Executive Summary / Key Takeaways

• Robust Performance and Strategic Focus: CRA International ($CRAI) continues its impressive growth trajectory, achieving record revenues and profitability in fiscal 2024 and maintaining strong momentum into fiscal 2025, driven by its specialized economic, financial, and management consulting services. The company's "portfolio works" strategy, emphasizing investment in high-growth areas and disciplined resource allocation, underpins this consistent performance.
• Differentiated Intellectual Capital: CRAI's core competitive advantage lies in its application of advanced analytic techniques, cutting-edge quantitative tools, and deep industry knowledge, which enables it to tackle complex, high-stakes engagements and deliver high-value expert testimony. This intellectual capital acts as a significant moat, supporting premium pricing and strong client retention.
• Optimistic Outlook with Prudent Management: Management has raised its full-year fiscal 2025 revenue guidance to a range of $740 million to $748 million and tightened its non-GAAP EBITDA margin outlook to 12.6% to 13.0%, reflecting confidence in its healthy project pipeline and effective cost management. This outlook incorporates expected bill rate increases and strategic talent investments.
• Shareholder-Friendly Capital Allocation: The company demonstrates a strong commitment to returning capital to shareholders, evidenced by a recent 16% increase in its quarterly cash dividend and an active share repurchase program. This strategy, aiming to return approximately half of adjusted net cash flows from operations, underscores management's confidence in future cash generation.
• Competitive Strengths Amidst Industry Dynamics: While operating in a competitive landscape with larger, more diversified firms, CRAI differentiates itself through specialized expertise in litigation and regulatory support, particularly in Antitrust & Competition Economics, and its ability to foster cross-practice collaborations for complex client needs. The firm's focus on attracting and retaining top-tier talent is crucial for maintaining this edge.

A Foundation of Expertise: CRAI's Enduring Business Model

CRA International, Inc. ($CRAI) stands as a worldwide leader in consulting services, built upon a foundational vision established in June 1965: to bridge academic rigor with practical business challenges. The company achieves this by applying advanced analytic techniques, cutting-edge quantitative tools, and in-depth industry knowledge to complex engagements for a diverse range of clients. This intellectual capital, rather than proprietary physical technology, forms the bedrock of CRAI's differentiated offering, enabling it to provide high-value economic, financial, and management consulting services.

CRAI operates primarily within a single professional and consulting services segment, yet its offerings span two broad areas: litigation, regulatory, and financial consulting, and management consulting. The company's strategic approach, often described as its "portfolio works," involves continuously planting "seeds of growth" by investing in areas gaining traction and redeploying assets from segments that may be struggling. This dynamic allocation of resources ensures that CRAI remains agile and responsive to market demands, consistently aiming to maximize long-term value per share.

The tangible benefits of CRAI's analytical prowess are evident in its operational performance. The firm's ability to deliver "high-quality expert testimony" and "data-driven recommendations" is a direct outcome of its sophisticated methodologies. For instance, in a patent infringement dispute related to mRNA COVID-19 vaccines, a CRAI expert testified on reasonable royalty damages, accounting for multiple liability scenarios and recovery periods, contributing to a global settlement. Similarly, the company's collaboration between competition and transfer pricing experts to advise a major mining company on related party pricing demonstrates the power of cross-functional economic analysis in addressing complex, multi-faceted client issues. This deep analytical capability allows CRAI to command effective rate increases, with an approximate 3% effective rate increase in 2025, and maintain high client satisfaction, indicating the high perceived value of its services.

Competitive Landscape and Strategic Differentiation

CRAI operates in a highly competitive consulting market, vying with both larger, more diversified firms and specialized niche players. Key direct competitors include FTI Consulting (FCN), Huron Consulting Group (HURN), Exponent (EXPO), and ICF International (ICFI). While these competitors offer overlapping services, CRAI distinguishes itself through its specialized expertise and client-focused strategy.

CRAI's strength lies in its deep specialization in economic and financial advisory, particularly in high-stakes litigation and regulatory support. This focus allows CRAI to offer greater depth in financial analysis and economic modeling compared to FTI Consulting, which, while having broader resources and global presence, may exhibit more revenue volatility in certain sectors. Against Huron Consulting Group, which emphasizes operational transformation and technology integration, CRAI's value proposition offers substantially deeper insights into economic matters, providing an edge in regulatory proceedings and asset valuation. Similarly, CRAI's comprehensive advisory across multiple industries provides a complementary edge over Exponent's more science-oriented services, allowing for greater efficiency in strategic planning. While ICF International focuses on sustainable solutions and policy advisory, CRAI's market positioning in private sector advisory offers deeper insights into business performance issues.

The firm's intellectual capital and established network of industry relationships serve as significant competitive advantages. This expertise translates into enhanced client loyalty and recurring revenue, contributing to superior margins and robust growth. The company's ability to foster cross-practice collaborations, bringing together diverse talents across geographies and practices for complex matters, further strengthens its market position. This collaborative approach is crucial as the world becomes more complicated, driving opportunities for combining resources.

