Good day everyone, and welcome to Charles River Associates Fourth Quarter and Fiscal Year End 2015 Conference Call. Today's call is being recorded. Today's news release and prepared remarks from the CRA's Chief Financial Officer are posted on the Investor Relations section of CRA's Web site. With us today are CRA's President and Chief Executive Officer, Paul Maleh; and Chief Financial Officer, Chad Holmes. At the time I would like to turn the call over to Mr. Holmes for opening remarks. Please go ahead sir.

Thank you, Christine. I'd like to remind everyone that the statements made during this conference call concerning the future business, operating results and financial condition of the company, including those identified in our earnings release, and statements regarding guidance, or expectations regarding our annual revenue growth and adjusted EBITDA margins, or using the terms expect, position, anticipate, believe seek, should, target, poised, estimate, and similar terms are forward-looking statements as defined in Section 21 of the Exchange Act. Information contained in these forward-looking statements is based on management's current expectations and is inherently uncertain and actual performance and results may differ materially from those expressed or implied in these statements due to many important factors. Additional information regarding these factors is included in today's earnings release and in the company's periodic reports with the SEC. The Company undertakes no obligation to update any forward-looking statements after the date of this call. Additionally, we will refer to some non-GAAP financial measures on this call, including adjusted EBITDA and certain measures presented on a constant currency basis. Everyone is encouraged to refer to today's earnings release for a full reconciliation of these non-GAAP items to their GAAP equivalents as well as a calculation of adjusted EBITDA based on GAAP and non-GAAP results, and a description of the process for calculating the measures presented on a constant currency basis. Let me now turn it over to Paul for his report. Paul?

Thanks Chad and good morning everyone. Our mission is to be the firm of choice for our clients' most important litigation, regulatory and strategic challenges, while providing fulfilling and exciting home for our colleagues. Our recruiting successes over the past few years, and growth in demand for our services in an otherwise flat marketplace, validate our strategy. We continue to see solid demand for our portfolio of services in fiscal 2015. For fiscal 2015, average weekly project lead flow and new project originations, each increased compared with fiscal 2014 by approximately 4%. More recent metrics indicate greater strength, with project lead flow and new project originations for the second half of 2015, growing approximately 6% and 7% respectively, compared with the second half of fiscal 2014. This momentum has continued during the first six weeks of fiscal 2016. While the timing and size of these new projects cannot be determined in advance, CRA's business fundamentals and strategy position the firm for growth. We are happy to report that consulting headcount increased by 13% from 451 at the end of fiscal 2014, to 511 at the end of fiscal 2015. Staffing investments were concentrated in areas with strong market presence, and opportunity for growth within the Antitrust & Competition, Forensic and Cyber Investigations, Labor and Employments, Lifesciences and Financial Services. Let's walk through our fourth quarter 2015 performance, followed by our full year 2015 results. As a reminder, it's important to note that both GAAP and non-GAAP results for the fourth quarter and full year of fiscal 2015, reflects 13 weeks and 52 weeks of operations respectively. Whereas the fourth quarter and full year of fiscal 2014, had 14 weeks and 53 weeks of operations respectively. Utilization was 68% for the fourth quarter of fiscal 2015, as we continue to integrate…

Thanks Paul. As a reminder, more expansive commentary on our financial results is available on our Investor Relations section of our web site. Before covering some additional metrics, I want to discuss the goodwill impairment charge related to CRA's NeuCo subsidiary. In the fourth quarter of fiscal 2015, NeuCo's goodwill impairment resulted in a non-cash charge totaling $4.5 million. As with all of NeuCo's results, the goodwill impairment charge relating to NeuCo, is excluded from CRA's non-GAAP results. The NeuCo goodwill impairment charge does not affect CRA's liquidity position, cash flow or our bank line of credit, in order to have any effect on CRA's operation. So that we can get to your questions, let me address a few additional metrics related to our fourth quarter performance. As Paul mentioned, we ended the year with 511 consulting staff, which consisted of 122 officers, 267 other senior staff and 122 junior staff. This is a net increase of 60 consultants from the 451 total consulting headcount that we reported at the end of fiscal 2014. Non-GAAP selling, general and administrative expenses, as a percent of revenue, excluding commissions to non-employee experts, is 20.1% for the fourth quarter of 2015 compared with 19.1% a year ago. The fourth quarter of 2015 continued to see non-recurring real estate expenditures, as we conceded our transition to new office space in Washington DC, while starting to build out related to our New York City office. The effective tax rate for the fourth quarter 2015, on a non-GAAP basis, was unusually high at 87.6%, compared with 36.3% on a non-GAAP basis for the fourth quarter of fiscal 2014. The increase in the tax rate compared with the fourth quarter of a year ago, is primarily related to lower than expected pre-tax fourth quarter earnings and a…

[Operator Instructions]. Thank you. Our first question comes from the line of David Gold with Sidoti. Please proceed with your question.

