Charles River Associates (CRA) Reports Financial Results for the Second Quarter of 2024

Rhea-AI Summary

Charles River Associates (NASDAQ: CRAI) reported strong Q2 2024 financial results, with revenue increasing 5.9% year-over-year to $171.4 million. The company raised its full-year fiscal 2024 guidance for both revenue and profit. Key highlights include:

- Utilization at 74%, with a slight 0.3% decrease in quarter-end headcount
- Net income decreased 31.2% to $6.5 million, while non-GAAP net income increased 26.4% to $12.7 million
- Earnings per diluted share decreased 29.9% to $0.94, non-GAAP EPS increased 28.9% to $1.83
- Non-GAAP EBITDA increased 18.5% to $22.3 million (13.0% of revenue)
- CRA returned $27.0 million to shareholders through dividends and share repurchases

The company now expects full-year fiscal 2024 revenue between $670.0-$685.0 million and non-GAAP EBITDA margin of 12.2-13.0%.

Positive

• Revenue grew 5.9% year-over-year to $171.4 million in Q2 2024
• Non-GAAP net income increased 26.4% year-over-year to $12.7 million
• Non-GAAP earnings per diluted share increased 28.9% year-over-year to $1.83
• Non-GAAP EBITDA increased 18.5% to $22.3 million, with margin expanding to 13.0%
• Company raised both revenue and profit guidance for full-year fiscal 2024
• Five practices showed year-over-year revenue growth
• CRA returned $27.0 million to shareholders through dividends and share repurchases

Negative

• GAAP Net income decreased 31.2% year-over-year to $6.5 million
• GAAP Earnings per diluted share decreased 29.9% year-over-year to $0.94
• Restructuring expense of $8.2 million associated with portfolio optimization actions
• Quarter-end headcount decreased 0.3% year-over-year

Insights

Financial Analyst

Charles River Associates (CRA) has delivered a robust performance in Q2 2024, showcasing resilience and growth in a challenging economic environment. The 5.9% year-over-year revenue increase to $171.4 million is particularly impressive, driven by strong contributions from five key practice areas. This broad-based growth indicates the company's ability to diversify its revenue streams effectively.

However, it's important to note the 31.2% decrease in net income to $6.5 million, primarily due to a $8.2 million restructuring expense. This expense, while impacting short-term profitability, appears to be a strategic move to optimize the company's portfolio for long-term growth. The non-GAAP figures paint a more positive picture, with non-GAAP net income increasing by 26.4% to $12.7 million.

The company's confidence is evident in its decision to raise both revenue and profit guidance for fiscal 2024. The new revenue guidance of $670.0 million to $685.0 million and non-GAAP EBITDA margin of 12.2% to 13.0% suggests management's optimism about future performance. This upward revision is a strong positive signal for investors.

CRA's commitment to shareholder returns is noteworthy, with $27.0 million returned to shareholders through dividends and share repurchases. The continuation of quarterly dividends further underscores the company's financial stability and commitment to shareholder value.

While the overall picture is positive, investors should remain cautious of the potential impacts of global economic uncertainties on CRA's business, as highlighted by management. The company's ability to navigate these challenges while maintaining growth will be important for its long-term success.

Market Research Analyst

CRA's Q2 2024 results offer valuable insights into the consulting industry's current landscape. The company's growth in five practice areas - Antitrust & Competition Economics, Financial Economics, Intellectual Property, Labor & Employment and Life Sciences - indicates robust demand for specialized consulting services in these sectors. This trend suggests a growing complexity in these fields, likely driven by regulatory changes, technological advancements and evolving market dynamics.

The 74% utilization rate is a key metric to watch. While solid, there might be room for improvement, potentially indicating some capacity for additional growth without significant headcount increases. The slight 0.3% year-over-year decrease in quarter-end headcount coupled with revenue growth suggests improved efficiency and productivity per employee.

CRA's portfolio optimization actions, resulting in an $8.2 million restructuring expense, reflect a proactive approach to adapting to market demands. This move could potentially lead to improved margins and competitiveness in the long run, although short-term profitability has been impacted.

The company's performance amidst global economic uncertainties demonstrates the resilience of the high-end consulting sector. However, it's important to monitor how macroeconomic factors, such as inflation, interest rates and geopolitical tensions, may influence client spending on consulting services in the coming quarters.

Overall, CRA's results and forward-looking guidance provide a positive outlook for the specialized consulting industry, particularly in sectors requiring deep expertise in complex economic and regulatory environments. The company's ability to grow revenue while optimizing its portfolio positions it well in a competitive market landscape.

Second Quarter 2024 Revenue of $171.4 Million Up 5.9% Year Over Year

Company Raises Both Revenue and Profit Guidance for Full-Year Fiscal 2024

BOSTON--(BUSINESS WIRE)-- 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 June 29, 2024.

