Cra International's Q3 2025 Earnings Call Contradictions: Headcount Strategy, Billing Rates, and International Growth Under Scrutiny

Date of Call: October 30, 2025

Financials Results

• Revenue: $185.9M, up 10.8% year-over-year
• EPS: Increased 16.4% year-over-year (amount not provided)

Guidance:

• Full-year fiscal 2025 revenue (constant currency vs FY24) now expected to be $740M–$748M (raised from prior $730M–$745M).
• Full-year non-GAAP EBITDA margin expected to be 12.6%–13.0% (lower bound raised from 12.3%).
• Reminder: fiscal year ends Jan 3, 2026, resulting in a 14th week in Q4.
• Quarterly cash dividend increased 16% to $0.57 per share.

Business Commentary:

* Strong Financial Performance: - Charles River Associates (CRA) reported a 10.8% year-over-year increase in revenue to $185.9 million in Q3 2025. - This growth was driven by broad-based demand across practices and regions, with 7 out of 11 practices growing year-over-year.

• International Growth:
• CRA's international operations expanded by 30.3% year-over-year, contributing significantly to the overall revenue growth.

• Growth was primarily attributed to strong performance in the Antitrust & Competition Economics and Life Sciences practices.

• Legal and Regulatory Services Expansion:

• Revenue from CRA's legal and regulatory services increased by 11.5%, supported by ongoing merger-related activity and demand for antitrust services.

• The growth was driven by high-profile mergers and regulatory reviews, such as the U.S. Department of Justice's review of the UnitedHealth-Amedisys acquisition.

• Utilization and Profitability:

• CRA achieved a quarterly utilization rate of 77%, which exceeded revenue growth, indicating strong operational efficiency.

• Non-GAAP net income, earnings per diluted share, and EBITDA all increased by 12.7%, 16.4%, and 14.6%, respectively, reflecting strong profitability.

• Capital Deployment and Shareholder Returns:

• CRA returned $7.2 million to shareholders through dividends and share repurchases in Q3 2025.
• The company also increased its quarterly cash dividend by 16%, demonstrating confidence in its business performance.

Sentiment Analysis:

Overall Tone: Positive

• Management cited record quarterly revenue performance: 'best three revenue quarters in CRA's history'; revenue up 10.8% YOY to $185.9M; raising FY25 revenue guidance and increasing the lower end of profit guidance; announced a 16% dividend increase to $0.57/share.

Q&A:

• Question from Andrew Nicholas (William Blair & Company L.L.C., Research Division): I wanted to talk about headcount first... surprised maybe to not see a bigger spike in junior consultants quarter-over-quarter... how sustainable that ratio is, any underlying actions that explain that mix dynamic and overall thoughts on headcount growth over the next couple of quarters?
  Response: We redeploy staff to growing practices, have added ~20 lateral VPs whose teams will be built out as their revenue ramps, and expect headcount to align with revenue over the medium term.

• Question from Andrew Nicholas (William Blair & Company L.L.C., Research Division): On bill-rate revenue growth — can you confirm bill-rate increases and unpack drivers (rate card increases vs mix)?
  Response: Effective bill-rate increases were ~3% (mostly implemented in Q1), combined with high utilization (77%) and favorable mix drove revenue; write-offs/reserves remain unchanged.

• Question from Andrew Nicholas (William Blair & Company L.L.C., Research Division): Is it fair to assume similar bill-rate increases going forward?
  Response: Yes — a 2%–4% annual bill-rate increase is a reasonable framework, though rates could be higher while preserving client value.

• Question from Andrew Nicholas (William Blair & Company L.L.C., Research Division): On international growth — any bigger secular themes driving stronger growth outside the U.S. and persistence going forward?
  Response: Europe's Antitrust & Competition Economics practice is driving international strength, benefiting from a consistent pro-enforcement environment and high-quality team, which supports persistence.

• Question from Marc Riddick (Sidoti & Company, LLC): You highlighted legal and regulatory activity picking up — can you add color on recent drivers and whether it's broad-based?
  Response: Demand is broad-based—strong inflows in Antitrust, IP, Forensic Services and early momentum in Finance—driven by increased case filings and court decisions.

• Question from Marc Riddick (Sidoti & Company, LLC): Do you have normal visibility heading into Q4 this year compared with typical seasonality?
  Response: Cautiously optimistic — three quarters of consistent strong results support confidence, but visibility hasn't materially changed versus last year.

