CRA INTERNATIONAL, INC. 10-Q

ITEM 1. Financial Statements CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data) Fiscal Quarter Ended March 30, 2024 April 1, 2023 Revenues $ 171,789 $ 152,845 Costs of services (exclusive of depreciation and amortization) 118,880 107,837 Selling, general and administrative expenses 30,499 28,372 Depreciation and amortization 2,792 2,943 Income from operations 19,618 13,693 Interest expense, net ( 464 ) ( 571 ) Foreign currency losses, net ( 142 ) ( 528 ) Income before provision for income taxes 19,012 12,594 Provision for income taxes 5,321 3,676 Net income $ 13,691 $ 8,918 Net income per share: Basic $ 1.97 $ 1.25 Diluted $ 1.95 $ 1.23 Weighted average number of shares outstanding: Basic 6,926 7,119 Diluted 7,011 7,252 See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) (in thousands) Fiscal Quarter Ended March 30, 2024 April 1, 2023 Net income $ 13,691 $ 8,918 Other comprehensive income (loss) Foreign currency translation adjustments, net of tax ( 1,105 ) 1,052 Comprehensive income $ 12,586 $ 9,970 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands, except share data) March 30, 2024 December 30, 2023 ASSETS Current assets: Cash and cash equivalents $ 37,122 $ 45,586 Accounts receivable, net of allowances of $ 5,201 and $ 4,335 , respectively 139,062 142,729 Unbilled services, net of allowances of $ 896 and $ 1,629 , respectively 70,251 56,827 Prepaid expenses and other current assets 14,286 11,575 Forgivable loans 14,718 8,759 Total current assets 275,439 265,476 Property and equipment, net 36,833 38,176 Goodwill 93,853 93,989 Intangible assets, net 6,851 7,196 Right-of-use assets 84,706 86,887 Deferred income taxes 13,998 13,885 Forgivable loans, net of current portion 38,675 45,182 Other assets 2,187 2,420 Total assets $ 552,542 $ 553,211 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 33,350 $ 28,701 Accrued expenses 106,008 171,040 Deferred revenue and other liabilities 9,080 12,289 Current portion of lease liabilities 16,743 16,475 Current portion of deferred compensation 1,590 7,582 Revolving line of credit 70,000 — Total current liabilities 236,771 236,087 Non-current liabilities: Deferred compensation and other non-current liabilities 13,967 11,681 Non-current portion of lease liabilities 88,961 92,280 Deferred income taxes 1,053 1,062 Total non-current liabilities 103,981 105,023 Commitments and contingencies (Note 10) Shareholders’ equity: Preferred stock, no par value; 1,000,000 shares authorized; none issued and outstanding — — Common stock, no par value; 25,000,000 shares authorized; 6,889,298 and 6,934,265 shares issued and outstanding, respectively — — Retained earnings 225,077 224,283 Accumulated other comprehensive loss ( 13,287 ) ( 12,182 ) Total shareholders’ equity 211,790 212,101 Total liabilities and shareholders’ equity $ 552,542 $ 553,211 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Fiscal Quarter Ended March 30, 2024 April 1, 2023 OPERATING ACTIVITIES: Net income $ 13,691 $ 8,918 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 2,792 2,943 Right-of-use asset amortization 3,565 3,570 Deferred income taxes ( 157 ) ( 236 ) Share-based compensation expense 1,039 940 Bad debt expense (recovery) 663 — Unrealized foreign currency remeasurement (gains) losses, net ( 208 ) ( 20 ) Changes in operating assets and liabilities: Accounts receivable 2,529 17,659 Unbilled services ( 13,623 ) ( 19,012 ) Prepaid expenses and other current assets, and other assets ( 2,552 ) 875 Forgivable loans 523 ( 9,982 ) Incentive cash awards payable 2,383 1,929 Accounts payable, accrued expenses, and other liabilities ( 69,302 ) ( 73,233 ) Lease liabilities ( 4,423 ) ( 4,402 ) Net cash used in operating activities ( 63,080 ) ( 70,051 ) INVESTING ACTIVITIES: Purchases of property and equipment ( 730 ) ( 562 ) Consideration paid for acquisition, net — ( 570 ) Net cash used in investing activities ( 730 ) ( 1,132 ) FINANCING ACTIVITIES: Borrowings under revolving line of credit 70,000 105,000 Repayments under revolving line of credit — ( 5,000 ) Tax withholding payments reimbursed by shares ( 1,631 ) ( 1,873 ) Cash dividends paid ( 3,075 ) ( 2,702 ) Repurchase of common stock ( 9,242 ) ( 20,577 ) Net cash provided by financing activities 56,052 74,848 Effect of foreign exchange rates on cash and cash equivalents ( 706 ) 407 Net increase (decrease) in cash and cash equivalents ( 8,464 ) 4,072 Cash and cash equivalents at beginning of period 45,586 31,447 Cash and cash equivalents at end of period $ 37,122 $ 35,519 Noncash investing and financing activities: Increase in accounts payable and accrued expenses for property and equipment $ 454 $ 23 Excise tax on share repurchases $ ( 65 ) $ ( 173 ) Right-of-use assets obtained in exchange for lease obligations $ 1,955 $ — Supplemental cash flow information: Cash paid for taxes $ 1,534 $ 1,081 Cash paid for interest $ 91 $ 124 Cash paid for amounts included in operating lease liabilities $ 5,569 $ 5,474 See accompanying notes to the condensed consolidated financial statements. 