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Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-03 · 69 added, 120 removed, 113 unchanged (63% of the section changed)

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Critical Accounting Policies and Estimates

Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as of October 1, 2022 remain unchanged from January 1, 2022, except for the accounting policies related to business combinations as described below.

Please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 1, 2022, filed with the SEC on March 3, 2022 (the "2021 Form 10-K") for details on these critical accounting policies.

Business Combinations .

We account for business acquisitions using the acquisition method of accounting, which requires assets acquired and liabilities assumed to be measured and recorded at their estimated fair values as of the acquisition date, with certain exceptions.

Right-of-use assets and lease liabilities are recorded on the date of acquisition in accordance with ASC Topic 842, Leases .

In addition, contract assets and contract liabilities are recorded in accordance with ASC 606, as we adopted Accounting Standards Update No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers on the first day of fiscal 2022.

All other tangible assets and identifiable intangible assets acquired and liabilities assumed are recorded at their fair value as of the date of acquisition.

The purchase price is determined as the fair value of consideration transferred.

Goodwill is recognized for the excess of consideration transferred over the net value of assets acquired and liabilities assumed.

Intangible assets that are separate from goodwill and have determinable useful lives are valued separately.

Fair value measurements require extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets, discount rates that we believe reflect the risk factors associated with the related cash flows, and estimates of useful lives.

The useful lives of identifiable intangible assets acquired in a business acquisition are estimated based on the expected period that we will receive substantially all of the projected future benefits from the intangible asset.

Our critical accounting policies involving the more significant estimates and judgments used in the preparation of our financial statements as of April 1, 2023 remain unchanged from December 31, 2022.

Please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 2, 2023 (the "2022 Form 10-K") for details on these critical accounting policies.

Recent Accounting Standards

Please refer to the sections captioned “Recent Accounting Standards” included in Note 1, “Summary of Significant Accounting Policies” in Part I, Item I, “Financial Statements” of this Quarterly Report on Form 10-Q (this "report").

Results of Operations—For the Fiscal Quarter and Fiscal Year-to-Date Period Ended October 1, 2022, Compared to the Fiscal Quarter and Fiscal Year-to-Date Period Ended October 2, 2021

There are no recent accounting standards that impact the unaudited condensed consolidated financial statements.

Results of Operations—For the Fiscal Quarter Ended April 1, 2023, Compared to the Fiscal Quarter Ended April 2, 2022

The following table provides operating information as a percentage of revenues for the periods indicated:

Fiscal Quarter

Ended Fiscal Year-to-Date

2022 October 2,

2021 October 1,

2022 October 2,

2023 April 2,

Revenues 100.0 % 100.0 %

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Net income 5.8 % 7.7 %

Fiscal Quarter Ended October 1, 2022, Compared to the Fiscal Quarter Ended October 2, 2021

Revenues increased by $12.0 million, or 8.8%, to $148.4 million for the third quarter of fiscal 2022 from $136.4 million for the third quarter of fiscal 2021.

Utilization increased to 74% for the third quarter of fiscal 2022 from 73% for the third quarter of fiscal 2021, while consultant headcount grew 3.3% from 882 at the end of the third quarter of fiscal 2021 to 911 at the end of the third quarter of fiscal 2022.

The primary driver of consultant headcount growth was the addition of 37 consultants resulting from the acquisition of Welch Consulting, Ltd.

(“Welch Consulting”) in the first quarter of fiscal 2022.

Fiscal Quarter Ended April 1, 2023, Compared to the Fiscal Quarter Ended April 2, 2022

Revenues increased by $4.4 million, or 3.0%, to $152.8 million for the first quarter of fiscal 2023 from $148.4 million for the first quarter of fiscal 2022.

Utilization decreased to 70% for the first quarter of fiscal 2023 from 74% for the first quarter of fiscal 2022, while consultant headcount grew 10.7% from 878 at the end of the first quarter of fiscal 2022 to 972 at the end of the first quarter of fiscal 2023.

Overall, revenues outside of the U.S.

represented approximately 18% and 20% of net revenues for the third quarters of fiscal 2022 and fiscal 2021, respectively.

Revenues derived from fixed-price projects decreased to 16% of net revenues for the third quarter of fiscal 2022 compared with 23% of net revenue for the third quarter of fiscal 2021.

represented approximately 23% and 21% of net revenues for the first quarters of fiscal 2023 and fiscal 2022, respectively.

