CRA INTERNATIONAL, INC. (CRAI)·Q3 2026 Earnings Summary

Executive Summary

• Q3 fiscal 2025 (ended Sep 27, 2025) delivered a clean beat vs S&P Global consensus: revenue $185.9M vs $179.4M*, non‑GAAP EPS $2.06 vs $1.80*; management raised FY25 revenue guidance to $740–$748M and lifted the lower end of non‑GAAP EBITDA margin to 12.6–13.0% . Revenue growth was broad‑based, with international up 30.3% YoY and four practices posting double‑digit gains .
  Actuals: revenue $185.891M; GAAP diluted EPS $1.73; non‑GAAP EPS $2.06 . Consensus: revenue $179.423M*, EPS $1.80*.
• Operating margin compressed YoY (9.3% vs 11.0%) as costs of services rose faster than revenue; net income was flat YoY at $11.5M (6.2% margin) despite the top‑line strength . Utilization remained strong at 77% .
• Guidance: FY25 revenue raised from $730–$745M to $740–$748M; non‑GAAP EBITDA margin raised at the low end from 12.3%–13.0% to 12.6%–13.0% (note 14th week in Q4 FY25) . Quarterly dividend increased 16% to $0.57 (from $0.49) .
• Stock reaction: shares rose ~2.8% since the release as beats and higher guidance buoyed confidence .

What Went Well and What Went Wrong

• What Went Well
  • Broad‑based growth with standout practices: “Antitrust & Competition Economics, Energy, Finance, and Intellectual Property each posted double‑digit revenue growth,” and international revenue surged 30.3% YoY .
  • Management raised FY25 revenue and profit guidance: “we are raising our revenue guidance and increasing the lower end of our profit guidance” to $740–$748M revenue and 12.6%–13.0% non‑GAAP EBITDA margin .
  • Strong utilization and talent upgrades: utilization hit 77% and management added ~20 new Vice Presidents to support growth pipelines .
• What Went Wrong
  • Margin pressure: operating margin fell to 9.3% from 11.0% a year ago due to higher costs of services (+14.1% YoY), despite SG&A leverage; net income margin ticked down to 6.2% .
  • Working capital and cash flow: YTD operating cash flow negative ($37.6M used) amid bonus payments, forgivable loan advances, and rising unbilled receivables; revolver borrowings at $95.0M .
  • DSO elevated: DSO rose to 115 days (70 billed/45 unbilled), up from 110 days in Q2; management flagged the increase on the call .

Financial Results

Quarterly trend (oldest → newest)

Consensus vs actuals (S&P Global) — Beats across Q1–Q3

• Values marked with * retrieved from S&P Global.

Revenue mix and geography (Q3)

KPIs and balance sheet snapshots

Non‑GAAP adjustments (Q3 2025): restructuring and separation benefits $3.7M (adds back to non‑GAAP); FX gain $0.8M; non‑GAAP net income $13.651M; non‑GAAP EBITDA $24.406M (13.1% margin) .

Guidance Changes

Note: FY25 includes a 14th week in Q4, which will add to reported revenue and EBITDA timing .

Earnings Call Themes & Trends

Management Commentary

• “Revenue increased by 10.8% year over year to $185.9 million… Our Antitrust & Competition Economics, Energy, Finance, and Intellectual Property practices each posted double‑digit revenue growth… North American operations increased 6.8% and international operations expanded 30.3% year over year.” — Paul Maleh, CEO .
• “We are raising our revenue guidance and increasing the lower end of our profit guidance… now expect revenue $740.0–$748.0 million and non‑GAAP EBITDA margin 12.6%–13.0%… FY ends January 3, 2026, resulting in a 14th week in Q4.” — Paul Maleh .
• “We concluded the quarter with $22.5 million of cash and $95.0 million of borrowings under our revolving credit facility… net debt of $72.5 million.” — Chad Holmes .
• “The effective rate increase is right around 3%, give or take… rate increases can be 2%–4% over time, realized as new projects come online.” — Paul Maleh .
• “The consistency of results that we've enjoyed during the year supports a positive outlook… we are cautiously optimistic.” — Paul Maleh .

Q&A Highlights

• Staffing pyramid and VP hires: Management added ~20 VPs in 2025; plan to build teams beneath as revenue ramps rather than pre‑hire junior staff, keeping utilization high in the near term .
• Pricing: 2025 bill rate increases running ~3%; forward framework 2%–4% with an emphasis on delivering commensurate value and efficiency to clients .
• International enforcement: EU antitrust enforcement remains consistently strong, helping drive 30%+ international growth; U.S. stance evolving, but no contraction in inflows seen .
• Visibility: Legal activity (case filings/judgments) rising; management sees “consistency of results,” maintaining cautious optimism into Q4/FY25 .

Estimates Context

• Q3 FY25 beats vs S&P Global consensus: revenue $185.9M vs $179.4M*, non‑GAAP/Primary EPS $2.06 vs $1.80*; Q1 and Q2 also exceeded both revenue and EPS consensus* .
• FY25 consensus (pre‑raise) stood at ~$745.2M revenue and $8.24 EPS*, with FY26 at ~$772.5M and ~$8.91 EPS*; management’s guidance midpoint ($744M) aligns with consensus revenue and embeds a 14th‑week Q4 tailwind .
• Target price consensus ~$249.5 (2 estimates)*, indicating moderate coverage depth.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Quality growth and beat/raise quarter: Broad‑based revenue strength, robust utilization, and international momentum underpin the beat; guidance raised within a tightening margin range .
• Watch margin mix: Operating margin compressed YoY in Q3 as costs of services outpaced revenue; non‑GAAP EPS benefited from restructuring adjustments; monitor cost discipline and realizations into Q4 .
• Cash flow/working capital is the swing factor: Higher unbilled and forgivable loans weighed on YTD OCF; DSO rose to 115 days; execution on collections and billing cadence could unlock cash in Q4 seasonally .
• Capital returns intact: Dividend hiked 16% to $0.57 and buybacks ongoing (remaining authorization ~$10.9M as of Q3); leverage at $95M revolver leaves flexibility with covenant headroom .
• Structural demand drivers durable: Antitrust (M&A scrutiny), energy transition/data‑center load growth, and cross‑practice complex litigation continue to fuel pipelines .
• Stock setup: Post‑earnings share gains (~+2.8%) reflect beats and higher guide; near‑term catalysts include Q4 seasonality (14th week) and sustained legal/regulatory activity .
• Medium‑term: Focus on talent ramp productivity (new VPs), international scale‑up, pricing realization within 2–4% band, and conversion of record legal activity into backlog and cash .

Appendix: Additional Items

• Dividend action: Quarterly dividend increased from $0.49 to $0.57, payable Dec 12, 2025 to shareholders of record Nov 25, 2025 .
• Selected balance sheet metrics: Cash $22.5M; total assets $629.0M; shareholders’ equity $201.7M at quarter‑end .
• Notable talent update: New VP strengthening Antitrust & Competition Economics practice, adding expertise in generative AI competition and IP matters .