Earnings call transcript Q2 2023

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Operator

Good day, everyone, and welcome to Charles River Associates Second Quarter 2023 Conference Call. Please note that today's call is being recorded. The company's earnings release and prepared remarks from CRA's Chief Financial Officer are posted on the Investor Relations section of CRA's website at crai.com.

With us today are CRA's President and Chief Executive Officer, Paul Maleh; Chief Financial Officer, Dan Mahoney; and Chief Corporate Development Officer, Chad Holmes.

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

Dan Mahoney

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

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

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

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

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

Paul Maleh

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

quarter the and that the health we third This of business. of past of project sales pleased lead XX% flow this our in as the in in project in flow I'm CRA's indicator we lead trend activity a several double-digit by our represents the the discussed have lead and the flow flow in project as marks history. of increased lead extended to together For overall consecutive report particular, good CRA's year-over-year. second quarter period growth growth quarters, pipeline strongest

assignments importantly, of quarter rate quarter by More below sequential growth conversion project but reflects second into first new as X% norms. revenue-producing flow this improvement grew the in originations still year-over-year. client the during opportunities relative we This translated is our historical a to our

The company's quarterly expansion portfolio million, year-over-year in of by history. sales quarter. the performance. X.X% the $XXX our Revenue revenue contributions performance to in Broad-based across strong highest the represents supported increased pipeline this our our second which drove

Services Four each of Seven Finance, the Economics, generating XX grew with practices and Financial double-digit Forensic revenue led Energy, year-over-year. growth. practices-- way

our each and larger Employment, to Geographically, in both Economics, year-over-year. overall year-over-year XX.X% increased the grew second practices by growth. North our Antitrust Labor our -- Life expanded of led three & & international operations, Additionally, Sciences revenue by and our and which Competition American contributed operations quarter, international

strong the continued effectively. business During manage growth, the of period we to

spend to and a some to compared of $XX.X sequential EBITDA Consultant quarter. our services the in would first our the utilization. quarter. improvement basis the revenue non-GAAP XXX quarter I now increase minutes delivered second to profitability year-over-year and The XX.X% or drive contributing remained the in reached helped of clients million highlighting for during relatively second flat quarterly the XXXX, like in growth headcount as few market to of point utilization a projects

including efficiency, in municipal litigation and contested of and matters in wide a alleged requiring active customs lastly, trading markets; from disputes analysis various during the in spoofing quarter, CRA's litigations the variety Finance activity, practices was complex high-profile the second merger about including practice litigation merger finance. of financial arising

including matters, international Additionally, assets the international and practice disputes securities America North arbitrations in fraud South Europe. matters or America, with and was in active numerous

a victory class a Senior testimony action jury Professor XXX(b) the testified management plan. Consultant related clients, planning, an to the trial and as Conrad ERISA of and at to on University, Ciccotello, in of monitoring CRA, for retirement defendant, our Yale Yale's an retirement financial high-profile Ciccotello in investment retirement performance In behalf provided expert of plans.

During a foreclosed and mortgage its provide work servicer The Financial group analyzing in litigation practice in homes. in experts lining. also of discriminatory quarter, matter support maintenance practice the second alleging a in CRA's marketing lending testimony of to mortgage Economics discrimination continued potential red continued the

mortgage by the assisted to the the banks of practice lenders client's analysis statistical other patterns In several geographic lending relation in companies market. response investigations, providing regulatory and to in

the In into alleged fraud, assisted cybercrime, resolving matter Forensic a the with strong practice with demand team both some C-suite assistance CRA Boards continues CRA's agency. instances, clients secret and investigations misconduct. to in regulatory and from experience seeking other client theft Service the trade

upon sanction called being help the the assist practice of Services to and into investigations compliance requirements, and As noncompliance. is announce potential export efficacy governments Forensic controls to programs existing with enhance new increasingly

was enhance U.S. assist export and licenses requirements global compliance machine manufacturer related to its practice a software. sophisticated example, hardware with For retained the controlled of to tools and to

