Good day, everyone, and welcome to the Charles River Associates Fourth Quarter 2025 Conference Call. Please note that today's call is being recorded. The company's earnings 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, 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. Please go ahead, sir.

Thank you, Melissa, 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 along with 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. 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. I will now turn it over to Paul for his report. Paul?

Thanks, Eric, and good morning, everyone. Thank you for joining us today. Revenue for fiscal 2025 increased by 9.3% to $751.6 million, marking CRA's eighth consecutive year of record annual revenue. Our performance benefited from broad-based contributions across the portfolio. Both lines of business contributed to the year's revenue growth as our legal and regulatory services increased 10.3% relative to fiscal 2024. And our management consulting services expanded 6.4% year-over-year. For fiscal 2025, 7 practices grew their top lines with 3: Antitrust & Competition Economics, Energy and Intellectual Property delivering double-digit revenue growth relative to fiscal 2024. Geographically, both our North American and international operations contributed to the year's revenue growth, increasing 7.3% and 19.5%, respectively. During this period of revenue growth, we continue to manage the business effectively achieving full year utilization of 77%. Our strong utilization and overall execution drove record profits for fiscal 2025 as measured by net income, earnings per diluted share and EBITDA. Turning to the fourth quarter. Our portfolio strength drove an 11.6% increase in revenue year-over-year, resulting in the best quarterly revenue in CRA's history. Continued growth of our sales pipeline supported this record Q4 revenue. During the quarter, our weekly average project lead flow and new project originations increased 9.3% and 7.7%, respectively, relative to the fourth quarter of 2024. For the fourth quarter, 6 of CRA's practices grew their top line with 4 Antitrust & Competition Economics, Energy, Forensic Services and Labor & Employment, delivering double-digit revenue growth year-over-year. Revenue in the fourth quarter for CRA's legal and regulatory services increased 14.3% relative to last year. The Antitrust & Competition Economics and Forensic Services practices led the way with each delivering quarterly revenue growth of more than 20% year-over-year. With this notable performance, each practice established new records for both quarterly…

Thanks, Paul. Hello, everyone. I want to update you on our capital deployment during the quarter. CRA continues to generate strong cash flows, demonstrating the strength in our operations and the quality of our revenue, CRA's fiscal 2025 adjusted net cash flows from operations increased 17% year-over-year to $108.4 million. Stated another way, during fiscal 2025, CRA converted 112% of its non-GAAP EBITDA into adjusted net cash flows from operations. This strong performance is consistent with prior years as CRA has converted EBITDA into adjusted net cash flows from operations at rates of 111% and 112% over the past 3 and 5 years, respectively. These cash flows represent a discretionary pool of capital used to fund reinvestment in the business and distributions to our shareholders. I will now detail how we allocated our capital during the fourth quarter. We repaid $61 million of our net borrowings under our revolving line of credit to bring our year-end balance to $34 million. We ended the year with a cash balance of $18.2 million, resulting in a net borrowing position of $15.8 million. Since year-end, we repaid the entire amount of outstanding borrowings under our revolving line of credit, bringing the balance to 0. The fourth quarter of 2025 also saw net cash outlays for talent investments of $17.6 million. For the full year, we spent $87.9 million to acquire and retain senior revenue-generating talent. We spent $1.1 million on capital expenditures, bringing our year-to-date total to $3.9 million. For fiscal 2026, we expect spending on capital expenditures in the range of $4 million to $5 million. We paid $3.7 million of dividends to our shareholders during the fourth quarter. For the full year 2025, we returned a total of $61 million to our shareholders through a combination of share repurchases and quarterly dividends. This amount represents 56% of CRA's 2025 adjusted net cash flows from operations and is consistent with our ongoing aim of returning half of our adjusted cash flows from operations to shareholders. Since stating this aim at the beginning of fiscal 2021, we have returned to shareholders 54% of CRA's aggregate adjusted net cash flows from operations. Specifically, over this 5-year period, we have returned a total of $239.3 million to our shareholders, consisting of $54.8 million of dividend payments and $184.5 million of share repurchases at an average price of $110 per share. As announced earlier today, CRA's Board of Directors authorized an expansion to our existing share repurchase program of $55 million. With this expansion, we now have $65.9 million available under our share repurchase program. Taken together, our capital allocation decisions demonstrate continued confidence in CRA's long-term prospects as we look to invest in the business for profitable growth, while at the same time, returning substantive capital to our shareholders, all with the aim of maximizing CRA's long-term value per share. With that, I will turn the call over to Eric for a few final comments. Eric?

