Charles River Associates (CRA) Reports Financial Results for the Third Quarter Of 2020
Strength Across Services and Geographies Drives Growth in Revenue;
Reinstates Financial Guidance for Fiscal Year 2020;
Increases Quarterly Dividend by 13%
Key Third-Quarter Fiscal 2020 Highlights
- Revenue grew 5.3% year over year to
$121.8 million . - Utilization was 69%, while quarter-end headcount increased 11.5% year over year.
- Net income was
$5.4 million , or 4.4% of revenue, compared with$5.7 million , or 5.0% of revenue, in the third quarter of fiscal 2019; non-GAAP net income was$6.1 million , or 5.0% of revenue, compared with$7.9 million , or 6.9% of revenue, in the third quarter of fiscal 2019. - Earnings per diluted share were
$0.68 , compared with$0.71 in the third quarter of fiscal 2019; non-GAAP earnings per diluted share were$0.76 , compared with$0.98 in the third quarter of fiscal 2019. - Non-GAAP EBITDA was
$12.0 million , or 9.8% of revenue, compared with$12.6 million , or 10.9% of revenue, in the third quarter of fiscal 2019. - On a constant currency basis relative to the third quarter of fiscal 2019, revenue would have been lower by
$0.9 million , GAAP net income and earnings per diluted share would have been lower by$0.2 million and$0.02 , respectively. Non-GAAP net income, earnings per diluted share and EBITDA would have been lower by$0.2 million ,$0.02 per diluted share,$0.2 million , respectively. - CRA returned
$6.8 million of capital to its shareholders, consisting of$1.8 million of dividend payments and$5.0 million for share repurchases of approximately 110,000 shares.
Management Commentary and Financial Guidance
“Against a challenging economic backdrop, CRA again demonstrated its ability to generate strong cash flows, providing funds to support the growth of the business and return capital to shareholders,” said
“Building on a record fiscal 2019 and first half of fiscal 2020, CRA produced growth across both the legal & regulatory and management consulting lines of business. Many of our practices generated revenue growth year over year, led by double-digit growth in each of our Energy, Finance, Forensic Services, and Risk, Investigations & Analytics practices. Geographically, we experienced balanced growth across our North American and international operations.”
“Through the first three quarters of fiscal 2020, on a constant currency basis relative to fiscal 2019, we have increased revenue by 11.8% to
CRA does not provide reconciliations of its annual non-GAAP EBITDA margin guidance to GAAP net income margin because CRA is unable to estimate with reasonable certainty the revaluation of contingent consideration liabilities, unusual gains or charges, foreign currency exchange rates, and the resulting effect of these items, and of equity awards, on CRA’s taxes without unreasonable effort. These items are uncertain, depend on various factors, and may have a material effect on CRA’s results computed in accordance with GAAP. A reconciliation between the historical GAAP and non-GAAP financial measures presented in this release is provided in the financial tables at the end of this release.
