CRA(CRAI) - 2024 Q1 - Quarterly Results

Q1 Fiscal Year 2024 Earnings Overview This section provides a high-level overview of CRA's financial and operational performance for Q1 Fiscal Year 2024 Summary of Q1 Fiscal 2024 Performance For Q1 Fiscal Year 2024, CRA reported revenue of $171.8 million, with net income at $13.7 million (8.0% of revenue) and non-GAAP net income at $13.8 million (8.0% of revenue) Key Financial Metrics | Metric | Q1 Fiscal 2024 (March 30, 2024) | | :----------------------------------- | :------------------------------ | | Revenue | $171.8 million | | Net income | $13.7 million (8.0% of revenue) | | Non-GAAP net income | $13.8 million (8.0% of revenue) | | Operating margin | 11.4% | | Non-GAAP operating margin | 11.4% | | Net income per diluted share | $1.95 | | Non-GAAP net income per diluted share| $1.96 | | Cash and cash equivalents | $37.1 million | | Revolving credit facility capacity | $175.5 million | Consultant Headcount At the end of Q1 Fiscal 2024, CRA's total consultant headcount was 997, showing a slight decrease from Q1 Fiscal 2023 but an increase in officers Consultant Headcount by Category | Category | Q1 Fiscal 2024 (March 30, 2024) | Q1 Fiscal 2023 (April 1, 2023) | | :----------------- | :------------------------------ | :----------------------------- | | Officers | 158 | 156 | | Other Senior Staff | 544 | 527 | | Junior Staff | 295 | 321 | | Total | 997 | 1,004 | Utilization Companywide utilization increased to 73% in Q1 Fiscal 2024, up from 70% in the prior year's quarter, indicating improved efficiency Companywide Utilization Rate | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :--------- | :------------- | :------------- | | Utilization| 73% | 70% | Detailed Financial Performance (GAAP & Non-GAAP) This section provides a comprehensive analysis of CRA's GAAP and non-GAAP financial results for the quarter Revenue Revenue for Q1 Fiscal 2024 increased to $171.8 million, representing a 12.4% growth compared to $152.8 million in Q1 Fiscal 2023 Revenue Performance | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :------ | :------------- | :------------- | | Revenue | $171.8 million | $152.8 million | Operating Expenses Operating expenses showed mixed trends in Q1 Fiscal 2024. SG&A expenses increased in absolute terms but decreased as a percentage of revenue, while depreciation and amortization slightly decreased. Share-based compensation remained stable as a percentage of revenue, and forgivable loan amortization decreased Selling, General and Administrative (SG&A) Expenses SG&A expenses increased in absolute terms but decreased as a percentage of revenue in Q1 Fiscal 2024 SG&A Expenses Breakdown | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :------------------------------------ | :------------- | :----------- | :------------- | :----------- | | SG&A expenses | $30.5 million | 17.8% | $28.4 million | 18.6% | | Less: commissions to non-employee experts | $3.7 million | 2.1% | $3.5 million | 2.3% | | SG&A expenses excluding commissions | $26.8 million | 15.6% | $24.8 million | 16.2% | Depreciation & Amortization Depreciation and amortization expenses slightly decreased in Q1 Fiscal 2024 Depreciation and Amortization Expenses | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :-------------------------- | :------------- | :----------- | :------------- | :----------- | | Depreciation & Amortization | $2.8 million | 1.6% | $2.9 million | 1.9% | Share-Based Compensation Expense Share-based compensation expense remained stable as a percentage of revenue in Q1 Fiscal 2024 Share-Based Compensation Expense | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :--------------------------- | :------------- | :----------- | :------------- | :----------- | | Share-based compensation expense | $1.0 million | 0.6% | $0.9 million | 0.6% | Forgivable Loan Amortization Forgivable loan amortization decreased in Q1 Fiscal 2024 compared to the prior year Forgivable Loan Amortization | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :--------------------------- | :------------- | :----------- | :------------- | :----------- | | Forgivable loan amortization | $8.7 million | 5.1% | $9.5 million | 6.2% | Operating Income Operating income significantly increased to $19.6 million (11.4% of revenue) in Q1 Fiscal 2024, up from $13.7 million (9.0% of revenue) in Q1 Fiscal 2023, reflecting improved operational efficiency Operating Income Performance | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :--------------------- | :------------- | :----------- | :------------- | :----------- | | Operating income (GAAP)| $19.6 million | 11.4% | $13.7 million | 9.0% | | Non-GAAP operating income| $19.6 million | 11.4% | $13.7 million | 9.0% | Other Income/Expense Net interest expense slightly decreased, and net foreign currency losses significantly reduced in Q1 Fiscal 2024 compared to the prior year Interest Income (Expense), net Net interest expense slightly decreased in Q1 Fiscal 2024 Net Interest Expense | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :-------------------- | :------------- | :----------- | :------------- | :----------- | | Net interest expense | $0.5 million | 0.3% | $0.6 million | 0.4% | Foreign Currency Losses, net Net foreign currency losses significantly reduced in Q1 Fiscal 2024 Net Foreign Currency Losses | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :------------------------- | :------------- | :----------- | :------------- | :----------- | | Net foreign currency losses| $0.1 million | 0.1% | $0.5 million | 0.3% | Income Taxes The effective tax rate for Q1 Fiscal 2024 decreased to 28.0% for both GAAP and non-GAAP measures, down from 29.2% and 29.0% respectively in Q1 Fiscal 2023 Effective Tax Rates | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :--------------------- | :------------- | :------------- | | GAAP Effective Tax Rate| 28.0% | 29.2% | | Non-GAAP Effective Tax Rate| 28.0% | 29.0% | Net Income and EPS Both GAAP and non-GAAP net income and diluted EPS saw substantial increases in Q1 Fiscal 2024, reflecting strong financial performance Net Income and Diluted EPS | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :--------------------------- | :------------- | :----------- | :------------- | :----------- | | GAAP Net income | $13.7 million | 8.0% | $8.9 million | 5.8% | | GAAP Diluted EPS | $1.95 | | $1.23 | | | Non-GAAP Net income | $13.8 million | 8.0% | $9.4 million | 6.1% | | Non-GAAP Diluted EPS | $1.96 | | $1.29 | | Non-GAAP EBITDA Non-GAAP EBITDA increased significantly to $22.4 million (13.0% of revenue) in Q1 Fiscal 2024, up from $16.7 million (10.9% of revenue) in the prior year, indicating improved profitability before non-cash and non-operating items Non-GAAP EBITDA Performance | Metric | Q1 Fiscal 2024 | % of Revenue | Q1 Fiscal 2023 | % of Revenue | | :-------------- | :------------- | :----------- | :------------- | :----------- | | Non-GAAP EBITDA | $22.4 million | 13.0% | $16.7 million | 10.9% | Constant Currency Basis Analysis On a constant currency basis, Q1 Fiscal 2024 revenue, GAAP net income, non-GAAP net income, diluted EPS, and non-GAAP EBITDA would have been slightly lower, indicating a positive impact from foreign currency fluctuations on reported results Constant Currency Impact on Key Metrics | Metric (Constant Currency) | Q1 Fiscal 2024 (Adjusted) | Reported Q1 Fiscal 2024 | | :------------------------- | :------------------------ | :---------------------- | | Revenue | $170.8 million | $171.8 million | | GAAP Net income | $13.6 million | $13.7 million | | GAAP Diluted EPS | $1.94 | $1.95 | | Non-GAAP Net income | $13.7 million | $13.8 million | | Non-GAAP Diluted EPS | $1.95 | $1.96 | | Non-GAAP EBITDA | $22.3 million | $22.4 million | Balance Sheet and Cash Flow This section reviews CRA's financial position and cash flow activities, highlighting key balance sheet metrics and operational cash generation Key Balance Sheet Metrics Days Sales Outstanding (DSO) improved in Q1 Fiscal 2024, while billed and unbilled receivables increased. Cash and cash equivalents saw a slight increase, and current liabilities decreased Selected Balance Sheet Metrics | Metric | Q1 Fiscal 2024 (March 30, 2024) | Q1 Fiscal 2023 (April 1, 2023) | | :------------------------------------ | :------------------------------ | :----------------------------- | | Total Days Sales Outstanding (DSO) | 106 days | 112 days | | Billed and unbilled receivables | $209.3 million | $197.2 million | | Current liabilities | $236.8 million | $253.8 million | | Cash and cash equivalents | $37.1 million | $35.5 million | Cash Flow from Operations Net cash used in operating activities decreased to $63.1 million in Q1 Fiscal 2024, an improvement from $70.1 million used in Q1 Fiscal 2023 Net Cash Used in Operating Activities | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :------------------------------------ | :------------- | :------------- | | Net cash used in operating activities | $63.1 million | $70.1 million | Capital Expenditures Capital expenditures slightly increased to $0.7 million in Q1 Fiscal 2024 from $0.6 million in the prior year Capital Expenditures | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :------------------ | :------------- | :------------- | | Capital expenditures| $0.7 million | $0.6 million | Financing Activities CRA reduced its outstanding borrowings under the revolving credit facility and decreased share repurchases in Q1 Fiscal 2024, while increasing cash dividends paid Revolving Credit Facility Outstanding borrowings under the revolving credit facility decreased in Q1 Fiscal 2024 Revolving Credit Facility Status | Metric | Q1 Fiscal 2024 (March 30, 2024) | Q1 Fiscal 2023 (April 1, 2023) | | :------------------------------------ | :------------------------------ | :----------------------------- | | Outstanding borrowings | $70.0 million | $100.0 million | Share Repurchases Share repurchases decreased in both number of shares and value in Q1 Fiscal 2024 Share Repurchase Activity | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :----------------- | :------------- | :------------- | | Shares repurchased | 66,000 | 181,000 | | Value of repurchases | $9.2 million | $20.6 million | Cash Dividends Cash dividends per common share and total dividends paid increased in Q1 Fiscal 2024 Cash Dividend Payments | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :---------------------- | :------------- | :------------- | | Dividend per common share | $0.42 | $0.36 | | Total dividends paid | $3.1 million | $2.7 million | GAAP Condensed Consolidated Statement of Cash Flows The GAAP condensed consolidated statement of cash flows shows a decrease in net cash used in operating activities and investing activities, while net cash provided by financing activities decreased in Q1 Fiscal 2024 compared to Q1 Fiscal 2023 GAAP Condensed Consolidated Statement of Cash Flows (in millions) | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :------------------------------------ | :------------- | :------------- | | Net cash provided by (used in) operating activities | $(63.1 million) | $(70.1 million) | | Net cash used in investing activities | $(0.7 million) | $(1.1 million) | | Net cash provided by (used in) financing activities | $56.1 million | $74.8 million | | Net increase (decrease) in cash and cash equivalents | $(8.5 million) | $4.1 million | | Cash and cash equivalents at end of period | $37.1 million | $35.5 million | Adjusted Net Cash Flows from Operations (Non-GAAP) Adjusted net cash flows from operations, which accounts for forgivable loan advances and repayments, showed a net cash outflow of $57.8 million in Q1 Fiscal 2024, an improvement from $53.8 million outflow in Q1 Fiscal 2023 Adjusted Net Cash Flows from Operations (Non-GAAP) (in millions) | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :------------------------------------ | :------------- | :------------- | | GAAP net cash provided by (used in) operating activities | $(63.1 million) | $(70.1 million) | | Forgivable loan advances | $5.3 million | $16.8 million | | Forgivable loan repayments | $0 | $(0.6 million) | | Other non-recurring cash items | N/A | $0.0 million | | Adjusted net cash flows from operations | $(57.8 million) | $(53.8 million) | | Adjusted net cash flows from operations as a percentage of net revenue | (33.7)% | (35.2)% | Non-GAAP Financial Measures Explanation This section clarifies the purpose and definitions of the non-GAAP financial measures used in the report Purpose and Definitions CRA utilizes non-GAAP financial measures such as non-GAAP net income, EPS, EBITDA, operating income, provision for income taxes, SG&A excluding commissions, and adjusted net cash flows from operations to provide a clearer understanding of its ongoing operating results, financial condition, and cash flows. These measures are considered important for management and investors, supplementing GAAP results by excluding certain non-recurring or non-cash items - Non-GAAP measures (net income, EPS, EBITDA, operating income, tax provision, SG&A excluding commissions, adjusted net cash flows from operations) are used to supplement GAAP results, offering insights into ongoing operating performance, financial condition, and cash flows[22][45][68] - Non-GAAP EBITDA is defined as net income before interest expense, income taxes, depreciation, and amortization, adjusted for non-cash valuation changes in contingent consideration, acquisition-related costs, foreign currency losses, and related tax effects[68] - Constant currency measures are calculated by recalculating current fiscal period local currency financial measures using prior fiscal period's foreign exchange rates to isolate the impact of currency fluctuations[68] Condensed Consolidated Financial Statements This section presents the company's condensed consolidated GAAP financial statements, including statements of operations, balance sheets, and cash flows Statements of Operations The condensed consolidated statements of operations provide a detailed breakdown of revenues, costs, and expenses, culminating in net income and earnings per share for Q1 Fiscal 2024 and Q1 Fiscal 2023 - Refer to the table in chunk 24 for detailed GAAP Condensed Consolidated Statements of Operations for the fiscal quarters ended March 30, 2024, compared to April 1, 2023[24][46] Reconciliation of Non-GAAP Net Income This section reconciles GAAP net income to non-GAAP net income, detailing adjustments for non-cash valuation changes, acquisition-related costs, foreign currency losses, and their tax effects - Refer to the table in chunk 25 for the reconciliation of GAAP net income to non-GAAP net income for the fiscal quarters ended March 30, 2024, compared to April 1, 2023[25][47] Reconciliation of Non-GAAP EBITDA This section provides a reconciliation from non-GAAP net income to non-GAAP EBITDA, including adjustments for interest expense, income taxes, and depreciation and amortization - Refer to the table in chunk 26 for the reconciliation of non-GAAP net income to non-GAAP EBITDA for the fiscal quarters ended March 30, 2024, compared to April 1, 2023[26][48] Balance Sheets The condensed consolidated balance sheets present the company's financial position, including assets, liabilities, and shareholders' equity, as of March 30, 2024, and December 30, 2023 - Refer to the table in chunk 27 for the Condensed Consolidated Balance Sheets as of March 30, 2024, and December 30, 2023[27][49] Statements of Cash Flows The condensed consolidated statements of cash flows detail the cash generated and used in operating, investing, and financing activities for Q1 Fiscal 2024 and Q1 Fiscal 2023 - Refer to the table in chunk 28 for the Condensed Consolidated Statements of Cash Flows for the fiscal quarters ended March 30, 2024, compared to April 1, 2023[28][50]