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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.05pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.06pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.04pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
No words rose this year.
Positive rising
successfully+1
enhance+1
profitability+1
improve+1
Risk Factors (Item 1A)
7,167 words
Item 1A. Risk Factors
Our operations are subject to a number of risks. You should carefully read and consider the following risk factors, together with all other information in this report, in evaluating our business. If any of these risks, or any risks not presently known to us or that we currently believe are not significant, develop into an actual event, then our business, financial condition, and results of operations could be affected. If that happens, the market price of our common stock could , and you may all or part of your investment.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
No words rose this year.
Positive rising
improvements+2
MD&A (Item 7)
5,847 words
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This section of the Form 10-K does not address certain items regarding the year ended December 30, 2023. Discussion and analysis of year-to-year comparisons between fiscal 2024 and fiscal 2023 not included in this Form 10-K can be found in "Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations" of our Annual Report on Form 10-K for the year ended December 28, 2024.
Overview
We are a leading worldwide economic, financial, and management consulting firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients.
Our business consists primarily of the delivery of professional services, and, accordingly, our success depends heavily on the efforts, abilities, business generation capabilities, and project execution capabilities of our employee consultants. In particular, our employee consultants' personal relationships with our clients are a critical element in obtaining and maintaining client engagements. If we lose the services of any employee consultant or group of employee consultants, or if our employee consultants fail to generate business or otherwise fail to perform effectively, that loss or failure could adversely affect our revenues and results of operations. Many of our employee consultants have signed confidentiality agreements and non-solicitation agreements. We do not have non-competition agreements with a majority of our employee consultants, however, they can terminate their relationships with us at any time. The post-employment restrictions that we have with some of our employee consultants offer us only limited protection and may not be enforceable in every jurisdiction. In the event that an employee leaves, some clients may decide that they prefer to continue working with the employee rather than with us. In the event an employee departs and acts in a way that we believe violates the employee's restrictions, we will consider any legal remedies we may have against such person on a case-by-case basis. We may decide that preserving cooperation and a professional relationship with the former employee or clients that worked with the employee, or other concerns, outweigh the benefits of any possible legal recovery.
Our business could suffer if we are unable to hire and retain additional qualified consultants as employees
Our business continually requires us to hire highly qualified, highly educated consultants as employees. Our failure to recruit and retain a significant number of qualified employee consultants could limit our ability to accept or complete engagements and adversely affect our revenues and results of operations. Relatively few potential employees meet our hiring criteria, and we face significant competition for these employees from our direct competitors, academic institutions, government agencies, research firms, investment banking firms, and other enterprises. These competing employers may be able to offer potential employees greater compensation and benefits or more attractive lifestyle choices, career paths, or geographic locations than we can. We must pay competitive market wages for these employee consultants and increased competition for our target candidates could adversely affect our margins and results of operations.
Maintaining our professional reputation is crucial to our future success
Our ability to secure new engagements and hire qualified consultants as employees depends heavily on our overall reputation as well as the individual reputations of our employee consultants and principal non-employee experts. Additionally, failure to comply with governmental, regulatory and legal requirements or with our company-wide policies could lead to governmental or legal proceedings that could expose us to significant liabilities and damage our reputation. Because we obtain a majority of our revenues from new engagements with existing clients, any client that is dissatisfied with our performance on a
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single matter could seriouslyimpair our ability to secure new engagements. Given the frequently high-profile nature of the matters on which we work, any factor that diminishes our reputation or the reputations of any of our employee consultants or non-employee experts could make it substantially more difficult for us to compete successfully for both new engagements and qualified consultants.
We depend on our non-employee experts
We depend on our relationships with our non-employee experts. We believe that these experts are highly regarded in their fields and that each offers a combination of knowledge, experience, and expertise that would be very difficult to replace. We also believe that we have been able to secure some engagements and attract some consultants in part because we can offer the services of these experts. Most of these experts can limit their relationships with us at any time for any reason. These reasons could include affiliations with universities with policies that prohibit accepting specified engagements, termination of exclusive relationships, the pursuit of other interests, and retirement.
In many cases we seek to include restrictive covenants in our agreements with our non-employee experts, which could include non-competition agreements and/or non-solicitation agreements. The limitation or termination of any of their relationships with us, or competition from any of them after these agreements expire, could harm our reputation, reduce our business opportunities and adversely affect our revenues and results of operations. The restrictive covenants that we may have with some of our non-employee experts offer us only limited protection and may not be enforceable in every jurisdiction. In the event that non-employee experts leave, clients working with these non-employee experts may decide that they prefer to continue working with them rather than with us. In the event a non-employee expert departs and acts in a way that we believe violates the expert's restrictive covenants we will consider any legal and equitable remedies we may have against such person on a case-by-case basis. We may decide that preserving cooperation and a professional relationship with the former non-employee expert or clients that worked with the non-employee expert, or other concerns, outweigh the benefits of any possible legal action or recovery.
To meet our long-term growth targets, we need to establish ongoing relationships with additional non-employee experts who have reputations as leading experts in their fields. We may be unable to establish relationships with any additional non-employee experts. In addition, any relationship that we do establish may not help us meet our objectives or generate the revenues or earnings that we anticipate.
Additional hiring and business acquisitions could disrupt our operations, increase our costs, or adversely affect our results
Our business strategy is dependent, in part, upon our ability to grow by hiring consultant employees or groups of consultant employees, and we regularly evaluate opportunities to acquire other businesses. We may not, however, be able to identify, hire, acquire, or successfully integrate new employees and acquired businesses without substantial expense, delay, or other operational or financial obstacles. Competition for future hiring and acquisition opportunities in our markets could increase the compensation we offer to potential employees or the prices we pay for businesses we wish to acquire. In addition, we may be unable to achieve the financial, operational, and other benefits we anticipate from any hiring or acquisition, including those we have completed. New acquisitions could also negatively impact existing practices. Hiring additional employees or acquiring businesses could also involve a number of additional risks, including:
• the diversion of management's time, attention, and resources from managing and marketing our existing business;
• the failure to retain key acquired personnel or retain existing personnel who may view the acquisition unfavorably;
• additional conflicts of interest due to the acquired businesses that could impact our ability to secure new engagements;
• the need to compensate new employees while they wait for their restrictive covenants with other institutions to expire;
• the potential need to raise significant amounts of capital to finance a transaction or the potential issuance of equity securities that could be dilutive to our existing shareholders;
• increased costs to improve or coordinate managerial, operational, financial, and administrative systems, including compliance with the Sarbanes-Oxley Act of 2002;
• the potential assumption of legal liabilities;
• the inability to attain the expected synergies with an acquired business;
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• the impact of earn-outs based on the future performance of our acquired businesses that may deter the acquired company from fully integrating into our existing business; and
• potential difficulties in integrating new employees whose service offerings, expertise, or staffing requirements may vary from our existing employee consultants.
