Paul Maleh - President and CEO Chad Holmes - CFO, EVP, and Treasurer.

Marc Riddick - Sidoti & Company Tim McHugh - William Blair & Company.

Good day, everyone, and welcome to Charles River Associates First Quarter Fiscal 2017 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; and Chief Financial Officer, Chad Holmes. At this time, I would like to turn the call over to Mr. Holmes for opening remarks. Please go ahead, sir..

Thank you, Audrey.

I would like to remind everyone that the statements made during this conference call, including reaffirming guidance on non-GAAP revenue and non-GAAP adjusted EBITDA margin for fiscal 2017 or any other statements concerning the future business, operating results or financial condition of CRA including those using the terms, looking ahead, expect, believe, anticipate, continue, estimate, should 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, and actual performance and results may differ materially from those expressed or implied in these statements due to many important factors.

Additional information regarding these factors is included in today's release and in CRA's periodic reports 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 on this call, including adjusted EBITDA and certain measures presented on a constant currency basis.

Everyone is encouraged to refer to today's release for a reconciliation of these non-GAAP financial measures to their GAAP counterparts and descriptions of the process for calculating adjusted EBITDA and the measures presented on a constant currency basis. Let me now turn it over to Paul for his report.

Paul?.

Thanks, Chad. And good morning, everyone. CRA delivered strong results for the first quarter of fiscal 2017 as we continued to successfully execute our strategy to generate broad-based profitable growth. I'm especially proud of our ability to onboard more than 100 new consultants while maintaining a company-wide utilization of 72%.

These efforts enabled us to achieve high single-digit revenue and profit growth in the quarter with contribution from our Antitrust & Competition Economics, Energy, Life Sciences and Marakon practices, despite incurring continued currency headwinds.

Growth in our Antitrust & Competition Economics practice was driven by both M&A and Antitrust engagements. For example in Europe, a team of CRA experts advised 21st Century Fox on it's proposed acquisition of leading pay-TV operator Sky, which was approved unconditionally by the European Commission.

CRA's analysis addressed potential competition concerns that integration of certain 21st Century Fox content with Sky's pay-TV platform would create incentives for Sky to limit rival pay-TV retailers access to 21st Century Fox content.

And at the same time, for Sky to cease to license audio-visual content and channels from other content producers competing with 21st Century Fox in certain genres. The Energy practice performance has been driven by a variety of strategic engagements and litigation support for clients.

The industry's transformation from centralized to decentralized and from fossil fuels to renewables is yielding a significant amount of work for our consultants. In the first quarter, CRA was engaged by one of the nation's largest utilities to assess alternative growth platforms such as renewables or new products and services.

We were also retained by a large utility to develop a capital allocation strategy to combat low usage growth and rising retail rates.

In the areas of litigation, the Energy practice's largest engagement for the quarter was a joint effort with CRA's competition practice in which we supported our client to complex litigation related to the alleged manipulation of electricity and gas markets.

Within Life Sciences, we are successfully integrating C1 consulting and project work is ramping up as expected. Staying true to C1's mantra of customers first, the integration efforts allowed our new colleagues from C1 to remain focused on the delivery of projects.

Our combined industry experience and analytical expertise is already generating exciting opportunities for our company. For example, a team of legacy Life Sciences and former C1 consultants recently won a launch strategy project that leverages the C1 analytics platform and CRA's deep market access and pricing experience.

We expect that the insights generated through data analytics will help the client optimize its sales, marketing, medical affairs and market access resources to customize its launch investments by local markets.

Marakon delivered another strong quarter building on the momentum gained in 2016, the practice has been generating new and expanded project work from top clients to continue to see our experts as strategic partners when it comes to driving sustainable growth and enterprise value.

For example, during the first quarter, Marakon deepened and expanded its relationship with a global consumer wellness company embedding the tools, processes and capabilities to deliver above market growth rates around the world.

Looking ahead, we are encouraged by our recent acquisition of C1 and the positive trends we are seeing in project originations across the firm. For fiscal 2017, on a constant currency basis, relative to fiscal 2016, we are reaffirming our previous guidance of non-GAAP revenue in the range of $350 million to $360 million.

And non-GAAP adjusted EBITDA margin in the range of 15.8% to 16.6%. This guidance includes the expected contributions from C1 Consulting.

