CRAI - Earnings call transcript Q3 2020

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Operator

Good day, everyone and welcome to Charles River Associates Third Quarter 2020 Conference Call. Today’s call is being recorded. Today’s 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 would like to turn the call over to Mr. remarks. opening for Mahoney, Dan. ahead, go Please

Dan Mahoney

any Thank these results forward-looking in statements current including expressed you, that including results on pandemic everyone. note expect, similar contained financial margin morning impact on business, statements or materially the operating Information is outlook inherently including results management’s as statements condition Act. Exchange financial and statements in made due our the those using on defined good or forward-looking in and expectations factors, EBITDA the important of the non-GAAP call, of revenue to uncertain. statements during Section the based of the operations. concerning future these from future statements many implied of and CRA, Please or XX condition and Rob are Actual may extent other COVID-XX those this guidance is terms terms to conference of and and performance and differ duration the

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

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

to it his Paul turn report. Paul? now for me over Let

Paul Maleh

these good for is times. today. everyone. challenging morning, hope during safe staying joining Thanks, everyone us and you healthy and Dan, doing well, I Thank

Highlighting of continues during XXXX consecutive to global to third quarter year-over-year as our first growth delivered in XXth quarter noteworthy continue on the company, services. our of fiscal growth deliver Although resiliency to the record of we fiscal the and economy, CRA portfolio of affect XXXX. the revenue built a the CRA half XXXX, invest for pandemic

XX% XXXX, welcomed to new XX% increase in of At fiscal we we in X% of see the net of fiscal quarter, relative second the X% head the colleagues XX for of a quarter to QX. saw quarter to from net fiscal the than the to In head in and year-over-year same quarter expect second XXXX. During increase we of fourth improved XX.X% utilization time, less relative count count XXXX. a

the quarter, management legal spend range are brought to sequentially XXXX, more ever. broad the analysis. of would XX% of second This retail, across we growth a CRA’s obtained and extreme of markets to revenue industries, Within deeply. more practice than our Competition I the me, expertise of obtained QX drawing its our than practice legal lows observed & Antitrust minutes and grew regulatory, saw During more more Economics third each M&A rebounded both and consulting exploring and from few component as like regulatory services. during in the and the in the across review Transactions QX care quarter. excuse revenue fiscal health on quarter and – largest XX% including merger than technology a XX%

the matters. litigation clients addition, variety support In continued of practice wide a on to

anti-competitive ongoing of in at experts among fixing, are others. several the price technology other Our monopolization in beverage and in consumer involved goods, providing testimony property. allegations CRA behaviors also intersection of disputes food and potentially the attempted are and antitrust industries, experts and intellectual cases covering

were third XX% total year-over-year. quarter, legal down filings Looking at the more the broadly market, in case

change with more varied are the decline filings by on case although that matters CRA litigation of services, of roughly type. XX%, saw types on closely rate Focusing aligned greatly we depending

increased quarter third the XX%. in filings case while X% antitrust year-over-year, declined filings securities example, For

the forensic our of risk handle down quarter ability and that and and were ideal This delivered the on approximately financial Within alleged XX% flows. less case third revenue institutions markets. continues all the CRA finance courtrooms relative Within suggests of judgments normal the practices, double-digit litigation our individual year-over-year. services these spoofing to and to quarter, prosecution finance, their investigations courtroom, the impacted of in court manipulation in to analytics XXXX. than Despite third and the work arising from continued conditions, matters practice, during for investigation number growth to be government’s

litigations, we In work actions. including on addition, continue to international merger-related appraisal and arbitrations litigation, securities

that to control experience practice employees services environments cybercrime, fraud, financial face These not adapted. operational their as exasperated companies COVID-XX noncompliance. have transitioned may and by and for fully responding which Our to working remote strong from been help industries issues certain unprecedented internal demand continues need environments to forensic challenges, and stresses misconduct allegations of have have

overcharges third retained billion inappropriate to in joint costs and a involved covering for claims the America, parts the $X.X was allocations North, counterclaims. and and over venture all of with of During in quarter, of investigate allegations XX-year Central practice South

