Q4 2022 CRA International Inc Earnings Call
Speaker 1: The I TR thir.
Speaker 1: That that.
Speaker 1: The.
Speaker 2: Good day everyone and welcome to Charles River Associates 4th quarter and 5th School Year 2022 Conference Call.
Speaker 2: 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 CRA.com.
Speaker 2: With us today are CRA's President and Chief Executive Officer, Paul Malley, 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. Mahoney for his opening remarks. Dan please go ahead.
Speaker 2: So this is today our CRA's president and chief executive officer, Paul Malley, 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. Mahoney for his opening remarks. Dan please go ahead. Thank you Rob. Good morning everyone.
Speaker 3: Please note that the statements made during this conference call, including guidance on future revenue and non-GAP even a margin, and any other statements concerning the future business, operating results, or financial condition of CRA, including those statements using the terms expect, outlook, or similar terms, are forward-looking statements as defined in section 21 of the Exchange Act.
Speaker 3: for our services as a result of changes in general in industry-specific economic conditions.
Speaker 3: Additional information regarding these factors is included in today's release and in CRA's periodic reports, including our most recently filed annual report on Form 10K and quarterly reports on Form 10Q filed at the SEC.
Speaker 3: CRA undertakes no obligation to update any forward looking statements after the day of this call.
Speaker 3: Additionally, we will refer to some non- GAAP financial measures in certain measures presented on a constant currency basis on this call. Everyone is encouraged to refer to today's release and related CFO remarks for reconcilations of these non- GAAP financial measures to their GAP comparable measures and descriptions of the calculation of Ipada.
Speaker 3: and measures presented on a constant currency basis.
Speaker 3: I will now turn it over to Paul for his report. Paul?
Speaker 2: Thanks, Dan. Good morning, everyone. Thank you for joining us today. Sierra once again set financial highs as fiscal 2022 topped a record-setting fiscal 2021. Revenue increased by 4.4% to $590.9 million.
Speaker 2: This marked the fifth consecutive year in which CRA established a new record for annual revenue. Over this five year period of time, as revenue increased by 60%, we expanded non-GAP EBITDA, net income, and earnings per diluted share.
Speaker 4: by 120% 167% and 211% respectively.
Speaker 4: Capitalizing on the revenue growth in fiscal 2022, CRA posted record profits for the year with non-gap net income, earnings per diluted share, and EBITDA, each growing faster than revenue. We achieved this performance despite strong currency headwinds.
Speaker 4: associated with the US dollar that shaved $12.6 million or 2.2% year-over-year growth from our reported revenue on a constant currency basis.
Speaker 4: CERA's revenue growth for fiscal 2022 was balanced geographically as our North American operations increased by 4 percent and international operations grew by 5 percent.
Speaker 4: Our expansion was led by legal and regulatory services which grew by 8% year-over-year. Eight of CRA's practices grew their top line with four practices, antitrust and competition economics, intellectual property, labor and employment.
Speaker 4: and risk investigations and analytics, delivering double-digit revenue growth in fiscal 2022. For the fourth quarter, we continue to see broad-based strength across our portfolio. Reported revenue increase 7.6% compared with the fourth quarter of fiscal 2021.
Speaker 4: Currency headwinds reduced revenue by 4.4 million or 3.3 percent year-over-year growth on a constant currency basis. Geographically, we saw balanced contributions from our North American and international operations, which grew fourth quarter revenue year-over-year by 8.2 percent.
Speaker 4: and 5.4% respectively.
Speaker 4: Leading the way with double-digit revenue growth in the fourth quarter were six practices.
Speaker 4: Auctions and competitive bidding, finance, financial economics, intellectual property, labor and employment, and risk investigations and analytics. In addition, our antitrust and competition economics and life sciences practices also expanded revenue year-over-year.
Speaker 4: which is impressive given the strong currency headwinds that series largest global practices faced during the fourth quarter.
Speaker 4: I would now like to spend a few minutes highlighting some of the services provided during the fourth quarter. Approximately one bit of CRA's revenue in a given quarter is linked to M&A activity, principally arising from our anti-trust and competition economics practice.