“CRA continued its run of strong performance into the second quarter as revenue increased 5.9% year over year to $171.4 million,” said Paul Maleh, CRA’s President and Chief Executive Officer. “Broad-based contributions drove our results, with five practices growing revenue year over year—Antitrust & Competition Economics, Financial Economics, Intellectual Property, Labor & Employment, and Life Sciences. From this position of strength, we took steps during the quarter to further enhance the performance of our service portfolio as reflected in our increased financial guidance.”

Highlights for Second Quarter Fiscal 2024

• Revenue grew 5.9% year over year to $171.4 million.
• Utilization was 74%, and quarter-end headcount decreased 0.3% year over year.
• Restructuring expense associated with portfolio optimization actions of $8.2 million, consisting of cash severance of $2.5 million and non-cash charges of $5.7 million.
• Net income decreased 31.2% year over year to $6.5 million, or 3.8% of revenue, compared with $9.5 million, or 5.9% of revenue, in the second quarter of fiscal 2023; non-GAAP net income increased 26.4% year over year to $12.7 million, or 7.4% of revenue, compared with $10.0 million, or 6.2% of revenue, in the second quarter of fiscal 2023.
• Earnings per diluted share decreased 29.9% year over year to $0.94 from $1.34 in the second quarter of fiscal 2023; non-GAAP earnings per diluted share increased 28.9% year over year to $1.83 from $1.42 in the second quarter of fiscal 2023.
• Non-GAAP EBITDA increased 18.5% to $22.3 million, or 13.0% of revenue, compared with $18.8 million, or 11.6% of revenue, in the second quarter of fiscal 2023.
• On a constant currency basis relative to the second quarter of fiscal 2023, revenue, GAAP net income, and earnings per diluted share would have remained unchanged. Non-GAAP net income would have been lower by $0.1 million, while earnings per diluted share and non-GAAP EBITDA would have been lower by $0.01 per diluted share and $0.1 million, respectively.
• CRA returned $27.0 million of capital to its shareholders, consisting of $2.9 million of dividend payments and $24.1 million for share repurchases of approximately 140,000 shares.

Management Commentary and Financial Guidance

“Through the first two quarters of fiscal 2024, on a constant currency basis relative to fiscal 2023, CRA generated total revenue of $342.2 million, the highest first-half revenue in CRA’s history, and non-GAAP EBITDA of $44.5 million, achieving a margin of 13.0%,” continued Maleh. “Reflecting the strong start to the year, we are increasing our revenue and profit guidance. For full-year fiscal 2024, on a constant currency basis relative to fiscal 2023, we expect revenue in the range of $670.0 million to $685.0 million and non-GAAP EBITDA margin in the range of 12.2% to 13.0%. This new guidance compares with a prior revenue range of $645.0 million to $675.0 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 and without unreasonable effort: (A) unusual gains or charges, foreign currency exchange rates, and the resulting effect of these items on CRA’s taxes and (B) the impact of equity awards on CRA’s taxes. 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 1, 2024, CRA announced a quarterly cash dividend of $0.42 per common share, payable on September 13, 2024 to shareholders of record as of August 27, 2024. 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 2024 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 www.crai.com. Follow us on LinkedIn, Instagram, 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 earnings per diluted 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), provision for 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 losses, net, restructuring costs and related tax effects. Non-GAAP net income and non-GAAP earnings per diluted share also exclude non-cash amounts relating to valuation changes in contingent consideration, acquisition-related costs, foreign currency losses, net, restructuring costs 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 June 29, 2024 relative to the fiscal year-to-date period ended July 1, 2023, revenue and non-GAAP EBITDA would have been lower by $1.0 million and $0.2 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 2024 on a constant currency basis relative to fiscal 2023 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; 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
JUNE 29, 2024 COMPARED TO JULY 1, 2023
(IN THOUSANDS, EXCEPT PER SHARE DATA)
		Fiscal Quarter Ended														Fiscal Year-to-Date Period Ended
		June 29, 2024				As a % of Revenue			July 1, 2023				As a % of Revenue			June 29, 2024				As a % of Revenue			July 1, 2023				As a % of Revenue
Revenues		$	171,442			100.0	%		$	161,965			100.0	%		$	343,230			100.0	%		$	314,810			100.0	%
Costs of services (exclusive of depreciation and amortization)			125,327			73.1	%			113,333			70.0	%			244,206			71.1	%			221,170			70.3	%
Selling, general and administrative expenses			32,016			18.7	%			29,846			18.4	%			62,514			18.2	%			58,218			18.5	%
Depreciation and amortization			2,811			1.6	%			2,872			1.8	%			5,603			1.6	%			5,815			1.8	%
Income from operations			11,288			6.6	%			15,914			9.8	%			30,907			9.0	%			29,607			9.4	%
Interest expense, net			(1,483	)		-0.9	%			(1,616	)		-1.0	%			(1,948	)		-0.6	%			(2,187	)		-0.7	%
Foreign currency losses, net			(191	)		-0.1	%			(686	)		-0.4	%			(333	)		-0.1	%			(1,214	)		-0.4	%
Income before provision for income taxes			9,614			5.6	%			13,612			8.4	%			28,626			8.3	%			26,206			8.3	%
Provision for income taxes			3,076			1.8	%			4,104			2.5	%			8,397			2.4	%			7,780			2.5	%
Net income		$	6,538			3.8	%		$	9,508			5.9	%		$	20,229			5.9	%		$	18,426			5.9	%
Net income per share:
Basic		$	0.96						$	1.36						$	2.93						$	2.61
Diluted		$	0.94						$	1.34						$	2.90						$	2.56
Weighted average number of shares outstanding:
Basic			6,834							6,983							6,880							7,051
Diluted			6,911							7,080							6,961							7,166

