CRA International, Inc. Stock

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, 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 8 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 and analytics posted double-digit revenue growth. While the antitrust and 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 and regulatory services increased by 10.1%. This growth was supported in trends in the broader legal market as total case filings and total core 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 the largest quarter of worldwide M&A activity on record.

Against this backdrop, CRA's antitrust and 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 2 category-defining platforms to advance a new area -- 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 prejudging 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, Law 360 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 forms. For example, CRA was engaged by a global smartphone manufacturer facing patent infringement claims in the Eastern District of Texas. The matter involved WiFi and cellular hand-off features on the smartphone and questions. CRA's engagement team performed multiple analysis to rebut the plaintiff's damages claim, a trial -- damages claim. 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 2 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 and 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 defendant's representation related to assets sold to plaintiffs.

Turning to our management consulting services. Both the energy and life sciences practice 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 fighting power procurement and the 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 leverage 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 and 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 2 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 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 in extension to CRA's existing credit facility as it approached the final year before maturity. The expanded facility will run for 5 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 prospect in the years ahead.

With that, I'll turn the call over to Eric for a few final comments. Eric?

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 the 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.

[Operator Instructions] Our first question comes from Andrew Nicholas with William Blair.

First question was just on the -- thanks, Paul. The management consulting strength in the quarter was really impressive. I think it was 25%, 26% growth. Can you unpack that a little bit more? What are the areas of that business that are presumably growing at really, really high rates? And maybe if you could speak to the sustainability, maybe not of that growth, but just of persistent demand into that business line in particular.

Sure. So life sciences and the energy practice both grew in excess of 20% year-over-year. I think they delivered similar type of year-over-year growth in Q1. So it has been persistent now for the last, let's say, 2 or 3 quarters for both.

The other thing I could add in terms of expected persistence is that they're both enjoying nice inbound of new opportunities and converting those new opportunities at historically high conversion rates there. So the near to medium term looks quite positive for both of those practices.

Within life sciences, they're enjoying both pricing and market access work and also work on their litigation-related matters. So really nice distribution even across that practice. And in the energy practice, the utility industry right now in the United States is experiencing change like it has never seen before. So we're getting a large degree of inbounds, as I mentioned, from the utilities, from private investors, from tech companies on that. And that doesn't seem to be dissipating or declining by any means [ for it ].

So quite happy with what we put in the bank for the first half, and we remain bullish in the second half for those 2 practices.

Perfect. That's helpful. And then on the antitrust business, I think the DOJ recently announced changes with the goal of, I think, accelerating some of the merger reviews, reduce some information requests. Just wondering how you're thinking about those changes and the potential impact on your business and whether or not you've seen any impact to date from those changes.

So I will start with the last question. To date, we haven't seen any kind of impact, either positive or negative, I would say, at this stage. My understanding is that the change is intended to make merger reviews more targeted and less burdensome on it. It's not to eliminate antitrust scrutiny. So with that said, if the reviews become more focused, it can actually increase the value of getting the economics right early on in the proceedings.

And then if I could just kind of squeeze in a couple of modeling items. I guess 2 part or 1 on the extra week. How should we think about the potential headwind there? I know it's obviously at the at the end of the year, so I'm not sure whether or not to assume normal utilization there or if it's a little bit of a lighter week that got added last quarter.

And then on the increased revolver, if you could just kind of speak to interest expense and your broader plans for leveraging that revolver through year-end.

Sure. So the updated revenue guidance, if you look at the midpoint of the range, really implies a pretty consistent quarterly revenue for CRA through 2026. I raised the extra week in Q4 of 2025 just in case people want to do their modeling in terms of year-over-year growth rates. The extra week in 2025 was unusually heavy for holiday time. So I would say on a growth rate basis, it probably had about 100 to 150 basis point impact, and not just the straight annual value -- average annual value of an extra week on that.

And then I think you were asking me about the new credit facility.

Interest expense Yes.

Sure. We're really excited to get this done, right? It's been 4 years. We're entering into the fifth year of the term that we signed back in 2022. We are more than 40% larger as an enterprise during that time. And if I do say so, we are experiencing a period of accelerated growth. So the Board, management, we wanted to make sure to maintain maximum flexibility to help us fund the intra-year operations of the firm with it.

And the term component of that was just really one that assisted us and our banking partners in providing that maximum flexibility. But the $75 million is pretty minimal in the grand scheme of our working capital needs.

Our next question comes from Marc Riddick with Sidoti & Company.

So I wanted to start with the certainly broad-based strength that you're seeing in a lot of areas. I was wondering if you could talk a little bit about how you're viewing the visibility. Certainly, there is a comfort level as far as in raising the guide. I guess maybe relative to what you've seen historically, Paul, can you talk a little bit about the level of visibility that you have currently and comfort levels of those catalysts and drivers?

So I'm pretty bullish as -- with respect to CRA and with respect to where the portfolio sits and what they've been delivering on that. If I were to say what is giving me any pause, is that every quarter, I am trying to forecast off of a level that we've never achieved before. Never achieved on the financial results that we're reporting, right, 8 consecutive years, continue to have "This quarter is a record. That quarter is a record." So we are forecasting off peaks. Now the good news is I'm also experiencing peak levels of new project opportunities and new high levels of new projects being converted to revenue-generating assignments there.

So I feel good as to where things are stacking up, but I can't say we have had experience at these levels. Thus is the cost of being successful, I guess.

And that actually kind of leads me to sort of the next part of this, I guess, is we're seeing the strength of utilization of 77%, and I know normally, historically, I know you've had some commentary as -- if you are approaching 80% or so. So I was maybe wondering if you could spend some time sort of discussing that and comfort levels as to utilization levels and ranges that you would be comfortable with and maybe sort of how that might play into hiring trends, whether that's on a senior level or accelerating college students or the like.

Sure. A lot there. Let me try to see if I could address it.

Sorry, I kept going there for a bit.

No worries. In 2024 and 2025, we did not see any net expansion really of our headcount. What we were doing during those years is moving capacity from one part of the organization that maybe wasn't delivering at revenue levels that we would have expected, to areas that are growing and in need of more resources.

So the revenue-generating capacity, the firm increased, but not necessarily the head count. We made a lot of progress in that portfolio optimization where, to the point in 2026, we're back to adding net heads to the portfolio. We're up 3.3% in Q2, and if attrition stays consistent with what we've been observing, I think we'll be in that mid-single-digit expansion of heads by year-end. But more to come on that front.

With respect to going forward, medium term, I've always said that headcount has to move -- or revenue moves consistently with headcount expansion. I think CRA in the medium term wants to be growing heads mid-single digits on it.

With respect to the utilization, I believe that even at headcount growth in the mid-single digits, we should be in the mid to upper 70s on the utilization front. You're going to always get some variability on the utilization front, particularly, say, during quarters 2, quarters 3. Why is that? Because we are having both some of our junior resources heading back to school and also welcoming a lot of new university hires. So that transitional friction sometimes puts downward pressure on the utilization in those particular quarters. But on average, for the year, our feeling of mid to upper 70s utilization holds true.

Great. And then, I guess, maybe last one for me, [ I just want you to ] talk a little bit about strength internationally and some of the drivers there, and if there are some things under the hood that maybe we don't get to discuss as much about. But that international has been pretty good for a bit now and so I was wondering if you could talk a little bit about that strength there.

It's been more than pretty good. It's been really amazing, quite frankly. When I see the numbers, I turn to my colleagues and I say, is this right? Because a couple of things to talk about the strength. One, it's life sciences and it's our antitrust and competition economics practice, both killing it in our international operations.

The second thing I will highlight is it's all organic, right? There's been no group hires, there's been no acquisitions. This is my colleagues doing a phenomenal job to develop the people internal in their pyramid, to raise them to revenue-generating levels and expanding their market share. I can't tell you at what level, but I'm pretty sure European consulting operations aren't growing in the 30% to 40% range.

So we're pretty pleased. And all the credit goes to my colleagues, both in the life sciences and the competition practice in Europe.

Our next question comes from Kevin Steinke with Barrington Research.

I wanted to start off by asking about some of your other practices that maybe we haven't touched on as much today, but besides the antitrust and competition economics and life sciences, which are 2 of your largest practices, you also noted double-digit growth in forensic services, which is among your top 3 largest practices. I think that continues the trend that you also experienced in the first quarter. So maybe can you touch on the drivers of growth there.

Sure. A couple of quarters ago, we talked about the impact of AI, and I'm regularly asked about how AI is affecting our business. And we used a few words that I think best captures what's going on at CRA, and that AI is a productivity enhancer and a demand amplifier. Being a demand amplifier doesn't mean that this is all revenue that we have created because we use AI tools. Sometimes it's the complexity that AI is introducing into our markets.

For example, in forensics, AI makes CRA more efficient, makes corporate America more efficient. It also makes the hackers a lot better at causing havoc at companies across the globe. So it's hard to say that AI hasn't had this perverse impact on demand in the cyber incident response work for the forensic practice. So they're seeing a surge there. They're seeing many of these hackers quite sophisticated in the use of these tools, and it does not seem to be waning right now.

Great. You also mentioned intellectual property and finance is growing double-digit in the quarter? I mean, I guess any drivers you might highlight in terms of the demand picture there right now in those practices?

I can't really highlight. We have talked about in the intellectual property space the whole concept of property rights and protection of those rights. That's going to continue to be a high-priority item for businesses around the globe, and we're seeing just that happen. I can't point to any particular micro-driver there, or finance. They're just doing a good job getting in the marketplace and getting their share or better of the cases out there.

I think this is finance's second quarter in a row of posting double-digit revenue growth. So the consistency and the persistence that my colleagues are demonstrating really should be commended.

Okay. Great. In terms of adding senior talent, just if you could provide an update on maybe what your success has been on that front thus far this year in terms of bringing on senior talent with existing books of business and how that might be contributing to your outlook for this year, and then just what the pipeline looks like as well.

Yes. When talking about new senior talent, I have to start with the nearly 30 new vice presidents that we welcomed into CRA during 2025. We're thrilled with our new colleagues, and we're pretty excited that, to date, through 2 quarters of 2026, they're ahead of expectations with respect to their ramp and revenue contribution. So really happy with that. And there's no reason that that ramp should not continue in the quarters ahead. So we're thrilled with that contribution.

We were able to add some senior level resources during Q1 and Q2. With respect to the guidance, usually, in-year hires are expected to contribute minimally to that current year, because we know it takes a little time for the ramp of those individuals and then to enjoy their full contribution. So I don't build in contributions from inorganic additions typically when I'm in that year.

Right. That makes sense. Okay. Maybe as you mentioned the 30 new vice presidents brought in, in 2025, assuming a fair number of those had existing books of business already, what's the outlook for them once they get on to the CRA platform in terms of are they able to increase their revenue generation as part of your firm relative to what they were able to do before? It seems like in the past, that's been kind of a key part of the organic growth story.

Absolutely has been a key part of the organic growth. It's not -- when we talk about organic growth, it's not just the same-store sales expansion within the business. It's also making sure we provide a more fruitful platform for our new senior colleagues to integrate into CRA. And we're pretty proud of the track record that once these senior colleagues get inside the CRA platform, they generate at levels higher than they experienced in prior professional institutions.

So that's the goal, right? You try to have a nice balanced contribution between the company and the individual. And I think my practice colleagues have done a really good job at that, irrespective of whether it's in legal, regulatory and management consulting.

Typically, the things that sometimes slow ramp is many of these senior colleagues have restricted covenants, whether they are straight out noncompetes or non-solicitation of clients. So they have to burn through many of those covenants before they get to historical levels of ramp. So it's not as much the integration at times, but more as to the restrictions that typically run about 12 months post joining CRA.

All right. That makes sense. Well, and congratulations on outstanding results.

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 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.