Hi, good morning.

Hi. Good morning Dave.

So I was hoping that you could give a little bit of color, as to utilization trends, absolutely bringing us forward, but also, I guess from a distance, one of the things we are looking at is, that even though you didn't add that many more heads in the fourth quarter, sequentially, your utilization went down pretty dramatically. So any commentary you can [indiscernible] from that, and maybe a monthly look at it as well?

Sure. Let me start with our goal as an enterprise is to operate in the low to mid-70s of utilization. That has been our goal and that will continue to be our goal in 2016 and beyond. With respect to the comment or question, that we didn't add that many heads in 2016, what really needs to be taken into account here, is that the majority of heads that were added in Q3 of 2015 occurred in the latter half of Q3 of that quarter. So for the first two to four weeks, it's almost pure training, and administrative integration of those resources, before they get totally online. So the majority of the staffing burden, or addition, really was felt during Q4. The impact on utilization, is that integration takes an effort, and my legacy colleagues did a wonderful job, making sure to try to get these new individuals ramped up, with new project work. And as a result, they may have lowered their utilization, as they are pushing work down or across the organization. What we like about the aggregate trend, is that we have seen improvements, both in legacy and in terms of the new staff. The other thing that we try to give a lot of color to, is that the demand for the services that we are observing, continues to grow at a pretty substantive rate. The reason that's important to us, it means that it is just -- in my view, a matter of time before these resources get to a more normalized level of utilization.

Got you. And so, do you think at this point, it's -- you're going to say, six months to get them there, is it a full year?

You know, it's really hard for me to estimate the exact time period. I would be very disappointed, if we are looking at a year from now, and I haven't seen these resources to our stated goals. So I think the ramps incurring. We are seeing nice incremental improvements in it, and what I always keep my eye on, again, not to beat this to death, is the lead flow in the new project origination; because, if you are adding capacity, particularly, you are adding capacity in an organic manner as we did. This was not an acquisition of a preexisting unit that was brought into CRA, this was organic expansion across our entire portfolio. The fact, that as we bring in these new resources, we are seeing demand increase for the services, it is not staying flat. And the reason I am harping on that, because that means that it is just a matter of time, before we see that demand and the new project originations translate into a good revenue and profitability.

Got you. Okay. Perfect. And then couple of other questions, first for you Paul; you commented that repurchases remain the preferred method of returning capital, and you have been somewhat aggressive buy over the last few years. But I guess what strikes me is, the repurchase activity for 2016 was, looks like half the rate of 2015, yet -- I am sorry, 2015 versus 2014, was about half versus, a significantly lower share price, particularly in the fourth quarter. Any thoughts or color or commentary there?

Sure. I would be happy to do so. Our view on the intrinsic valuation of CRA has not changed. So this is not that we believe, that the value of the company has declined. We had new investment needs in 2015 that we did not have in 2014. For example, we had the real estate, which we knew there was going to be a substantial capital outlay. We had targeted substantial headcount improvements, which we knew would require capital, in terms of bringing the new staff in, and then capital, in terms of getting them integrated, up to a more standard company average. So we try to balance all this internally, in terms of our internal cash generation, and that is the main reason for the slightly lower share repurchase activity in 2015. As things stabilize, with these investment needs, we are constantly looking for ways to repurchase the equity, and we are doing so now, and we will continue to do so in the weeks and quarters ahead.

Perfect. And one last, on the guidance, and maybe it's more appropriate for Chad, basically, it'd be helpful; can you give some sense, as you think about 2016, as to what we should think about from a stock comp and from a forgivable loan amortization standpoint? Just given your visibility into that for right now, as we build out our models?

Sure. Let me start with the forgivable loan amortization. Right now, when we enter any year, we don't necessarily earmark acquisition capital to either be cash or forgivable loan, in terms of the vehicle and distribution. That sort of is on a opportunity specific point. So I couldn't tell you with a lot of certainty, with respect to whether we plan to issue more forgivable loans or at a higher rate than 2016 than in the past years. We will continue to try to see opportunities for brand, at both organic and inorganic, and we always strive to have the portfolio more rated towards organic expansion on that. Maybe Chad can provide more details with respect to the actual loan amortization for 201Maybe Chad can provide more details with respect to the actual loan amortization for 2015?

For 2015, the loan amortization was $16 million, for the full year.

