures, business quality and on $XX.X will quarter $XX.X announced million $X reflecting for outlays to available Dan that, million to comments. per common cash third as repurchases. of to $X.XX talent a to increase total $XX.X XX, XXXX. We XXXX XXXX, Demonstrating I'll program. we earlier The today, record the under our our XX% of few of of have a share in commitment With $X.X This the spent to our We investments for X, on December payable final share. our dividend quarterly from year-to-date repurchase dividend shareholders, to returned over we million to $XXX,XXX Year-to-date, for call return Dan? the dividend million. in currently November our and $X.XX million capital our also of saw payments shareholders bringing have confidence of be share turn capital

Thanks, Chad.

As section Investor commentary available on reminder, expansive CFO the a financial more of prepared on results remarks. is our Relations our under website

me related fiscal performance questions, to the provide additional of to third few metrics quarter our XXXX. we in Before let a get

and the ended This staff. an junior XXX at general other commissions the and selling, we consultant the Non-GAAP quarter of for XX.X% attributable the fiscal X.X% XX.X% X,XXX XXX officers, consisting reported count terms of senior nonemployee revenue XXX third head a was experts to of staff quarter increase XXXX compared XXXX. fiscal QX In headcount, excluding of compared with the of ago. consultant expenses administrative XXX at year with to XX.X% represents end

compared on an This with the was fiscal ratio XX.X% increase effective a quarter's quarter by expenses impacted other XXXX. operating basis basis XX% rate non-GAAP was for quarter fiscal non-GAAP and XXXX in and travel primarily of for expenses. higher on the entertainment third tax of third The a

impacted a by was The foreign tax in of a reserve rate quarter jurisdiction. the release current positively

DSO of sheet. of XXX days the available quarter of We $XXX.X end balance in XXXX fiscal the XX consisted XXX of at days for total was capacity fiscal in XX days quarter with the end DSO to concludes build compared third line unbilled. of of Turning million. That and $XX.X concluded the the credit of a at third cash liquidity XXXX. cash equivalents of quarter prepared third remarks. second the quarter with of the million and further our of $XXX.X and on our days million

final turn has we Paul call the over announcement. Paul? one Before for questions,

Day Copley regarding XX, the trends in on Fairmont which discuss strategy industry over feedback markets on operate, in Plaza to Boston the will Investor Based November Hotel our greater Wednesday, business host we depth. Dan. Thanks from investors and an past we and in at year the the questions

a have including will to Economics, Services of us highlight more number and our and joining Forensic & Antitrust on We details Competition colleagues Life provide Sciences. practices,

we We like provide to call up forward like -- many for now soon we . webcast event. at to John, registration would the will questions. and of open seeing and look you this would information

line [Operator with Blair. from And first the the Instructions] question comes Andrew of Nicholas William

and bit historical start to an hoping from new trends that pressuring you I wanted could grads utilization, imagine have a in, I down would utilization. some unpack of little your I that come bit. a with that sequentially. was you aberration

to bit. the there lower historical higher conversion the break quantitatively any have attrition. you a then of to You mid-XXs. any the whether for way kind time expected rates it's Is rates, recovery down or you've some that relatedly, kind low qualitatively to on And about thoughts if that shown of talked line in

Sure.

thanks slowly we've increasing been throughout all, low Andrew. have our for our year, attrition consulting Because at count head been beginning we as commented, of at what -- historically the of that, of We levels. question, we expected initially First the beyond rates the have the year.

consulting the it in on of through of of fiscal the type that believe say, We house capacity sometime that excess excess the CRA side have by the at QX. without capacity experienced could top slowdown But or operating some is XXXX. of, QX of revenue get we we the we normal on procedures end with

up now faster of which materializes But take that QX bit, welcome. care we 'XX now, quickly rate, the . Clearly, will will flows had on the a So little if that third itself. that normal head revenue of will how given 'XX, right all revenue at a quarter, and moves I've all materialize. I'm into a uncertain fake QX during of

to more bit probably comfortable middle I'm Andrew. XXXX of with something the towards So get looking feel a I