each in and range industries will of across hundreds in Court a cyber team to France. expert Arbitration ICC quarter of providing witness Our Paris, geographies. be of The continues practice conduct the testimony next broad year incident response also International matters

practice respond behalf e-discovery on and a example, response forensic the global attack. help cyber a to broker, to services competencies For incident deep ransomware the the leverages of during insurance quarter, client

laundering based nonprofit report CRA’s the completed gender global Act of violations of risk Practices third a of of The practice, also for investigation institution Directors also in in Foreign an money government analytics organization examining multiple financial large the and quarter, supplier large the investigated They period EU. racial Corrupt investigations allegations alleged jurisdictions. national a Board possible a and U.S. in a the into over foreign by issued the XX-year discrimination. next During team

would turn services. our Next, to like I to consulting management

practice, our life which sciences in highlight August year-over-year our single-digit colleagues. growth, London-based energy new to While welcomed I practice XX enjoyed want

help on to transform engagement modernize continued During business. utility and the to a large a the its UK-based work third quarter, practice

We to shutdown. a long-running the related engagement, assisting international on Congratulations Through power three of for revenue to fiscal arbitration plant XX.X% first we also continued work dispute fiscal of a XX.X% $XX.X colleagues delivering currency million, to $XXX.X my of Federal Republic to costs a Germany to quarter. an a by by the of strong another in increased XXXX, have on and XXXX, EBITDA relative constant quarters margin basis the million achieving X.X%. non-GAAP nuclear

$XXX of Dan, of On our to expect a EBITDA performance margin we revenue fiscal to financial we currency $XXX strength growing the XXXX. constant in our service full XXXX, fiscal momentum Chad? reinstating and that, the year Given a for range additional million to basis, comments. to the and turn and million are then across With X.X% portfolio, year-to-date will guidance non-GAAP range the Chad few for call the I the of in XX.X%. relative

Chad Holmes

about I few a capital the comments to want during Thanks, provide quarter. Paul. our deployment

Paul against challenging As economic backdrop, cash described, a strong CRA generated flows. again

months through fiscal XX net was trailing adjusted operating quarter third CRA’s cash revenue. activities XX XX.X% by the XXXX, of $XX.X months provided the of or For trailing million

XX% provided primarily our than and year activities overhead in Our spending. the ago, by was operating a by business growth adjusted driven reduced net cash higher

talent with fund from flows of begins forgivable which metric our net issuances, back net cash adds operating used acquisition and a pool discretionary cash maintenance. statement such this are operating acquisitions, activities loan and reminder, of by a to provided repayment as Adjusted represents debt shareholders. for As by activities predominantly office cash net talent items used redistributions and capital provided to talent expansions,

wrapped as we million During XXXX, we expenditures, the on York, capital New Zurich. in $X.X third approximately quarter up Toronto spent of office build-outs fiscal our and

we XXXX, capital to quarter fourth spend expenditures. on the fiscal $X of less million than expect For total

As credit, borrowings while by our Dan repaid $XX $X.X our we line of greater in quarter, will the cash detail, balance describe of revolving million. million our under during increased

also for dividend XXX,XXX shareholders, capital $X.X of We of share approximately of million $X $X.X to payments shares. of returned repurchases million and million consisting our

of Dan of Dan? commitment be reflecting share. as our XXXX. capital to $X.XX the common shareholders to I’ll our record now, from XX, final comments. to to for $X.XX call a shareholders, in XX, increase will Finally, to a we dividend per over earlier This XXXX, announced few November today December cash turn on dividend payable XX% quarterly And returning

Dan Mahoney

Thanks, Chad.

