CRA International, Inc. — Form 10-Q Summary
Period and business: The supplied filing is for the fiscal quarter ended October 2, 2021, not 2020 Q3 as stated in the request metadata. CRA is a global consulting firm offering litigation, regulatory and financial consulting, and management consulting, reported as one business segment. Comparisons below are with the fiscal quarter ended September 26, 2020 and the corresponding year-to-date period.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Year to date 2021 | Year to date 2020 |
|---|---|---|---|---|
| Revenue | $136.4 million | $121.8 million | $431.2 million | $371.0 million |
| Operating income | $12.8 million | $8.0 million | $43.4 million | $24.5 million |
| Operating margin | 9.4% | 6.6% | 10.1% | 6.6% |
| Net income | $10.9 million | $5.4 million | $33.0 million | $17.8 million |
| Diluted EPS | $1.44 | $0.68 | $4.31 | $2.23 |
| Operating cash flow | Year to date: $13.9 million | Prior year to date: negative $10.7 million |
Q3 revenue rose 12.0%; year-to-date revenue rose 16.2%. Operating income increased about 60% in Q3 and 77% year to date. Higher utilization and consultant headcount supported growth: Q3 utilization was 73% versus 69%, and consultant headcount was 882 versus 826 at the comparable prior-year quarter-end. Costs of services declined as a share of revenue to 70.4% from 72.5% in Q3 and to 71.1% from 72.6% year to date. SG&A was 18.0% versus 18.2% in Q3 and 16.6% versus 18.3% year to date.
The effective tax rate was 14.8% for Q3 versus 28.2% and 22.0% year to date versus 27.5%. CRA attributed the lower rates primarily to greater tax benefits from stock-based compensation; the year-to-date comparison was partly offset by the U.K. statutory tax rate increase and deferred-tax remeasurement.
Financial position and liquidity
At October 2, 2021, cash and cash equivalents were $19.7 million, down from $45.7 million at January 2, 2021. Working capital was $31.8 million. Accounts receivable were $108.0 million and unbilled services were $65.8 million. Year-to-date operating cash flow was $13.9 million, compared with cash used of $10.7 million a year earlier; capital expenditures were $1.7 million versus $15.7 million.
CRA had $6.0 million outstanding on its $175 million revolving credit facility and $4.2 million in letters of credit, with the facility maturing October 24, 2022. The company reported covenant compliance and stated that cash, operating cash flow and available facility capacity should meet anticipated needs for at least 12 months. Lease liabilities totaled $142.8 million, including current and non-current portions.
Material changes, outlook and risks
- Year-to-date financing cash outflow was $37.8 million, mainly reflecting $40.0 million of share repurchases and $5.9 million of dividends, partly offset by $6.0 million of net revolver borrowings and $5.0 million from stock issuance, principally option exercises.
- CRA completed a $25.3 million self-tender offer, including transaction costs, repurchasing 337,837 shares at $74 per share. It repurchased 219,564 shares under its separate program year to date and had approximately $35.5 million remaining under that program at quarter-end.
- Management expects to continue regular quarterly dividends and share repurchases, subject to Board discretion and available resources. The Board declared a subsequent $0.31-per-share dividend payable December 10, 2021. The filing gives no specific earnings or revenue guidance.
- Management said inflation had not materially affected results to date, but could do so in the future. Other stated uncertainties include changes in economic conditions, hiring and retention, client collections, acquisition activity, capital-market access and the ability to refinance the revolving facility.
- Legal actions were described as arising in the ordinary course; management did not expect them to materially affect results or financial position, while noting outcomes are inherently uncertain. No material changes to the risk factors from the 2020 Form 10-K were reported.
Key facts for investors to verify
- Confirm the intended reporting year: the filing itself reports Q3 fiscal 2021, despite the request metadata indicating 2020 Q3.
- Track collections and working-capital trends, particularly unbilled services, which increased substantially year to date and contributed to operating cash use.
- Assess whether improved utilization and staffing growth can be sustained, and monitor incentive compensation and other personnel costs.
- Review cash deployment, remaining repurchase authorization, dividend commitments and revolver refinancing needs ahead of its October 2022 maturity.
- Consider the effect of stock-based compensation tax benefits on the reported effective tax rate and comparability of earnings.