Or just internationally, my to of there of anything kind No, these growth would which out. that's is I'm would end little differences lumpiness understand a bit strong super outperform imply believe and lot months will in is any domestically. slower difficult to far there helpful describe region? or just are that lead guess obviously markets things predict I and on for anything that growth continue by is international question, of that a these really that quarters? the versa follow-up U.S. curious, it you in vice going -- to the coming would that

not geographically. in us saw new a which month North outperform August, existed project portfolio, offset forward. projects. quarter American really -- to opportunities, the third gave in matters or experienced of services a soft and quarter It anything delays international of in revenue-generating were July company-wide. That fake. September, across we about the existing No, we XXXX, both a to overriding not We saw We slowness head bit began improvement the that as that new general strong X% operations trough trend In we very work. in say I would an We a should have quarter. convert across saw that or slow but August. was up there's think was I don't going enough we our August of

if your one there in. of or just expectation understand I of where we Or it it trying terms that leads that conservatism for improvement in September? guidance. August, it's Is quarter more some maybe is could sneak for me to last to look more kind like question, fourth sit expectation like And to of and

Yes.

decade, month, in how Given are have my past month August, over month a the we expecting seen I forward September encompassed expectations accurate of haven't everything been we in late, frankly, saw of August. August more many No, than periods the that of looking going quite

not last that's So hopefully words. I famous think aberration, an

month pleased and with were the the way fourth quarter. so the we far, And the pleased with we September, we're began in improvement of .

question the of Barrington And from Kevin the comes Steinke line next Research. with

more year? lower the off that little what bit margin Why your call don't changed like last the sounds changed full outlook since rate you and It just conversion expected you digging a the by the start change to the was might and perhaps for have to into expected. led revenue in factors attrition are projects than contributing was you -- main less X than the that the Is outlook. those that new into

it throughout The talking saw attrition, right? attrition rates fiscal been XXXX. we low We've about coming,

to I XX% we that. revenue-generating enjoying our conversion conversions If capacity. throughout So compare drop new of surprise, about as not history What on resulted down generally of third were much quarter a were the the surprise rates in of was we conversion didn't was CRA, the opportunities but course fact a of projects. in business they is that reverse the those still excess on that consulting the

in. projects So weren't new we getting any coming

a get busy to new expeditious try to manner. on consulting New projects are our essential, more particularly staff,

conversion results. I disappointing was that the the it think led So

the your then has and Is rate in bit picked And September. that about correct? that up September, that comments August a Understood. implies conversion Okay.

The experiences from part entering and level. our into as clear to important also conversion over are weeks lower few decade, XXXX. no the to why happening, improved the And operating note last have new say, rate with we just a our but August, think I October excluding at what into markets. has explanation from we not we first that's They it's September below are in observed still in is

the trying part, ourselves same client we to that We the offered. are people. are same new services the to for with not bases. have always introduce And They most

drop kind we're in So X X% of XXXX revenue. of into even still frustrating, historic the are conversion And and up that year, XXXX. on kind volatility, with months that near but storm. highs is riding the levels rate The this achieved our that in we profitability we're

but fake all frustrated we're experienced could that head the worse, bit August. means, in of came with the by with particularly revenue month So the be a Kevin, out, where we

That's Okay. fair.

because leads kind So that that's into my interesting question. of next

You mentioned explanation conversion for the in that no real rates. there's slowdown clear

fairly Is themes been mean, of guess. it's no that and anything maybe haven't part mentioned but being trends have delayed? that transactions like tie you the practices M&A clear across able a Or rate might perhaps behind I I broad-based, correct? that's or then you think to slowdown, it, And I to geographies. it conversion

It is broad-based.

of conflict key of then for don't the just clear there's deal the not any do M&A conflicts, the other experienced. kind do reference in generators get see case to, I on call of see I we respect made the proceed. and we of to note The activity, of after we revenue mean, announcement several kind CRA it not is we intact, departure broader opportunities. either any to kind quarter the a we back the With meaning We we clear of The remarks. or some press my lead been prepared can of asset would that. at M&A we that By get that impact no thing to on that, calls

that M&A So is in clearly, I but beyond it, part the of slowdown one it goes think headwind.

really, share. as not the mentioned Okay. losing you're market But obviously, is commentary. That's intact, helpful asset there, you

on performed well still year-to-date. quite relative You a basis

business of so the for in shape an term. indication that's And long just the all is good

evidenced I increase think announced. the dividend you that's by

in and demand increase dividend that outlook. to the about how relates talk just perhaps long-term business your maybe the long-term it and confidence So

