EX-99.2 3 craiq1-20238xkexx992xcfore.htm EX-99.2 Document

Exhibit 99.2
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CHARLES RIVER ASSOCIATES (CRA)
FIRST QUARTER FISCAL YEAR 2023
EARNINGS ANNOUNCEMENT
PREPARED CFO REMARKS
CRA is providing these prepared remarks by CFO Dan Mahoney in combination with its press release. These remarks are offered to provide the investment community with additional information on CRA’s financial results prior to the start of the conference call.
As previously announced, the conference call will be held May 4, 2023 at 10:00 a.m. ET. These prepared remarks will not be read on the call.
Q1 Fiscal 2023 Summary (Quarter ended April 1, 2023)
Revenue: $152.8 million
Net income: $8.9 million, or 5.8% of revenue; non-GAAP net income: $9.4 million, or 6.1% of revenue
Net income per diluted share: $1.23; non-GAAP net income per diluted share: $1.29
Operating margin: 9.0%; non-GAAP operating margin: 9.0%
Non-GAAP EBITDA: $16.7 million, or 10.9% of revenue
Effective tax rate: 29.2%; non-GAAP effective tax rate: 29.0%
Utilization: 70%
Consultant headcount at the end of Q1 of fiscal 2023: 972, which consists of 158 officers, 535 other senior staff and 279 junior staff
Cash and cash equivalents: $35.5 million at April 1, 2023
Revolving credit facility borrowing capacity: $94.3 million at April 1, 2023

Revenue
For Q1 of fiscal 2023, revenue was $152.8 million, compared with revenue of $148.4 million for Q1 of fiscal 2022.
Headcount
The following table outlines CRA’s consultant headcount at the end of the stated quarters:
Q1
2023
Q4
2022
Q3
2022
Q2
2022
Q1
2022
Officers158149146145146
Other Senior Staff535496481475505
Junior Staff279294284243227
Total972939911863878

Utilization
For Q1 of fiscal 2023, companywide utilization was 70%, compared with 74% for Q1 fiscal 2022.
Client Reimbursables
For Q1 of fiscal 2023, client reimbursables were $14.0 million, or 9.1% of revenue, compared with $16.2 million, or 10.9% of revenue, for Q1 of fiscal 2022.
Contingent Liability
For Q1 of fiscal 2023, the estimated value of the contingent consideration obligation increased from Q4 of fiscal 2022 by $0.02 million to $1.1 million. The change in the value of the contingent liability is recorded as an adjustment to cost of services (exclusive of depreciation and amortization) in the period reported.
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Selling, General and Administrative (SG&A) Expenses
For Q1 of fiscal 2023, SG&A expenses were $28.4 million, or 18.6% of revenue, compared with $25.8 million, or 17.4% of revenue, for Q1 of fiscal 2022. Commissions to non-employee experts are included in SG&A expenses. These commissions represented approximately 2.3% of revenue for Q1 of fiscal 2023, compared with 3.0% in Q1 of fiscal 2022. Excluding these commissions, SG&A expenses were 16.2% of revenue for Q1 of fiscal 2023, compared with 14.4% in Q1 of fiscal 2022.
Fiscal Quarter Ended
$ in 000’sApril 1,
2023
As a % of RevenueApril 2,
2022
As a % of Revenue
SG&A expenses$28,372 18.6 %$25,817 17.4 %
Less: commissions to non-employee experts3,542 2.3 %4,496 3.0 %
SG&A expenses excluding commissions$24,830 16.2 %$21,321 14.4 %
Depreciation & Amortization
For Q1 of fiscal 2023, depreciation and amortization expenses amounted to $2.9 million, or 1.9% of revenue, compared with $3.0 million, or 2.0% of revenue, for Q1 of fiscal 2022.
Forgivable Loan Amortization
For Q1 of fiscal 2023, forgivable loan amortization was $9.5 million, or 6.2% of revenue, compared with $7.8 million, or 5.3% of revenue, for Q1 of fiscal 2022.
Share-Based Compensation Expense
For Q1 of fiscal 2023, share-based compensation expense was approximately $0.9 million, or 0.6% of revenue, compared with $1.0 million, or 0.7% of revenue, for Q1 of fiscal 2022.
Operating Income
For Q1 of fiscal 2023, operating income was $13.7 million, or 9.0% of revenue, compared with operating income of $15.5 million, or 10.5% of revenue, for Q1 of fiscal 2022. Non-GAAP operating income was $13.7 million, or 9.0% of revenue, for Q1 of fiscal 2023, compared with $15.7 million, or 10.6% of revenue, for Q1 of fiscal 2022.
Fiscal Quarter Ended
$ in 000’sApril 1,
2023
As a % of RevenueApril 2,
2022
As a % of Revenue
Income from operations$13,693 9.0 %$15,529 10.5 %
Adjustments needed to reconcile GAAP income from operations to non-GAAP income from operations:
Non-cash valuation change in contingent consideration21 — %— — %
Acquisition-related costs22 — %171 0.1 %
Non-GAAP income from operations$13,736 9.0 %$15,700 10.6 %
Interest Income (Expense), net
For Q1 of fiscal 2023, net interest expense was $0.6 million, or 0.4% of revenue, compared with net interest expense of $0.2 million, or 0.1% of revenue, for Q1 of fiscal 2022.
Foreign Currency Gains (Losses), net
For Q1 of fiscal 2023, net foreign currency losses were $0.5 million, or 0.3% of revenue, compared with net foreign currency gains of $0.2 million, or 0.1% of revenue, for Q1 of fiscal 2022.
Foreign currency gains (losses), net, is comprised of net gains and losses on foreign denominated transactions and the revaluation of working capital balances.
Income Taxes
The following table outlines CRA’s income tax provision recorded and the resulting effective tax rates:
GAAPNon-GAAP
Fiscal Quarter EndedFiscal Quarter Ended
$ in 000’sApril 1,
2023
April 2,
2022
April 1,
2023
April 2,
2022
Tax Provision$3,676 $4,094 $3,815 $4,100 
Effective Tax Rate29.2 %26.4 %29.0 %26.5 %
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Fiscal Quarter Ended
$ in 000’sApril 1,
2023
As a % of RevenueApril 2,
2022
As a % of Revenue
Income before provision for income taxes$12,594 8.2 %$15,520 10.5 %
Adjustments needed to reconcile GAAP income before provision for income taxes to non-GAAP income before provision for income taxes
Non-cash valuation change in contingent consideration21 — %— — %
Acquisition-related costs22 — %171 0.1 %
Foreign currency (gains) losses, net528 0.3 %(199)(0.1)%
Non-GAAP income before provision for income taxes$13,165 8.6 %$15,492 10.4 %
GAAP provision for income taxes$3,676 $4,094 
Tax effect on non-GAAP adjustments139 
Non-GAAP provision for income taxes$3,815 $4,100 
Net Income
For Q1 of fiscal 2023, net income was $8.9 million, or 5.8% of revenue, or $1.23 per diluted share, compared with net income of $11.4 million, or 7.7% of revenue, or $1.52 per diluted share, for Q1 of fiscal 2022. Non-GAAP net income for Q1 of fiscal 2023 was $9.4 million, or 6.1% of revenue, or $1.29 per diluted share, compared with $11.4 million, or 7.7% of revenue, or $1.51 per diluted share, for Q1 of fiscal 2022.
Non-GAAP EBITDA
For Q1 of fiscal 2023, non-GAAP EBITDA was $16.7 million, or 10.9% of revenue, compared with $18.7 million, or 12.6% of revenue, for Q1 of fiscal 2022.
Constant Currency Basis
For Q1 of fiscal 2023, revenue was $152.8 million, and net income was $8.9 million, or 5.8% of revenue, or $1.23 per diluted share. On a constant currency basis relative to Q1 of fiscal 2022, Q1 of fiscal 2023 revenue would have been higher by $3.1 million to $155.9 million, GAAP net income would have increased by $0.8 million to $9.7 million, or 6.2% of revenue, and earnings per diluted share would have increased by $0.11 to $1.34 per diluted share.
For Q1 of fiscal 2023, revenue was $152.8 million, and non-GAAP net income was $9.4 million, or 6.1% of revenue, or $1.29 per diluted share. On a constant currency basis relative to Q1 of fiscal 2022, Q1 of fiscal 2023 revenue would have been higher by $3.1 million to $155.9 million, non-GAAP net income would have increased by $0.8 million to $10.1 million, or 6.5% of revenue, non-GAAP earnings per diluted share would have increased by $0.10 to $1.39 per diluted share, and non-GAAP EBITDA would have increased by $1.1 million to $17.7 million, or 11.4% of revenue.
A description of the process for calculating the measures presented on a constant currency basis is contained under the heading “Non-GAAP Financial Measures” below.
Key Balance Sheet Metrics
Billed and unbilled receivables at April 1, 2023 were $197.2 million, compared with $173.7 million at April 2, 2022. Current liabilities at April 1, 2023 were $253.8 million, compared with $208.9 million at April 2, 2022.
Total Days Sales Outstanding, or DSO, for Q1 of fiscal 2023 was 112 days, consisting of 70 days of billed and 42 days of unbilled. This compares with 99 days reported for Q1 of fiscal 2022, consisting of 59 days of billed and 40 days of unbilled.
Cash and Cash Flow
Cash and cash equivalents was $35.5 million at April 1, 2023, compared with $43.7 million at April 2, 2022.
Net cash used in operating activities for Q1 of fiscal 2023 was $70.1 million, compared with net cash used in operating activities of $61.8 million for Q1 of fiscal 2022.
As of April 1, 2023, outstanding borrowings under CRA’s revolving credit facility amounted to $100.0 million. At April 2, 2022, outstanding borrowings under CRA’s revolving credit facility amounted to $60.0 million.
Capital expenditures totaled $0.5 million for Q1 of fiscal 2023, compared with $1.3 million for Q1 of fiscal 2022.
CRA repurchased approximately 181,000 shares of its common stock during Q1 of fiscal 2023 for $20.6 million, compared with Q1 of fiscal 2022, when approximately 57,000 shares of common stock were repurchased for $5.0 million.
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A quarterly cash dividend of $0.36 per common share, for total dividends and dividend equivalents of $2.7 million was paid in Q1 of fiscal 2023, compared with a quarterly cash dividend of $0.31 per common share, for total dividends and dividend equivalents of $2.4 million paid in Q1 of fiscal 2022.
GAAP Condensed Consolidated Statement of Cash Flows
CRA has derived the condensed consolidated statement of cash flow data for the years ended December 31, 2022 and January 1, 2022 from its audited financial statements appearing on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on March 2, 2023. The condensed consolidated statement of cash flow data for the second and third quarters of fiscal year 2021 and the first, second, and third quarters of fiscal year 2022 and the first quarter of fiscal year 2023 have been derived from CRA’s unaudited financial statements appearing on Form 10-Q for each of the respective fiscal quarters as well as the consolidated statements of cash flows appearing on Form 10-K for the fiscal years ended December 31, 2022 and January 1, 2022 and have been prepared on the same basis as CRA’s audited financial statements.
GAAP Condensed Consolidated Statement of Cash FlowsLTMQ1Q4Q3Q2
($ in 000’s)Q1 20232023202220222022
Net cash provided by (used in) operating activities$16,908 $(70,051)$60,136 $43,797 $(16,974)
Net cash used in investing activities(7,312)(1,132)(4,981)(932)(267)
Net cash provided by (used in) financing activities(16,215)74,848 (48,212)(32,840)(10,011)
Effect of foreign exchange rates on cash and cash equivalents(1,564)407 411 (1,553)(829)
Net increase (decrease) in cash and cash equivalents$(8,183)$4,072 $7,354 $8,472 $(28,081)
Cash and cash equivalents at beginning of period43,702 31,447 24,093 15,621 43,702 
Cash and cash equivalents at end of period$35,519 $35,519 $31,447 $24,093 $15,621 
GAAP Condensed Consolidated Statement of Cash FlowsLTMQ1Q4Q3Q2
($ in 000’s)Q1 20222022202120212021
Net cash provided by (used in) operating activities$53,708 $(61,838)$61,795 $50,126 $3,625 
Net cash used in investing activities(13,916)(11,985)(893)(560)(478)
Net cash provided by (used in) financing activities(26,347)52,111 (14,173)(43,428)(20,857)
Effect of foreign exchange rates on cash and cash equivalents(1,372)(716)(264)(450)58 
Net increase (decrease) in cash and cash equivalents$12,073 $(22,428)$46,465 $5,688 $(17,652)
Cash and cash equivalents at beginning of period31,629 66,130 19,665 13,977 31,629 
Cash and cash equivalents at end of period$43,702 $43,702 $66,130 $19,665 $13,977 

Adjusted Net Cash Flows from Operations
Below are the quarterly and last twelve-month reconciliations of GAAP net cash provided by (used in) operating activities for each of the periods presented to non-GAAP adjusted net cash flows from operations. The reconciling items are forgivable loan advances and repayments for each period, which are reported as a component of GAAP net cash provided by (used in) operating activities, along with other non-recurring cash items.
Adjusted Net Cash Flows from OperationsLTMQ1Q4Q3Q2
($ in 000’s)Q1 20232023202220222022
GAAP net cash provided by (used in) operating activities$16,908 $(70,051)$60,136 $43,797 $(16,974)
Forgivable loan advances43,026 16,842 9,517 3,313 13,354 
Forgivable loan repayments(641)(616)— — (25)
Other non-recurring cash items (1)213 22 69 30 92 
Adjusted net cash flows from operations$59,506 $(53,803)$69,722 $47,140 $(3,553)
Net revenue$595,364 $152,845 $144,976 $148,441 $149,102 
GAAP net cash provided by (used in) operating activities as a percentage of net revenue2.8 %(45.8)%41.5 %29.5 %(11.4)%
Adjusted net cash flows from operations as a percentage of net revenue10.0 %(35.2)%48.1 %31.8 %(2.4)%
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Adjusted Net Cash Flows from OperationsLTMQ1Q4Q3Q2
($ in 000’s)Q1 20222022202120212021
GAAP net cash provided by (used in) operating activities$53,708 $(61,838)$61,795 $50,126 $3,625 
Forgivable loan advances21,178 8,800 4,893 5,105 2,380 
Forgivable loan repayments(69)— (69)— — 
Other non-recurring cash items (1)111 111 — — — 
Adjusted net cash flows from operations$74,928 $(52,927)$66,619 $55,231 $6,005 
Net revenue$567,797 $148,382 $134,766 $136,412 $148,237 
GAAP net cash provided by (used in) operating activities as a percentage of net revenue9.5 %(41.7)%45.9 %36.7 %2.4 %
Adjusted net cash flows from operations as a percentage of net revenue13.2 %(35.7)%49.4 %40.5 %4.1 %
(1) Other non-recurring cash items includes acquisition-related costs.
NON-GAAP FINANCIAL MEASURES
In these remarks, CRA has supplemented the presentation of its financial results calculated in accordance with U.S. generally accepted accounting principles or “GAAP” with the following financial measures that were not calculated in accordance with GAAP: non-GAAP net income, non-GAAP net income per share, non-GAAP EBITDA, non-GAAP income from operations, non-GAAP provision for income taxes, SG&A expenses excluding commissions and adjusted net cash flows from operations. CRA believes that these non-GAAP financial measures are important to management and investors because these measures supplement the understanding of CRA’s ongoing operating results, financial condition and cash flows. Non-GAAP adjusted net cash flows from operations is used by management to assess CRA’s ability to fund items such as the acquisition of talent, office expansions, debt repayment and distributions to shareholders. In addition, non-GAAP net income and non-GAAP EBITDA are used by CRA in its budgeting process, and the non-GAAP adjustments described below are made to the performance measures for some of CRA’s performance-based compensation.
As used herein, CRA defines non-GAAP EBITDA as net income before interest expense (net), income taxes, and depreciation and amortization further adjusted for the impact of certain items that it does not consider indicative of its core operating performance, such as non-cash amounts relating to valuation changes in contingent consideration, acquisition-related costs, foreign currency (gains) losses, net and related tax effects. Non-GAAP net income, non-GAAP income from operations and non-GAAP provision for income taxes also exclude non-cash amounts relating to valuation changes in contingent consideration, acquisition-related costs, foreign currency (gains) losses, net and related tax effects. The adjustments made to non-GAAP adjusted net cash flows from operations add back forgivable loan issuances, net of repayments, along with other non-recurring cash items. These remarks also present certain current fiscal period financial measures on a “constant currency” basis in order to isolate the effect that foreign currency exchange rate fluctuations can have on CRA’s financial results. These constant currency measures are determined by recalculating the current fiscal period local currency financial measure using the specified corresponding prior fiscal period’s foreign exchange rates.

All of the non-GAAP financial measures referred to above should be considered in conjunction with, and not as a substitute for, the GAAP financial information presented in these remarks. EBITDA and the financial measures identified in these remarks as “non-GAAP” are reconciled to their GAAP comparable measures either in these remarks or in the attached financial tables. In evaluating these non-GAAP financial measures, note that the non-GAAP financial measures used by CRA may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
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CRA INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL QUARTERS ENDED
APRIL 1, 2023 COMPARED TO APRIL 2, 2022
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Fiscal Quarter Ended
April 1,
2023
 As a % of
Revenue
April 2,
2022
 As a % of
Revenue
Revenues$152,845 100.0 %$148,382 100.0 %
Cost of services (exclusive of depreciation and amortization)107,837 70.6 %104,060 70.1 %
Selling, general and administrative expenses28,372 18.6 %25,817 17.4 %
Depreciation and amortization2,943 1.9 %2,976 2.0 %
Income from operations13,693 9.0 %15,529 10.5 %
Interest expense, net(571)-0.4 %(208)-0.1 %
Foreign currency gains (losses), net(528)-0.3 %199 0.1 %
Income before provision for income taxes12,594 8.2 %15,520 10.5 %
Provision for income taxes3,676 2.4 %4,094 2.8 %
Net income$8,918 5.8 %$11,426 7.7 %
Net income per share:
  Basic$1.25 $1.55 
  Diluted$1.23 $1.52 
Weighted average number of shares outstanding:
  Basic7,119 7,360 
  Diluted7,252 7,503 
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CRA INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE FISCAL QUARTERS ENDED
APRIL 1, 2023 COMPARED TO APRIL 2, 2022
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Fiscal Quarter Ended
April 1,
2023
As a % of
Revenue
April 2,
2022
As a % of
Revenue
Revenues$152,845 100.0 %$148,382 100.0 %
Net income$8,918 5.8 %$11,426 7.7 %
Adjustments needed to reconcile GAAP net income to non-GAAP net income:
Non-cash valuation change in contingent consideration 21 — %— — %
Acquisition-related costs22 — %171 0.1 %
Foreign currency (gains) losses, net528 0.3 %(199)-0.1 %
Tax effect on adjustments(139)-0.1 %(6)— %
Non-GAAP net income$9,350 6.1 %$11,392 7.7 %
Non-GAAP net income per share:
Basic$1.31 $1.54 
Diluted$1.29 $1.51 
Weighted average number of shares outstanding:
Basic7,119 7,360 
Diluted7,252 7,503 


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CRA INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
FOR THE FISCAL QUARTERS ENDED
APRIL 1, 2023 COMPARED TO APRIL 2, 2022
(IN THOUSANDS)

Fiscal Quarter Ended
April 1,
2023
As a % of
 Revenue
April 2,
2022
As a % of
 Revenue
Revenues$152,845 100.0 %$148,382 100.0 %
Net income$8,918 5.8 %$11,426 7.7 %
Adjustments needed to reconcile GAAP net income to non-GAAP net income:
Non-cash valuation change in contingent consideration21 — %— — %
Acquisition-related costs22 — %171 0.1 %
Foreign currency (gains) losses, net528 0.3 %(199)-0.1 %
Tax effect on adjustments(139)-0.1 %(6)— %
Non-GAAP net income$9,350 6.1 %$11,392 7.7 %
Adjustments needed to reconcile non-GAAP net income to non-GAAP EBITDA:
Interest expense, net571 0.4 %208 0.1 %
Provision for income taxes3,815 2.5 %4,100 2.8 %
Depreciation and amortization2,943 1.9 %2,976 2.0 %
Non-GAAP EBITDA$16,679 10.9 %$18,676 12.6 %
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CRA INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

April 1,
2023
December 31,
2022
Assets
Cash and cash equivalents$35,519 $31,447 
Accounts receivable and unbilled services, net197,222 194,987 
Other current assets25,544 22,426 
Total current assets258,285 248,860 
Property and equipment, net43,734 45,582 
Goodwill and intangible assets, net101,809 101,510 
Right-of-use assets93,610 96,725 
Other assets64,618 58,240 
Total assets$562,056 $550,917 
Liabilities and Shareholders’ Equity
Accounts payable$22,846 $27,584 
Accrued expenses104,413 155,864 
Current portion of lease liabilities16,164 15,972 
Revolving line of credit100,000 — 
Other current liabilities10,348 17,705 
Total current liabilities253,771 217,125 
Non-current portion of lease liabilities101,921 106,008 
Other non-current liabilities9,580 16,630 
Total liabilities365,272 339,763 
Total shareholders’ equity196,784 211,154 
Total liabilities and shareholders’ equity$562,056 $550,917 
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CRA INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

Fiscal Quarter Ended
April 1,
2023
April 2,
2022
Operating activities:
Net income$8,918 $11,426 
Adjustments to reconcile net income to net cash used in operating activities, net of effect of acquired businesses:
Non-cash items, net7,197 7,086 
Accounts receivable and unbilled services(1,353)(7,110)
Working capital items, net(84,813)(73,240)
Net cash used in operating activities(70,051)(61,838)
Investing activities:
Purchases of property and equipment, net(562)(1,346)
Consideration paid for acquisition, net(570)(10,639)
Net cash used in investing activities(1,132)(11,985)
Financing activities:
Issuance of common stock, principally stock options exercises— 341 
Borrowings under revolving line of credit105,000 60,000 
Repayments under revolving line of credit(5,000)— 
Tax withholding payments reimbursed by shares(1,873)(897)
Cash dividends paid(2,702)(2,377)
Repurchase of common stock(20,577)(4,956)
Net cash provided by financing activities74,848 52,111 
Effect of foreign exchange rates on cash and cash equivalents407 (716)
Net increase (decrease) in cash and cash equivalents4,072 (22,428)
Cash and cash equivalents at beginning of period31,447 66,130 
Cash and cash equivalents at end of period$35,519 $43,702 
Noncash investing and financing activities:
Increase (decrease) in accounts payable and accrued expenses for property and equipment$23 $(211)
Excise tax on share repurchases$(173)$— 
Right-of-use assets obtained in exchange for lease obligations$— $1,210 
Supplemental cash flow information:
Cash paid for taxes$1,081 $1,622 
Cash paid for interest$124 $97 
Cash paid for amounts included in operating lease liabilities$5,474 $5,285 
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