Good day, everyone, and welcome to Charles River Associates First 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; and Chief Corporate Development Officer and Interim Chief Financial Officer, Chad Holmes. At this time, I'd like to turn the call over to Mr. Holmes for opening remarks. Chad, 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, Chad, and good morning, everyone. Thank you for joining us today. Building on the momentum of an exceptional fiscal 2024, CRA continued its strong performance into the first quarter of fiscal 2025 and delivered record financial results. During the first quarter, revenue increased by 5.9% year-over-year to $181.9 million, which represents the highest quarterly revenue in the company's history. Broad-based contributions drove the quarter's strong performance with 5 practices growing year-over-year. 4 practices, energy, finance, intellectual property, and Life Sciences posted double-digit revenue growth, while the Antitrust & Competition Economics practice posted a new high for quarterly revenue. We also expanded geographically as CRA's international operations led the way with nearly 20% year-over-year revenue growth. We continue to manage the business effectively, converting strong top line growth into even faster bottom line expansion. Non-GAAP net income, earnings per diluted share, and EBITDA increased year-over-year by 11%, 13%, and 11%, respectively. Each profit metric also set a new quarterly record for CRA. For the company as a whole, consultant headcount decreased 5% compared to the first quarter of 2024 and was flat sequentially. Consulting utilization improved on a year-over-year basis to 76%. The increase in utilization was supported by the continued replenishing of our sales pipeline. After a sluggish start in January, project lead flow accelerated during the quarter, increasing by 5% year-over-year. New project originations followed a similar pattern and increased by 3% relative to the first quarter of 2024. 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 by roughly 5%. This growth was in line with the broader legal market as total case filings and total judgments increased 13% and 2%, respectively, compared to the first quarter of 2024. Turning to the M&A market, worldwide M&A activity rebounded from a slow January and February to start the year, reaching $885 billion during the first quarter of 2025. This represented an increase of 15% compared to year-ago levels and the strongest opening quarter for deal-making since 2022. Against this backdrop, the record quarter for CRA's Antitrust & Competition Economics practice reflected continued demand for antitrust services and ongoing merger-related activity. During the quarter, CRA economists worked for Microsoft to help secure a favorable decision from the U.K. Competition and Market Authority in its investigation of the Microsoft OpenAI partnership. The team of CRA experts documented and quantified the pace of innovation and market entry in the AI space. They further helped the CMA understand the inner workings of the partnership, its effect on the parties' incentives, and its role in underpinning investment and innovation across the AI economy. The CMA concluded that there was no basis to review the partnership under the merger regulations. CRA's Antitrust & Competition Economics practice remained active in high-stakes legal disputes during the first quarter. Our consultants and affiliated experts prepared and delivered expert reports and testimony in a range of competition-related matters, including litigated mergers, claims of anti-competitive conduct, antitrust class actions, and matters at the intersection of antitrust and intellectual property. These engagements span a diverse set of industries such as technology, health care, retail, and consumer goods. In the first quarter, CRA's finance practice continued to be active in several merger and other transaction-related lawsuits in Delaware Chancery Court and Federal Court. As an example, during the quarter, the practice collaborated with members of CRA's Antitrust & Competition Economics practice and the risk investigations and analytics practice to investigate, on behalf of a European tax authority, alleged multi-jurisdictional fraud connected to a dividend arbitrage scheme. Chicago, New York, Boston, and London-based teams performed extensive trading and market practice analysis, investigative research, document review, forensic accounting, and flow of funds analysis. A CRA expert testified in trials in several jurisdictions, including the United States. In February, a jury in the U.S. awarded $500 million to CRA's clients. CRA's intellectual property practice advised on multiple high-stakes litigation, arbitration, and valuation matters, covering a broad range of industries, including artificial intelligence, chemicals, consumer electronics, energy, financial services, food and beverage, life sciences, software, and telecommunications. One example is that a CRA expert testified as an economic damages and licensing expert on behalf of a leading telecommunications company being sued for patent infringement in Marshall, Texas, one of the most active patent litigation venues in the U.S. CRA's analysis and testimony demonstrated, among other things, that the features in question had low value based on the analysis of customer usage metrics and that the plaintiffs' claim of over $1 billion in royalties was excessive and economically unjustified based on the facts in the case. The juries found in favor of CRA's clients. Within our management consulting services, revenue increased 10% year-over-year as both Energy and Life Sciences practices delivered double-digit revenue growth. During the first quarter, CRA's Energy practice delivered strong performance across strategy, risk and compliance, data center support, utility planning, and transaction support services. For example, on a strategy assignment, the team assisted a major utility in developing its large load strategy encompassing data centers and the onshoring of additional manufacturing needs in its service region. Within risk and compliance, the practice provided expertise to infrastructure investors on the impacts of California wildfires, leveraging a skilled team with a background in wildfire mitigation planning. In resource planning, the team supported Liberty Utilities in filing its 2025 Integrated Resource Plan in Missouri with plans for subsequent filings in other states. Finally, on the transaction advisory side, the practice supported due diligence efforts across multiple transactions, including a utility buy-side diligence and a chemical sell-side diligence, leveraging the depth of the team's industry expertise. CRA's Life Sciences practice continues to emphasize a commitment to R&D pipeline opportunities in the industry, working with our clients' commercial and product development teams as they assess opportunities and work to bring new products to market. The first quarter featured projects focused on opportunity assessment, sales forecasting, and launch planning. Additionally, the quarter was highlighted by expert witness work involving antitrust matters, an area that we expect will grow in the years ahead as combination products become more common in the life sciences industry. Some obvious combinations are drugs approved for administration with a particular device, but similar concerns are likely to be faced by new gene therapies and the associated viral vectors needed to deliver the gene therapy to the appropriate cells. Overall, I'm grateful to all of my colleagues for their hard work during the first quarter as we helped our clients address their most important challenges. While pleased with the strong performance of the business, we continue to look for opportunities to further optimize our service portfolio by reconfiguring the teams in targeted areas of the company. During the quarter, these efforts affected approximately 15 individuals, resulting in a restructuring charge that was offset by the reversal of non-cash charges associated with the previously recorded performance award. Now turning to guidance, we are encouraged by the strong start to the year and the trend of lead flow activity within the quarter. As such, we are reaffirming our full-year financial guidance for fiscal 2025. For full-year fiscal 2025, on a constant currency basis relative to fiscal 2024, we expect revenue in the range of $715 million to $725 million and non-GAAP EBITDA margin in the range of 12% to 13%. However, we are mindful that uncertain global economic, business, and political conditions can be volatile and affect our business. With that, I'll turn the call over to Chad for a few additional comments.

Thanks, Paul. 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 your questions, I will provide a few additional metrics related to our performance in the first quarter of fiscal 2025. In terms of consultant headcount, we ended the quarter at 947, consisting of 156 officers, 66 other senior staff, and 225 junior staff. This represents a 5% year-over-year decrease compared with the 997 consultant headcount reported at the end of Q1 fiscal 2024 and is flat sequentially relative to the 946 consultant headcount reported at the end of Q4 fiscal 2024. Non-GAAP selling, general and administrative expenses excluding the 2% attributable to commissions to non-employee experts was 15.9% of revenue for the first quarter of fiscal 2025 compared with 15.6% a year ago. The effective tax rate for the quarter on a non-GAAP basis was 27.2% compared with 28.0% on a non-GAAP basis for the first quarter of fiscal 2024. Turning to the balance sheet, DSO at the end of the first quarter was 107 days compared with 106 days at the end of the fourth quarter of fiscal 2024. DSO in the quarter consisted of 65 days of billed and 42 days of unbilled. Turning to our capital deployment during the quarter, we concluded the quarter with $25.6 million of cash and $85 million of borrowings under our revolving credit facility, resulting in net debt of $59.4 million. The borrowings during the first quarter were primarily to fund bonus payments, which is consistent with our practice in prior years. Bonuses relating to fiscal 2024 were largely paid in the first quarter, with the final installments expected to be completed by the end of the second quarter. In addition to the normal bonus cycle, the first quarter of 2025 saw cash outlays of $27.4 million to acquire and retain senior talent and $1 million for capital expenditures. During the first quarter, we also delivered $3.5 million of dividends to our shareholders. That concludes our prepared remarks. We'll now open the call for questions. Operator, please go ahead.

Our first question comes from Andrew Nicholas with William Blair.

I wanted to first ask about the activity from April to date, Paul. Can you provide some insights into what you've observed over the past couple of weeks in this volatile market? Additionally, how does your experience in April influence your confidence in maintaining guidance for this year?

Sure, Andrew. As we talked about, our journey to a record-setting Q1 of fiscal '25 was not necessarily a straight line. We began with an unusually slow January, and we have seen the level of activity, both in terms of business inflow, new project originations, and billings grow as the quarter proceeded. So February was greater than January, and March was greater than February. We are only a couple of weeks into the month of April. And what I can share is that the trends we have seen in March have continued. But I think it's a little too early to declare victory or to assume that those trends would just naturally continue going forward. But so far, so good.

Got it. And then a really nice quarter. It sounds like for Life Sciences. Could you maybe talk a little bit about that pipeline specifically, maybe where some of the bigger opportunities are and how excited you are for that business maybe relative to some challenges over the past couple of years?

Sure. No, I'm very happy for the Life Sciences practice. I know they've been working hard to benefit from some of the seeds of growth that they've been planting. I would love to see a true streak start. So they've posted a couple of good quarters together. There, again, I'd like to see that continue, but they're enjoying success geographically. They're enjoying success across the business concentration areas of that litigation strategy and more regulatory support there. So things are clicking right now for that practice. And we're just hoping that the momentum continues into Q2 and throughout '25.

Great. And maybe if you wouldn't mind me squeezing one more in just on headcount growth and plans there. Another really good quarter of utilization. So if you could just kind of talk about where you sit, it looks like forgivable loan outlays were also a little bit higher than normal. So any comments on retention or attrition would also be helpful.

Sure. So on headcount, the one thing I want to put out there as a reminder, there was a headcount action that took place in Q2 of fiscal 2024. And we are still seeing the effect in terms of year-over-year comparisons on the headcount. And that's why we provided the year-over-year growth rate or decline of roughly 5%, but also wanted to highlight that sequentially it was flat relative to Q4. What we are constantly trying to do is make sure we are optimizing the investments we put into this firm, and investments are always just cash outlays for talent. Investments are always making sure that our business units are operating as profitably as one would expect. And if there are areas of underperformance, to see whether action is required with that. I could say for those individuals impacted there, it is just really unfortunate positioning of where heads may exist and where the revenue opportunities are being realized across the portfolio, but we are still investing for headcount growth across all of our practices. As I said before, medium to long-term, we should expect headcount growth to be roughly in line with revenue growth. So that positioning hasn't changed. So hopefully, I addressed the headcount point there, Andrew. Moving on to the talent and investments. As Chad highlighted, the talent outlays were both for new talent acquisition and retention. Retention or maintenance payments for talent is nothing new. I know it's getting a little more airtime because of some of the disruptions in the labor industry. But relative to our expectations, as we enter 2025 or we look at the longer term for maintenance capital, what we incurred in Q1 is not that far different from what our ex ante expectations were. So I'm pleased that our colleagues are choosing to stay because they have plenty of opportunities. It is our job as leaders to make sure this environment is one that they want to stay and prosper at. So yes, there was maintenance capital, but it wasn't that dissimilar from ex-ante expectations, Andrew.

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

So congratulations on a nice strong start to the year. I was kind of curious as to it's interesting that you mentioned the cadence of sort of how things built through the months. I was wondering was there anything that you could tie the external headlines to within any of the practices that were sort of a noticeable trigger? Or do you get the sense that these were just general opportunities that you're already working on that just sort of maybe came to fruition a little bit more aggressively towards the back half of the quarter?

Sure. I really wish I could discretely tie cause and effect here. But there have been so many causes right now in our macro and geopolitical environments and that the pace of the hits to our economy, the global economy, has been pretty consistent through the quarter. So I can't necessarily say it's related to A or related to B. You overlay to that, there's also been some shocks to our industry in which we operate. So to say it is directly tied to one or another, I'm not prepared to do that. I think the one thing that's clear to me, at least, all of these impacts create uncertainty, and sometimes uncertainty causes a pause in our clients moving forward with matters and our clients announcing mergers and our clients pursuing strategic advice. So we are happy to say that we are just building from the slow start to January, and hopefully, that trend continues forward. But no direct tie to any particular announcement.

Okay. And then I was sort of curious as to whether or not you're seeing much in the way of any particular industry verticals, client industry verticals that are a little more active recently or if there's anything that stands out to you currently?

I'm very pleased that all areas of our portfolio are experiencing growth. Legal regulatory and management consulting are both expanding in North America and internationally. They may not be growing at the same pace, but they never typically do. This diversity is why we maintain a portfolio and why we've consistently achieved strong financial results over an extended period. The portfolio is effective. One of the aspects I'm most proud of is that contributions are coming from every part of the organization.

It's certainly encouraging. I was curious whether you're noticing any developments regarding the return to office pace. Are you observing any changes in this area, both within your own company and more broadly in your interactions with clients, over the last few months?

We were doing so well, Marc, on your question until we got to this topic. So I will start with what we're seeing in the outside world, maybe our clients all I could really comment there is what I'm reading in the popular press the same as you're reading. I know there's been a little bit of a movement to try to get people back into the office for all sorts of reasons, but it's more, again, third-party consumption of the data. I have no primary information. With respect to CRA, there hasn't been any kind of significant shift, both in terms of management asks of our colleagues or our colleagues' participation in the office. If I look on average, colleagues are in the office a little more than 3 days a week on average. A lot of times, people want to compare that to a 5-day-a-week type average. But the fact is even pre-COVID, my colleagues were never in the office 5 days a week. Sometimes they're traveling on business. Sometimes, they took advantage of the flexibility that exists to work from home when those conditions are necessary. So comparing 3 to 5 is probably not an accurate or fair comparison. What I'd love to see is the in-office participation grow a little bit, yes. But to do that, I need to do a better job making clear of the advantages to my colleagues for being in the office. We don't operate by a strict standard at CRA.

Our next question comes from Kevin Steinke with Barrington Research.

I want to start off by asking about the recent restructuring that impacted 15 individuals. Can you provide more insight into what led to that decision and if any specific practice areas were affected?

I'm not going to get into a lot more detail on geography or the practices affected, namely because a couple of things. I want to respect the impacted individuals with that, and the impacts with respect to the practices are not indicative of the general health of those practices. So I don't want the narrative to get away from the reality here. Typically, we are constantly trying to optimize the portfolio. Many times, any kind of actions taken are just running through our GAAP financials. We had enough issues, both creating reductions of profitability on some and increasing profitability on others, that I wanted to try to be as clear as possible to our shareholders so they can look at the financial results and gleam what impact they may have on future quarters. That's why we broke it out today. Because as you saw, the GAAP financials would actually have been more lucrative in terms of profitability levels than the non-GAAP financials. I just want to give clarity as to potential expectations going forward on that.

Okay. And then I know for Antitrust & Competition Economics, for that practice, a lot of times, headlines around M&A get a lot of the attention and the discussion. But just from some recent headlines related to the tech sector, it seems like antitrust activity is still really strong, which I would assume is benefiting you. So maybe just any comments on trends in antitrust demand within that practice.

Sure. All I can say is you know, is bow and give them accolades. I don't know how many times I'm going to have to say here during a quarterly report and talk about the record levels achieved by this practice, our largest practice compared to anything out there in the industry. This practice has been growing. This practice has been providing exceptional services to our clients who come back time and time again for assistance from CRA. When it is not merger-related activity that may be driving the growth, it is support and various antitrust investigations. So I am regularly in awe. I know I shouldn't be after being at CRA for 35 years, but the performance of our Antitrust & Competition Economics practice, both in North America and abroad, has been nothing short of exceptional now for the past decade. So hats off to them. And even when markets appear to be slowing, their strength in that market continues to drive ample demand.

Great. And lastly, I just wanted to ask about the kind of project and client examples you talked about in your prepared remarks, you talked quite a bit about collaboration across practices and across offices. And just wondering how often that occurs in terms of that collaboration across practices and offices and maybe if that's kind of an underreported part of the story that we should be thinking about in terms of your ability to collaborate.

Sure. No, that's a good question. I will take the opportunity to say it is probably underreported. We do not operate with any kind of targets on strategic revenue generation or revenue coming from that cross-practice collaboration. Our general position is that practice structures are something for internal organization. But when you go to market, it's all about bringing the best talent to bear on your clients' particular engagement. That's why in this report, what we tried to do is call out when the matter is dictating the combination of our talents across geographies and across our practices. As our world becomes more complicated, some of the opportunities to combine our resources will grow. So congrats to my colleagues for delivering the best service possible. On the geographic collaboration, quite frankly, that has been going on for a long time. We operate in a global labor pool, so individuals regularly work across geographic borders.

Congrats to the strong start of the year, and I'll turn it back over.

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.

As we wrap up today's call, I have a special point to highlight. In June 1965, CRA formally began operations. Our founders envisioned a company that would bring the developing expertise of academia, especially in the then burgeoning area of quantitative methods and economics to the business world. This vision continues to resonate strongly today, as we apply cutting-edge quantitative tools and microeconomic analysis to practical business problems. On Monday, June 2, CRA will ring the opening bell for NASDAQ to celebrate the company's 60th birthday. It will be a celebration of colleagues past and present. So just a moment to say thank you to my assistant colleagues and to the alumni of CRA. I would like to also thank everyone who joined us today. We appreciate your time and interest in CRA and the support you provided the company over the years. We'll be participating in meetings with investors in the coming months and we look forward to updating you on our progress on our second quarter call. 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.