Revenues derived from fixed-price projects decreased to 18% of net revenues for the first quarter of fiscal 2023 compared with 19% of net revenue for the first quarter of fiscal 2022.

The percentage of revenue derived from fixed-price projects depends largely on the proportion of our revenues derived from our management consulting business, which typically has a higher concentration of fixed-price service contracts.

Costs of Services (exclusive of depreciation and amortization).

Costs of services (exclusive of depreciation and amortization) increased by $6.3 million, or 6.6%, to $102.3 million for the third quarter of fiscal 2022 from $96.0 million for the third quarter of fiscal 2021.

Costs of services (exclusive of depreciation and amortization) increased by $3.7 million, or 3.6%, to $107.8 million for the first quarter of fiscal 2023 from $104.1 million for the first quarter of fiscal 2022.

The increase in costs of services was due to an increase in employee compensation and fringe benefit costs of $4.3 million primarily as a result of a higher headcount and an increase in forgivable loan amortization of $1.6 million, partially offset by a decrease in client reimbursable expenses of $2.2 million.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) decreased to 68.9% for the third quarter of fiscal 2022 from 70.4% for the third quarter of fiscal 2021.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses increased by $3.7 million, or 15.3%, to $28.2 million for the third quarter of fiscal 2022 from $24.5 million for the third quarter of fiscal 2021.

Within this category of expenses, there was a $1.2 million increase in travel and entertainment, a $1.0 million increase in employee compensation and fringe benefit costs, a $0.7 million increase in miscellaneous and other costs, a $0.6 million increase in software subscription and data services, and a $0.4 million increase in commissions to our non-employee experts.

Partially offsetting the increase in these expenses was a $0.2 million decrease in bad debt expense for the third quarter of fiscal 2022 as compared to the third quarter of fiscal 2021.

As a percentage of revenues, selling, general and administrative expenses increased to 19.0% for the third quarter of fiscal 2022 from 18.0% for the third quarter of fiscal 2021.

Commissions to our non-employee experts remained flat at 3.2% of revenues for the third quarter of fiscal 2022 and the third quarter of fiscal 2021.

Provision for Income Taxes.

The income tax provision was $4.0 million and the effective tax rate ("ETR") was 25.3% for the third quarter of fiscal 2022 compared to $1.9 million and 14.8% for the third quarter of fiscal 2021.

The ETR for the current fiscal quarter was higher than the prior year primarily due to a decrease in the tax benefit related to share-based compensation and foreign-derived intangible income, and higher nondeductible compensation paid to executive officers.

The ETR for the third quarter of both fiscal 2022 and fiscal 2021 were lower than the combined federal and state statutory tax rate primarily due

to the tax benefit related to share-based compensation, partially offset by non-deductible compensation paid to executive officers.

Net income increased to $11.9 million for the third quarter of fiscal 2022 from $10.9 million for the third quarter of fiscal 2021.

The net income per diluted share was $1.63 per share for the third quarter of fiscal 2022, compared to $1.44 of net income per diluted share for the third quarter of fiscal 2021.

Weighted average diluted shares outstanding decreased by approximately 314,000 shares to approximately 7,246,000 shares for the third quarter of fiscal 2022 from approximately 7,560,000 shares for the third quarter of fiscal 2021.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since October 2, 2021, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units and the exercise of stock options since October 2, 2021.

Fiscal Year-to-Date Period Ended October 1, 2022, Compared to the Fiscal Year-to-Date Period Ended October 2, 2021

Revenues increased by $14.7 million, or 3.4%, to $445.9 million for the fiscal year-to-date period ended October 1, 2022 from $431.2 million for the fiscal year-to-date period ended October 2, 2021.

Utilization was 75% for the fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, while consultant headcount grew 3.3% from 882 at the end of the third quarter of fiscal 2021 to 911 at the end of the third quarter of fiscal 2022.

The primary driver of consultant headcount growth was the addition of 37 consultants resulting from the acquisition of Welch Consulting in the first quarter of fiscal 2022.

Overall, revenues outside of the U.S.

represented approximately 20% and 19% of net revenues for the fiscal year-to-date periods ended October 1, 2022 and October 2, 2021, respectively.

Revenues derived from fixed-price projects decreased to 18% of net revenues for the fiscal year-to-date period ended October 1, 2022 compared with 24% of net revenue for the year-to-date period ended October 2, 2021.