CRA INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED
JUNE 29, 2024 COMPARED TO JULY 1, 2023
(IN THOUSANDS, EXCEPT PER SHARE DATA)
		Fiscal Quarter Ended														Fiscal Year-to-Date Period Ended
		June 29, 2024				As a % of Revenue			July 1, 2023				As a % of Revenue			June 29, 2024				As a % of Revenue			July 1, 2023				As a % of Revenue
Revenues		$	171,442			100.0	%		$	161,965			100.0	%		$	343,230			100.0	%		$	314,810			100.0	%
Net income		$	6,538			3.8	%		$	9,508			5.9	%		$	20,229			5.9	%		$	18,426			5.9	%
Adjustments needed to reconcile GAAP net income to non-GAAP net income:
Non-cash valuation change in contingent consideration			-			-	%			16			-	%			-			-	%			36			-	%
Restructuring (1)			8,176			4.8	%			-			-	%			8,176			2.4	%			-			-	%
Acquisition-related costs			-			-	%			-			-	%			-			-	%			22			-	%
Foreign currency losses, net			190			0.1	%			686			0.4	%			332			0.1	%			1,214			0.4	%
Tax effect on adjustments			(2,205	)		-1.3	%			(165	)		-0.1	%			(2,239	)		-0.7	%			(304	)		-0.1	%
Non-GAAP net income		$	12,699			7.4	%		$	10,045			6.2	%		$	26,498			7.7	%		$	19,394			6.2	%
Non-GAAP net income per share:
Basic		$	1.85						$	1.44						$	3.84						$	2.75
Diluted		$	1.83						$	1.42						$	3.80						$	2.70
Weighted average number of shares outstanding:
Basic			6,834							6,983							6,880							7,051
Diluted			6,911							7,080							6,961							7,166
(1) Includes cash severance of $2.5M and non-cash charges of $5.7M associated with portfolio optimization actions.

CRA INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED
JUNE 29, 2024 COMPARED TO JULY 1, 2023
(IN THOUSANDS)
		Fiscal Quarter Ended														Fiscal Year-to-Date Period Ended
		June 29, 2024				As a % of Revenue			July 1, 2023				As a % of Revenue			June 29, 2024				As a % of Revenue			July 1, 2023				As a % of Revenue
Revenues		$	171,442			100.0	%		$	161,965			100.0	%		$	343,230			100.0	%		$	314,810			100.0	%
Net income		$	6,538			3.8	%		$	9,508			5.9	%		$	20,229			5.9	%		$	18,426			5.9	%
Adjustments needed to reconcile GAAP net income to non-GAAP net income:
Non-cash valuation change in contingent consideration			-			-	%			16			-	%			-			-	%			36			-	%
Restructuring (1)			8,176			4.8	%			-			-	%			8,176			2.4	%			-			-	%
Acquisition-related costs			-			-	%			-			-	%			-			-	%			22			-	%
Foreign currency losses, net			190			0.1	%			686			0.4	%			332			0.1	%			1,214			0.4	%
Tax effect on adjustments			(2,205	)		-1.3	%			(165	)		-0.1	%			(2,239	)		-0.7	%			(304	)		-0.1	%
Non-GAAP net income		$	12,699			7.4	%		$	10,045			6.2	%		$	26,498			7.7	%		$	19,394			6.2	%
Adjustments needed to reconcile non-GAAP net income to non-GAAP EBITDA:
Interest expense, net			1,483			0.9	%			1,616			1.0	%			1,948			0.6	%			2,187			0.7	%
Provision for income taxes			5,281			3.1	%			4,269			2.6	%			10,636			3.1	%			8,084			2.6	%
Depreciation and amortization			2,811			1.6	%			2,872			1.8	%			5,603			1.6	%			5,815			1.8	%
Non-GAAP EBITDA		$	22,274			13.0	%		$	18,802			11.6	%		$	44,685			13.0	%		$	35,480			11.3	%
(1) Includes cash severance of $2.5M and non-cash charges of $5.7M associated with portfolio optimization actions.