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 fourth quarter of fiscal 2025. In terms of consultant headcount, we ended the year at 959, consisting of 164 officers, 563 other senior staff and 232 junior staff. This represents a 1.4% increase compared with the 946 consultant headcount reported at the end of fiscal 2024. Non-GAAP selling, general and administrative expenses, excluding the 1.0% attributable to commissions to nonemployee experts was 16.1% of revenue for the fourth quarter of fiscal 2025 compared with 15.9% a year ago. For the full year fiscal 2025 and fiscal 2024, the ratio was 16.1% of revenue. The effective tax rate for the fourth quarter of fiscal 2025 on a non-GAAP basis was 28.8% and compared with 30.9% on a non-GAAP basis for the fourth quarter of fiscal 2024. The lower rate in the fourth quarter of 2025 was largely attributable to the impact of the prior period remeasurement of our deferred tax assets as a result of changes in tax laws that were nonrecurring in the current period. For the full year fiscal 2025, the effective tax rate on a non-GAAP basis was 28.4% compared with 29.2% on a non-GAAP basis for the full year fiscal 2024. The lower rate for the full year fiscal 2025 was largely attributable to the impact of state legislative changes in the prior year that were nonrecurring in the current year. The effective tax rate for fiscal 2026 is projected to be in the range of 31% to 32%. The year-over-year increase is largely attributable to changes in legislation impacting executive compensation. Turning to the balance sheet. DSO at the end of the fourth quarter was 108 days compared with 115 days at the end of the third quarter of fiscal 2025. DSO in the fourth quarter consisted of 78 days of billed and 30 days of unbilled. We concluded the fourth quarter of fiscal 2025 with $18.2 million in cash and cash equivalents and a further $162.2 million of available capacity on our line of credit for a total liquidity of $180.4 million. That concludes our prepared remarks. We will now open the call for questions. Melissa, please go ahead.

[Operator Instructions] Our first question comes from the line of Marc Riddick with Sidoti & Company.

I wanted to sort of get the -- get some thoughts around the revenue guide starting first with sort of how you look at that, especially compared with sort of where you ended the year on consultant count and the strength of utilization, it seems to be as strong as the year finished. And given where headcount is, it seems as though it'd sort of be approaching the sort of historical higher end of the ranges that you're usually operating in. And given your commentary on the guide, maybe you could sort of give us some thoughts as to maybe what goes into that given sort of where you are in headcount utilization.

Sure. Well, let me start by saying, I think your interpretation of our messaging with respect to our financial performance and its implications on 2026 is dead on. We had a fantastic fiscal 2025, and we're really quite bullish on fiscal 2026 as can be seen by the guidance that we provided. We're growing revenue, and we're growing it profitably. Even with the success, it does not mean that we are not constantly refining and improving our portfolio. Sometimes we double down on investments. Sometimes we scale back investments in certain practices. As we've discussed in prior quarters, that, of course, has an impact on the headcount that you observe in terms of the aggregate headcount. But that does not necessarily mean that the headcount of our growing practices is not growing more commensurate with their revenue expansion. As we have said also in the past, if you get to sort of a medium, long term, headcount should roughly approximate revenue growth. So the flattish headcount growth in 2025 should not be seen as a more normal case or a new steady state for CRA. Going forward, I expect headcount growth would increase.

Okay. Excellent. And then maybe we could shift gears in the prior quarter, you've spoken about the strength in the litigation activity I was wondering if maybe you could sort of give an update as to maybe what you saw there in the fourth quarter and then how sort of that figures into the 2026 commentary?

Sure. the performance by several of our practices, and I'm going to highlight our Antitrust Competition Economics practice and our forensic practice. Their performance in Q4 is, I don't know how else to put it [indiscernible] to have the largest practice at CRA and probably the largest practice in the world, delivering 20% year-over-year growth is mind-boggling. I don't know how else to describe it. As did it surpass my expectations in Q4? Absolutely. And the reason we came forward with the guidance we put out for 2026 is I don't really see any near-term signs or any signs for that matter of it slowing. So much congratulations is due to my colleagues in the practice, both in North America and in Europe. You saw the growth rate of the European expansion, right, which just talks about the kind of strength that my European competition colleagues are demonstrating in the marketplace. Forensics, is I'm happy to say it looks to be on a nice growth trajectory. And they also posted their best quarter ever in Q4. And as we've been highlighting for the last several quarters, I know it's not in legal regulatory, the energy practice is taking advantage of this unique moment in the utility energy industry right now and capturing share. So very proud of the accomplishments of my colleagues.

Excellent. And then the last one for me, I guess, there's a lot of pieces that are certainly contributing to the strength that you're seeing. Maybe you could talk a little bit about the -- certainly, the revenue mix appears to be very positive. Maybe talk a little bit about the pricing dynamic that you're seeing underneath because it seems as though that's a contributor as well. But maybe you could talk a little bit about what you're seeing there and if there are any particular areas where you're seeing any particular pushback that's meaningful in any way?

Sure. Pricing always goes hand-in-hand with the CRA's ability to deliver value to our clients. you're able to raise prices because clients deem that your services are continuing to be valuable in their -- addressing their challenges there. So for 2025, we were right in that 3% range of rate increases. That stuck largely during the year. So we're very happy with that. and ways you can see it's sticking, we have not experienced any kind of increase in write-offs or the collectability of our revenue. We're still collecting $0.97, $0.98 on the dollar, and we deliver our revenue at our reported rates. We are not an organization that goes into the process of significantly discounting rates depending on the practice. We get what we charge, which talks again to the quality. Looking forward, we expect rate increases in the low single digits, maybe a little higher than the 3% in 2026. As we also have discussed in the past, we will start getting a better read on the stickiness of those rate increases sometime during Q2. But all signs are that we should be just fine as the year progresses.

Our next question comes from the line of Kevin Steinke with Barrington Research.

I want to say thank you for the comments around AI as it relates to your business, it's obviously very timely in light of what's been going on in the equity markets. But I wanted to drill down a little more specifically on you're mentioning that you brought on a VP of Artificial Intelligence and that you're kind of looking to move more towards an execution phase from an exploratory phase on internal AI initiatives. And just wondering if there have been any initial thoughts or discussions internally about is that perhaps an enabler of margin expansion over time?

Right now, it's difficult for me to compute whether I would see a margin expansion over time. For me, I see it more as a revenue enhancement opportunity as we get to move to higher value-added services more rapidly. The reason we brought on a leader of the initiative internally is this sort of individual experimentation that has been going on over the past couple of years is gaining a lot of steam, and I want to make sure we are coordinated as an organization and even more importantly, that we are respecting the confidentiality of our clients' data on that. So that is probably the main reason for the coordination, but I also believe the coordination will allow for a more rapid ramp of a lot of these initiatives.

Great. That sounds great that you actually see it as an enabler of revenue growth. So just moving on to again, I wanted to follow up on the Forensic Services practice. That seemed to kind of really pop here in the quarter as you discussed. But Were there any particularly large projects that rolled in? Or has the pipeline strengthened there? Just kind of any more detail on what's going on there? And is it -- do you feel like there's some sustainability there or some legs there to that practice continuing to grow, maybe not at 20% plus, but just kind of how you see it playing out over the year?

Sure. We highlighted the lead flow growth in Q4. The reason we did that is we're having just almost as robust and inbound of new project opportunities as we were able to deliver on the revenue growth, and that bodes really well for 2026. We always have large projects across our practices that come in and go off of our books. What I've been really impressed with the consistency of the quarters during 2025 and years prior is that we don't miss a beat that we have enough of a backlog that we only experienced what I would call temporary softness in any one practice before we move on to the new revenue opportunities. I think the lead flow in our forensic practice has been rather robust. And I remain bullish for their 2026. Like you said, I think it's asking a lot for them to deliver 20% revenue growth quarter after quarter, but I see a lot of good things ahead for that consulting team.

Okay. That sounds good. And I just wanted to ask about the forgivable loan amortization. Obviously, you had -- based on your announcements you had throughout 2025, a really strong year for attracting talent. And just wanted to kind of confirm that, that's what's really driving the expected increase in forgivable amortization in 2026 and you're not necessarily having to pay more or pay more to attract a particular consultant compared to history. It's more just the volume of hiring, I would guess.

Sure. So let me begin with the last part of your question and then move back with it. So first of all, our -- the acquisition cost of bringing on incremental revenue has remained relatively constant or consistent with prior quarters and years. So we have not experienced a rising purchase price for a lack of a better descriptor with respect to that incremental revenue. We brought on a lot of great new talent. We also, given the disruptions in the broader marketplace in 2025, there was money paid to retain some talent. Retention of revenue-generating resources within our organization is not new. If I look at the expectations for CRA, when I look at 3-, 5-year windows of time, the outlays that are made in 2025, yes, they may be a bit concentrated, but are consistent with our medium-term 3- to 5-year forecast. So that is also not out of the ordinary. Both are contributing to an increase of forgivable loan amortization as we enter in 2026. And the reason we highlighted that more explicitly when people are interpreting our reported GAAP financials, please take in consideration that you have a large noncash expense flowing through that income statement. If you account for that, look at EBITDA like we demonstrated in our investor deck and look at the forgivable loan amortization. If you sum those 2 pieces up, it's probably as high a measure as CRA has ever delivered. So by no means are we becoming less profitable as an organization. And it's so good, I really want to say it again. We are not becoming less profitable as an organization. We continue to be able to deliver impressive revenue growth at expanding margins because every year is a new high point for the company. So again, good things ahead in '26 and beyond.

Okay. Great. That's helpful. And obviously, your ability to attract talent, it bodes very well for your future revenue growth and your future just market opportunities. But just I want to ask lastly about share repurchases it looks like you didn't complete any in the fourth quarter, but I assume with the increased repurchase authorization and the recent dislocation in the stock price that you'd want to continue to be active on the repurchase front. Is that correct?

That is correct. Our share repurchases tend to be a little bit front-loaded in the year because as we enter any year, we expect to deliver strong results, and we expect the market to reward us for those strong results, thus expect an increasing stock price. So you typically find share repurchases to be more heavily weighted towards the first half of the year relative to the second half of the year. I would say that's point one. Point two, I'm clearly not happy where my stock price sits here. We are significantly undervalued. There's not much I can do about that immediately. I can deliver -- we can continue to deliver the strong results. And I think it's safe to assume that you also anticipate CRA being an active repurchaser of its shares in the quarters ahead.

Our next question comes from the line of Andrew Nicholas with William Blair.

I wanted to ask on the M&A environment. I apologize if I missed it, but I think most of the commentary was specific to what you saw in '25. Have you seen M&A and relatedly M&A-related Antitrust stay or accelerate with strength so far this year?

I think there was definitely an acceleration as the year progressed. But again, when you look at the consistency of the results, of the firm quarter-to-quarter. That's hard to exactly pinpoint on that. The 20% year-over-year growth by the competition practice in Q4 clearly points to a really strong quarter for the practice, both in North America and internationally. And right now, we see no signs of that slowing down. They're working on matters that they secured in '25 and the lead flow year-to-date has also been quite strong. So it seems like the market is conducive to high value-added services.

Great. That's constructive. I appreciate it. And then for my follow-up, I wanted to go back to the AI topic. I heard you on kind of the AI efficiency examples. Foreign translation or foreign language translation, some of the capabilities around contract review, maybe data analysis. All of that sounds super helpful and interesting. I'm just curious because I think, Paul, you said the expectation is that some of that is handled with AI, you can move your focus to higher value type work. Can you walk me through just kind of how you think about that from an impact in the economics of these projects? Does that work moving from lower value to higher value equal the same hours at higher rates or better utilization? Or just kind of thinking about kind of the second order effects of that and how it might impact the model as that becomes a bigger and bigger part of the way that you work.

Sure. I do not anticipate a worsening or a decrease in our staffing leverage at CRA. I think it's important to note that our staffing leverage is somewhere in the 4:1 or 5:1. And by that, I'm saying about non-Vice Presidents to Vice Presidents at CRA. So in the legal -- particularly in the legal regulatory area on that. So we are not particularly highly levered. So the displacement base is smaller than -- you may think at some other consultancy. So I will start with that. To date, because these large language models or a lot of the tools I described are not something that we just started using in Q4. We've actually been using these tools for the last couple of years with it. And to date, we have not seen a decrease in the utilization of our junior staff. Those are the individuals we hire directly from undergraduate institutions, and we have not decreased the leverage with respect to the junior staff that assist us on delivering our revenue. So we believe we can effectively use that staff because the staff is working at the direction of these senior experts. And when you're talking about the complexity of the problems we have, the size of the data sets that we're dealing with, the senior most expert cannot handle that work by themselves. They delegate it out to their project team for helping them deliver. So I've seen no evidence to date on that. And right now, I also -- I'm not worried about any kind of negative consequences in '26, but time will tell.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Maleh for any final comments.

Thank you, Melissa. Again, thanks to everyone for joining us today. We appreciate your time and interest in CRA. We will be participating in meetings with investors in the coming months, and we look forward to updating you on our progress on our first quarter call. That concludes today's call. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.