CRA(CRAI) - 2025 Q2 - Quarterly Results

Q2 Fiscal Year 2025 Overview Executive Summary of Financial Results CRA reported strong Q2 FY25 results with significant revenue growth and improved GAAP net income, driven by increased utilization and higher client reimbursables, while non-GAAP net income remained stable Q2 Fiscal 2025 Key Financial Highlights: | Metric | Q2 FY25 | Q2 FY24 | | :--------------------------------- | :-------- | :-------- | | Revenue | $186.9 million | $171.4 million | | Net income (GAAP) | $12.1 million | $6.5 million | | Net income (non-GAAP) | $12.7 million | $12.7 million | | Net income per diluted share (GAAP) | $1.79 | $0.94 | | Net income per diluted share (non-GAAP) | $1.88 | $1.83 | | Operating margin (GAAP & non-GAAP) | 10.6% | 6.6% (GAAP), 11.4% (non-GAAP) | | Non-GAAP EBITDA | $23.3 million | $22.3 million | | Effective tax rate (GAAP) | 29.2% | 32.0% | | Effective tax rate (non-GAAP) | 29.0% | 29.4% | | Cash and cash equivalents | $19.4 million | $24.6 million | | Revolving credit facility borrowing capacity | $126.5 million | N/A | Key Operational Highlights Operational performance in Q2 FY25 showed increased utilization and client reimbursables, despite a slight decrease in total consultant headcount compared to the prior year - Companywide utilization increased to 76% in Q2 FY25 from 74% in Q2 FY24[6] Consultant Headcount Trends: | Quarter | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | Q2 2024 | | :---------------- | :------ | :------ | :------ | :------ | :------ | | Officers | 159 | 156 | 151 | 156 | 157 | | Other Senior Staff | 557 | 566 | 552 | 560 | 531 | | Junior Staff | 221 | 225 | 243 | 262 | 280 | | Total | 937 | 947 | 946 | 978 | 968 | - Client reimbursables grew to $19.6 million (10.5% of revenue) in Q2 FY25, up from $16.4 million (9.5% of revenue) in Q2 FY24[7] Detailed Income Statement Analysis Revenue Revenue for Q2 Fiscal 2025 showed a solid year-over-year increase, reflecting continued business growth Revenue Performance: | Period | Revenue (in millions) | | :----- | :-------------------- | | Q2 FY25 | $186.9 | | Q2 FY24 | $171.4 | | YoY Change | +9.0% | Operating Expenses Operating expenses showed mixed trends, with SG&A remaining stable as a percentage of revenue (excluding commissions), while depreciation and amortization increased, and forgivable loan and share-based compensation amortization decreased Selling, General and Administrative (SG&A) Expenses SG&A expenses increased in absolute terms but remained relatively stable as a percentage of revenue, with commissions to non-employee experts slightly increasing their share SG&A Expenses Breakdown: | Metric | Q2 FY25 (in $000s) | % of Revenue | Q2 FY24 (in $000s) | % of Revenue | | :--------------------------------- | :------------------ | :----------- | :------------------ | :----------- | | SG&A expenses | $35,079 | 18.8% | $32,016 | 18.7% | | Less: commissions to non-employee experts | $4,576 | 2.4% | $3,816 | 2.2% | | SG&A expenses excluding commissions | $30,503 | 16.3% | $28,200 | 16.4% | Depreciation & Amortization Depreciation and amortization expenses increased both in absolute terms and as a percentage of revenue year-over-year Depreciation & Amortization Expenses: | Period | Amount (in millions) | % of Revenue | | :----- | :------------------- | :----------- | | Q2 FY25 | $3.5 | 1.9% | | Q2 FY24 | $2.8 | 1.6% | Forgivable Loan Amortization Forgivable loan amortization significantly decreased in Q2 FY25 compared to the prior year, positively impacting profitability Forgivable Loan Amortization: | Period | Amount (in millions) | % of Revenue | | :----- | :------------------- | :----------- | | Q2 FY25 | $10.2 | 5.5% | | Q2 FY24 | $14.4 | 8.4% | Share-Based Compensation Expense Share-based compensation expense decreased in Q2 FY25, both in absolute terms and as a percentage of revenue Share-Based Compensation Expense: | Period | Amount (in millions) | % of Revenue | | :----- | :------------------- | :----------- | | Q2 FY25 | $1.0 | 0.5% | | Q2 FY24 | $1.4 | 0.8% | Operating Income GAAP operating income saw a substantial increase year-over-year, primarily due to the absence of significant restructuring charges present in the prior year, while non-GAAP operating income remained stable Operating Income Performance: | Metric | Q2 FY25 (in $000s) | % of Revenue | Q2 FY24 (in $000s) | % of Revenue | | :--------------------------------- | :------------------ | :----------- | :------------------ | :----------- | | Income from operations (GAAP) | $19,727 | 10.6% | $11,288 | 6.6% | | Non-GAAP income from operations | $19,727 | 10.6% | $19,464 | 11.4% | | Restructuring and other adjustments (Q2 FY24) | — | —% | $8,176 | 4.8% | Other Income (Expense), Net Net interest expense and foreign currency losses both increased in Q2 FY25, contributing to a higher overall non-operating expense Interest Income (Expense), net Net interest expense increased slightly in Q2 FY25 compared to the prior year Net Interest Expense: | Period | Amount (in millions) | % of Revenue | | :----- | :------------------- | :----------- | | Q2 FY25 | $1.8 | 1.0% | | Q2 FY24 | $1.5 | 0.9% | Foreign Currency Gains (Losses), net Net foreign currency losses increased significantly in Q2 FY25, indicating a larger negative impact from currency fluctuations Net Foreign Currency Gains (Losses): | Period | Amount (in millions) | % of Revenue | | :----- | :------------------- | :----------- | | Q2 FY25 | $(0.8) | 0.4% (Loss) | | Q2 FY24 | $(0.2) | 0.1% (Loss) | Income Taxes Both GAAP and non-GAAP effective tax rates decreased in Q2 FY25, leading to a higher GAAP tax provision on increased pre-tax income Income Tax Provision and Effective Tax Rates: | Metric | Q2 FY25 | Q2 FY24 | | :------------------- | :------ | :------ | | GAAP Tax Provision | $4,994 | $3,076 | | GAAP Effective Tax Rate | 29.2% | 32.0% | | Non-GAAP Tax Provision | $5,208 | $5,281 | | Non-GAAP Effective Tax Rate | 29.0% | 29.4% | Net Income and EPS GAAP net income and diluted EPS significantly improved year-over-year, while non-GAAP net income remained consistent, and non-GAAP diluted EPS saw a slight increase Net Income and EPS Performance: | Metric | Q2 FY25 | % of Revenue | Q2 FY24 | % of Revenue | | :--------------------------------- | :-------- | :----------- | :-------- | :----------- | | Net income (GAAP) | $12.1 million | 6.5% | $6.5 million | 3.8% | | Net income per diluted share (GAAP) | $1.79 | N/A | $0.94 | N/A | | Non-GAAP net income | $12.7 million | 6.8% | $12.7 million | 7.4% | | Non-GAAP net income per diluted share | $1.88 | N/A | $1.83 | N/A | Non-GAAP EBITDA Non-GAAP EBITDA increased in absolute terms but slightly decreased as a percentage of revenue in Q2 FY25 Non-GAAP EBITDA: | Period | Amount (in millions) | % of Revenue | | :----- | :------------------- | :----------- | | Q2 FY25 | $23.3 | 12.4% | | Q2 FY24 | $22.3 | 13.0% | Constant Currency Basis Analysis The analysis on a constant currency basis indicates that foreign exchange rate fluctuations had a minor positive impact on reported revenue, net income, and EBITDA for Q2 FY25 Impact of Constant Currency on Q2 FY25 Results (vs. Q2 FY24 rates): | Metric | Reported Q2 FY25 | Constant Currency Q2 FY25 (Adjusted) | Difference | | :--------------------------------- | :--------------- | :----------------------------------- | :--------- | | Revenue | $186.9 million | $185.4 million | -$1.5 million | | GAAP Net Income | $12.1 million | $12.0 million | -$0.1 million | | GAAP EPS (diluted) | $1.79 | $1.76 | -$0.03 | | Non-GAAP Net Income | $12.7 million | $12.6 million | -$0.1 million | | Non-GAAP EPS (diluted) | $1.88 | $1.86 | -$0.02 | | Non-GAAP EBITDA | $23.3 million | $23.1 million | -$0.2 million | Balance Sheet and Cash Flow Review Key Balance Sheet Metrics Key balance sheet metrics show an increase in receivables and current liabilities, while Days Sales Outstanding remained consistent year-over-year Key Balance Sheet Metrics: | Metric | June 28, 2025 | June 29, 2024 | | :--------------------------------- | :-------------- | :-------------- | | Billed and unbilled receivables | $235.0 million | $216.6 million | | Current liabilities | $317.3 million | $252.7 million | | Total Days Sales Outstanding (DSO) | 110 days | 110 days | | - Billed DSO | 73 days | 70 days | | - Unbilled DSO | 37 days | 40 days | Cash and Cash Flow Cash and cash equivalents