Good day, everyone, and welcome to Charles River Associates First 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 to 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. CRA continued its strong performance into the first quarter of fiscal 2026 as revenue increased by 10.5% year-over-year to $201 million. This represents the highest quarterly revenue in the company's history, besting the previous record set by the fourth quarter of fiscal 2025. Broad-based contributions drove the quarter's strong performance with 8 practices growing year-over-year. 4 practices, Energy, Finance, Forensic Services and Life Sciences posted double-digit revenue growth, while the Antitrust & Competition Economics practice posted a new high for quarterly revenue.

We generated growth across our geographies with our North American operations increasing revenue by 8.5% and our international operations expanding 20.3% year-over-year. For the company as a whole, consultant headcount increased 2.5% compared to the first quarter of 2025. Consultant utilization improved on a year-over-year basis to 77%. The increase in consultant headcount and utilization were supported by the continued replenishing of our sales pipeline, average weekly project lead flow and new project originations, each set quarterly records and posted double-digit growth relative to the first quarter of 2025.

We continue to manage the business effectively during the first quarter, generating $23.2 million of non-GAAP EBITDA or 11.5% of revenue. As a reminder, historically, the first quarter is disproportionately affected by higher employee-related benefit costs and taxes due to the payment of annual bonuses. Also embedded in the first quarter EBITDA figure is noncash amortization of forgivable loans of $13.8 million or 6.9% of revenue. This represents an increase of 4.8% -- $4.8 million or 53% year-over-year, which is consistent with our expectations and prior commentary when establishing our annual profit guidance for fiscal 2026.

I would now like to spend a few minutes highlighting the markets for our services and some of the projects delivered during the first quarter. Revenue in the first quarter from CRA's legal and regulatory services increased 11.5%. This growth was in line with the broader legal market as total case filings and total court judgments increased 8% and 13%, respectively, compared to the first quarter of 2025.

Turning to the M&A market. Worldwide M&A activity totaled $1.2 trillion during the first quarter of 2026, an increase of 27% compared to prior year levels. This represents the strongest opening quarter for dealmaking since 2021 and the third consecutive quarter surpassing $1 trillion. Against this backdrop, CRA's Antitrust & Competition Economics practice delivered a record quarter, capitalizing on ongoing merger-related activity and continued demand for antitrust services.

During the quarter, CRA's competition practice was jointly retained in a merger between 2 of the largest North American distributors of janitorial, sanitation and food services products. CRA analyzed the merger's potential competitive impact by locally -- by locality and across many customer verticals. Leveraging the party sales and bidding data, combined with industry-level and public data, CRA designed, prepared and presented multiple empirical analyses to the Federal Trade Commission, culminating in the agency's unconditional clearance of the transaction.

In another project, a CRA competition team advised REEL International, a designer and builder of industrial lifting and handling systems, in defending against a damages claim brought by a competitor Fives ECL before the Hamburg Local Division of the United Patent Court. ECL sought compensation for alleged lost profits, claiming that a patent infringement by REEL led to a price reduction. The CRA team supported REEL with an expert report emphasizing the importance of assessing the profits the claimants would likely have earned absent the infringement.

In February 2026, the court dismissed the claim in full. The decision is among the first Unified Patent Court rulings on the assessment of causation and quantification of damages since the pan-European court's launch in 2023. Elsewhere, our finance practice continued to be active in complex commercial disputes and investigations across all of its focus areas, including mergers and corporate governance, bankruptcy, trading, securities, insurance and international arbitration. For example, a team of CRA consultants supported an expert who testified on damages related to food safety crisis in the first Caremark trial in Delaware Court of Chancery, addressing the fiduciary duties of company directors to ensure proper information and reporting systems.

Separately, another team supported a CRA expert who testified at trial between excluded and participating lenders in Serta Simmons Bedding 2020 liability management uptier transaction. During the first quarter, CRA's forensic services practice supported hundreds of matters across ransomware, wire transfer fraud, employee misconduct, trade secret disputes and broader litigation engagements. For example, we recently assisted a global software company seeking assurance that its software development environments, including core code bases, had been compromised by threat actor activity.

Our team conducted a comprehensive forensic review of build systems and orchestration infrastructure, which oversee and control the software development life cycle to assess any potential manipulation of code or the build process. The practice is also being retained on engagements that position us at the center of highly complex and emerging data challenges, particularly in the privacy and advertising technology space. For instance, we are supporting one of the world's largest advertising technology companies in defending a privacy class action involving online tracking technologies. Our team performed detailed analysis across a multi-terabyte data set, produced a comprehensive expert report and is prepared to provide expert testimony in support of the client's defense at trial.

Turning to our management consulting services. Both the Energy and Life Sciences practice delivered double-digit revenue growth. CRA's Energy practice supported a wide array of clients in the first quarter of the year, including utilities, electric system operators, private equity, large energy customers, electric equipment manufacturers and regulators. For example, the practice advised a utility client regarding its data center tariffs and its approach for managing large loads to mitigate risk to customers. Elsewhere, the practice was hired by PJM, the Mid-Atlantic system operator, to lead the high-profile backstop procurement option related to increased loads amid data center growth.

Finally, the practice was hired by a private equity group to provide commercial and regulatory due diligence on a large community solar portfolio. In our Life Sciences practice, we continue to leverage strengths across the team's strategy and policy consulting capabilities. For example, working with a midsized global pharmaceutical company focused on immunology, the team developed a comprehensive strategy for Board-level review regarding growth opportunities, pricing and market access issues and associated policy concerns.

Another project involved a global pricing study for a new combination therapy containing an existing blockbuster product in the cardiovascular and nephrology space. The analysis covered markets in North America, Europe and Asia with particular consideration for the Most Favored Nation pricing policies being put forth by the current U.S. administration.

Overall, I'm grateful to all of my colleagues for their hard work during the first quarter in helping our clients address their most important challenges. We are pleased with the strong performance of the business to start the year and continue to fuel those practices that are able to capitalize on growth opportunities through additional talent investments and consultant hires. In parallel, we took the opportunity to further optimize our service portfolio by reconfiguring the consulting team in targeted areas of the company.

During the quarter, these optimization efforts affected 22 individuals across about a half a dozen practices and various corporate departments, resulting in a restructuring charge of $2.6 million. The charge is comprised of $1.6 million of cash charges and $1.0 million of noncash charges. Anticipated annual cost savings from this action are estimated to be approximately $5 million with minimal impact on revenue going forward. It is important to note that we continue to see numerous growth opportunities and our pipeline of talent acquisition remains robust. As such, we intend to redeploy these annual savings back into the business to further strengthen the company and to pursue profitable growth in the quarters ahead.

Turning now to guidance. We are reaffirming our full year financial guidance for fiscal 2026. We are encouraged by the strong start to the year, supportive market trends and the continued replenishing of our sales pipeline. However, we remain mindful that evolving geopolitical, global macroeconomic and business conditions can affect our business.

Finally, I was not planning to directly address AI's impact on CRA's business and the services that we provide because I think our results speak for themselves. We continue to grow revenue and to grow it profitably. The demand environment for CRA services is very strong, perhaps the strongest that I have seen during my tenure at CRA. Having said all that, the market for CRA shares seems to signal a fundamental misunderstanding of what CRA does. Clients hire us because they are dealing with situations in which expert insights can have profound financial and strategic impact. Often the value at stake for our clients is many, many multiples of the fees paid to CRA.

The source of our value lies in our expert judgment, framing the right question, choosing defensible assumptions and supporting conclusions in an ever-changing and increasingly complex business climate. AI can accelerate and in many cases, enhance our work, but it does not replace CRA's expertise and credibility in complex and high-stakes environments.

As discussed during our last earnings call, we see AI as both the demand amplifier and productivity enhancer. Furthermore, we believe it strengthens CRA's overall position due to our deep expertise, strong governance and established credibility. We remain extremely confident about CRA's future and look forward to delivering long-term value to our colleagues, clients and shareholders in the years ahead.

With that, I'll turn the call over to Chad and then to 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. The first quarter of 2026 saw net cash outlays of $62.3 million for talent investments. Approximately 1/4 of this amount was spent to acquire senior revenue-generating talent, approximately 1/2 funded performance awards earned by previously acquired talent under their original transaction terms. The remaining 1/4 related to talent retention.

During the first quarter, we returned $25.3 million of capital to our shareholders, consisting of $3.8 million of dividend payments and $21.5 million for repurchases of approximately 116,000 shares. This reflects the continued strong belief by the Board and management in the cash-generating ability of the business and the company's fundamental value relative to the prevailing stock price. We currently have $44.5 million available under our share repurchase program.

During the quarter, we also spent $2.6 million for traditional capital expenditures. We concluded the quarter with $32.5 million of cash and $192 million of borrowings under our revolving credit facility, resulting in a net debt of $159.5 million. As a reminder, borrowings during the first quarter are typically elevated in part to fund annual bonus payments, which is consistent with our practice in prior years. More than 80% of the bonuses relating to fiscal 2025 were paid in the first quarter, with the final installments expected to be completed by the end of the second quarter.

We concluded the first quarter of fiscal 2026 with total liquidity of $86.7 million, consisting of $32.5 million in cash and cash equivalents and a further $54.2 million of available capacity on our line of credit. As CRA's annual revenues approach $800 million, we are outgrowing the current revolving credit facility established in 2022 when CRA had revenue of less than $600 million. As detailed in our quarterly report on Form 10-Q filed today with the SEC, the company earlier this week increased its credit facility by $50 million, bringing the total from $250 million to $300 million of aggregate borrowing capacity. The expanded facility will provide financial flexibility to support CRA's continued growth and working capital needs.

With that, I'll turn the call over to Eric for a few final comments. Eric?

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 first quarter of fiscal 2026. In terms of consultant headcount, we ended the quarter at 971, consisting of 170 officers, 598 other senior staff and 203 junior staff. This represents a 2.5% year-over-year increase compared with the 947 consultant headcount reported at the end of Q1 fiscal 2025 and a 1.3% sequential increase relative to the 959 consultant headcount reported at the end of Q4 fiscal 2025.

Non-GAAP selling, general and administrative expenses, excluding the 1.5% attributable to commissions to nonemployee experts, was 15.6% of revenue for the first quarter of fiscal 2026 compared with 15.9% a year ago. The effective tax rate for the first quarter of fiscal 2026 on a non-GAAP basis was 30.3% compared with 27.2% on a non-GAAP basis for the first quarter of fiscal 2025. The increase is primarily due to an increase in nondeductible executive compensation and a decreased benefit related to share-based compensation.

Turning to the balance sheet. DSO stood at 100 days at the end of the first quarter compared with 108 days at the end of the fourth quarter of fiscal 2025. DSO in the first quarter consisted of 58 days of billed and 42 days of unbilled.

That concludes our prepared remarks. We will now open the call for questions. Rob, please go ahead.

[Operator Instructions] Our first question comes from Kevin Steinke with Barrington Research.

I wanted to start out by asking about the demand environment. As you noted, Paul, perhaps the strongest you've seen in your tenure at the company. Obviously, you've done a great job as a firm aligning your services with what the market needs and what the market is demanding. So I'm sure that's contributing to the demand trends you're seeing. But looking beyond that, can you pinpoint anything in the macro environment that's really spurring this demand? Case filings and court judgments continue to increase seemingly above trend. And obviously, the project lead flow and origination growth continues to be very strong. So I don't know if you can add any more thoughts on the supportive market trends that you're seeing in light of macro uncertainties.

Yes. I think you did a really good job answering the question. It's a little bit of a lot of things. And -- but I don't want to lose sight. It's a lot to do with the quality of my colleagues and the services that they provide. Every quarter, every year, we are dealing with new record highs in revenue and profitability. And with those new record highs in financials comes new record highs with input in terms of the opportunities and our ability to convert those opportunities into revenue generation.

With that said, the last 5 or 6 months is at a higher rate than I have observed. It's pretty normally distributed relative to the revenue of our practices at CRA. Competition is -- continues to get their share of the most prominent cases. We're seeing forensic to be very active, life sciences, energy, finance. When about 98% of the revenue that is generated from CRA by those 8 practices grows year-over-year by over 10% from record highs in the previous quarter, that's saying something.

