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 Fiscal Year-to-Date Period Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Revenues $ 171,442 $ 161,965 $ 343,230 $ 314,810 Costs of services (exclusive of depreciation and amortization) 125,327 113,333 244,206 221,170 Selling, general and administrative expenses 32,016 29,846 62,514 58,218 Depreciation and amortization 2,811 2,872 5,603 5,815 Income from operations 11,288 15,914 30,907 29,607 Interest expense, net ( 1,483 ) ( 1,616 ) ( 1,948 ) ( 2,187 ) Foreign currency losses, net ( 191 ) ( 686 ) ( 333 ) ( 1,214 ) Income before provision for income taxes 9,614 13,612 28,626 26,206 Provision for income taxes 3,076 4,104 8,397 7,780 Net income $ 6,538 $ 9,508 $ 20,229 $ 18,426 Net income per share: Basic $ 0.96 $ 1.36 $ 2.93 $ 2.61 Diluted $ 0.94 $ 1.34 $ 2.90 $ 2.56 Weighted average number of shares outstanding: Basic 6,834 6,983 6,880 7,051 Diluted 6,911 7,080 6,961 7,166 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 Fiscal Year-to-Date Period Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Net income $ 6,538 $ 9,508 $ 20,229 $ 18,426 Other comprehensive income (loss) Foreign currency translation adjustments, net of tax ( 315 ) 1,074 ( 1,420 ) 2,126 Comprehensive income $ 6,223 $ 10,582 $ 18,809 $ 20,552 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) June 29, 2024 December 30, 2023 ASSETS Current assets: Cash and cash equivalents $ 24,649 $ 45,586 Accounts receivable, net of allowances of $ 5,590 and $ 4,335 , respectively 140,141 142,729 Unbilled services, net of allowances of $ 879 and $ 1,629 , respectively 76,429 56,827 Prepaid expenses and other current assets 15,748 11,575 Forgivable loans 14,213 8,759 Total current assets 271,180 265,476 Property and equipment, net 36,817 38,176 Goodwill 93,855 93,989 Intangible assets, net 7,981 7,196 Right-of-use assets 81,338 86,887 Deferred income taxes 13,842 13,885 Forgivable loans, net of current portion 39,009 45,182 Other assets 1,990 2,420 Total assets $ 546,012 $ 553,211 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,997 $ 28,701 Accrued expenses 113,252 171,040 Deferred revenue and other liabilities 8,480 12,289 Current portion of lease liabilities 16,966 16,475 Current portion of deferred compensation 3,976 7,582 Revolving line of credit 87,000 — Total current liabilities 252,671 236,087 Non-current liabilities: Deferred compensation and other non-current liabilities 16,046 11,681 Non-current portion of lease liabilities 84,492 92,280 Deferred income taxes 1,054 1,062 Total non-current liabilities 101,592 105,023 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; 6,752,604 and 6,934,265 shares issued and outstanding, respectively — — Retained earnings 205,351 224,283 Accumulated other comprehensive loss ( 13,602 ) ( 12,182 ) Total shareholders’ equity 191,749 212,101 Total liabilities and shareholders’ equity $ 546,012 $ 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 Year-to-Date Period Ended June 29, 2024 July 1, 2023 OPERATING ACTIVITIES: Net income $ 20,229 $ 18,426 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 5,603 5,815 Right-of-use asset amortization 7,462 7,193 Deferred income taxes ( 102 ) ( 236 ) Share-based compensation expense 2,396 2,098 Bad debt expense (recovery) 681 392 Unrealized foreign currency remeasurement (gains) losses, net ( 271 ) ( 62 ) Changes in operating assets and liabilities: Accounts receivable 1,341 4,676 Unbilled services ( 19,817 ) ( 21,091 ) Prepaid expenses and other current assets, and other assets ( 3,821 ) ( 3,247 ) Forgivable loans ( 6,083 ) ( 4,374 ) Incentive cash awards payable 4,796 4,029 Accounts payable, accrued expenses, and other liabilities ( 64,488 ) ( 69,747 ) Lease liabilities ( 9,199 ) ( 8,851 ) Net cash used in operating activities ( 61,273 ) ( 64,979 ) INVESTING ACTIVITIES: Purchases of property and equipment ( 3,046 ) ( 1,282 ) Consideration paid for acquisition ( 1,500 ) ( 570 ) Net cash used in investing activities ( 4,546 ) ( 1,852 ) FINANCING ACTIVITIES: Borrowings under revolving line of credit 93,000 105,000 Repayments under revolving line of credit ( 6,000 ) ( 25,000 ) Tax withholding payments reimbursed by shares ( 1,977 ) ( 2,009 ) Cash dividends paid ( 5,976 ) ( 5,230 ) Repurchase of common stock ( 33,348 ) ( 23,577 ) Net cash provided by financing activities 45,699 49,184 Effect of foreign exchange rates on cash and cash equivalents ( 817 ) 471 Net decrease in cash and cash equivalents ( 20,937 ) ( 17,176 ) Cash and cash equivalents at beginning of period 45,586 31,447 Cash and cash equivalents at end of period $ 24,649 $ 14,271 Noncash investing and financing activities: Increase in accounts payable and accrued expenses for property and equipment $ 553 $ 376 Excise tax on share repurchases $ ( 300 ) $ ( 200 ) Right-of-use assets obtained in exchange for lease obligations $ 2,329 $ 190 Supplemental cash flow information: Cash paid for taxes $ 12,681 $ 6,218 Cash paid for interest $ 1,533 $ 2,178 Cash paid for amounts included in operating lease liabilities $ 11,163 $ 11,077 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 YEAR-TO-DATE PERIOD ENDED JUNE 29, 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 ) 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 Net income — — 6,538 — 6,538 Foreign currency translation adjustment — — — ( 315 ) ( 315 ) Share-based compensation expense — 1,357 — — 1,357 Restricted shares vesting 6,143 — — — — Redemption of vested employee restricted