decreased, but net cash provided by operating activities improved significantly. The company increased its borrowings under the revolving credit facility GAAP Condensed Consolidated Statement of Cash Flows The GAAP cash flow statement shows an increase in net cash provided by operating activities for Q2 FY25, despite a decrease in overall cash and cash equivalents Q2 Cash Flow Highlights: | Metric | Q2 FY25 | Q2 FY24 | | :--------------------------------- | :-------- | :-------- | | Cash and cash equivalents (period end) | $19.4 million | $24.6 million | | Net cash provided by operating activities | $5.9 million | $1.8 million | | Outstanding borrowings (revolving credit) | $120.0 million | $87.0 million | | Capital expenditures | $1.2 million | $2.3 million | GAAP Condensed Consolidated Statement of Cash Flows (in $000s): | Metric | LTM Q2 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | | :--------------------------------- | :---------- | :------ | :-------- | :-------- | :-------- | | Net cash provided by (used in) operating activities | $36,866 | $5,852 | $(79,994) | $79,424 | $31,584 | | Net cash used in investing activities | $(15,740) | $(1,189) | $(974) | $(10,591) | $(2,986) | | Net cash provided by (used in) financing activities | $(27,373) | $(11,875) | $79,058 | $(64,629) | $(29,927) | | Net increase (decrease) in cash and cash equivalents | $(5,201) | $(6,150) | $(1,113) | $2,230 | $(168) | | Cash and cash equivalents at end of period | $19,448 | $19,448 | $25,598 | $26,711 | $24,481 | Adjusted Net Cash Flows from Operations Adjusted net cash flows from operations, which account for forgivable loan advances and repayments, show a stronger operational cash generation capacity compared to GAAP figures Adjusted Net Cash Flows from Operations (in $000s): | Metric | LTM Q2 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | | :--------------------------------- | :---------- | :------ | :-------- | :-------- | :-------- | | GAAP net cash provided by (used in) operating activities | $36,866 | $5,852 | $(79,994) | $79,424 | $31,584 | | Forgivable loan advances | $62,302 | $13,507 | $27,431 | $7,106 | $14,258 | | Forgivable loan repayments | $(3,073) | — | $(600) | $(2,473) | — | | Adjusted net cash flows from operations | $96,095 | $19,359 | $(53,163) | $84,057 | $45,842 | | Adjusted net cash flows from operations as a percentage of net revenue | 13.5% | 10.4% | (29.2)% | 47.6% | 27.3% | Shareholder Capital Allocation CRA continued its commitment to shareholder returns through increased share repurchases and higher quarterly cash dividends Share Repurchases The company significantly increased its share repurchase activity in Q2 FY25 compared to the prior year Common Stock Repurchases: | Period | Shares Repurchased (approx.) | Value (in millions) | | :----- | :--------------------------- | :------------------ | | Q2 FY25 | 231,000 | $43.2 | | Q2 FY24 | 140,000 | $24.1 | Dividends CRA increased its quarterly cash dividend per common share in Q2 FY25 Quarterly Cash Dividends: | Period | Dividend per Share | Total Dividends (in millions) | | :----- | :----------------- | :---------------------------- | | Q2 FY25 | $0.49 | $3.4 | | Q2 FY24 | $0.42 | $2.9 | Non-GAAP Financial Measures Explanation This section explains the rationale and definitions for the non-GAAP financial measures used by CRA, emphasizing their role in supplementing GAAP results for a clearer understanding of ongoing operations, financial condition, and cash flows, and for internal management purposes - Non-GAAP financial measures are provided to supplement GAAP results, offering additional insight into CRA's ongoing operating results, financial condition, and cash flows[35] - Non-GAAP adjusted net cash flows from operations are used by management to assess the company's ability to fund talent acquisition, office expansions, debt repayment, and shareholder distributions[35] - Non-GAAP EBITDA is defined as net income before interest expense (net), provision for income taxes, and depreciation and amortization, further adjusted for certain non-core operating performance items like restructuring costs and foreign currency gains/losses[36] Appendices: Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations This section presents the GAAP condensed consolidated statements of operations, detailing revenues, costs, and profitability for the fiscal quarters and year-to-date periods ended June 28, 2025, and June 29, 2024 GAAP Condensed Consolidated Statements of Operations (in $000s, except per share data): | Metric | Q2 2025 | % of Revenue | Q2 2024 | % of Revenue | YTD 2025 | % of Revenue | YTD 2024 | % of Revenue | | :--------------------------------- | :------ | :----------- | :------ | :----------- | :------- | :----------- | :------- | :----------- | | Revenues | $186,878 | 100.0% | $171,442 | 100.0% | $368,729 | 100.0% | $343,230 | 100.0% | | Costs of services | $128,542 | 68.8% | $125,327 | 73.1% | $248,896 | 67.5% | $244,206 | 71.1% | | SG&A expenses | $35,079 | 18.8% | $32,016 | 18.7% | $67,617 | 18.3% | $62,514 | 18.2% | | Depreciation and amortization | $3,530 | 1.9% | $2,811 | 1.6% | $6,941 | 1.9% | $5,603 | 1.6% | | Income from operations | $19,727 | 10.6% | $11,288 | 6.6% | $45,275 | 12.3% | $30,907 | 9.0% | | Net income | $12,122 | 6.5% | $6,538 | 3.8% | $30,124 | 8.2% | $20,229 | 5.9% | | Diluted EPS | $1.79 | N/A | $0.94 | N/A | $4.42 | N/A | $2.90 | N/A | Reconciliation of Non-GAAP Financial Measures This section provides a detailed reconciliation of GAAP net income to non-GAAP net income and non-GAAP EBITDA, highlighting adjustments for restructuring, foreign currency, and tax effects for both quarterly and year-to-date periods Reconciliation of Non-GAAP Financial Measures (in $000s, except per share data): | Metric | Q2 2025 | % of Revenue | Q2 2024 | % of Revenue | YTD 2025 | % of Revenue | YTD 2024 | % of Revenue | | :--------------------------------- | :------ | :----------- | :------ | :----------- | :------- | :----------- | :------- | :----------- | | GAAP Net income | $12,122 | 6.5% | $6,538 | 3.8% | $30,124 | 8.2% | $20,229 | 5.9% | | Adjustments (Restructuring, FX, Tax effect) | $601 | 0.3% | $6,161 | 3.6% | $(2,147) | -0.6% | $6,270 | 1.8% | | Non-GAAP Net income | $12,723 | 6.8% | $12,699 | 7.4% | $27,977 | 7.6% | $26,498 | 7.7% | | Non-GAAP Diluted EPS | $1.88 | N/A | $1.83 | N/A | $4.10 | N/A | $3.80 | N/A | | Interest expense, net | $1,796 | 1.0% | $1,483 | 0.9% | $2,225 | 0.6% | $1,948 | 0.6% | | Provision for income taxes (Non-GAAP) | $5,208 | 2.8% | $5,281 | 3.1% | $10,903 | 3.0% | $10,636 | 3.1% | | Depreciation and amortization | $3,530 | 1.9% | $2,811 | 1.6% | $6,941 | 1.9% | $5,603 | 1.6% | | Non-GAAP EBITDA | $23,257 | 12.4% | $22,274 | 13.0% | $48,046 | 13.0% | $44,685 | 13.0% | Condensed Consolidated Balance Sheets This section provides the condensed consolidated balance sheets, outlining assets, liabilities, and shareholders' equity as of June 28, 2025, and December 28, 2024 Condensed Consolidated Balance Sheets (in $000s): | Metric | June 28, 2025 | December 28, 2024 | | :--------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $19,448 | $26,711 | | Accounts receivable and unbilled services, net | $235,025 | $219,548 | | Total current assets | $293,108 | $269,363 | | Total assets | $606,777 | $571,439 | | Total current liabilities | $317,325 | $251,309 | | Revolving line of credit | $120,000 | — | | Total liabilities | $409,777 | $359,366 | | Total shareholders' equity | $197,000 | $212,073 | Condensed Consolidated Statements of Cash Flows This section presents the GAAP condensed consolidated statements of cash flows for the fiscal year-to-date periods ended June 28, 2025, and June 29, 2024, detailing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in $000s): | Metric | YTD June 28, 2025 | YTD June 29, 2024 | | :--------------------------------- | :---------------- | :---------------- | | Net income | $30,124 | $20,229 | | Net cash used in operating activities | $(74,142) | $(61,273) | | Net cash used in investing activities | $(2,163) | $(4,546) | | Net cash provided by financing activities | $67,183 | $45,699 | | Net decrease in cash and cash equivalents | $(7,263) | $(20,937) | | Cash and cash equivalents at end of period | $19,448 | $24,649 | | Cash paid for taxes | $14,854 | $12,681 | | Cash paid for interest | $1,670 | $1,533 |