So I wish I could point to one item, Kevin, but the world isn't getting more simple. It's more complex and thus the need for that kind of expertise in our services continues to grow. Fingers crossed that we see that continue throughout Q2 and the rest of 2026.

Okay. That's great. And you mentioned the Life Sciences growing double digits, which was nice to see. Anything particularly going on in the market for your services that's helping to spur that growth? And what do you see for that practice going forward?

Yes. I think I've been particularly tough on Life Sciences. Every quarter, I get questions about their growth trajectory, and I said -- I keep answering that I would like to see a trend. Well, they've delivered on a trend. They have now multiple quarters of substantive growth. They grew double digits this year. We highlighted that our European operations grew more than 20%, and that was driven by more than 20% growth in our European Life Sciences practice and more than 20% growth in our Antitrust & Competition Economics practice.

So they are getting wonderful opportunities and they're converting those opportunities. And the lead flow is rather robust, not just for the firm, but for the practice in particular. So hopefully, in Q2, we can be reporting another strong growth for that practice.

Okay. Good. And I wanted to also touch on the -- you mentioned a robust pipeline of acquisition talent. And again, could you talk about what's contributing to that? And just also from a numbers perspective, when you formulated the guidance for 2026, are you also factoring in additional forgivable loan amortization from hiring throughout the year this year, given that robust acquisition pipeline, I assume perhaps there's something baked into the guidance for that already.

So for our guidance on the revenue line -- on the revenue side, I try to look at the colleagues that are in place at the time I provide the guidance. I do not build in any anticipated inorganic revenue additions during 2026. I do try to build in into the profitability margin, some acquisition costs or the related amortization that goes with many of those costs into the EBITDA profit guidance.

The reason I don't do the same on the revenue side is the timing of when those individuals join and their ability to ramp in a given year is very uncertain. Thus, we don't assume the revenue benefit, but try to assume the cost burden associated with those additions.

Okay. That makes sense. That's helpful. I'll turn it back over. Congratulations on the strong results.

Our next question comes from Marc Riddick with Sidoti & Company.

So I wanted to start with, again, very, very strong top line growth and broad-based as we've seen for several quarters now. I wanted to talk a little bit about your commentary around some of the assignment changes. Maybe you could delve a little bit into that. And maybe is that something that you can foresee doing more often with talent as you sort of try to match the opportunities that you see in front of you? And then I have a follow-up around that.

I'm not quite sure, exactly, I lost you midstream to your question. Let me start talking and then I'm going to pause and have you clarify for me. First, thank you for recognizing the top line growth. What I don't want to lose sight of is the profit margin is pretty damn impressive, okay? We posted 11.5% on that relative to, I think, at the time was close to an all-time high for first quarter profitability in Q1 of 2025.

The reason that you see a reported drop in EBITDA margin is because of that increase in forgivable loan amortization. We went from about 5% of revenue in 2025 on forgivable loan amortization to 6.9% of revenue in Q1 of fiscal 2026. When you add the EBITDA and the forgivable loan amortization and you compare them year-over-year, the fact is the margin is within 20 basis points of each other. And again, that's comparing it to record levels.

So the top line revenue, impressive. Congratulations to my colleagues, but we also shouldn't lose sight of the strong profitability that has been delivered. With respect to the recruitment, right now, it continues to look for the best available talent. When I have 8 practices delivering top line growth, many achieving record levels, many achieving double-digit revenue growth. We are not shy to add talent to any of those units. The individuals we were lucky enough to add in fiscal 2025 are producing ahead of our expectations into the first quarter of 2026. So I anticipate them continuing to ramp, and Chad has been quite busy on the recruitment of people, both across the legal-regulatory arena and on the management consulting side.

Okay. Great. And sorry if I lost you there for a bit. I did want to talk a little bit about the improvement in utilization as well. And maybe you could talk a little bit about the pacing of how that progressed through the quarter. And certainly, given your commentary, it sounds as though that continued since the end of the quarter, but maybe talk a little bit about that, the pickup in utilization and sort of how that paced through the quarter.

Yes. It's -- we basically have been at the upper 70s at that 70% mark starting in January. It wasn't a trend of improvement throughout the quarter. We were pretty strong from the get-go, as we got into 2026. And we saw the improved utilization, not just on the legal-regulatory side, but also on the management consulting side of the house.

And when you have everyone billing more hours, you get the kind of top line growth that we described. And our guidance, when we look at medium long term is to be in that upper 70s ballpark going forward. And with that and with our strong cost controls, it should result in impressive profitability and profitability that converts into high cash flow levels as it has historically and going forward.

And I wanted to touch a little bit on -- I think you touched a little bit on the -- on this in your prepared remarks, but can you discuss maybe some of the changes that you've seen in the level of complexity, particularly on the M&A side? I mean, are you getting a sense that are these things taking longer? Is it a matter of just -- what are we seeing just relative to maybe even 2, 3 years ago as far as what we're seeing on M&A and what you're seeing there?

Yes. It's been a while since I've been actively working on a case. So excuse me for the generalities on that. The amount of data that we're being asked to analyze the complexity of the markets for which our clients serve is becoming broader and more complex and the desire for results as expeditiously as possible has never been higher. So it's really across all of our business units. It's not just in the Antitrust Competition Economics practice, Life Sciences practice is experiencing that. We tried to highlight that in the case example of the favored nation pricing that's going on and the complexities in trying to roll out new drugs with that added wrinkle here.

We have regularly talked about the energy practice and what their clients are facing with the rapid growth of these data centers. So I can't really point to any practice in which their world is getting more simple. And lucky for CRA and lucky for our clients that we have the appropriate expertise to address that.

Our next question comes from Andrew Nicholas with William Blair.

I only have one. A lot of my questions got asked already, but I just wanted to check in on kind of rate realization and pricing. Obviously, really good top line growth. So I imagine that's a part of that equation. But if you could just speak to pricing realization and then kind of as a follow-up to what you were just describing, the extent to which you think increased complexity, bigger projects could be a boon for that part of the growth algorithm going forward.

Sure. So like most years, at the beginning of the year, we will test the market and assess whether we should increase our bill rates across our practices. On average, we're in the low to mid-single-digit rate increase in terms of our reported rates. Oftentimes, in the first quarter, we're seeing minimal contribution from those rate increases because typically, we do not get the benefit of those new rates on legacy projects that have been in place, but more often on new projects coming in the door.

So as the year progresses, we should get even more contribution from those rate increases. Now that's not to say that the first quarter of '26 didn't enjoy a benefit from rate increases. They were just more likely the rate increases that were implemented during 2025. I think as we get into Q2, Q3 and beyond, you will see more of the full benefit of the rate increases. Early indications are quite positive.

We've always been a high-cost provider of services, right? But the reason that, that works for CRA, works for our clients, is we also are a high value-added provider of services. So I think the balance exists. We haven't seen any increase in write-offs on the bills going out. But with another quarter or 2 under our belt, I'll be able to give you a more definitive answer. But so far, so good on that, Andrew.

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.

Great. Thank you, Rob. I would like to thank everyone who joined 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 we look forward to updating you on our progress on our second quarter call. This concludes today's call. Thank you.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Good day, everyone, and welcome to the Charles River Associates Fourth Quarter 2025 Conference Call. Please note that today's call is being recorded. The company's earnings release and prepared remarks from CRA's Chief Financial Officer 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. Please go ahead, sir.

Thank you, Melissa, and good morning to everyone. Please note that the statements made during this conference call, including guidance on future revenue and non-GAAP EBITDA margin along with 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 any forward-looking statements after the date of this call.

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. Revenue for fiscal 2025 increased by 9.3% to $751.6 million, marking CRA's eighth consecutive year of record annual revenue. Our performance benefited from broad-based contributions across the portfolio. Both lines of business contributed to the year's revenue growth as our legal and regulatory services increased 10.3% relative to fiscal 2024.

And our management consulting services expanded 6.4% year-over-year. For fiscal 2025, 7 practices grew their top lines with 3: Antitrust & Competition Economics, Energy and Intellectual Property delivering double-digit revenue growth relative to fiscal 2024. Geographically, both our North American and international operations contributed to the year's revenue growth, increasing 7.3% and 19.5%, respectively.

During this period of revenue growth, we continue to manage the business effectively achieving full year utilization of 77%. Our strong utilization and overall execution drove record profits for fiscal 2025 as measured by net income, earnings per diluted share and EBITDA.

Turning to the fourth quarter. Our portfolio strength drove an 11.6% increase in revenue year-over-year, resulting in the best quarterly revenue in CRA's history. Continued growth of our sales pipeline supported this record Q4 revenue. During the quarter, our weekly average project lead flow and new project originations increased 9.3% and 7.7%, respectively, relative to the fourth quarter of 2024.

For the fourth quarter, 6 of CRA's practices grew their top line with 4 Antitrust & Competition Economics, Energy, Forensic Services and Labor & Employment, delivering double-digit revenue growth year-over-year. Revenue in the fourth quarter for CRA's legal and regulatory services increased 14.3% relative to last year.

The Antitrust & Competition Economics and Forensic Services practices led the way with each delivering quarterly revenue growth of more than 20% year-over-year. With this notable performance, each practice established new records for both quarterly and annual revenue. In addition to these 2 practices, the labor and employment and risk investigations and analytics practices expanded revenue year-over-year.

During the quarter, CRA's Antitrust & Competition Economics practice worked on merger transactions across a range of industries and geographies as worldwide M&A activity in 2025 totaled $4.6 trillion, an increase of 49% compared to 2024 and represented the strongest annual period for dealmaking since 2021. For example, the practice was retained by the Hershey Company, an industry-leading snacks company with iconic brands to advise on its acquisition of LesserEvil, a maker of organic snacks.

The CRA team provided support to Hershey on the competition and regulatory compliance aspects of its acquisition. [ Although ], a global CRA team advised Boeing with the submissions made to competition authorities across the world in connection with its acquisition of Spirit AeroSystems. The transaction closed in December 2025, following the consent order from the FTC and earlier clearances by the U.K. Competition and Market Authority and the European Commission conditional on full compliance with commitments offered by the emerging parties.

During the fourth quarter, the Forensic Services practice worked on hundreds of ransomware, wire transfer fraud, employee misconduct, trade secret and various litigation matters. Our team is consistently retained by companies ranging from large Fortune 500 companies to smaller private companies that are in crisis. For example, when a company is crippled by ransomware.

Our team provides support for clients to contain incidents, recover operations, advise on business interruption claims and manage stakeholder communications in alignment with relevant authorities. During Q4, the labor and employment practice continued to assist clients in all phases of employment-related litigation. The practice was routinely engaged for pre-litigation support, expert testimony and proactive consulting services in complex employment matters.

For example, a CRA Vice President was retained as an expert by a large tech company in a nationwide class action matter involving alleged violations of the Fair Labor Standards Act as well as California's and New York's labor codes. During the fourth quarter, the risk investigations and analytics practice worked on several large investigative and damages matters across multiple jurisdictions.

In the U.S., the practice was retained as an expert on behalf of a leading global energy company to opine on damages from an alleged breach of contract in relation to a joint development agreement between the parties to develop heat exchangers and a related acquisition. In the United Kingdom, the practice was engaged on behalf of an African utility company that commenced arbitration proceedings regarding the concession agreement with a national government entity. CRA consultants are providing financial analysis of multiple elements of the concession agreements.

Within our management consulting offering, the energy practice continued to operate at the forefront of key industry developments during the fourth quarter with revenue increasing more than 20% relative to the fourth quarter of 2024. Activity was particularly strong around data center-driven load growth where the practice supported 1 electric utility and 2 gas utilities in evaluating strategic options to attract and serve large-scale data center customers, including consideration around infrastructure investment, tariffs and regulatory positioning.

In parallel, the practice remained engaged on electricity market design and planning issues as clients increasingly recognize that existing market structures are under strain from rapid load growth, resource adequacy challenges and evolving reliability needs. This work included advising utility developers and other market participants on the implications of these changes for investment, operations and policy. CRA's Life Sciences strategy work continues to span the product life cycle. As an example, during the fourth quarter, a couple of our major projects involved opposite ends of the spectrum in liver disease.

For one of our clients, we engaged in mapping the patient's journey and identifying unmet needs to assist a pharmaceutical company in identifying new therapy development opportunities in liver disease. On the other end of the spectrum, we helped the pharmaceutical company prepare for a loss of patent exclusivity on a blockbuster product. Recapping our record financial performance, CRA reported revenue for fiscal 2025 of $751.6 million and non-GAAP EBITDA of $96.8 million, producing a non-GAAP EBITDA margin of 12.9%.

CRA achieved this performance during a period of market turbulence and external disruptions. From geopolitical and macroeconomic shifts to industry-specific volatility, CRA absorbed the shocks and continue to expand its bench of talented contributors. On the consulting side of the business, during fiscal 2025, we promoted 8 colleagues to Vice President and hired 19 new Vice Presidents.

As previously announced, we made investments to expand our leadership ranks on the corporate side, drawing from our deep bench of management talent to promote Eric Nierenberg to CFO; Brian Langan, to Chief Strategy and Business Transformation Officer; and Sandy David, to Principal Accounting Officer. We further expanded our leadership team with the external hires of Graham Ross as CRA's Chief Marketing Officer; and Curt Lefebvre as Vice President of Artificial Intelligence to oversee CRA's deployment of AI across the organization as we move beyond broad experimentation and toward disciplined enablement.

Moreover, we made all of these investments without missing a beat in our financial performance. Overall, I'm grateful to my colleagues for their hard work during the fourth quarter and throughout the year as we delivered outstanding services to help our clients address their most challenges -- their most important challenges. For full year fiscal 2026 on a constant currency basis relative to fiscal 2025, we expect revenue in the range of $785 million to $805 million and non-GAAP EBITDA margin in the range of 12.0% to 13.0%.

Based on current forecast, we expect that currency effects will decrease our reported revenue by roughly $5 million and will decrease our reported EBITDA by less than $1 million when stated on a constant currency basis. In addition, noncash forgivable loan amortization, which is reflected as an expense when presenting EBITDA metrics is expected to increase approximately $15 million or more than 30% year-over-year in fiscal 2026 due to the increase in talent investments completed in fiscal 2025.

Finally, as a reminder, fiscal 2026 returns to CRA's typical 52-week year, whereas fiscal 2025 contained an extra week and resulted in a 53-week year. To close my prepared remarks, I would like to share my thoughts on the recent market volatility. Over the past month, CRA's strong operating performance has been overshadowed by apparent unease in the broader equity market over the potential impact of AI on all types of businesses, including those in the consulting space. We view AI as a catalyst for improved productivity and revenue growth. Since the public release of ChatGPT and the resulting attention on large language models, my colleagues have found innovative ways to deploy a variety of AI tools and techniques with client projects. For example, AI tools have accelerated the creation of computer code and scripts in support of our analytical work, enhanced first pass document review, including foreign language translations and accelerated basic desk research.

What may seem like small productivity enhancements allow my colleagues to reallocate more time and resources to part of our clients' challenges where CRA can provide unique insight. The combination of CRA's industry-leading expertise and the capabilities of these new technologies allows us to identify opportunities and deliver the creative solutions that our clients have come to expect from CRA.

For example, our energy practice has developed an artificial intelligence-driven resource adequacy model known as CRA Adequacy X that utilizes a Monte Carlo-based loss of load approach. It uses artificial intelligence and synthetic data to simulating future grid conditions such as changing load shapes and generator unit performance to capture correlated events like high load coupled with wide-scale outages during cold winter events. By stimulating future conditions, CRA can accurately capture the capacity contribution of different generating technologies and identify critical reliability risks, which would be missed by only simulating historical conditions.

Additionally, AI is expanding the range and complexity of economic decisions that can be evaluated from regulatory scenario testing to competitive simulations and litigation, the value is not in the machine selecting the answer. The value lies in expert judgment, framing the right questions, choosing defensible assumptions and defending conclusions, AI can accelerate the work. but it does not replace the credibility in complex and high-stakes environments. Importantly, our approach to AI adoption is disciplined and governance focused.

We are integrating AI through controlled pilots, strong quality control processes and reproducibility standards and strict data security safeguards. Human oversight remains central to every client-facing deliverable. As we scale adoption, our priority is to use AI in ways that strengthen quality, speed and consistency while maintaining the standards our clients and courts expect. As I have often said, our long-term business drivers are complexity, regulation, litigation and high-stakes economic decision-making. These are not going away.

If anything, they are likely to intensify. We see AI as strengthening the position of firms like CRA with deep expertise, strong governance and established credibility. Our culture of expertise and rigor is durable. We remain confident in our strategy and in CRA's ability to continue delivering long-term value to our clients, colleagues and shareholders. With that, I will 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 deployment during the quarter. CRA continues to generate strong cash flows, demonstrating the strength in our operations and the quality of our revenue, CRA's fiscal 2025 adjusted net cash flows from operations increased 17% year-over-year to $108.4 million.

Stated another way, during fiscal 2025, CRA converted 112% of its non-GAAP EBITDA into adjusted net cash flows from operations. This strong performance is consistent with prior years as CRA has converted EBITDA into adjusted net cash flows from operations at rates of 111% and 112% over the past 3 and 5 years, respectively. These cash flows represent a discretionary pool of capital used to fund reinvestment in the business and distributions to our shareholders.

I will now detail how we allocated our capital during the fourth quarter. We repaid $61 million of our net borrowings under our revolving line of credit to bring our year-end balance to $34 million. We ended the year with a cash balance of $18.2 million, resulting in a net borrowing position of $15.8 million. Since year-end, we repaid the entire amount of outstanding borrowings under our revolving line of credit, bringing the balance to 0. The fourth quarter of 2025 also saw net cash outlays for talent investments of $17.6 million.

For the full year, we spent $87.9 million to acquire and retain senior revenue-generating talent. We spent $1.1 million on capital expenditures, bringing our year-to-date total to $3.9 million. For fiscal 2026, we expect spending on capital expenditures in the range of $4 million to $5 million. We paid $3.7 million of dividends to our shareholders during the fourth quarter. For the full year 2025, we returned a total of $61 million to our shareholders through a combination of share repurchases and quarterly dividends.

This amount represents 56% of CRA's 2025 adjusted net cash flows from operations and is consistent with our ongoing aim of returning half of our adjusted cash flows from operations to shareholders. Since stating this aim at the beginning of fiscal 2021, we have returned to shareholders 54% of CRA's aggregate adjusted net cash flows from operations. Specifically, over this 5-year period, we have returned a total of $239.3 million to our shareholders, consisting of $54.8 million of dividend payments and $184.5 million of share repurchases at an average price of $110 per share.

As announced earlier today, CRA's Board of Directors authorized an expansion to our existing share repurchase program of $55 million. With this expansion, we now have $65.9 million available under our share repurchase program. Taken together, our capital allocation decisions demonstrate continued confidence in CRA's long-term prospects as we look to invest in the business for profitable growth, while at the same time, returning substantive capital to our shareholders, all with the aim of maximizing CRA's long-term value per share.

With that, I will turn the call over to Eric for a few final comments. Eric?

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 fourth quarter of fiscal 2025. In terms of consultant headcount, we ended the year at 959, consisting of 164 officers, 563 other senior staff and 232 junior staff. This represents a 1.4% increase compared with the 946 consultant headcount reported at the end of fiscal 2024.

Non-GAAP selling, general and administrative expenses, excluding the 1.0% attributable to commissions to nonemployee experts was 16.1% of revenue for the fourth quarter of fiscal 2025 compared with 15.9% a year ago. For the full year fiscal 2025 and fiscal 2024, the ratio was 16.1% of revenue. The effective tax rate for the fourth quarter of fiscal 2025 on a non-GAAP basis was 28.8% and compared with 30.9% on a non-GAAP basis for the fourth quarter of fiscal 2024.

The lower rate in the fourth quarter of 2025 was largely attributable to the impact of the prior period remeasurement of our deferred tax assets as a result of changes in tax laws that were nonrecurring in the current period. For the full year fiscal 2025, the effective tax rate on a non-GAAP basis was 28.4% compared with 29.2% on a non-GAAP basis for the full year fiscal 2024.

The lower rate for the full year fiscal 2025 was largely attributable to the impact of state legislative changes in the prior year that were nonrecurring in the current year. The effective tax rate for fiscal 2026 is projected to be in the range of 31% to 32%. The year-over-year increase is largely attributable to changes in legislation impacting executive compensation.

Turning to the balance sheet. DSO at the end of the fourth quarter was 108 days compared with 115 days at the end of the third quarter of fiscal 2025. DSO in the fourth quarter consisted of 78 days of billed and 30 days of unbilled. We concluded the fourth quarter of fiscal 2025 with $18.2 million in cash and cash equivalents and a further $162.2 million of available capacity on our line of credit for a total liquidity of $180.4 million.

That concludes our prepared remarks. We will now open the call for questions. Melissa, please go ahead.

[Operator Instructions] Our first question comes from the line of Marc Riddick with Sidoti & Company.

I wanted to sort of get the -- get some thoughts around the revenue guide starting first with sort of how you look at that, especially compared with sort of where you ended the year on consultant count and the strength of utilization, it seems to be as strong as the year finished. And given where headcount is, it seems as though it'd sort of be approaching the sort of historical higher end of the ranges that you're usually operating in. And given your commentary on the guide, maybe you could sort of give us some thoughts as to maybe what goes into that given sort of where you are in headcount utilization.

Sure. Well, let me start by saying, I think your interpretation of our messaging with respect to our financial performance and its implications on 2026 is dead on. We had a fantastic fiscal 2025, and we're really quite bullish on fiscal 2026 as can be seen by the guidance that we provided. We're growing revenue, and we're growing it profitably. Even with the success, it does not mean that we are not constantly refining and improving our portfolio. Sometimes we double down on investments. Sometimes we scale back investments in certain practices. As we've discussed in prior quarters, that, of course, has an impact on the headcount that you observe in terms of the aggregate headcount. But that does not necessarily mean that the headcount of our growing practices is not growing more commensurate with their revenue expansion. As we have said also in the past, if you get to sort of a medium, long term, headcount should roughly approximate revenue growth. So the flattish headcount growth in 2025 should not be seen as a more normal case or a new steady state for CRA. Going forward, I expect headcount growth would increase.

Okay. Excellent. And then maybe we could shift gears in the prior quarter, you've spoken about the strength in the litigation activity I was wondering if maybe you could sort of give an update as to maybe what you saw there in the fourth quarter and then how sort of that figures into the 2026 commentary?

Sure. the performance by several of our practices, and I'm going to highlight our Antitrust Competition Economics practice and our forensic practice. Their performance in Q4 is, I don't know how else to put it [indiscernible] to have the largest practice at CRA and probably the largest practice in the world, delivering 20% year-over-year growth is mind-boggling. I don't know how else to describe it.

As did it surpass my expectations in Q4? Absolutely. And the reason we came forward with the guidance we put out for 2026 is I don't really see any near-term signs or any signs for that matter of it slowing. So much congratulations is due to my colleagues in the practice, both in North America and in Europe. You saw the growth rate of the European expansion, right, which just talks about the kind of strength that my European competition colleagues are demonstrating in the marketplace. Forensics, is I'm happy to say it looks to be on a nice growth trajectory.

And they also posted their best quarter ever in Q4. And as we've been highlighting for the last several quarters, I know it's not in legal regulatory, the energy practice is taking advantage of this unique moment in the utility energy industry right now and capturing share. So very proud of the accomplishments of my colleagues.

