Q1 2025 CRA International Inc Earnings Call
Operator: Good day, everyone, and welcome to Charles River Associates first quarter 2025 conference. Please note that today's call is being recorded. The company's earnings release and prepared CFO remarks are posted on the Investor Relations section of CRA's website at CRA.com.
Good day, everyone and welcome to Charles River Associates first quarter 2025 conference call.
Please note that today's call's being recorded.
Company's earnings release and prepared CFO remarks are posted on the Investor Relations section.
We are a website at C R a dot com.
Operator: With us today are CRA's President and Chief Executive Officer, Paul Maleh, and Chief Corporate Development Officer and Interim Chief Financial Officer, Chad Holmes.
With us today are Cra's, President and Chief Executive Officer, Paul Omalley.
Chad Holmes: And Chief Corporate development Officer, and interim Chief Financial Officer, Chad Holmes.
Chad Holmes: At this time, I'd like to turn the call over to Mr. Holmes for opening remarks. Chad, please go ahead. Thank you, Rob, and good morning to everyone.
Chad Holmes: At this time I'd like to turn the call over to Mr. Holmes for opening remarks, Chad. Please go ahead.
Chad Holmes: Thank you Rob and good morning to everyone. Please note that the statements made during this conference call, including guidance on future revenue and non-GAAP EBIT da margin and any other statements concerning the future business operating results or financial condition of CRA.
Chad Holmes: Please note that the statements made during this conference call, including guidance on future revenue and non-GAAP EBITDA 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. Information contained in these forward-looking statements is based on management's current expectations and is inherently uncertain. Actual performance and results may differ materially from those expressed or implied in these statements due to many important factors, including the level of demand for our services as a result of changes in general and industry-specific economic conditions.
Chad Holmes: <unk> those statements using the terms expect outlook or similar terms are forward looking statements as defined in section 21 of the Exchange Act.
Chad Holmes: Information contained in these forward looking statements is based on management's current expectations and is inherently uncertain actual performance and results may differ materially from those expressed or implied in these statements due to many important factors, including the level of demand for our services as a result of changes in general.
Chad Holmes: And industry specific economic conditions 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 10-K, and quarterly reports on Form 10-Q filed with the SEC CRA under.
Chad Holmes: 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 10-K and quarterly reports on Form 10-Q filed with the SEC.
Chad Holmes: CRA undertakes no obligation to update any forward-looking statements after the date of this call.
Chad Holmes: It takes no obligation to update any forward looking statements. After the date of this call.
Chad Holmes: Additionally, we will refer to some non-GAAP financial measures and 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 reconciliations of these non-GAAP financial measures to their GAAP comparable measures and descriptions of the calculation of EBITDA and measures presented on a constant currency basis.
Chad Holmes: Additionally, we will refer to some non-GAAP financial measures and 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 reconciliations of these non-GAAP financial measures to their GAAP comparable measures and descriptions of the.
Chad Holmes: <unk> of EBIT da and measures presented on a constant currency basis.
Paul Maleh: I will now turn it over to Paul for his report. Thanks, Chad, and good morning, everyone. Thank you for joining us today. Building on the momentum of an exceptional fiscal 2024, CRA continued its strong performance into the first quarter of fiscal 2025 and delivered record financial results. During the first quarter, revenue increased by 5.9 percent year-over-year to $181.9 million, which represents the highest quarterly revenue in the company's history. Broad-based contributions drove the quarter's strong performance, with five practices growing year-over-year. Four practices—energy, finance, intellectual property, and life sciences—posted double-digit revenue growth, while the antitrust and competition economics practice posted a new high for quarterly revenue.
I'll now turn it over to Paul for his report Paul.
Paul Omalley: Thanks, Chad and good morning, everyone. Thank you for joining us today.
Paul Omalley: Building on the momentum of an exceptional fiscal 'twenty 'twenty four CRA continued its strong performance into the first quarter of fiscal 2025 and delivered record financial results. During the first quarter revenue increased by five 9% year over year to $181 9 million.
Paul Omalley: Which represents the highest quarterly revenue in the company's history.
Paul Omalley: Broad based contributions drove the quarter's strong performance with five practices growing year over year for practices energy finance intellectual property and life Sciences posted double digit revenue growth, while the antitrust and competition economics practice posted a new high.
Paul Omalley: High for quarterly revenue, we also expanded geographically as Cra's International operations led the way with nearly 20% year over year revenue growth.
Paul Maleh: We also expanded geographically, as CRA's international operations led the way with nearly 20 percent year-over-year revenue growth. We continue to manage the business effectively, converting strong top-line growth into even faster bottom-line expansion. Non-GAAP net income, earnings per diluted share, and EBITDA increase year-over-year by 11%, 13%, and 11% respectively. Each profit metric also set a new quarterly record for CRA. For the company as a whole, consultant headcount decreased 5% compared to the first quarter of 2024 and was flat sequentially. Consultant utilization improved on a year-over-year basis to 76%. The increase in utilization was supported by the continued replenishing of our sales pipeline.
Paul Omalley: We continue to manage the business effectively converting strong topline growth into even faster bottom line expansion non-GAAP net income earnings per diluted share and EBITDA increase year over year by 11%, 13% and 11% respectively.
Paul Omalley: Each profit metric also set a new quarterly record for CRA.
Paul Omalley: For the company as a whole consultant head count decreased 5% compared to the first quarter of 'twenty 'twenty, four and was flat sequentially consultant utilization improved on a year over year basis to 76%. The increase in utilization was supported by the continued replenishing.
Paul Omalley: Although our sales pipeline after a sluggish start in January project lead flow accelerated during the quarter and increased by 5% year over year, New project originations, followed a similar pattern and increased by 3% relative to the first quarter of 2024.
Paul Maleh: After a sluggish start in January, project lead flow accelerated during the quarter and increased by 5% year-over-year. New project originations followed a similar pattern and increased by 3% relative to the first quarter of 2024.