Many suffered to year. the of dramatically matters implications. which clients attacks, In response Forensic these that practice addition, XXXX. help cases, per cases, in theft in In significant ransomware Services disruptions respond of caused operational cyber investigate continues financial to half the of other occurred while are some surged data hundreds first and have and incident

stolen, multiple insurance we of data example, and incident and respond laws states ransomware from a were large For customer across quantities assisted countries. brokerage a which privacy massive to multinational triggering recover third-party in

other partnered with Additionally, Services has practices. practice CRA the Forensic

and respond Life econometric multistate the care to help into into For provider health by were pricing scrutiny members example, practices and improper key contributed to of we skills and practice Commission and assess retained the CRA's by Sciences Trade Federal important market a engagement. insights alleged

the across to In industry clients CRA's Energy in consulting engagements. testimony quarter, serve expert management the second and continued practice

a major strategy. power formulating U.K. in in CRA For and new a utility example, a participant to assisted formulate decarbonization utility industry transmission U.S. advisory gas major integrating nuclear strategy, its subsidiary, a within its offering,

witnesses the in courtroom, of a to the synthetic expert related fuels. practice involving the investments Within prudence dispute provided

Turning practice. to the Worldwide our from in a measured aggregate low the & as quarter on of rebounded by deal Economics market XX worldwide decade strongest activity, making basis, second increasing first the M&A for quarter for quarter months. in a the value Competition past sequential transaction Antitrust XXXX, making XX% the

increase second in increase M&A to quarter. XXXX. activity flow a merger-related trajectory the in another relative practice second generating practices this demand market, continued the The in services, the of quarterly similar a for quarter yet and on XX% revenue the first Capitalizing quarter high followed the sales for established Antitrust Competition merger-related lead new pipeline to in

our merger-related year-over-year. relatively increase, sequential flat the lead was flow Despite

Finally, to like valued I highlight colleague a in would Competition Bailey. the Liz practice,

behalf Blizzard Federal she and During and witness economic analysis present hearing on an provided only the Trade to plenary Bailey testimony of Activision Microsoft was Commission. examination for live expert testimony on evidentiary by hearing. in the motion filed Dr. the expert a the quarter, injunction during direct

Activision in in closing Her opinions judge and a times injunction motion and favor for ruling our the of during the Microsoft numerous FTC's written testimony Blizzard. cited clients, the denied was court's plenary by that arguments

lower million fiscal the of achieving fiscal million constant relative revenue of of are our of our two a our guidance. we XXXX, of which incorporate $X.X the a $X.X generated business, million, $XXX non-GAAP million guidance. adjustment, end results revenue to quarters currency strength XX.X%. the raising to a Reflecting $XX.X total contribute continued and currency and guidance EBITDA. to first increasing now Through CRA revenue and on These of XXXX Turning EBITDA to margin and constant quality profit basis

guidance expect the million XXXX, of non-GAAP of million range fiscal year to on second in to and full basis half XXXX, relative the during margin revenue constant the EBITDA For XX.X% the to assumes continued year. currency $XXX performance This of a XX.X%. strong in $XXX range fiscal updated we

second we during our address I'm fiscal my It their $X to our of U.S. constant their challenges. million shave account which during foreign EBITDA of important most market's hard basis XXXX. on work grateful from from of also dollars, reported $X expectations helped currency takes our million rates a colleagues the reported into clients for as revenue quarter half the approximately the the may Overall, and all approximately for second exchange current

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

Chad Holmes

Hello, everyone. Paul. Thanks,

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

year our of years, of borrowings. aim in with the with borrowings. we quarter, second finish the to repaid end have zero our we million $XX the outstanding experience prior Consistent Since

XXXX outlays quarter to In the addition of forgivable of investments also second normal saw cycle, bonus for repayments. cash net loan $XXX,XXX, of talent the

$XXX,XXX spent total bringing year-to-date on expenditures, We $X.X million. to our capital

of We approximately also dividend payments repurchase quarter, XX,XXX million to shareholders consisting million the $X.X returned during $X second million to of $X.X and our shares.

Dan turn quarter share call approximately to As we for million had a final end, With our that, over program. few of the comments. repurchase I'll $XX.X under available

Dan Mahoney

Thanks, Chad.

