CRA International, Inc. — Form 10-Q Summary
Period clarification: The request identifies 2023 Q1, but the supplied filing is for CRA’s fiscal first quarter ended March 30, 2024, compared with the quarter ended April 1, 2023. Amounts below are in millions of U.S. dollars unless noted.
Business context
CRA is a consulting firm providing litigation, regulatory and financial consulting, and management consulting. It reports as one business segment. The unaudited filing covers the fiscal quarter ended March 30, 2024.
Financial performance
| Metric | Q1 fiscal 2024 | Q1 fiscal 2023 | Change |
|---|---|---|---|
| Revenue | $171.8 | $152.8 | Up 12.4% |
| Operating income | $19.6 | $13.7 | Up 43.3% |
| Operating margin | 11.4% | 9.0% | Up 2.4 percentage points |
| Net income | $13.7 | $8.9 | Up 53.5% |
| Diluted EPS | $1.95 | $1.23 | Up 58.5% |
| Cash flow from operations | $(63.1) | $(70.1) | Use of cash narrowed |
Revenue growth accompanied utilization rising to 73% from 70% and consultant headcount increasing 2.6%, to 997. U.S. revenue was $142.2 million versus $117.9 million; U.K. revenue was $21.2 million versus $25.6 million. Fixed-price work remained 18% of revenue. Outside-U.S. revenue declined to approximately 17% of revenue from 23%.
Costs of services rose 10.2%, slower than revenue growth, and declined to 69.2% of revenue from 70.6%. SG&A rose 7.5% but declined to 17.8% of revenue from 18.6%. Diluted weighted-average shares fell by approximately 241,000, primarily due to repurchases, supporting EPS growth. The effective tax rate was 28.0%, down from 29.2%.
Cash, debt and liquidity
- Cash and equivalents were $37.1 million at quarter-end, down from $45.6 million at fiscal year-end.
- Operating cash use was $63.1 million, primarily reflecting payment of a significant portion of fiscal 2023 bonuses and awards, plus increased unbilled receivables. Investing cash use was $0.7 million, mainly capital expenditures.
- Financing provided $56.1 million, including $70.0 million of net revolving-credit borrowings, offset partly by $9.2 million of repurchases and $3.1 million of dividends.
- Revolver borrowings were $70.0 million, versus none at December 30, 2023. The $250 million facility had $175.5 million of available capacity after letters of credit. CRA reported compliance with its covenants.
- Current assets were $275.4 million and current liabilities were $236.8 million. Lease liabilities totaled $105.7 million across current and non-current portions.
Outlook, risks and notable items
- Management expects cash, operating cash generation and available revolver capacity to meet anticipated working-capital and capital-expenditure needs for at least 12 months. No numerical revenue or earnings guidance is provided.
- Management said inflation had not materially affected results to date, while noting future effects cannot be assured. Future funding needs could rise with acquisitions, economic changes, hiring or other unexpected expenses.
- The Board expanded the repurchase authorization by $35 million in February 2024. About $37.2 million remained available at quarter-end; the company expects to continue repurchases. CRA anticipates regular quarterly dividends, subject to Board discretion.
- CRA reported no material changes to its risk factors, no material changes in market-risk exposure, and no material changes to internal control over financial reporting. Disclosure controls were deemed effective.
- Management said ordinary-course legal matters are not expected to materially affect financial position or results, while acknowledging their outcomes are inherently uncertain. No legal proceedings were reported under Part II, Item 1.
- A $663,000 bad-debt expense was recorded, compared with none in the prior-year quarter. No goodwill or intangible-asset impairment was recorded.
Important facts for investors to verify
- Confirm the reporting-period mismatch: this is Q1 fiscal 2024, not Q1 2023.
- Track whether higher utilization and consultant headcount continue to support revenue growth and margins.
- Assess cash conversion after the substantial seasonal bonus payments and growth in unbilled services; operating cash flow was negative despite higher earnings.
- Monitor the $70 million revolver balance, covenant headroom, interest costs and continued shareholder returns.
- Review future bad-debt expense, forgivable-loan balances and any changes in litigation or other contingencies.