CRA International (CRAI) 31 Oct 242024 Q3 Earnings call transcript

Good day, everyone, and welcome to Charles River Associates Third Quarter 2024 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.

At this time, I'd like to turn the call over to Mr. remarks. opening for Mahoney ahead. go please Dan,

other these Thank as statements you, the forward-looking Actual of guidance is Act. Please that or are conditions. in of and changes differ morning, future operating terms future as the to results, contained in factors, the and industry-specific similar financial in implied the and uncertain. and made Exchange management's general during many terms Section good condition on XX inherently materially any margin statements EBITDA or including including services including and expectations everyone. concerning a due this level the performance statements revenue result current these business, expressed Information economic based dined those note may statements of CRA, of non-GAAP Rob, statements in statements using conference on important our from outlook forward-looking demand call, is expect, those results for

these forward-looking Form periodic date on reports, the undertakes to Additional information most filed CRA's and reports Form report our this annual any the XX-Q no factors release today's regarding CRA on filed update with recently and including statements in quarterly XX-K after SEC. in included of obligation is call.

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

to over Paul? his report. will turn I for now Paul it

XXXX. us continued record performance Thank a increased QX. followed strong Dan, Revenue QX record million, break you run everyone. fiscal QX by third the for morning, of Thanks, quarter year-over-year XX.X% in $XXX.X today. of and good to CRA joining performance into that its and a

the represent in of fiscal history. X fact, X XXXX CRA's quarters highest In quarters revenue

utilization of a quarter to we basis decreased XX% this Quarterly to of have on improved third strong effectively. to headcount business XXXX. During year-over-year continued the compared consultant period growth, slightly manage the as

pleased of is transition utilization inflows the We our ranks. our consultant seasonal this continued junior consultant from with third period and a especially with The productivity level increase quarter of significant outflows the part large as resulted are within of replenishing sales pipeline. consultant in in

X% legal trends consistent declined norms. overall strong Our lead X%. core the market year-over-year increased broader flow by year-over-year, remaining historical project third while by in total conversion the with case as increased judgments mix total outpaced performance and rates XX% in filings quarter with This by

our of we year-over-year. conditions, nearly increased these especially and strong regulatory the which pleased legal In market growth XX% with light are revenue in services

net year-over-year growth the EBITDA. history. X revenue, earnings quarters XX%, outpacing share, execution drove growth profitability as and the similar per utilization strong X profitability the quarters our as more represent Our fiscal XXXX than each EBITDA the net diluted overall measured earnings rate. income far of first third non-GAAP highest And and performance company's quarter share in represents This per highest increased to and income, by revenue profitability in by

XX% energy, year-over-year. each grew with year-over-year antitrust analytics more and growing X and broad-based practices, and intellectual economics, was performance practices property Our investigations revenue competition economics, risk by financial than

some few the third of would the delivered like spend during to minutes I highlighting projects now a quarter.

nearly continued Economics as & its year-over-year. revenue Our grew Antitrust XX% it Competition strong performance practice by

to year services. by activity increase first during antitrust XXXX of X trillion compared X of first Worldwide the months the loan. and continued for quarter totaled quarters in an M&A third highest revenue in ago fiscal the merger-related In XXXX, represent practice's history. fact, fueled X the quarters the Performance of was demand XX% $X.X

The compared of XXXX XX% third year. of the quarter quarter second to the increased

on this and industries worked geographies. range backdrop, transactions CRA a across of Against

strategic supported our competitive the analyze practice's in transactions health process and relevant experts characteristics in throughout clients markets This interactions world work work harm. assessing with empirical participants theory our parties economic luxury involve regulators, of combination product, and care, CRA jurisdictions Their evaluating example, defining with across support the The the For our that the and data of regulators. and around combination expertise goods, the graphic involved expertise. changing team's the pursuing transportation these and high industries. the markets to series their allows team tech

antitrust also of inquiries. assisted the clients CRA's in practice Antitrust Competition context & Economics