Quarterly Dividend
On
Conference Call Information and Prepared CFO Remarks
CRA will host a conference call today at
In combination with this press release, CRA has posted prepared remarks by its CFO
About
Charles River Associates® is a leading global consulting firm specializing in economic, financial, and management consulting services. CRA advises clients on economic and financial matters pertaining to litigation and regulatory proceedings, and guides corporations through critical business strategy and performance-related issues. Since 1965, clients have engaged CRA for its unique combination of functional expertise and industry knowledge, and for its objective solutions to complex problems. Headquartered in
NON-GAAP FINANCIAL MEASURES
In this release, CRA has supplemented the presentation of its financial results calculated in accordance with
The adjustments made to the financial measures identified in this release as “non-GAAP” are as follows: for each of the periods presented, the adjustments exclude non-cash amounts relating to valuation changes in contingent consideration and related tax effects. This release also presents certain current fiscal period financial measures on a “constant currency” basis in order to isolate the effect that foreign currency exchange rate fluctuations can have on CRA’s financial results. These constant currency measures are determined by recalculating the current fiscal period local currency financial measure using the specified corresponding prior fiscal period’s foreign exchange rates. On a constant currency basis relative to the first three quarters of fiscal 2019, revenue would have been higher by
All of the non-GAAP financial measures referred to above should be considered in conjunction with, and not as a substitute for, the GAAP financial information presented in this release. EBITDA and the financial measures identified in this release as “non-GAAP” are reconciled to their GAAP comparable measures in the financial tables appended to the end of this press release. In evaluating these non-GAAP financial measures, note that the non-GAAP financial measures used by CRA may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
SAFE HARBOR STATEMENT
Statements in this press release concerning our future business, operating results and financial condition, including those concerning guidance on future revenue and non-GAAP EBITDA margin, the impact of the COVID-19 pandemic, our ability to effectively provide our services remotely, the impact of exchange rate fluctuations on our financial results, our expectations regarding continued growth, our expectations regarding the payment of any future quarterly dividends and the level and extent of any purchases under our share repurchase program, and statements using the terms “outlook,” “expect,” or similar expressions, are “forward-looking” statements as defined in Section 21 of the Exchange Act. These statements are based upon our current expectations and various underlying assumptions. Although we believe there is a reasonable basis for these statements and assumptions, and these statements are expressed in good faith, these statements are subject to a number of additional factors and uncertainties. Our actual performance and results may differ materially from the performance and results contained in or implied by the forward-looking statements made herein, due to many important factors. These factors include, but are not limited to, the possibility that the demand for our services may decline as a result of changes in general and industry specific economic conditions; the timing of engagements for our services; the effects of competitive services and pricing; our ability to attract and retain key employee or non-employee experts; the inability to integrate and utilize existing consultants and personnel; the decline or reduction in project work or activity; global economic conditions including less stable political and economic environments; the extent and duration of the impact of the COVID-19 pandemic on our operations and results, including the effects on the financial health of our clients, and the impact of the imposition of public health measures and travel, health-related, business and other restrictions; foreign currency exchange rate fluctuations; unanticipated expenses and liabilities; risks inherent in international operations; changes in tax law or accounting standards, rules, and regulations; our ability to collect on forgivable loans should any become due; and professional and other legal liability or settlements. Additional risks and uncertainties are discussed in our periodic filings with the
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|
|||||||||||||||||||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||||||||||||||||||
|
FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED |
|||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||
|
(IN THOUSANDS, EXCEPT PER SHARE DATA) |
|||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Fiscal Quarter Ended |
|
Fiscal Year-to-Date Period Ended |
|||||||||||||||||||||||||||
|
|
|
As a % of |
|
|
|
As a % of |
|
|
|
As a % of |
|
|
|
As a % of |
|||||||||||||||
| Revenues |
$ |
121,762 |
|
100.0 |
% |
$ |
115,686 |
|
100.0 |
% |
$ |
370,951 |
|
100.0 |
% |
$ |
332,108 |
|
100.0 |
% |
|||||||||
| Cost of services (exclusive of depreciation and amortization) |
|
88,304 |
|
72.5 |
% |
|
83,805 |
|
72.4 |
% |
|
269,462 |
|
72.6 |
% |
|
233,412 |
|
70.3 |
% |
|||||||||
| Selling, general and administrative expenses |
|
22,194 |
|
18.2 |
% |
|
22,449 |
|
19.4 |
% |
|
67,742 |
|
18.3 |
% |
|
68,929 |
|
20.8 |
% |
|||||||||
| Depreciation and amortization |
|
3,244 |
|
2.7 |
% |
|
2,527 |
|
2.2 |
% |
|
9,293 |
|
2.5 |
% |
|
7,696 |
|
2.3 |
% |
|||||||||
| Income from operations |
|
8,020 |
|
6.6 |
% |
|
6,905 |
|
6.0 |
% |
|
24,454 |
|
6.6 |
% |
|
22,071 |
|
6.6 |
% |
|||||||||
| Interest expense, net |
|
(277 |
) |
-0.2 |
% |
|
(424 |
) |
-0.4 |
% |
|
(1,011 |
) |
-0.3 |
% |
|
(954 |
) |
-0.3 |
% |
|||||||||
| Foreign currency gains (losses), net |
|
(217 |
) |
-0.2 |
% |
|
210 |
|
0.2 |
% |
|
1,103 |
|
0.3 |
% |
|
(379 |
) |
-0.1 |
% |
|||||||||
| Income before provision for income taxes |
|
7,526 |
|
6.2 |
% |
|
6,691 |
|
5.8 |
% |
|
24,546 |
|
6.6 |
% |
|
20,738 |
|
6.2 |
% |
|||||||||
| Provision for income taxes |
|
2,123 |
|
1.7 |
% |
|
952 |
|
0.8 |
% |
|
6,744 |
|
1.8 |
% |
|
4,754 |
|
1.4 |
% |
|||||||||
| Net income |
$ |
5,403 |
|
4.4 |
% |
$ |
5,739 |
|
5.0 |
% |
$ |
17,802 |
|
4.8 |
% |
$ |
15,984 |
|
4.8 |
% |
|||||||||
| Net income per share: | |||||||||||||||||||||||||||||
| Basic |
$ |
0.69 |
|
$ |
0.74 |
|
$ |
2.28 |
|
$ |
2.02 |
|
|||||||||||||||||
| Diluted |
$ |
0.68 |
|
$ |
0.71 |
|
$ |
2.23 |
|
$ |
1.94 |
|
|||||||||||||||||
| Weighted average number of shares outstanding: | |||||||||||||||||||||||||||||
| Basic |
|
7,771 |
|
|
7,769 |
|
|
7,780 |
|
|
7,903 |
|
|||||||||||||||||
| Diluted |
|
7,934 |
|
|
8,050 |
|
|
7,964 |
|
|
8,205 |
|
|||||||||||||||||
|
|
|||||||||||||||||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|||||||||||||||||||||||||||||
|
FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED |
|||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||
|
