Good morning, and welcome to Charles River Associates' Second Quarter Fiscal Year 2013 Conference Call. Today's call is being recorded. You may listen to the webcast on CRA's website located at www.crai.com. In addition, today's news release and prepared remarks from the company's Chief Financial Officer are posted on the Investor Relations section of the site. With us today are CRA's President and Chief Executive Officer, Paul Maleh; and Chief Financial Officer, Wayne Mackie. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Mackie. Please go ahead, sir.

Thank you, Robert. Statements made during this conference call concerning the future business; operating results; tax rates; the financial condition of the company; the anticipated, expected or intended impact of the company's key hires and expense management initiatives; and statements using the terms anticipates, believes, expects, should, prospects, target, on track, optimistic, remaining positive, hope, opportunities, position, or similar expressions are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are based upon management's current expectations and are subject to a number of factors and uncertainties. Information contained in these forward-looking statements is inherently uncertain, and actual performance and results may differ materially due to many important factors. Such factors that could cause actual performance and results to differ materially from any forward-looking statements made by the company are included in the company's filings with the Securities and Exchange Commission, and in today's news release and prepared CFO remarks. The company cannot guarantee any future results, levels of activity, performance or achievement. The company undertakes no obligation to undertake any of its forward-looking statements -- to update any of its forward-looking statements after the date of this call. Let me remind everyone that we will be referring to some non-GAAP financial items on this call. I would encourage everyone to refer to today's earnings release for a full reconciliation of these non-GAAP items to their GAAP equivalents. Let me now turn it over to Paul Maleh for his report. Paul?

Thanks, Wayne, and good morning, everyone. During the second quarter of fiscal 2013, we experienced mixed results within our portfolio. The strongest performance -- the strong performance of some practices was offset by softness in other areas of our portfolio. Toward the end of the second quarter, we experienced an improvement in project activity and a related pickup in utilization that has continued into the third quarter, including areas that experienced some softness. Given this, we believe that the company is positioned for improved performance in the second half of fiscal 2013. Non-GAAP revenue for the second quarter of fiscal 2013 increased 3% sequentially and declined 3% year-over-year. Utilization was 67%, flat with the sequential first quarter and down from 70% in the second quarter of fiscal 2012. Within our portfolio, the Antitrust & Competition Economics and Life Sciences practices grew both sequentially and year-over-year during the second quarter. In addition, the Labor & Employment practice delivered solid results. This was our second consecutive quarter of record revenue in our Antitrust & Competition Economics practice. Utilization and revenue in our Antitrust & Competition Economics practice improved during the latter part of the quarter, reflecting organic growth, including in Europe, and increasing contributions from the new senior-level consultants we welcomed to CRA in prior months. These new consultants enhanced our capabilities and made use of capacity from other parts of the organization, while gathering solid deal flow. In addition, they created cross-selling opportunities that resulted in new projects. Within Antitrust & Competition Economics, work during the quarter was driven by a range of engagements around the globe. For example, CRA was retained by Baxter and the law firms representing Baxter to assist in its acquisition of Gambro, a Swedish dialysis equipment manufacturer. This deal presented competition-related challenges in multiple geographies. CRA…

Thanks, Paul, and good morning, everyone. In terms of headcount, we ended the fiscal quarter with 475 consulting staff, which consisted of 337 senior staff and 138 junior staff. This is a net decrease of 5 consultants from the 5 -- 480 we reported at the end of Q1 of fiscal 2013. Our company-wide utilization remained flat at 67% for Q2 of fiscal 2013, compared with Q1 of fiscal 2013. In the latter part of the second quarter, our utilization level improved, and we are working to continue this trend for the balance of Q3 and beyond. Our target utilization level is mid-70s. Our international revenue contribute for this fiscal quarter was 21%, down from the 25% we recorded in Q2 of fiscal 2012, but up slightly from the 24% we recorded in Q1 of fiscal 2013. Q2 2013 non-GAAP gross margin was 30.2%, compared with 32% for the -- for Q2 of fiscal 2012. The reduction in gross margin percentage in Q2 of fiscal 2013, compared with Q2 of fiscal 2012, is due principally to a 2 percentage point increase in reimbursable expenses. The increase in reimbursable expenses results from the recent addition of several senior consulting staff as nonemployee experts whose compensation is classified as a reimbursable expense, who generate no incremental margin, as opposed to employees whose compensation is recorded as research labor and provide incremental margin. This, combined with the revenue shortfalls in certain practices, resulted in the gross margin compression we experienced. Cost of services for Q2 of fiscal 2013 includes approximately $550,000 of share-based compensation expense and $3.2 million in amortization of forgivable loans for a total of approximately $3.7 million of these noncash expenses. The effective tax rate for the second quarter of fiscal 2013 on a non-GAAP basis was approximately 56.9%, up…