However, CRAI faces vulnerabilities due to its relatively smaller scale compared to some larger competitors, which could impact customer acquisition costs and market share in broader international segments. Additionally, while its specialized focus is a strength, it also creates sector-specific exposure that could lead to revenue instability during economic downturns. To counter these, CRAI strategically invests in attracting and retaining top talent, including welcoming nearly 20 new Vice Presidents from lateral market hires in 2025 and a class of over 100 recent college graduates. This continuous investment in human capital is vital for maintaining its competitive edge and ensuring a net positive talent acquisition amidst market disruptions.

Financial Performance and Operational Excellence

CRAI has demonstrated a remarkable track record of financial performance, building on seven consecutive years of record annual revenue in fiscal 2024. This momentum continued into fiscal 2025, with the first three quarters marking the best three revenue quarters in the company's history.

For the third quarter of fiscal 2025, CRAI reported revenues of $185.9 million, an increase of 10.8% year-over-year. This growth was broad-based, with seven of eleven practices expanding year-over-year, and notably, Antitrust & Competition Economics, Energy, Finance, and Intellectual Property practices each posting double-digit revenue growth. International operations were a significant driver, expanding 30.3% year-over-year, while North American operations increased 6.8%. The company's utilization rate reached 77% in Q3 2025, up from 76% in the prior year, reflecting efficient deployment of its consultant base.

Profitability metrics also saw strong gains. Non-GAAP net income increased by 12.7%, diluted earnings per share rose by 16.4% to $1.73, and EBITDA grew by 14.6% year-over-year in the third quarter of fiscal 2025. For the fiscal year-to-date period ended September 27, 2025, revenues increased by 8.5% to $554.6 million from $511 million in the comparable prior-year period. Net income for this period reached $41.6 million, a substantial increase from $31.7 million in the prior year, with diluted net income per share at $6.16.

Operational efficiency is a key focus for CRAI. While costs of services (exclusive of depreciation and amortization) increased by 14.1% in Q3 2025, primarily due to higher employee and incentive compensation and forgivable loan amortization, selling, general and administrative (SG&A) expenses as a percentage of revenues decreased to 18.1% from 18.6% in the prior year. The effective tax rate for Q3 2025 was 29.3%, higher than the prior year due to a decreased benefit from share-based compensation and deferred tax asset remeasurement, partially offset by state tax law changes.

Liquidity and Shareholder Returns

CRAI maintains a healthy liquidity position, underpinned by strong cash flow generation. The company ended Q3 fiscal 2025 with $22.5 million in cash and cash equivalents and $101.1 million of available capacity under its $250 million revolving credit facility. This liquidity is deemed sufficient to meet anticipated working capital and capital expenditure requirements for at least the next 12 months.

The company's capital allocation strategy prioritizes both reinvestment in the business and substantial returns to shareholders. For fiscal 2024, CRAI converted 102% of its non-GAAP EBITDA into adjusted net cash flows from operations, totaling $92.5 million. This strong cash generation supports its commitment to return approximately half of its adjusted net cash flows from operations to shareholders. Demonstrating this commitment, CRAI's Board of Directors declared a 16% increase in its quarterly cash dividend to $0.57 per common share, payable in December 2025. Additionally, the company actively repurchases its common stock, having repurchased $47.1 million worth of shares year-to-date through Q3 2025, with approximately $10.9 million remaining under its current authorization. Capital expenditures are expected to be lower in fiscal 2025, in the range of $5 million to $6 million, compared to $16.6 million in 2024, providing further financial flexibility.

Outlook and Risks

CRAI's management has expressed confidence in its forward trajectory, raising its full-year fiscal 2025 revenue guidance to a range of $740 million to $748 million on a constant currency basis, up from a prior range of $730 million to $745 million. The non-GAAP EBITDA margin guidance has also been refined to a range of 12.6% to 13.0%, with the lower end raised from 12.3%. This optimistic outlook is supported by a healthy pipeline, consistent lead flow activity, and the expectation of continued bill rate increases in the 2% to 4% range. The fiscal year ending January 3, 2026, will also include a 14th week in the fourth quarter, contributing to the revenue outlook.

Despite this positive outlook, CRAI acknowledges several risks. Uncertain global macroeconomic, business, and political conditions remain a primary concern, as these can affect client demand and project timelines. The inherent unpredictability of legal actions also poses a risk, given the company's significant exposure to litigation and regulatory services. Furthermore, while inflation has not materially impacted financial results to date, there is no assurance it will not adversely affect them in the future. The competitive landscape for talent, particularly in the legal and regulatory services sector, could lead to increased compensation costs, which management has factored into its margin expectations.

Conclusion

CRA International stands as a compelling investment opportunity, distinguished by its deep intellectual capital, specialized consulting expertise, and a proven track record of profitable growth. The company's ability to consistently deliver record financial results, even amidst dynamic market conditions, underscores the resilience of its business model and the high value clients place on its analytical services. With a strategic focus on optimizing its service portfolio, investing in top-tier talent, and a disciplined approach to capital allocation, CRAI is well-positioned for sustained success.

The firm's commitment to returning capital to shareholders, coupled with a bullish outlook for fiscal 2025, reinforces the investment thesis. While macroeconomic uncertainties and intense competition for talent present ongoing challenges, CRAI's strategic agility, strong financial health, and leadership in niche, high-value consulting segments provide a solid foundation for long-term shareholder value creation.