管理層發言
Good day, everyone, and welcome to Charles River Associates' Second Quarter 2026 Conference Call. Please note that today's call is being recorded. The company's earnings release and prepared CFO remarks are posted on the Investor Relations section of CRA's website at crai.com. With us today are CRA's President and Chief Executive Officer, Paul Maleh; Chief Financial Officer, Eric Nierenberg; and Chief Corporate Development Officer, Chad Holmes. At this time, I'd like to turn the call over to Dr. Nierenberg for opening remarks. Eric, please go ahead.
Thank you, Rob, and good morning, everyone. Please note that the statements made during this conference call, including guidance on future revenue and non-GAAP EBITDA margin, and any other statements concerning the future business, operating results or financial condition of CRA, including those statements using the terms expect, outlook or similar terms are forward-looking statements as defined in Section 21 of the Exchange Act. Information contained in these forward-looking statements is based on management's current expectations and is inherently uncertain. Actual performance and results may differ materially from those expressed or implied in these statements due to many important factors, including the level of demand for our services as a result of changes in general and industry-specific economic conditions. Additional information regarding these factors is included in today's release and in CRA's periodic reports, including our most recently filed Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. CRA undertakes no obligation to update these forward-looking statements after the date of this call to reflect new information or developments. Additionally, we will refer to some non-GAAP financial measures and certain measures presented on a constant currency basis on this call. Everyone is encouraged to refer to today's release and related CFO remarks for reconciliations of these non-GAAP financial measures to their GAAP comparable measures and descriptions of the calculation of EBITDA and measures presented on a constant currency basis. I will now turn it over to Paul for his report. Paul?
Thanks, Eric, and good morning, everyone. Thank you for joining us today. Building on eight consecutive years of record annual revenue and a best-ever first quarter to start fiscal 2026, we delivered revenue of $210.8 million in the second quarter. This represents year-over-year growth of 12.8% and the highest quarterly revenue in CRA's history. Broad-based contributions once again characterized CRA's financial performance, reflecting both the quality and the depth of the portfolio. Eight practices grew year-over-year, representing 95% of the company's total revenue for the second quarter. Six practices: Energy, Finance, Forensic Services, Intellectual Property, Life Sciences and Risk, Investigations & Analytics posted double-digit revenue growth, while the Antitrust & Competition Economics practice established a new high for quarterly revenue. Additionally, our North American and international operations contributed to the quarter's revenue growth, increasing 8.7% and 32.9%, respectively. This top line performance translated into the highest second quarter profits in the company's history as non-GAAP net income, earnings per diluted share and EBITDA grew by 9%, 14.9% and 15.3%, respectively. During the second quarter, we welcomed more than 60 new consultants as headcount increased 3.3% compared to the second quarter of 2025, while consultant utilization ticked up to 77% versus 76% in the second quarter of 2025. The increases in overall consultant headcount and utilization were supported by the continued replenishing of our sales pipeline. Average weekly project lead flow and new project originations remained strong, with each metric showing double-digit growth relative to the second quarter of 2025. Revenue in the second quarter from CRA's Legal & Regulatory services increased by 10.1%. This growth was supported by trends in the broader legal market as total case filings and total court judgments increased 11% and 5%, respectively, compared to the second quarter of 2025. Turning to the M&A market: worldwide M&A activity totaled $2.85 trillion during the first half of 2026, an increase of 50% compared to the year-ago levels and making it the strongest opening period for dealmaking since such records began in 1980. The second quarter of 2026 totaled $1.6 trillion, an increase of 31% compared to the first quarter of this year, surpassing $1 trillion for the fourth consecutive quarter and making it the largest quarter of worldwide M&A activity on record. Against this backdrop, CRA's Antitrust & Competition Economics practice posted its sixth straight record quarter, capitalizing on ongoing merger-related activity and continued demand for antitrust services. During the quarter, CRA was retained by Fivetran, the data foundation for AI, to advise on its merger with dbt Labs, the creator of dbt, or data build tool, and the leader in standards for AI-ready structured data. The CRA team provided economic assistance to Fivetran on the competition and regulatory compliance aspects of the transaction in the United States. The parties announced the completion of their merger on June 1, 2026, which brings together two category-defining platforms to advance a new era of trusted open data infrastructure for AI at scale. Our Finance practice continued to be active in complex commercial disputes and investigations during the quarter. In bankruptcy matters, we were active in disputes involving liability management transactions. In one such matter, the Serta Simmons Bedding litigation had a court ruling on July 7, awarding more than $400 million in damages and prejudgment interest to CRA's clients. In its ruling, the court specifically relied on the testimony of CRA senior consultant Marti Murray, calling her analysis more persuasive than the opposing expert. The implications of the Serta ruling have been discussed widely in the press, including multiple articles in The Wall Street Journal, Bloomberg Law, Law360 and elsewhere. In Q2, CRA's Forensic Services practice grew over 20% year-over-year and established a new high for quarterly revenue while responding to numerous types of crisis management events experienced by our clients. For example, when over 8,000 universities experienced an outage with Canvas software during a critical week of exams, our team was rapidly deployed to respond and review the information at risk to assist with getting the software back online. Elsewhere, CRA's Intellectual Property practice advised on multiple high-stakes litigation and valuation matters, covering a broad range of industry and legal forums. For example, CRA was engaged by a global smartphone manufacturer facing patent infringement claims in the Eastern District of Texas. The matter involved Wi-Fi and cellular hand-off features on the smartphone in question. CRA's engagement team performed multiple analyses to rebut the plaintiff's damages claim at trial. At trial, the jury rejected the plaintiff's claim of more than $100 million and awarded just $3 million, consistent with CRA's expert opinion at trial. In another matter, a CRA expert testified in high-stakes international arbitration involving a patent dispute between two leading telecommunication firms. The arbitration panel awarded the royalty rate that CRA's expert opined to, saving the client millions of dollars. During the second quarter, the Risk, Investigations & Analytics practice worked on a number of large investigative advisory and damage-related expert assignments as revenue grew more than 20% year-over-year. For example, a CRA team investigated and will serve as forensic accounting experts in a civil litigation regarding a fraudulent misrepresentation claim in the private aviation sector. As part of the assignment, the team performed document review, investigative research and analyzed bank account records and financial documentation to trace the flow of funds and substantiate the existence of alleged payments and liabilities owed. The team also investigated the defendants' representation related to assets sold to plaintiffs. Turning to our Management Consulting services, both the Energy and Life Sciences practices delivered revenue growth in excess of 20% year-over-year. CRA's Energy practice continued to achieve strong results across a diverse range of clients, including utilities, private equity investors, electric system operators and large energy consumers. During the second quarter, the practice advised the executive leadership team of one of the nation's largest utilities on the development of its Utility of the Future strategy, addressing the growth of distributed energy resources, rapidly increasing demand from data centers, and opportunities for new utility products and services. The practice was also selected by PJM, the electric system operator serving the mid-Atlantic and portions of the Midwest, for a multiyear engagement to develop enhanced data center load forecasts, as unprecedented demand growth creates new challenges for system planning and investment. In parallel, CRA's Energy practice continued to advise data center developers and operators on siting, power procurement and development strategies across the United States, while helping other large energy consumers navigate increasingly complex and rapidly evolving energy markets. In our Life Sciences practice, we continued to help our clients build their strategies across the life cycle at both the franchise and product level. For one large pharmaceutical multinational, we have been working with their R&D team to help find new opportunities in a broad disease category. CRA's efforts leveraged industry-specific AI tools to analyze markets and innovation dynamics, portfolio positions and recent licensing and acquisition activity to identify potential areas of focus. For another large pharmaceutical multinational, we are continuing to support their global launch strategy for a potential blockbuster oncology product. CRA's work focused on branded value propositions and message testing for health care professionals and patients. Overall, I'm grateful to all of my colleagues for their hard work during the second quarter in helping our clients address their most important challenges. To start fiscal 2026, the start of fiscal 2026 represents the best first half of revenue and non-GAAP EBITDA in CRA's history. In the first half of the year, on a constant currency basis relative to fiscal 2025, CRA generated total revenue of $408.8 million and non-GAAP EBITDA of $49.7 million, resulting in a margin of 12.2%. Given our strong first half results and healthy pipeline, we are increasing our annual revenue guidance and reaffirming our profit margin guidance. For full year 2026, on a constant currency basis relative to fiscal 2025, we expect revenue in the range of $805 million to $820 million, and non-GAAP EBITDA margin in the range of 12.0% to 13.0%. This new revenue guidance compares with the prior range of $785 million to $805 million. We expect that the constant currency adjustment will decrease CRA's reported annual revenue by approximately $2.5 million and CRA's reported annual EBITDA by less than $250,000 in fiscal 2026. This implies that the constant currency adjustment for the second half of fiscal 2026 will increase reported revenue by approximately $500,000 and reported EBITDA by $100,000. As previously reported, noncash forgivable loan amortization, which is reflected as an expense when presenting EBITDA metrics, is expected to increase in fiscal 2026 by approximately $15 million, reflecting investments in talent to drive profitable growth. Noncash forgivable loan amortization increased by more than $9 million in the first half of this year relative to the first half of fiscal 2025, implying an increase of slightly more than $5 million is expected during the second half of fiscal 2026 relative to the second half of fiscal 2025. Finally, as a reminder, fiscal 2026 returns to CRA's typical 52-week year, whereas fiscal 2025 contained an extra week in the fourth quarter and resulted in a 53-week year. We continue to be encouraged by the strong start to the year, supportive market trends and continued replenishing of our sales pipeline. However, we remain mindful that evolving geopolitical, global macroeconomic and business conditions can affect our business. With that, I'll turn the call over to Chad, and then Eric for a few additional comments. Chad?
Thanks, Paul. Hello, everyone. I want to update you on our capital and capital deployment during the quarter. We concluded the quarter with $21.4 million of cash and $219 million of borrowings under our revolving credit facility, resulting in net debt of $197.6 million. The borrowings were used to manage working capital needs during the first two quarters, including the funding of annual bonus payments as we have done in prior years. In addition to the normal bonus cycle, the second quarter of 2026 saw net cash outlays of $18.2 million for talent investments and $1.6 million for traditional capital expenditures. During the second quarter, we returned $31.4 million of capital to our shareholders, consisting of $3.6 million of dividend payments and $27.8 million for repurchases of approximately 193,000 shares at an average price of $144 per share. Year-to-date, we have spent $49.3 million repurchasing a total of 309,000 shares at an average price of $160 per share. This reflects the long-standing confidence of the Board and management team in the cash-generating ability of the business and their belief that the company's fundamental value exceeds the prevailing stock price. We currently have $16.6 million available under our share repurchase program. We concluded the second quarter of fiscal 2026 with total liquidity of $98.7 million, consisting of $21.4 million of cash and cash equivalents and a further $77.3 million of available capacity on our line of credit in place at quarter's end. Earlier today, we announced an increase and extension to CRA's existing credit facility as it approached the final year before maturity. The expanded facility will run for five years with an aggregate principal amount of up to $400 million, consisting of a $75 million term loan and a $325 million revolving credit facility, which includes a seasonal flex that provides CRA with the option to reduce the facility by $75 million during periods when working capital demands are lower. The expanded facility replaces CRA's existing credit facility which was scheduled to mature in August of 2027, and reflects both CRA's growth since the prior facility was established in 2022 and management's bullish views on CRA's prospects in the years ahead. With that, I'll turn the call over to Eric for a few final comments.
Thanks, Chad. As a reminder, more expansive commentary on our financial results is available on the Investor Relations section of our website under Prepared CFO remarks. Before we get to questions, let me provide a few additional metrics related to our performance in the second quarter of fiscal 2026. In terms of consultant headcount, we ended the quarter at 968, consisting of 161 officers, 581 other senior staff and 226 junior staff. This represents a 3.3% year-over-year increase from the 937 consultant headcount reported at the end of Q2 fiscal 2025. Non-GAAP selling, general and administrative expenses, excluding the 1.3% attributable to commissions to nonemployee experts, was 15.5% of revenue for the second quarter of fiscal 2026, compared with 16.3% a year ago. The effective tax rate for the second quarter of fiscal 2026 on a non-GAAP basis was 32.6%, compared with 29.0% on a non-GAAP basis for the second quarter of fiscal 2025. The increase is primarily due to an increase in nondeductible executive compensation, partially offset by a remeasurement of deferred tax assets related to changes in current year state apportionment. For the remainder of the year, we expect the effective tax rate to be in the range of 33% to 34%, resulting in a full year tax rate range of 32% to 33%. Turning to the balance sheet: DSO stood at 113 days at the end of the second quarter, compared with 100 days at the end of the first quarter of fiscal 2026. DSO in the second quarter consisted of 68 days of billed and 45 days of unbilled. That concludes our prepared remarks. We will now open the call for questions. Rob, please go ahead.
分析師問答
Our first question comes from Andrew Nicholas with William Blair.
First question on the management consulting strength in the quarter, which was roughly 25% to 26% growth. Can you unpack that a little more? What areas of that business are growing at very high rates? And could you speak to the sustainability or persistence of demand into that business line in particular?
Sure. Life Sciences and the Energy practice both grew in excess of 20% year-over-year. They delivered similar year-over-year growth in Q1, so this has been persistent for the last two or three quarters for both. Both practices are enjoying a nice inbound of new opportunities and converting those new opportunities at historically high conversion rates. So the near- to medium-term looks quite positive for both of those practices. Within Life Sciences, they're seeing both pricing and market access work and litigation-related matters, so there's a nice distribution across the practice. In the Energy practice, the utility industry in the United States is experiencing change like it has never seen before, so we're getting strong inbounds from utilities, private investors and tech companies. That demand doesn't seem to be dissipating. We're quite happy with what we've put in the bank for the first half, and we remain bullish in the second half for these two practices.
Thanks. On the antitrust business: the DOJ recently announced changes intended to accelerate some merger reviews and reduce information requests. How are you thinking about those changes and the potential impact on your business? Have you seen any impact to date?
To date, we haven't seen any impact either positive or negative. My understanding is the change is intended to make merger reviews more targeted and less burdensome, not to eliminate antitrust scrutiny. If reviews become more focused, it could actually increase the value of getting the economics right early in the proceedings.
If I can squeeze in a couple of modeling items. First, how should we think about the extra week in fiscal 2025? How much of a headwind is that and should we assume normal utilization in that extra week? Second, on the increased revolver, could you speak to interest expense and broader plans for using that revolver through year-end?
The updated revenue guidance midpoint implies pretty consistent quarterly revenue for CRA through 2026. I mentioned the extra week in Q4 of 2025 for modeling purposes. That extra week in 2025 was unusually heavy for holiday time, so on a growth rate basis it probably had about a 100 to 150 basis point impact beyond the straight annual value of an extra week. Regarding the new credit facility, we're excited to get it done. We are more than 40% larger as an enterprise since signing the prior facility in 2022 and experiencing accelerated growth. The expanded facility provides us maximum flexibility to fund intra-year operations. The $75 million term loan is minimal relative to our working capital needs.
Our next question comes from Marc Riddick with Sidoti & Company.
You mentioned broad-based strength and raised the guide. How are you viewing visibility now relative to historical levels, and what gives you comfort on the catalysts and drivers?
I'm bullish on CRA and where the portfolio sits. What gives me pause is that we're forecasting off levels we've never seen before — consecutive record quarters and years. The good news is we're seeing peak levels of new project opportunities and high conversion rates, so I feel good about how things are stacking up, but we don't have prior experience at these levels. That is the cost of being successful.
Utilization is 77%. Historically you've commented about levels approaching 80%. Can you discuss comfort levels for utilization ranges, how that factors into hiring trends, and whether you're hiring senior-level staff or university hires?
In 2024 and 2025 we didn't see net headcount expansion; instead we shifted capacity to areas that were growing. The revenue-generating capacity increased but headcount did not. In 2026 we're back to adding net heads — up 3.3% in Q2. If attrition stays consistent, we expect mid-single-digit expansion of heads by year-end. Medium-term, CRA wants to grow heads mid-single digits. With that headcount growth, we should be in the mid- to upper-70s utilization range. You will see variability in quarters two and three because junior resources return to school and we welcome new university hires, which creates transitional friction and can put downward pressure on utilization in those quarters. But on average for the year, mid- to upper-70s utilization is our view.
Can you discuss the international strength and drivers there? It has been strong for a while.
International performance has been outstanding. Life Sciences and our Antitrust & Competition Economics practice are performing exceptionally well in international markets. Importantly, this strength is organic — no group hires or acquisitions. Colleagues in Europe have developed internal talent and expanded market share. We're very pleased with their execution and the results.
Our next question comes from Kevin Steinke with Barrington Research.
You noted double-digit growth in Forensic Services, among other practices. Can you touch on the drivers of growth there?
A couple of quarters ago we talked about AI. AI is both a productivity enhancer and a demand amplifier. In forensics, AI makes CRA more efficient, but it also makes attackers more capable, increasing the frequency and complexity of cyber incidents. That dynamic has amplified demand for cyber incident response work in the Forensic Services practice, and that demand is not waning.
You also mentioned Intellectual Property and Finance growing double digits. Any particular drivers there?
In Intellectual Property, protection of property rights continues to be a high priority for businesses globally. Finance has been active in complex commercial disputes and investigations. Both practices are executing well and gaining share; Finance has now posted double-digit revenue growth for two consecutive quarters.
Can you provide an update on adding senior talent this year and how successful these hires have been in bringing existing books of business to CRA? How is the pipeline looking?
We welcomed nearly 30 new vice presidents in 2025, and through two quarters of 2026 they're ahead of expectations on ramp and revenue contribution. We're pleased with that. In-year hires typically contribute minimally to current-year guidance because it takes time to ramp, so we don't build substantial contributions from inorganic additions into the year in which they occur.
For those senior hires who had existing books of business, once they join CRA, are they able to increase their revenue generation relative to prior firms?
Yes. When senior colleagues join CRA, the goal is to provide a more fruitful platform so they can generate at higher levels than in prior institutions. We have a strong track record of that. Sometimes ramp is slowed by restricted covenants such as noncompetes or client non-solicitation, which often run roughly 12 months post-joining and can delay full contribution. Integration generally goes well, but covenants are the typical limiting factor.
We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Paul Maleh for closing comments.
I would like to thank you for joining us today. We appreciate your interest in CRA and the support you have provided the company over the years. We will be participating in investor meetings and conferences over the coming months and look forward to updating you on our progress on our third quarter call. This concludes today's call. Thank you, everyone.
This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.