CRA International, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter ended April 3, 2021, compared with the quarter ended March 28, 2020. The request metadata says “2020 Q1,” but the filing reports the first quarter of fiscal 2021.
Business context
CRA is a global consulting firm operating as Charles River Associates, providing litigation, regulatory and financial consulting, and management consulting. It reports one business segment.
Financial performance
| Metric | Q1 FY2021 | Comparable quarter | Change |
|---|---|---|---|
| Revenue | $146.5 million | $126.2 million | Up 16.1% |
| Income from operations | $14.6 million | $8.1 million | Up 80.8% |
| Operating margin | 10.0% | 6.4% | Up 3.6 percentage points |
| Net income | $10.5 million | $6.5 million | Up $4.0 million |
| Diluted EPS | $1.34 | $0.80 | Up 67.5% |
| Effective tax rate | 24.4% | 29.4% | Down 5.0 percentage points |
| Net cash used in operating activities | $39.8 million | $65.4 million | Cash use decreased |
Revenue growth reflected higher gross revenue, utilization rising to 76% from 71%, and consultant headcount increasing 4.8% to 837. Costs of services rose 15.8%, but declined slightly as a share of revenue, to 71.9% from 72.1%. SG&A fell 3.8%, and as a share of revenue declined to 15.8% from 19.1%. Net income benefited from stronger operating results and a lower effective tax rate. Foreign currency results were a $0.6 million loss, versus a $1.4 million gain in the prior-year quarter.
Financial position, cash flow and capital allocation
- At April 3, 2021, cash and equivalents were $31.6 million, down from $45.7 million at fiscal year-end. Current assets were $210.5 million and current liabilities $183.1 million, resulting in working capital of $27.4 million.
- Operating cash outflow was principally driven by payments of prior-year bonuses and performance awards, contingent consideration, and other liabilities. Investing cash outflow was $0.7 million, primarily for office equipment.
- Financing provided $26.5 million, including $40.0 million of net revolving-credit borrowings. The company also repurchased $9.6 million of shares and paid $2.0 million in shareholder dividends during the quarter.
- Revolver capacity is $175.0 million, with $40.0 million drawn and $4.7 million in letters of credit at quarter-end. CRA reported covenant compliance; the facility matures no later than October 24, 2022.
- Quarter-end total liabilities included $150.5 million of lease liabilities. The filing does not present a separate total-debt figure beyond the revolving-credit borrowing.
- After quarter-end, CRA completed a $25.0 million self-tender, repurchasing 337,837 shares at $74.00 each, funded with cash and revolver borrowings. The board also declared a $0.26-per-share quarterly dividend.
Outlook, risks and notable items
Management said cash, operating cash generation and available revolver capacity should be sufficient for anticipated working capital and capital expenditure needs for at least the next 12 months. CRA anticipated regular quarterly dividends and said it expected to continue share repurchases, while noting that dividends and repurchases remain subject to board discretion. No specific earnings or revenue guidance was provided.
Management identified potential funding needs from acquisitions, changes in business plans or economic conditions, and other unexpected circumstances. Performance-award costs may vary with achievement of targets. The company said inflation had not materially affected results to date. It reported no material changes to the risk factors in its latest Form 10-K, no legal proceedings in the listed item, and no material internal-control changes; management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether improved utilization and hiring translate into sustained revenue growth and margins.
- The timing and cash-flow effects of bonus payments, unbilled services and receivables, and the company’s ability to convert earnings into operating cash.
- Post-quarter effects of the $25.0 million tender offer on cash, revolver borrowings, leverage and share count.
- Revolver availability, covenant headroom, and repayment or refinancing plans ahead of its October 2022 maturity.
- How variable performance awards, forgivable-loan compensation costs, and any future acquisitions affect profitability and liquidity.