Costs of Services (exclusive of depreciation and amortization).

Costs of services (exclusive of depreciation and amortization) increased by $3.0 million, or 1.0%, to $309.4 million for the fiscal year-to-date period ended October 1, 2022 from $306.4 million for the fiscal year-to-date period ended October 2, 2021.

The increase in costs of services was due to an increase of $3.8 million in employee compensation and fringe benefit costs primarily as a result of a higher headcount and an increase in forgivable loan amortization of $1.3 million, partially offset by a decrease in client reimbursable expenses of $1.7 million and a decrease in the valuation expense of the contingent consideration of $0.4 million.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) decreased to 69.4% for the fiscal year-to-date period ended October 1, 2022 from 71.1% for the fiscal year-to-date period ended October 2, 2021.

As a percentage of revenues, costs of services (exclusive of depreciation and amortization) increased slightly to 70.6% for the first quarter of fiscal 2023 from 70.1% for the first quarter of fiscal 2022.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses increased by $10.3 million, or 14.3%, to $82.0 million for the fiscal year-to-date period ended October 1, 2022 from $71.7 million for the fiscal year-to-date period ended October 2, 2021.

Within this category of expenses, there was a $2.7 million increase in travel and entertainment, a $2.2 million increase in employee compensation and fringe benefit costs, a $1.6 million increase in commissions to our non-employee experts, a $1.2 million increase in software subscription and data services, a $1.1 million increase in miscellaneous and other costs, a $0.9 million increase in legal and other professional services fees, and a $0.9 million increase in rent expense.

Partially offsetting the increase in these expenses was a $0.3 million decrease in bad debt expense for the fiscal year-to-date period ended October 1, 2022 as compared to the fiscal year-to-date period ended October 2, 2021.

As a percentage of revenues, selling, general and administrative expenses increased to 18.4% for the fiscal year-to-date period ended October 1, 2022 from 16.6% for the fiscal year-to-date period ended October 2, 2021.

Commissions to our non-employee experts increased to 3.3% of revenues for the fiscal year-to-date period ended October 1, 2022 compared to 3.0% of revenues for the fiscal year-to-date period ended October 2, 2021.

Selling, general and administrative expenses increased by $2.6 million, or 9.9%, to $28.4 million for the first quarter of fiscal 2023 from $25.8 million for the first quarter of fiscal 2022.

Within this category of expenses, there was a $1.3 million increase in travel and entertainment, a $0.4 million increase in employee compensation and fringe benefit costs, a $0.6 million increase in miscellaneous and other costs, a $0.6 million increase in software subscription and data services, and a $0.5 million increase in rent expense.

Partially offsetting the increase in these expenses was a $0.9 million decrease in commissions to our non-employee experts for the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022.

As a percentage of revenues, selling, general and administrative expenses increased to 18.6% for the first quarter of fiscal 2023 from 17.4% for the first quarter of fiscal 2022.

Commissions to our non-employee experts decreased to 2.3% of revenues for the first quarter of fiscal 2023 compared to 3.0% of revenues the first quarter of fiscal 2022.

Provision for Income Taxes.

The income tax provision was $12.7 million and the ETR was 26.7% for the fiscal year-to-date period ended October 1, 2022, compared to $9.3 million and 22.0% for the fiscal year-to-date period ended October 2, 2021.

The ETR for the current fiscal year-to-date period was higher than the prior year-to-date period primarily due to a decrease in the tax benefit related to share-based compensation and foreign-derived intangible income, and higher nondeductible compensation paid to executive officers, partially offset by the impact of the U.K.

statutory rate increase in the second quarter of fiscal 2021 that did not recur in the current period.

The ETR for the current fiscal year-to-date period was approximately the same as the combined federal and state statutory tax rate and included offsetting items primarily related to the tax benefit for share-based compensation and nondeductible compensation paid to executive officers.

The ETR for the fiscal

year-to-date period ended October 2, 2021 was lower than the combined federal and state statutory tax rate primarily due to the tax benefit related to share-based compensation, partially offset by non-deductible compensation paid to executive officers and the impact of the U.K.

statutory tax rate change.

Net income increased by $1.9 million to $34.9 million for the fiscal year-to-date period ended October 1, 2022 from $33.0 million for the fiscal year-to-date period ended October 2, 2021.

The diluted net income per share was $4.72 for the fiscal year-to-date period ended October 1, 2022, compared to diluted net income per share of $4.31 for the fiscal year-to-date period ended October 2, 2021.