6 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE FISCAL QUARTER ENDED MARCH 30, 2024 (unaudited) (in thousands, except share data) Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Issued Amount BALANCE AT DECEMBER 30, 2023 6,934,265 $ — $ 224,283 $ ( 12,182 ) $ 212,101 Net income — — 13,691 — 13,691 Foreign currency translation adjustment — — — ( 1,105 ) ( 1,105 ) Issuance of common stock — — — — — Exercise of stock options — — — — — Share-based compensation expense — 1,039 — — 1,039 Restricted shares vesting 33,441 — — — — Redemption of vested employee restricted shares for tax withholding ( 12,526 ) ( 1,631 ) — — ( 1,631 ) Shares repurchased ( 65,882 ) 592 ( 9,834 ) — ( 9,242 ) Accrued excise tax on shares repurchased — — ( 65 ) — ( 65 ) Accrued dividends on unvested shares — — 77 — 77 Cash dividends paid ($ 0.42 per share) — — ( 3,075 ) — ( 3,075 ) BALANCE AT MARCH 30, 2024 6,889,298 $ — $ 225,077 $ ( 13,287 ) $ 211,790 See accompanying notes to the condensed consolidated financial statements. 7 Table of Contents CRA INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE FISCAL ENDED April 1, 2023 (unaudited) (in thousands, except share data) Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Issued Amount BALANCE AT DECEMBER 31, 2022 7,149,884 $ 1,743 $ 224,392 $ ( 14,981 ) $ 211,154 Net income — — 8,918 — 8,918 Foreign currency translation adjustment — — — 1,052 1,052 Share-based compensation expense — 940 — — 940 Restricted shares vesting 45,544 — — — — Redemption of vested employee restricted shares for tax withholding ( 16,614 ) ( 1,873 ) — — ( 1,873 ) Shares repurchased ( 180,881 ) ( 810 ) ( 19,767 ) — ( 20,577 ) Accrued excise tax on shares repurchased — — ( 173 ) — ( 173 ) Accrued dividends on unvested shares — — 45 — 45 Cash dividends paid ($ 0.36 per share) — — ( 2,702 ) — ( 2,702 ) BALANCE AT APRIL 1, 2023 6,997,933 $ — $ 210,713 $ ( 13,929 ) $ 196,784 See accompanying notes to the condensed consolidated financial statements. 8 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Summary of Significant Accounting Policies Description of Business CRA International, Inc. (“CRA” or the “Company”) is a worldwide leading consulting services firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers services in two broad areas: litigation, regulatory, and financial consulting and management consulting. CRA operates in one business segment. CRA operates its business under its registered trade name, Charles River Associates. Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of CRA International, Inc. and its wholly-owned subsidiaries (collectively the "Company") which require consolidation after the elimination of intercompany accounts and transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for annual financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported results of operations, financial position, or cash flows. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair presentation of CRA’s results of operations, financial position, cash flows, and shareholders’ equity for the interim periods presented in conformity with U.S. GAAP. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 30, 2023 included in CRA’s Annual Report on Form 10-K filed with the SEC on February 29, 2024 (the “2023 Form 10-K”). Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and judgments that affect the reported amounts of assets and liabilities, as well as the related disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of consolidated revenues and expenses during the reporting period. Estimates in these condensed consolidated financial statements include, but are not limited to, allowances for accounts receivable and unbilled services, revenue recognition on fixed-price contracts, variable consideration to be included in the transaction price of revenue contracts, the useful life of long-lived assets, measurement of operating lease right-of-use assets and liabilities, share-based compensation, valuation of contingent consideration liabilities, valuation of acquired intangible assets, goodwill, accrued