example, CMA employees of into conversational hiring associated Competition inflection, Microsoft in hired Microsoft and and and AI a models chatbot. AI investigated foundation of competition employees dismissed tools. from arrangements swift, with entered jurisdictional models and team concerns a constituted European merger lessening of of of advised whether For as inflection. the certain foundational it the in question Market a Alongside would the of Authority or this CRA's a consumer whether the the cleared U.K. both members hiring of and result either developer the Ultimately, development

also [ power integrated to utilities the and need ] for the of meet their mix electricity resource utilities, the including third quarter, planning. CRA's demand senior offer several practice practice plans, regional describes the Energy transmission of resource and the In Source quarter Liberty can the hiring how comply practice evolve and retire it and energy The on clients. to -- services additional to Night continues early Alliance the will the series helped need develop in subsidiaries gas year with now transmission third which to plants. multiple to to coal of resources that benefit from supported

and planning, The also to can the directly center understand been a utilities. rapid vehicles as a up recently design fighting. helping help is These in country. centers, complicated plans, such of the across manufacturing data markets rate with practice by develop, is and The to working topics energy electric more which better have clients number team take with supply year to increase loads data and

also transmission energy distributed active the practice in community, platform. third that due investment with included quarter and the large projects multiple portfolios remained Finally, address diligence assignments the electrical

Financial the Economics learning client's litigation. risk models, quarter, lending to model services statistical practice which involved lending validation arriving of continue bank to Theory are from credit of their machine the card the lending testing multiple and and used soundness consumer description. unsecured During installment to fair loans provided fintech the CRA's provided potential partners. independent platforms assess third and Experts proprietary practice clients also evaluated assist in credit models, and and of reviews

the matter providing large back a expert of to example, in action focused a loans dating XXXX. underwriting mortgage is on For bank class to testimony mortgage CRA discrimination

of experts CRA's matter economic worked matter, within practice relating another clients third intellectual several property mortgage loan The litigation a CRA's testifying In quarter. underwriting in assisting analysis noteworthy engagements the is false performance. to on strong bench during claims and

a regarding behalf research infringement leading university of university's collaborative damages the expert robotics. of CRA example, on from a arising testified economic the For patent covering

a verdict agreements. royalty comparable reached reasonable led analysis of university and the trial damage a The jury monetary awarded professor patent The favor one was a of on matter based with start-ups another by of testimony economic retained detailed CRA charging equity the of performed provide companies damages technology. infringement and to expert involving top and a transaction jury a in of components those and theory royalty value presented and the consumer electronic significant

In the of awarded hundreds plaintiff what of that light dollars CRA's than our of jury requested. testimony, less and damages the analysis were economic millions

projects Integration efforts Julia first to The third Rowe. the by active we and and a May marked from Bakewell Texas. litigation serve Cross contributions and August. client achieved the team highly the quarter in Chris with are IP according opening patent our market the plan. marketing continued underway, full efforts joint footprint in led quarter to in of an This milestone important Houston well and added of staffing crucial office location provides new have with

laundering analytics During flags red at was The [ on $XXX in global context time quarter, a ] was retained of investigations soundness to testimony and investigations scheme. and and defend practices the applicable anti-money globe. retained million proper with a help and the and in fraud, on charge the CRA's third to the In and States, United of multidisciplinary collusion team financial failure risk bank's disputes number the PANS across a question. policies a regulations institution the the of industry the detect team procedures practice

various by was professional country. jurisdictions of In flow funds league sanctioned CRA the professional modestly strong partners Brazil, for to a Sciences of declined practice quarter retained analyze bet business XXXX, in across sports third events to products. to a related In quantify retained and year-over-year. potential Europe, Life CRA's to the future Compared series

rare of expert witness the team diseases. assessments, continued launch opportunity assessing its quarter, global work the the on policy and cost work engagements ongoing During client pricing,

