• Revenue: Increased by 13.7% year over year to $167.7 million.
• Consultant Utilization: Improved to 76% year over year.
• Legal and Regulatory Services Revenue: Increased nearly 20% year over year.
• Non-GAAP Net Income Earnings per Diluted Share and EBITDA: Each increased by more than 50% year over year.
• Antitrust and Competition Economics Revenue: Grew by nearly 30% year over year.
• Total Revenue for First Three Quarters of Fiscal 2024: $509.4 million.
• Non-GAAP EBITDA for First Three Quarters of Fiscal 2024: $65.6 million with a margin of 12.9%.
• Cash and Cash Equivalents: $24.5 million at the end of the third quarter.
• Net Debt: $35.5 million.
• Capital Expenditures: $3 million in the third quarter.
• Dividends: $2.9 million delivered to shareholders in the third quarter.
• Consultant Headcount: 978, a 3.6% decrease compared to the previous year.
• Non-GAAP SG&A Expenses: 16.2% of revenue for the third quarter.
• Effective Tax Rate: 28.5% on a non-GAAP basis for the third quarter.
• Days Sales Outstanding (DSO): 122 days at the end of the third quarter.
• Total Liquidity: $160.4 million at the end of the third quarter.

• Warning! GuruFocus has detected 3 Warning Signs with LANC.

Release Date: October 31, 2024

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

Positive Points

• CRA International Inc (NASDAQ:CRAI) reported a 13.7% year-over-year increase in revenue for Q3 2024, reaching $167.7 million, marking the highest Q3 revenue in the company's history.
• The company achieved record profitability in Q3 2024, with non-GAAP net income, earnings per diluted share, and EBITDA each increasing by more than 50% year-over-year.
• Seven practices within CRAI experienced revenue growth year-over-year, with five practices growing by more than 10%, including Antitrust and Competition Economics, Energy, Financial Economics, Intellectual Property, and Risk Investigations and Analytics.
• The Antitrust and Competition Economics practice saw nearly 30% revenue growth year-over-year, driven by strong demand for antitrust and merger-related services.
• CRAI reaffirmed its revenue and profit guidance for the full year of fiscal 2024, expecting revenue in the range of $670 to $685 million and a non-GAAP EBITDA margin of 12.2% to 13.0%.

Negative Points

• Consultant headcount decreased by 3.6% compared to the end of Q3 2023, with a total of 978 consultants, indicating potential challenges in maintaining or expanding workforce capacity.
• The Life Sciences practice experienced a modest decline in revenue year-over-year during Q3 2024, suggesting challenges in this segment.
• The effective tax rate for Q3 2024 on a non-GAAP basis was 28.5%, significantly higher than the 18.0% rate in Q3 2023, impacting net income.
• Days Sales Outstanding (DSO) increased to 122 days at the end of Q3 2024, up from 110 days at the end of Q2 2024, indicating potential delays in cash collection.
• Net debt stood at $35.5 million at the end of Q3 2024, reflecting ongoing borrowings and financial obligations.

Q & A Highlights

Q: Can you provide an update on talent and headcount, especially considering the strong utilization this quarter? Do you have enough staff for the current demand? A: Paul A. Maleh, CEO: We made headcount adjustments in Q2, impacting about 80 consultants, which affected year-over-year comparisons. We are directing resources to busier areas with growth potential. Legal and regulatory areas are growing faster than management consulting, which typically runs at lower utilization. We are open to hiring but are being prudent with timing and additions.

Q: How is the demand in management consulting, given reports of pressure on strategy-focused work? A: Paul A. Maleh, CEO: In Life Sciences, we see stabilization with a sawtooth pattern in performance, waiting to capitalize on growth opportunities. The Energy practice is experiencing strong growth, hiring aggressively, and seeing strong demand, unlike stabilization or contraction.

Q: Can you discuss the performance and trends in the Antitrust and Competition Economics practice? A: Paul A. Maleh, CEO: The practice is performing exceptionally well, growing significantly in both dollar and percentage terms. This growth is driven by replenishing the pipeline and expanding projects, not just from older projects continuing. Their performance is remarkable, with strength building on strength.

Q: What are the trends in lead flow and conversion rates? A: Paul A. Maleh, CEO: Lead flow grew by 8%, and we returned to historical norms, converting roughly two-thirds of leads into revenue-generating projects. This consistent conversion rate has been maintained for about 12 months, supporting our confidence in reaffirming guidance.

Q: How do you view the regulatory environment and potential impacts on demand trends with the upcoming US election? A: Paul A. Maleh, CEO: Each administration presents different demand drivers and offsets. CRA has operated successfully under both administrations, and we are well-positioned to adjust to client needs. The strength of our service portfolio will allow us to adapt, irrespective of the election outcome.

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