While we are pleased with our performance in the first quarter of fiscal 2017, we remain mindful that the uncertainties around global economic conditions and short-term challenges arising from the integration of newly hired professionals could affect our business. With that, I will turn the call over to Chad for a few additional remarks.

Chad?.

Thanks, Paul. As a reminder, more expansive commentary on our financial results is available on the Investor Relations section of our website. Before we get to your questions, let me provide a few additional metrics related to our first quarter 2017 performance.

In terms of headcount, we ended the first quarter with 627 consulting staff, which consisted of 126 officers, 340 other senior staff and 161 junior staff. This is a net increase of 128 consultants, or approximately 26% growth from the 499 total consulting headcount that we reported at the end of the first quarter of fiscal 2016.

Headcount for the first quarter of fiscal 2017 included the 84 consultants who joined CRA as part of the C1 transaction.

Non-GAAP selling, general and administrative expenses as a percent of non-GAAP revenue, excluding the 3.1% attributable to commissions to non-employee experts, was 18.1% for the first quarter of fiscal 2017 compared with 19.0% a year ago. Turning to the balance sheet.

DSO at the end of the first quarter was 104 days compared with 102 days at the end of the fourth quarter of fiscal 2016. DSO in the first quarter consisted of 63 days of billed and 41 days of unbilled, compared with 73 days of billed and 29 days of unbilled in the fourth quarter of fiscal 2016.

We concluded the first quarter of fiscal 2017 with $21.8 million in cash and cash equivalents, with a significant portion residing internationally. As a result, in the first quarter we borrowed on our line of credit in the amount of $6 million.

The first quarter is typically a period of lower cash levels as it coincides with the timing of a significant portion of our annual bonus outlays. Turning to our capital allocation strategy.

We remain committed to maximizing long-term shareholder value by reinvesting in our business and returning capital through both share repurchases and quarterly dividends.

Although we did not buyback any shares in Q1, we will continue to pursue share repurchases as long as we believe a gap exists between the firms intrinsic value and the observed market price of our stock.

We announced today that CRA's Board of Directors authorized an expansion to our existing share repurchase program of an additional $20 million in value of shares of common stock, bringing the total amount available under our share repurchase program to approximately $29 million.

The timing, amount and extent to which CRA repurchases shares will depend upon market conditions and other factors we may consider in our sole discretion.

In connection with this expanded share repurchase program, our Board of Directors also recently authorized CRA in its discretion to adopt a Rule 10b5-1 trading plan in connection with its repurchase activity. Finally, as a reminder, in the first quarter we paid a quarterly cash dividend of $0.14 per common share.

Today, we announced that our Board of Directors declared a quarterly cash dividend of $0.14 per common share, payable on June 16, 2017 to shareholders of record as of May 29, 2017. That concludes my prepared remarks. Audrey, we would now like to open up the call for questions..

Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Tim McHugh with William Blair & Company..

Yes, thanks. It takes for the color on I guess different practice areas. I'm wondering if you can talk a little bit about the pipeline. I apologize if you gave that, but how are the new project lead flow and to what extent, I guess are you expecting -- how is the -- sorry, I should say this another way. The regulatory environment.

How is uncertainty or changes kind of starting to impact the business, and how should we think about that at all going for the rest of the year?.

Yeah. I think the uncertainty is definitely -- first of all good morning, Tim. Thanks for joining us. I think the uncertainty that we're observing both in the U.K. and here in The States has caused some companies to temporarily pause on many of their actions.

You probably saw this most prominently in December, January, but as we exited those months, things are much more back to what I would consider normal activity with project originations growing each month during the quarter. So we are keeping a close eye on it.

But clearly what you have seen from the M&A data, both on volume and dollar values has clearly been impacted during Q1.

But right now, we're pleased with the originations and the trends of those originations for our legacy operations, and C1 has really hit the ground running and contributed some a great new portfolio of projects and also gave us -- is giving us robust new opportunities..

Okay. And just as -- maybe on the margins, revenue turns seem encouraging, seems like you're tracking well, if not to the high end of your guidance range. The margins, I guess this was the easiest comp for the year.

I know there is some seasonality, but can you talk at all about I guess relative to what you expect for the full year, how the margins came in here for the first quarter as well as, I guess how the acquisitions may be impacting that as it rolls in?.

Sure. I was actually pretty excited about the margins for Q1. Q1 without any impact of acquisitions is sort of negatively weighted by all the employee taxes that we incurred during the quarter. Why did we incur a disproportionate amount of employee taxes, is the majority of our bonus payments are paid during the first quarter.