Turning to our XXXX revenue Through a generated currency million, a the margin of relative and fiscal of XXXX, non-GAAP first achieving now and $XX.X on to million constant quarters we profit guidance. are X reflecting our revenue reaffirming strength quality a of total fiscal the EBITDA and CRA business, basis continued guidance. XX.X%, of $XXX.X of

EBITDA on a $XXX For and basis currency million the margin relative important to as year we fiscal and the XXXX hard their Overall, challenges. our clients XX.X% to we my constant $XXX non-GAAP during quarter range expect of all in full fiscal the XXXX million helped of range I'm to in of most grateful third their to XX.X%. for work colleagues address revenue

and Chad Dan to then over call Chad? the turn for to I'll that, comments. With additional

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

XXXX net $X investments of million capital $XX.X quarter of million. of outlays third cash The saw expenditures for and also talent

IT reminder, expenditures consulting fund our to our our in infrastructure a support to used in teams. and our As capital investments offices are

$XX year for Consistent to capital million expect expenditures. XXXX, spend million the with commentary, total of we on $XX to fiscal full prior

shareholders dividends We XXXX, a as XXXX. common quarterly from increase of payable $X.XX November capital million per record share. to our we during our also shareholders. in our third in Earlier demonstrating to of the XX, XX, today, business of confidence be return the will to quality dividend and December announced shareholders the reflecting quarter delivered $X.X to $X.XX commitment XX% to on dividend of our This cash

shareholders, payments million currently Year-to-date, our $XX.X repurchase we million program. dividend available to repurchases. share have and $XX.X consisting million share under for of $XX.X our $X.X million returned have We of

call final the few turn to I'll a that, Dan With for over comments. Dan?

Chad. Thanks,

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

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

and staff consultant junior XXX, consisting with XXX senior of decrease terms XXX In the of consultant X.X% at headcount, represents XXX at quarter X,XXX officers, compared end fiscal ended the headcount we QX staff. This reported of the other XXXX. a

expenses to quarter of with Non-GAAP non-GAAP revenue of the excluding XXXX, third fiscal of attributable third experts, general tax non-GAAP XXXX XX.X% nonemployee basis basis year a fiscal quarter administrative ago. effective XX.X% was commissions XX.X% for to was selling, on a quarter The X.X% and compared compared of for for the third rate the a XXXX. XX.X% fiscal with the

reminder, As a was year impacted of by rate the a the foreign a in jurisdiction. reserve prior positively release tax

second of consisted Turning DSO quarter DSO with fiscal typically DSO third of the reduction of in has of quarters the compared quarter DSO third each and the to a unbilled. in and days days in of The fiscal the third days reduction in sheet. XXX ranged the XX% end of the the quarter. past pattern XXX and at XX XXXX. the seasonal between balance of with XX fourth quarter increases days the X years. a fiscal fiscal follows second end build at and quarter X% was fourth

our of of $XX.X for cash quarter-to-date, $XXX.X strength and million. quality line a cash fiscal a our million of $XXX.X the collections capacity XXXX. our available credit on further XXXX cash third the We concluded expect of in we the of similar Based in with of receivables million liquidity on reduction total fiscal fourth quarter equivalents of and quarter

prepared our remarks. concludes That

open questions. for now will ahead. We the Rob, please call go

[Operator Instructions].

comes Our Andrew first Nicholas from William with Blair. question

I to didn't to outflows call how Do you the utilization quarter. talent of enough demand to feel headcount, your out but inflows see On it people ratio. the junior on talent, that junior of you the and wanted briefly this of Anything pick an really quarter. for And that we up have in quarter. light think, kind that of within thinking staffing especially trajectory and going good I in just looks see it you're and forward, third to where about like you alluded the seeing? of used Paul, there seasonally in in headcount update you terms the sit like, in that, or get

Sure.