Our acquisitions have been accounted for as purchases using acquisition method accounting. Some of our acquisitions involved purchase prices in excess of tangible asset values, resulting in the creation of goodwill and other intangible assets. Under generally accepted accounting principles, we do not amortize goodwill or intangible assets acquired in a business combination that are determined to have indefinite useful lives, but instead review them annually (or more frequently if impairment indicators arise) for impairment. To the extent that we determine that such an asset has been impaired, we will write down its carrying value on our consolidated balance sheet and book a non-cash impairment charge in our consolidated statement of operations. If, as a result of acquisitions or otherwise, the amount of intangible assets being amortized increases, so will our amortization charges in future periods.
Risks Related to Our Client Relationships
Clients can terminate engagements with us at any time
Many of our engagements depend upon disputes, proceedings, or transactions that involve our clients. Our clients may decide at any time to seek to resolve the dispute or proceeding, abandon the transaction, or file for bankruptcy. Our engagements can therefore terminate suddenly and without advance notice to us. If an engagement is terminatedunexpectedly, our employee consultants working on the engagement could be underutilized until we assign them to other projects. In addition, because much of our work is project-based rather than recurring in nature, our consultants' utilization depends on our ability to secure additional engagements on a continual basis. Accordingly, the termination or significant reduction in the scope of a single large engagement could reduce our utilization and have an immediate adverse impact on our revenues and results of operations.
Information, technology systems or service failures, or a cybersecurity incident or other compromise of our or our client's confidential or proprietary information, as well as any violation of data protection laws, could have a material adverse effect on our reputation, business and results of operations
We rely upon our information and technology infrastructure and systems, including from third parties, to operate, manage and run our business and to provide services to our clients. This includes infrastructure and systems for receiving, storing, hosting, analyzing, transmitting and securing our and our clients' sensitive, confidential or proprietary information, including, but not limited to, health and other personally-identifiable information and commercial, financial and consumer data. Our ability to secure and maintain the confidentiality, integrity and availability of both these systems and this information is critical to our reputation and the success of our businesses.
Our information and technology systems may be affected by or subject to events that are out of our control, including, but not limited to, the possibility of disruptions or outages or cybersecurity incidents which continue to evolve (including from emerging technologies such as AI) and pose a constant risk. Examples of these events include malicious attacks, unauthorized system intrusions by unknown third parties, viruses, malicious software, ransomware, worms, insider threats, failures in our or our third party hosting sites’ (whether hosted offsite or in the cloud) information and technology systems, unavailability of backup restoration, disruptions in the Internet or electricity grids, natural disasters, and terrorism. Any of these events could disrupt our or our client’s business operations or cause us or our clients to incur unanticipatedlosses, including the costs of investigating and remediating any such event and any fines/settlements related thereto, as well as reputational damage, any of which could have a material adverse effect on our business and results of operations. In the past we have experienced, and we anticipate we will continue to experience cybersecurity threats to our systems.
In addition, our or our clients' sensitive, confidential or proprietary information could be compromised, corrupted, or lost whether intentionally or unintentionally, by various causes such as an inadvertent disclosure or cybersecurity incident (as described above). This client information could be compromised or corrupted because of groups that include without limitation our employees, outside consultants, vendors, or rogue third-party "hackers" or enterprises (including nation-state sponsored groups). Any unauthorized access, corruption, or loss of clients’ information could result in our sufferingclaims, fines, damages, losses or reputational damage, any of which could have a material adverse effect on our business and results of operations.
Further, we also must comply with applicable U.S. and foreign privacy laws and regulations, including the General Data Privacy Regulation ("GDPR") in the European Union and its United Kingdom equivalent, laws that adopt the GDPR as a model
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(such as Brazil's General Law for the Protection of Privacy), and U.S. state and federal laws such as the California Consumer Protection Act, and these laws are becoming increasingly complex and vary by jurisdiction. In addition to directly applying, our clients impose contractual obligations regarding compliance with these laws. The costs of complying with these laws and any fines resulting from lack of compliance, and the other costs of protecting our and our clients' confidential information, could have a material effect on our financial results. Although we have insurance intended to provide coverage for cybersecurity incidents, data protective violations, and similar concepts, the level of coverage may not be sufficient for the event or the event may be outside of the policy’s coverage.
Potential conflicts of interests may preclude us from accepting some engagements
We provide our services primarily in connection with significant or complex transactions, disputes, or other matters that are usually adversarial or that involve sensitive client information. Our engagement by a client may preclude us from accepting engagements with the client's competitors or adversaries because of conflicts between their business interests or positions on disputed issues or other reasons. Accordingly, the nature of our business limits the number of both potential clients and potential engagements. Moreover, in many industries in which we provide consulting services there has been a continuing trend toward business consolidations and strategic alliances. These consolidations and alliances reduce the number of potential clients for our services and increase the chances that we will be unable to continue some of our ongoing engagements or accept new engagements as a result of conflicts of interests.
We derive revenue from a limited number of large engagements
We derive a portion of our revenues from a limited number of large engagements. If we do not obtain a significant number of new large engagements each year, our business, financial condition, and results of operations could suffer. In general, the volume of work we perform for any particular client varies from year to year, and due to the specific engagement nature of our practice, a major client in one year may not hire us in the following year.
Our clients may be unable or unwilling to pay us for our services
Our clients include some companies that may from time to time encounter financial difficulties, particularly during a downward trend in the economy, or may dispute the services we provide. If a client's financial difficulties become severe or a dispute arises, the client may be unwilling or unable to pay our invoices in the ordinary course of business, which could adversely affect collections of both our accounts receivable and unbilled services. On occasion, some of our clients have entered bankruptcy, which has prevented us from collecting amounts owed to us. The bankruptcy of a client with a substantial accounts receivable could have a material adverse effect on our financial condition and results of operations. Clients who have paid sizable invoices may later declare bankruptcy, and a court may determine that we are not properly entitled to any of those payments consequently requiring a repayment by us of some or all of them, which could adversely affect our financial condition and results of operations.
Additionally, from time to time, we may derive a significant amount of revenue from contracts with government agencies in the United States. Because of this, changes in federal government budgetary priorities could directly affect our financial performance. This could result in the cancellation of contracts and/or the incurrence of substantial costs without reimbursement under our contracts with the federal government, which could have a negative effect on our business, financial condition, results of operations and cash flows.
Risks Related to Our Operations
Changes in global economic, business, health and political conditions could have a material adverse impact on our revenues, results of operations, and financial condition
Overall global economic, business, health and political conditions, as well as conditions specific to the industries we or our clients serve, can affect our clients' businesses and financial condition, their demand or ability to pay for our services, and the market for our services. These conditions, all of which are outside of our control, include but are not limited to merger and acquisition activity levels, the availability, cost and terms of credit, the state of the United States and global financial markets, including the impact of rising inflation rates, the levels of litigation and regulatory and administrative investigations and proceedings, global health crises and pandemics, political developments, geopolitical unrest or other conflicts in foreign nations, natural disasters and the potential impact such developments, uncertainties or further unrest could have on our clients, on the markets in which we operate and on general economic and business conditions. In addition, many of our clients are in highly regulated industries, and regulatory and legislative changes affecting these industries could impact the market for our service offerings, render our current service offerings obsolete, or increase the competition among providers of these services.
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Although we are not able to predict the positive or negative effects that general changes in global economic, business and political conditions will have on our individual practice areas or our business as a whole, any specific changes in these conditions could have a material adverse impact on our revenues, results of operations and financial condition.
Our results of operations and consequently our business may be adversely affected if we are not able to maintain our current bill rates, compensation costs and/or utilization rate
Our revenues and profitability are largely based on the bill rates charged to our clients, compensation costs and the utilization of our consultants. We calculate utilization by dividing the total hours worked by our employee consultants on engagements during the measurement period by the total number of hours that our employee consultants were available to work during that period. If we are not able to maintain adequate bill rates for our services, maintain compensation costs or obtain appropriate utilization rates from our consultants, our results of operations may be adversely impacted. Bill rates, compensation costs and consultant utilization rates are affected by a number of factors, including:
• Our clients' perceptions of our ability to add value through our services;
• The market demand for our services;
• Our competitors' pricing of services and compensation levels;
• The market rate for consultant compensation;
• Our ability to redeploy consultants from completed client engagements to new client engagements; and
• Our ability to predict future demand for our services and maintain the appropriate staffing levels without significantly underutilizing consultants.
The interpretation and application of tax legislation or other changes in taxation of our operations could harm our business, revenue, cash flows and financial results
We are subject to income and other taxes in the U.S. at the state and federal level and also in foreign jurisdictions. Changes in applicable U.S. state, federal or foreign tax laws and regulations, or their interpretation and application, could materially affect our tax expense and profitability.
Future changes in tax laws, treaties or regulations, and their interpretation or enforcement, may be unpredictable, particularly as taxing jurisdictions face an increasing number of political, budgetary and other fiscal challenges. Tax rates in the jurisdictions in which we operate may change as a result of macroeconomic and other factors outside of our control, making it increasingly difficult for multinational corporations like ourselves to operate with certainty about taxation in many jurisdictions. As a result, we could be materially adversely affected by future changes in tax law or policy (or in their interpretation or enforcement) in the jurisdictions where we operate, including the United States, which could have a material adverse effect on our business, cash flow, results of operations, financial condition, as well as our effective income tax rate.
Increasing scrutiny and changing expectations from governmental organizations, investors, clients and our colleagues with respect to our sustainability-related practices and those of our clients may impose additional costs on us or expose us to new or additional risks
There is varied regulation and focus on sustainability matters across different jurisdictions, and stakeholder views and priorities regarding these matters continue to evolve and sometimes diverge. The European Union’s Corporate Sustainability Reporting Directive and from other governmental organizations, and our investors, clients and employees, maintain interest in sustainability issues such as environmental stewardship, climate change, and workforce development. How these various stakeholders evaluate and prioritize different sustainability initiatives may shift over time in ways that are difficult to predict. We continue to evaluate existing, new and proposed governmental requirements, and to monitor, report and assess policies and practices that we believe will align with our client, investor and other third-party imposed sustainability-related standards and expectations. For example, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to sustainability matters, and their evolving methodologies and assessments may lead to negative investor sentiment, stock price fluctuations and the diversion of investment to other companies. If our sustainability practices do not meet evolving rules and regulations or investor or other stakeholder expectations and standards (or if we are viewed in a negative light based on positions we do or do not take or work we do or do not perform for certain clients or industries), then our reputation, our ability to attract or retain employee consultants and non-employee experts, and our ability to attract new engagements and clients could be negatively impacted, as could our attractiveness as an investment, service provider, business partner or acquirer. Additionally, the relative importance that different stakeholders place on various sustainability initiatives may conflict, making it difficult to satisfy all stakeholder
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expectations. Similarly, our failure or perceived failure to pursue or fulfill our current or future goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts.
Our revenues, operating results and cash flows are likely to fluctuate
We experience fluctuations in our revenues, operating results and cash flows and expect that they will continue to occur in the future due to factors that are either within or outside of our control, including, but not limited to, the timing and duration of our client engagements, utilization of our employee consultants, the types of engagements we are working on at different times, the geographic locations of our clients or where the services are rendered, the length of billing and collection cycles, hiring, business and capital expenditures, severity of insurance claims, share repurchases, dividends, debt repayments, and other general economic factors. We may also experience future fluctuations in our cash flows from operations because of increases in employee compensation, including changes to our incentive compensation structure and the timing of incentive payments, which we generally pay during the first quarter of each year, or hiring or retention payments or bonuses which are paid throughout the year. Also, the timing of future acquisitions and other investments and the cost of integrating them may cause fluctuations in our operating results and related cash flows.
Fluctuations in our quarterly revenues and results of operations could depress the market price of our common stock
We may experience significant fluctuations in our revenues and results of operations from one quarter to the next. If our revenues or net income in a quarter fall or drop below the expectations of securities analysts or investors, the market price of our common stock could fall significantly. Our results of operations in any quarter can fluctuate for many reasons, including:
• our ability to implement billing rate increases or maintain billing rates;
• the number, scope, and timing of ongoing client engagements;
• the extent to which we can reassign our employee consultants efficiently from one engagement to the next;
• the extent to which our employee consultants or clients take holiday, vacation, and sick time, including traditional seasonality related to summer vacation and holiday schedules;
• employee hiring and attrition;
• the extent of revenue realization or cost overruns;
• fluctuations in our provision for income taxes due to changes in income arising in various tax jurisdictions, statutory tax rates, valuation allowances, non-deductible expenses, and changes in estimates of our uncertain tax positions;
• fluctuations in interest rates;
• inflation, an economic slowdown, stagflation and/or recessions;
• currency fluctuations; and
• collectability of receivables and unbilled work in process.
Because we generate most of our revenues from consulting services that we provide on an hourly fee basis, our revenues in any period are directly related to the number of our employee consultants, their billing rates, and the number of billable hours they work in that period. We have a limited ability to increase any of these factors in the short term. Accordingly, if we underutilize our consultants during one part of a fiscal period, we may be unable to compensate by augmenting revenues during another part of that period. In addition, we are occasionally unable to utilize fully any additional consultants that we hire, particularly in the quarter in which we hire them. Moreover, a significant majority of our operating expenses, primarily office rent and salaries, are fixed in the short term. As a result, any failure of our revenues to meet our projections in any quarter could have a disproportionateadverse effect on our net income. For these reasons, we believe our historical results of operations are not necessarily indicative of our future performance.