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

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

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

positively This QX quarter��s effective management ratio impacted was our and for the revenue by of overhead. strong

Additionally, travel policies. due were in and ongoing and significantly entertainment lower year-over-year, work-from-home expenses travel to jurisdictions various restrictions primarily

XX.X% the fiscal We fiscal risk COVID-XX. will non-GAAP XXXX. a The was on with quarter to impacts for third third on our XXXX mitigate the basis to continue financial for expenses basis proactively tax monitor a of properly and from compared discretionary effective manage XX% quarter rate the non-GAAP of

the reminder, in reserves, a tax quarter certain rate. which prior included reduced overall As of the release rate year the tax the

end XXX transitioned line build remote the account third approximately and work days when both with at collections days taking DSO revolving world and company’s XXXX. was of days the million been available of XXX on of XX the before days capacity our strong, Of of quarter of most of in sheet, balance pace consistent remained unbilled. of a has consisted the the into third environment. to quarter second credit $XXX to cash our our and our the the Turning end The fiscal after balance. of totaling of XX DSO note, at compared quarter liquidity

the million during at of quarter, QX to we closely on line the outstanding down more million at of our Looking end credit paid million $XX at the bring revolving XXXX down $XX $XX end fiscal the the to from QX. components, balance of third

for the million majority the questions. an million. bring concludes have since to concluded with internationally. fiscal call We additional residing We million to we open $XX.X cash XXXX our like That third cash remarks. with down balance now the paid $XX equivalents, Rob, of outstanding prepared the would and current to quarter in $X

Operator

from [Operator first is Please Blair. with Thank your proceed question question. William And you. with Instructions] of Andrew the line Nicholas our

Trevor Romeo

morning. for Trevor the taking here. for you in Romeo Andrew. This questions Hi, Thank actually good is

the all, seems growth imply in of some First guidance quarter. sequential fourth to the

of You and nice been the mentioned shop with performance the antitrust strong businesses side many year. other compared of for sequential for some has the the last the trends quarter throughout

two those kind to sides of if you to how the discuss could quarter? of expect fourth So dynamics wondering you from, where up the expect come in I’m between business you out the just play those pick

Paul Maleh

Hey, imply good Yes, thanks levels. for XXXX record year-over-year guidance growth does the implies sequential morning growth. our and also question. the I believe from It

have As been parts we the demonstrating contributing. we have all portfolio quarter-after-quarter, of are

had up and really through seeing really in continue had America across merger This see we both was the nice lines the across they activity acquisition antitrust showing Antitrust growth the quarter, contribution though balanced are level Europe. surprise, coming pick are, also And and experience fourth biggest, the through activity we of our business both & both pleasant here quarter. signs year-over-year for All that Competition of litigation even to and geographies, expansion. the didn’t North growth, practice world We in both the probably business given that Economics door matters. looking and we

Trevor Romeo

they as litigation-related that of most worse? lately if to haven’t have? months. That’s a the with work physically system hear. court you. normal Is the proceedings if to able as I they think you just that across dynamics get little are could risk over talk further well higher I to just are still because was maybe most also the or you And handle still few country, cases slowing caseloads. of had of further COVID Paul, Thank bit wondering the then good mentioned a courts that Okay, largely past closed about And especially virtual them great. continues could not there implemented is

Paul Maleh

Yes.

courts courts any Let of think statistics will the of of flow the of yes, these start that to proceed you the ability listed various the saying, what necessarily the through observing impacting that we’re various is the know in coming impediments I I are optimistic both the clients’ change It’s But all various in the me of reading things matters don’t what I cases, federal the here. have of court we ability quarter. we’re jurisdictions directly. And and terms significantly by all surge not are to because systems. answer here. any and in coming from the don’t our just any information

Trevor Romeo

That’s it. Thank got Okay, very much. helpful. you

Paul Maleh

Thank you.

Operator

with your comes question line & from Sidoti next question. Please Our Marc Riddick Company. the of proceed with

Marc Riddick

Hi, good morning.