Weighted average diluted shares outstanding decreased by approximately 267,000 to approximately 7,376,000 shares for the fiscal year-to-date period ended October 1, 2022 from approximately 7,643,000 shares for the fiscal year-to-date period ended October 2, 2021.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since October 2, 2021, offset in part by the vesting of restricted stock and time-vesting restricted stock units, and the exercise of stock options since October 2, 2021.

The income tax provision was $3.7 million and the effective tax rate ("ETR") was 29.2% for the first quarter of fiscal 2023 compared to $4.1 million and 26.4% for the first quarter of fiscal 2022.

The ETR for the current fiscal quarter was higher than the prior year primarily due to a decrease in the tax benefit related to share-based compensation, an increase in nondeductible meals and entertainment expenses, and an increase in the U.K.

statutory rate from 19% to 25% effective April 1, 2023, with a blended rate of 23.5% for the fiscal year.

The increase in the tax impact of the meals expense is as result of the expiration of the relief provided by The Consolidated Appropriations Act, 2021, whereby the deduction for business meals from restaurants was 100% during 2021 and 2022 and reverted back to 50% in 2023.

The ETR for the first quarter of fiscal 2023 was higher than the combined federal and state statutory tax rate primarily due to nondeductible compensation paid to executive officers and nondeductible meals and entertainment expenses, partially offset by the tax benefit for share-based compensation.

The ETR for the first quarter of fiscal 2022 was approximately the same as the combined federal and state statutory tax rate and included offsetting items primarily related to the tax benefit for share-based compensation and nondeductible compensation paid to executive officers.

Net income decreased to $8.9 million for the first quarter of fiscal 2023 from $11.4 million for the first quarter of fiscal 2022.

The net income per diluted share was $1.23 per share for the first quarter of fiscal 2023, compared to $1.52 of net income per diluted share for the first quarter of fiscal 2022.

Weighted average diluted shares outstanding decreased by approximately 251,000 shares to approximately 7,252,000 shares for the first quarter of fiscal 2023 from approximately 7,503,000 shares for the first quarter of fiscal 2022.

The decrease in weighted average diluted shares outstanding was primarily due to the repurchase of shares of our common stock since April 2, 2022, offset in part by the vesting of shares of restricted stock and time-vesting restricted stock units and the exercise of stock options since April 2, 2022.

Liquidity and Capital Resources

Fiscal Year-to-Date Period Ended October 1, 2022

Fiscal Quarter Ended April 1, 2023

We believe that our current cash and cash equivalents, cash generated from operations, and amounts available under our revolving credit facility will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

During the fiscal year-to-date period ended October 1, 2022, cash and cash equivalents decreased by $42.0 million.

During the fiscal quarter ended April 1, 2023, cash and cash equivalents increased by $4.1 million.

We completed the period with cash and cash equivalents of $35.5 million.

The principal drivers of the reduction of cash and cash equivalents were payment of a significant portion of our fiscal 2021 performance bonuses in the first and second quarters of fiscal 2022, the consideration paid for the acquisition of Welch Consulting, the repurchase of shares, and the payment of dividends, offset by net borrowings of $45.0 million.

During the fiscal year-to-date period ended October 1, 2022, working capital (defined as current assets less current liabilities) decreased by $9.9 million to $26.4 million.

The decrease in working capital was principally due to a decrease in cash and cash equivalents of $42.0 million and an increase in borrowings of $45.0 million.

Partially offsetting these decreases to working capital was an increase in accounts receivable and unbilled services of $46.8 million, an increase in prepaid expenses and other current assets of $3.4 million, a decrease in accrued expenses of $23.7 million, and a decrease in deferred revenue and other liabilities of $5.5 million.

At October 1, 2022, $9.7 million of our cash and cash equivalents was held within the U.S.

The principal drivers of the increase of cash and cash equivalents was net borrowings of $100.0 million offset by payment of a significant portion of our fiscal 2022 performance bonuses in the first quarter of fiscal 2023, the repurchase of shares, and the payment of dividends.

During the fiscal quarter ended April 1, 2023, working capital (defined as current assets less current liabilities) decreased by $27.2 million to $4.5 million.

The decrease in working capital was principally due to an increase in borrowings of $100.0 million and a decrease in prepaid expenses and other current assets of $1.0 million.