and deferred income taxes, valuation allowances on deferred tax assets, accrued incentive compensation, and certain other accrued expenses. These items are monitored and analyzed by CRA for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. CRA bases its estimates on historical experience and various other assumptions that CRA believes to be reasonable under the circumstances. Actual results may differ from those estimates if CRA’s assumptions based on past experience or other assumptions do not turn out to be substantially accurate . Recent Accounting Standards Not Yet Adopted Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07) . The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 also requires that a public entity that has a single reportable segment provide all disclosures required by these amendments and all existing segment disclosures in Topic 280. 9 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) ASU 2023-07 is effective for CRA for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. CRA plans to adopt the amendments during the fourth fiscal quarter of 2024. CRA is in the process of evaluating the impact of adopting ASU 2023-07. Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09) . The ASU requires disclosure of specific categories in the rate reconciliation, provides additional information for reconciling items that meet a quantitative threshold, and discloses the amount of income taxes paid disaggregated by federal, state, foreign taxes, and individual jurisdiction. ASU 2023-09 also requires income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. ASU 2023-09 is effective for CRA for annual periods beginning after December 15, 2024. CRA plans to adopt the amendments during the annual reporting fiscal year of 2025. CRA is in the process of evaluating the impact of adopting ASU 2023-09. 2. Revenues and Allowances The contracts CRA enters into and operates under specify whether the projects are billed on a time-and-materials or a fixed-price basis. Time-and-materials contracts are typically used for litigation, regulatory, and financial consulting projects while fixed-price contracts are principally used for management consulting projects. In general, project costs are classified in costs of services and are based on the direct salary of CRA’s employee consultants on the engagement, plus all direct expenses incurred to complete the project, including any amounts billed to CRA by its non-employee experts. Disaggregation of Revenue The following tables disaggregate CRA’s revenue by type of contract and geographic location (in thousands): Fiscal Quarter Ended Type of Contract March 30, 2024 April 1, 2023 Consulting services revenues: Fixed-price $ 30,082 $ 26,834 Time-and-materials 141,707 126,011 Total $ 171,789 $ 152,845 Revenues have been attributed to locations based on the location of the legal entity generating the revenues. Fiscal Quarter Ended Geographic Breakdown March 30, 2024 April 1, 2023 Consulting services revenues: United States $ 142,204 $ 117,872 United Kingdom 21,154 25,649 Other 8,431 9,324 Total $ 171,789 $ 152,845 10 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Reserves for Variable Consideration and Credit Risk Revenues from CRA's consulting services are recorded at the net transaction price, which includes estimates of variable consideration for which reserves are established. Variable consideration reserves are based on specific price concessions and those expected to be extended to CRA customers estimated by CRA's historical realization rates. Reserves for variable consideration are recorded as a component of the allowances for accounts receivable and unbilled services on the condensed consolidated balance sheets. Adjustments to the reserves for variable consideration are included in revenues on the condensed consolidated statements of operations. The following table presents CRA's bad debt expense, net of recoveries of previously written off allowances (in thousands): Fiscal Quarter Ended March 30, 2024 April 1, 2023 Bad debt expense (recovery), net $ 663 $ — Reimbursable Expenses Revenues also include reimbursements for costs incurred by CRA in fulfilling its performance obligations, including travel and other out-of-pocket expenses, fees for outside consultants, and other reimbursable expenses. CRA recovers substantially all of these costs. The following expenses are subject to reimbursement (in thousands): Fiscal Quarter Ended March 30, 2024 April 1, 2023 Reimbursable expenses $ 17,061 $ 13,981 Contract Balances from Contracts