Earnings call transcript Q1 2023

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Operator

Good day, everyone, and welcome to Charles River Associates First Quarter 2023 Earnings 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,

Dan Mahoney

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

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

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

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

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

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

Paul Maleh

Thank morning, good today. everyone. and you for Dan, us joining Thanks,

in Revenue the the our build continued quarter and business demand highest the increased CRA history. $XXX.X services. first to the in company's million to quarterly revenue During for momentum

international led grew in during consulting expanded first quarter. quarter operations the XX% operations, fueling was X.X% first headcount a American in year-over-year, increase North by and international a and of year-over-year expansion this both utilization which XX.X% Our by the our

colleagues of and This I'm a CRA will in ample opportunities destination excited choice. ahead. collection continues talent top provide talented of continue for growth CRA that expanded to quarters value-creating to make the

year-over-year X.X% Both metrics financial are reported of annual CRA previously fiscal basis currency XXXX. growth constant for announced non-GAAP EBITDA margin guidance of and a of the our squarely range in On XX.X%.

legal Turning growth. and revenue practices offerings. our overall CRA's drove service to regulatory our

Antitrust Financial and & growth. Forensic Employment Economics, Economics, each & revenue practices For double-digit Competition Services Services year-over-year Labor with & Labor Forensic grew and posting Employment

delivered quarter. the like a during highlighting minutes now and the would services I our few projects market to to clients first spend some of for our the

revenue work Competition remained Our a and as Antitrust established demand projects practice & for merger-related continued new antitrust on Economics challenging quarterly for services high a despite backdrop. strong,

activity in Worldwide the to aggregate and by of of compared XXXX to XXXX. fell declined quarter low transaction decade M&A a and value XX% first quarter first as the measured

in in XX% ago. lead experienced decline the first to of As relative XXXX, an the of practice opportunities merger-related such, quarter competition flow a year

the strength overall quarter and ongoing the first the a practice revenue fueling in XX% practice's ago year industry opportunities, flow, overcame practice non-merger-related these The expand more increase of the to both merger-related project than in year-over-year. relative However, by lead partially including trends. saw

practice industrial and & software technology, products. consumer clients During continued in CRA's on industries, including mergers Competition Antitrust Economics the high-profile hardware, quarter, to several support

square merger lettable complementary feet Shaftesbury two in supported property the real lettable trusts units a will a X.X Capco of million resulting example, For together merger CRA of the XXX portfolio buildings, of and Central party's with investment bring in of team space. portfolio and landlords estate mixed-use about UK The approximately registered London.

lead found a to the cleared and review, prepared of After unconditionally the Competition merger Market lessening analysis and UK's with substantial CRA, that acquisition. no would one Authority, a the competition Phase line the in evidence by

in & legal Competition their In review to support CRA's Antitrust clients disputes. merger practice, to work, addition Economics continue

During CRA and disputes competition expert other prepared consultants arising matters delivered the and from quarter, and claims. class testimony first international actions, reports and antitrust

engaged client's provided to experts opinions CRA and surveys, developed a multiple their claims trademark example, analyses were For trademark and relief. and to regard experts expert in support teams valuation, with District US and infringement monetary unfair consumer damages Court. The competition

quarter. broadly, the more trends during the legal delivered mixed Looking market up case X% filings were first Total year-over-year.

X% of of bucked CRA revenue legal regulatory X% first from the judgments by its in grew However, declined number to the court quarter. trends offering XXXX. and total relative these first nearly and the quarter

in to marketing also a continues regulatory During discrimination mortgage companies testimony experts mortgage group potential homes. responding support investigations, several to CRA's in matter, and maintenance mortgage Economics lending discriminatory quarter, red provided lining. litigation foreclosed in and assist banks concerning of Financial practice the a servicer the alleging in practice of The and

provided client practice client's continues the assisted CRA lenders geographic lending Services in The other matter to and resolving the patterns in in of relation statistical market agency. the with a in regulatory Forensic some cases, analysis the seeking cyber and with trade other matters per fraud, The into clients, strong response experience responds Boards and incident and hundreds assistance from cybercrime, to investigations year. theft, of demand investigates to alleged misconduct. secret C-suite team

to we quarter, our company. We leading multiple digital to and a North helped recover brokerage trading company a in six-month also publicly Leveraging assisted software markets traded an company incident. unauthorized American allegations We the unauthorized investigate forensic corporate the incident, intrusion. care system its secret responding and ransomware health insurance last the major clients practice and competencies, a pharmaceutical help a network. assisted to respond a a including theft, respond device financial involving medical global of from In massive trade

health e-discovery navigate continues Finally, recent to audit that had Employment dollars. practice its our publicly allegations embezzled economic engaged across millions & of to Labor changing to a investigated CRA's company, proactively capabilities former entertainment Chief and traded companies conditions. committee to of insurance accounting Officer Marketing activities, industries, including finance, be assist help restructuring clients as care, the adjust legal and forensic