Partially offsetting these decreases to working capital was an increase in cash and cash equivalents of $4.1 million, an increase in accounts receivable and unbilled services of $2.2 million, an increase in the current portion of our forgivable loans of $4.1 million, a decrease in accounts payable of $4.7 million, a decrease in the current portion of deferred compensation of $4.2 million, a decrease in accrued expenses of $51.5 million, and a decrease in deferred revenue and other liabilities of $3.1 million.

At April 1, 2023, $10.4 million of our cash and cash equivalents was held within the U.S.

We have sufficient sources of liquidity in the U.S., including cash flow from operations and availability on our revolving credit facility to fund U.S.

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Sources and Uses of Cash.

During the fiscal year-to-date period ended October 1, 2022, net cash used in operating activities was $35.0 million.

Net income was $34.9 million for the fiscal year-to-date period ended October 1, 2022.

Uses of cash for operating activities included a $12.1 million decrease in lease liabilities, a net increase of $48.9 million in accounts receivable and unbilled receivables, and a $1.9 million increase in prepaid expenses and other current assets primarily related to the timing of renewing annual subscriptions.

During the fiscal quarter ended April 1, 2023, net cash used in operating activities was $70.0 million.

Net income was $8.9 million for the fiscal quarter ended April 1, 2023.

Uses of cash for operating activities included a $4.4 million decrease in lease liabilities, a net increase of $1.3 million in accounts receivable and unbilled receivables, and a $0.9 million decrease in prepaid expenses and other current assets primarily related to the timing of renewing annual subscriptions.

Other uses of cash included a decrease in accounts payable, accrued expenses, and other liabilities of $73.2 million, primarily due to the payment of a significant portion of our fiscal 2022 performance bonuses and performance awards, and an increase in forgivable loans for the period of $10.0 million, which was primarily driven by $16.2 million of forgivable loan issuances, net of repayments, offset by $6.2 million of forgivable loan amortization.

Cash used in operations included incentive cash award expense of $1.9 million, non-cash depreciation and amortization expense of $2.9 million, right-of-use amortization of $3.6 million, share-based compensation expenses of $0.9 million, and other non-cash gains and benefits of $0.2 million.

During the fiscal year-to-date period ended October 1, 2022, net cash used in investing activities was $13.2 million, which included $10.2 million of net consideration paid for the acquisition of Welch Consulting and $3.0 million for capital expenditures, primarily related to purchases of office equipment.

During the fiscal year-to-date period ended October 1, 2022, net cash provided by financing activities was $9.3 million, primarily as a result of net borrowings under the revolving credit facility of $45.0 million and $0.8 million received upon the issuance of shares of common stock related to the exercise of stock options.

Offsetting these increases in cash provided by

financing activities were repurchases of common stock of $27.6 million, payment of cash dividends of $6.9 million, payment of $1.0 million for debt issuance costs, and tax withholding payments reimbursed by restricted shares on vesting of $1.0 million.

During the fiscal quarter ended April 1, 2023, net cash used in investing activities was $1.1 million, which included $0.6 million of net consideration paid for the acquisitions of Welch Consulting and bSG and $0.5 million for capital expenditures, primarily related to purchases of office equipment.

During the fiscal quarter ended April 1, 2023, net cash provided by financing activities was $74.8 million, primarily as a result of net borrowings under the revolving credit facility of $100.0 million.

Offsetting these increases in cash provided by financing activities were repurchases of common stock of $20.6 million, payment of cash dividends of $2.7 million, and tax withholding payments reimbursed by restricted shares on vesting of $1.9 million.

Lease Commitments

We are a lessee under certain operating leases for office space and equipment.

Certain of our operating leases have terms that impose asset retirement obligations due to office modifications or the periodic redecoration of the premises, which are included in other liabilities on our consolidated balance sheets and are recorded at a value based on their estimated discounted cash flows.

Certain of our operating leases have terms that impose asset retirement obligations due to office modifications or the periodic redecoration of the premises, which are included in other liabilities on our condensed consolidated balance sheets and are recorded at a value based on their estimated discounted cash flows.

We do not expect to incur asset retirement obligation or redecoration obligation costs over the next twelve months.

At October 1, 2022, the remainder of our asset retirement obligations and redecoration obligations are approximately $2.5 million and are expected to be paid between fiscal 2026 and fiscal 2031 when the underlying leases terminate or when the respective lease agreement requires redecoration.