Right. But I guess the question is more, you give your guidance a little bit differently than many others, right? You don't give any EPS number, but you give an adjusted EBITDA target. And embedded in that adjusted EBITDA target, is this forgivable loan piece and the stock comp piece. So I guess the question is, as you put together that guidance, can you give us some color on, what you are thinking or what level you're looking at for that? Because we got the other components we can forecast, but these components, you actually presumably have hard numbers, but you used to do that?

Sure. I think right now, it is safe to assume that the rates that you observe in 2015 would continue through 2016, that is really the best estimate that I have, to provide going forward. And if there are discrete acquisitions that are using forgivable loans as a vehicle, we would communicate that to our shareholders and to the analysts.

So, same level for both forgivable loans and for stock-based comp?

Yes.

Okay, got you. And I guess I can throw out a suggestion that on a go forward, I think it would be helpful if you added an EPS component to the guidance.

You know, I am not going to make anyone happy with an EPS guidance, because the part that is so difficult for us to estimate, is how we are going to add inorganic revenue to the firm. Whether it will be through a forgivable loan or a traditional acquisition accounting, that is sort of off income statement. So with the exact same contributions, exact same cash outflow, I can have a substantively different EPS. So my predictability there, is really rather low, and that is the reason I went closer to a cash flow measure for our shareholders.

Got you. All right. Fair enough. I appreciate it. Thank you both.

Thank you, David.

Our next question comes from the line of Tim McHugh with William Blair. Please proceed with your questions.

Yes, thanks. Just on the -- I guess the fourth quarter, I get why, given the timing of the hiring, why expenses would be up and why utilization would be down, and as you had to wait for time for those new consultants to ramp up. I guess more, just the revenue, even being the down of -- I guess, roughly call it 10% or so or maybe a little less versus the run rate you had early in the year, at least versus kind of Q1, maybe a little less versus Q2 and Q3 but, long winded way of asking, kind of what changed from the demand [indiscernible], I know you described good project lead flow for the second half of the year, was that less true for Q4, or was there a bigger seasonal impact around the year end, or is it something else, I guess? Why it got the aggregate revenue down?

Well, revenue is actually not down. I guess from an exactly reported Q4 2014 relative to Q4 2015, it is down. But if I look at the revenue run rate, on an apples-to-apples basis, it's actually up slightly. Again, it's not anything that we are hanging our hat on, it is lower than what we would have expected. But it is not down. I mean, the reason I am highlighting that, Tim, is to say that, I am not seeing a tightening of the revenue opportunities that we have. The decline is, as you are getting new resources ramped up, and the best example, and this is what I tried to give to investors and board alike, when discussing it; let's say a new professional needs somewhere between two to four projects to get to, what we think to be optimal utilization levels. You always look for legacy projects, if you have those opportunities, but oftentimes, their ramp comes from new project originations, and that's what takes a little bit of the time. So it's not that the projects aren't there, but it's getting them ramped up and are fully loaded with the project load. So the revenues there, we are just trying to get these projects up and running as quickly as we can, and optimally staffed for our clients and for the firm.

Okay. I guess -- maybe let me try it. I mean, I guess, you had been -- on a reported basis, $76 million to $77 million of revenue for three or four quarters there, and this quarter, of closer to $71.5 million. So I get though, that it takes time for new people to ramp up their project lead flow, but your legacy people produced at a lower rate in the fourth quarter, than they had been in the prior quarters? I guess that's what I am not understanding?

You have a very different vacation calendar in Q4. We had three holidays. So you had thanksgiving, you had the holidays in December, and you had New Years, all falling within Q4. So to compare that to say Q1, which is a very little, very different holiday profile, doesn't translate, particularly when we are dealing with a business that's predominantly time and material. That's why I began with the comparison back to Q4 of 2014. SO I am not seeing a decline in the revenue. If you look at the difference of just holiday time, between Q4 and say Q1; if anywhere, Q1s are typically 5% to 7% more, just because of the holiday time, in terms of available hours for billings on that.

Did that surprise you though, because the revenue came in below the guidance then, I guess? So where you [indiscernible] that?

Yeah. We are not --

I guess, why did that surprise you then? If that's the kind of the --

It's expected to get -- I knew of the holiday calendar, I expected to get faster ramp on the integration. That's what the surprise was. We sort of knew Christmas was where it was at. That wasn't a surprise, but it was on the ramp of those new colleagues. That was where the surprise was.

Okay. And can I just -- you gave some broad comments, good demand continued, I guess, just in your Competition and Antitrust business, and certainly included in that has been very strong, I guess. But given the choppiness in the macro environment, how do you think about that business, as you go forward here more so? Is there -- would you expect to see some impact there, or you still feel confident around the kind of the trendline for that business?