California order internal equity standards regularly to on were the practice performance wage compensation Separately, critical clients retained multiple consultants to continues assist for partner and to clients and CRA decisions assess annual making fair quarter, hour at federal labor first the be a entering lawsuits. proactively in concerns. During in mediation and

of employment deep together The retentions class team's the also acquisition one-year led brought and anniversary to Equal Commission. the the also to the that to on CRA's Employment actions multiple than Opportunity The brought collectives and combined individuals' efforts Consulting. a leaders XXX Welch retreat labor commemorate of gathering on or employment by expertise leverage held matters practice of quarter client consulting expanding focused experience. and first during more years the

on our of as flow quarter acquired lead adjusting whole, more company the Welch strong the this sales to ago. increased The projects quarter on the lead Consulting the than first Project in a For XXXX. we year pipeline. strong builds year-over-year, -- by after XX% replenish flow fourth the the projects generated one continue for during

lead six strongest period of history. activity represents months the CRA's Together, the past flow in

with adjusting While over projects. originations the record project the for year-over-year Welch remained our flat flow Consulting we're pleased the transition quarters, after lead roughly past two new

that clients years their to it to past begin competitors. relative leading delaying several new that projects work During their the the Instead, examination conversion composition are observed lead the no evidence first Based over projects. with are into quarter, to discussions see we more and of we appears our a history generators, losing projects. we revenue decision our frequently in of an on on delay leads

we quarter on financial fiscal our our year guidance. to for first XXXX. Turning reaffirming full Based performance, are guidance

million of of As is revenue $XXX stated fiscal XX.X%. on in a constant and guidance EBITDA to range expected a to previously basis for XX.X% reminder, the XXXX range million margin non-GAAP our to the calls provided relative currency in and $XXX

grateful we hard our I'm important work my Overall, quarter clients first colleagues helped their the address for challenges. most to their during as

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

Chad Holmes

in $XX.X Thanks were consistent Paul. want million our I concluded The years. during of debt practice payments, prior Hello, $XX.X and the quarter. you to is resulting credit with position borrowings million a capital $XXX primarily quarter to borrowings update which fund facility, of under on million. revolving cash the We of net everyone. our our in bonus deployment with

bonus We the $XXX,XXX capital XXXX first of expenditures. saw outlays for in to forgivable quarter loans also the addition spent In $XX.X connection on million investments. talent cycle, normal of cash with

fiscal we to $X million spend expect million $X on to capital expenditures. For XXXX,

during million for $XX.X returned $XX.X shares. of to also total consisting and million XXX,XXX repurchases approximately a quarter, first of payments shareholders of the our We share of dividend million $X.X

have We approximately under share repurchase program. $XX.X our million available

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

Dan Mahoney

Thanks, Chad.

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

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

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

primarily and This ratio an was quarter's impacted travel entertainment by expenses. in increase

basis rate of was for and quarter arising quarter from first an a on in of the lower on rate higher with for of a The compensation non-GAAP the quarter non-GAAP fiscal basis UK benefit the effective for statutory XX%. was increase XX% attributable XXXX XXXX. from XX% to fiscal XXXX compared in largely the rate The tax to first accounting first a the XX.X% stock-based

of full fiscal rate to range the our year XX% For be tax effective in to XX%. expect the non-GAAP XXXX, we

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

prepared our remarks. concludes That

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

Operator

session. Thank William Our conducting Please Blair. Nicholas first proceed you. At Andrew with comes a question. question this be time, question-and-answer with Instructions] we’ll from your [Operator

Andrew Nicholas

again Good the strong hiring taking questions. wanted my on I morning. for Thanks year-over-year. to environment talent growth start really

on be If the retention success talent spend firm, about and easy talking time your now you some that the it to is helpful. recruiting just get would how front right at could