At April 1, 2023, the remainder of our asset retirement obligations and redecoration obligations are approximately $2.7 million and are expected to be paid between fiscal 2026 and fiscal 2031 when the underlying leases terminate or when the respective lease agreement requires redecoration.

We expect to satisfy these lease and related obligations as they become due from cash generated from operations.

We were a party to an amended and restated credit agreement (the "Initial Credit Agreement") that provided us with a $175.0 million revolving credit facility that included a $15.0 million sublimit for the issuance of letters of credit.

The Initial Credit Agreement was scheduled to mature on October 24, 2022;

we were permitted to repay any borrowings at any time prior to the maturity date.

On August 19, 2022, we refinanced our revolving credit facility under the Initial Credit Agreement by entering into a Credit Agreement (the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and with Citizens Bank, N.A., as a letter of credit issuing bank.

The Credit Agreement provides us a $250.0 million revolving credit facility, which may be decreased at our option to $200.0 million during the period from July 16th in a year through January 15th in the next year.

Additionally, for the period from January 16th to July 15th of each calendar year, we may elect to not increase the revolving credit facility to $250.0 million.

CRA is party to a Credit Agreement, dated as of August 19, 2022 (the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and with Citizens Bank, N.A., as a letter of credit issuing bank.

The Credit Agreement provides CRA with a $250.0 million revolving credit facility, which may be decreased at CRA's option to $200.0 million during the period from July 16th in a year through January 15th in the next year.

Additionally, for the period from January 16th to July 15th of each calendar year, CRA may elect to not increase the revolving credit facility to $250.0 million.

The revolving credit facility includes a $25.0 million sublimit for the issuance of letters of credit.

Concurrent with our entry into the Credit Agreement, we terminated the Initial Credit Agreement and repaid in full all outstanding indebtedness under the Initial Credit Agreement of approximately $50.0 million.

Also, letters of credit in the aggregate amount of approximately $4.4 million that had been issued under the Initial Credit Agreement were deemed to be issued and outstanding under the new revolving credit facility.

In connection with the Credit Agreement, we incurred debt issuance costs from the lenders and third-parties of $1.0 million.

There was $100.0 million in borrowings outstanding under the revolving credit facility as of April 1, 2023 and no borrowings outstanding as of December 31, 2022.

As of April 1, 2023, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $5.7 million.

We may use the proceeds of the revolving credit loans under the Credit Agreement for general corporate purposes and may repay any borrowings under the revolving credit facility at any time, but any borrowings must be repaid no later than August 19, 2027.

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We are required to pay a fee on the amount available to be drawn under any letter of credit issued under the revolving credit facility at a rate per annum that varies between 1.25% and 2.00% depending on our consolidated net leverage ratio.

In addition, we are required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies between 0.175% and 0.250% depending on our consolidated net leverage ratio.

Under the Credit Agreement, we must comply with various financial and non-financial covenants.

The primary financial covenants consist of a maximum consolidated net leverage ratio and a minimum consolidated interest coverage ratio.

The primary non-financial covenants include, but are not limited to, restrictions on our ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations.

indebtedness outstanding under the revolving credit facility may become immediately due upon the occurrence of stated events of default, including our failure to pay principal, interest or fees, or upon the breach of any covenant.

As of October 1, 2022, we were in compliance with the covenants of the Credit Agreement.

There was $45.0 million in borrowings outstanding under the revolving credit facility as of October 1, 2022.

As of October 1, 2022, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $4.4 million.

addition, we are required to pay a fee on the unused portion of the revolving credit facility at a rate per annum that varies

between 0.175% and 0.250% depending on our consolidated net leverage ratio.

Under the Credit Agreement, CRA must comply with various financial and non-financial covenants.

The primary financial covenants consist of a maximum consolidated net leverage ratio of 3.0 to 1 and a minimum consolidated interest coverage ratio of 2.5 to 1.

The primary non-financial covenants include, but are not limited to, restrictions on CRA's ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations.

Any indebtedness outstanding under the revolving credit facility may become immediately due upon

the occurrence of stated events of default, including CRA's failure to pay principal, interest or fees, or upon the breach of any covenant.

As of April 1, 2023, CRA was in compliance with the covenants of the Credit Agreement.

Forgivable Loans

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The compensation committee of our Board of Directors is responsible for approving all cash and equity awards under the LTIP.

We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings available on our revolving credit facility.

We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings available under our revolving credit facility.