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

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

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

year, the through compared and excluding fiscal digits revenue we a selling, commissions headcount nonemployee Non-GAAP expect to year experts By to and typical X.X% was year-over-year. high of single a XX.X% normal attrition the efforts of for second by XXXX quarter in hiring percentage ago. the of expenses, the to administrative end the consultant XX.X% with general increase to mid- attributable patterns,

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

the sheet. balance Turning to

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

remarks. our concludes prepared That

will call for the open now We questions.

Operator

with [Operator from with proceed comes your Instructions] Our Barrington Kevin Steinke Research. question first question. Please

Kevin Steinke

everyone. morning, Good

Paul Maleh

Kevin. morning, Good

Kevin Steinke

project to a new comments saw little The off sequential maybe I below but around originations. improvement still wanted start about you historical by bit your asking there, norms.

that improvement a and then drove what be bit historic might on below what in the keeping thoughts it origination any Just trends also norms?

Paul Maleh

talking began We at our flow continued Sure. reporting QX. discussion that end in about the of our during March QX lead and earnings of

noted that the During that flow we saw time, firm. increase a to we in in significant coming lead

in considerably relative down We that also of revenue-generating to our the noticed lead was to that conversion norms. projects flow historic

flows, that being the cases we that weren't the As way not felt road mergers or of kind losing but the announced. any disproportionate we were confident lead being just analyzed down those so to in kicked competitors, a we bit were opportunities more

thought we was into convert when. were eventually revenue-generating come or uncertainty they The to projects. So going

start that to seeing probably know in as don't relative of uncertainty I about XX% So conversion market what as resolution a did the kind rate our We're historical that of contributed still down XX%, this on rate. but whole, to an conversion improvement any we norms. exactly

Kevin Steinke

Okay, certainly, in continued thank impressive flow. lead And growth project you.

you said three of double-digit quarters consecutive I growth think there.

of any or growth practices you we on here areas lot really are the wanted firm. that to pockets strength lead there call Or the is Should the being by a assume highlighted? those seeing of you talked flow strength driven about illuminate? across You you're just areas specific

Paul Maleh

growth marketplace can we us influence No, lead on of revenue think just cautiously the can bullish flows over that's the amount business output converted inputs rewarding been has has prospects sharper that the the about revenue-generating happens. to very lead of we try when months. We of influence the leads the into past more surge get and start the projects, to we'll see relatively nine turbulent and we and into focus always flow model, our into We growth, organization what benefits seeing in just coming like in to those CRA. it's these and broad-based, that pretty that a have

Kevin Steinke

guidance increase increased range. as you. Is EBITDA the to about you've revenue Thank also in Okay. the end I well as Anything of and based on or low wanted ask seen guidance out on guess, for range front? here - non-GAAP the particular call the that in the the margin might what the the second your that you first outperformed margin the would either revenue initial I that have expectations in half? outlook the half certainly, just

Paul Maleh

date, I think return the bit particularly with we're given has when. for but line norms, rates that's there's been still we to We expectations, observing. to think a performance as the what pretty historical to conversion uncertain much market in opportunities see as variables upside

So performance when significant half. the or looking increase second enjoyed we produce It's into any those projecting the kind strong are year, the conversion continuation to of of the rate more half of first flows results. in during a out lead we not

Kevin Steinke

and noticeable recruitment has to or talent I o you. Any tightening? Or to of terms wanted in trends been and it hire Lastly, loosening talent? pretty of see for much Thank in as is ability ask Okay. the market you as it your it. about terms just attract talent overall

Paul Maleh

prior running ability attract and is been the for typically QX higher hire year. lows seen consistent what is thus anticipated. have the talent lower the think than the observe not is to has half in historic of of headcount we've we sort quarters with QX, pretty bit would identify, into and to and What with a attrition voluntary yielding second prior we've during in I seen quarters. more That otherwise we - what rates closer consistent

end productive year. our to use the noted, all of I terms colleagues care our think it we our best We're make expectations So by doing of headcount talent this most itself the in we're but happy of of will take have, as have to Dan the of here. growth

Kevin Steinke

for and insight congratulations solid Thanks Okay. on it results. the turn over. the I'll

Paul Maleh

Kevin. you, Thank

Operator

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

Marc Riddick

Good morning.

