CRA International,Inc.

Good day, everyone, and welcome to Charles River Associates' second quarter 2026 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, 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. C.R.A. 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 characterize 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 and analytics posted double-digit revenue growth, while the antitrust and 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 remain strong, with each metric showing double-digit growth relative to the second quarter of 2025. Revenue in the second quarter from CRA's legal and 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 dealmaking 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 and competition economics practice posted its sixth straight record quarter, capitalizing on ongoing merger-related activity and continued demand for antitrust services. During the quarter, 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 1, 2026, which brings together two category-defining platforms to advance a new error 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 Sutter-Simmons betting 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, Marty Murray, calling her analysis more persuasive The implications of the SIRTA ruling have been discussed widely in the press, including multiple articles in the Wall Street Journal, Bloomberg Law, Law 360, 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 and questions. CRA's engagement team performed multiple analysis to rebut the plaintiff's damages claim at trial. 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 and 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 Operating Operators serving the Mid-Atlantic and portions of the Midwest for a multi-year engagement to develop enhanced data-centered load forecasts as unprecedented demand growth creates new challenges for system planning and investment. In parallel, CRA's energy practice continued to advise data-centered 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 lifecycle 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 products. C.R.A.' '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. To start fiscal 2026, the start of fiscal 2026 represents the best first half of revenue and non-GAAP EBITDA in C.R.A.' 's history. In the first half of the year, on a constant currency basis relative to fiscal 2025, CRA generated total revenue of $408.8 million and non-GAAP EBITDA of $49.7 million, resulting in a margin of 12.2%. Given our strong first half results and healthy pipeline, we are increasing our annual revenue guidance Thank you all for joining us today. guidance compares with the prior range of $785 million to $805 million. We expect that the constant currency adjustment will decrease CRA's reported annual revenue by approximately $2.5 million and CRA's reported annual EBITDA by less than $250,000 in fiscal 2026. This implies that the constant currency adjustment for the second half of fiscal 2026 will increase reported revenue by approximately $500,000 and reported EBITDA by $100,000. As previously reported, non-cash forgivable loan amortization, which is reflected as an expense when presenting EBITDA metrics, is expected to increase in fiscal 2026 by approximately $15 million. reflecting investments and talent to drive profitable growth. Non-cash forgivable loan amortization increased by more than $9 million in the first half of this year relative to the first half of fiscal 2025, implying an increase of slightly more than $5 million is expected during the second half of fiscal 2026 relative to the second half of fiscal 2025. Finally, as a reminder, fiscal 2026 returns to CRA's typical 52-week year, whereas fiscal 2025 contained an extra week in the fourth quarter and resulted in a 53-week year. We continue to be encouraged by the strong start to the year, supportive market trends, and continued replenishing of our sales pipeline. However, we remain mindful Thanks, Paul. Hello, everyone. I want to update you on our capital and capital deployment during the quarter. We concluded the quarter with $21.4 million of cash and $219 million of borrowings