Good day, everyone and welcome to Charles River Associates Third Quarter 2020 Conference Call. Today’s call is being recorded. Today’s release and prepared remarks from CRA’s Chief Financial Officer 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, Dan Mahoney; and Chief Corporate Development Officer, Chad Holmes. At this time, I would like to turn the call over to Mr. Mahoney, for opening remarks. Please go ahead, Dan.

Thank you, Rob and good morning to 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 extent and duration of the impact of the COVID-19 pandemic on our financial condition and results of operations. Additional information regarding these factors is included in today’s release, 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. CRA undertakes no obligation to update any forward-looking statements after the date of this call. 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. Let me now turn it over to Paul for his report. Paul?

Thanks, Dan, and good morning, everyone. Thank you for joining us today. I hope everyone is doing well, staying safe and healthy during these challenging times. Although the pandemic continues to affect the global economy, CRA built on a record fiscal 2019 and first half of fiscal 2020, to deliver noteworthy growth during the third quarter of 2020. Highlighting the resiliency of our company, CRA delivered year-over-year revenue growth for the 19th consecutive quarter as we continue to invest in our portfolio of services. During the quarter, we welcomed 65 new colleagues for a net increase in head count of 11.5% year-over-year and 3% relative to the second quarter of fiscal 2020. At the same time, we saw utilization improved to 69% from 66% in the second quarter of fiscal 2020. In the fourth quarter of fiscal 2020, we expect to see a net increase in head count of less than 3% relative to Q3. During the third quarter, we saw growth across both our legal and regulatory and management consulting services. I would like to spend a few minutes exploring each component more deeply. Within legal and regulatory, our Antitrust & Competition Economics practice grew more than 20% sequentially as M&A markets rebounded from the extreme lows observed during the second quarter. This brought the practice to more than 90% of the revenue obtained in Q3 – excuse me, more than 97% of the revenue obtained in Q3 of fiscal 2019, its largest quarter ever. Transactions across a broad range of industries, including retail, health care and technology are drawing on CRA’s expertise and merger review and analysis. In addition, the practice continued to support clients on a wide variety of litigation matters. Our experts are providing testimony in cases covering allegations of price fixing, attempted monopolization and other…

Thanks, Paul. I want to provide a few comments about our capital deployment during the quarter. As Paul described, against a challenging economic backdrop, CRA again generated strong cash flows. For the trailing 12 months through the third quarter of fiscal 2020, CRA’s adjusted net cash provided by operating activities was $77.3 million or 15.8% of trailing 12 months revenue. Our adjusted net cash provided by operating activities was 33% higher than a year ago, driven primarily by the growth in our business and reduced overhead spending. As a reminder, this metric begins with net cash provided by operating activities from our statement of cash flows and adds back net forgivable loan issuances, which are predominantly used for talent acquisition and talent maintenance. Adjusted net cash provided by operating activities represents a discretionary pool of capital used to fund items such as talent acquisitions, office expansions, debt repayment and redistributions to shareholders. During the third quarter of fiscal 2020, we spent approximately $2.2 million on capital expenditures, as we wrapped up our office build-outs in New York, Toronto and Zurich. For the fourth quarter of fiscal 2020, we expect to spend less than $2 million on total capital expenditures. As Dan will describe in greater detail, during the quarter, we repaid $21 million of our borrowings under our revolving line of credit, while our cash balance increased by $5.3 million. We also returned $6.8 million of capital to our shareholders, consisting of $1.8 million of dividend payments and $5 million for share repurchases of approximately 110,000 shares. Finally, reflecting our commitment to returning capital to shareholders, we announced earlier today a 13% increase in our quarterly cash dividend from $0.23 to $0.26 per common share. This dividend will be payable on December 11, 2020, to shareholders of record as of November 24, 2020. And now, I’ll turn the call over to Dan for a few final comments. Dan?