Paul Maleh

Marc. morning, Good

Marc Riddick

quarter announcements be a Wanted you bit during about, of certainly additions a to go head couple the of that quarter expecting positive first to there little similar we all, as some at? mix are talk a moving it in was primarily has lot which a seemed the of I Are the third count fourth there. additions wanted you’re junior. though over I the forecasting parts, things, seasonal as of been senior well. some some mix to or looking It of know

might mix was look as So, talk could as if what adds. like far that of I you wondering the sort about

Paul Maleh

of because colleagues, dates university the junior the ads practice. We that hire of did deferred so towards of beginning one from world. the hires colleagues and the pyramid from this of a But staffing majority both in our QX new fourth quarter have and we in here. our the now on third into in energy new the to colleagues ranks are group also class the can junior our during our and the some us mix the senior best with the virtual quarter UK, of we end did staff nice and I referenced junior that senior joined QX, of start just integrate Still had ranks the we

Marc Riddick

you to talk that that Okay. wanted M&A of of And if clear the bit positive. to visibility to how also to played that there? guidance the maybe was about I fourth decision the shift certainly first the wondering little what the and strength we’ve reinstate antitrust the seen, sort And gears certainly was of relative a into year then into could and a I quarter does half

Paul Maleh

our influence to I reinstating guidance. think it’s significant

performer. is practice Our practice Antitrust CRA is of top firm Competition & the makes XX% and foundational Economics about up really a the of always

pick comfortable as gives more balance antitrust foundation mergers with both we feel mentioned, mentioned across that So activity, litigation, implies sequential see growth. earlier, nice as up, us their and activity And providing as – and a it’s and to I Romeo of a year-over-year that guidance.

Marc Riddick

with little of maybe seeing could you different to industries. Okay, all and a particular home. that broad-based other increased great. touch areas? are little maybe similar if wondering could a a mix And bit wondering mention you what or made I participation seeing about experiencing across understandable are us on if of little from more that if and are broad-based then was as you certainly service fraud bit than groups if and working lot are service was of they in a you talk any there less I is practice bit cybercrimes But a industry the forensics

Paul Maleh

because facing just the very in we’ve increase But their work investigation and XXXX, economy global during Corporate is really the Clearly, right sharp the throughout been also demand now. XXXX. taken that a work of pleasantly for that surprised has America cyber forensic in demand continues environment

I So, cyber. there’s demand the and for, associated some call, of is would investigations these estimates There independent what work. litigation cyber with damage response as from

grow having as has don’t contributor by practice one for been you growing rapidly growth. solely that So, as

components the their of demand all are we seeing that So across services.

Marc Riddick

flat you the And alluded I earlier much revenue and lower sort wanted was SG&A on spending to to despite the certainly, this overall travel of around touch growth. year-over-year last area quarter of and some pretty during

for wondering you’re is at sort looking seeing given strength if factor the out part there, that spending Thanks. as fourth as a And for of could quarter? margin into activity is there second expectations going that bit you any – talk forward? contributing maybe going was I visibility far the So we’re little a wave of that expected the

Paul Maleh

Sure.

where comfortable. colleagues offices encouraging able most our of our are are colleagues, feel our to All receive and work we ready but to they

are in totally this that route. taking of travel. we vast business also to for our are all seen any work-from-home, the majority support. we communities, haven’t Given my kind of choosing colleagues the dynamics And matter, clients Thus, various which our

to for and seen quarter. fourth purposes, the any we into kind of continue We haven’t that travel marketing expect

So range, guidance to the margin a able being was enough provide on that also too, factor EBITDA contributing Marc.

Marc Riddick

you Okay, very great. much. Thank

Paul Maleh

you. Thank

Operator

is of from Please Our line the next question Barrington Steinke Kevin question. Research. with with your proceed

Kevin Steinke

morning. Good

trying that case So in as work case, maybe suit lead provide wondering, to other harm? that in that not against of follow-on light etcetera, a just across tailwind to to magnitude obviously, terms type a in Google, only like market? private the of, claiming how specific that the broader party of sense can suits, in get antitrust much just of was up, I’m cropping the the but filed particular that, I’m a case to market could that

Paul Maleh

for large will don’t we It’s government the One, really difficult tell technology suits a companies. these doing into when reasons. are be entities investigations kind these to in of number know of what findings

have huge of are findings suit the any, that investigation. follow-on So in a with on the if the will type litigations, associated impact

The other sometimes part very investigations is, these rapidly. resolved are

this take still it all And Sometimes of few is may years. unknown a at time. that

on retention capacity one Although several of CRA can’t or involved another matters, matters. reference that is specific in I can’t landmark these in the our state I

Kevin Steinke

that environment? continuing your work-from-home growth, the I’m to consultants think drive Okay, with and how just people you add to how most this environment that, to that’s in this of aspects handling fair integrating about you new colleagues curious enough. cultural continuing With new in longer-term you’re about

Paul Maleh

Yes.

We professional are services firm. a

are people. go further to any don’t I asset have our Our that. than

special something built at have CRA. We very

of special preserve times economic asset several of all in takes during my last worth We not the years run are built by that members colleagues finding cost of just now ends people demonstrates our company higher savings really doing hard these volatile maximize lot levels because, think what difficult. value are in and over that. to because but is the work the the making utilization performance accustomed that over making we’ve sources we capacity the as the sound long but working the not levels it asset the meet to to we’re think It you world other will our preserving. I think corporate, by of offset we’ve few that Integrating the the a we’re to corny, or costs. – profitability see, virtual been years, is of

You can or it’s all hard past, training XX/X. years into into done acclimated an the really the have do doing that calls organization, on calls Zoom people virtually. is we phone on But get in all culture, you’re when to

are is new do the best. we consulting commend and a for welcome. the So, doing both I It to on lot of making but house house steps, front. first have but side colleagues corporate that to the our my optimal, on of our of Good really of work on feel colleagues, not side all the still

Kevin Steinke

kind referenced That’s activity M&A Obviously, you’re areas bit your or seeing we there about momentum growing the portfolio? quite to press the morning. and it talked in have a this across want antitrust you helpful. know other is if And where highlight you any release, in broadly Okay. momentum I would business. of is don’t But

Paul Maleh

our I a activity across practice. the Economics Antitrust step-up Competition is One, we the momentum believe with Clearly, in have portfolio. broadly & seen

coming the number projects that cited contracted we new CRA, QX, of into During year-over-year.

an new of we although cases in to saw it low coming single digits, was expansion the QX, firm. During

positive, working trend. take we on continue we’re to that So and as to that hard try a

Kevin Steinke

us more with it capital kind going your increase just activity repurchase maybe your talk Okay, share But maybe then quarter the about continues forward? how little great. on lastly, a update dividend bit [Technical allocation. capital strategy. in of just guess and your the Difficulty] I you and normal just And

Paul Maleh

Yes.

changed. long-term company, capital is produces I and well-run Our This allocation attractive strategy cash flows. think, hasn’t very

and but right repurchases because I we’re shareholders. now believe share able, going to terms to money value-creating in prudent our do in reinvest and starve demand been the We with always very have services our back to the means give cash allocation just by ability not the for redistribution business priced, through flows, be uncertainty stock forward. We attractively to of of trying the of capital the our grow in is environment. any growth with to marketplace our want those

Kevin Steinke

results. Well, great. Okay, all nice That’s I Thank on congratulations the have. you.

Paul Maleh

you. you. Thank Thank I you, Kevin. appreciate

Operator

Thank you.

have Paul the now I turn end to Maleh the closing for And the We call session. question-and-answer reached of remarks. will over

Paul Maleh

listening your and thanks to Thanks appreciate joining questions. for in asking CRA. everyone for Again, some good and us today. for interest our time We analysts

meetings you. everyone. that forward progress our We to the look investors we months, coming Thank With concludes our will in with safe, updating call. be on call. in participating virtual fourth that, today’s you quarter and Be on

Operator

call. thank Thank time. disconnect this you, We Mr. lines your for Maleh. Everyone concludes your may now participation. you at This today’s

CRA International (CRAI) 2 Nov 202020 Q3 Earnings call transcript