So, that's why the seasonality you'll find Q1 in a margin basis to be much lower than Q2 through Q4. So, I think on just a natural progression even if the revenues stayed the same, we would see a significant pickup in margins on that. Once you introduce the C1 acquisition, there were clearly acquisition-related costs that we incurred during Q1.

Chad, what ballpark was that?.

Roughly about $300,000..

So and that is just rolled into our operating expenses during it.

And the fact I commend all of our corporate services and all the consulting services to bring on 100 new professionals, whether they join you as part of a one signal entity or a mix, it was a big undertaking for firm of our size and the fact that we’re able to maintain productivity and deliver profit margins that are consistent with what was a very good 2016.

We’re pretty pleased with how the year started. At this time, we are just reaffirming the guidance. As we get further into the year we can reassess of whether any revision up or down would be needed..

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

I wanted to touch on maybe what you were thinking about the, for the remainder of the year with headcount given the fact that you have absorbed so many folks, what you were thinking about as far as some of the other practices and what we can look forward to as far potential headcount growth for the remainder of the year?.

Yes, I think as we've talked about in prior calls, I think our headcount growth would be largely commensurate with the level of revenue growth that we had. So outside of the addition of C1, we would probably be looking at headcount growth in the 4% to 5% range.

And that would be added throughout the year with the majority of those additions joining us during Q3 and Q4 of our fiscal year..

Okay, great. And I wanted to touch on the, maybe some of the areas that might look particularly attractive from an acquisition pipeline standpoint.

And given what you've just on-boarded, sort of what your appetite would be for that at this time?.

Antitrust & Competition Economics practice, our Finance practice and group and Marakon. So we're going to be opportunistic. Again, well I’m not chasing a revenue bogey. I like our strategy, I like our path to continue to make CRA a stronger organization..

Okay. Great. I was wondering if you could share a little bit around some of the commentary that you had about some of the pause, and certainly, we've got a good amount of uncertainty out there which have affected various firms in different ways in the current environment.

So I wanted to start digging a little bit more about what you are as far as the pause and activity inclines in December, January timeframe.

Was that concentrated in any one particular area, was it more across the board and how should we think about it -- it's hard to necessarily get a great feel when you go on a headline-by-headline basis these days, but I did want to get a sense of what sort of pause -- the pause that you saw?.

Yeah. No, we saw it pretty much across the board because if you think the uncertainty that's been introduced to the marketplace, it is very much across the board.

From what is happening in the general economic conditions, of some of the large worldwide players, to what is going to be their regulatory position, to what is going to be the degree of regulatory oversight for various industries. Those have really not been established.

And many of those regulatory bodies, still are waiting for the establishment of their leadership groups. So we too, like you are tracking the headlines and are trying to keep abreast of what we're seeing.

December and January are historically a softer month in terms of opportunities and originations, and if anything, I would say this year was probably a little softer than I have seen historically. But I've been encouraged by how that has ramped up as the year has progressed.

I don't know whether that ramp is CRA specific, Marc, or whether the ramp is more that -- some of that uncertainty is starting to get resolved. So, we're going to keep a close eye on that and track it, but I think our practices have performed admirably given some of the clouds that have been over our overall economy..

Okay, great. And then one little minor detail I just wanted to follow-up on, the expansion of the share repurchase. So, now we're looking at about $29 million in that authorization.

Is that open-ended on timing or is there a protected end date there?.

It is open-ended on timing. We believe CRA is still attractively valued. And thus, if I have opportunities to make attractive investments I'm going to do them.

So, we're going be purchasers of our shares, we remain committed to returning capital to shareholders, and I think the balance of the reinvesting of that capital into the business and returning it to shareholders has been well received.

And we've been able to achieve both our targets, both our shareholders and also the growth aspirations of the firm through that capital sharing.

So, we're going be in the marketplace, there is no timeline with it, and as Chad said, we constantly observe what the market conditions are and what may be other opportunities there are for the capital that this firm is generating..

Thank you. There are no further questions. That does conclude our question-and-answer session. At this time, I will turn it back to your CEO, Paul Maleh for closing comments..

Thanks Audrey. And again thank you to everyone for joining us today. We appreciate your time and interest in CRA. We'll be getting out to meet with investors in the coming months. And we look forward to updating you on our progress next quarter. With that, that concludes today's call. Thank you, everyone..

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