with Customers CRA defines contract assets as assets for which it has recorded revenue because it determines that it is probable that it will earn a performance-based or contingent fee, but is not yet entitled to receive a fee because certain events, such as completion of the measurement period or client approval, must occur. The contract assets balance was immaterial as of March 30, 2024 and December 30, 2023. When consideration is received, or such consideration is unconditionally due from a customer prior to transferring consulting services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after performance obligations have been satisfied and all revenue recognition criteria have been met. The following table presents the closing balances of CRA's contract liabilities (in thousands): March 30, 2024 December 30, 2023 Contract liabilities $ 2,683 $ 6,037 11 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) CRA recognized the following revenue that was included in the contract liabilities balance as of the opening of the respective period or for performance obligations satisfied in previous periods (in thousands): Fiscal Quarter Ended March 30, 2024 April 1, 2023 Amounts included in contract liabilities at the beginning of the period $ 4,703 $ 5,139 Performance obligations satisfied in previous periods $ 2,847 $ 2,638 3. Forgivable Loans In order to attract and retain highly skilled professionals, CRA may issue forgivable loans to employees and non-employee experts, certain of which may be denominated in local currencies. A portion of these loans is collateralized. The forgivable loans have terms that are generally between two and six years with interest rates currently ranging up to 6.00 %. The principal amount of forgivable loans and accrued interest is forgiven by CRA over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with CRA and complies with certain contractual requirements. The forgiveness of the principal amount of the loans is recorded as compensation over the service period, which is consistent with the term of the loans. The following table presents forgivable loan activity for the respective periods (in thousands): March 30, 2024 December 30, 2023 Beginning balance $ 53,941 $ 56,456 Advances 5,250 23,342 Repayments — ( 1,816 ) Amortization ( 5,772 ) ( 24,198 ) Effects of foreign currency translation ( 26 ) 157 Ending balance $ 53,393 $ 53,941 Current portion of forgivable loans $ 14,718 $ 8,759 Non-current portion of forgivable loans $ 38,675 $ 45,182 4. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the fiscal quarter ended March 30, 2024 are summarized as follows (in thousands): Goodwill, at December 30, 2023 $ 165,882 Accumulated goodwill impairment ( 71,893 ) Goodwill, net at December 30, 2023 93,989 Additions due to acquisitions — Foreign currency translation adjustment ( 136 ) Goodwill, net at March 30, 2024 $ 93,853 Goodwill, net at March 30, 2024, is comprised of goodwill of $ 165.7 million and accumulated impairment of $ 71.9 million. There were no impairment losses related to goodwill during the fiscal quarter ended March 30, 2024 or during the fiscal year ended December 30, 2023. 12 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and amortized using the straight-line method over their expected useful lives. The components of acquired identifiable intangible assets are as follows (in thousands): March 30, 2024 December 30, 2023 Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships 10 $ 13,800 $ ( 6,949 ) $ 6,851 $ 13,800 $ ( 6,604 ) $ 7,196 There were no impairment losses related to intangible assets during the fiscal quarter ended March 30, 2024 or during the fiscal year ended December 30, 2023. Amortization expense related to intangible assets was $ 0.3 million and $ 0.4 million for the fiscal quarters ended March 30, 2024 and April 1, 2023, respectively. 5. Accrued Expenses Accrued expenses consist of the following (in thousands): March 30, 2024 December 30, 2023 Compensation and related expenses $ 81,503 $ 143,647 Performance awards 8,105 16,556 Direct project accruals 2,158 1,704 Other 14,242 9,133 Total accrued expenses $ 106,008 $ 171,040 As of March 30, 2024 and December 30, 2023, approximately $ 56.6 million and $ 121.2 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.” 6. Income Taxes For the fiscal quarters ended March 30, 2024 and April 1, 2023, CRA’s effective income tax rate (“ETR”) was 28.0 % and 29.2 %, respectively. The ETR for the first quarter of fiscal 2024 was lower than the first quarter of fiscal 2023 primarily due to changes in state statutory tax rates in the current year, having had a valuation allowance in the prior year that has now been reversed, as well as the impact of a higher profit in the current period. 