Speaker 4: Worldwide M&A activity totaled $3.6 trillion in 2022, a decrease of 37% compared to 2021. And the largest year-over-year percentage declined since 2001. That decline was particularly acute in the second half of the year.
Speaker 4: Transaction activity declined 33% in the second half of 2022 compared to the first half representing the largest second half percentage drop since records began in 1980. Amid this backdrop, our Anatrust and Competition Economics practice experienced a slowdown.
Speaker 4: in lead flow of merger-related opportunities in the fourth quarter of 2022, relative to a year ago. Yet, in aggregate, the practice of overall project lead flow growth, including both merger and merger-related and non-merger-related opportunities.
Speaker 4: expanded by more than 15% in the fourth quarter relative to a year or go. Partially fueling the practices increase in revenue year over year.
Speaker 4: During the fourth quarter, CRA's anti-trust and competition economics practice worked on transactions across a range of industries and geographies. For example, a CRA team supported the merging parties in the acquisition of lease plan by ALD, a subsidiary of society general. The deal involved overlaps in vehicle leasing industry.
Speaker 4: and associated leasing services in 25 effective countries.
Speaker 4: The CRA team of economists prepared analysis of competition in vehicle leasing across the effective countries in support of merger control filings and remedy preparation.
Speaker 4: Following the market test of the proposed remedies, the European Commission concluded that the transaction would no longer raise competition concerns.
Speaker 4: This decision followed previous unconditional clearance by several national competition authorities, including the UK's Competition and Market Authority and the Mexican Competition Authority.
Speaker 4: In addition to their merger review work, CERA's antitrust and competition economics practice continued to support clients and legal disputes. During the fourth quarter, CERA experts prepared and delivered expert reports and testimony and antitrust class actions.
Speaker 4: and in international disputes that highlight the intersection of intellectual property and antitrust issues.
Speaker 4: Looking more broadly, revenue from CRA's legal and regulatory services during the fourth quarter increased 12 percent year-over-year despite mixed trends in the legal market. Within the broader legal market, total-case filings during the fourth quarter,
Speaker 4: of 2022 were up 3% year over year. Within the courtroom, the number of total court judgments during the fourth quarter was down 6% relative to the fourth quarter of 2021. The finance practice was active in all of its core areas during the fourth quarter.
Speaker 4: Specifically, the practice was engaged in various insurance matters, including numerous matters related to the lapse provision of the State of California's insurance code. The practice also continued its work on matters related to alleged spoofing in certain financial markets as well as various international matters.
Speaker 4: including international arbitrations and securities fraud matters with assets or disputes in Europe and Latin America.
Speaker 4: A significant portion of the work from the financial economics practice during the fourth quarter involved assisting multiple mortgage lenders and their responses to regulatory investigations into suspected redlining.
Speaker 4: Equal access to credit is a major policy focus of federal consumer financial protection regulators and CRA assisted clients by performing extensive analysis of their geographic lending patterns and benchmarking them against other lenders in the market.
Speaker 4: The team also assisted the client's legal counsel in formulating responses to the regulators'
Speaker 4: The intellectual property practice advised on multiple high-stakes litigation arbitration and valuation matters during the quarter. In a patent and friendship matter, CRA was retained by the federal government and two of its contractors to evaluate damages arising from the alleged infringement
Speaker 4: of patented technology related to the alignment of images from soldiers night vision goggles with thermal images from their weapon sites. Say we reviewed extensive evidence and prepared analysis that demonstrates the plaintiff's claim damages significantly exceeded.
Speaker 4: the value of the technological innovations allegedly distributed by the patents in suit. The intellectual property practice also consulted on economic issues and multiple investigations at the U.S. International Trade Commission.
Speaker 4: and provided expert testimony in an ITC hearing involving floor cleaning devices.
Speaker 4: CERA's labor and employment practice was engaged during the quarter across a variety of industries, including finance, healthcare, legal, and technology to help clients navigate annual performance and compensation decisions. CERA's work assists clients in their efforts to promote internal equity among employee groups.