• Question from Marc Riddick (Sidoti & Company, LLC): Any client verticals more active than others recently?
  Response: Energy is notably strong, Life Sciences is showing improving consistency, and litigation demand is industry-agnostic; large complex matters continue to drive work.

• Question from Kevin Steinke (Barrington Research Associates, Inc., Research Division): On regulatory scrutiny in the U.S. for Antitrust/M&A — have you seen any meaningful change?
  Response: No observable decline — Antitrust practice continues to see record inflows despite regulatory shifts; any policy changes haven't reduced demand to date.

• Question from Kevin Steinke (Barrington Research Associates, Inc., Research Division): Can you discuss Life Sciences activity and outlook entering the next several quarters?
  Response: Life Sciences is recovering modestly with a slight upward trend and mid-single-digit YTD growth; market dynamics are supportive but we remain cautious.

• Question from Kevin Steinke (Barrington Research Associates, Inc., Research Division): Outlook for the Intellectual Property practice and sustainability of demand (e.g., AI-related issues)?
  Response: IP demand is strong and expanding via cross-practice collaborations, creating larger, more complex engagements—supporting sustained demand.

• Question from Kevin Steinke (Barrington Research Associates, Inc., Research Division): Regarding VP hiring strength — what's driving the recent influx of Vice Presidents?
  Response: Selective, active recruitment (~20 VP hires) driven by CRA's value proposition and successful onboarding; pipeline is rich and attracting experienced candidates.

Contradiction Point 1

Headcount and Growth Strategy

It involves the company's headcount strategy and growth expectations, which are crucial for understanding the company's future performance and resource allocation.

Regarding headcount, why wasn't there a larger increase in junior consultants quarter-over-quarter, considering seasonal factors? - Andrew Nicholas (William Blair & Company L.L.C., Research Division)

2025Q3: 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. - Paul Maleh(CEO)

Will new college graduates join typical, larger, or smaller classes? - Andrew Nicholas (William Blair & Company L.L.C., Research Division)

2025Q2: We're investing in practices with growth potential, redeploying investments as needed. - Paul Maleh(CEO)

Contradiction Point 2

Rate Increases and Billing Rates

It involves the company's billing rates and rate increase strategy, which directly impacts revenue and pricing expectations.

Are the low double-digit aggregate bill rate increases driven by rate hikes, mix, or other factors? - Andrew Nicholas (William Blair & Company L.L.C., Research Division)

2025Q3: 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 happens 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. - Paul Maleh(CEO)

How is the pricing environment, and have there been any pushbacks? - Marc Riddick (Sidoti & Company, LLC)

2025Q2: Rate increases for fiscal 2025 have been realized. - Paul Maleh(CEO)

Contradiction Point 3

International Growth Strategy

It involves the company's international growth strategy, which is vital for understanding the company's geographic expansion and revenue diversification.

Are certain client verticals more active in specific areas of the business? - Marc Riddick (Sidoti & Company, LLC)

2025Q3: 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. - Paul Maleh(CEO)

What are the key drivers of the guidance increase and what is the current visibility level? - Marc Riddick (Sidoti & Company, LLC)

2025Q2: Strong first half of fiscal 2025 continued from the strong performance in fiscal 2024. The level of lead flow activity has been positive. - Paul Maleh(CEO)

Contradiction Point 4

Headcount Growth and Sustainability

It involves differing explanations regarding the sustainability of the headcount ratio between junior and senior consultants, which could have implications for future growth and operational efficiency.

Why wasn’t there a larger quarter-over-quarter increase in junior consultant headcount, given the seasonal dynamics? - Andrew Nicholas (William Blair & Company L.L.C., Research Division)

2025Q3: 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. - Paul Maleh(CEO)

Can you clarify the headcount numbers, specifically the increase from 5,700 to 6,000 over the past 12 months, and whether the 5,700 figure was capitalized or an estimate? - James Friedman (Jefferies)

2025Q1: We are at the stage where we are beginning to see that the investment in headcount that we made in 2024 is now starting to bear fruit. - Paul Maleh(CEO)

Contradiction Point 5

Regulatory Scrutiny and Antitrust Enforcement

It reflects potential changes in regulatory scrutiny and enforcement, which could impact the company's business and client base.

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2025Q3: The Antitrust & Competition Economics practice is delivering record quarter after record quarter. - Paul Maleh(CEO)

How are different practices contributing to the 2025 outlook? - Kevin Steinke (Barrington Research)

2024Q4: There's a shift. Areas that were quiet are now beginning to see healthy activity. But I want to point out again, we are anticipating a more balanced growth model. - Paul Maleh(CEO)