Business and Talent Acquisitions

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Our ability to secure short-term and long-term debt or equity financing in the future, including our ability to refinance our credit agreement, will depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing revolving credit facility, and the overall credit and equity market environments.

We completed a business acquisition during the first quarter of fiscal 2022, which is further described in Note 2, "Business Acquisition” in Part I, Item I, “Financial Statements” of this report.

We completed two business acquisitions during the first and fourth quarters of fiscal 2022, which is further described in Note 2, "Business Acquisition” in Part I, Item I, “Financial Statements” of this report.

Share Repurchases

In February 2022, our Board of Directors authorized an expansion of our existing share repurchase program, authorizing the purchase of an additional $20.0 million of our common stock.

We may repurchase shares under this program in open market

purchases (including through any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.

During the fiscal quarter and fiscal year-to-date period ended October 1, 2022, we repurchased and retired 51,524 shares and 319,534 shares, respectively, under our share repurchase program at an average price per share of $97.04 and $86.47, respectively.

During the fiscal quarter and fiscal year-to-date period ended October 2, 2021, we repurchased and retired 53,012 shares and 219,564 shares, respectively, under our share repurchase program at an average price per share of $94.32 and $66.72, respectively.

In addition, during the second quarter of fiscal 2021, we repurchased 337,837 shares at a purchase price of $74.00 under a modified "Dutch auction" self-tender offer, as further described in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K.

As of October 1, 2022, we had approximately $22.9 million available for future repurchases under our share repurchase program.

We plan to finance future repurchases with available cash, cash from future operations, and available funds from our revolving credit facility.

In March 2023, we announced that our Board of Directors authorized an expansion of our existing share repurchase program of an additional $20.0 million of our common stock.

We may repurchase shares under this program in open market purchases (including through any Rule 10b5-1 plan adopted by us) or in privately negotiated transactions in accordance with applicable insider trading and other securities laws and regulations.

During the fiscal quarter ended April 1, 2023, we repurchased and retired 180,881 shares under our share repurchase program at an average price per share of $113.76.

During the fiscal quarter ended April 2, 2022, we repurchased and retired 56,665 shares under our share repurchase program at an average price per share of $87.46.

As of April 1, 2023, we had approximately $22.3 million available for future repurchases under our share repurchase program.

We plan to finance future repurchases with available cash, cash from future operations, and borrowings available under our revolving credit facility.

We expect to continue to repurchase shares under our share repurchase program.

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We anticipate paying regular quarterly dividends each year.

These dividends are anticipated to be funded through cash flow from operations, available cash on hand, and/or available borrowings under our revolving credit facility.

These dividends are anticipated to be funded through cash flow from operations, available cash on hand, and/or borrowings available under our revolving credit facility.

Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration, timing and amounts of any such dividends remain subject to the discretion of our Board of Directors.

During the fiscal quarter and fiscal year-to-date period ended October 1, 2022, we paid dividends and dividend equivalents of $2.2 million and $6.9 million, respectively.

During the fiscal quarter and fiscal year-to-date period ended October 2, 2021, we paid dividends and dividend equivalents of $1.9 million and $5.9 million, respectively.

During the fiscal quarter ended April 1, 2023, we paid dividends and dividend equivalents of $2.7 million.

During the fiscal quarter ended April 2, 2022, we paid dividends and dividend equivalents of $2.4 million.

Impact of Inflation

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• potential acquisitions of businesses that would allow us to diversify or expand our service offerings;

• potential contingent obligations related to our acquisitions;

• contingent obligations related to our acquisitions;

• other known future contractual obligations.

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As such, our operating model provides flexibility with respect to the deployment of cash flow from operations.

Given this flexibility, we believe that our cash flows from operations, supplemented by cash on hand and borrowings from our revolving credit facility (as necessary), will provide adequate cash to fund our long-term cash needs from normal operations for at least the next twelve months.

Given this flexibility, we believe that our cash flows from operations, supplemented by cash on hand and borrowings under our revolving credit facility (as necessary), will provide adequate cash to fund our long-term cash needs from normal operations for at least the next twelve months.

Our conclusion that we will be able to fund our cash requirements by using existing capital resources and cash generated from operations does not take into account the impact of any future acquisition transactions or any unexpected significant changes in the number of employees or other expenditures that are currently not contemplated.

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Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our exposure to market risk during the three months ended April 1, 2023.

For information regarding our exposure to certain market risks, see Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk” of our 2022 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis