CRA International, Inc. (CRAI) Earnings

Management highlights

### Overall Financial & Operational Performance - Q2 2026 marked the highest quarterly revenue and highest Q2 profit in CRA's history, extending the company's streak of eight consecutive years of record annual revenue following a record start to FY2026 in Q1. The first half of FY2026 delivered the highest first half revenue and non-GAAP EBITDA in company history, with $408.8 million in total constant currency revenue and $49.7 million in non-GAAP EBITDA (12.2% margin). - Average weekly project lead flow and new project originations both grew double-digit YoY, maintaining a strong, replenished sales pipeline. ### Key Operational Wins - The antitrust practice advised Fivetran on competition and regulatory compliance for its completed merger with DBT Labs, a combination of two leading AI data infrastructure platforms. - The finance practice provided expert analysis in the Sutter-Simmons betting litigation that was explicitly relied on by the court, which awarded CRA's client over $400 million in damages and prejudgment interest. - The intellectual property practice assisted a global smartphone manufacturer in patent litigation, where the jury rejected the plaintiff's $100 million damages claim and awarded just $3 million, aligned with CRA's expert opinion; in a separate international telecom arbitration, the panel awarded the royalty rate CRA's expert proposed, saving the client millions. - The energy practice won a multi-year engagement with PJM Interconnection to develop enhanced data-centered load forecasts to address unprecedented demand growth for power systems, and continues to support data center developers across the U.S. with siting and power procurement. - The life sciences practice is leveraging industry-specific AI tools to help large pharmaceutical clients identify new R&D opportunities and develop global launch strategies for oncology blockbuster candidates. ### Capital Deployment & Balance Sheet Update - CRA returned $31.4 million to shareholders in Q2 2026: $3.6 million in dividend payments and $27.8 million in share repurchases (193,000 shares at an average price of $144 per share). Year-to-date, CRA has repurchased 309,000 shares for $49.3 million at an average price of $160 per share, reflecting management and board confidence in CRA's cash generation and fundamental value. - The company announced an expanded and extended 5-year credit facility with a total aggregate principal amount of up to $400 million, consisting of a $75 million term loan and $325 million revolving credit facility, to support future operational flexibility as the company has grown more than 40% since the prior facility was signed. - At quarter-end, CRA had total liquidity of $98.7 million, with $16.6 million remaining available under the current share repurchase program. ### Talent Strategy - After two years of portfolio optimization (reallocating headcount from underperforming areas to growing practices with no net headcount growth), CRA resumed net headcount expansion in FY2026, with 3.3% YoY headcount growth in Q2. Management expects mid-single-digit full year net headcount growth if attrition remains consistent. Medium-term, CRA targets mid-single-digit annual headcount growth with utilization holding in the mid-to-upper 70% range.

Guidance

- Management raised full-year FY2026 revenue guidance from the prior range of $785 million to $805 million to a new higher range. The midpoint of the updated guidance implies consistent quarterly revenue through the end of 2026. - Constant currency headwinds are expected to reduce reported full-year FY2026 revenue by approximately $2.5 million, and reduce reported full-year EBITDA by less than $250,000. The constant currency impact for the second half of FY2026 is expected to be a $500,000 revenue increase and $100,000 EBITDA increase. - The full-year non-GAAP effective tax rate is expected to be in the range of 32% to 33%, with the rate for the remainder of 2026 expected to fall between 33% and 34%. - Non-cash forgivable loan amortization (a reflection of talent investments to drive growth) is expected to increase $15 million in full-year FY2026, with a slightly more than $5 million increase expected in the second half relative to the year-ago period. The 2025 53-week fiscal year (with an extra week in Q4 2025) creates an estimated 100 to 150 basis point headwind for YoY full-year 2026 growth rate comparisons, beyond the average weekly impact of an extra week.

Segment performance

CRA delivered total Q2 2026 revenue of $210.8 million, a 12.8% year-over-year (YoY) increase and the highest quarterly revenue in company history. 8 practices, representing 95% of total revenue, grew YoY, with 6 practices posting double-digit growth: - Legal and Regulatory Services: Total revenue grew 10.1% YoY, supported by an 11% YoY increase in total case filings and 5% YoY increase in total court judgments. Sub-segments include: - Antitrust and Competition Economics: Posted its sixth consecutive record quarterly revenue, driven by a global M&A market that saw $1.6 trillion in Q2 2026 activity (the largest quarterly M&A total on record). Revenue contribution is part of the 95% of total revenue from growing practices. - Forensic Services: Grew over 20% YoY and hit a new quarterly revenue high, driven by rising demand for crisis management and cyber incident response services. - Intellectual Property: Posted double-digit YoY growth, supported by high demand for expert testimony and valuation work on high-stakes patent litigation and international arbitration matters. - Finance: Posted double-digit YoY growth (second consecutive quarter of double-digit growth), driven by activity in complex commercial disputes and bankruptcy litigation. - Risk Investigations and Analytics: Grew more than 20% YoY, supported by large investigative, advisory, and damage expert assignments across sectors. - Management Consulting Services: Grew ~25-26% YoY overall, with two core sub-segments delivering growth in excess of 20% YoY: - Energy: Grew over 20% YoY, driven by strong demand for strategy, system planning, and procurement advisory from utilities, private equity investors, data center operators, and large energy consumers. - Life Sciences: Grew over 20% YoY, supported by demand for R&D strategy, launch strategy, pricing, market access, and litigation advisory work for large pharmaceutical clients. Geographically, North American revenue grew 8.7% YoY, while international revenue grew 32.9% YoY. Profitability also hit a Q2 record: non-GAAP net income grew 9% YoY, diluted EPS grew 14.9% YoY, and non-GAAP EBITDA grew 15.3% YoY. Consultant utilization rose to 77% from 76% YoY, with total consultant headcount of 968, a 3.3% YoY increase.

Risks & headwinds

- All forward-looking guidance and statements are inherently uncertain, and actual results may differ materially from expectations due to changes in general and industry-specific economic conditions that impact demand for CRA's services. - CRA is forecasting revenue and profit off all-time record highs, and the company has no prior operational experience at these revenue levels, creating uncertainty in forecasting accuracy. - Non-compete and non-solicitation covenants can delay the revenue contribution of newly hired senior talent, typically for up to 12 months after joining the firm. - Seasonal factors (including returning junior staff to school and onboarding new university hires) can create temporary downward pressure on utilization in Q2 and Q3. - AI has amplified demand for some services (such as forensic cyber response) by increasing the sophistication of malicious actors, creating new operational and market risks for clients that translate to demand for CRA, but this trend relies on continued disruption to maintain growth.

Analyst Q&A

• Q: Management consulting delivered very strong 25-26% growth this quarter. What areas are driving this growth, and how sustainable is the persistent demand? /

  A: Both the life sciences and energy practices have grown over 20% YoY for two to three consecutive quarters, so the growth is already persistent. Both are seeing strong new inbound opportunities and converting new opportunities at historically high rates, giving positive visibility for the near to medium term. Life sciences has balanced growth across pricing, market access, and litigation work, while U.S. utility industry transformation is driving consistent high demand for energy practice services from utilities, investors, and tech companies.

• Q: The DOJ recently announced changes to accelerate merger reviews and reduce information requests. How might this impact CRA's antitrust business, and have you seen any impact to date? /

  A: There has been no measurable positive or negative impact so far. The changes are designed to make reviews more targeted rather than eliminate antitrust scrutiny, so if reviews become more focused, it could actually increase the value of having accurate economic analysis early in the process, which is a positive for CRA.

• Q: Forensic services, another large CRA practice, has continued double-digit growth. What drivers are behind this trend? /

  A: AI is acting as a productivity enhancer for CRA but also a demand amplifier across the business. In forensics, improved AI tools have made hackers much more effective at causing large-scale cyber disruptions for global companies, leading to a surge in demand for cyber incident response services from the forensic practice, and this demand is not waning.

• Q: International growth has been very strong for a while now. What is driving this outperformance? /

  A: International growth (32.9% YoY in Q2) is entirely organic, coming from two core practices: life sciences and antitrust/competition economics are both performing extremely well in European operations. The growth comes from internal development of talent and expansion of market share, with growth rates in the 30-40% range that are well above typical for European consulting operations.