(IN THOUSANDS, EXCEPT PER SHARE DATA) |
|||||||||||||||||||||||||||||
| Fiscal Quarter Ended | Fiscal Year-to-Date Period Ended | ||||||||||||||||||||||||||||
2020 |
As a % of Revenue |
2019 |
As a % of Revenue |
2020 |
As a % of Revenue |
2019 |
As a % of Revenue |
||||||||||||||||||||||
| Revenues |
$ |
121,762 |
|
100.0 |
% |
$ |
115,686 |
|
100.0 |
% |
$ |
370,951 |
|
100.0 |
% |
$ |
332,108 |
|
100.0 |
% |
|||||||||
| Net income |
$ |
5,403 |
|
4.4 |
% |
$ |
5,739 |
|
5.0 |
% |
$ |
17,802 |
|
4.8 |
% |
$ |
15,984 |
|
4.8 |
% |
|||||||||
| Adjustments needed to reconcile GAAP net income to non-GAAP net income: | |||||||||||||||||||||||||||||
| Non-cash valuation change in contingent consideration |
|
905 |
|
0.7 |
% |
|
3,001 |
|
2.6 |
% |
|
1,901 |
|
0.5 |
% |
|
3,435 |
|
1.0 |
% |
|||||||||
| Tax effect on adjustments |
|
(238 |
) |
-0.2 |
% |
|
(815 |
) |
-0.7 |
% |
|
(508 |
) |
-0.1 |
% |
|
(931 |
) |
-0.3 |
% |
|||||||||
| Non-GAAP net income |
$ |
6,070 |
|
5.0 |
% |
$ |
7,925 |
|
6.9 |
% |
$ |
19,195 |
|
5.2 |
% |
$ |
18,488 |
|
5.6 |
% |
|||||||||
| Non-GAAP net income per share: | |||||||||||||||||||||||||||||
| Basic |
$ |
0.78 |
|
$ |
1.02 |
|
$ |
2.46 |
|
$ |
2.33 |
|
|||||||||||||||||
| Diluted |
$ |
0.76 |
|
$ |
0.98 |
|
$ |
2.40 |
|
$ |
2.25 |
|
|||||||||||||||||
| Weighted average number of shares outstanding: | |||||||||||||||||||||||||||||
| Basic |
|
7,771 |
|
|
7,769 |
|
|
7,780 |
|
|
7,903 |
|
|||||||||||||||||
| Diluted |
|
7,934 |
|
|
8,050 |
|
|
7,964 |
|
|
8,205 |
|
|||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
||||||||||||||||||||||||||||
|
FOR THE FISCAL QUARTERS AND FISCAL YEAR-TO-DATE PERIODS ENDED |
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
(IN THOUSANDS) |
||||||||||||||||||||||||||||
|
Fiscal Quarter Ended |
|
Fiscal Year-to-Date Period Ended |
||||||||||||||||||||||||||
|
|
|
As a % of |
|
|
|
As a % of |
|
|
|
As a % of |
|
|
|
As a % of |
||||||||||||||
| Revenues |
$ |
121,762 |
|
100.0 |
% |
$ |
115,686 |
|
100.0 |
% |
$ |
370,951 |
|
100.0 |
% |
$ |
332,108 |
|
100.0 |
% |
||||||||
| Net income |
$ |
5,403 |
|
4.4 |
% |
$ |
5,739 |
|
5.0 |
% |
$ |
17,802 |
|
4.8 |
% |
$ |
15,984 |
|
4.8 |
% |
||||||||
| Adjustments needed to reconcile GAAP net income to non-GAAP net income: | ||||||||||||||||||||||||||||
| Non-cash valuation change in contingent consideration |
|
905 |
|
0.7 |
% |
|
3,001 |
|
2.6 |
% |
|
1,901 |
|
0.5 |
% |
|
3,435 |
|
1.0 |
% |
||||||||
| Tax effect on adjustments |
|
(238 |
) |
-0.2 |
% |
|
(815 |
) |
-0.7 |
% |
|
(508 |
) |
-0.1 |
% |
|
(931 |
) |
-0.3 |
% |
||||||||
| Non-GAAP net income |
$ |
6,070 |
|
5.0 |
% |
$ |
7,925 |
|
6.9 |
% |
$ |
19,195 |
|
5.2 |
% |
$ |
18,488 |
|
5.6 |
% |
||||||||
| Adjustments needed to reconcile non-GAAP net income to non-GAAP EBITDA: | ||||||||||||||||||||||||||||
| Interest expense, net |
|
277 |
|
0.2 |
% |
|
424 |
|
0.4 |
% |
|
1,011 |
|
0.3 |
% |
|
954 |
|
0.3 |
% |
||||||||
| Provision for income taxes |
|
2,361 |
|
1.9 |
% |
|
1,767 |
|
1.5 |
% |
|
7,252 |
|
2.0 |
% |
|
5,685 |
|
1.7 |
% |
||||||||
| Depreciation and amortization |
|
3,244 |
|
2.7 |
% |
|
2,527 |
|
2.2 |
% |
|
9,293 |
|
2.5 |
% |
|
7,696 |
|
2.3 |
% |
||||||||
| Non-GAAP EBITDA |
$ |
11,952 |
|
9.8 |
% |
$ |
12,643 |
|
10.9 |
% |
$ |
36,751 |
|
9.9 |
% |
$ |
32,823 |
|
9.9 |
% |
||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| (IN THOUSANDS) | |||||||
|
|
|
|
|||||
| Assets | |||||||
| Cash and cash equivalents |
$ |
24,108 |
$ |
25,639 |
|||
| Accounts receivable and unbilled services, net |
|
157,684 |
|
144,410 |
|||
| Other current assets |
|
14,869 |
|
14,028 |
|||
| Total current assets |
