Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CRA International Inc (NASDAQ:CRAI) achieved a 10.2% increase in revenue for fiscal 2024, marking the seventh consecutive year of record annual revenue.
• The company posted record profits with net income, earnings per diluted share, and EIA each growing faster than revenue, exceeding 20% year over year.
• Seven of CRAI's 11 practices grew their top lines in Q4, with energy, finance, and intellectual property delivering double-digit revenue growth.
• The company ended the quarter with a strong consulting headcount utilization of 78%, up from 73% in the previous year.
• CRAI's fiscal 2024 adjusted net cash flows from operations increased by 13% year over year to $92.5 million, demonstrating strong cash flow generation.

Negative Points

• Consultant headcount decreased by 5.8% compared to the previous year, indicating potential challenges in talent retention or recruitment.
• The effective tax rate for Q4 of fiscal 2024 increased to 30.9% from 26.1% in the previous year, impacting net income.
• Non-gap selling, general, and administrative expenses remained high at 15.9% of revenue for Q4, only slightly down from the previous year.
• The company faces ongoing challenges in matching supply and demand for services, particularly in legal and regulatory sectors.
• Uncertain global macroeconomic, business, and political conditions pose risks to CRAI's business outlook for fiscal 2025.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with CHRRD.

Q: Can you discuss the high utilization level experienced in Q4 and its impact on headcount expectations for 2025? A: Paul Malley, CEO, explained that CRA is constantly trying to match supply and demand for services. In 2024, targeted actions were taken to correct excess capacity in some areas. Legal and regulatory services, which operate at higher utilization, are growing faster than management consulting, contributing to the increased utilization rate. Headcount growth is expected to align with revenue growth in the medium to long term.

Q: How do you view the outlook for 2025, particularly for practices like antitrust and competition economics and life sciences? A: Paul Malley noted that the 2025 outlook is strong, building on record highs in 2024. The portfolio offers opportunities for solid and profitable growth. While competition has been a steady contributor, there is an expectation for other practices, such as life sciences and energy, to grow at faster rates.

Q: What are the factors influencing the non-GAAP EBITDA margin guidance of 12.0% to 13.0% for fiscal 2025? A: Paul Malley highlighted that CRA has been making gains in profitability over the years. The guidance reflects confidence in maintaining these gains without giving them back, despite potential cost management challenges and portfolio composition changes. The margin range is consistent with previous guidance.

Q: Are there any concerns about the impact of the new administration on business, particularly regarding regulatory enforcement and tariffs? A: Paul Malley stated that it's too early to determine the impact of the new administration. While M&A activity was low in January, overall market expectations remain positive. Uncertainty can delay expenditures, but no significant hesitancy has been observed yet.

Q: How is CRA managing talent acquisition and retention, especially in light of market disruptions? A: Paul Malley explained that CRA is experiencing strong retention rates and is focused on hiring wisely to place capacity in the right areas. The firm is actively working to provide an attractive environment for existing and prospective hires, aiming to be a net positive in talent acquisition despite market disruptions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.