Changes in financial accounting standards or practices may cause unexpected financial reporting fluctuations and affect our reported results of operations
We are required to prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States of America, which may change periodically. From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial Accounting Standards Board and the SEC. A change in accounting standards or practices may adversely affect our reported financial results or the way we
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conduct our business. It may also require changes to the current accounting treatment of certain transactions and the way they are reported in our financial statements. Additionally, such a change in accounting standards or practices may require us to enhance our internal accounting systems and processes, as well as our internal control over financial reporting.
Our failure to execute our business strategy or manage future growth successfully could adversely affect our revenues and results of operations
Any failure on our part to execute our business strategy or manage future growth successfully could adversely affect our revenues and results of operations. In the future, we could open offices in new geographic areas, including foreign locations, and expand our employee base as a result of internal growth and acquisitions. Opening and managing new offices often requires extensive management supervision and increases our overall selling, general and administrative expenses. Expansion creates new and increased management, consulting, and training responsibilities for our employee consultants, and expansion may require additional regulatory compliance. Expansion also increases the demands on our internal systems, procedures, and controls, and on our managerial, administrative, financial, marketing, and other resources. We depend heavily upon the managerial, operational, and administrative skills of our executive officers to manage our expansion and business strategy. New responsibilities and demands may adversely affect the overall quality of our work.
Our engagements may result in professional liability and we may be subject to other litigation, claims or assessments
Our services typically involve difficult analytical assignments and carry risks of professional and other liability. Many of our engagements involve matters that could have a severe impact on a client's business, and cause the client to lose significant amounts of money, or prevent the client from pursuing desirable business opportunities. Accordingly, if a client is dissatisfied with our performance, the client could threaten or bring litigation in order to recover damages or to contest its obligation to pay our fees. Litigationalleging that we performed negligently, disclosed client confidential information, or otherwise breached our obligations to the client could expose us to significant liabilities to our clients and other third parties and tarnish our reputation.
Despite our efforts to prevent litigation, from time to time we are party to various lawsuits, claims, or assessments in the ordinary course of business. Disputes may arise, for example, from business acquisitions, employment issues, regulatory actions, and other business transactions. The costs and outcome of any lawsuits or claims could have a material adverse effect on our business and results of operations.
We may need to take material write-offs for the impairment of goodwill, including if our market capitalization declines
As further described in our Notes to Consolidated Financial Statements, goodwill is monitored annually for impairment, or more frequently, if events or circumstances exist that would more likely than not reduce the fair value of a reporting unit below its carrying amount. In performing the goodwill impairment testing and measurement process, we compare the estimated fair value of our reporting unit to its net book value to identify potential impairment. We estimate the fair value of our consulting business utilizing our market capitalization, plus an appropriate control premium. Market capitalization is determined by multiplying the shares outstanding on the test date by the market price of our common stock on that date. We determine the control premium utilizing data from publicly available premium studies for the trailing four quarters for public company transactions in our industry group. If the estimated fair value of a reporting unit is less than its net book value, an impairment charge would be recorded in our consolidated statement of operations.
A goodwill impairment charge in any period would have the effect of decreasing our earnings in such period. If we are required to take a substantial impairment charge, our reported operating results would be materially adversely affected in such period, though such a charge would have no impact on cash flows or working capital for such period.
Our performance could be affected if employees and non-employee experts default on loans
We utilize forgivable loans with some of our employees and non-employee experts, other than our executive officers, as a way to attract and retain them. A portion of these loans is collateralized. Defaults under these loans could have a material adverse effect on our consolidated statement of operations, financial condition and liquidity.
Fluctuations in the types of service contracts we enter into may adversely impact revenue and results of operations
We derive a portion of our revenues from fixed-price contracts. These contracts are more common in our management consulting area, and would likely grow in number with expansion of that area. Fluctuations in the mix between time-and-material contracts, fixed-price contracts and arrangements with fees tied to performance-based criteria may result in fluctuations of revenue and results of operations. In addition, if we fail to accurately estimate third-party vendor expenses and the resources
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required for a fixed-price project or fail to satisfy our contractual obligations in a manner consistent with the project budget, we might generate a smaller profit or incur a loss on the project. Revenue generated from fixed-price contracts was approximately 17% of our total revenues for the year ended January 3, 2026.
We could incur substantial costs protecting our proprietary rights from infringement or defendingagainst a claim of infringement
As a professional services organization, we may rely on post-employment restrictions with some of our employees and non-employee experts to protect our proprietary rights. These agreements, however, may offer us only limited protection and may not be enforceable in every jurisdiction. In addition, we may incur substantial costs trying to enforce these agreements.
Our services may involve the development of custom business processes or solutions for specific clients. In some cases, the clients retain ownership or impose restrictions on our ability to use the business processes or solutions developed from these projects. Issues relating to the ownership of business processes or solutions can be complicated, and disputes could arise that affect our ability to resell or reuse business processes or solutions we develop for clients.
In recent years, there has been significant litigation in the U.S. involving patents and other intellectual property rights. We could incur substantial costs in prosecuting or defending any intellectual property litigation, which could adversely affect our operating results and financial condition.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain and use information that we regard as proprietary. Litigation may be necessary in the future to enforce our proprietary rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defendagainstclaims of infringement or invalidity. Any such resulting litigation could result in substantial costs and diversion of resources and could adversely affect our business, operating results and financial condition. Any failure by us to protect our proprietary rights, or any court determination that we have either infringed or lost ownership of proprietary rights, could adversely affect our business, operating results and financial condition.
Risks Related to Our Competition
Competition from other litigation, regulatory, financial, technology and management consulting firms could hurt our business
The market for litigation, regulatory, financial, and management consulting services is intensely competitive, highly fragmented, and subject to rapid change. We may be unable to compete successfully with our existing competitors or with any new competitors. In general, there are few barriers to entry into our markets, and we expect to face additional competition from new entrants into our business. New technologies, such as AI and machine learning, continue to evolve and as a result risks continue to be unknown or uncertain. There is no assurance that we can successfully develop and deploy AI or other technologies in our business or such technologies will improve and enhance our services, operations or profitability. Many of our competitors, including possible new entrants, have or may have significantly greater personnel, financial, managerial, technical, and marketing resources than we do, which could enhance their ability to respond more quickly to technological changes (including the adoption of AI), finance acquisitions, and fund internal growth.
Risks Related to Our International Operations
Our international operations create risks
Our international operations carry financial and business risks, including:
• adverse social, political and economic conditions, such as inflation, rising interest rates and risk of global or regional recession;
• unexpected changes in trading policies, regulatory requirements, tariffs, and other barriers;
• restrictions on the repatriation of earnings;
• potentially adverse tax consequences, such as changes in tax laws and statutory tax rates;
• the impact of differences in the governmental, legal and regulatory environment in foreign jurisdictions, as well as U.S. laws and regulations related to our foreign operations;
• political developments, geopolitical unrest or other conflicts or natural disasters in foreign nations; and
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• civil disturbances or other catastrophic events that reduce business activity.