7. Net Income Per Share CRA calculates basic earnings per share using the two-class method. CRA calculates diluted earnings per share using the more dilutive of either the two-class method or treasury stock method. The two-class method was more dilutive for the fiscal quarters ended March 30, 2024 and April 1, 2023. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all the net earnings for the period had been distributed. CRA's participating securities consist of unvested share-based payment awards that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common shareholders. Net earnings allocable to these participating securities were not material for the fiscal quarters ended March 30, 2024 and April 1, 2023. 13 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data): Fiscal Quarter Ended March 30, 2024 April 1, 2023 Numerator: Net income — basic $ 13,691 $ 8,918 Less: net income attributable to participating shares 46 34 Net income — diluted $ 13,645 $ 8,884 Denominator: Weighted average shares outstanding — basic 6,926 7,119 Effect of dilutive stock options and restricted stock units 85 133 Weighted average shares outstanding — diluted 7,011 7,252 Net income per share: Basic $ 1.97 $ 1.25 Diluted $ 1.95 $ 1.23 For the fiscal quarter ended March 30, 2024, there were no anti-dilutive share-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average outstanding shares. For the fiscal quarter ended April 1, 2023, the anti-dilutive share-based awards that were excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding amounted to 196 shares. 8. Fair Value of Financial Instruments The following tables show CRA's financial instruments recorded in the condensed consolidated financial statements which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands): March 30, 2024 Level 1 Level 2 Level 3 Assets: Money market mutual funds $ — $ — $ — Total Assets $ — $ — $ — Liabilities: Contingent consideration liability $ — $ — $ 190 Total Liabilities $ — $ — $ 190 14 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) December 30, 2023 Level 1 Level 2 Level 3 Assets: Money market mutual funds $ — $ — $ — Total Assets $ — $ — $ — Liabilities: Contingent consideration liability $ — $ — $ 190 Total Liabilities $ — $ — $ 190 The contingent consideration liability pertains to estimated future contingent consideration payments related to the acquisition of bioStrategies Group, Inc. during fiscal 2022. The following table summarizes the changes in the contingent consideration liability (in thousands): Fiscal Quarter Ended Fiscal Year Ended March 30, 2024 December 30, 2023 Beginning balance $ 190 $ 1,056 Remeasurement of acquisition-related contingent consideration — ( 934 ) Accretion — 68 Ending balance $ 190 $ 190 9. Credit Agreement 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 16 in a year through January 15 in the next year. Additionally, for the period from January 16 to July 15 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. 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 March 30, 2024, CRA was in compliance with the covenants of the Credit Agreement. There were $ 70.0 million in borrowings outstanding under the revolving credit facility as of March 30, 2024 and no borrowings outstanding as of December 30, 2023. As of March 30, 2024, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $ 4.5 million. 10. Commitments and Contingencies As described in the previous note, CRA is party to standby letters of credit with its lenders in support of minimum future lease payments under certain operating leases for office space. 15 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) CRA is subject to legal actions arising in the ordinary course of business. In management’s opinion, based on current knowledge, CRA believes it has adequate legal defenses or insurance coverage, or both, with respect to the eventuality of such actions. CRA does not believe any settlement or judgment relating to any pending legal action would materially affect its financial position or results of operations . However, the outcome of such legal actions is inherently unpredictable and subject to inherent uncertainties. 11. Subsequent Events On May 2, 2024, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.42 per common share, payable on June 14, 2024 to shareholders of record as of May 28, 2024. 16 Table of Contents