crai-20221001

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________________________________________

FORM 10-Q

________________________________________________________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-24049

________________________________________________________________________________________

CRA International, Inc.

(Exact name of registrant as specified in its charter)

________________________________________________________________________________________


			Massachusetts			04-2372210
			(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
			200 Clarendon Street, Boston, MA			02116-5092
			(Address of principal executive offices)			(Zip Code)

(617) 425-3000

(Registrant’s telephone number, including area code)

________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, no par value

CRAI

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Outstanding at October 28, 2022

Common Stock, no par value per share

7,134,885 shares

Table of Contents

CRA International, Inc.

INDEX


PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	3
	Condensed Consolidated Statements of Operations (unaudited)—Fiscal Quarters and Fiscal Year-to-Date Periods Ended October 1 , 2022 and October 2 , 2021	3
	Condensed Consolidated Statements of Comprehensive Income (unaudited)—Fiscal Quarters and Fiscal Year-to-Date Periods Ended October 1 , 2022 and October 2 , 2021	4
	Condensed Consolidated Balance Sheets (unaudited)—October 1 , 2022 and January 1, 2022	5
	Condensed Consolidated Statements of Cash Flows (unaudited)—Fiscal Year-to-Date Periods Ended October 1 , 2022 and October 2 , 2021	6
	Condensed Consolidated Statements of Shareholders’ Equity (unaudited)—Fiscal Year-to-Date Periods Ended October 1 , 2022 and O ctober 2 , 2021	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	26
ITEM 4.	Controls and Procedures	26

PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	27
ITEM 1A.	Risk Factors	27
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
ITEM 3.	Defaults Upon Senior Securities	28
ITEM 4.	Mine Safety Disclosures	28
ITEM 5.	Other Information	28
ITEM 6.	Exhibits	28
Signatures		29

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)


	Fiscal Quarter Ended				Fiscal Year-to-Date Period Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Revenues	$	148,441	$	136,412	$	445,925	$	431,167
Costs of services (exclusive of depreciation and amortization)	102,267		95,980		309,403		306,396
Selling, general and administrative expenses	28,246		24,490		82,026		71,740
Depreciation and amortization	3,034		3,141		9,060		9,657
Income from operations	14,894		12,801		45,436		43,374
Interest expense, net	(667)		(183)		(1,343)		(791)
Foreign currency gains (losses), net	1,667		235		3,566		(253)
Income before provision for income taxes	15,894		12,853		47,659		42,330
Provision for income taxes	4,017		1,908		12,713		9,318
Net income	$	11,877	$	10,945	$	34,946	$	33,012
Net income per share:
Basic	$	1.66	$	1.48	$	4.81	$	4.42
Diluted	$	1.63	$	1.44	$	4.72	$	4.31
Weighted average number of shares outstanding:
Basic	7,119		7,375		7,247		7,440
Diluted	7,246		7,560		7,376		7,643

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)


	Fiscal Quarter Ended				Fiscal Year-to-Date Period Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net income	$	11,877	$	10,945	$	34,946	$	33,012
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax	(3,806)		(1,028)		(8,838)		(1,275)
Comprehensive income	$	8,071	$	9,917	$	26,108	$	31,737

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share data)


	October 1, 2022		January 1, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	24,093	$	66,130
Accounts receivable, net of allowances of $2,903 and $3,256, respectively	133,895		116,962
Unbilled services, net of allowances of $1,171 and $1,364, respectively	74,955		45,095
Prepaid expenses and other current assets	13,993		10,589
Forgivable loans	10,453		10,571
Total current assets	257,389		249,347
Property and equipment, net	46,967		53,612
Goodwill	89,036		88,936
Intangible assets, net	7,468		4,181
Right-of-use assets	98,425		110,475
Deferred income taxes	9,449		9,319
Forgivable loans, net of current portion	43,290		38,020
Other assets	2,255		1,470
Total assets	$	554,279	$	555,360
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	26,387	$	23,511
Accrued expenses	132,641		156,314
Deferred revenue and other liabilities	7,327		12,821
Current portion of lease liabilities	15,478		14,337
Current portion of deferred compensation	4,204		6,103
Revolving line of credit	45,000		—
Total current liabilities	231,037		213,086
Non-current liabilities:
Deferred compensation and other non-current liabilities	12,783		10,947
Non-current portion of lease liabilities	108,936		124,464
Deferred income taxes	848		1,029
Total non-current liabilities	122,567		136,440
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding	—		—
Common stock, no par value; 25,000,000 shares authorized; 7,108,853 and 7,362,703 shares issued and outstanding, respectively	1,029		—
Retained earnings	218,434		215,784
Accumulated other comprehensive loss	(18,788)		(9,950)
Total shareholders’ equity	200,675		205,834
Total liabilities and shareholders’ equity	$	554,279	$	555,360

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)