Excellent. And then the last one for me, I guess, there's a lot of pieces that are certainly contributing to the strength that you're seeing. Maybe you could talk a little bit about the -- certainly, the revenue mix appears to be very positive. Maybe talk a little bit about the pricing dynamic that you're seeing underneath because it seems as though that's a contributor as well. But maybe you could talk a little bit about what you're seeing there and if there are any particular areas where you're seeing any particular pushback that's meaningful in any way?

Sure. Pricing always goes hand-in-hand with the CRA's ability to deliver value to our clients. you're able to raise prices because clients deem that your services are continuing to be valuable in their -- addressing their challenges there. So for 2025, we were right in that 3% range of rate increases. That stuck largely during the year.

So we're very happy with that. and ways you can see it's sticking, we have not experienced any kind of increase in write-offs or the collectability of our revenue. We're still collecting $0.97, $0.98 on the dollar, and we deliver our revenue at our reported rates. We are not an organization that goes into the process of significantly discounting rates depending on the practice. We get what we charge, which talks again to the quality.

Looking forward, we expect rate increases in the low single digits, maybe a little higher than the 3% in 2026. As we also have discussed in the past, we will start getting a better read on the stickiness of those rate increases sometime during Q2. But all signs are that we should be just fine as the year progresses.

Our next question comes from the line of Kevin Steinke with Barrington Research.

I want to say thank you for the comments around AI as it relates to your business, it's obviously very timely in light of what's been going on in the equity markets. But I wanted to drill down a little more specifically on you're mentioning that you brought on a VP of Artificial Intelligence and that you're kind of looking to move more towards an execution phase from an exploratory phase on internal AI initiatives. And just wondering if there have been any initial thoughts or discussions internally about is that perhaps an enabler of margin expansion over time?

Right now, it's difficult for me to compute whether I would see a margin expansion over time. For me, I see it more as a revenue enhancement opportunity as we get to move to higher value-added services more rapidly. The reason we brought on a leader of the initiative internally is this sort of individual experimentation that has been going on over the past couple of years is gaining a lot of steam, and I want to make sure we are coordinated as an organization and even more importantly, that we are respecting the confidentiality of our clients' data on that. So that is probably the main reason for the coordination, but I also believe the coordination will allow for a more rapid ramp of a lot of these initiatives.

Great. That sounds great that you actually see it as an enabler of revenue growth. So just moving on to again, I wanted to follow up on the Forensic Services practice. That seemed to kind of really pop here in the quarter as you discussed. But Were there any particularly large projects that rolled in? Or has the pipeline strengthened there? Just kind of any more detail on what's going on there? And is it -- do you feel like there's some sustainability there or some legs there to that practice continuing to grow, maybe not at 20% plus, but just kind of how you see it playing out over the year?

Sure. We highlighted the lead flow growth in Q4. The reason we did that is we're having just almost as robust and inbound of new project opportunities as we were able to deliver on the revenue growth, and that bodes really well for 2026. We always have large projects across our practices that come in and go off of our books. What I've been really impressed with the consistency of the quarters during 2025 and years prior is that we don't miss a beat that we have enough of a backlog that we only experienced what I would call temporary softness in any one practice before we move on to the new revenue opportunities. I think the lead flow in our forensic practice has been rather robust. And I remain bullish for their 2026. Like you said, I think it's asking a lot for them to deliver 20% revenue growth quarter after quarter, but I see a lot of good things ahead for that consulting team.

Okay. That sounds good. And I just wanted to ask about the forgivable loan amortization. Obviously, you had -- based on your announcements you had throughout 2025, a really strong year for attracting talent. And just wanted to kind of confirm that, that's what's really driving the expected increase in forgivable amortization in 2026 and you're not necessarily having to pay more or pay more to attract a particular consultant compared to history. It's more just the volume of hiring, I would guess.

Sure. So let me begin with the last part of your question and then move back with it. So first of all, our -- the acquisition cost of bringing on incremental revenue has remained relatively constant or consistent with prior quarters and years. So we have not experienced a rising purchase price for a lack of a better descriptor with respect to that incremental revenue. We brought on a lot of great new talent. We also, given the disruptions in the broader marketplace in 2025, there was money paid to retain some talent. Retention of revenue-generating resources within our organization is not new. If I look at the expectations for CRA, when I look at 3-, 5-year windows of time, the outlays that are made in 2025, yes, they may be a bit concentrated, but are consistent with our medium-term 3- to 5-year forecast. So that is also not out of the ordinary. Both are contributing to an increase of forgivable loan amortization as we enter in 2026. And the reason we highlighted that more explicitly when people are interpreting our reported GAAP financials, please take in consideration that you have a large noncash expense flowing through that income statement. If you account for that, look at EBITDA like we demonstrated in our investor deck and look at the forgivable loan amortization. If you sum those 2 pieces up, it's probably as high a measure as CRA has ever delivered. So by no means are we becoming less profitable as an organization. And it's so good, I really want to say it again. We are not becoming less profitable as an organization. We continue to be able to deliver impressive revenue growth at expanding margins because every year is a new high point for the company. So again, good things ahead in '26 and beyond.

Okay. Great. That's helpful. And obviously, your ability to attract talent, it bodes very well for your future revenue growth and your future just market opportunities. But just I want to ask lastly about share repurchases it looks like you didn't complete any in the fourth quarter, but I assume with the increased repurchase authorization and the recent dislocation in the stock price that you'd want to continue to be active on the repurchase front. Is that correct?

That is correct. Our share repurchases tend to be a little bit front-loaded in the year because as we enter any year, we expect to deliver strong results, and we expect the market to reward us for those strong results, thus expect an increasing stock price. So you typically find share repurchases to be more heavily weighted towards the first half of the year relative to the second half of the year. I would say that's point one. Point two, I'm clearly not happy where my stock price sits here. We are significantly undervalued. There's not much I can do about that immediately. I can deliver -- we can continue to deliver the strong results. And I think it's safe to assume that you also anticipate CRA being an active repurchaser of its shares in the quarters ahead.

Our next question comes from the line of Andrew Nicholas with William Blair.

I wanted to ask on the M&A environment. I apologize if I missed it, but I think most of the commentary was specific to what you saw in '25. Have you seen M&A and relatedly M&A-related Antitrust stay or accelerate with strength so far this year?

I think there was definitely an acceleration as the year progressed. But again, when you look at the consistency of the results, of the firm quarter-to-quarter. That's hard to exactly pinpoint on that. The 20% year-over-year growth by the competition practice in Q4 clearly points to a really strong quarter for the practice, both in North America and internationally. And right now, we see no signs of that slowing down. They're working on matters that they secured in '25 and the lead flow year-to-date has also been quite strong. So it seems like the market is conducive to high value-added services.

Great. That's constructive. I appreciate it. And then for my follow-up, I wanted to go back to the AI topic. I heard you on kind of the AI efficiency examples. Foreign translation or foreign language translation, some of the capabilities around contract review, maybe data analysis. All of that sounds super helpful and interesting. I'm just curious because I think, Paul, you said the expectation is that some of that is handled with AI, you can move your focus to higher value type work. Can you walk me through just kind of how you think about that from an impact in the economics of these projects? Does that work moving from lower value to higher value equal the same hours at higher rates or better utilization? Or just kind of thinking about kind of the second order effects of that and how it might impact the model as that becomes a bigger and bigger part of the way that you work.

Sure. I do not anticipate a worsening or a decrease in our staffing leverage at CRA. I think it's important to note that our staffing leverage is somewhere in the 4:1 or 5:1. And by that, I'm saying about non-Vice Presidents to Vice Presidents at CRA. So in the legal -- particularly in the legal regulatory area on that. So we are not particularly highly levered. So the displacement base is smaller than -- you may think at some other consultancy. So I will start with that. To date, because these large language models or a lot of the tools I described are not something that we just started using in Q4.

We've actually been using these tools for the last couple of years with it. And to date, we have not seen a decrease in the utilization of our junior staff. Those are the individuals we hire directly from undergraduate institutions, and we have not decreased the leverage with respect to the junior staff that assist us on delivering our revenue. So we believe we can effectively use that staff because the staff is working at the direction of these senior experts.

And when you're talking about the complexity of the problems we have, the size of the data sets that we're dealing with, the senior most expert cannot handle that work by themselves. They delegate it out to their project team for helping them deliver. So I've seen no evidence to date on that. And right now, I also -- I'm not worried about any kind of negative consequences in '26, but time will tell.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Maleh for any final comments.

Thank you, Melissa. Again, thanks to everyone for joining us today. We appreciate your time and interest in CRA. We will be participating in meetings with investors in the coming months, and we look forward to updating you on our progress on our first quarter call. That concludes today's call. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Great. Why don't we get started here. I'm Kevin McVeigh, part of the UBS research effort here. We're thrilled to kick off. This is my first fireside chat. We're thrilled to have Charles River. We've got their CEO, Paul Maleh. First year, I think, on our account that Charles River is attending. So we're thrilled to have Charles River as part of this process. Really appreciate all you folks coming out.

I guess with that said, Paul, maybe just a little bit about the company. I think we're entering year 60 of Charles River, which just in and of itself is an achievement, 60 years just to be able to continue to evolve and thrive. Maybe just a little bit about Charles River, the then and now, and maybe we'll start there just for the benefit of the audience. And part of the goal, I'm going to try to keep this as iterative as possible. If anyone wants to ask any questions, I can get them through the iPad or through my e-mail, [email protected] or Bloomberg IM.

Okay. Well, thank you, Kevin, and thank you to UBS for having us. This is our first year presenting at this conference, and we appreciate that opportunity.

As Kevin said, CRA is celebrating its 60th anniversary this year. We were founded back in 1965 from some professors from Harvard and MIT, who had the grand theory of bringing academic quality research into an economic finance strategy to help business leaders make more informed decisions by providing insights into information. That was the mission of the firm back in 1965 and quite frankly, still remains the core mission of the firm today. We are a consulting company, about 1,000 consulting professionals on that. About 80% of the business is in legal regulatory, something probably no one has ever heard of and about 20% more traditional management consulting.

That's great. And Paul, may be a little bit -- it's amazing, obviously, we don't cover the stock. But I think if you look at the stock chart, you folks have thrived just looking at the stock chart relative to a lot of Gen AI uncertainty. So I wonder if maybe you can help us understand how you're able to differentiate yourself both across the legal and on the management consulting side. And I think for most of you folks know part of our core thesis, and again, we don't cover CRAI, but it's -- the data differentiation is really what insulates a lot of the companies we cover in a post-Gen AI world and still very early in terms of trying to navigate through that process, but maybe a little bit of the differentiation that you folks offer.

Sure. I've been at CRA for 36 years. I stepped into the CEO role back in 2009. And 2009, for those who can remember, was not necessarily a wonderful business environment. It was right with the financial crisis that was happening. And my first job as CEO was to restructure about 1/3 of the company away. And that was really hard for a company that I grew up in a company that I love.

But last restructuring action was in summer of 2012. And I think if you look at our growth as a firm, we've been growing at about 9%, 10% a year since then. We've been growing profits at a faster rate. And the stock appreciation, as Kevin has said, I would challenge all of you to compare to any company you are, whether you want to compare it to Google, Meta, we've been performing quite admirably. And I think kind of that kind of sustained longevity of excellence goes to the differentiation of the products that we offer and the value that clients see in our offering. We are -- we don't have any annuity type revenue streams.

So even though Amazon or Google or Apple or these large players maybe repeat clients, they're on a project-by-project basis. So we have to prove our worth on every single assignment that comes through the door. And I think the value that being provided is bar none. We are one of the top 2, 3 providers in the world. I think we're the best in terms of economic consulting services to these kind of companies. So that is the hallmark is the functional expertise of economics. We're using that same expertise to help clients on industry verticals of life sciences and electric utilities.

That's helpful. You mentioned 8% revenue growth. Maybe 9% to 10%. I should have said high single digits. Maybe help us dimensionalize how much of that is pricing versus international expansion as opposed to volume? Maybe any thoughts around just the buildup on that?

Sure. So about 80% of CRA's total revenue comes from Legal Regulatory with the 20% being the management consulting. Of the 9% to 10% growth over the last dozen years, about 2/3 of that is organic. And we view inorganic additions as a way to supplement the portfolio, but the core driver is the organic services and expansion.

Rate increases, there's some years in which we may be able to be more aggressive on rate increases. But on average, it's in that 2% to 4% range of net increase associated with bill rates increase. So still the substantive part of our growth comes from selling more hours, selling more services.

And as you think about the 2 segments from a competitive perspective, 60 years a long time, what do you think in terms of -- and having covered this sector a long time, not CRA, but the broader sector, I've always appreciated the core of these models really the differentiation and there's no 2 pure-play public comps. But as you think about competitive dynamics across the industry, where do you sit today and other companies just help us dimensionalize a little bit how the competitive landscape sits? And has that shifted over time? And with the shift in technology, do you see new suite of competitors emerging?

Sure. So lots of different parts of that question. So our competitor said differs whether you're looking at a legal regulatory services or you're looking at the management consulting services.

I'll start with the management consulting services. There are clearly boutiques and there are clearly the behemoth that we all know of, whether they're coming from the big 4 or the big 3 management consulting firms. We stay in that cross-section of economics and regulations within life sciences and energy as our differentiator. So we're not trying to compete head on with these large players. We're trying to stay in our core competency area.

In the legal regulatory side, as you mentioned, there is no perfect comparable. And in fact, the majority of our comparables are privately held, whether privately held by the partners of the firm are privately held by PE-backed institutions with that. So it's hard to say what is the direct competitor. There are a handful of publicly traded firms. Some have overlapping services, FTI Consulting,Huron have some overlapping services, but that's really about it in terms of things you can readily observe. What I can say is if I look at the industry as a whole, and we track growth of law firms, we track growth in the information we can observe. We've been taking share over these last dozen years. I just can't tell you from what parties we've been taking share, but our aggregate growth has been in far in excess of what we observe for the industry as a whole on both legal regulatory and the management consulting side.

If you want, I could try to move into the whole AI piece? Or do you have any specific questions you have there?

No, I think that's going to obviously be a common theme through this conference. So maybe it's probably not the first or last time in this discussion, we'll talk about it, but it's probably a good segue.

Yes. I've been waiting for that huge price pump. We were visionaries when we went public back in '99, having the ticker of CRAI. That hasn't happened yet. But we'll wait to see whether AI now becomes as a revenue driver. AI is a wonderful opportunity in that it enables us to undertake the initial parts of our research projects more efficiently, more rapidly and get to higher value-added services across our institution with that. There are limitations to that, both limitations of accuracy of the tools, limitation to contractual limitations on how we can use our clients' data. And then there's the human element of the limitation. I'll quickly try to touch up on that.

AI is constantly getting better, right? But still, the estimation errors, right, or the predictive errors are about 85% right. If we're 85% right as a consultancy and legal regulatory, we're going to be out of business on that. So a big part of using the tool is knowing how to test it as to its accuracy as to the information that's relying on to form its opinion and as to its ability to be replicated. When you submit evidence to a courtroom, it needs to be replicated. And as all of you have played around or probably a lot more sophisticatedly than I have, I asked the same question one day than I do another day, and I get a different answer to that. That's a problem with respect to the communication results. So the accuracy of the tool is always a concern.

One way to improve accuracy is to increase the information flow into your various tools. That's sometimes problematic, particularly in the legal regulatory side in that I may have a half a dozen different engagements with Google, but I can't use Google's information from Project 1 on Google's Project 3 for it because the attorneys and the client have fought vigorously to keep that information from Project 1 out of Project 3. So I can't combine even like clients information to make the tools more efficient. So that's what I mean by limitations to the tool. Even we have seen on the management consulting side, we do a lot of work with pharmaceutical companies on market pricing and market access. And Pfizer doesn't want us to use their information in any means to help better the accuracy of projects we may be doing for another pharmaceutical company. So again, there are limitations to the use of the information that we become privy to for value adding.

And the part that I'm probably losing the most sleep on is the human element. We are a consulting company. We -- our asset are our people. Is the use of the tool and does it put in jeopardy thinking by my colleagues. A lot of times, knowledge of a case, testing of the theories of the case come from working with the data. When information is so quickly synthesized, are you going to lose that element of learning? Or how do you replicate it later down on the discovery chain on that? The other part, there's been a lot of research, organizational research that sometimes innovation suffers from the use of AI. And clients come to us for creativity. When they have a multibillion-dollar merger being contemplated, they want creative solutions, right? It's not as simple as combine them and let the regulatory bodies approve or reject for it.

So are we jeopardizing that innovation, that creativity with the tools? And that comes into the training we're trying to do real time at CRA trying to -- not just training of how to use the tool, but how to learn by using the tool. So those are evolutions that we're quite excited with the tools. And also, AI, despite how wonderful it is, it's leading to a lot of litigation. So there's also been a bit of a driver for our demand side of the equation that we don't think is going away anytime soon. Property right disputes are going to be very prevalent, the better these tools become. And we're already seeing a lot of these matters across our desks now.

And not to mention on the energy side, the utility side, all of these data centers. We haven't seen true expansion of demand capacity in the utility sector for decades. They're facing it now. And how exactly do you meet this new need for energy? How do you meet this need for greater transmission of it? And these are things that are being asked to be done instantaneously. But as we know, utilities are necessarily the fastest-moving entities. And also when you're talking about such long-lived assets with what could potentially be a very short-lived entry or exit into a particular data center. So that has given rise to a lot of different demand opportunities, both on behalf of the tech companies are retaining us to help them in negotiating and pick in the locations of the data centers and also on behalf of the utilities that are trying to negotiate.

Critical topic and theme. Maybe I'll see if there's any questions from the audience around this or any other questions. If not, we can keep going.

Okay. Paul, maybe just a follow-up because I think -- and again, part of our view on the Gen AI side is the differentiation of the data. And I think for most of the folks that we serve, we cover Thomson Reuters, we cover Intapp, which are -- we also think of meaningful data moats. And this may be tough to quantify, but the data that your clients are offering to you, how much of that is internal kind of hard to source as opposed to readily available, right? Because if there's any way to even dimensionalize that, I mean, because obviously, the software is only as good as the data you're overlaying on top of it. So did that come into the conversation as it -- because again, it's -- you're seeing the revenue increase as opposed to any impact from it. So clearly, you're a net beneficiary as far as to say.

The majority of information that I'm talking about is privately held by the company itself. Google has been in various litigations, whether in the ad tech revenue, the search revenue, and you could replace Microsoft in there or any other party. They're providing us transaction or second-by-second data on that. That is not readily available. So it's a huge amount of data being provided to us and solely to us on that particular matter. Can it be supplemented with public information to test the validity of it? Absolutely. But the majority of the analysis being performed is on privately disseminate information.

That's helpful. And just to shift because there's the revenue side of it, there's obviously the human element of it, too. And you've enjoyed incredibly low voluntary attrition. I think the number is around 10% or so over the last 5 years or so. Maybe talk to that, right, in an environment where there's a -- I came out of -- I say half jokingly when we have, I'm covering CPA, so I was at Deloitte, the big 4 at the time, and turnover was much higher than that, right? So maybe talk about the go-to-market, how you're able to retain folks and really maybe weave into that this Gen AI because part of what you alluded to, I think is important, people from an entry level need to know how to think, right? So if the machines think for you, it becomes an information void over time. So maybe I know there's a lot there, but it's incredibly important topic.

I always try to take a client mentality when thinking about my different constituent groups, right? We have the ultimate clients who are paying for our services here. But the consultants I have within CRA are also my set of clients. And my job as a CEO is to create an environment that creates value for those individuals because when you want to hire the best and brightest, guess what, they have choices. They can go elsewhere and oftentimes get a premium overpay for the switching costs with it.

So we have a couple of statistics that Kevin is referencing. Can I throw it up there? I'm going to break the piece. Okay. So there's something in the upper right-hand portion, and this is the 10%. So every year, I present to the Board our top 30 revenue generators. We show them where the practices, the geographies, what they're getting paid. If I look at the union of the top 30 revenue generators over a 5-year period of time, it's roughly 55, 60 people. So the 10% is not 10% per annum. It's 10% -- less than 10% in total. So that means over a 5-year period of time, we're losing less than one of our top revenue generators. And I highlight this because I'm probably most proud of the statistic is that their decision to stay at CRA and continue to prosper, I think, speaks to the value created by being on the CRA platform because they can't go anywhere they want.

They're choosing to stay at a firm because of the quality of their colleagues, because of the quality of the client relationships we have and because if you think they're all rational investors, it's because it's the highest NPV that they can have, even with the potential for payments for switching cost to go to a competitor.

That's helpful. And I think when I think about professional services, you're only as good as your people and your clients. And I think you service 85 of the Fortune 100, 98 of Am Law 100. So you probably couldn't have a more enviable client base. Maybe talk to those relationships? Have they evolved over 60 years? How are you able to state because, again, to me, as I think about business models, right, they get expressed through their clients and their people, right? So maybe talk to that a little bit.

Absolutely. So the next -- these 2 slides are wonderful in that you have law firms and you have ultimate clients. On the legal regulatory side of the house, we usually have retention involving 2 parties. The ultimate client who we're working to help them address their challenges and the law firm act as an intermediary.

So here, this is just the past 2 years of the Am Law 100 law firms, right? We worked for 98 of those firms. With respect to the ultimate clients, 85 of the Fortune 100 companies. So we're working for all the prominent players. That's the good news. The other piece of good news, and I guess I'm going to pitch it this way to our Board in a couple of weeks. It's 85 of the 100 , but we still capture a very small percentage of their purse. That's the growth opportunity, right? When I joined CRA, there was the idea is what's marketing at CRA. It's picking up the phone after one ring, not 2, right? There was sort of an arrogance of just intellect or phone or ring. Well, markets have become more competitive.

So during my time as CEO, we tried to increase the number of individuals helping us with the client penetration. And we've been pretty successful as you can see from the financial results, growing and growing profitably. I think the next phase of our growth is trying to be a bit more client-centric instead of consulting-centric in the next 5 to 10 years, right? It's trying to capture a bit more of the share of wallet of both the Fortune 100 companies and the Am Law 100 companies. So that's the opportunity. There is a slight cultural change that happens is trying to convince my colleagues that making the pie bigger is better for everyone and not worrying about how to slice up that pie.

That's very helpful. With 60 years of history, you've obviously seen pretty meaningful shifts in technology, right, arguably even before computers existed. If you think about kind of where we are from a Gen AI perspective, in terms of impact on the business model, are there any other periods of time in parallel where there were such levels of -- and by the way, the revenue continues to grow, which is terrific, but just -- so it's clearly the value you're adding. But just maybe to help the audience dimensionalize any other shifts in terms of whether it's -- whether it's Internet or just.

There's been a lot. I mean I hate to even start with the Internet, but Internet was just coming aboard when I joined CRA, right, or the idea that I used to go to our library to use a laptop. We didn't have laptops, we use the computer. We used to sign up time to use that device. So there's clearly been large technology introduced into our industry that has changed the way we've operated.

One example is I used to bring documents -- boxes of documents home every day. And what did I get paid to do, make binders, highlight the key passages, right? eDiscovery, totally commoditized that. It's electronic discovery and manipulation of data, right? The precursor to some of these AI engines on it. So AI, clearly far more sophisticated, say, than eDiscovery, but I don't know whether it's as monumental as the advent of the Internet or the access of information at that time. So the tool is wonderful for me. It's the human adoption or adoption of that tool that is really the test of how rapid the integration will be in a firm like CRA, right?

It's being used, data intake, early data manipulation is being used. The ease of programming and manipulating these large data sets, never been better with that. So all of those aspects are being used. But can I go from just the first tier of consulting services to bring in the AI tool to the second tier, that remains to be seen yet, right? That's the evolution for a firm like CRA for any consulting company.

The other thing I'll highlight is CRA is very much of an expert-led firm. Our ratio of Vice Presidents to non-Vice President 4 or 5:1, okay? If you look at most consulting companies, they're about 10 or 12:1. So the idea that we're at risk of commoditizing or eliminating a lot of our junior resources, one, we don't have a lot of junior resources. It's not the service that we provide, right? We are a more senior-led expert-led firm. And if you believe what -- at least what I'm reading is that the value of expertise increases with the continued proliferation of the tools. And we've seen that to date. Hopefully, it will continue to evolve.

Fascinating debate because part of our view, too, is a lot of the lower-end work, your clients probably weren't paying for to begin with, right? So some of that gets more efficiently delivered, net-net, you're probably in a better position. But I guess from a delivery perspective and maybe a revenue perspective, have clients shifted in terms of how they want to pay or the deliverables? And I know that's probably could spend hours on that alone.

So we're really expensive, right? Bill rates of undergrads straight out of university are $450, $500 an hour. Vice Presidents are $1,500, $2,000 an hour. So when you're really expensive, you better be delivering value. And whether the clients are going to demand it, you better be finding ways to demonstrate your differentiation and demonstrate your value to it.

So clearly, AI is people are asking. Are you being as efficient as you can on the delivery of your services? So it's not like those questions didn't exist previously for a firm like CRA. Probably a little more waiting on the management consulting side for the efficiency, given the fact that a lot of projects are fixed priced. But we may be -- what you may forgo on revenue, you're gaining on efficiency with profit enhancements on that side of the house. And the legal regulatory, the to-do list on those engagements tends to be so long that if you're able to do the lower level work more rapidly, you just get to higher levels of your to-do list, hopefully, by the end of the matter.

Any -- I may put it back to the audience.

[indiscernible].

Sure. So if I'm sitting at any point in time during the year, with the projects that I currently have in-house., This is not a predictive statement. This is just based on what my experience has been. At any point in time, I have about 55% to 60% of the preceding 12 months revenue in-house, okay? That still means that I need to come up with a lot of projects in order to deliver on the revenue expectations. That has always been the case on it.

So things that we look at, we look for industry trends, what is the M&A activity, what is the legal case filings, the large antitrust investigations, general GDP growth, right? Consultants are so discretionary spend. If clients are tightening their wallets, it's going to impact us, no matter how differentiated you are in your service with that. Internally, we'll always communicate to our shareholders lead flow, lead flow conversion to new projects. Typically, revenue growth is highly correlated with leads coming into the firm. So those are a number of the variables. What I can say is that we've been tremendously consistent over the time. I think 2025 will be our eighth consecutive record year of revenue and will be a record year of profits, too. So even with the fact that only about 60% is so-called in the bank, the momentum that comes with having clients like are listed here has fed the demand quite nicely over the past decade.

Yes. The international makes up roughly about 20%. If anything, the regulatory environment internationally, particularly in Europe, has been much more vigorous than that here in the States. So we're actually seeing a lot of growth opportunities there with a lot of the segmentation that happens with Brexit or the U.K. operating differently than the European Union. That's other revenue opportunities that exist for us. And even better so, a lot of these large mergers or investigations are multinational. They're not single jurisdiction matters, which adds to the complexity and the revenue opportunities.

Anyone else? I think we're up on time. So thank you, Paul, again, and Eric and Chad, it's really -- thank you for your time.

Thank you, everyone. I appreciate you giving me your ear.

Good day, everyone, and welcome to Charles River Associates Third Quarter 2025 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 to 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 any forward-looking statements after the date of this call. 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. CRA continued its run of strong results into the third quarter of fiscal 2025. Revenue increased by 10.8% year-over-year to $185.9 million. Combined with the record revenue performance in the first and second quarters fiscal 2025 has produced the best 3 revenue quarters in CRA's history, reflecting the durability of CRA's business model. Our performance during the third quarter was broad-based with 7 of 11 practices growing year-over-year.

Our Antitrust & Competition Economics, energy, finance and intellectual property practices each posted double-digit revenue growth. We also generated growth across our geographies with our North American operations increasing revenue by 6.8% and our international operations expanding 30.3% year-over-year. The strong international performance was driven primarily by our Antitrust & Competition Economics and Life Sciences practices.

During the period of strong growth, we have continued to manage the business effectively with quarterly utilization reaching 77%. Our strong utilization and overall execution drove year-over-year growth in profitability that exceeded revenue growth as non-GAAP net income, earnings per diluted share and EBITDA increased by 12.7%, 16.4% and 14.6%, respectively.

Revenue in the third quarter from CRA's legal and regulatory services increased 11.5%. This growth was supported by activity in the broader legal market as total case filings and total court judgments each increased by double-digit percentages compared to activity in the third quarter of 2024, capitalizing on ongoing merger-related activity and continued demand for antitrust services. Antitrust & Competition Economics practice established another new high for quarterly revenue. The practice continues to support clients on high-profile mergers as worldwide M&A activity totaled $3 trillion during the first 9 months of 2025, an increase of 33% compared to year ago levels and the strongest opening period deal making since 2021.

During the third quarter, for example, CRA's competition practice advised UnitedHealth Group in connection with the U.S. Department of Justice's review of UnitedHealth $3.3 billion acquisition of Amedisys. The DOJ, which had initially sought to block the transaction, announced that it reached a settlement with UnitedHealth and Amedisys, enabling the deal to proceed following 2 years of regulatory review.

Series competition team provided its expertise throughout the DOJ investigation and litigation proceedings. The practice also contributed to the strong growth produced by CRA's international operations. For example, during the third quarter, a CRA provided economic analysis and support to Microsoft during an investigation into its team's collaboration platform.

In September 2025, the European Commission announced that it settled the long-running investigation by accepting commitments from Microsoft to address EU competition concerns. Elsewhere, our finance practice continues to be active across a range of industries and litigation venues. For example, CRA has been assisting a client in the chemicals and agricultural product industry and high stakes litigation involving alleged breaches of contract and anticompetitive conduct.

In the most recent quarter, CRA assisted in pursuing and resolving disputes surrounding the production of structured data formulating and analyzing potential damages and preparing for mediation in another matter. CRA was retained to provide expert testimony on financial issues in the NASCAR antitrust litigation scheduled for trial in December.

During the third quarter, CRA's intellectual property practice advised on multiple high x litigation and valuation matters in a patent infringement dispute relating to mRNA COVID-19 vaccines a CRA expert testified on reasonable loyalty damages accounting for multiple liability scenarios and recovery periods. The parties subsequently entered into a global settlement resolving all pending U.S. litigation related to COVID-19 vaccines and established a framework to resolve ongoing patent disputes outside the U.S. upon the defendants acquisition of CRA's client for approximately $1.25 billion.

Under the terms of the settlement, CRA's client and its partners will also receive a payment of $740 million as well as royalties on sales of COVID-19 vaccines in the United States going forward. We also saw strong activity related to our transfer pricing services during the third quarter with transfer pricing top of mind for many tax authorities CRA experts continue to be called upon to help regarding disputes around the world.

We are also seeing a growing need for cross-functional economic analysis, and it brings together experts for multiple practices, For example, CRA's competition and transfer pricing colleagues are providing advice to a major mining company to ensure that their related party pricing would not be perceived as predatory pricing under anti-competition laws.

Within our management consulting services, revenue increased 8% year-over-year, led by the strong performance of our energy practice and supported by the expansion in our Life Sciences. CRA's Energy practice continues to be a trusted adviser to energy companies, utilities, investors and other ecosystem players navigating a rapidly evolving energy landscape. During the quarter, the practice supported a major California electric utility in developing its integrated resource plan, helping to balance reliability, decarbonization and affordability objectives.

The team also contributed to several initiatives examining market design as questions grow about how electricity markets compensate generators and ensure resource adequacy. In addition, the energy practice saw strong activity from private capital clients providing commercial and regulatory due diligence for investments in energy infrastructure, utilities and increasingly, digital infrastructure such as data centers and network assets, where energy has become a major component of cost and investment strategy.

These projects continue to draw on CRA's deep industry knowledge and analytical expertise to help clients evaluate opportunities across the evolving power and infrastructure sectors. In our Life Sciences practice, we continue to engage on early-stage assets with a global perspective. As an example, during the quarter, we worked with a client on their strategy for a newly acquired portfolio of neurological assets.

Our team evaluated the pricing and access potential for the portfolio across the U.S. and key European markets, covering indications ranging from bipolar disorder to Alzheimer's disease and provided data-driven recommendations on clinical trial design and launch sequencing to maximize value.

In our expert witness work, we continue to leverage our strategy consulting experience in 2 disputes regarding new product launches. Overall, I'm grateful to all of my colleagues for their hard work during the third quarter.

CRA's strong long-term performance is indicative of the company's overall quality as we continue to help our clients address their most important and complex challenges and demonstrates our ability to capitalize on growth opportunities in the market.

Turning now to guidance. Through the first 3 quarters of fiscal 2025 on a constant currency basis relative to fiscal 2024, CRA generated total revenue of $552.1 million and non-GAAP EBITDA of $71.8 million, producing a margin of 13.0%. Reflecting the continued strength and quality of our business, we are raising our revenue guidance and increasing the lower end of our profit guidance. For full year fiscal 2025 on a constant currency basis relative to fiscal 2024, we now expect revenue in the range of $740 million to $748 million and non-GAAP EBITDA margin in the range of 12.6% to 13.0%.

The new guidance compares with a prior revenue range of $730 million to $745 million and a prior non-GAAP EBITDA margin range of 12.3% to 13.0%. As a reminder, our fiscal year ends on January 3, 2026, resulting in a 14th week in the fourth quarter of 2025. While we are pleased with CRA's year-to-date performance in fiscal 2025, we remain mindful that uncertain global macroeconomic, business and political conditions can affect our business and our clients.

With that, I'll turn the call over to Chad and then to 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 $22.5 million of cash and $95.0 million of borrowings under our revolving credit facility, resulting in net debt of $72.5 million.

These figures reflect $25 million of net payments made during the quarter to reduce borrowings under our revolving credit facility. The third quarter of 2025 also saw net cash outlays of $28.1 million to acquire and retain senior talent and $700,000 for capital expenditures. During the third quarter, we returned $7.2 million of capital to our shareholders, consisting of $3.2 million of dividend payments and $4.0 million for repurchases of approximately 22,000 shares at an average share price of $185.74.

We currently have $10.9 million available under our share repurchase program. Earlier today, we announced a 16% increase in our quarterly cash dividend from $0.49 to $0.57 per common share, which demonstrates our confidence in the quality of the business and reflects our commitment to returning capital to shareholders. This new dividend amount is supported by the growth and performance of CRA's business and is more than 4x the size of our first dividend in 2016. We concluded the third quarter of fiscal 2025 with total liquidity of $123.6 million, consisting of $22.5 million in cash and cash equivalents and a further $101.1 million of available capacity on our line of credit.

With that, I'll turn the call over to Eric for a few final comments. Eric?

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 third quarter of fiscal 2025. In terms of consultant headcount, we ended the quarter at 968, consisting of 164 officers, 567 other senior staff and 237 junior staff.

This represents a 1.0% year-over-year decrease compared with the 978 consultant headcount reported at the end of Q3 fiscal 2024 and a 3.3% sequential increase relative to the 937 consultant headcount reported at the end of Q2 fiscal 2025. Non-GAAP selling, general and administrative expenses, excluding the 1.8% attributable to commissions to nonemployee experts, was 16.3% of revenue for the third quarter of fiscal 2025 compared with 16.2% a year ago.

The effective tax rate for the third quarter of fiscal 2025 on a non-GAAP basis was 28.8% compared with 28.5% on a non-GAAP basis for the third quarter of fiscal 2024. Turning to the balance sheet. DSO stood at 115 days at the end of the third quarter compared with the 110 days at the end of the second quarter of fiscal 2025. DSO in the third quarter consisted of 70 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.

[Operator Instructions] Our first question comes from Andrew Nicholas with William Blair.

I wanted to talk about headcount first. Actually, I think I asked a similar question this time last year, but just surprised maybe to not see a bigger spike in junior consultants quarter-over-quarter given kind of the seasonal dynamics there. I think relative to history, the ratio of junior to senior staff is also relatively low. So just wondering how sustainable that ratio is, if there's any kind of underlying actions going on that explain that mix dynamic and maybe just overall thoughts on health care or headcount growth over the next couple of quarters.

Sure. Andrew. I think the way to start thinking about it is throughout CRA's history, we have continuously planted sort of seeds of growth. And our job as consultants and as management in the firm is to try to increase the probability of their success and make the appropriate investments at the appropriate times.

The headcount volatility or changes that you've seen, say, in the last 12 to 24 months are really us evaluating these growth opportunities at times where we think the potential is not there for future growth. We redeploy the assets to somewhere else in the firm. So the parts of the company that are growing are receiving headcount growth. The opportunities that we think are not fruitful, we redeploy those assets elsewhere. So that's, I would say, is part one of the answer.

We are not starving any of the practices that are expanding. In fact, they are growing and growing profitably. The other part that I want to highlight is, I believe, thus far, in 2025, we've welcomed nearly 20 new Vice Presidents from lateral market hires. So this is going to inflate the Vice President headcount relative to the headcount in other parts of the firm. As these individuals start to ramp and the revenue starts to materialize, you can I think, safely assume that we will build out the pyramid under these professionals.

But we typically do not do that simultaneously because we believe we can meet the short-term demand with existing capacity. So I think as you get to more of a medium, long term, you should start seeing that headcount growth to be roughly approximating revenue growth. It's just during periods of rapid hiring or during periods of redeploying the assets that you may see some of the statistics that we've been reporting on the last couple of quarters.

No, that makes perfect sense. I appreciate the color. I guess somewhat related and maybe your previous answer helps to answer this next question. But just on overall bill rate revenue growth was again really strong in the quarter. Utilization really strong, but somewhat consistent with what you saw this time last year. So it seems like bill rates in the aggregate are up maybe low double digits, if my math is correct. And just wondering if you could unpack that -- confirm that and then just kind of unpack what's driving that? Is it straight kind of rate card increases? Is it mix or any other dynamics that I'm not thinking of?

Sure. I'm going to start with sort of a patting myself on the back, patting the company on the back here is that we've had this consistent delivery of exceptional performance. And sometimes, we take the statistics that we're reporting every quarter for granted. The utilization may be consistent with what it was a year ago, but let's not forget, it's 77% and a year ago was at 76%. So we are constantly comparing ourselves to peak levels of performance, and that goes for utilization, it goes for revenue and it goes for profitability across the firm.

So I just don't want that to be overlooked as a company here for what we're delivering. With respect to the rates, our rate increases are set usually towards the end of the preceding year and go into the beginning of the current year. So rate increases happened, the majority of it during Q1 of fiscal 2025. As new projects come online, we get to realize more of the full benefit of that rate increase.

I believe in 2025, I think the effective rate increase is right around 3%, give or take. That has stuck. We do not see any change in write-offs. We do not see any change of reserves. And in fact, we're pretty happy with the repeat client activity that we're having during the year. And the reason I raised that is that's an indication that the value perceived is still quite high by our clients.

Great. Is it fair to assume similar type increases going forward? Like is that a fair framework for us to think about bill rates in the medium term?

I think any time you start with an assumption of bill rates in the 2% to 4% range and then with the acknowledgment that, that doesn't happen, that doesn't happen instantaneously on January 1, but usually happens as new project inflow comes into the firm. Yes, I think that's a fair assumption. I know my consulting colleagues will probably push back, but I believe the rate increases can be even higher, but we want to make sure that the value delivered to our clients always is first priority.

Makes sense. Last one for me. Just on international growth. I mean, I think you mentioned some of the practices that are doing really well outside the United States, a few cases that you had or projects that you had going on in the quarter that led to that 30% plus type growth. Are there any kind of bigger picture secular themes internationally that you would also maybe point out that are driving stronger growth there than in the U.S.? And maybe any comments on how persistent those themes might be going forward?

Sure. Thank you, Andrew. I'm going to start again celebrating the contributions of our competition practice in Europe. I think they are by far the top quality provider of services in the Antitrust & Competition Economics space. For a practice that's been around, a subpractice that's been around as long as they have to deliver a 30% year-over-year growth on straight time and material type revenue is really impressive, is really impressive.

I think in terms of the secular changes, there hasn't been as much volatility in Europe with respect to enforcement stance. They've been very pro-enforcement previous to 2025, and that has continued. In the U.S., maybe we have a little bit of starts and stops with the transition to the new administration and the new stance on mergers and regulatory oversight. So I would say it's more the consistency of the strong enforcement in comparing that to North America. But it starts with just the amazing quality of the group we have over there in Europe.

Our next question comes from Marc Riddick with Sidoti & Company.

So I wanted to -- first of all, thanks for all the detail and color that was provided in your prepared remarks. I wanted to talk a little bit about the legal and regulatory activity that you highlighted. It seems to be continuing to pick up there. I was wondering maybe you could talk to a little bit of the drivers that you're seeing there maybe more recently. It sounds like it's sort of broad-based, but maybe you could put maybe a little more color on that part of the client activity.

Yes. When I saw the legal stats, I actually asked members of the team to go double check those numbers. I was really surprised to see the kind of growth in terms of new case filings and court decisions on that. So I think that bodes well for the quarters ahead as those matters seek consulting support with that.

With respect to what we are seeing, the practices that are traditionally strong continue to see really good inflow activity, the Antitrust Competition Economics practice, the intellectual property practice, the Forensic Services practice, and we're seeing some early signs of maybe momentum building within our finance practice.

So I think you would say it is broad-based. It also is contributing when I'm talking about 7 of 11 practices growing year-over-year and 4 or 5 -- I'm sorry, I'm losing track now, 4 growing double digit year-over-year. So the inflow has been broad-based. The conversion of those opportunities to revenue and profits has been broad-based. So we're in a pretty good position now, and we look forward to the quarters ahead to see if those continue to materialize.

Thanks for the commentary there because, yes, those numbers kind of really jumped out at me when you mentioned that in your prepared remarks. So I appreciate you putting more color on that. And of course, we've seen some of the gains on the M&A activity and what that's meant and the strength that, well, quite frankly, you guys were doing better than the market for a while with antitrust and competition economics.

But I was wondering, are we -- it seems as though we're -- if we were looking at normal visibility for this time of the year because normally, as we're heading into the fourth quarter and holidays and things like that, do you get the sense that this year provides a normal amount of visibility with activity levels because it certainly seems as though, given the strength you're seeing kind of across the board, it seems as though maybe you have a little more visibility than you normally do this time of year.

I think I generally agree with the statements you've made. What gives me confidence in some of the visibility is really the consistency of results that we've enjoyed during the year. I've also enjoyed similar kind of consistency during fiscal of 2024.

So after 3 quarters of fiscal 2024, I can't say I felt less confident than I do now or vice versa. We're having the first 3 quarters at the time were the best 3 quarters that we had in 2024 or the best 3 quarters we've ever had when you look at 2025. So we are cautiously optimistic. I can't say that visibility or the large long-term projects have increased in 2025 relative to 2024, but I like where we stand.

Okay. And then the last thing for me, are you getting any sense that there are any particular client verticals that are maybe more active than others in any parts of the business? Or are there any that kind of stood out to you over the last few months?

Besides the industry examples that we've been giving within the energy sector, -- that has continued to show really strong demand. We're starting to see maybe a consistency in the upward ascension in the pharmaceutical life sciences space. And then with respect to the litigation practices, they're really industry agnostic on that. So we're happy with the dollar value of mergers being up, but there's still, right, the flip side is the number of mergers being announced to date is flat or slightly down. So there are some offsetting, but large complex matters typically require consulting assistance. So we'll see what the next few quarters hold.

Our next question is from Kevin Steinke with Barrington Research.

I wanted to start off by just asking about the level of overall regulatory scrutiny on the Antitrust and M&A side. You've talked about the continued intense scrutiny internationally. But it seems like from the results you're putting up that we haven't perhaps really seen any meaningful change in the regulatory environment in the U.S.? And is that something you would say is fair to say to characterize it that way?

What I can say is just strictly with respect to what we are observing in terms of project inflows. It's hard to say I've seen a decline in antitrust enforcement as the Antitrust & Competition Economics practice is delivering record quarter after record quarter. There's clearly some changes afoot. How they materialize or how quickly they materialize still remains to be seen. But to date, the inflow coming into CRA, I haven't seen any kind of contraction because of the new stance.

Okay. And you just kind of touched on it a moment ago, but I was going to ask about life sciences. It sounds like maybe the pipeline is perking up a bit there. So could you maybe just talk about some of the activity you're seeing going on there and kind of the outlook as we move forward for the next several quarters?

For many quarters now, we've been talking about Life Sciences performance as being a bit sawtooth. But in 2025, we're starting to see a slight upward sloping, maybe sawtooth pattern there. We're still growing probably mid-single digits in that practice year-to-date. So I like the initial indicators, but I'm not ready to declare victory or a disproportionate forward ascension in the quarters ahead.

Clearly, there's a lot of market factors that would be supportive of the continued growth. I don't think anyone can say that the pharma industry is becoming less complex. There's a lot more complexities on drug pricing, a lot more complexities on the rollout, on favored nation status and so on. So I think the broader market dynamics are supportive for our services, but some of the cost disciplines, I think, have gotten in a way -- have gone in the way of more pronounced quarter-over-quarter growth.

Okay. Yes, that's helpful. I also wanted to ask about the intellectual property practice. I think that's one you called out for the last 2 quarters here is growing at a double-digit rate. And you cited the COVID-related example in your prepared remarks. I think I've also heard you talk about in the past, maybe AI is going to create a lot of issues in the intellectual property field. And just kind of wondering about the outlook for that practice and kind of sustainability of demand for it going forward.

Sure. I think what the intellectual property practice is doing right now is really impressive. You talked about the market dynamics right now. There are finding teaming opportunities with intellectual property in our Antitrust Competition Economics practice, teaming opportunities with the finance practice. So I don't see those demand drivers going away. And the reason I'm highlighting these cross-practice collaborations is typically cross-practice collaborations mean more complex matters, larger matters. So I'm really happy with the teaming that is happening. And I'm also very pleased to see that our IP practice seems to be a go-to provider in many of these engagements.

Great. Lastly, I did want to ask about the strength of hiring on the VP, the Vice President side for thus far in 2025. It did seem like over the last 3 months, you had quite a few press releases announcing new VPs across your various practices. So can you just speak to the hiring pipeline? I mean, is there something going in on the market that's allowing you to add more talent more quickly? Or just kind of speak to that talent influx that you've seen here over the last several months.

I've been pretty thrilled with the inflow of new Vice President colleagues at CRA in 2025. Chad and his team have done an exceptional job identifying colleagues as they work with the practices. But I think the other part to note is the individuals we're recruiting have lots of choices, right? They can practically go to any other consulting firm in our marketplace. But the fact that they see the value proposition at CRA is what has been most exciting for me.

They see the success that we're having in the marketplace. They see the success that people joining CRA are having in terms of the ramp of their business. So it is a great collaborative effort with the identification of the individuals, the communication of the value proposition to those individuals. And as important is the demonstration of success of those individuals once they join CRA. So the pipeline is rich and -- but we're being very selective on who we bring in. But to date, we're pretty excited about the 20 or so colleagues that have joined.

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.

Again, thanks to everyone for joining us today. We appreciate your time and interest in CRA. We'll be participating in meetings with investors in the coming months, and we look forward to updating you on our progress on our fourth quarter call early next year. With that, that 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.