If our international revenues increase relative to our total revenues, the above listed factors could have a more pronounced effect on our operating results.
Fluctuations in currency exchange rates could adversely affect our operations
We conduct our business in the Americas, Europe, and Australia, and the global scope of our business exposes us to risk of fluctuations in foreign currency markets. Specifically, our results of operations are subject to fluctuations primarily in the British Pound and Euro against the U.S. Dollar as well as the Euro against the British Pound. The fluctuation in foreign currency markets can both increase and decrease our overall revenue and expenses for any fiscal period, and therefore has a resulting negative impact on our reported results of operations and on our ability to predict our future results and earnings accurately. Additionally, global economic events have caused and may continue to cause significant volatility in currency exchange rate fluctuations. Revenue generated from our U.K.-based operations was approximately 13% (which includes currency exchange effects) of our total revenues for the year ended January 3, 2026. We currently do not hedge our exposure to current foreign currency exchange risks by engaging in foreign exchange hedging transactions, though we may do so in the future.
Risks Related to Our Indebtedness
Our debt obligations may adversely impact our financial performance
We rely on our cash and cash equivalents, cash flows from operations and borrowings under our credit agreement to fund our short-term and anticipated long-term operating activities. We currently have a revolving credit facility with our bank for up to $250.0 million, 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, we may elect to not increase the revolving credit facility to $250.0 million. The amounts available under this revolving credit facility are constrained by various financial covenants and reduced by certain letters of credit outstanding. Our loan agreement with the bank will mature on August 19, 2027. The degree to which we are leveraged could adversely affect our ability to obtain further financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures. Our ability to secure short-term and long-term debt or equity financing in the future will also depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing or any future revolving credit facility, and the overall credit and equity market environments. There was $34.0 million in borrowings outstanding under the revolving credit facility as of January 3, 2026.
Risks Related to Our Common Stock
The market price of our common stock may be volatile
The market price of our common stock has fluctuated widely and may continue to do so. Many factors could cause the market price of our common stock to rise and fall. Some of these factors are:
• variations in our quarterly results of operations;
• changes in quarterly dividends;
• the extent of any repurchases of shares of our common stock;
• the hiring or departure of key personnel or non-employee experts;
• changes in our professional reputation;
• the introduction of new services by us or our competitors;
• acquisitions or strategic alliances involving us or our competitors;
• changes in accounting principles or methods or issues with our internal control over financial reporting;
• changes in estimates of our performance or recommendations by securities analysts;
• future sales of shares of common stock in the public market; and
• market conditions in the industry and the economy as a whole.
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In addition, the stock market often experiences significant price and volume fluctuations. These fluctuations are often unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our common stock. When the market price of a company's stock drops significantly, shareholders often institute securities class action litigationagainst that company. Any litigationagainst us could cause us to incur substantial costs, divert the time and attention of our management and other resources, or otherwise harm our business.
There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts
Our Board of Directors declared the first quarterly dividend on our common stock during 2016 and we have continued to pay quarterly dividends throughout fiscal 2025. Although we anticipate paying regular quarterly dividends on our common stock for the foreseeable future, the declaration of dividends is subject to the discretion of our Board of Directors, and is restricted by applicable state law limitations on distributions to shareholders. As a result, the amount, if any, of the dividends to be paid by us in the future depends upon a number of factors, including but not limited to our available cash on hand, anticipated cash needs, overall financial condition, and future prospects for earnings and cash flows, as well as other factors considered relevant by our Board of Directors. In addition, our Board of Directors may also suspend the payment of dividends at any time. Any reduction or suspension in our dividend payments could adversely affect the price of our common stock.
Our stock repurchase programs could affect the market price of our common stock and increase its volatility
Our Board of Directors has from time to time authorized repurchase programs of our outstanding common stock. Under these stock repurchase programs, we are authorized to repurchase, from time-to-time, shares of our outstanding common stock on the open market or in privately negotiated transactions. The timing and amount of stock repurchases are determined based upon our evaluation of market conditions and other factors. Any stock repurchase program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our common stock under any program. Repurchases pursuant to our stock repurchase programs could affect the market price of our common stock and increase its volatility. Any termination of our stock repurchase programs could cause a decrease in the market price of our common stock, and the existence of a stock repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity and trading volumes of our common stock. There can be no assurance that any stock repurchases under these programs will enhance shareholder value because the market price of our common stock may decline below the levels at which those repurchases were made. Although our stock repurchase programs are intended to enhance long-term shareholder value, short-term fluctuations in the market price of our common stock could reduce the programs' effectiveness.
Our charter and by-laws, and Massachusetts law may deter takeovers
Our articles of organization and by-laws and Massachusetts law contain provisions that could have anti-takeover effects and that could discourage, delay, or prevent a change in control or an acquisition that our shareholders may find attractive. These provisions may also discourage proxy contests and make it more difficult for our shareholders to take some corporate actions, including the election of directors. These provisions could limit the price that investors might be willing to pay for shares of our common stock.
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We derive revenues principally from professional services rendered by our employee consultants. In most instances, we charge clients on a time-and-materials basis and recognize revenues in the period when we provide our services. We charge consultants' time at hourly rates, which vary from consultant to consultant depending on a consultant's position, experience, expertise, and other factors. We derive a portion of our revenues from fixed-price engagements. Revenues from fixed-price engagements are recognized using a proportional performance method based on the ratio of costs incurred to the total estimated project costs. We generate substantially all of our professional services fees from the work of our own employee consultants and a portion from the work of our non-employee experts. Factors that affect our professional services revenues include the number and scope of client engagements, the number of consultants we employ, the consultants' billing rates, and the number of hours our consultants work. Revenues also include reimbursements for costs we incur in fulfilling our performance obligations, including travel and other out-of-pocket expenses, fees for outside consultants and other reimbursable expenses.
Our costs of services include the salaries, bonuses, share-based compensation expense, forgivable loan amortization, and benefits of our employee consultants. Our bonus program awards discretionary bonuses based on our revenues and profitability and individual performance. Costs of services also include out-of-pocket and other third-party vendor expenses, and the salaries of support staff whose time is billed directly to clients, such as librarians, editors, and programmers, as well as the amounts billed to us by our outside consultants for services rendered while completing a project. Costs of services does not include depreciation and amortization. Selling, general and administrative expenses include salaries, bonuses, share-based compensation expense, and benefits of our administrative and support staff, commissions to non-employee experts for generating new business, office rent, marketing, and other operating costs.
Utilization and Seasonality
We derive the majority of our revenues from the number of hours worked by our employee consultants. Our utilization of those employee consultants is one key indicator that we use to measure our operating performance. We calculate utilization by dividing the total hours worked by our employee consultants on engagements during the measurement period by the total number of hours that our employee consultants were available to work during that period. Utilization was 77%, 75%, and 70% for fiscal 2025, fiscal 2024, and fiscal 2023, respectively.
We experience certain seasonal effects that impact our revenue. Concurrent vacations or holidays taken by a large number of consultants can adversely impact our revenue. For example, we usually experience fewer billable hours in our fiscal third quarter, as that is the summer vacation season for most of our offices, and in our fiscal fourth quarter, as that is the quarter that typically includes the December holiday season. In addition, much of our junior staff hiring occurs in our fiscal third quarter during which our new colleagues receive training and become acclimated to the organization. As a result, utilization may be impacted for the latter half of the year.
International Operations
Revenues outside of the U.S. accounted for approximately 20% of our total revenues in fiscal 2025, 19% of our total revenues in fiscal 2024, and 21% of our total revenues in fiscal 2023. Revenue by country is detailed in Note 2 to our Notes to Consolidated Financial Statements.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets and liabilities, as well as related disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are monitored and analyzed by management 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. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if our assumptions based on past experience or our other assumptions do not turn out to be substantially accurate.
Our significant accounting policies are discussed in Note 1 in our Notes to Consolidated Financial Statements. A summary of the accounting policies that we believe are most critical to understanding and evaluating our financial results is set forth below. We believe the following accounting policies involve our more subjective and complex judgments that have the most significant potential impact to the presentation of our financial statements. This summary should be read in conjunction with our consolidated financial statements and the related notes included in Item 8 of this annual report on Form 10-K.
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Revenue Recognition. Revenue is recognized when we satisfy a performance obligation by transferring services promised in a contract to a client in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our clients. If, at the outset of an arrangement, we determine that an enforceable contract does not exist, revenues are deferred until all criteria for an enforceable contract are met.
We derive substantially all of our revenues from the performance of professional services for our clients. The contracts that we enter into and operate under specify whether the engagement will be billed on a time-and-materials basis or a fixed-price basis.
• Time-and-materials arrangements require the client to pay us based on the number of hours worked at contractually agreed-upon hourly rates. We recognize revenues from these arrangements based on hours incurred and contracted rates based on a right-to-payment for services completed to date. When a time-and-materials arrangement has a "cap" or "limit" amount, we recognize revenue up to the cap or limit amount specified by the client, based on the efforts or hours incurred and expenses incurred. Thereafter, revenue is reserved pending an amendment of the cap or limit.
• Fixed-price arrangements require the client to pay a contractually agreed-upon fee in exchange for a pre-established set of professional services. We base our fees on our estimates of the costs and timing for completing a performance obligation. We generally recognize revenues under fixed-price arrangements using a proportional performance method, which is based on the ratio of costs incurred to the total estimated costs for completing a performance obligation. Our fixed-price arrangements generally have a single performance obligation. For arrangements that contain multiple performance obligations, the fixed price is allocated based on the estimated relative standalone selling prices of the promised services underlying each performance obligation.
Reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other third-party vendor expenses, are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in which the expense is incurred.
Variable consideration to be included in the transaction price is estimated using the expected value method based on facts and circumstances. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Variable consideration estimates are based on specific price concessions already granted and those expected to be extended to our clients based on historical realization rates. If actual results in the future vary from our estimates, we adjust these estimates in the period such variances become known.
We usually issue invoices to our customers on a monthly basis, and payment is usually due upon receipt of the invoice unless contract terms state otherwise. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less.
Deferred Compensation. We account for performance-based and service-based cash awards using an accrual method where changes in estimates or the forgiveness of the principal amount of loans are recorded as compensation expense over the remaining service period. To the extent the terms of an award attribute all or a portion of the expected future benefits to a period of service greater than one year, the cost of those benefits is accrued over the employee's or non-employee's requisite service period in a systematic and rational manner.
The requisite service period ranges from two to eight years starting with the employee's employment date or non-employee's affiliation date. For an employee or non-employee consultant currently affiliated with us, the requisite service period generally begins at the start of the award's measurement period and when compliance is met with certain contractual requirements. A recipient of such an award is expected to be employed by or affiliated with us for the entire measurement period. If the recipient's employment or affiliation with us terminates during the measurement period, the amount paid will be determined in accordance with the recipient's specific contract provisions.
The terms of award agreements may include the achievement of minimum required financial targets over the award's measurement period. These financial targets may include a measure of revenue generation, profitability, or both. The amount of the liability of the award agreements is estimated based on internally generated financial projections or sourced revenue. The process of projecting these financial targets over the measurement period is highly subjective and requires significant judgment and estimates. There can be no assurance that the estimates and assumptions used in preparing these projections will prove to be accurate.
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Accounting for Income Taxes. We record income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized based on estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. We include in our estimate of deferred tax assets and liabilities an estimate of the realizable benefits from operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss; changes to the valuation allowance; changes to federal, state, or foreign tax laws; future expansion into areas with varying country, state, and local income tax rates; deductibility of certain costs; uncertain tax positions; expenses by jurisdiction; and results of acquisitions or dispositions.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in several different tax jurisdictions. We are periodically reviewed by domestic and foreign tax authorities. These reviews include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. We account for uncertainties in income tax positions in accordance with Topic 740, Income Taxes . The number of years with open tax audits varies depending on the tax jurisdiction.
Recent Accounting Standards
CRA adopted Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07") during fiscal 2024 and ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09") during fiscal 2025. Please refer to the section captioned "Recent Accounting Standards" in Note 1 of our Notes to Consolidated Financial Statements contained in this Form 10-K.
Results of Operations
The following table provides operating information as a percentage of revenues for the periods indicated:
Fiscal Year Ended
January 3,
(53 weeks)
December 28,
(52 weeks)
December 30,
(52 weeks)
Revenues
Costs of services (exclusive of depreciation and amortization)
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Interest expense, net
Foreign currency gains (losses), net
Income before provision for income taxes
Provision for income taxes
Net income
Fiscal 2025 Compared to Fiscal 2024
Our fiscal year end is the Saturday nearest December 31 of each year. Our fiscal years periodically contain 53 weeks rather than 52 weeks. Fiscal 2025 was a 53-week year, and fiscal 2024 was a 52-week year.
Revenues. Revenues increased by $64.2 million, or 9.3%, to $751.6 million for fiscal 2025 from $687.4 million for fiscal 2024. Utilization increased to 77% for fiscal 2025 from 75% for fiscal 2024, while consultant headcount increased by 13 consultants during fiscal 2025. Billable hours increased by 6.0% for fiscal 2025 when compared to fiscal 2024.
Overall, revenues outside of the U.S. increased to 20% of net revenues for fiscal 2025 from 19% for fiscal 2024. Revenues derived from fixed-price engagements decreased to 17% of net revenues for fiscal 2025 from 18% for fiscal 2024. Revenues derived from time-and-materials engagements increased to 83% of net revenues for fiscal 2025 from 82% for fiscal 2024. The percentages of revenue derived from fixed-price engagements depends largely on the proportion of our revenues
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derived from our management consulting business, which typically has a higher concentration of fixed-price service engagements.
Costs of Services (exclusive of depreciation and amortization). Costs of services (exclusive of depreciation and amortization) increased by $39.4 million, or 8.2%, to $519.3 million for fiscal 2025 from $479.9 million for fiscal 2024. The increase in costs of services was due primarily to an increase of $35.8 million in employee compensation and fringe benefit costs, and an increase of $6.3 million of client reimbursable indirect project expenses in fiscal 2025 compared to fiscal 2024. These increases were partially offset by a decrease in forgivable loan amortization of $2.6 million and a decrease of $0.1 million in expense related to miscellaneous and other expenses in fiscal 2025 compared to fiscal 2024. As a percentage of net revenue, costs of services decreased to 69.1% for fiscal 2025 as compared to 69.8% for fiscal 2024.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $9.9 million, or 7.9%, to $135.0 million for fiscal 2025 from $125.1 million for fiscal 2024. This increase was due primarily to a $3.5 million increase in legal and professional services, a $2.4 million increase in employee compensation and fringe benefit costs, a $1.5 million increase in rent expense, a $1.5 million increase in travel and entertainment expenses, a $1.1 million increase in other operating expenses, and a $0.8 million increase in software subscription and data services. These increases were partially offset by a $0.9 million decrease in commissions to our non-employee experts.
As a percentage of revenues, selling, general and administrative expenses decreased to 18.0% for fiscal 2025 from 18.2% for fiscal 2024. Commissions to non-employee experts decreased to 1.8% of revenue in fiscal 2025 compared to 2.1% of revenues in fiscal 2024.
Provision for Income Taxes. For fiscal 2025, our income tax provision was $21.8 million and the effective tax rate ("ETR") was 28.5%, as compared to a provision of $19.6 million and an effective tax rate of 29.6% for fiscal 2024. The ETR for fiscal 2025 was lower than the prior year primarily due to the impact of state legislative changes in the prior year that was nonrecurring in the current year and the impact of jurisdictional mix of earnings, partially offset by increases in executive compensation and the remeasurement of our current-year deferred tax assets as a result of changes in state apportionment. The ETR for fiscal 2025 was higher than our combined federal and state statutory rate primarily due to non-deductible meals and entertainment, non-deductible compensation paid to executive officers, the remeasurement of current year deferred tax assets, partially offset by the tax benefit related to share-based compensation. The ETR for fiscal 2024 was higher than our combined federal and state statutory rate for the same reason noted for fiscal 2025.
Net Income. Net income increased by $8.1 million to $54.8 million for fiscal 2025 from $46.7 million for fiscal 2024. The diluted net income per share was $8.14 per share for fiscal 2025, compared to diluted net income per share of $6.74 per share for fiscal 2024. Diluted weighted average shares outstanding decreased by approximately 194,000 shares to approximately 6,714,000 shares for fiscal 2025 from approximately 6,908,000 shares for fiscal 2024. The decrease in diluted weighted average shares outstanding was primarily due to the repurchase of shares of our common stock since December 28, 2024, offset in part by the issuance or vesting of shares of restricted stock and time-vesting restricted stock units.
Liquidity and Capital Resources
We believe that current cash, 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. As of January 3, 2026, we have $18.2 million of cash and cash equivalents and $162.2 million of borrowing capacity under our revolving credit facility.
General. In fiscal 2025, our cash and cash equivalents decreased by $8.5 million, completing the year with cash and cash equivalents of $18.2 million. The principal drivers of the decrease of cash and cash equivalents were the payment of a significant portion of our fiscal 2024 performance bonuses in the first half of fiscal 2025, forgivable loan advances, purchases of property and equipment, the repurchase and retirement of shares of our common stock throughout the year under our share repurchase program and the payment of dividends.
At January 3, 2026, $2.9 million of our cash and cash equivalents were 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. operations over the next 12 months without the need to repatriate funds from our foreign subsidiaries.
As of January 3, 2026, our cash accounts were concentrated at two financial institutions, which potentially exposes us to credit risks. The financial institutions are creditworthy and we have not experienced any losses related to such accounts. We do not believe that there is significant risk of non-performance by the financial institutions, and its cash on deposit is fully liquid. We continually monitor the credit ratings of these institutions.
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Sources and Uses of Cash. During fiscal 2025, net cash provided by operating activities was $22.4 million. Net income was $54.8 million for fiscal 2025. Sources of cash for operating activities included a $15.9 million increase in accounts payable, accrued expenses and other liabilities and a $11.9 million increase in incentive cash awards payable. Offsetting these sources of cash for operating activities included, a $25.7 million increase in accounts receivable and unbilled receivables, a $20.5 million decrease in lease liabilities, a $53.4 million increase in forgivable loans, (comprised of $86.0 million of forgivable loan issuances, net of repayments, offset by $32.6 million of forgivable loan amortization), and a $4.4 million decrease in prepaid expenses and other current assets.
Cash provided by operating activities included the non-cash items of right-of-use asset amortization of $15.4 million, depreciation and amortization expense of $14.1 million, share-based compensation expenses of $5.9 million, and offset by deferred income taxes of $1.7 million.
During fiscal 2025, net cash used in investing activities was $3.9 million, which included capital expenditures primarily related to furniture and leasehold improvements.
We used $29.8 million of net cash in financing activities during fiscal 2025, primarily as a result of $47.1 million of repurchases of our common stock, net borrowings of $34.0 million on our revolving credit facility, $13.8 million of cash dividends and dividend equivalents, and tax withholding payments reimbursed by restricted shares of $2.9 million.
Lease Commitments
We are a lessee under certain operating leases for office space and equipment, which have remaining lease terms between one and nine years, many of which include one or more options to extend the term for periods of up to five years for each option. The maturities of lease liabilities, as of January 3, 2026, related to office space and equipment are discussed in Note 4 in our Notes to Consolidated Financial Statements. We have no additional significant operating leases we have committed to that have not yet commenced.
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 accrued expenses and deferred compensation and other non-current liabilities in our consolidated balance sheet and are recorded at a value based on their estimated discounted cash flows. At January 3, 2026, we expect to incur asset retirement obligation or redecoration obligation costs over the next twelve months of $0.2 million. The remainder of our asset retirement obligations and redecoration obligations are approximately $3.0 million and are expected to be settled between fiscal 2027 and fiscal 2035 when the underlying leases terminate. We expect to satisfy these lease and related obligations, as they become due, from cash generated from operations.
Indebtedness
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.
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. Borrowings under the revolving credit facility bear interest at a rate per annum equal to one of the following rates, at our election, plus an applicable margin as described below: (i) in the case of borrowings in U.S. dollars, the Base Rate (as defined in the Credit Agreement), (ii) in the case of borrowings in U.S. dollars, a rate based on Term SOFR (as defined in the Credit Agreement) for the applicable interest period, (iii) in the case of borrowings in Euros, EURIBOR (as defined in the Credit Agreement) for the applicable interest period, (iv) in the case of borrowings in Pounds Sterling, a daily rate based on SONIA (as defined in the Credit Agreement), (v) in the case of borrowings in Canadian Dollars, Term CORRA (as defined in the Credit Agreement) for the applicable interest period, (vi) in the case of borrowings in Swiss Francs, a daily rate based on SARON (as defined in the Credit Agreement), or (vii) in the case of borrowings in any other Alternate Currency (as defined in the Credit Agreement), the relevant daily or term rate determined as provided in the Credit Agreement. The applicable margin on borrowings based on the Base Rate varies within a range of 0.25% to 1.00% depending on our consolidated net leverage ratio, and the applicable margin on borrowings based on any of the other rates described above varies within a range of 1.25% to 2.00% depending on our consolidated net leverage ratio.
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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 of 3.0 to 1.0 and a minimum consolidated interest coverage ratio of 2.5 to 1.0. 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. Any 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 January 3, 2026, we were in compliance with the covenants of the Credit Agreement.
There was $34.0 million in borrowings outstanding under the revolving credit facility as of January 3, 2026. As of January 3, 2026, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $3.8 million. CRA has chosen to classify the revolving credit facility as a current liability in its consolidated balance sheet, as CRA has the intent to repay the amount within 12 months after the balance sheet date.
Forgivable Loans
In order to attract and retain highly skilled professionals, we may issue forgivable loans or term loans to employees and non-employee experts. A portion of these loans is collateralized by key person life insurance. The forgivable loans have terms that are generally between two and eight years. The principal amount of forgivable loans and accrued interest is forgiven by us over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with us 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.
Compensation Arrangements
We have entered into compensation arrangements for the payment of performance awards to certain of our non-employee experts and employees that are payable if specific performance targets are met. These financial targets may include a measure of revenue generation, profitability, or both. The amounts of the awards to be paid under these compensation arrangements could fluctuate depending on future performance during the applicable measurement periods. Changes in the estimated awards are expensed prospectively over the remaining service period. We believe that we will have sufficient funds to satisfy any cash obligations related to the performance awards. We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings on our revolving credit facility.
Our 2006 Equity Plan, authorizes the grant of a variety of incentive and performance equity awards to our directors, employees and non-employee experts, including stock options, shares of restricted stock, restricted stock units, and other equity awards.
Our long-term incentive program LTIP serves as a framework for equity grants made under our 2006 Equity Plan to our senior corporate leaders, practice leaders, and key revenue generators. The equity awards granted under the LTIP include stock options, time-vesting restricted stock units, and performance-vesting restricted stock units.
Our LTIP also allows us to grant service and performance-based cash awards in lieu of, or in addition to, equity awards to our senior corporate leaders, practice leaders, and key revenue generators. The compensation committee of our Board of Directors is responsible for approving all cash and equity awards under the LTIP. Under our cash incentive plan, we expect to pay LTIP cash awards of approximately $12.0 million over the next twelve months and $26.7 million between fiscal 2027 and fiscal 2030. We expect to fund any cash payments from existing cash resources, cash generated from operations, or borrowings on our revolving credit facility.
Business and Talent Acquisitions
As part of our business, we regularly evaluate opportunities to acquire other consulting firms, practices or groups, or other businesses. In recent years, we have typically paid for acquisitions with cash, or a combination of cash and our common stock, and we may continue to do so in the future. To pay for an acquisition, we may use cash on hand, cash generated from our operations, borrowings under our revolving credit facility, or we may pursue other forms of financing. 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
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depend on several factors, including our future profitability, the levels of our debt and equity, restrictions under our existing revolving credit facility with our bank, and the overall credit and equity market environments.
Share Repurchases
In February 2026 and February 2025, our Board of Directors authorized an expansion to our existing share repurchase program, authorizing the purchase of an additional $55.0 million and $45.0 million, respectively, of our common stock. The program has no expiration date. 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 fiscal 2025, fiscal 2024, and fiscal 2023, we repurchased and retired 252,205 shares, 206,379 shares, and 296,158 shares, respectively, under our share repurchase program at an average price per share of $186.95, $161.59, and $106.08, respectively. We had approximately $10.9 million and $65.9 million available for future repurchases under our share repurchase program as of January 3, 2026 and February 26, 2026, respectively. We plan to finance future repurchases with available cash, cash from future operations and funds from our revolving credit facility. We expect to continue to repurchase shares under our share repurchase program.
Dividends to Shareholders
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 borrowings 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 years ended January 3, 2026, December 28, 2024, and December 30, 2023, we paid dividends of $13.8 million, $12.3 million, and $10.8 million, respectively.
Impact of Inflation
To date, inflation has not had a material impact on our financial results. There can be no assurance, however, that inflation will not adversely affect our financial results in the future.
Future Capital and Liquidity Needs
We anticipate that our future capital and liquidity needs will principally consist of funds required for:
• operating and general corporate expenses relating to the operation of our business, including the compensation of our employees under various annual bonus or long-term incentive compensation programs;
• the hiring of individuals to replenish and expand our employee base;
• capital expenditures, primarily for information technology equipment, office furniture and leasehold improvements;
• debt service and repayments, including interest payments on borrowings from our revolving credit facility;
• share repurchases under programs that we may have in effect from time to time;
• dividends to shareholders;
• potential acquisitions of businesses that would allow us to diversify or expand our service offerings;
• contingent obligations related to our acquisitions; and
• other known future contractual obligations.
The hiring of individuals to replenish and expand our employee base is an essential part of our business operations and has historically been funded principally from operations. Many of the other above activities are discretionary in nature. For example, capital expenditures can be deferred, acquisitions can be forgone, and share repurchase programs and regular dividends can be suspended. 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 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.
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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. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that have a material effect on the cash flow or profitability of our business. Any of these events or circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified currently available sources and could require us to raise additional debt or equity funding to meet those needs on terms that may be less favorable compared to our current sources of capital. Our ability to raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:
• our future profitability;
• the quality of our accounts receivable;
• our relative levels of debt and equity;
• the volatility and overall condition of the capital markets; and
• the market prices of our securities.
Factors Affecting Future Performance
Item 1A. Risk Factors of this annual report on Form 10-K sets forth risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this annual report on Form 10-K. If any of these risks, or any risks not presently known to us or that we currently believe are not significant, develops into an actual event, then our business, financial condition, and results of operations could be adversely affected.