Speaker 4: The practice continues to be a critical partner for clients entering mediation on various lawsuits arising from California's Wage and Hour laws and the Federal Fair Labor Standards Act.
Speaker 4: The series deep expertise and employment matters led to multiple experts being retained on actions brought by individuals, classes, or collectives, and the Equal Employment Opportunity Commission. For example, on behalf of an academic medical center, a ledge to have violated the H. Discrimination and Employment Act.
Speaker 4: and the Americans with Disability Act, Syria was retained to provide economic and statistical analysis of the center's policies.
Speaker 4: The risk investigations and analytics practice continues to focus on executing matters, multidisciplinary, investigative, and analytic assignments. During the fourth quarter, a team of forensic accounting, investigative, and analytic professionals.
Speaker 4: continued work on a fraud in the financial services industry related to asset misappropriation of hundreds of millions of dollars that stretched across multiple international jurisdictions over several years. The team reviewed and analyzed hundreds of thousands of financial records, emails, and other supporting documentation.
Speaker 4: undertook a flow of funds analysis and prepared a factual report.
Speaker 4: Within our management consulting offering, the auctions are competitive bidding practice during the fourth quarter. Managed 13 global dairy trade events, six natural fiber exchange will auctions, and five electricity procurement auctions for clients in Ohio and Pennsylvania. In the fourth quarter, our dairy trade marketplace achieved the milestone.
Speaker 4: of transacting more than $33 billion cumulatively in over 300 trading events since the GDT marketplace was established. Additionally, the team managed requests for proposal processes for a range of electric utility clients in the United States. The series Electric Utility RFPs support the development of over three gigawatts of generating capacity.
Speaker 4: But we also were active across other therapeutic categories. For example, our life sciences practice has been working with a pharmaceutical manufacturer on the pricing and market access for a new antifungal drug.
Speaker 4: We are building our strategic recommendations on a foundation of market research with hospitals, physicians, and health plans, analysis of place, patient, and physician level data, and econometric modeling. In addition to the practices important work, I'm also extremely excited by the announcement we made in late November regarding series acquisition of bio-stratitude.
Speaker 4: of everyone at CRA. I want to extend a warm welcome to our new colleagues.
Speaker 4: Overall, I'm grateful to all my colleagues for their hard work during the fourth quarter and throughout the year as we helped our clients address their most important challenges. Recapping record financial performance, CRRA reported revenue for fiscal 2022 of $590.9 million or $603.5 million.
Speaker 4: on a constant currency basis after adjusting for 12.6 million of currency headwinds.
Speaker 4: Full year non-GAP EBITDA was 72.9 million or 75.3% on a constant currency basis after adjusting for 2.4 million of currency headwinds. Non-GAP EBITDA margin was 12.5% on a constant currency basis. Our fiscal 2022 performance demonstrates series continues.
Speaker 4: 2023 and beyond as we look to extend our trend of broad-based, profitable growth. Before I provide our financial guidance for fiscal 2023, I want to comment on a refinement to our approach for the coming year that was referenced in this morning's earnings announcement.
Speaker 4: Since 2016, we have provided financial guidance on a constant currency basis to highlight the operating performance that we as management can control. We believe that this approach provides transparency and comparability when evaluating series reported financial performance.
Speaker 4: reflecting on our investor communications and financial results over the past several years, starting with the first quarter of 2023, we will be modifying our presentation of non-GAP EBITDA to exclude the non-operating effects of both gains and losses arising from foreign currencies.
Speaker 4: Under this revised definition, crra's non-GAAP EBITDA margin on a constant currency basis was 12% for each of fiscal year's 2021 and 2020 -two.
Speaker 4: With this as a backdrop for a full year fiscal 2023 on a constant currency basis relative to fiscal 2022, we expect revenue in the range of $615 million to $640 million and non-GAP even a margin in the range of 10.8%.
Speaker 4: to 11.5%. While we are pleased with CRS strong performance in 2022, we remain mindful that short-term challenges arising from uncertainties around macroeconomic, business, public health, and political conditions can affect our business.