Paul Maleh

Good morning, of in increased arriving in with XX% stated new we and those headcount units. Competition of With that, our XX.X% Andrew. practices, top-performing QX had two XX Consulting our net additions our we approximately year-over-year. additions as Forensic

namely to this provide to sort attrition, that it's of of a little call in our talented value-creating experienced annual continues only going to to choice, respect that to attrition total how of year we make will and collection continues quarters pretty that opportunities good and to top growth answer in continue accordingly. too to talent our excited about a early feel and ample I'm question we're XX% historically, colleagues because adjust ahead. expanded for unfold CRA hiring Does Andrew? CRA the plans see the Thus we get your destination QX. With of

Andrew Nicholas

helpful. holding thoughts that on the I you both that speak Thank the buyout signs hoping from the now? any relatedly business That's was right and takeaways Thank in firm? strategies then the health Sciences or of and could market you. overall Yes. Life end quarter And And into then early to you. just

Paul Maleh

the five led years. a a remain to confident source both pattern. Sciences for growth and the performance energy I CRA Unfortunately, practice drive has Sure. past for going more recently over been forward. by CRA of Management growth has in been ability more practice's of sawtooth Life the group's Consulting

that would more any like sort have I They there. We generators just work ascension that I'm with upward But fine see of of continue to to -- haven't drive hard lost of curve. to to quarter-to-quarter just we an revenue volatility, demand.

how really think less I would we're flow quarter the the Life of just in one to say the to Lead But again, unfolds. wait bank, QX time. is matter think, what Sciences So than year slightly was was a it at going see in with I time. I into expected

Andrew Nicholas

you. Thank helpful. Very

Paul Maleh

Thank Andrew. you,

Operator

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

Kevin Steinke

you Hey, the to the flow lead despite up within that good you wanted flow. for I lead morning practice XX% in what asking an everyone. decline start off think the practice said I M&A-related Antitrust lead by XX% & about Economics referenced, Competition flow

on what's lead flow current in touch that you from can strength some M&A So market? despite headwinds driving the

Paul Maleh

strength of it said the I've performance. think a of practice. services to Kevin. morning, quarter fortunate provider Good quarter of with that Antitrust and after it Sure. worldwide, & record very levels talking are within times such colleagues group I'm they talented Competition premier many our I about continued work the appears Economics do we're almost

I down in. lead leads We're coming is revenue-generating flow still converting flow not M&A, year-over-year And broader just think opportunities. with even CRA uncertainty the -- into though or lead more market to time. to getting for those anything is this calls. the than has we're received do competitors the general We getting and at with revenue The those that do projects the

the is in forefront don't changing the States of next bodies and years. and abroad that still at So here antitrust see in regulatory the few I

I we those well are on So think to capitalize positioned opportunities.

Kevin Steinke

for new across on you firm, uncertainty. quarter -- reference year-over-year project those practices? as were originations due the trying Just to delay was is the macroeconomic Okay. the delays did flow in to or Great. delays are firm whole as get few that broad-based the project up how you And conversions in to flat. those a a touched just you're XX% maybe to fairly first although Is lead the that seeing? that a some macro broad-based sense are confined it -- And

Paul Maleh

flow and am seeing then examination I When strongly the more new Yes. losing And flat projects competitors? anytime as closer norm lead first our says, historical going I is -- Am no. as the market concern it for losing share? up my always than did I firm remain to see

First, in experienced was the conversion new across services. portfolio to our of revenue-generating leads pretty decline evenly of projects

point during another versus So I an unusual to can't practice who experience had QX. one

XX% XX% into in conversion too leads they projects are revenue-generating normally experienced those to went our inquire because reduction to convert the what Second, revenue they individuals in of generators, who we experiencing a top rates.

we're of ideal what there. until pulling more for have matter clients not is us scenarios conflicts, merger the on yet the announcement hearing their on the And asking calling to litigation-related clear just trigger or but market they delaying

these for that leads are firm. hopeful the opportunities revenue I'm So, still

revenue The that in but I think do challenge CRA's still I the is know we when have is grasp. think that forthcoming. I don't are opportunities

Kevin Steinke

Okay. for this I affected outlook at guess And it point your hasn't year. the

the reiterated guidance. You

good way pretty feel up guess. the still I you about is So the shaping year

Paul Maleh

in stronger revenue times believe the issued is I when firm the I sometimes always think More portfolio hopeful well-positioned Yes. guidance deliver we And I that to get of the market value these uncertainties see overall is but just the and I remain better. has way. in higher our proposition from don't changed even ahead.

Kevin Steinke

bit want about just getting of you're utilization quarter? strength metric Okay, on and down your mid-XXs great. consultant particular related from that color I little typical up, rate. of kind XX% the people the to the or a somewhat ask in any Is hiring ramped just that to

Paul Maleh

our by Yes, constituted. currently point the I target mean I for start saying utilization as that portfolio mid-XXs is will the

back We decade. have on I far basis. delivered utilization a that's for frankly mid-XXs an think quite as annual as

we we're The with opportunities. Of what as see course going some target. headcount sort And mid-XXs of long-term you revenue match will to quarter-to-quarter. get remains volatility our still best to do that our the

and going that hire I will because to I'm profitable best know leads in for to quarters and getting easy. our be never to and that seems since to what's because stronger the the driving take in ahead it brightest utilization, driving take depression going short-term that's resources revenue growth. our ability revenue be top place are Kevin And getting I talent if is to the Our

Kevin Steinke

questions. over. the I'll taking for you thank Well, Okay. turn it

Paul Maleh

you, Thank Kevin.

Operator

is question, Company. question Please with next proceed from & Our Riddick your Marc Sidoti with

Marc Riddick

morning. good Hey,

Paul Maleh

Good morning Marc.

Marc Riddick

bit wondering a want my sort something bit. could a of So, arms that of to touch get around you if little made mention but I was you little on I

and were it sorry if down some you right? that year-over-year. heard I judgment of up Was year-over-year correctly X% data You down is around filings think about And were said X% judgments. I filings the talking

Paul Maleh

Correct.

Marc Riddick

Okay.

in I a wanted maybe So, what on that for going the seeing you that of might forward? means touch just to bit that gap causes some of and just little maybe kind CRA be

Paul Maleh

of repeat leads with have. the there. myself want hesitating I I'm just to some that we don't views are because The

lead faster terms at Our flow growing we're of than still what opportunities. a is observing new rate in aggregate

our for periods happy too on level. of to time want litigations down clients quarter So always respect aggregate with to longer growth or know in see seen. remains that. aggregate forward. courts always whether be strategy But not like pushing a judgments I respect I that's I delay to market with look tying more to far to that see of court read filings about expanding. don't into a of That to over and like I'm to always outpacing market CRA's I that.

Marc Riddick

the the I mentioned little was a toward could was release touch over was fairly was wondering I And was in the shifting press performance up that then the Okay. things if that? -- which I of nicely. one -- bit international on you believe

Paul Maleh

competition that of seeing with Yes. in the and antitrust Europe. our A marketplace to our credit that's by expansion lot We're goes in colleagues leaders currency headwind. and

our operations would basis. take on higher it X.X% the or stated So constant not currency a even of year-over-year a into constant growth account not be is growth That currency basis. on if I does international

our driving So ahead. life in sciences competition getting think in the also are our nice We're contributions area. colleagues colleagues I from

Marc Riddick

Thanks. from in you we've environment? Okay. on Excellent. It past rates on but not quick but color the too? pricing being think, as update pressured maybe can unnecessarily seems that some And economic the give sort us the then, in general this that I a on just touched of conditions outside are by give though the looking just

Paul Maleh

expected. as more quarter what increase. pretty With say Sure. now bank can is of right QX insight going things stickiness have rate little are in our much the I we With a the every as to

sheets fiscal being rates. New XXXX by cases have being They're accepted new clients. higher put our are forth rate that with

of have write-offs we remains what of which rates pretty of means consistent the acceptance experienced are unchanged, levels with historically. level those Our

So we Hopefully, with I'm to-date. pretty QX continues and pleased have beyond what form.

Marc Riddick

Excellent. very much. Thank you

Paul Maleh

you. Thank

Operator

end the have over back the like We Paul the turn question-and-answer to Maleh now call reached I would to closing comments. of session. for

Paul Maleh

to joining us thanks We everyone for CRA. continued time appreciate in and Again today. interest your

forward we be call. you, Rob. concludes Thank with in call. in quarter meetings coming and on progress investors look to will That our months today's participating second our We you the on updating

Operator

our very This call welcome. concludes You're today.

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

CRA International (CRAI) 4 May 232023 Q1 Earnings call transcript