shares for tax withholding ( 2,340 ) ( 346 ) — — ( 346 ) Shares repurchased ( 140,497 ) ( 1,011 ) ( 23,095 ) — ( 24,106 ) Accrued excise tax on shares repurchased — — ( 235 ) — ( 235 ) Accrued dividends on unvested shares — — ( 33 ) — ( 33 ) Cash dividends paid ($ 0.42 per share) — — ( 2,901 ) — ( 2,901 ) BALANCE AT JUNE 29, 2024 6,752,604 $ — $ 205,351 $ ( 13,602 ) $ 191,749 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 YEAR-TO-DATE PERIOD ENDED July 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 Net income — — 9,508 — 9,508 Foreign currency translation adjustment — — — 1,074 1,074 Share-based compensation expense — 1,158 — — 1,158 Restricted shares vesting 3,630 — — — — Redemption of vested employee restricted shares for tax withholding ( 1,237 ) ( 136 ) — — ( 136 ) Shares repurchased ( 31,090 ) ( 554 ) ( 2,446 ) — ( 3,000 ) Accrued excise tax on shares repurchased — — ( 27 ) — ( 27 ) Accrued dividends on unvested shares — — ( 47 ) — ( 47 ) Cash dividends paid ($ 0.36 per share) — — ( 2,528 ) — ( 2,528 ) BALANCE AT JULY 1, 2023 6,969,236 $ 468 $ 215,173 $ ( 12,855 ) $ 202,786 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. 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, "CRA" or "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”). Note 1 to the Consolidated Financial Statements included in Part II, Item 8, on the 2023 Form 10-K describes the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. Recent Accounting Standards Not Yet Adopted Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the Financial Accounting Standards Board ("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. 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 amendment during the fourth fiscal quarter of 2024. CRA expects the adoption of this ASU will impact its disclosures, but will not have a material effect on its consolidated financial statements. Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued 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 9 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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 amendment during the annual reporting for fiscal year 2025. CRA has begun to assess the impact of the amendment and has modeled out the changes to its income tax disclosures. As the amendment relates solely to disclosures, the adoption is not expected to have an effect on CRA's financial results. 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 (exclusive of depreciation and amortization) 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 Fiscal Year-to-Date Period Ended Type of Contract June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Consulting services revenues: Fixed-price $ 29,292 $ 27,896 $ 59,373 $ 54,729 Time-and-materials 142,150 134,069 283,857 260,081 Total $ 171,442 $ 161,965 $ 343,230 $ 314,810 Revenues have been attributed to locations based on the location of the legal entity generating the revenues. Fiscal Quarter Ended Fiscal Year-to-Date Period Ended Geographic Breakdown June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Consulting services revenues: United States $ 138,601 $ 126,894 $ 280,805 $ 244,766 United Kingdom 22,161 26,396 43,315 52,045 Other 10,680 8,675 19,110 17,999 Total $ 171,442 $ 161,965 $ 343,230 $ 314,810 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. 10 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table presents CRA's bad debt expense, net of recoveries of previously written off allowances (in thousands): Fiscal Quarter Ended Fiscal Year-to-Date Period Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Bad debt expense (recovery), net $ 18 $ 392 $ 681 $ 392 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 Fiscal Year-to-Date Period Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Reimbursable expenses $ 16,361 $ 17,252 $ 33,423 $ 31,233 Contract Balances from Contracts with Customers The timing of revenue recognition, billings, and cash collections results in accounts receivables, unbilled services, and contract liabilities on the consolidated balance sheets. Revenues recognized for services performed, but not yet billed to clients, are recorded as unbilled services. The following table presents the open and closing balances of CRA's accounts receivables, net and unbilled services, net (in thousands): June 29, 2024 December 30, 2023 December 31, 2022 Accounts receivable, net $ 140,141 $ 142,729 $ 143,644 Unbilled services, net $ 76,429 $ 56,827 $ 51,343 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 June 29, 2024, December 30, 2023, and December 31, 2022. 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): June 29, 2024 December 30, 2023 December 31, 2022 Contract liabilities $ 2,153 $ 6,037 $ 6,977 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 Fiscal Year-to-Date Period Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Amounts included in contract liabilities at the beginning of the period $ 2,296 $ 2,832 $ 5,612 $ 6,194 Performance obligations satisfied in previous periods $ 3,394 $ 3,298 $ 3,515 $ 2,744 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 5.00 %. 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): June 29, 2024 December 30, 2023 Beginning balance $ 53,941 $ 56,456 Advances 24,130 23,342 Repayments ( 288 ) ( 1,816 ) Reclassifications from accrued expenses or to other assets (1) ( 6,743 ) — Amortization (2) ( 17,757 ) ( 24,198 ) Effects of foreign currency translation ( 61 ) 157 Ending balance $ 53,222 $ 53,941 Current portion of forgivable loans $ 14,213 $ 8,759 Non-current portion of forgivable loans $ 39,009 $ 45,182 _______________________________ (1) Relates to the reclassification of performance awards previously recorded as accrued expenses or forgivable loans that have been reclassified to other receivables. (2) During the quarter ended June 29, 2024, approximately $ 5.7 million of amortization was accelerated due to involuntary terminations. 4. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the fiscal year-to-date period ended June 29, 2024 are summarized as follows (in thousands): 12 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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 ( 134 ) Goodwill, net at June 29, 2024 $ 93,855 Goodwill, net at June 29, 2024 of $ 93.9 million, 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-year-to-date period ended June 29, 2024 or during the fiscal year ended December 30, 2023. 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): June 29, 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 $ 15,300 $ ( 7,319 ) $ 7,981 $ 13,800 $ ( 6,604 ) $ 7,196 There were no impairment losses related to intangible assets during the fiscal year-to-date period ended June 29, 2024 or during the fiscal year ended December 30, 2023. As a result of an asset acquisition in CRA's Intellectual Property Practice, CRA recognized $ 1.5 million of intangible assets related to customer relationships during the fiscal quarter ended June 29, 2024. Amortization expense related to intangible assets was $ 0.4 million and $ 0.7 million for the fiscal quarter and fiscal year-to-date period ended June 29, 2024, respectively, $ 0.3 million and $ 0.7 million for the fiscal quarter and fiscal year-to-date period ended July 1, 2023, respectively. 5. Accrued Expenses Accrued expenses consist of the following (in thousands): June 29, 2024 December 30, 2023 Compensation and related expenses $ 99,285 $ 143,647 Performance awards 1,671 16,556 Direct project accruals 3,194 1,704 Other 9,102 9,133 Total accrued expenses $ 113,252 $ 171,040 As of June 29, 2024 and December 30, 2023, approximately $ 75.6 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 June 29, 2024 and July 1, 2023, CRA’s effective income tax rate (“ETR”) was 32.0 % and 30.1 %, respectively. The ETR for the second quarter of fiscal 2024 was higher than the second quarter of fiscal 2023 primarily due to increases in estimated state apportionment and nondeductible executive compensation and a decrease in the U.S. benefit 13 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) associated with the foreign-derived intangible income deduction, partially offset by having had a valuation allowance in the prior year that has now reversed. For the fiscal year-to-date periods ended June 29, 2024 and July 1, 2023, CRA's ETR was 29.3 % and 29.7 %. respectively. The ETR for the current fiscal year-to-date period was lower than the prior year-to-date period primarily due to having had a valuation allowance in the prior year that has now reversed. 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 and fiscal year-to-date periods ended June 29, 2024 and July 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 and fiscal year-to-date periods ended June 29, 2024 and July 1, 2023. The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data): Fiscal Quarter Ended Fiscal Year-to-Date Period Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Numerator: Net income — basic $ 6,538 $ 9,508 $ 20,229 $ 18,426 Less: net income attributable to participating shares 22 34 68 69 Net income — diluted $ 6,516 $ 9,474 $ 20,161 $ 18,357 Denominator: Weighted average shares outstanding — basic 6,834 6,983 $ 6,880 $ 7,051 Effect of dilutive stock options and restricted stock units 77 97 81 115 Weighted average shares outstanding — diluted 6,911 7,080 6,961 7,166 Net income per share: Basic $ 0.96 $ 1.36 $ 2.93 $ 2.61 Diluted $ 0.94 $ 1.34 $ 2.90 $ 2.56 For the fiscal quarter and fiscal year-to-date period ended June 29, 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 and fiscal-year-to-date ended July 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 17,120 and 4,329 shares, respectively. 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): 14 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) June 29, 2024 Level 1 Level 2 Level 3 Assets: Money market mutual funds $ — $ — $ — Total Assets $ — $ — $ — Liabilities: Contingent consideration liability $ — $ — $ 190 Total Liabilities $ — $ — $ 190 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 Year-to-Date Period Ended Fiscal Year Ended June 29, 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 (as amended, 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 15 Table of Contents CRA INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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 June 29, 2024, CRA was in compliance with the covenants of the Credit Agreement. There were $ 87.0 million in borrowings outstanding under the revolving credit facility as of June 29, 2024 and no borrowings outstanding as of December 30, 2023. As of June 29, 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. 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 August 1, 2024, CRA announced that its Board of Directors declared a quarterly cash dividend of $ 0.42 per common share, payable on September 13, 2024 to shareholders of record as of August 27, 2024. 16 Table of Contents