Paul Maleh

Marc. morning, Good

Marc Riddick

to all, start with all the for I and detail thanks of here. the first that So seeing wanted color - the you're

about through about don't up. quarter. the first a talk bit up to I bit pace that. It I improved sequentially that, drivers a there? Certainly, there's the get of the little - you there talk Was quarter? seems that why thoughts to though from improve just So there's utilization was for utilization. Did lumpiness wanted certainly, the wanting it's but as your any little pick on

Paul Maleh

quarter. during but quarter, and demand was it's throughout by influenced a We for our lot improvement during services demand, improvement Utilization course, definitely second of that pretty an overall quarter. also saw steady in by it of the the influenced the new headcount is, of the welcomed colleagues in growth as we

second our projects the So integrated get one, think coming a of on care to into the historical aboard, staffed But get to but colleagues pressure over 'XX, on more upward has the all new pressure as demand take them utilization. particularly sort should has again, heading and patterns. utilization downward we the back half utilization, that itself of on I

Marc Riddick

you about details to as that what a and know - how I you're wondering and with as or filings remainder and lot the gave court was was the seeing, what but to I judgments you're into year? pacings the for could plays curious those and your of thinking you I thoughts Great. seeing if of

Paul Maleh

We saw year-over-year the roughly the judgments during new being quarter. growth the of number mid-single-digit of and cases produced court number on

lead new observing. flow I'm of So sure that some a helping that which expansion, is modest we're

Marc Riddick

a seeing upside about there? the to talk as lot line internationally little the some of I the of - opportunities wondering you that benefits you've already shift a forces Then was gears of that if I some with the growth some certainly, and top far wanted of and driving shared. bit you're there's as could

Paul Maleh

hesitate upside after always opportunities strength try and strong a answers just been of delivering Sure. I to of for record of the I because levels performance, give our number quarter if continued We've myself. about do the so to quarter, performance practices. performance of say

supportive continued excellent pop, environment, in don't believe know or litigation the but overall upside both We North just execution I colleagues the more surprise our my is So house. growth portfolio. and throughout still side by very the in here of anything a of Europe, is in America service regulatory whether

about There's the their new to at capacity, best of has which lot clients structure energy practice discussion middle how clean and been generating of - a Energy portfolios. advising our

last portfolio. seeing opportunities with throughout now quarters. the the pop, the to our don't foresee for we're excellent of So been just growth we've throughout expect I able the that to any and share kind continue investors we do the several but performance

Marc Riddick

It's Thank great. very Appreciate it. much. you

Paul Maleh

Thank you, Marc.

Operator

your next Please Our Nicholas Blair. with Andrew question. question William with from proceed is

Andrew Nicholas

wondering picture we've to just Good I'm non-M&A on thoughts wanted how Appreciate Hi. well. ask on side new over of as just multiyear a would question. you in all - these M&A changes on parts think Antitrust the guidelines proposals the big outlook some Antitrust? your be here impact my U.S., Just period, there. I for morning. business whether some it's your internationally the the I seen in taking interested kind moving or side?

Paul Maleh

Sure. to of There's be the alluding what of mergers is frankly, or as change for mergers in guidelines quite you're still what guidelines, analysis, as out been, or position response and bode of CRA at and be to deals and that firms seen. probability what standards CRA particular. all for mean getting they of terms I the new services But our what in industry these complexity will terms in How increase decrease will that should whole for those uncertainty will at is well for the a whether play professional it exactly commissions in still take company exactly looking the overall a to, be enforcement will antitrust is the here. good like mean through,

Andrew Nicholas

you. That's helpful. Thank

Paul Maleh

Andrew. Okay. Thank you,

Operator

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

Paul Maleh

days for and appreciate months, concludes to and in meetings today's our updating call. interest forward look again, that, everyone you. on to call. in in We'll Thanks, third be with progress that CRA. thanks quarter we us Rob, today. joining Thank our coming your and investors participating With We the time on you and

Operator

conference. today's concludes This

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

CRA International (CRAI) 3 Aug 232023 Q2 Earnings call transcript