It’s a good question. What I can tell you is that, lead flow going into that business, we haven't seen any decline of that. When I look at predictors of what M&A activity may be into 2016, I haven't really come across a lot of those predictions that indicate a decline in net activity for the next 12 months. There is clearly a lot of economic uncertainty, that we are all trying to balance and weigh, but at least from what I am seeing and observable, things coming into this firm, and more macro forecasters, I am not seeing a decline over the next 12 months. But we are keeping our eye on that.

All right. Thanks.

Thank you.

[Operator Instructions]. Our next question comes from the line of Patrick Retzer with Retzer Capital Management. Please proceed with your question.

Hi guys.

Good morning.

In your call, you have referred to the intrinsic value of the stock several times, can you tell us what you believe that value is, either in terms of a price range or multiples or one or more metrics?

So let me try to answer that the best I can, okay? What I observe and when I run into kind of discounted cash flow valuation for our firm, that is based on our best expectations, those values tend to be roughly consistent with the market multiples that are observed by other companies in our sector. I am not seeing a disconnect between what we see as our intrinsic valuation, and what I am observing is market multiples for other firms, comparably situated. We do not provide what that value is, but what I can tell you, is that value is significantly higher than what I observe in the stock price of CRA.

Okay. I mean, when I look at comparables, I would think, the intrinsic value of CRA on an apples-to-apples basis is at least $25 to $30, if not above $30 a share?

No. Any investors out there listening, I would encourage them to run their own valuation, and if anyone's coming up with their own valuation, that is consistent with our observed market price, I would love to see it; because we are not coming up with that in our analysis.

Okay. So considering that, and the fact that you have been quite aggressive in stock buybacks in the past, and the stock is at a huge discount of where it was, just a year ago, did you consider doing something even more aggressive, like a debt auction?

We are taking everything into account, and what we are trying to do is, we will inform our shareholders and the greater investing market of future plans on that. But what I can say definitively, right now, is we do believe the stock is very attractively priced, and will be working to purchase as much shares as we can.

Okay. Thank you.

Thank you.

Our next question comes from the line of John Lewis with Osmium Partners. Please proceed with your question.

Hey, good morning John.

Good morning Paul. Yeah, I continue to be really disappointed. It feels like the theme of everyone wins but the shareholders, continues. A year and a half ago, there was a couple of conference calls in a row, where you said we will direct all excess capital into share repurchases until the massive gap between intrinsic value and our quoted share price is closed. I was in the [ph] the stock was $26, $27 a share. And we get into this inconsistent radical departures of what is said and what is done, consistently now. And so now, we have got a stock that's going from $27 to $17 a share, and as the two sell-side analysts before correctly observed, we buy with a tablespoon, 88,000 shares of stock. So I continue to scratch my head and watch with the stock down, massive ramp in new consultants, and it seems like maybe some of these verticals are attractive, but the net result is -- since you have become CEO, the stock is down 50%, its trading at the lowest valuation of any company in the peer group, and you guys are thumb sucking.

You got a question in there, John?

Yeah, there is a question there.

Okay. So why don't we get to it?

When are you guys going to use your balance sheet with $40 million in cash? You got $125 million in uncapped lines of capital, when are you going to get in there and meaningfully buy back stock, versus just drift around here?

It's all about what you want to define as excess capital and what you think as needed for the operations of this firm.

I think three times EBIT, starts looking like, the stock is pretty meaningfully undervalued, unless you don't have confidence in your strategy? I think it's kind of put up or shut up.

We retired more shares of anyone in the sector over the last three or four years. And as a percent of the shares outstanding. I could understand why you would like to see more. We would like to see more. And are doing what we can to address that. But to say that it has not been front and center of the actions over the last three years, I don't think necessarily is accurate of our operations, John.

Yeah, the issue is, that it was done at 60% higher prices I'd like to buy more at low prices and less at high prices. That's the disconnect. That's the frustration. When there is a huge opportunity on your plate, you buy back 88,000 shares, and at $27, you buy back tens of millions of dollars worth of stock. And that's what [indiscernible].

So as I said, right, we tell our shareholders what we are purchasing, and a that strategy evolves or actions change, you will be the first to know.

I will just leave it at this; I think that the Board is radically underrepresented by shareholders. I think that's a problem and I am definitely very disappointed. Thanks.

At this time, we have reached the end of the question-and-answer session. I will now turn the conference back over to Mr. Maleh for any closing or additional remarks.

Okay. Thanks Christine and thanks everyone for joining us today. We appreciate your time and interest in CRA, we will be getting out, meeting with investors in the coming months, and we look forward to updating you on the progress next quarter. With that, that concludes today's call, thank you to everyone.