CRA INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
	June 29, 2024			December 30, 2023
Assets
Cash and cash equivalents	$	24,649		$	45,586
Accounts receivable and unbilled services, net		216,570			199,556
Other current assets		29,961			20,334
Total current assets		271,180			265,476
Property and equipment, net		36,817			38,176
Goodwill and intangible assets, net		101,836			101,185
Right-of-use assets		81,338			86,887
Other assets		54,841			61,487
Total assets	$	546,012		$	553,211
Liabilities and Shareholders’ Equity
Accounts payable	$	22,997		$	28,701
Accrued expenses		113,252			171,040
Current portion of lease liabilities		16,966			16,475
Revolving line of credit		87,000			-
Other current liabilities		12,456			19,871
Total current liabilities		252,671			236,087
Non-current portion of lease liabilities		84,492			92,280
Other non-current liabilities		17,100			12,743
Total liabilities		354,263			341,110
Total shareholders’ equity		191,749			212,101
Total liabilities and shareholders’ equity	$	546,012		$	553,211

CRA INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
	Fiscal Year-to-Date Period Ended
	June 29, 2024				July 1, 2023
Operating activities:
Net income	$	20,229			$	18,426
Adjustments to reconcile net income to net cash used in operating activities:
Non-cash items, net		15,769				15,200
Accounts receivable and unbilled services		(18,476	)			(16,415	)
Working capital items, net		(78,795	)			(82,190	)
Net cash used in operating activities		(61,273	)			(64,979	)
Investing activities:
Purchases of property and equipment, net		(3,046	)			(1,282	)
Consideration paid for acquisition, net		(1,500	)			(570	)
Net cash used in investing activities		(4,546	)			(1,852	)
Financing activities:
Borrowings under revolving line of credit		93,000				105,000
Repayments under revolving line of credit		(6,000	)			(25,000	)
Tax withholding payments reimbursed by shares		(1,977	)			(2,009	)
Cash dividends paid		(5,976	)			(5,230	)
Repurchase of common stock		(33,348	)			(23,577	)
Net cash provided by financing activities		45,699				49,184
Effect of foreign exchange rates on cash and cash equivalents		(817	)			471
Net decrease in cash and cash equivalents		(20,937	)			(17,176	)
Cash and cash equivalents at beginning of period		45,586				31,447
Cash and cash equivalents at end of period	$	24,649			$	14,271
Noncash investing and financing activities:
Increase in accounts payable and accrued expenses for property and equipment	$	553			$	376
Excise tax on share repurchases	$	(300	)		$	(200	)
Right-of-use assets obtained in exchange for lease obligations	$	2,329			$	190
Supplemental cash flow information:
Cash paid for taxes	$	12,681			$	6,218
Cash paid for interest	$	1,533			$	2,178
Cash paid for amounts included in operating lease liabilities	$	11,163			$	11,077

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801315702/en/

Dan Mahoney

Chief Financial Officer

Charles River Associates

617-425-3505



Nicholas Manganaro

Sharon Merrill Advisors

crai@investorrelations.com

617-542-5300

Source: Charles River Associates

FAQ

What was Charles River Associates' (CRAI) revenue for Q2 2024?

Charles River Associates (CRAI) reported revenue of $171.4 million for Q2 2024, representing a 5.9% increase year-over-year.

How did CRAI's earnings per share (EPS) change in Q2 2024 compared to Q2 2023?

CRAI's GAAP earnings per diluted share decreased 29.9% to $0.94 in Q2 2024 from $1.34 in Q2 2023. However, non-GAAP earnings per diluted share increased 28.9% to $1.83 from $1.42 in the same period.

What is CRAI's updated revenue guidance for fiscal year 2024?

CRAI raised its revenue guidance for fiscal year 2024 to a range of $670.0 million to $685.0 million, on a constant currency basis relative to fiscal 2023.

How much did CRAI return to shareholders in Q2 2024?

CRAI returned $27.0 million to shareholders in Q2 2024, consisting of $2.9 million in dividend payments and $24.1 million for share repurchases of approximately 140,000 shares.

What was CRAI's non-GAAP EBITDA margin in Q2 2024?

CRAI's non-GAAP EBITDA margin in Q2 2024 was 13.0% of revenue, compared to 11.6% in Q2 2023.