CRA International, Inc. (CRAI) - 10-Q Summary
Business Context and Reporting Period
CRA International, Inc. is a global consulting firm specializing in litigation, regulatory, financial, and management consulting. This report covers the fiscal quarter ended April 4, 2026, compared to the prior year period ended March 29, 2025. The company operates as a single business segment.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenues | $200.98 million | $181.85 million |
| Net Income | $11.13 million | $18.00 million |
| Diluted EPS | $1.69 | $2.62 |
| Operating Margin | 9.0% | 14.0% |
| Effective Tax Rate | 36.0% | 27.0% |
| Cash & Equivalents | $32.50 million | $25.60 million (end of period) |
| Revolving Credit Borrowed | $192.00 million | $34.00 million (prior year-end) |
| Net Cash Used in Operating Activities | ($113.89 million) | ($79.99 million) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 10.5% to $201.0 million, driven by higher utilization (77% vs. 76%) and increased consultant headcount (971 vs. 947). Fixed-price contracts rose to 18% of revenue.
- Profitability Decline: Net income decreased 38.2% to $11.1 million. Operating income dropped from $25.5 million to $18.0 million.
- Cost Increases: Costs of services rose 20.4% to $145.0 million (72.2% of revenue vs. 66.2% prior year). This was primarily due to an $11.8 million increase in employee compensation and a $10.2 million increase in forgivable loan amortization.
- Tax Rate Impact: The effective tax rate increased to 36.0% from 27.0%, attributed to nondeductible executive compensation, a foreign valuation allowance, and reduced share-based compensation tax benefits.
- Liquidity Shift: Operating cash flow turned significantly negative ($113.9 million used) due to the payment of fiscal 2025 performance bonuses and increased forgivable loan advances. This was offset by net borrowings of $158.0 million under the revolving credit facility.
Outlook, Commentary, and Risks
- Capital Structure Update: On May 4, 2026, the company amended its Credit Agreement to increase the revolving credit facility capacity from $250 million to $300 million.
- Shareholder Returns: The company repurchased 116,040 shares for $21.5 million during the quarter. A quarterly dividend of $0.57 per share was declared on May 7, 2026.
- Management Commentary: Management attributes the cash outflow to seasonal bonus payments and forgivable loan issuances, stating that current cash and credit availability are sufficient for the next 12 months.
- Risks: The filing references standard risks including economic conditions, client concentration, and the unpredictability of legal proceedings, though no material legal proceedings were reported.
Investor Verification Checklist
- Verify the sustainability of the 10.5% revenue growth given the 20.4% increase in cost of services.
- Monitor the effective tax rate, which rose significantly due to nondeductible executive compensation and foreign valuation allowances.
- Assess the impact of the increased debt load ($192 million drawn) on future interest expenses and leverage ratios.
- Review the timing of performance bonus payments, which caused a significant operating cash outflow this quarter.
- Confirm the utilization of the newly expanded $300 million credit facility and its impact on financial flexibility.