CRA International, Inc. 2026 Q2 Earnings Call

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, 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 21E 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 eight 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 & Analytics, posted double-digit revenue growth. While the Antitrust & 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 & Regulatory services increased by 10.1%.

This growth was supported in trends in the broader legal market as total case filings and total court 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 deal-making 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 & 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 1st, 2026, which brings together two category-defining platforms to advance 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 7th, awarding more than $400 million in damages and prejudgment 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, Law360, 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 Wi-Fi and cellular handoff features on the smartphone in question. CRA's engagement team performed multiple analyses to rebut the plaintiff's 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 two 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 & 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 multi-year 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 siting, 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 potential blockbuster oncology product. CRA's work focused on branded value propositions and message testing for healthcare professionals and patients. Overall, I'm grateful to all of my colleagues for the hard work during the second quarter in helping our clients address their most important challenges.