CRA(CRAI) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For fiscal 2023, CRA reported revenue of $624 million, a 5.6% increase compared to fiscal 2022, marking the sixth consecutive year of record revenue [55][36] - Non-GAAP net income and diluted earnings per share for the fourth quarter increased by 15% and 19% year-over-year, respectively, achieving all-time highs for both metrics [1] - Non-GAAP EBITDA for fiscal 2023 was$ 68.3 million, with a margin of 11.0% on a constant currency basis [36][85] - Adjusted net cash flows from operations increased 35% year-over-year to $81.6 million, converting 120% of non-GAAP EBITDA into adjusted net cash flows [37][36] Business Line Data and Key Metrics Changes - Seven of CRA's 11 practices grew their top line, with Forensic Services and Labor & Employment delivering double-digit revenue growth compared to fiscal 2022 [1] - The Antitrust & Competition Economics practice saw a 23% increase in worldwide M&A activity in the fourth quarter, leading to record quarterly revenue [33] - Legal and regulatory services revenue increased by 16% in the fourth quarter, surpassing broader market growth rates [56][91] Market Data and Key Metrics Changes - North American operations increased by 5%, while international operations grew by 7% in fiscal 2023 [55] - Total case filings in the fourth quarter were up 10% year-over-year, with total court judgments increasing by 7% [56] Company Strategy and Development Direction - The company aims to balance labor supply with demand for services, ending the quarter with a consulting headcount of 1,004, a 6.9% increase year-over-year [22] - CRA's board authorized an expansion of the share repurchase program by an additional$ 35 million, reflecting confidence in long-term prospects [28] - The company plans to invest $14 million to$ 15 million in capital expenditures for IT infrastructure and office expansions to support headcount growth [38] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the demand environment, noting improvements in macroeconomic conditions and M&A activity [66][50] - The conversion of project leads into revenue-producing assignments improved significantly in the fourth quarter, aligning with expectations [32] - Management highlighted strong retention rates within the consulting team and a focus on talent investments in high-performing practices [22][87] Other Important Information - CRA's DSO at the end of the fourth quarter was 105 days, down from 114 days in the previous quarter [63] - The effective tax rate for the fourth quarter on a non-GAAP basis was 26.1%, compared to 22% in the same quarter of the previous year [85] Q&A Session Summary Question: Can you discuss the drivers behind the revenue guidance for 2025? - Management noted that the foundation of demand remains strong, with improved conversion rates and project originations contributing to the guidance [66][43] Question: What are the plans for capital expenditures and investments? - Management indicated that investments will focus on expanding office locations and upgrading IT infrastructure to support growth [45][38] Question: How is the company addressing the broader demand environment? - Management observed that case filings are increasing, and there are signs of improvement in the M&A market, contributing to a more favorable outlook [66][50]