[Operator Instructions] Our first question is from the line of Joseph Foresi of Janney Montgomery Scott.

My first question here is, in the beginning of the year, you had take a considerable amount of hires that you had brought in. I'm just wondering if you could split out for us what their contribution was this quarter and maybe what your expectations are for this year? And have they ramped at the -- on the schedule that you were looking for?

Sure, I can give you some qualitative descriptions about these new hires that were brought on. I'm not prepared to give you the specifics on revenues and whatnot, but what I can say is, in aggregate, our new hires year-to-date are performing above the expectations we described to the Street when they joined us. For example, the Chicago Partners group that joined us back in the beginning of February, I think is running close to full capacity and has exceeded our expectations to date. As referenced in our script, they're actually using staff from other parts of the firm. So we're very pleased with the contributions, both on workflow and our ability to enhance our service offering to clients.

Okay, and just -- I think you talked about some -- maybe macro headwinds on the M&A side, but you did mention that the quality of the pipeline is better than it's been in a while. Can you just give us some sense of what you mean by quality? Is it the size and the breadth? And the execution has been, I guess, rather inconsistent over the last couple of quarters. Would the pipeline lead you to believe that, that starts to smooth out in the back half of the year?

When we refer to quality, the 2 things we look for is the clients who are retaining us and the significance of the matter. Ultimately, we want to be helping our clients on their most pressing legal and regulatory challenges. The retentions that we've had during this quarter, I think, meet both criteria. We're being retained by very significant clients on very pressing matters. Matters that would be familiar to everyone if I were able to list the names of those engagements. Some have started and we're working on those engagements. Some, the retention is in, but no revenue was actually been generating. Our expectation is they will contribute in the coming months and quarters as we ramp up those matters.

Okay, and then just finally, obviously, you paid out some retention bonuses and forgivable loans. Is there -- can you maybe give us some idea of any potential targets associated with that as far as revenue growth or productivity or any targets that you might be thinking about as far as what a steady-state growth rate for this business could be and what margins could look like. I know you've given margin expectations in the past. I'm just trying to get some color on what we're looking at going forward from where you sit right now.

Sure, yes, our forgivable loan balances clearly have increased. The majority of those dollars have gone to bringing new talent into CRA. So that new talent is expected to generate revenue growth into the future. So that's where the majority of the dollars have gone. The one measure that we have introduced today is that of an adjusted EBITDA measure. And the reason for that introduction is, these new talent acquisitions, the currency used was a form of forgivable loans. So the proceeds aren't really residing on our balance sheet, but flowing through our income statement. Thus, historical comparisons of the company today to past quarters becomes a little more difficult because the currency used today is different than the currency used in the past on these talent acquisitions. So we're trying to provide people with an apples-to-apples basis of how to look at our margin. We reported 13.8% of adjusted EBITDA this quarter and year-to-date is about 14%. Even with performance that is below our desired levels, that we're still producing relatively healthy cash flows for this firm. So going forward, we're expecting this portfolio to produce closer to expectations and thus you should see that margin improve on that. So in no way is our expectations, because of the headwind we may be encountering in the marketplace, to see weaker performance in Q3 and Q4 ahead.

Our next version is from the line of Tim McHugh of William Blair. Timothy McHugh - William Blair & Company L.L.C., Research Division: Just on these forgivable loans first. I guess, is the change versus using signing bonuses in the past or are you referring to acquiring things versus, I guess, organically adding people by using forgivable loans?