I our roughly with our have capital several increase, dividend The to those been to substantial which of for shareholders. commitment our think, the form to total years. of to XX% redistributions shareholders back have accounted of repurchases, last distributions aligns The XX% return through share capital over dominant

the the dividend distribution and it on the shift asset proportions increase not believe Clearly, in But share payments. forward. talks the a -- don't this signals in overall our about shares between those we're So the changing the and significantly stability dividend, changing confidence of with I repurchases going dividend. viability

line next The comes Riddick with Marc of question from the Sidoti.

the sort as over, wanted lumpy Or first, that go we of of a of quarter? I as to sort are timing it sort maybe there be projects perspective? was anything or thinking think large far that to projects guess, ended maybe any major I about should there about anything during from

any didn't U.S. division that. We have was on major approval the projects matter AC and Microsoft the of there

pencils thing go only couple had a the on those request down larger note. that's of temporary So of matters. We a on projects

efforts We consulting those restarted the cases. have since on

those be are on consulting in go-forward the couple We the to got to of improve So did at down on request back a our month August, cases it. teams pencils but of basis. a permanent

could some sort of you demand seeing what a a of side share far as that's seeing you're -- and on are not I talk about maybe driven are And on the bit effect whether of from that delays maybe having on you're anything what you you like sort an things if or M&A wanted we moves any think just what just that things. seeing? or bit regulatory as I to thoughts that wonder of are talked Okay. things little government you're as sort

post the will from have impact did cases terms capital to in they of If important an run been a government their there have amount we delays. shutdown clearly have surplus Yes, of shutdown. government

States in overall the all couple We last think yet. the opportunities and abroad. that type for the haven't same right had market enjoying to I of of here we've deal at the regulatory been don't as But of both has now. years It's temperature, cooled with that

the earlier would maybe I as evidence be versus Great. now And view imagine seeing AI-driven how about seeing maybe regulation I expecting? the of long-term you're then pace and some of should like Or as But this that -- the far those as things you you're we was the change. things year? such types that in of maybe thinking necessarily different anything the than Are of what just projects?

Many I say terms view don't technological wouldn't No, years spectrum. higher-quality delivered those clients. changes many dealt -- resulted the to for on has the changed this excited for have that CRA and about have opportunity in that And what will now. with of impact our across of improved forward of our provides step have another of I been we're technology or CRA lots and them maybe specifically AI in There's efficiencies at we business. services

information Our allowed respect specifically, the with. we work and maintaining to are privacy confidentiality or the main of concern to is with AI this technology

little you're year. But seeing I pricing wondering bit wondering dynamics pricing seems you expensive. a Great. what nothing gotten less into And the there's has about that talk then environment. was little if maybe bit about certainly maybe could and the could expecting any you I was you next a were if talk it's going mean, I

-- on quarter-to-quarter new that active and basis, Clients incur reserves sticking large in run haven't the management write-off increases are we much shifted. of on their The put that's projects. of effect long any part. being all a so environment. 'XX seeing Sure. budgets. are at We're adopted in that had their in The those more not The we also good rate beginning news. the shift being But kind projects of are on pricing

job, flow, importantly that making clients information having our expect. come and better have not to clients sure the we're most So surprised deliver are do quality exceptional to to increasing a continuing

you're if you thought maybe caution client that X And may. the to a in Is are elongated more there we're expectation would Or a that expecting a mean of of bit going reversion sort of there sales cycles of sort just or forward? period in, seeing? I a that

of accustomed there's we a that part back had that results part volatility QX I is because uncertainty just because thought mean of more all did, a reason has which that now. was of is CRA forward lower to, QX sudden, the shock hesitating I'm a that Yes, reason the the of grown trend. we guidance the downward have then towards the right QX, step I on

I bit there's anything are exactly when a we So mean, now. new a return to our but sort believe a I don't bit usual in am business uncertain. is broader that entering right to uncertain marketplace as of suggest we

pursuit the of aggressive just in care we and take So trying should and we're to be very our rest of time. opportunities of with the the the engagements way deliver itself passage

Maleh end will At closing additional of for reached or the Q&A And Mr. this time, the session. remarks. we the have to I now turn conference any over back

With CRA. appreciate We early Day Investor our upcoming and Thank our you, interest quarter look today's today. call that, everybody. update you us an your joining time for to in our call. fourth everyone on We and seeing forward to concludes thanks at year. that progress on Again, providing next

concludes teleconference. That today's

this at your Thank participation. your you disconnect time. may for lines You