CRA International Inc.

05/07/2026 | Press release | Distributed by Public on 05/07/2026 06:16

Quarterly Report for Quarter Ending April 4, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Except for historical facts, the statements in this quarterly report are forward-looking statements. Forward-looking statements are merely our current predictions of future events. These statements are inherently uncertain, and actual events could differ materially from our predictions. Important factors that could cause actual events to vary from our predictions include those discussed below under the heading "Risk Factors." We assume no obligation to update our forward-looking statements to reflect new information or developments. We urge readers to review carefully the risk factors described in the other documents that we file with the SEC. The SEC maintains a website that contains these documents, reports, proxy statements, information statements, and other information regarding issuers, such as us, that file electronically with the SEC at https://www.sec.gov.
Additional Available Information
Our principal Internet address is www.crai.com. Our website provides a link to a third-party website through which our annual, quarterly, and current reports, and amendments to those reports, are available free of charge. We do not maintain or provide any information directly to the third-party website, and we do not check its accuracy.
Critical Accounting Policies and Estimates
Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as of April 4, 2026 remain unchanged from January 3, 2026. Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended January 3, 2026, filed with the SEC on February 26, 2026 for details on these critical accounting policies.
Recent Accounting Standards
On January 4, 2026, CRA adopted Accounting Standards Update ("ASU") No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"), which modernized the accounting for internal-use software. ASU 2025-06 removed all references to software development stages and requires capitalization of software costs when management has committed to funding the software project and it is probable the project will be completed and the software will be used to perform the function intended. The adoption of ASU 2025-06 did not have a material impact CRA's condensed consolidated financial statements.
Results of Operations-For the Fiscal Quarter Ended April 4, 2026, Compared to the Fiscal Quarter Ended March 29, 2025
The following table provides operating information as a percentage of revenues for the periods indicated:
Fiscal Quarter
Ended
April 4,
2026 		March 29,
2025
Revenues 100.0 % 100.0 %
Costs of services (exclusive of depreciation and amortization) 72.2 66.2
Selling, general and administrative expenses 17.2 17.9
Depreciation and amortization 1.7 1.9
Income from operations 9.0 14.0
Interest expense, net (0.5) (0.2)
Foreign currency gains (losses), net 0.2 (0.3)
Income before provision for income taxes 8.7 13.6
Provision for income taxes 3.1 3.7
Net income 5.5 % 9.9 %
Fiscal Quarter Ended April 4, 2026, Compared to the Fiscal Quarter Ended March 29, 2025
Revenues. Revenues increased by $19.1 million, or 10.5%, to $201.0 million for the first quarter of fiscal 2026 from $181.9 million for the first quarter of fiscal 2025. Utilization increased to 77% for the first quarter of fiscal 2026 from 76% for the first quarter of fiscal 2025, while consultant headcount increased to 971 at the end of the first quarter of fiscal 2026 from 947 at the end of the first quarter of fiscal 2025.
Overall, revenues outside of the U.S. represented approximately 20% and 18% of net revenues for each of the first quarters of fiscal 2026 and fiscal 2025, respectively. Revenues derived from fixed-price projects increased to 18% of net revenues for the first quarter of fiscal 2026 compared to 17% of net revenues for the first quarter of fiscal 2025. The percentage of revenue derived from fixed-price projects depends largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service contracts.
Costs of Services (exclusive of depreciation and amortization). Costs of services (exclusive of depreciation and amortization) increased by $24.6 million, or 20.4%, to $145.0 million for the first quarter of fiscal 2026 from $120.4 million for the first quarter of fiscal 2025. The increase in costs of services was due to an increase in employee and incentive compensation of $11.8 million, an increase in forgivable loan amortization, including performance award amortization of $10.2 million, and an increase in indirect project expenses of $2.6 million. As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased to 72.2% for the first quarter of fiscal 2026 from 66.2% for the first quarter of fiscal 2025.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $2.0 million, or 6.2%, to $34.5 million for the first quarter of fiscal 2026 from $32.5 million for the first quarter of fiscal 2025. Within this category of expenses, there was a $1.0 million increase in employee and incentive compensation, a $0.7 million increase in travel and entertainment, a $0.5 million increase in legal and professional service fees, a $0.3 million increase in rent expense, and a $0.3 million increase in miscellaneous and other fees, partially offset by a $0.8 million decrease in commissions to non-employee experts for the first quarter of fiscal 2026 as compared to the first quarter of fiscal 2025.
As a percentage of revenues, selling, general and administrative expenses decreased to 17.2% for the first quarter of fiscal 2026 from 17.9% for the first quarter of fiscal 2025. Commissions to our non-employee experts decreased to 1.5% of revenues for the first quarter of fiscal 2026 compared to 2.0% of revenues for the first quarter of fiscal 2025.
Provision for Income Taxes. The income tax provision was $6.3 million and the ETR was 36.0% for the first quarter of fiscal 2026 compared to $6.6 million and 27.0% for the first quarter of fiscal 2025. The ETR for the fiscal quarter ended April 4, 2026 was higher than the fiscal quarter ended March 29, 2025 primarily due to an increase in nondeductible executive compensation, the recording of a valuation allowance in a foreign jurisdiction, and a decrease in tax benefit related to share-based compensation, partially offset by a decrease to a prior year tax reserve. The ETR for the first quarters of fiscal 2026 and 2025 were both higher than the combined federal and state statutory tax rate primarily due to nondeductible executive compensation and nondeductible meals and entertainment expenses, partially offset by the tax benefit related to share-based compensation and the Foreign-Derived Deduction Eligible Income deduction. Specific to the current quarter, the ETR was also higher due to the recording of a valuation allowance in a foreign jurisdiction.
Net Income. Net income decreased to $11.1 million for the first quarter of fiscal 2026 from $18.0 million for the first quarter of fiscal 2025. The net income per diluted share was $1.69 per share for the first quarter of fiscal 2026, compared to $2.62 for the first quarter of fiscal 2025. Weighted average diluted shares outstanding decreased by approximately 274,000 shares to approximately 6,588,000 shares for the first quarter of fiscal 2026 from approximately 6,862,000 shares for the first quarter of fiscal 2025. The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since March 29, 2025, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units since March 29, 2025.
Liquidity and Capital Resources
Fiscal Quarter Ended April 4, 2026
We believe that our current cash, cash equivalents, cash generated from operations, and amounts available under our revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months. As of April 4, 2026, we had $32.5 million of cash and cash equivalents and $54.2 million of borrowing capacity under our revolving credit facility.
General. During the fiscal quarter ended April 4, 2026, cash and cash equivalents increased by $14.3 million. We completed the period with cash and cash equivalents of $32.5 million. The principal drivers of the increase in cash and cash equivalents were net borrowings of $158.0 million, offset by the payment of a significant portion of our fiscal 2025 performance bonuses in the first quarter of fiscal 2026, forgivable loan advances, repurchase of shares, and the payment of dividends.
At April 4, 2026, $5.6 million of our cash and cash equivalents was held within the U.S. We have sufficient sources of liquidity in the U.S., including cash flow from operations and availability on our revolving credit facility to fund U.S. operations for the next 12 months without the need to repatriate funds from our foreign subsidiaries.
Sources and Uses of Cash. During the fiscal quarter ended April 4, 2026, net cash used in operating activities was $113.9 million. Net income was $11.1 million for the fiscal quarter ended April 4, 2026. Uses of cash for operating activities included a decrease in accounts payable, accrued expenses, and other liabilities of $91.2 million, primarily due to the payment of a significant portion of our fiscal 2025 performance bonuses, an increase in forgivable loans for the period of $52.6 million which was primarily driven by $62.3 million of forgivable loan issuances, net of repayments, offset by $9.7 million of forgivable loan amortization, an increase of $27.0 million in unbilled receivables, a $4.8 million decrease in lease liabilities, and a $4.3 million increase in prepaid expenses and other current assets, and other assets. Partially offsetting these uses of cash was a decrease of $41.7 million in accounts receivable and an increase of $3.2 million in incentive cash awards payable.
Non-cash items included right-of-use amortization of $3.7 million, depreciation and amortization expense of $3.4 million, share-based compensation expenses of $1.4 million, and unrealized foreign currency remeasurement losses, net of $0.3 million.
During the fiscal quarter ended April 4, 2026, net cash used in investing activities was $2.6 million, which consisted of capital expenditures, primarily related to computer equipment.
During the fiscal quarter ended April 4, 2026, net cash provided by financing activities was $131.3 million, primarily as a result of net borrowings under the revolving credit facility of $158.0 million. Offsetting this increase in cash provided by financing activities were repurchases of common stock of $21.5 million, payment of cash dividends and dividend equivalents of $3.8 million, and tax withholding payments reimbursed by restricted shares on vesting of $1.4 million.
Lease Commitments
We are a lessee under certain operating leases for office space and equipment. Certain of our operating leases have terms that impose asset retirement obligations due to office modifications or the periodic redecoration of the premises, which are included in deferred compensation and other non-current liabilities on our condensed consolidated balance sheets and are recorded at a value based on their estimated discounted cash flows. At April 4, 2026, we expect to incur asset retirement obligation or redecoration obligation costs over the next twelve months of $0.2 million. The remainder of our asset retirement obligations and redecoration obligations are approximately $3.0 million and are expected to be paid between fiscal year 2026 and fiscal year 2035 when the underlying leases terminate or when the respective lease agreement requires redecoration. We expect to satisfy these lease and related obligations as they become due from cash generated from operations.
Indebtedness
CRA is party to a Credit Agreement, dated as of August 19, 2022 (as amended, the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and with Citizens Bank, N.A., as a letter of credit issuing bank. The Credit Agreement provides CRA with a $250.0 million revolving credit facility, which may be decreased at CRA's option to $200.0 million during the period from July 16 in a year through January 15 in the next year. Additionally, for the period from January 16 to July 15 of each calendar year, CRA may elect to not increase the revolving credit facility to $250.0 million. The revolving credit facility includes a $25.0 million sublimit for the issuance of letters of
credit. On May 4, 2026, the Credit Agreement was amended and restated to increase the capacity of the revolving credit facility by $50.0 million to $300.0 million. The expanded facility will continue to provide financial flexibility to support our continued growth and working capital needs.
We may use the proceeds of the revolving credit loans under the Credit Agreement for general corporate purposes and may repay any borrowings under the revolving credit facility at any time, but any borrowings must be repaid no later than August 19, 2027. Borrowings under the revolving credit facility bear interest at a rate per annum equal to one of the following rates, at our election, plus an applicable margin as described below: (i) in the case of borrowings in U.S. dollars by us, the Base Rate (as defined in the Credit Agreement), (ii) in the case of borrowings in U.S. dollars, a rate based on Term SOFR (as defined in the Credit Agreement) for the applicable interest period, (iii) in the case of borrowings in Euros, EURIBOR (as defined in the Credit Agreement) for the applicable interest period, (iv) in the case of borrowings in Pounds Sterling, a daily rate based on SONIA (as defined in the Credit Agreement), (v) in the case of borrowings in Canadian Dollars, Term CORRA (as defined in the Credit Agreement) for the applicable interest period, (vi) in the case of borrowings in Swiss Francs, a daily rate based on SARON (as defined in the Credit Agreement), or (vii) in the case of borrowings in any other Alternate Currency (as defined in the Credit Agreement), the relevant daily or term rate determined as provided in the Credit Agreement. The applicable margin on borrowings based on the Base Rate varies within a range of 0.25% to 1.00% depending on our consolidated net leverage ratio, and the applicable margin on borrowings based on any of the other rates described above varies within a range of 1.25% to 2.00% depending on our consolidated net leverage ratio.
We are required to pay a fee on the amount available to be drawn under any letter of credit issued under the revolving credit facility at a rate per annum that varies between 1.25% and 2.00% depending on our consolidated net leverage ratio. In addition, we are required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.175% and 0.250% depending on our consolidated net leverage ratio.
Under the Credit Agreement, we must comply with various financial and non-financial covenants. The primary financial covenants consist of a maximum consolidated net leverage ratio of 3.0 to 1.0 and a minimum consolidated interest coverage ratio of 2.5 to 1.0. The primary non-financial covenants include, but are not limited to, restrictions on our ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations. Any indebtedness outstanding under the revolving credit facility may become immediately due upon the occurrence of stated events of default, including our failure to pay principal, interest or fees, or upon the breach of any covenant. As of April 4, 2026, we were in compliance with the covenants of the Credit Agreement.
There were $192.0 million and $34.0 million in borrowings outstanding under the revolving credit facility as of April 4, 2026 and January 3, 2026, respectively. The amounts available under the revolving credit facility were reduced by certain letters of credit outstanding, which amounted to $3.8 million, as of both April 4, 2026 and January 3, 2026. CRA has chosen to classify the revolver as a current liability in its condensed consolidated balance sheet, as CRA has the intent to repay the amount within 12 months after the balance sheet date.
Forgivable Loans
In order to attract and retain highly skilled professionals, we may issue forgivable loans or term loans to employees and non-employee experts. A portion of these loans is collateralized by key person life insurance. The forgivable loans have terms that are generally between two and eight years. The principal amount of forgivable loans and accrued interest is forgiven by us over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with us and complies with certain contractual requirements. The forgiveness of the principal amount of the loans is recorded as compensation over the service period, which is consistent with the term of the loans.
Compensation Arrangements
We have entered into compensation arrangements for the payment of performance awards to certain of our employees and non-employee experts that are payable if specific performance targets are met. The financial targets may include a measure of revenue generation, profitability, or both. The amounts of the awards to be paid under these compensation arrangements could fluctuate depending on future performance during the applicable measurement periods. Changes in the estimated awards are expensed prospectively over the remaining service period. We believe that we will have sufficient funds to satisfy any cash obligations related to the performance awards. We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings available on our revolving credit facility.
Our Amended and Restated 2006 Equity Incentive Plan, as amended (the "2006 Equity Plan"), authorizes the grant of a variety of incentive and performance equity awards to our directors, employees and non-employee experts, including stock options, shares of restricted stock, restricted stock units, and other equity awards.
Our long-term incentive program, (the "LTIP") is used as a framework for equity grants made under our 2006 Equity Plan to our senior corporate leaders, practice leaders, and key revenue generators. The equity awards granted under the LTIP include stock options, time-vesting restricted stock units, and performance-vesting restricted stock units.
Our LTIP allows us to grant service and performance-based cash awards in lieu of, or in addition to, equity awards to our senior corporate leaders, practice leaders, and key revenue generators. The compensation committee of our Board of Directors is responsible for approving all cash and equity awards under the LTIP. We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings available under our revolving credit facility.
Business and Talent Acquisitions
As part of our business, we regularly evaluate opportunities to acquire other consulting firms, practices or groups, or other businesses. In recent years, we have typically paid for acquisitions with cash, or a combination of cash and our common stock, and we may continue to do so in the future. To pay for an acquisition, we may use cash on hand, cash generated from our operations, borrowings available under our revolving credit facility, or we may pursue other forms of financing. Our ability to secure short-term and long-term debt or equity financing in the future, including our ability to refinance our credit agreement, will depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing revolving credit facility with our bank, and the overall credit and equity market environments.
Share Repurchases
In February 2026, we announced that our Board of Directors authorized an expansion to our existing share repurchase program by an additional $55.0 million of our common stock, in addition to the $10.9 million then remaining under the program. The program has no expiration date. We may repurchase shares under this program in open market purchases (including through any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.
During the fiscal quarter ended April 4, 2026, we repurchased and retired 116,040 shares under our share repurchase program at an average price per share of $184.96. We had approximately $44.5 million available for future repurchases under our share repurchase program as of April 4, 2026. We plan to finance future repurchases with available cash, cash from future operations, and borrowings available under our revolving credit facility. We expect to continue to repurchase shares under our share repurchase program.
Dividends to Shareholders
We anticipate paying regular quarterly dividends each year. These dividends are anticipated to be funded through cash flow from operations, available cash on hand, and/or borrowings available under our revolving credit facility. Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration, timing and amounts of any such dividends remain subject to the discretion of our Board of Directors. During the fiscal quarters ended April 4, 2026 and March 29, 2025, we paid dividends and dividend equivalents of $3.8 million and $3.5 million, respectively.
Impact of Inflation
To date, inflation has not had a material impact on our financial results. There can be no assurance, however, that inflation will not adversely affect our financial results in the future.
Future Capital and Liquidity Needs
We anticipate that our future capital and liquidity needs will principally consist of funds required for:
•operating and general corporate expenses relating to the operation of our business, including the compensation of our employees under various annual bonus or long-term incentive compensation programs;
•the hiring of individuals to replenish and expand our employee base;
•capital expenditures, primarily for information technology equipment, office furniture and leasehold improvements;
•debt service and repayments, including interest payments on borrowings from our revolving credit facility;
•share repurchases under programs that we may have in effect from time to time;
•dividends to shareholders;
•potential acquisitions of businesses that would allow us to diversify or expand our service offerings;
•contingent obligations related to our acquisitions; and
•other known future contractual obligations.
The hiring of individuals to replenish and expand our employee base is an essential part of our business operations and has historically been funded principally from operations. Many of the other above activities are discretionary in nature. For example, capital expenditures can be deferred, acquisitions can be forgone, and share repurchases and regular dividends can be suspended. As such, our operating model provides flexibility with respect to the deployment of cash flow from operations. Given this flexibility, we believe that our cash flows from operations, supplemented by cash on hand and borrowings under our revolving credit facility (as necessary), will provide adequate cash to fund our long-term cash needs from normal operations for at least the next twelve months.
Our conclusion that we will be able to fund our cash requirements by using existing capital resources and cash generated from operations does not take into account the impact of any future acquisition transactions or any unexpected significant changes in the number of employees or other expenditures that are currently not contemplated. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that have a material effect on the cash flow or profitability of our business. Any of these events or circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified currently available sources and could require us to raise additional debt or equity funding to meet those needs on terms that may be less favorable compared to our current sources of capital. Our ability to raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:
•our future profitability;
•the quality of our accounts receivable;
•our relative levels of debt and equity;
•the volatility and overall condition of the capital markets; and
•the market prices of our securities.
Factors Affecting Future Performance
Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this report, as well as a description of material risks we face, are set forth below under the heading "Risk Factors" and included in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended January 3, 2026. If any of these risks, or any risks not presently known to us or that we currently believe are not significant, develops into an actual event, then our business, financial condition, and results of operations could be adversely affected.
CRA International Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 07, 2026 at 12:16 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]