CRA International, Inc. — Form 10-Q Summary
Reporting-period note: The request metadata says 2021 Q1, but the filing covers the fiscal quarter ended April 2, 2022, compared with the quarter ended April 3, 2021. Financial figures below are in U.S. dollars; statement amounts are in thousands unless noted.
Business context and reporting period
CRA is a global consulting firm providing litigation, regulatory and financial consulting, and management consulting services. It operates as one business segment. The quarter included the February 28, 2022 acquisition of Welch Consulting, which added 45 colleagues; its results were not material to the quarter.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $148.4 million | $146.5 million | Up 1.3% |
| Operating income | $15.5 million | $14.6 million | Up 6.1% |
| Operating margin | 10.5% | 10.0% | Up 0.5 percentage points |
| Net income | $11.4 million | $10.5 million | Up 8.8% |
| Diluted EPS | $1.52 | $1.34 | Up 13.4% |
| Net cash used in operating activities | $61.8 million | $39.8 million | Use increased |
Costs of services fell 1.2% to $104.1 million, improving to 70.1% of revenue from 71.9%. SG&A rose 11.3% to $25.8 million, or 17.4% of revenue versus 15.8%, reflecting higher expert commissions, compensation, travel and other costs. The effective tax rate increased to 26.4% from 24.4%; management cited reduced share-based compensation tax benefits, a foreign valuation allowance, higher state taxes and nondeductible executive compensation.
Cash was $43.7 million at quarter-end, down $22.4 million from January 1, 2022. Current assets were $242.1 million and current liabilities $208.9 million, for working capital of $33.2 million. Operating cash use principally reflected payment of fiscal 2021 bonuses and awards, alongside increases in unbilled services and forgivable loans. Investing cash use was $12.0 million, including $10.6 million for the acquisition and $1.3 million of capital expenditures. Financing provided $52.1 million, principally from revolver borrowings.
CRA had $60.0 million drawn on its $175.0 million revolving credit facility and $4.4 million in letters of credit, leaving approximately $110.6 million available. The facility matures October 24, 2022. CRA reported covenant compliance at April 2, 2022. Total lease liabilities were approximately $135.3 million. Forgivable loans totaled $52.0 million, including $12.9 million current.
Material changes versus the prior comparable period
- Revenue increased modestly, while utilization declined to 74% from 76%. Consultant headcount grew 4.9% to 878, including additions from Welch Consulting.
- Time-and-materials revenue rose to $119.6 million from $113.1 million; fixed-price revenue declined to $28.8 million from $33.4 million. Fixed-price work fell to 19% of revenue from 23%.
- Revenue outside the U.S. represented approximately 21% versus 20%. “Other” geographic revenue rose to $9.1 million from $6.0 million, while U.S. revenue was broadly flat.
- Diluted weighted-average shares fell by approximately 328,000, primarily due to share repurchases, contributing to EPS growth. CRA repurchased 56,665 shares at an average $87.46 per share and paid $2.4 million in dividends.
- The Welch acquisition added $4.2 million of customer-relationship intangible assets and $2.4 million of goodwill; purchase-price allocation remained preliminary. CRA also issued $7.9 million of forgivable loans to key employees and agreed to deferred compensation, which will be expensed after the transaction.
Outlook, commentary, risks and unusual items
Management said cash, operating cash generation and revolver availability through maturity should fund anticipated working capital and capital needs for at least 12 months. This assessment does not assume future acquisitions or significant unexpected changes in staffing or spending. Management anticipated regular quarterly dividends and continued share repurchases, subject to board discretion and available funding; the board declared a $0.31-per-share dividend on May 5, 2022.
Management reported no material inflation impact to date, but cautioned that inflation could adversely affect future results. The filing identifies the October 2022 revolver maturity, potential refinancing and acquisition funding needs, consultant hiring and retention, and uncertain future cash requirements as relevant considerations. CRA reported no material changes to the risk factors in its 2021 Form 10-K, no legal proceedings listed in Part II, and no material impact expected from ordinary-course legal matters, while noting outcomes are inherently uncertain. Disclosure controls were assessed as effective, with no material change in internal control reported.
Important facts for investors to verify
- Confirm the intended reporting year: the filing is Q1 2022, not Q1 2021 as stated in the request metadata.
- Monitor refinancing or repayment of the $60.0 million revolver balance before its October 24, 2022 maturity.
- Assess whether lower utilization and the shift away from fixed-price work persist, and how consultant hiring translates into revenue.
- Track cash conversion and working-capital movements, especially bonus payments, unbilled services and forgivable-loan advances.
- Review the finalized Welch Consulting purchase-price allocation and the ongoing compensation cost of acquisition-related forgivable loans and deferred compensation.
- Consider the higher SG&A ratio and effective tax rate when assessing whether earnings and margin improvement are sustainable.