Thanks, Chad. As a reminder, more expansive commentary on our financial results is available on the Investor Relations section of our website, under Prepared CFO Remarks. Before we get to questions, let me provide a few additional metrics related to our performance in the third quarter of fiscal 2020. In terms of consulting headcount, we ended the quarter at 826, which consisted of 140 officers, 473 other senior staff and 213 junior staff. This represents a 3% increase compared with the 802 consultant head count reported at the end of the second quarter of fiscal 2020. Non-GAAP selling, general and administrative expenses, excluding the 3% attributable to commissions to non-employee experts was 15.2% of revenue for the third quarter of fiscal 2020 compared with 16.8% a year ago. This quarter’s ratio was positively impacted by the strong revenue for Q3 and effective management of our overhead. Additionally, travel and entertainment expenses were significantly lower year-over-year, primarily due to ongoing travel restrictions in various jurisdictions and work-from-home policies. We will continue to monitor our discretionary expenses to properly manage risk and proactively mitigate the financial impacts from COVID-19. The effective tax rate for the third quarter of fiscal 2020 on a non-GAAP basis was 28% compared with 18.2% on a non-GAAP basis for the third quarter of fiscal 2019. As a reminder, the tax rate in the prior year quarter included the release of certain tax reserves, which reduced the overall rate. Turning to the balance sheet, DSO at the end of the third quarter was 113 days compared with 107 days at the end of the second quarter of fiscal 2020. DSO in the third quarter consisted of 75 days of build and 38 days of unbilled. Of note, our pace of collections has been consistent both before and after most of the world transitioned to a remote work environment. The company’s liquidity remained strong, totaling approximately $111 million when taking into account our available capacity on our revolving line of credit and our cash balance. Looking more closely at the components, during the third quarter, we paid down $21 million on our revolving line of credit to bring the outstanding balance down from $59 million at the end of fiscal Q2 2020 to $38 million at the end of Q3. We have since paid down an additional $8 million to bring the current outstanding balance to $30 million. We concluded the third quarter of fiscal 2020 with $24.1 million in cash and cash equivalents, with the majority residing internationally. That concludes our prepared remarks. Rob, we would now like to open the call for questions.

Thank you. [Operator Instructions] And our first question is from the line of Andrew Nicholas with William Blair. Please proceed with your question.

Hi, good morning. This is actually Trevor Romeo in for Andrew. Thank you for taking the questions here. First of all, the guidance seems to imply some sequential growth in the fourth quarter. You mentioned some nice sequential trends for the antitrust side of the shop compared with last quarter and the performance for many of the other businesses has been strong throughout the year. So I’m just wondering if you could kind of discuss where you expect the pick up to come from, how you expect those dynamics between those two sides of the business to play out in the fourth quarter?

Hey, good morning and thanks for the question. Yes, I believe the guidance does imply sequential growth. It also implies year-over-year growth from our record 2019 levels. As we have been demonstrating quarter-after-quarter, we have all parts of the portfolio are contributing. This quarter, we had both lines of business showing nice growth and expansion. We had both geographies, both here in North America and in Europe. And probably the biggest, pleasant surprise, even though they didn’t experience year-over-year growth, was our Antitrust & Competition Economics practice really seeing activity pick up both across the merger and acquisition world and also across the antitrust litigation matters. All signs are, given the level of business activity we see coming through the door that we are really looking for that balanced contribution to continue through the fourth quarter.

Okay, great. That’s good to hear. And then I was also just wondering if you could talk a little bit further about the court system dynamics over the past few months. Paul, I think you had mentioned that courts are still not able to handle the normal caseloads. Is that largely just because most of them are still physically closed or they haven’t implemented virtual proceedings as well as maybe they could have? And especially with higher COVID cases lately across most of the country, is there a risk of litigation-related work slowing further if that continues to get worse? Thank you.

Yes. Let me start by saying, I don’t know any of these things directly. I don’t have any information coming from any of our various court systems. It’s just what we’re observing in terms of the statistics and what we’re reading here. But I think the answer is yes, to all the impediments that you listed are all impacting both the courts ability and the various clients’ ability to proceed in the various federal jurisdictions here. And because of the surge of cases, we are not necessarily optimistic that the flow of matters through the courts will change significantly in the coming quarter.