	Fiscal Year-to-Date Period Ended
	October 1, 2022		October 2, 2021
OPERATING ACTIVITIES:
Net income	$	34,946	$	33,012
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of effect of acquired business:
Depreciation and amortization	9,060		9,657
Right-of-use asset amortization	10,260		9,711
Deferred income taxes	(157)		(1,357)
Share-based compensation expense	3,567		2,830
Bad debt expense (recovery)	(345)		44
Unrealized foreign currency remeasurement (gains) losses, net	(662)		(220)
Changes in operating assets and liabilities:
Accounts receivable	(17,989)		3,172
Unbilled services	(30,864)		(25,213)
Prepaid expenses and other current assets, and other assets	(1,883)		(2,850)
Forgivable loans	(7,361)		9,304
Incentive cash awards	4,863		5,030
Accounts payable, accrued expenses, and other liabilities	(26,336)		(17,668)
Lease liabilities	(12,114)		(11,549)
Net cash provided by (used in) operating activities	(35,015)		13,903
INVESTING ACTIVITIES:
Purchases of property and equipment	(2,999)		(1,730)
Consideration paid for acquisition, net	(10,185)		—
Net cash used in investing activities	(13,184)		(1,730)
FINANCING ACTIVITIES:
Issuance of common stock, principally stock option exercises	760		5,005
Borrowings under revolving line of credit	124,000		72,000
Repayments under revolving line of credit	(79,000)		(66,000)
Payments for debt issuance costs	(1,008)		—
Tax withholding payments reimbursed by shares	(1,002)		(588)
Cash paid for contingent consideration	—		(2,357)
Cash dividends paid	(6,860)		(5,903)
Repurchase of common stock	(27,630)		(39,977)
Net cash provided by (used in) financing activities	9,260		(37,820)
Effect of foreign exchange rates on cash and cash equivalents	(3,098)		(365)
Net decrease in cash and cash equivalents	(42,037)		(26,012)
Cash and cash equivalents at beginning of period	66,130		45,677
Cash and cash equivalents at end of period	$	24,093	$	19,665

Noncash investing and financing activities:
Increase (decrease) in accounts payable and accrued expenses for property and equipment	$	(201)	$	(7)

Right-of-use assets obtained in exchange for lease obligations	$	2,146	$	1,751
Restricted common stock issued for contingent consideration	$	—	$	2,250

Supplemental cash flow information:
Cash paid for taxes	$	11,407	$	12,484
Cash paid for interest	$	1,026	$	528
Cash paid for amounts included in operating lease liabilities	$	15,864	$	15,556

See accompanying notes to the condensed consolidated financial statements.

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CRA INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE FISCAL YEAR-TO-DATE PERIOD ENDED OCTOBER 1, 2022 (unaudited)

(in thousands, except share data)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares Issued	Amount
BALANCE AT JANUARY 1, 2022	7,362,703	$	—	$	215,784	$	(9,950)	$	205,834
Net income	—	—		11,426		—		11,426
Foreign currency translation adjustment	—	—		—		(1,172)		(1,172)
Exercise of stock options	14,552	341		—		—		341
Share-based compensation expense	—	1,037		—		—		1,037
Restricted shares vesting	29,558	—		—		—		—
Redemption of vested employee restricted shares for tax withholding	(10,163)	(897)		—		—		(897)
Shares repurchased	(56,665)	(481)		(4,475)		—		(4,956)
Accrued dividends on unvested shares	—	—		(11)		—		(11)
Cash dividends paid ($0.31 per share)	—	—		(2,377)		—		(2,377)
BALANCE AT APRIL 2, 2022	7,339,985	$	—	$	220,347	$	(11,122)	$	209,225
Net income	—	—		11,643		—		11,643
Foreign currency translation adjustment	—	—		—		(3,860)		(3,860)


Share-based compensation expense	—	1,041		—		—		1,041
Restricted shares vesting	3,630	—		—		—		—
Redemption of vested employee restricted shares for tax withholding	(921)	(78)		—		—		(78)
Shares repurchased	(211,345)	(963)		(16,711)		—		(17,674)
Accrued dividends on unvested shares	—	—		(52)		—		(52)
Cash dividends paid ($0.31 per share)	—	—		(2,259)		—		(2,259)
BALANCE AT JULY 2, 2022	7,131,349	$	—	$	212,968	$	(14,982)	$	197,986
Net income	—	—		11,877		—		11,877
Foreign currency translation adjustment	—	—		—		(3,806)		(3,806)

Exercise of stock options	19,476	419		—		—		419
Share-based compensation expense	—	1,489		—		—		1,489
Restricted shares vesting	9,843	—		—		—		—
Redemption of vested employee restricted shares for tax withholding	(291)	(27)		—		—		(27)
Shares repurchased	(51,524)	(852)		(4,148)		—		(5,000)
Accrued dividends on unvested shares	—	—		(39)		—		(39)
Cash dividends paid ($0.31 per share)	—	—		(2,224)		—		(2,224)
BALANCE AT OCTOBER 1, 2022	7,108,853	$	1,029	$

SEC Form 10-Q filed by CRA International Inc.