|
196,661 |
|
184,077 |
|||
| Property and equipment, net |
|
64,886 |
|
61,295 |
|||
|
|
93,739 |
|
94,980 |
||||
| Right-of-use assets |
|
123,390 |
|
130,173 |
|||
| Other assets |
|
71,501 |
|
62,718 |
|||
| Total assets |
$ |
550,177 |
$ |
533,243 |
|||
| Liabilities and Shareholders’ Equity | |||||||
| Accounts payable |
$ |
16,574 |
$ |
26,069 |
|||
| Accrued expenses |
|
103,952 |
|
121,301 |
|||
| Current portion of lease liabilities |
|
14,551 |
|
12,847 |
|||
| Revolving line of credit |
|
38,000 |
|
- |
|||
| Other current liabilities |
|
24,105 |
|
11,193 |
|||
| Total current liabilities |
|
197,182 |
|
171,410 |
|||
| Non-current portion of lease liabilities |
|
141,331 |
|
146,551 |
|||
| Other non-current liabilities |
|
7,269 |
|
17,531 |
|||
| Total liabilities |
|
345,782 |
|
335,492 |
|||
| Total shareholders’ equity |
|
204,395 |
|
197,751 |
|||
| Total liabilities and shareholders’ equity |
$ |
550,177 |
$ |
533,243 |
|||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (IN THOUSANDS) | ||||||||
| Fiscal Year-to-Date Period Ended | ||||||||
2020 |
2019 |
|||||||
| Operating activities: | ||||||||
| Net income |
$ |
17,802 |
|
$ |
15,984 |
|
||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Non-cash items, net |
|
20,385 |
|
|
18,214 |
|
||
| Accounts receivable and unbilled services |
|
(13,042 |
) |
|
(10,956 |
) |
||
| Working capital items, net |
|
(35,797 |
) |
|
(43,149 |
) |
||
| Net cash used in operating activities |
|
(10,652 |
) |
|
(19,907 |
) |
||
| Investing activities: | ||||||||
| Purchases of property and equipment |
|
(15,742 |
) |
|
(12,548 |
) |
||
| Net cash used in investing activities |
|
(15,742 |
) |
|
(12,548 |
) |
||
| Financing activities: | ||||||||
| Issuance of common stock, principally stock options exercises |
|
1,667 |
|
|
2,006 |
|
||
| Borrowings under revolving line of credit |
|
77,000 |
|
|
54,000 |
|
||
| Repayments under revolving line of credit |
|
(39,000 |
) |
|
(18,000 |
) |
||
| Tax withholding payments reimbursed by shares |
|
(390 |
) |
|
(388 |
) |
||
| Cash paid on dividend equivalents |
|
(40 |
) |
|
(35 |
) |
||
| Cash dividends paid to shareholders |
|
(5,372 |
) |
|
(4,742 |
) |
||
| Repurchase of common stock |
|
(8,807 |
) |
|
(18,068 |
) |
||
| Net cash provided by financing activities |
|
25,058 |
|
|
14,773 |
|
||
| Effect of foreign exchange rates on cash and cash equivalents |
|
(195 |
) |
|
(513 |
) |
||
| Net decrease in cash and cash equivalents |
|
(1,531 |
) |
|
(18,195 |
) |
||
| Cash and cash equivalents at beginning of period |
|
25,639 |
|
|
38,028 |
|
||
| Cash and cash equivalents at end of period |
$ |
24,108 |
|
$ |
19,833 |
|
||
| Noncash investing and financing activities: | ||||||||
| Purchases of property and equipment not yet paid for |
$ |
3,923 |
|
$ |
3,461 |
|
||
| Purchases of property and equipment paid by a third party |
$ |
- |
|
$ |
126 |
|
||
| Asset retirement obligations |
$ |
155 |
|
$ |
427 |
|
||
| Right-of-use assets obtained in exchange for lease obligations |
$ |
2,601 |
|
$ |
37,298 |
|
||
| Right-of-use assets related to the adoption of ASC 842 |
$ |
- |
|
$ |
82,329 |
|
||
| Lease liabilities related to the adoption of ASC 842 |
$ |
- |
|
$ |
106,765 |
|
||
| Supplemental cash flow information: | ||||||||
| Cash paid for taxes |
$ |
5,933 |
|
$ |
6,078 |
|
||
| Cash paid for interest |
$ |
932 |
|
$ |
848 |
|
||
| Cash paid for amounts included in operating lease liabilities |
$ |
13,736 |
|
$ |
12,053 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20201029005649/en/
Chief Financial Officer
617-425-3505
crai@investorrelations.com
617-542-5300
Source: