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 three 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. Our 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 for 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's $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 two years of regulatory review. Our 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 team provided economic analysis and support to Microsoft during an investigation into its Teams 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 continued 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-stakes litigation and valuation matters in a patent infringement dispute relating to mRNA COVID-19 vaccines; a CRA expert testified on reasonable royalty 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 that brings together experts from 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 practice. 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 two 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 the 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.

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 4 times 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.

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.

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 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 information. I guess somewhat related, and possibly your previous answer addresses this next question. Overall, bill rate revenue growth was again really strong in the quarter. Utilization was also really strong, consistent with what you saw this time last year. It seems like bill rates overall are up by maybe low double digits, if my math is correct. I'm just wondering if you could confirm that and explain what's driving it. Is it primarily rate card increases, or is there a mix or any other factors that I'm not considering?

Sure. I'm going to start with sort of a pat on the back here. 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. 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 happen 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, 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 in 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 as 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 anytime you start with an assumption of bill rates in the 2% to 4% range, acknowledging that it 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 is always the 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 as long as they have to deliver a 30% year-over-year growth on straight time and material type revenue 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 prior 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 when 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.

I wanted to thank you for the detailed insights provided in your prepared remarks. I would like to discuss the legal and regulatory activity that you mentioned, which seems to be increasing. Could you elaborate on the drivers behind this recent activity? It appears to be quite broad, so any additional insights on client activity in this area would be appreciated.

Yes. When I reviewed the legal statistics, I asked my team to verify those figures because I was quite surprised by the significant growth in new case filings and court decisions. This suggests positive prospects for the upcoming quarters as these issues likely require consulting support. In terms of our current activities, the traditionally strong practices are experiencing robust inflow, including the Antitrust Competition Economics, intellectual property, and Forensic Services practices. We're also noticing early signs of momentum in our finance practice. Overall, this growth is widespread, with 7 of our 11 practices showing year-over-year growth, and 4 practices growing at double-digit rates year-over-year. The inflow and conversion of these opportunities into revenue and profits are both broad-based. We are in a solid position and look forward to seeing if this trend continues in the future quarters.

Thank you for that insight, as the numbers you mentioned really stood out to me in your remarks. I appreciate the additional context. We've certainly noticed the benefits from the M&A activity and the strength you’ve demonstrated, especially considering you were outperforming the market for a time regarding antitrust and competition economics. I’m curious about the visibility for this time of year. Typically, as we move into the fourth quarter and the holiday season, do you feel this year offers a typical level of visibility in terms of activity? It appears that, given your strong performance across the board, you might have even more visibility than usual at 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 consistency during fiscal 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 the flip side that 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 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 of our services, but some of the cost disciplines, I think, have gotten 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 as 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 am very pleased with the number of new Vice President colleagues joining CRA in 2025. Chad and his team have excelled in identifying talented individuals as they collaborate with the practices. It’s important to note that the candidates we are recruiting have many options available to them; they could easily go to any other consulting firm in our industry. What excites me the most is that they recognize the value proposition at CRA. They see the success we are achieving in the marketplace and the growth that new colleagues experience in their businesses after joining us. This process involves teamwork in identifying potential hires, clearly communicating our value to them, and showcasing the success of those who come on board. We have a strong pipeline but are being quite selective about whom we hire. So far, we are really excited about the approximately 20 new colleagues who have joined us.

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.