Speaker 3: With that, I'll turn the call over to Chad and then Dan for a few additional comments. Chad? Thanks, Paul. Hello, everyone. I want to update you on our capital deployment initiatives during the quarter. During the quarter, we repaid $45 million of our borrowings under our revolving line of credit to bring our year-end outstanding debt to zero.
Speaker 3: as we have done in prior years. Our cash balance increased during the quarter by $7.4 million to end the year at $31.4 million. The fourth quarter of 2022 saw cash outlays of $9.5 million for four forgivable loans in connection with talent investments.
Speaker 3: We also spent $800,000 on capital expenditures bringing the full year amount to $3.8 million. For fiscal 2023, we expect to spend $7 million to $8 million on capital expenditures with the year-over-year increase primarily related to expenditures on real estate. We paid $2.7 million of dividends to our shareholders during the fourth quarter.
For the full year, we returned a total of $37.2 million to our shareholders through a combination of share repurchases and quarterly dividends.
This represents 62% of CRA's 2022 adjusted net cash flows from operations.
and exceeds our previously stated aim of returning half of our adjusted cash flows from operations to shareholders.
As announced earlier today, CRA's Board of Directors authorized an expansion to our existing share repurchase program of an additional $20 million in value of shares of Common Stock.
With this expansion, we have approximately $42.9 million available under our Share Repurchase Program.
Taken together, our capital allocation decisions in fiscal 2022 demonstrate continued confidence in CRA's long-term outlook as we look to invest in the business for profitable growth while simultaneously returning meaningful capital to our shareholders.
With that, I'll turn the call over to Dan for a few final comments. Dan? Thanks, Chad. As a reminder, more expansive commentary on our financial results is available on the Investor Relations section of our website under prepared CFO remarks.
Before we get to questions, let me provide a few additional metrics related to our performance in the fourth quarter of fiscal 2022. In terms of consultant headcount, we ended the year at 939, which consisted of 149 officers, 496 other senior staff, and 294 junior staff. This represents a 9.1 percent increase compared with the 861 consultant headcount reported at the end of the year.
by an increase in travel and entertainment expenses and higher other operating expenses, including professional services fees.
For the full year fiscal 2022, the ratio was 15.5%, compared with 14.2% for full year fiscal 2021.
The effective tax rate for the fourth quarter of fiscal 2022 on a non-gap basis was 22.2% compared with 27.4% on a non-gap basis for the fourth quarter of fiscal 2021.
The lower rate in the fourth quarter of 2022 was largely attributable to a higher benefit arising from the accounting for stock-based compensation.
Turning to the balance sheet, DSO at the end of the fourth quarter was 114 days, compared with 123 days at the end of the third quarter of fiscal 2022. DSO in the fourth quarter consisted of 82 days of build and 32 days of unbuild.
We concluded the fourth quarter of fiscal 2022 with $31.4 million in cash and cash equivalents and a further $195.6 million of available capacity on our line of credit for total liquidity of $227 million.
That concludes our prepared remarks. We will now open the call for questions.
Rob, please go ahead. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. If you'd like to remove your question, please press start 2 on your telephone keypad. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, but we poll for questions.
Our first question comes from Andrew Nicholas with William Blair. Please proceed with your question.
Hey guys, good morning, this is Daniel Maxwell on for Andrew today. Just to kick things off, I was wondering if you could give a little detail on how you're thinking about head count growth in 23 after after strong growth in 22. And any detail you can give on what practices that might be concentrated in as well as and breakdown you can give between.
do as the year goes on is try our best to match the supply of labor and the demand for our services.
There are some portions of headcount that have already decisions have already been made, starting in the fall of 2022, that will be joining us this summer. Those are the university hires that you referenced on that. But in terms of an exact year end number, really depends on the broader market that we're seeing and the rate of replacements.
we do at CRA come via the university route. Lateral hires are typically oriented towards senior level revenue generating individuals. So the majority of hires are going to be coming via university, Daniel. Great, thanks. And with respect.
practices make up roughly 80% of the firm's revenue. The rest of the firm will be roughly proportional to their contribution to that revenue line. Great, that's helpful. Thanks for hitting all the parts of that. And for my follow-up.
Just wondering if you can comment broadly on the macro assumptions that are baked into guidance, maybe on the high and low ends of the guidance range. And any flow through impact you would expect from those in terms of upside or downside to margin estimates.
If you can comment broadly on the macro assumptions that are baked into guidance, maybe on the high low ends of the guidance range and any flow through impact you would expect from those in terms of upside or downside to margin estimates. Sure.
I don't think I would be the only one who voices uncertainty with respect to how to read our macroeconomic factors. It's sort of like with the weather here in New England, just wait a few minutes and it will change. So right now all I can observe are the larger factors hitting CRA and how CRA is responded to date.
To date, we have been pretty resilient with different practices stepping forward during different periods of time. So that portfolio seems to have weathered the volatility. I won't say downturn with respect to, I know a lot of people always ask about M&A activity.
Our M&A revenue still remains relatively strong, particularly given the broader market statistics that we cited earlier. The one thing that I'm not expecting to change is that of the general regulatory environment. Regulators here in the United States and abroad.
are cracking down across various market sectors, whether it is in antitrust enforcement and technology or in antitrust enforcement in the financial services sector, that doesn't seem to be changing and we are clearly benefiting from that continued rise of demand there.
You know, we're keeping our eye on all the factors. I'm happy with the way the firm has performed to date. Leads flow into the first couple of months of fiscal 23. Also, continue that general trend that we've been enjoying. So more to come on that in that area, Daniel.
Great. That's it for me. Thanks a lot. Thank you.
Our next question is from Mark Riddick with Sedodian Company. Please proceed with your question. Good morning. Good morning, Mark. So I wanted to go over just a couple of areas that sort of jumped out. I mean, the pickup of headcount, which was certainly kind of...
sort of indicates some positive views on the trends that you're talking about. I was sort of thinking about the, you know, for a lot of the folks that we cover, the acquisition of talent is a major challenge. And so I was wondering maybe we could talk a little bit about the...
maybe the pricing inflation or how we should think about, you know, I would imagine it was, it wasn't inexpensive to add this kind of talent, but maybe you could talk a little bit about that environment. Sure, I'll give it a shot.
You always hire based on what you think the long-term value proposition is of your firm For firms like CRA our livelihood is based on hiring the best and brightest individuals at any point in time and The availability of those individuals varies
So if we have opportunities to enhance our pool of colleagues, we're going to take it. I'm not going to worry too much about any kind of short-term volatility that it may cause on profitability because it is just that. It's short-term. We are value-based decision makers and thus we'll continue to take these positive NPV projects.
As we've talked about in past earnings calls, the cost of labor has gone up. Has gone up. We're trying to see where that will shake out, given some of the flight softness.
that has been introduced into the broader labor market. But to date, we've been able to largely mitigate those higher cost of labor through rating creases and the way we deliver our services. By that I mean if we're able to deliver our services.
on a more leverage matter, thus being more junior professionals, relative to senior professionals, that also helps to offset the cost pressures. But as you can see from the profitability in 2022, the margins relative to 21.
We're identical and actually 21, fiscal 21 and fiscal 2022 margins. We're higher than we really have ever achieved as a firm. So I think we're doing a pretty good job on that mitigation. Hopefully, the future continues to cooperate.
And that actually leads to my next question as far as the commentary. And I appreciate the clarification around currency and how you view that and how that flows into the guide. But why if we talk a little bit about the margin?
range that you have in the guide and maybe there's also ties into some of the comments and prepared remarks as far as picking up a travel and entertainment activity and experiences and maybe going out to see how many go out to see clients face to face a little bit more having some of that pick up. I was wondering maybe it's sort of just talk maybe in a broad sense of maybe sort of where that is kind of relative to you know maybe
pre-pandemic levels or you know kind of where we're heading and maybe what you're seeing there and how that that's lowdancy or Setting up expectations for 23 Well, let me first answer what I think is a really easy question You said in terms of pre-pandemic levels our margins are markedly higher than they were prior to March 20 March 2020 In that we are have been enjoying record levels of profitability now consecutively
for several years. So what I'm going to try to spend the second half of my answer on is more the forward looking on it. If I'm not mistaken, the going in margin in 22 was roughly the same as the margin that we have just provided in for guidance for fiscal 2023.
We begin with that largely because of the uncertainty that we have in our marketplace, not just in terms of the demand for our services, but you know, COVID has sort of interfered with our ability to get out, to meet clients, to look in Iraq with senior talent. And so that also remains uncertain heading into...
I'm hoping we begin seeing a more stable environment in which we can interact with our clients and prospective recruits, but that is also unknown. With respect to CRAs travel and meals and incidentals, sometimes that could be a driver of SGNA.
I don't think we're anywhere near doing too much marketing or client outreach at CRA. So if my colleagues see the opportunity and are willing to go out and seek out these kind of business opportunities, I'm going to gladly support them.
with higher S-GNA levels. So, going forward, I'm comfortable with the range. Do I think there's upside opportunity? Yeah, as there always is upside opportunity. But it's really roughly in the same position that we have been for the last couple of years. Okay, great. And then shifting to the...
talk to us about maybe what you're seeing there as far as the potential pipeline evaluations if that's changed much since we last spoke or at least maybe in the last six months or so.
Sure, I'll start with a few words and then I'll kick things over to Chad on that front. Our commitment to maximize the long-term value per share of CRA remains strong here at CRA. By no means in my capital constrained, I am not having to forego.
positive MPV projects because of a lack of capital. In fact, I have $200 million of dry powder that I can access at any point in time if the right opportunity presents itself. So we have been returning substantive capital back to our shareholders and I see that continuing in the quarters and years ahead. With respect to the talent pipeline, I'm really excited.
that right now our funnel has really never been any more robust than it is today. It's just our efforts to select the right talent to join this company. So with that I'm going to turn it over to Chad. Maybe he can provide a little more color in terms of the senior talent pipeline. Thanks Paul and good morning Mark. So as you know and as we talked about in prior calls.
We're always looking to add quality individuals to the CRA team and have been and continue to be active in the market for talent. We continue to see a strong and consistent flow of high quality individuals who have been drawn to CRA's track record of strong performance over this extended period of time. As Paul said, our pipeline is as rich as it's ever been.
regarding valuation, they remain healthy, despite what's gone on in the broader financial markets. So we have remained disciplined when evaluating opportunities. A strategic cultural fit, business fit, remain our primary filters when we assess talent acquisition opportunities. And once we have cleared those hurdles and have identified a good opportunity, we can then consider
the financial elements, including valuation, and we're mindful not to overpay. So we were active last year. You can see that through the outflows that we spent throughout 2022. We were able to make investments across many of our practices, majority probably directed towards the legal and regulatory offering, which is our biggest offering, so it's roughly been proportional. 2023, I would expect a similar pattern. We're going to be active.
trust and competition economics practice certainly impressive with 15% beef low growth.
in the quarter despite you mentioned.
to slow down and merger related leads. Can you just talk about what's driving that lead flow growth? Is it, I guess you've touched down the antitrust enforcement? Is that the key driver there or gaining market share? What kind of, what are some of the factors you'd highlight driving that demand?
Sure. Good morning, Kevin.
Let me start by saying, when we talk about our competition practice, I sort of, you know, do boughs of praise to my practices, to my colleagues here in North America and Europe , because we're not talking about easy compables for that practice. They have been setting record levels of performance year after year after year.
So, first, when I talk about leaf flow in the M&A marketplace, declining for that practice in Q4, take that with a grain of salt in that they've been at high levels, quarter after quarter. So, I'm not too worried about...
us getting our fair share of the M&A activity being contemplated both here in the states and abroad. Secondly, we've been a go-to provider for a better company type of investigations being conducted here in the United States and in Europe for the major technology companies.
for the major financial institution companies, and we're seeing that similar type of in-bounds continuing for the firm.
So I'm pretty pleased with that. It's hard to always ascertain the timeline of when those leads will turn into projects, turn into revenue. But anytime you have a 15% year-over-year growth for a practice of the magnitude of our competition practice, it just speaks.
to the excellence of those colleagues. Great. And this more broadly across the firm again, you mentioned 17% increase in project lead flow overall in the fourth quarter. That's, you know,
Clearly some impressive demand in the face of economic uncertainty. Could you just touch on, I guess broader, any trends or that you'd call out across maybe your top four practices? Well, maybe outside of antitrust, the competition.
Or again, is it, you know, just feel like it's a quality of your people being able to be able to pull in the business or any other fact that you point to their driving at the man? Sure. The majority of the inbound inquiries during Q4 resides in the legal regulatory arena with the two largest practices driving that growth was competition as a...
is always again the conversion of those projects to revenue and the timing of it but I think we've done a pretty good job to date over the medium to long-term with bringing those opportunities to fruition.
All right, great. In terms of the margin guidance, is that you still feel like the S-GNA expenses excluding commissions around what 15.5% or so is a reasonable expectation. Maybe that 15.5 to 16 somewhere in there, what are you thinking about?
volatility of the revenue quarter to quarter that may also drive the percentage higher. But I'm comfortable with S-GNA in the range of 15.5 to 16% not just for 2023, but also beyond. I think that is a sweet spot.
we're going to try to manage to. Alright, great. I also wanted to ask about life sciences. You mentioned growth in the fourth quarter. So what's the outlook there? Again, your largest practice on the management consulting side. Alright.
What does lead flow look like there going into 2023? And I know you did a tuck in there as well, a tuck in acquisition. But does any more comments on life sciences would be helpful?
Sure. The leaf low was not as robust in life sciences as we were talking about that in the legal regulatory arena, but yet positive. There's been no structural changes in the practice.
So all the people that delivered our performance in 2022 are here as we begin 2023 and I expect their contributions to continue. And we're just always looking to supplement that. The inclusion of the BioStrategy Group has us really excited.
not just for those 17 individuals, but it also gives us an additional geographic home from which to recruit from. So now Chicago becomes a location for us to place top talent. And the other thing that Chad didn't elaborate on.
but in terms of that talent funnel that he was referred to, a lot of that talent is in the life sciences area. So we're just trying to work through, make sure they're good fits, and make sure they're right for CRA in the long run. No one benefits from us trying to...
optimize near-term quarters. Great. That's helpful. And then this last lead is kind of a numbers-related question. Dan, I don't, you know, if we wanted to recast the adjusted EBITDA margins historically to exclude the foreign currency gains and losses, I don't know if that's as easy as excluding those and maintaining tax rate or is it, you know, something we'll just have to wait for is the numbers come out to recast the historical quarters.
Yeah, Kevin. So it is, it is that simple by just adding back or excluding that, that FX gain loss line because of the way that if you follow our, our reconciliation starting with our non-Gaft net income, which is already accounting for the, taken into effect those, those tax adjustments you're referring to.
But also refer you to our investor deck that we posted this morning. And in the back there we have a number of reconciliations which include on an annual basis recasted numbers, both sets historical presentation as well as under the new definition. So that's another resource you can look to. And this point really just, yeah, that adjustment really jumped out at us for.
Q4. In that, when we updated our guidance at the, during the Q3 earnings call, I had high confidence that we would hit our profit, midpoint range of our profitability guidance on it. And that was with one month into the quarter. And the foreign currency impact just grew over those last two months. And it just prompted us to make this change for transparency for our shareholders and for its comparability quarter over quarter. But for that foreign exchange.
The quarter was pretty much exactly in line with our expectations for the quarter end for the year Yeah, that's helpful and I agree it is you know, it's definitely I think is it makes a lot of sense to exclude that Going forward and yeah, certainly the bottom line looked looked better when you exclude that Volatile item so appreciate appreciate that color. All right. Well, thanks. Thanks for taking the questions. Okay
Thank you, Kevin, and thanks to everyone for joining us today. We appreciate your time and interest in CRA. We'll be participating in virtual meetings with investors in the coming weeks and months, and we look forward to updating you on our progress on our first quarter call. With that, that concludes today's call. Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.