year-over-year order roughly in I about the the to in which impacted action think headcount I have address to quarter, third talk headcount XX QX. the taken consultants. headcount about change during

account, raise trying of is If third of ahead. we're resources that and into you year-over-year that weeks that busier, are a months I in expansion there that an consultant is do higher take the areas reason to to quarter. the direct The what heads the is probability actually growth in have

business. so driving we are And growth in seeing the the are areas that

utilization XX%. You it increased in the see to

consulting rate exists management additions and legal thus, of But ahead. than higher and area our that have But The to regulatory with regulatory trying see be growth of the management no we're restrictions timing on area because at still with has the we just opportunities lower heads the run utilization the of growing a the to of area. a prudent the faster at at tends the to consulting been We're regulatory. other than we reluctance the can thing in additions. we that The legal There's those quarters active count And a the clip. hire. no slightly expansion head that and I market. portfolio run will legal note in

held has some companies. of consulting, pressure you it of not part the business? deterioration seeing feel And of little ask bit more or like work or under kind brought focused stabilization about of over privately that headlines year-to-date. the maybe strategy hearing I'll does a Can some demand in sort further there your you from couple last been dynamics been talk Great. whether of of any about since It peers there's your up, from some management months

Sure.

and on that their executing are shrinking going we're the about phase talk me a for stabilization our say is that in opportunity a to that performance And stories sort start been seeing quarter-to-quarter. some is then waiting in opportunities quarters. practice practice, I both. our I areas energy the Let have resident a practice. what X for in the of which more sawtooth Sciences along a different would that Life pattern are of has Sciences have for sawtooth don't practice really, is several Life very we're of What practice. growth I quarter-to-quarter. in

to me, comforts Sciences. resident that the point on are sure that would are Life opportunities So I like us where in growth get the to capitalizing we

With respect We're of seeing a to period opportunities. energy, it's time. wonderful been

we're hiring kind portfolio, are bring services. marketplace to being our the with aggressively rewarded strong expertise right for demand of We the and to those in

for the I'm for practice. that seeing described I in So even growth by ahead strong contraction and am are very stabilization no quarters means very in energy as the practice, a a optimistic opportunistic, the current seeing actually very quarter

with Our Company. & next question Sidoti comes the from Marc Riddick

what I was so? the maybe quarter? quarter, whether or quarter that monthly How we sort of think on this could wondering as thanks bit cadence line. little seeing, the as wondering, for talk through if the about up? especially through far we're Was the consistent that I was something basis you by was a top on should So detail how all picked went about the a the

I'm I have Yes. experienced fiscal scarred little in then a started to with a what where and I saw July bit admit of a we QX strong XXXX, given deterioration.

August continued through and strength, started we month the September. with of of and through that the month quarter, This strength

in attractive by the impacted of and we to see performance volatility So I vacation fringe high didn't strength, results that quarter kind strength consulting definitely led really rates, amongst is in a rates produced high more any our colleagues.

I And just that shift matter generally. we're that speak I to and wondering is you the there. you wanted for a Great. seeing then to it it guys the I on what antitrust years? of Okay. now of moment, taking all complicated? you maybe to working A commentary was what things we're a Is appreciate it Is had if last that like longer? are of above, Are versus in things are it about the that maybe being is larger these seeing combination few the more scale. could

of & the I performance decisions large frankly, and basis, M&A the because strategic it's Antitrust who wish but grow the in at Competition amaze at but can practice on you're CRA, to Economics antitrust. the my still with with it of percentage I good. a me quite talking or not increments, quarter just the quarter their grow and after across say they're the about damn CEO, because colleagues practice the They able largest able scale, marketplace to doing dollar significantly was generally

but constantly older larger, would longer it's of from are company just a What really it, is the [ brush older be doing also don't It that stating again, Yes, performance. just are that, as growth. X continuing. those I to projects Their pipeline just building grew in remiss strength want projects similar merely not That quarter. and replenishing on remarkable they're is it's we to the driving XX% they're expansion exceptional, that whole, from ], over LG but I benefit as is or projects lived, in strength. they not the is

bit as much what could maybe conversion to bit far you so. Maybe that relative on commentary touch around -- where norms? is flow. Very you and you seeing historical on little little touch a could you're a lead Maybe made as

Sure.

This projects. leads X%. So 'XX, change of able we lead roughly year, is historical conversion we converting our the last where to of returned revenue-generating new flow our had that -- generating projects. flow norms the on year, big to flow we we X/X lead is short of were of good into still fell QX by we had fiscal But to very grow lead

to for running. pretty QX. XX 'XX seen we're now that, It months With the and QX, X/X. of So started in please about and of norms QX QX pleased. We've historical fiscal return that continued roughly in in

at increase on pleased regret We nothing and make reaffirm gave that that. the pretty on seen the to both trend we're with guidance. the fiscal guidance the increase. It the We that QX to on we're profitability confidence us we've So call, the during love us 'XX revenue. --

should fourth would Okay. there sort imagine And for seasonality be I'm that we of taken with about the of like, normal would relative blips we or is be be aware last one blips the seasonality assuming, then are being to or thinking out holiday I for anything any me. and of there the that maintaining account particular anything into the ordinary? there guidance should any quarter of

with hope consistency stands change Sure. about where good we've I the I indication sitting today going enjoyed coming sure today. their family in and quarter-to-quarter, People going not. take as spend to feel service here month-to-month, our time Because, I But should. that is vacations, to again, they no see weeks. are portfolio

Our question Research. Steinke comes next Barrington from with Kevin

continued on Great. the strong results. Congratulations

to attrition wanted normal seen you had in just the at know lower start to than about attrition, by that ranks, you action I headcount off I asking of which kind trends So junior consultant contributed referenced.

more at if in seen maybe of kind wondering a change least few from couple you've rates it ago? quarters of attrition normalization where was Just a or there a

your trying outlier the just for is low to quarter And challenging those bit you're attrition to This plan projections address and always the with year it a you're more for I goals hiring it. for is having to funny an because challenge future, makes Sure. but plan a embrace for in having ahead. topic me trying

as voluntary on company still But attrition are low rates trending the for a the whole. our side

still done see we those of utilization that of it's elevation more see planning a seen CRA in voluntary I seeing as talent. will good turn Perhaps that can is of tighten, a start are But pretty you date. attrition destination And anything accordingly. rates if with consulting labor a management, the the to rates. for to job top choice normalization, nice begins market to but haven't through to start we've I terms We think an

extensively Got Investor most know but guidelines the for have recent potential That's And on environment, the refresh given more you helpful. just pretty election with and regulatory here. put in the regard review Okay. what your other in around maybe you on thought place I investors right particularly covered Can settings, for it. U.S. of this Day, demand M&A administration have in there your business you. impact change. light to been trends know I and potential some corner stringent

all review could would you of if maybe be just that that, So helpful.

Sure.

demand drivers potential definitely are there to each here. demand positive and administration those associated offsets So with drivers

think successfully firm both operated administrations. have under the these we I has

I well have I So the going I'm to you I and to as firms the will clients. strength tell go the will your ill is not do ahead to elected adjust demand just do of necessarily I think of informed it service Who in portfolio mix who's And And enough the you, to to to positioned just prepared, we up, to that. versa. here of constantly, go down knows? needs President. have are consulting impacts. M&A But of irrespective feel sit adjust quarters do fine will allow trust we'll vice but be overall or that us and think I think of kind

Okay.

congratulations. I'll it over. Sounds back Well, turn great. again,

time that to appreciate call. to today's going thank participating coming CRA. early and to you that, meetings on and you, progress concludes look year. interest investors to in again you quarter with updating we Kevin, everyone everyone the next your and our us for for months. call We're be in We today. participating. weeks With fourth forward Thanks joining on and Thank in our

conference. This concludes today's

your lines You your this may you time, at we and participation. for thank disconnect