I think what I'm referring to here is, in our industry, the concept of organic growth is a little fuzzy. So when a firm brings on an individual and it's just a single person hire, that is viewed as organic growth. But still, you require investment capital to bring on significant revenue generators. What has changed today relative to what has happened in the past is, we have had some significant acquisitions in the past in which we acquired entire firms and thus we're able to use purchase accounting in how we recorded those proceeds. When we bring on individuals like the senior people who joined us in the past 6 months, and we pay using forgivable loans, we're not able to use purchase accounting. And thus those proceeds or the amortization of those proceeds are flowing through our income statement. So the cash flow or the margin impact is very different across a purchase accounting scenario and a forgivable loan scenario. And thus, as I told Joe, the introduction of this adjusted EBITDA margin is to try to get this on a more consistent basis. Timothy McHugh - William Blair & Company L.L.C., Research Division: Right. So it's not a difference of using signing bonuses versus forgivable loans.

No. Timothy McHugh - William Blair & Company L.L.C., Research Division: It's the fact, using an -- you weren't able to acquire in an acquisition and use purchase accounting.

Correct. The forgivable loans are a multi-period commitment. Whereas, sometimes the signing bonuses may be for a shorter period of time. So but yes, the main difference is the use of forgivable loans versus the acquisition accounting. Timothy McHugh - William Blair & Company L.L.C., Research Division: How much of this was the Chicago Partners group that you brought over?

A large share was the proceeds to bring on senior individuals and the proceeds then in terms of other cash outlays outside the forgivable loans of proceeds paid to Navigant for that separation. Timothy McHugh - William Blair & Company L.L.C., Research Division: That's included in this $38 million?

No, no, the payments made to Navigant are other cash outlays. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And the -- were -- did you -- was there any part of this where you had to start paying more bonuses to existing employees to retain people, or is it -- how much, I guess, was attracting external talents versus keeping what you have?

The majority of it was attracting external talent. We wanted to extend our relationship with the key senior professionals with 1 or 2 key senior professionals. And we basically had some monetary incentives there. Timothy McHugh - William Blair & Company L.L.C., Research Division: And what type of lock? Are you getting 5-year type of lock ups? Is that...

The majority of the agreements we signed are in the neighborhood of 4 to 8 years for that. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay, all right. And then the finance business or practice -- you felt -- it sounded like you felt better after last quarter about how kind of late in the quarter at least early in the second quarter that there were signs of life. But it doesn't feel like that happened, but you're saying it did happen towards the end of the quarter? I guess can you...

What's been really frustrating on the finance side of the business is that, if all I looked at as the matters we're getting retained on and who the ultimate clients are in those matters, I would feel very good as to the backlog and the prospects for that business, but we have a number of situations where retentions are occurring and work is being delayed. So you gear up for large engagements, and then are told to wait. That clearly has a negative impact on the business. The positive aspects that we've seen in the last few weeks is, people are starting to work. We're getting people active on these engagements, and I think the value of the backlog is there. And it's there to produce very positive results for the practice and for the firm. We just need to get people actually active on this. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And Marakon, I know it's a lumpy business, but at least 2 straight quarters here where you've been pretty disappointed with it. Is there anything more structural or do you still -- are you still comfortable saying it's just the normal lumpiness in that business?

I think there's no one more disappointed on the performance to date within Marakon than my colleagues within the practice. These are high performing individuals who may expect a lot of themselves on a continual basis. They clearly have faced some headwinds, and the choppiness has been a little prolonged. We're seeing retention. Whereas, when we look at their backlog, it's always a combination of committed work and highly probable work. The reason that we have a sense of optimism going forward is that a lot of that highly-probable work is starting to shift to the committed category here. And whereas, in litigation sometimes, once you get retained, we may be put on ice. It is less common within Marakon, as once retained, we typically begin work. So we saw a increase in the level of activity in the month of June in terms of people actually billing to engagements. And when we look at their backlog, the mix of committed versus highly-probable work is also improving. So I'm going to stick with what I've said, multiple quarters, they're good consultants. And ultimately, if I'm able to bring my clients the highest-quality people out there, we will be successful. But yes, clearly, there's been frustration, but there are signs that we'll see improvement. Timothy McHugh - William Blair & Company L.L.C., Research Division: Is that behind just the international revenue weakness? Is that attributable to Marakon or was it other practices dragging it down?

Yes, the international revenue weakness was really across 2 main units, and that being Marakon and also Life Sciences in Europe. The practice that continues to amaze is our European Competition practice, where it's just having record quarter after record quarter and all of that is pure organic expansion in the marketplace.

[Operator Instructions] Our next question comes from the line of David Gold with Sidoti & Company. David Gold - Sidoti & Company, LLC: So just a couple more questions. On the forgivable loan program, presumably -- I guess the way I'd think about that is, it's a shift in compensation expense now. It basically is, anyway you pay it, you're amortizing compensation, right?

We actually look at it a little differently than a compensation expense. Clearly, it's flowing through our cost of goods sold. So from that perspective, you're 100% right. But these are proceeds that the firm uses to entice and incentivize people to join CRA and bring their revenue streams to this organization and potential revenue streams to this organization. Those individuals still receive annual compensation driven by other metrics. So this is more of an upfront payment that is amortized over their contract term with CRA. David Gold - Sidoti & Company, LLC: Got it. So to the extent these are, say, 5-year contracts, is it -- do you expect that after the 5 years they're just on straight compensation or are there further forgivable loans that follow?

I think what you'd find is, it's mixed. There are some people that you sign a new agreement to continue the relationship. There are other people that, because of their affiliation with the firm, they're seeing a great deal of value creation by that partnership, unless the arrangement is a little different than when they first joined. So clearly, there are individuals that you need to sign new contracts with, and that may require upfront payment. But there are other individuals that we continue with a normal company consulting relationship. David Gold - Sidoti & Company, LLC: Okay. So you view these internally, then, you're saying, more as a signing bonus that happens to get amortized? In your mind it's not compensation?

I view it differently, right? I don't view it any -- I view it the same way that if I had acquired a firm, and I paid $10 million for acquiring the firm and that firm, that $10 million bought me a 5-year noncompete for those individuals. I view the forgivable loans and recruiting talent in the exact same manner as that $10 million for the acquisition of a firm. David Gold - Sidoti & Company, LLC: Got you. Got you. Okay, fair enough. And then a couple of other -- on the 2Q, the improvement that you noted as you got towards the end of the quarter, that sort of came hand-in-hand with Wayne's comment that the goal was still 70% utilization for the company. Do we still -- does that 70% utilization goal stand for the second half of the year?

Yes, if I look at what the utilization has been for the last couple of months, we're very close to our goal of -- the stated low-to-mid 70% utilization mark. David Gold - Sidoti & Company, LLC: Got you. Okay, and then one more, can you give some color on what sort of changed during the quarter, or as we got to the end, was it a couple of new -- was it some new assignments that you won or what sort of -- or was it contribution from the new hires as they ramp-up or anything you can point to just, yes, to get some sense if there was a change of even just business success?

I think it just was really more consistent contribution across the entire portfolio. We need our entire portfolio contributing to growth and profitability. And what we started to see is that the dispersion across the performance got a little tighter over the last -- latter part of the second quarter. So it's not one project that all of a sudden got hot that is contributing to it, it's many practices just stepping up and improving their contributions. David Gold - Sidoti & Company, LLC: Got you. Okay, and then just one last, as you think about second half of the year and hiring plans or expectations, how should we think about that?

We're still out there looking for recruitment of senior revenue generators. So we're still active in the market there. With respect to capacity, for the most part, areas of our company have capacity. So I'm not looking to hire capacity. We can run at a much heavier rate. So we're looking to improve the top line and get those cash flow measures even more attractive.

At this time, we have reached the end of the Q&A session. I will now turn the conference back over to Mr. Maleh for any closing or additional remarks.

Again, thanks to everyone for joining us today. As always, we appreciate your time and interest in CRA and look forward to updating you on our progress next quarter. With that, that concludes today's call. Thank you, everyone.

Thank you. You may now disconnect your lines at this time. Thank you for your participation.