Paul Maleh: I would now like to spend a few minutes highlighting the markets for our services and some of the projects delivered during the first quarter. Revenue in the first quarter from CRA's legal and regulatory services increased by roughly 5%. This growth was in line with the broader legal market as total case filings and total court judgments increased 13% and 2% respectively compared to the first quarter of 2024. Turning to the M&A market, worldwide M&A activity rebounded from a slow January and February to start the year, reaching $885 billion during the first quarter of 2025. This represented an increase of 15% compared to year-ago levels and the strongest opening quarter for dealmaking since 2022.
Paul Omalley: I would now like to spend a few minutes highlighting the markets for our services and some of the projects delivered during the first quarter.
Revenue in the first quarter from Cra's legal and regulatory services increased by roughly 5%. This growth was in line with the broader legal market as total case filings until the court judgments increased 13% and 2% respectively compared to the first quarter of 'twenty 'twenty four.
Paul Omalley: Turning to the M&A market worldwide M&A activity rebounded from a slow January and February to start the year, reaching $885 billion. During the first quarter of 'twenty twenty-five. This represented an increase of 15% compared to year ago levels and the strongest.
Paul Omalley: Operating quarter for deal, making since 2022 against this backdrop the record quarter for CRH antitrust and competition economics practice reflected continued demand for antitrust services and ongoing merger related activity.
Paul Maleh: Against this backdrop, the record quarter for CRA's antitrust and competition economics practice reflected continued demand for antitrust services and ongoing merger-related activities. During the quarter, CRA Economist worked for Microsoft to help secure a favorable decision from the UK Competition and Market Authority in its investigation of the Microsoft Open AI Partnership. The team of CRA experts documented and quantified the pace of innovation and market entry in the AI space. They further helped the CMA understand the inner workings of the partnership, its effect on the party's incentives, and its role in underpinning investment and innovation across the AI economy.
Paul Omalley: During the quarter CRA economist worked for Microsoft to help secure a favorable decision from the U K competition and market authority and its investigation that the Microsoft Open AI partnership.
Paul Omalley: The team of CRA experts documented and quantified the pace of innovation and market entry in the AI space. They further help the CMA understand the inner workings of the partnership its effect on the party's incentives and its role in underpinning investment and innovation across the AI.
Paul Maleh: The CMA concluded that there was no basis to review the partnership under the merger regulation. CRA's antitrust and competition economics practice remained active in high-stakes legal disputes during the first quarter. Our consultants and affiliated experts prepared and delivered expert reports and testimony in a range of competition-related matters, including in litigated mergers, claims of anti-competitive conduct, antitrust class actions, and in matters at the intersection of antitrust and intellectual property. These engagements spanned a diverse set of industries, such as technology, health care, retail, and consumer goods. In the first quarter, CRA's finance practice continued to be active in several merger and other transaction-related lawsuits in Delaware Chancery Court and Federal Court.
Paul Omalley: The CMA concluded that there was no basis to review the partnership under the merger regulations C.
Paul Omalley: You raise antitrust and competition economics practice remained active in high Stakes legal disputes during the first quarter, our consultants and affiliated experts prepared and delivered expert reports and testimony and a range of competition related matters, including in litigated mergers claims are and I compare.
Paul Omalley: Additive conduct antitrust class actions and in matters at the intersection of antitrust and intellectual property. These engagements spans a diverse set of industries, such as technology health care retail and consumer goods.
Paul Omalley: In the fourth in the first quarter Cra's finance practice continued to be active in several merger and other transaction related lawsuits in Delaware Chancery Court and Federal Court as an example during the quarter. The practice collaborated with members of theorize antitrust and competition economics.
Paul Maleh: As an example, during the quarter, the practice collaborated with members of CRA's antitrust and competition economics practice and the risk investigations and analytics practice to investigate on behalf of a European tax authority an alleged multi-jurisdictional fraud connected to a dividend arbitrage scheme. Chicago, New York, Boston, and London-based teams performed extensive trading and market practice analysis, investigative research, document review, forensic accounting, and flow of funds analysis. CRA expert testified at trials in several jurisdictions, including the United States. In February, a jury in the U.S. awarded $500 million to CRA's client. CRA's intellectual property practice advised on multiple high-stakes litigation, arbitration, and valuation matters covering a broad range of industries, including artificial intelligence, chemicals, consumer electronics, energy, financial services, food and beverage, life sciences, software, and telecommunications.
Paul Omalley: <unk> practice and the risk investigations and analytics practice to investigate on behalf of a European tax authority and alleged multi jurisdictional fraud connected to a dividend arbitrage scheme.
Paul Omalley: Chicago, New York, Boston, and London based teams performed extensive trading and market practice analysis investigated research document review forensic accounting and flow of funds analysis, a CRA expert testified at trials in several jurisdictions, including the United States.
Paul Omalley: In February of jewelry in the U S awarded $500 million to Cra's clients.
Paul Omalley: Cra's intellectual property intellectual property practice advised on multiple high Stakes litigation arbitration and valuation matters covering a broad range of industries, including artificial intelligence chemicals consumer electronics energy financial services food and beverage life Sciences saw.
Paul Omalley: We're and telecommunications and one example, a CRA expert testified as an economic damages and licensing expert on behalf of a leading telecommunications company being sued for patent infringement in Marshall, Texas, one of the most active patent litigation venues in the U S.
Paul Maleh: In one example, a CRA expert testified as an economic damages and licensing expert on behalf of a leading telecommunications company being sued for patent infringement in Marshall, Texas, one of the most active patent litigation venues in the U.S. CRA's analysis and testimony demonstrated, among other things, that the features in question had low value based on an analysis of customer usage metrics and that the plaintiff's claim of over $1 billion in royalties was excessive and economically unjustified based on the facts in the case. The jury is found in favor of CRA's client. Within our management consulting services, revenue increased 10 percent year-over-year as both energy and life sciences practice delivered double-digit revenue growth.
Paul Omalley: So you raise analysis and testimony demonstrated among other things that the features in questions had low value based on an analysis of customer usage metrics and that the plaintiffs claim of over $1 billion in royalties was excessive and economically unjustified based on the facts and the key.
Paul Omalley: The jury's found in favor of Cra's clients.
Paul Omalley: Within our management consulting services revenue increased 10% year over year as both energy and life Sciences practice delivered double digit revenue growth during the first quarter Sea rays energy practice delivered strong performance across.
Paul Maleh: During the first quarter, CRA's energy practice delivered strong performance across strategy, risk and compliance, data center support, utility planning, and transaction support services. For example, on a strategy assignment, the team assisted a major utility in developing its large-load strategy encompassing data centers and the on-shoring of additional manufacturing needs in its service region. Within risk and compliance, the practice provided expertise to infrastructure investors on the impacts of California wildfires, leveraging a skilled team with a background in wildfire mitigation planning. And in resource planning, the team supported Liberty Utilities in filing its 2025 integrated resource plan in Missouri, with plans for subsequent filings in other states.
Paul Omalley: Strategy risk and compliance data center support utility planning and transaction support services for example on the strategy assignment the team assisted a major utility in developing its large load strategy encompassing data centers and the onshoring of.
Paul Omalley: Manufacturing needs and its service region within risk and compliance the practice provided expertise to infrastructure investors on the impacts of California wildfires, leveraging our skilled team with a background in wildfire mitigation planning and in resource planning the teams supported live.
Paul Omalley: Pretty utilities and filing it's 2025 integrated resource plan in Missouri with plans for subsequent filings in other states.
Paul Maleh: Finally, on the transaction advisory side, the practice supported due diligence efforts across multiple transactions, including a utility buy-side diligence and a chemical sell-side diligence, leveraging depth of the team's industry expertise. CRA's life sciences practice continues to emphasize a commitment to R&D pipeline opportunities in the industry, working with our clients' commercial and product development teams as they assess opportunities and work to bring new products to market. The first quarter featured projects focused on opportunity assessment, sales forecasting, and launch planning. Additionally, the quarter was highlighted by expert witness work involving antitrust matters, an area that we expect will grow in the years ahead as combination products become more common in the life sciences industry.
Paul Omalley: Finally on the transaction advisory side, the practice supported due diligence efforts across multiple transactions, including a utility by side diligence and a chemical sell side diligence leveraging depth of the teams industry expertise.
Paul Omalley: Cra's life Sciences practice continues to emphasize our commitment to R&D pipeline opportunities in the industry working with our clients commercial and product development teams as they assess opportunities and work to bring new products to market.
Paul Omalley: The first quarter featured projects focused on opportunity assessment sales forecasting and launch planning. Additionally, the quarter was highlighted by expert witness work involving antitrust matters an area that week that we expect will grow in the years ahead as combination products become.
Paul Omalley: More common in the life Sciences industry. Some obvious combinations are drugs approved for administration with a particular device, but similar concerns are likely to be faced by new gene therapies and the associated viral vectors needed to deliver the gene therapy to the appropriate cells overall.
Paul Maleh: Some obvious combinations are drugs approved for administration with a particular device, but similar concerns are likely to be faced by new gene therapies and the associated viral vectors needed to deliver the gene therapy to the appropriate cells.
Paul Maleh: Overall, I'm grateful to all of my colleagues for their hard work during the first quarter as we helped our clients address their most important challenges. While pleased with the strong performance of the business, we continue to look for opportunities to further optimize our service portfolio by reconfiguring the teams in targeted areas of the company. During the quarter, these efforts affected approximately 15 individuals, resulting in a restructuring charge that was offset by the reversal of non-cash charges associated with a previously recorded performance award.
Paul Omalley: All I'm grateful to all of my colleagues for their hard work during the first quarter as we helped our clients address their most important challenges.
Paul Omalley: While pleased with the strong performance of the business. We continue to look for opportunities to further optimize our service portfolio by Reconfiguring the teams.
Paul Omalley: In targeted areas of the company during the quarter. These efforts affected approximately 15 individuals'.
Paul Omalley: Resulting in a restructuring charge that was offset by the reversal of noncash charges associated with the previously recorded performance Award.
Paul Maleh: Now turning to guidance. We are encouraged by the strong start to the year and the trend of lead flow activity within the quarter.
Paul Omalley: Now turning to guidance, we are encouraged by the strong start to the year and the trend of lead flow activity within the quarter as such we are reaffirming our full year financial guidance for fiscal 2025 for full year fiscal 2025 on a constant currency basis relative to fiscal 'twenty.
Paul Maleh: As such, we are reaffirming our full-year financial guidance for fiscal 2025. For full-year fiscal 2025 on a constant currency basis relative to fiscal 2024, we expect revenue in the range of $715 million to $725 million and non-GAAP even a margin in the range of 12 to 13 percent. However, we are mindful that uncertain global macroeconomic, business, and political conditions can be volatile and affect our business.
24, we expect revenue in the range of $715 million to 725 million and non-GAAP EBITDA margin in the range of 12% to 13%. However, we are mindful that uncertain global macroeconomic business and political conditions can.
Paul Omalley: Be volatile and affect our business with that I'll turn the call over to Chad for a few additional comments Chad.
Chad Holmes: With that, I'll turn the call over to Chad for a few additional comments. Thanks, Paul. As a reminder, more expansive commentary on our financial results is available on the Investor Relations section of our website under Prepared CFO Remarks.
Chad Holmes: Thanks, Paul 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 your questions I will provide a few additional metrics related to our performance in the first quarter of fiscal 2020 five.
Chad Holmes: Before we get to your questions, I will provide a few additional metrics related to our performance in the first quarter of fiscal 2025. In terms of consultant headcount, we ended the quarter at 947, consisting of 156 officers, 566 other senior staff, and 225 junior staff. This represents a 5% year-over-year decrease compared with the 997 consultant headcount reported at the end of Q1 fiscal 2024, and is flat sequentially relative to the 946 consultant headcount reported at the end of Q4 fiscal 2024. Non-GAAP selling general and administrative expenses, excluding the 2% attributable to commissions to non-employee experts, was 15.9% of revenue for the first quarter of fiscal 2025, compared with 15.6% a year ago.
Chad Holmes: In terms of consultant head count we ended the quarter at 947, consisting of 156 officers 566, other senior staff and 225 Junior staff.
Chad Holmes: This represents a 5% year over year decrease compared with the 997 consultant head count reported at the end of Q1 fiscal 'twenty 'twenty four and its flat sequentially relative to the 946 consultant head count reported at the end of Q4 fiscal 'twenty 'twenty.
Chad Holmes: Four.
Chad Holmes: non-GAAP selling general and administrative expenses, excluding the 2% attributable to commissions to non employee experts was 15.9% of revenue for the first quarter of fiscal 2025, compared with 15, 6% a year ago the.
Chad Holmes: The effective tax rate for the first quarter of fiscal 2025 on a non-gap basis was 27.2%, compared with 28.0% on a non-gap basis for the first quarter of fiscal 2024.
The effective tax rate for the quarter of the first quarter of fiscal 2025 on a non-GAAP basis was 27, 2% compared with 28.0% on a non-GAAP basis for the first quarter of fiscal 'twenty 'twenty four.
Chad Holmes: Turning to the balance sheet, DSO at the end of the first quarter was 107 days compared with 106 days at the end of the fourth quarter of fiscal 2024. DSO in the quarter consisted of 65 days of billed and 42 days of unbilled.
Chad Holmes: Turning to the balance sheet DSO at the end of the first quarter was 107 days 107 days compared with 106 days at the end of the fourth quarter of fiscal 'twenty 'twenty four DSO.
Chad Holmes: DSO in the quarter consisted of 65 days of billed and 42 days of Unbilled.
Chad Holmes: Turning to our capital deployment during the quarter, we concluded the quarter with $25.6 million of cash and $85 million of borrowings under our revolving credit facility, resulting in net debt of $59.4 million. The borrowings during the first quarter were primarily to fund bonus payments, which is consistent with our practice in prior years. Bonuses relating to fiscal 2024 were largely paid in the first quarter, with the final installments expected to be completed by the end of the second quarter.
Chad Holmes: Turning to our capital deployment during the quarter, we concluded the quarter with $25 $6 million of cash and $85 million of borrowings under our revolving credit facility, resulting in net debt of $59 $4 million. The borrowings during the first quarter were primarily to fund.
Chad Holmes: Bonus payments, which is consistent with our practice in prior years bonuses relating to fiscal 'twenty 'twenty four we're largely paid in the first quarter with the final installment is expected to be completed by the end of the second quarter.
Chad Holmes: In addition to the normal bonus cycle, the first quarter of 2025 saw cash outlays of $27.4 million to acquire and retain senior talent and $1 million for capital expenditure.
Chad Holmes: In addition to the normal bonus cycle, the first quarter of 'twenty twenty-five saw cash outlays of $27 4 million to acquire and retain senior talent and $1 million for capital expenditures.
Chad Holmes: During the first quarter, we also delivered $3.5 million of dividends to our shareholders.
Chad Holmes: During the first quarter, we also delivered $3.5 million of dividends to our shareholders.
Chad Holmes: That concludes our prepared remarks.
Chad Holmes: That concludes our prepared remarks, well now open the call for questions. Operator. Please go ahead.
Operator: We'll now open the call for questions. Operator, 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 1 on your telephone keypad. Any confirmation, Tom, will indicate your line is in the question. You may press star 2 if you'd like to remove it.
Chad Holmes: Thank you at this time well be conducting a question and answer session.
Chad Holmes: If you'd like to ask a question. Please press star one on your telephone keypad.
Chad Holmes: He confirmation Callaway indicate your line is in the question queue. You May press star two if you'd like to remove them.
Operator: Question from the One moment, please, while we poll for questions.
Chad Holmes: Question from the Q1 moment, please while we poll for questions.
Andrew Nicholas: Our first question comes from Andrew Nicholas with William Blair. Please proceed with your question. Hi, good morning. Thanks for taking my questions.
Speaker Change: Our first question comes from Andrew Nicholas with William Blair. Please proceed with your question.
Andrew Nicholas: Hi, Good morning, Thanks for taking my questions I wanted to first ask on April to date activity, Paul a little bit of color on maybe what you've seen over the past couple of weeks in a pretty choppy market environment, and maybe relatedly, how what you've seen in April.
Paul Maleh: I wanted to first ask on April to date activity, Paul, a little bit of color on maybe what you've seen over the past couple weeks in a pretty choppy market environment, and maybe relatedly how what you've seen in April impacts or informs your confidence in reiterating guidance this year. Sure. First of all, good morning, Andrew. As we talked about, our journey to a record-setting Q1 of Fiscal 25 was not necessarily a straight line. We began with an unusually slow January, and we have seen the level of activity, both in terms of business inflow, new project originations, and billings, grow as the quarter proceeded.
Andrew Nicholas: Impacts or informs your confidence in reiterating guidance this year.
Andrew Nicholas: Sure first of all good morning, Andrew.
Andrew Nicholas: As we talked about our journey to a record setting Q1 of fiscal 'twenty five a was not necessarily a straight line. We began with an unusually slow January and we have seen the level of activity both in terms of business inflow.
Andrew Nicholas: Low new project originations and billings grow as the quarter proceeded. So February was greater than January and March was greater than February.
Paul Maleh: So February was greater than January, and March was greater than February. We only are in a couple of weeks. into the month of April. And what I can share is that the trends that we have seen in March have continued, but I think it's a little too early to declare victory or to assume that those trends would just naturally continue going forward. But so far, so good. Got it. Thank you.
Andrew Nicholas: We only are in a couple of weeks.
Andrew Nicholas: Into the month of April and what I can share is that the trends that we have seen in March.
Andrew Nicholas: We have continued but I think it's a little.
Andrew Nicholas: Too early.
Andrew Nicholas: To declare victory or to assume that those trends would just naturally continue going forward, but so far so good.
Andrew Nicholas: Yeah.
Andrew Nicholas: Got it. Thank you and then a really nice quarter it sounds like for life Sciences.
Andrew Nicholas: And then a really nice quarter, it sounds like, for life sciences.
Paul Maleh: Could you maybe talk a little bit about that pipeline specifically, maybe where some of the bigger opportunities are and how excited you are for that business, maybe relative to some challenges of the past couple years? Sure. No, I'm very happy for the life sciences practice. I know they've been working hard to benefit from some of the seeds of growth that they've been planting. I would love to see a true streak start. So they've posted a couple of good quarters together. You know, there again, I'd like to see that continue. But they're enjoying success geographically. They're enjoying success across the business concentration areas of that litigation strategy and more regulatory support there.
Speaker Change: Could you maybe talk a little bit about that pipeline, specifically, maybe where some of the bigger opportunities are and and and how excited you are for that business, maybe relative to some challenges at couple of years.
Speaker Change: Sure No I'm very happy for the life Sciences practice, I know they've been working hard.
Speaker Change: To benefit from some of the seeds of growth that they've been planting.
Speaker Change: I would love to see a true streak start.
Speaker Change: So they've posted a couple of good quarters together you know there again I'd like to see that continue but they're enjoying success geographically they're enjoying success.
Speaker Change: Across the business concentration areas of that litigation strategy and more regulatory support there. So things are clicking right now for that practice.
Andrew Nicholas: So things are clicking right now for that practice. And we're just hoping that the momentum continues into Q2 and throughout 25. Great.
Speaker Change: And we're just hoping that the momentum continues into Q2 and throughout 'twenty five.
Andrew Nicholas: And maybe if you wouldn't mind me squeezing one more in just on headcount growth and plans there. Another really good quarter of utilization. So, if you could just kind of talk about where you sit, it looks like forgivable loan outlays were also a little bit higher than normal. So, any comments on retention or attrition would also be helpful. Thanks again. Sure.
Speaker Change: Great and then maybe if you wouldn't mind me squeezing one more in just on on head count growth and plan their another really good quarter of utilization.
Speaker Change: So if you could just kind of talk about where you said it looks like before giving them alone outlays were also a little bit higher than normal so any any comments on retention or attrition would also be helpful. Thanks again.
Speaker Change: Sure so on head count, but one thing.
Paul Maleh: So on headcount, the one thing... I want to put out there as a reminder, there was a headcount action that took place in Q2 of fiscal 2024, and we are still seeing the effect in terms of year-over-year comparisons on the headcount. And that's why we provided the year-over-year growth rate or decline of roughly 5 percent, but also wanted to highlight sequentially it was flat relative to Q4. What we are constantly trying to do is make sure we are optimizing the investments we put into this firm. And investments aren't always just cash outlays for talent. Investments are always making sure that our business units are operating as profitably as one would expect, and if there are areas of underperformance, to see whether action is required with that.
Speaker Change: I want to put out there as a reminder, there was a head count action that took place in Q2 of fiscal 'twenty 'twenty four.
Speaker Change: And we are still seeing the effect in terms of year over year comparisons on the head count and that's why we provided the year over year growth rate or decline of roughly 5%, but also wanted to highlight sequentially. It was flat relative to.
Speaker Change: Q4, what we are constantly trying to do is make sure. We are optimizing the investments we put into this firm and investments aren't always just cash outlays for talent investments are always making sure that our business units are operating as Prof.
Speaker Change: Certainly as one would expect and if there are areas of underperformance to see whether action is required.
Speaker Change: With that so.
Paul Maleh: We, you know, I could say for those. 15 individuals impacted. There, it's just really Unfortunate positioning of where heads may exist and where the revenue opportunities are being realized across the portfolio. But we are still investing for headcount growth across all of our practices. And as I said before, medium to long term, we should expect headcount growth to be roughly in line with revenue growth. So that positioning hasn't changed. So hopefully I addressed the headcount point there, Andrew.
Speaker Change: We you know I could say for those.
Speaker Change: 15 individuals' are impacted.
Speaker Change: There, it's just really.
Speaker Change: Unfortunate positioning of where heads may exist and where the revenue opportunities are being realized across the portfolio.
Speaker Change: But we are still investing for head count growth across all of our practices are and as I said before our medium to long term, we should expect head count growth to be roughly in line with revenue growth so that positioning hasn't changed.
Speaker Change: So hopefully I addressed the head count point, there Andrew moving onto the talented investments as Chad highlighted the talent outlays were both for a new talent acquisitions and retention, our retention or maintenance paint.
Paul Maleh: Moving on to the talent investments. As Chad highlighted, the talent outlays were both for new talent acquisitions and retention. Retention or maintenance payments for talent is nothing new. I know it's getting a little more airtime because of some of the disruptions in the broader industry. But relative to our expectations, as we enter 2025 or we look at longer term for maintenance capital, what we incurred in Q1 is not that far different than what our ex-ante expectations were. So I'm pleased that our colleagues are choosing to stay at CRA because they have plenty of And it's our job as leaders to make sure this environment is one that they want to stay and prosper at.
Speaker Change: <unk> for talent is nothing new I know its getting a little more air time Ah.
Speaker Change: Because of some of the disruptions in the broader industry, but relative to our expectations as.
Speaker Change: As we enter 2025 or we look at longer term for maintenance capital what we incurred in Q1 is not that far different than what our ex ante expectations were.
Speaker Change: So I'm pleased.
That our colleagues are choosing to stay at CRA, because they have plenty of opportunities.
Speaker Change: And it's our job as leaders are to make sure. This environment is one that they want to stay in prosper at so yes, there was maintenance capital, but it wasn't that dissimilar from ex ante expectations Andrew.
Andrew Nicholas: So yes, there was maintenance capital, but it wasn't that dissimilar from ex-ante expectations, Andrew. Very helpful. Thanks, Paul. Thank you.
Speaker Change: Yeah.
Andrew Nicholas: Very helpful. Thanks, Paul.
Speaker Change: Thank you.
Marc Riddick: Our next question comes from Marc Riddick with Sidoti and Company. Please proceed with your question. Good morning. Good morning, Marc. So congratulations on a nice strong start to the year. I was sort of curious as to, it's interesting that you mentioned the cadence of sort of how things built through the months. I was wondering, was there anything that you could tie the external headlines to within any of the practices that were sort of a noticeable trigger? Or do you get the sense that these were just general opportunities that you were already working on that just sort of maybe came to fruition a little bit more aggressively toward the back half of the quarter?
Speaker Change: Our next question comes from Marc Riddick with Sidoti and company. Please proceed with your question.
Speaker Change: Good morning.
Speaker Change: Good morning, Mark.
Speaker Change: So congratulations.
Speaker Change: And a nice strong start to the year I was sort of curious as to.
Speaker Change: It's interesting that you mentioned that the cadence of sort of how things built through.
Speaker Change: Through the months I was wondering if there was there anything that you could tie.
Speaker Change: You know the external headlines to within any of the practices that that you know we're.
Speaker Change: Or sort of a noticeable trigger or do you get the sense that these were.
Speaker Change: Just general you know opportunities that youre already working on that just sort of maybe came to fruition a little bit.
Speaker Change: L. A was it more aggressively.
Speaker Change: Toward the back half of the quarter.
Paul Maleh: Sure. I really wish I could discreetly tie cause and effect here, but there's been so many causes right now in our, you know, macro and geopolitical environments here, and that the pace of, you know, the hits to our economy, the global economy, have been pretty consistent through the quarter. So I can't necessarily say it's related to A or related to B. You overlay to that, there's also been some shocks to our industry in which we operate in. So to say it is directly tied to one or another, I'm not prepared to do that. I think the one thing that's clear, to me, at least, all of these impacts create uncertainty.
Speaker Change: Sure I really wish I could discretely tie cause and effect here, but theres been so many causes right now and our you know macro and geopolitical environments here.
Speaker Change: And that the pace.
Speaker Change: Of you know the hits to our.
Speaker Change: Economy, the global economy have been they have been pretty consistent through the quarter. So I can't necessarily say, it's related to a or related to be you overlay to that there's also been some shocks to our industry in which we operate in.
Speaker Change: So to say it is directly tied to one or another I'm not prepared to do that I think the one thing that's clear.
Speaker Change: To me at least all of these impacts create uncertainty.
Paul Maleh: And sometimes uncertainty causes a pause in our clients moving forward with matters, in our clients announcing mergers, in our clients pursuing strategic advice. So I'm happy to say that we are just building from the slow start to January, and hopefully that trend continues forward. But no direct tie to any particular announcement.
Speaker Change: And sometimes uncertainty causes a pause.
Speaker Change: And our clients moving forward with matters and our clients announcing mergers and our clients pursuing a strategic advice. So we I'm happy to say that we are just building from the slow start to January and hopefully that trend continues.
Speaker Change: Forward, but no direct tied to any particular announcement.
Paul Maleh: Okay, and then I was sort of curious as to whether or not you're seeing much in the way of any particular industry verticals, client industry verticals that are a little more active recently, or if there's anything that stands out to you currently. No, no. Again, I'm real happy that I had all parts of the portfolio were growing from legal regulatory is expanding, management consulting is expanding, North America, international. And are they expanding at the same rate? No, they're not. But the fact is they never expand at identical rates. That's why we have a portfolio. And that's also why we've been able to deliver, you know, if I do say so myself, the excellence in financial results for such an extended period of time.
Speaker Change: Okay, and then I was sort of curious as to.
Speaker Change: Whether or not you're seeing much in the way of.
Speaker Change: Any particular industry verticals client industry verticals that are a little more active recently or if there's any of that anything that stands out to you currently.
Speaker Change: No no and again I'm I'm real happy that I had all parts of the portfolio. We're growing from legal regulatory is expanding management consulting is expanding North America International.
Speaker Change: And are they expanding at the same rate Oh, they're not but the fact is they never expand and identical rates. That's why we have a portfolio and that's also why we have been able to deliver.
Speaker Change: If I do say so myself the excellence in financial results for.
Speaker Change: For such an extent extended period of time, it's the portfolio works. So I'm, probably if I'm taking away one of the things I'm. Most proud of is the fact that the contributions are coming from all parts of the organization.
Paul Maleh: It's the portfolio work. So I'm probably, if I'm taking away one of the things I'm most proud of, is the fact that the contributions are coming from all parts of the organization.
Marc Riddick: It's certainly encouraging.
Speaker Change: It's certainly encouraging.
Marc Riddick: And I was sort of curious as to whether or not you're seeing much in the way of, I mean, we get commentary and headlines around the sort of return to office pacings and thoughts. And I was wondering if you're seeing much in the way of that, both, I guess, maybe internally for your own company, but I guess maybe more broadly in your dealings with clients. Do you find yourself seeing much in the way of any change there over the last few months?
Speaker Change: As to whether or not you're seeing much in the way of them. We we we get commentary and headlines around the sort of return to office, pacings, and and and and thoughts and I was wondering if you're seeing much in the way of that both I guess, maybe internally for your own company, but.
Speaker Change: But I guess, maybe more broadly in your dealings with with clients do you do you find yourself I'm seeing much in the way of any change there over the last few months.
Paul Maleh: You know, we were doing so well, Marc, on your question until we got to this topic. So, I will start with what we're seeing in the outside world, maybe our clients. All I could really comment there is what I'm reading in the popular press, the same as you're reading. I know there's been a little bit of a movement to try to get people back into the office for a whole sorts of reasons, but it's more, again, I'm third-party consumption here of the data. I have no primary information. With respect to CRA, there hasn't been any kind of significant shift, both in terms of management asks of our colleagues or our colleagues' participation in the office.
Speaker Change: You know we were doing so well mark on your question.
Speaker Change: Until we got to this topic, so I'll start with.
Speaker Change: What we're seeing on in the outside World, maybe our clients all I could really comment there is what I'm reading in the popular press the same as you're reading I know theres been a little bit of a movement to try to get our.
Speaker Change: People back into the office for a whole sorts of reasons, but it's more again third party consumption here of the data I have no primary information with respect to CRA, there hasn't been any kind of significant shift both in terms.
Speaker Change: Management asks of our colleagues or our colleagues' participation in the office.
Paul Maleh: If I, you know, if I look on average, My colleagues are in the office a little more than three days a week on average. And a lot of times people want to compare that to a five day a week type average. But the fact is, even pre-COVID, my colleagues were never in the office five days a week. Sometimes they're traveling on business. Sometimes they took advantage of the flexibility that exists to work from home when those conditions are necessary. So comparing three to five is probably not an accurate or fair comparison. So, you know, what I love to see, the in-office participation grow a little bit, yes.
Speaker Change: If I you know if I look on average.
Speaker Change: Our colleagues are in the office, a little more than three days a week on average.
Speaker Change: And a lot of times people want to compare that to a five day a week type average, but the fact is even pre COVID-19 my colleagues would never in the office five days a week.
Speaker Change: Sometimes the traveling on business, sometimes they took.
Speaker Change: Advantage of the flexibility that exists to work from home are when those conditions are necessary. So comparing three to five is probably not an accurate or fair comparison. So you know what I love to see head office participation grow a little bit yes.
Paul Maleh: But that means I need to do a better job making clear of the advantages to my colleagues for being in the office. We don't operate by edict at CRA.
Speaker Change: But that means I need to do a better job, making clear of the advantages to my colleagues for being in the office, we don't operate by eat it gets CRA.
Marc Riddick: Thank you very much.
Speaker Change: Excellent. Thank you very much.
Operator: Thank you, Marc.
Mark: Thank you Mark.
Kevin Steinke: Our next question comes from Kevin Steinke with Barrington Research. Please proceed with your question. Hey, good morning, Paul and Chad. Hey Kevin, good morning.
Speaker Change: Our next question comes from Kevin Spanky with Barrington Research. Please proceed with your question.
Kevin Spanky: Hey, good morning, Paul and Chad.
Speaker Change: Hey, Kevin good morning.
Kevin Steinke: I want to start out by asking about, I know it was a pretty small action in terms of the restructuring impacting 15 individuals, but maybe any more color on what. led to that decision and, you know, if there are any specific practice areas affected.
Speaker Change: I wanted to start out by asking about I know it was a pretty small action in terms of the restructuring impacting 15 individuals, but maybe any more color on what.
Speaker Change: Led to that decision and you know if there are any.
Speaker Change: Specific practice areas.
Speaker Change: <unk>.
Paul Maleh: I'm not going to get into a lot more detail on geography or the practices affected, namely because a couple things. I want to respect the impacted individuals with that, and the impacts with respect to the practices are not indicative of the general health of those practices. So I don't want the narrative to get away from the reality here. Typically a, you know, we are constantly trying to optimize the portfolio. Many times any kind of actions taken are just running through our gap financials. We had enough of issues, both creating reductions in profitability and some creating increases of profitability that I wanted to try to be as clear as possible to our shareholders so they could look at the financial results and glean what impact it may have on future quarters.
Speaker Change: I'm not going to get into a lot more detail on geography of the practices are affected.
Speaker Change: Namely because a couple of things I want to respect.
Speaker Change: The impacted individuals are with that and the impacts are with respect to the practices are not indicative of the general health of those practices. So I don't want the narrative to get away from the reality here.
Speaker Change: Typically a you know.
Speaker Change: We are constantly trying to optimize the portfolio. Many times any kind of actions taken are just running through our GAAP financials, we had a enough.
Speaker Change: Of issues, both creating reductions our own profitability and some it creating increases our profitability.
Speaker Change: That I wanted to try to be as clear as possible to our shareholders. So they can look at the financial results and gleam what impact they may have on future quarters. That's why we broke it out today because as you saw the GAAP financials would actually have been.
Kevin Steinke: That's why we broke it out today, because as you saw, the GAAP financials would actually have been more lucrative in terms of profitability levels than the non-GAAP financials. I just want to give clarity as to potential expectations going forward on that. Okay, thanks.
Speaker Change: In a more lucrative in terms of profitability levels than the non-GAAP financials, I just want to give clarity.
Speaker Change: As to you know potential expectations going forward on that.
Speaker Change: Okay. Thanks, and then.
Kevin Steinke: And then I know for antitrust and competition economics, for that practice, A lot of times headlines around M&A get a lot of the attention and the discussion, but Yeah, just from some recent headlines related to the tech sector, it seems like antitrust activity is still really strong, which I would assume is benefiting you.
Speaker Change: I know her antitrust and competition economics for that practice.
Speaker Change: A lot of times.
Speaker Change: Headlines around M&A get a lot of the attention in the discussion but.
Speaker Change: Yeah, just from some recent headlines related to the tech sector. It seems like.
Speaker Change: And I Trust activity is still really strong, which I would assume is benefiting you. So maybe just and.
Paul Maleh: So maybe just any comments on. We're close friends and I trust Amanda within that practice. Sure. All I can say is, you know, is bow and give them accolades. I don't know how many times I'm going to have to sit here during a quarterly report and talk about the record levels achieved by this practice, our largest practice. you know, compared to anything out there in the industry. This practice has been growing. This practice has been providing exceptional services to our clients who come back time and time again for assistance by CRA. When it's not merger-related activity that may be driving the growth, it is support in various antitrust investigations.
Speaker Change: Any comments on.
Speaker Change: Trends in our antitrust demand within that that practice.
Speaker Change: Sure. All I can say is you know is bow and give them accolades are I don't know how many times.
Speaker Change: I'm going to have to sit here during a quarter.
Speaker Change: Lee report and talk about the record levels achieved by this practice our largest practice.
You know compared to anything out there in the industry. This practice has been growing this practice has been providing exceptional services to our clients who come back time and time again.
Speaker Change: For assistance of CRA.
Speaker Change: When it's not merger related activity that may be driving the growth.
Speaker Change: It is support and various antitrust investigations. So I am regularly at all I know it shouldn't be after being at CRA for 35 years, but the performance of our antitrust and competition economics practice, both in North America and abroad.
Paul Maleh: So I am regularly at awe. I know I shouldn't be after being at CRA for 35 years, but the performance of our antitrust and competition economics practice both in North America and abroad has been nothing short of exceptional now for the past decade. So hats off to them. And even when markets appear to be slowing, their strength in that market continues to drive ample demand. Great.
Speaker Change: <unk> has been nothing short of exceptional now for the past decade.
Speaker Change: So hats off to them and even when markets appear to be slowing their strength.
Speaker Change: And that market continues to drive our ample demand.
Paul Maleh: And lastly, I just wanted to ask about One of the kind of project and client examples you talked about in your prepared remarks, you talked quite a bit about collaboration across practices and across offices. And I'm just wondering how often that occurs in terms of that collaboration across practices and offices. And maybe if that's kind of a... you know, underreported part of the story that we should be thinking about in terms of your ability to collaborate. Sure. No, that's a good question, and I'll take the opportunity to say it is probably underreported. We do not operate with any kind of targets on strategic revenue generation or revenue coming from that cross-practice collaboration.
Speaker Change: Great and.
Speaker Change: Lastly, I just wanted to ask about.
Speaker Change: One of the.
Speaker Change: Kind of project and client. Examples you you were you talked about in your prepared remarks.
Speaker Change: Talked quite a bit about collaboration across practices and.
Speaker Change: Across offices.
Speaker Change: And I was just wondering how often that occurs.
Speaker Change: In terms of that collaboration across practices and offices and maybe if that's kind of a.
Speaker Change: Underreported part of the story.
Speaker Change: We should be thinking about in terms of your ability to collaborate.
Speaker Change: Sure No. That's a good question and I'll take the opportunity to say it is probably under reported.
Speaker Change: We do not operate with any kind of targets on strategic revenue generation or revenue coming from that cross practice collaboration our general position is that practice structures or something for internal organization, but when you go to market.
Paul Maleh: Our general position is that practice structures are something for internal organization, but when you go to market, it's all about bringing the best talent to bear on your client's particular engagement. That's why in this report, what we tried to do is call out when the matter is dictating the combination of our talents across geographies and across our practices. And as our world becomes more complicated, some of the, you know, the opportunities to combine our resources, you know, I think that will grow. So, you know, congrats to my colleagues for delivering the best services possible. On the geographic collaboration, quite frankly, that has been going on for a long time.
Speaker Change: It's all about bringing the best talent to bear on your clients particular engagement. That's why in this report what we tried to do is call out when the matter is dictating the combination of our talent across geographies and across our practices and as our world becomes more car.
Speaker Change: Implicated.
Speaker Change: Some of the you know the opportunities are.
Speaker Change: <unk> to combine our resources are you know I think that will grow. So you know congrats to my colleagues for.
Speaker Change: For delivering the best services possible on the geographic collaboration quite frankly that has been going on for a long time, we operate in a global labor pool. So individuals' regularly work across geographic borders.
Kevin Steinke: We operate in a global labor pool, so individuals regularly work across geographic borders. All right, great. That's helpful.
Speaker Change: Alright, great that's helpful.
Kevin Steinke: Again, congratulations to the strong start to the year, and I'll turn it back over. No. Thank you, Kevin.
Speaker Change: Again congratulations.
Speaker Change: Since our start to the year and I'll turn it back over.
Speaker Change: No. Thank you Kevin.
Operator: We have reached the end of the question and answer session.
Speaker Change: We finished the end of our question and answer session I'd now like to turn the call back over to Paul O'malley for closing comments.
Paul Maleh: I'd now like to turn the call back over to Paul Maleh for closing comments.
Paul Maleh: As we wrap up today's call, I have A special point to highlight, in June 1965, CRA formally began operation. Our founders envisioned a company that would bring the developing expertise of academia, especially in the then burgeoning area of quantitative methods and economics, to the business world. This vision continues to resonate strongly today as we apply cutting-edge quantitative tools and microeconomic analysis to practical business problems. On Monday, June 2nd, CRA will ring the opening bell for NASDAQ to celebrate the company's 60th birthday. It will be a celebration of colleagues past and present. So, just a moment to say thank you to my existing colleagues and to the alumni of CRA.
Speaker Change: As we wrap up today's call I have.
Speaker Change: A special point to highlight.
Speaker Change: In June 1965 series formally began operations.
Speaker Change: Our founders envisioned a company that would bring the developing expertise of academia, especially in the then burgeoning area of quantitative methods and economics.
Speaker Change: To the business World.
Speaker Change: This vision continues to resonate strongly today.
Speaker Change: As we apply cutting age quantitative tools and microeconomic analysis to practical business problems on Monday June 2nd CRA will ring the opening bell for NASDAQ to celebrate the company's 60th birthday there'll be a celebration of colleagues passed.
Speaker Change: And present so.
Speaker Change: Just a moment to say thank you to.
Speaker Change: To my existing colleagues and to the alumni of CRA Ah I would like to also thank everyone who joined US today. We appreciate your time and interest in CRA and the support you've provided the company over the years will be participating in meetings with investors in the coming months and we look forward to updating you.
Paul Maleh: I would like to also thank everyone who joined us today. We appreciate your time and interest in CRA and the support you've provided the company over the years. We'll be participating in meetings with investors in the coming months, and we look forward to updating you on our progress on our second quarter call.
Speaker Change: You on our progress on our second quarter call that concludes today's call. Thank you everyone.
Operator: That concludes today's call. Thank you, everyone. This concludes today's conference.
Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
Operator: You may disconnect your lines at this time, and we thank you for your participation.