Okay, got it. That’s helpful. Thank you very much.

Thank you.

Our next question comes from the line of Marc Riddick with Sidoti & Company. Please proceed with your question.

Hi, good morning.

Good morning, Marc.

Wanted to go over a couple of things, certainly a lot of positive moving parts, I wanted to talk a little bit about, first of all, the head count additions which you’re forecasting there. It seemed as though during the third quarter it was primarily junior. Are you expecting that to be a similar mix in the fourth quarter or some of the seasonal mix are we looking at? I know there has been some announcements of some senior additions as well. So, I was wondering if you could sort of talk about what that mix might look like as far as the adds.

Still the majority of the ads are on the junior staff ranks just because of our staffing pyramid here. We had deferred the start dates of our junior class ranks in towards the end of Q3 and to the beginning of Q4, so we can best integrate our new colleagues in this virtual world. But we did have some new senior colleagues, both from university hires that joined us during the third quarter and now into the fourth quarter and also a nice mix of junior and senior colleagues from our group hire that we did in the UK, the one I referenced with the energy practice.

Okay. And then I wanted to also sort of shift gears into the antitrust and the strength of M&A that we’ve seen, certainly relative to the first half of the year was certainly a clear positive. And I was wondering if you could talk a little bit about what that does to the fourth quarter visibility and maybe how that played into the decision to reinstate guidance there?

I think it’s significant influence to our reinstating guidance. Our Antitrust & Competition Economics practice is really the foundational practice of CRA makes up about 40% of the firm and is always a top performer. So as we see their activity pick up, and it’s a nice balance of activity, as I mentioned, across mergers and antitrust litigation, that gives us a foundation to feel more comfortable with providing guidance. And as Romeo mentioned earlier, both – that implies sequential and year-over-year growth.

Okay, great. And then you made mention as to that broad-based across a lot of different service industries. I was wondering if you could talk a little bit about maybe if you are seeing a similar broad-based mix of industry participation in the forensics practice and maybe what they are experiencing certainly is understandable with increased fraud and cybercrimes and all of us working from home. But I was wondering if you could touch a little bit on if there are any particular groups that are seeing a little bit more or less than other service areas?

Clearly, the cyber work has taken a sharp increase in demand in during 2020, just because of the environment that Corporate America and really global economy is facing right now. But we’ve also been very pleasantly surprised that the demand for their forensic investigation work continues throughout 2020. So, there’s demand for, what I would call, independent investigations from cyber. There is litigation and damage estimates associated with some of these cyber as the response work. So, you don’t grow as rapidly as that practice has been growing by having solely one contributor for growth. So we are seeing that demand across all the components of their services.

And the last area I sort of wanted to touch on and you alluded to some of this earlier around lower travel spending during the quarter and certainly, SG&A overall was pretty much flat year-over-year despite revenue growth. So I was wondering if you could talk a little bit given the second wave activity that we’re seeing out there, is there any sort of visibility that you’re looking at as far as spending expectations going into the fourth quarter? And maybe is that part of a contributing factor for the – for expected margin strength going forward? Thanks.

Sure. All of our offices are ready and able to receive our colleagues, but we are encouraging our colleagues to work where they feel most comfortable. Given all the dynamics in our various communities, the vast majority of my colleagues are choosing to work-from-home, which we totally support. And for that matter, our clients are also taking this route. Thus, we haven’t seen any kind of business travel. We haven’t seen any kind of travel for marketing purposes, and we expect that to continue into the fourth quarter. So that was also a contributing factor enough being able to provide guidance on the EBITDA margin range, too, Marc.

Okay, great. Thank you very much.

Thank you.

Our next question is from the line of Kevin Steinke with Barrington Research. Please proceed with your question.

Good morning. So in light of, obviously, the antitrust suit that was filed against Google, I’m just wondering, in a case like that, not only specific to that particular case, but how much can that lead to follow-on work in the market in terms of other private party suits, etcetera, cropping up, maybe claiming harm? I’m just trying to get a sense as to the type of tailwind that a case of that magnitude could provide across the broader market?

It’s really difficult to tell for a number of reasons. One, we don’t know what the findings will be in these kind of suits when government entities are doing investigations into these large technology companies. So the findings in the suit will have a huge impact on the type of follow-on litigations, if any, are associated with that investigation. The other part is, sometimes these investigations are resolved very rapidly. Sometimes it may take a few years. And all of that is still unknown at this time. Although I can’t reference our retention on the specific matters, I can’t state that CRA is involved in one capacity or another in several of these landmark matters.

Okay, that’s fair enough. With you continuing to add new consultants in this environment to drive longer-term growth, I’m just curious about the cultural aspects of that, how you’re handling that with most people continuing to work-from-home and how you think about integrating your new colleagues in this environment?

Yes. We are a professional services firm. Our asset are our people. I don’t have to go any further than that. We have built something very special at CRA. I think our performance over several years now demonstrates that we’ve built the special and not just the members of corporate, but all of my colleagues are working really hard to preserve that asset during these volatile economic times because we think the asset is worth preserving. We think that it will maximize the value of our company in the long run by doing that. It takes a lot of work because, as you see, the profitability levels or the utilization levels are what we’ve been accustomed to over the last few years, but we’re making – not to sound corny, we’re making ends meet by finding other sources of cost savings to offset the higher capacity costs. Integrating people in the virtual world is difficult. You can do all the training that we have done in years past, virtually. But it’s hard to really get people acclimated into an organization, into the culture, when all you’re doing is on phone calls or on Zoom calls 24/7. So, we are doing our best. It is not optimal, but I really have to commend all of my colleagues, both on the corporate side of the house and on the consulting side of the house for making our new colleagues feel welcome. Good first steps, but a lot of work to still do on that front.

Okay. That’s helpful. And you referenced in your press release, growing momentum in the business. Obviously, we have talked quite a bit about antitrust and M&A activity this morning. But I don’t know if there is any other areas you would want to highlight where you’re seeing momentum or is it kind of broadly across the portfolio?

One, I believe the momentum is broadly across the portfolio. Clearly, we have seen a step-up in activity with our Antitrust & Competition Economics practice. During Q2, we cited that the number of new projects coming into CRA, contracted year-over-year. During Q3, although it was low single digits, we saw an expansion of new cases coming in to the firm. So we take that as a positive, and we’re working hard to try to continue on that trend.

Okay, great. And then just lastly, maybe just update us on capital allocation. I guess it continues with your kind of your normal strategy. But maybe just talk a little bit more about the dividend increase and your share repurchase activity in the quarter and how you [Technical Difficulty] capital going forward?

Yes. Our long-term capital allocation strategy hasn’t changed. This company, I think, is well-run and produces very attractive cash flows. We have always been able, with those cash flows, to reinvest in the business for value-creating growth and give money back to shareholders. We believe our stock is very attractively priced, but we’re trying to be prudent with the allocation of our capital in terms of redistribution through share repurchases just because of the uncertainty in the marketplace right now and the demand environment. I do not want to starve by any means our ability to grow our services going forward.

Okay, great. Well, congratulations on the nice results. That’s all I have. Thank you.

Thank you, Kevin. Thank you. I appreciate you.

Thank you. We have reached the end of the question-and-answer session. And I will now turn the call over to Paul Maleh for closing remarks.

Again, thanks to everyone for joining us today. Thanks for our analysts for listening and asking some good questions. We appreciate your time and interest in CRA. We will be participating in virtual meetings with investors in the coming months, and we look forward to updating you on our progress on our fourth quarter call. Be safe, everyone. With that, that concludes today’s call. Thank you.

Thank you, Mr. Maleh. Everyone may now disconnect your lines at this time. This concludes today’s call. We thank you for your participation.