CRA INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business

CRA International, Inc. and its wholly-owned subsidiaries (collectively, "CRA" or the "Company") is a worldwide leading consulting services firm that applies advanced analytic techniques and in-depth industry knowledge to complex engagements for a broad range of clients. CRA offers services intwo broad areas: litigation, regulatory, and financial consulting and management consulting. CRA operates inone business segment. CRA operates its business under its registered trade name, Charles River Associates.

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of CRA which require consolidation, after the elimination of intercompany accounts and transactions. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair presentation of CRA’s results of operations, financial position, cash flows, and shareholders’ equity for the interim periods presented in conformity with U.S. GAAP. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 28, 2024 included in CRA’s Annual Report on Form 10-K filed with the SEC on February 20, 2025.

Note 1 to the Consolidated Financial Statements included in Part II, Item 8, on Form 10-K for the fiscal year ended December 28, 2024 describes the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Recent Accounting Standards

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

On December 28, 2024, CRA adopted Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures("ASU 2023-07"), which established reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

Recent Accounting Standards Not Yet Adopted

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures("ASU 2023-09"). The ASU expands annual disclosures in an entity’s income tax rate reconciliation table and requires annual disclosures regarding cash taxes paid both in the U.S. (federal, state and local) and foreign jurisdictions. ASU 2023-09 also requires income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.

ASU 2023-09 is effective for CRA for annual periods beginning after December 15, 2024. CRA plans to adopt the amendment during the annual reporting for fiscal year 2025. CRA has begun to assess the impact of the amendment and has modeled out the changes to its income tax disclosures. As the amendment relates solely to disclosures, the adoption is not expected to have an effect on CRA's financial results.

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses("ASU 2024-03"). The ASU requires disclosure, in the notes to the financial statements, specified information about certain costs and expenses including employee compensation, depreciation, and intangible asset amortization.

ASU 2024-03, further clarified in ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense

Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date is effective for CRA for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. CRA is in the process of evaluating the impact of adopting ASU 2024-03.

2. Revenues and Allowances

The contracts CRA enters into and operates under specify whether the projects are billed on a time-and-materials or a fixed-price basis. Time-and-materials contracts are typically used for litigation, regulatory, and financial consulting projects while fixed-price contracts are principally used for management consulting projects. In general, project costs are classified in costs of services and are based on the direct salary of CRA’s employee consultants on the engagement, plus all direct expenses incurred to complete the project, including any amounts billed to CRA by its non-employee experts.

Disaggregation of Revenue

The following tables disaggregate CRA’s revenue by type of contract and geographic location (in thousands):

Revenues have been attributed to locations based on the location of the legal entity generating the revenues.

Reserves for Variable Consideration and Credit Risk

Revenues from CRA's consulting services are recorded at the net transaction price, which includes estimates of variable consideration for which reserves are established. Variable consideration reserves are based on specific price concessions and those expected to be extended to CRA customers estimated by CRA's historical realization rates. Reserves for variable consideration are recorded as a component of the allowances for accounts receivable and unbilled services on the condensed consolidated balance sheets. Adjustments to the reserves for variable consideration are included in revenues on the condensed consolidated statements of operations.

CRA also maintains allowances for accounts receivable and unbilled services for estimated losses resulting from clients’ failure to make required payments. Under ASC 326, CRA estimates allowances based on historical charge-off rates, adjusted for days sales outstanding and expected changes to clients’ financial conditions during the anticipated collection period. Bad debt expense, net of recoveries of previously written off allowances, is recorded as a component of selling, general and administrative expenses on the condensed consolidated statements of operations.

The following table presents CRA's bad debt expense, net of recoveries of previously written off allowances (in thousands):

Reimbursable Expenses

Revenues also include reimbursements for costs incurred by CRA in fulfilling its performance obligations, including travel and other out-of-pocket expenses, fees for outside consultants, and other reimbursable expenses. CRA recovers substantially all of these costs. The following expenses are subject to reimbursement (in thousands):

Contract Balances from Contracts with Customers

The timing of revenue recognition, billings, and cash collections results in accounts receivables, unbilled services, and contract liabilities on the condensed consolidated balance sheets. Revenues recognized for services performed, but not yet billed to clients, are recorded as unbilled services. The following table presents the open and closing balances of CRA's accounts receivable, net and unbilled services, net (in thousands):

CRA defines contract assets as assets for which it has recorded revenue because it determines that it is probable that it will earn a performance-based or contingent fee, but is not yet entitled to receive a fee because certain events, such as completion of the measurement period or client approval, must occur. The contract assets balance was immaterial as of March 29, 2025, December 28, 2024, and December 30, 2023.

When consideration is received, or such consideration is unconditionally due from a customer prior to transferring consulting services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after performance obligations have been satisfied and all revenue recognition criteria have been met. Contract liabilities are included in deferred revenue and other liabilities in the condensed consolidated balance sheets. The following table presents the closing balances of CRA's contract liabilities (in thousands):

CRA recognized the following revenue that was included in the contract liabilities balance as of the opening of the respective period or for performance obligations satisfied in previous periods (in thousands):

3. Forgivable Loans

In order to attract and retain highly skilled professionals, CRA may issue forgivable loans to employees and non-employee experts, certain of which may be denominated in local currencies. A portion of these loans is collateralized. The forgivable loans have terms that are generally between two andsix years with interest rates currently between 0.59% and 5.12%. The principal amount of forgivable loans and accrued interest is forgiven by CRA over the term of the loans, so long as the employee or non-employee expert continues employment or affiliation with CRA and complies with certain contractual requirements. During the fiscal quarter ended March 29, 2025 and fiscal year 2024 there were no balances due under these loans for which the full principal and interest were not forgiven or not collected upon termination of employment or affiliation with CRA. The forgiveness of the principal amount of the loans is recorded as compensation over the service period, which is consistent with the term of the loans.

The following table presents forgivable loan activity for the respective periods (in thousands):

(1)Relates to the reclassification of performance awards previously recorded as accrued expenses or forgivable loans that have been reclassified to other receivables.

(2)During the fiscal quarter ended March 29, 2025, approximately $0.04 million of amortization was accelerated due to involuntary terminations. During the fiscal year ended December 28, 2024, approximately $5.7 million of amortization was accelerated due to involuntary terminations.

4. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the fiscal quarter ended March 29, 2025 are summarized as follows (in thousands):

Goodwill, net at March 29, 2025 is comprised of goodwill of $166.0 million and accumulated impairmentof $71.9 million. There wereno impairment losses related to goodwill during the fiscal quarter ended March 29, 2025 or during the fiscal year ended December 28, 2024.

Intangible assets that are separable from goodwill and have determinable useful lives are valued separately and amortized using the straight-line method over their expected useful lives. There wereno impairment losses related to intangible assets during the fiscal quarter ended March 29, 2025 or during the fiscal year ended December 28, 2024.

The components of acquired identifiable intangible assets are as follows (in thousands):

As a result of an asset acquisition in CRA's intellectual property practice, CRA recognized $1.5 million of intangible assets related to customer relationships during the second quarter of fiscal 2024. Amortization expense related to intangible assets was $0.4 million and $0.3 million for the fiscal quarters ended March 29, 2025 and March 30, 2024, respectively.

5. Accrued Expenses

Accrued expenses consist of the following (in thousands):

As of March 29, 2025 and December 28, 2024, approximately $66.7 million and $144.2 million, respectively, of accrued bonuses were included above in “Compensation and related expenses.”

6. Income Taxes

For the fiscal quarters ended March 29, 2025 and March 30, 2024, CRA’s effective income tax rate (“ETR”) was 27.0%and 28.0%, respectively. The ETR for the first quarter of fiscal 2025 was lower than the first quarter of fiscal 2024 primarilydue to the impact of state tax law changes effective for the 2025 tax year and an increase in the tax benefit related to share-based compensation.

7. Net Income Per Share

CRA calculates basic earnings per share using the two-class method. CRA calculates diluted earnings per share using the more dilutive of either the two-class method or treasury stock method. The two-class method was more dilutive for the fiscal quarters ended March 29, 2025 and March 30, 2024.

Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all the net earnings for the period had been distributed. CRA's participating securities consist of unvested share-based payment awards that contain a nonforfeitable right to receive dividends and therefore are considered to participate in undistributed earnings with common shareholders. Net earnings allocable to these participating securities were not material for the fiscal quarters ended March 29, 2025 and March 30, 2024.

The following table presents the calculation of basic and diluted net income per share (in thousands, except per share data):

Anti-dilutive share-based awards are excluded from the calculation of common stock equivalents for purposes of computing diluted weighted average shares outstanding. There were no anti-dilutive share-based awards for the fiscal quarters ended March 29, 2025 and March 30, 2024.

8. Fair Value of Financial Instruments

As of March 29, 2025 and December 28, 2024, CRA did not have any financial instruments measured at fair value on a recurring basis.

The contingent consideration liability pertained to estimated future contingent consideration payments related to the acquisition of bioStrategies Group, Inc. during fiscal 2022. CRA had no contingent consideration obligation during the fiscal quarter ended March 29, 2025. The following table summarizes the changes in the contingent consideration liability for the fiscal year ended December 28, 2024 (in thousands):

9. Credit Agreement

CRA is party to a Credit Agreement, dated as of August 19, 2022 (as amended, the "Credit Agreement") with Bank of America, N.A., as swingline lender, a letter of credit issuing bank and administrative agent, and with Citizens Bank, N.A., as a letter of credit issuing bank. The Credit Agreement provides CRA with a $250.0 million revolving credit facility, which may be decreased at CRA's option to $200.0 million during the period from July 16 in a year through January 15 in the next year. Additionally, for the period from January 16 to July 15 of each calendar year, CRA may elect to not increase the revolving credit facility to $250.0 million. The revolving credit facility includes a $25.0 million sublimit for the issuance of letters of credit.

Under the Credit Agreement, CRA must comply with various financial and non-financial covenants. The primary financial covenants consist of a maximum consolidated net leverage ratio of 3.0 to 1 and a minimum consolidated interest coverage ratio of 2.5 to 1. The primary non-financial covenants include, but are not limited to, restrictions on CRA's ability to incur future indebtedness, engage in acquisitions or dispositions, pay dividends or repurchase capital stock, and enter into business combinations. Any indebtedness outstanding under the revolving credit facility may become immediately due upon the occurrence of stated events of default, including CRA's failure to pay principal, interest or fees, or upon the breach of any covenant. As of March 29, 2025, CRA was in compliance with the covenants of the Credit Agreement.

There were$85.0 million in borrowings outstanding under the revolving credit facility as of March 29, 2025 andno borrowings outstanding as of December 28, 2024. As of March 29, 2025, the amount available under the revolving credit facility was reduced by certain letters of credit outstanding, which amounted to $3.9 million.

10. Commitments and Contingencies

As described in Note 9, CRA is party to standby letters of credit with its banks in support of minimum future lease payments under certain operating leases for office space.

CRA is subject to legal actions arising in the ordinary course of business. In management’s opinion, based on current knowledge, CRA believes it has adequate legal defenses or insurance coverage, or both, with respect to the eventuality of such actions. CRA does not believe any settlement or judgment relating to any pending legal action would materially affect its financial position or results of operations. However, the outcome of such legal actions is inherently unpredictable and subject to inherent uncertainties.

11. Segment Reporting

CRA manages its business globally withinone operating segment, professional and consulting services, in accordance with ASC Topic 280, Segment Reporting (“ASC 280”). The accounting policies of the professional and consulting services segment are the same as those described in Note 1 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the SEC on February 20, 2025.

The chief operating decision maker, which is our Chief Executive Officer, assesses performance for the professional and consulting services segment and decides how to allocate resources based on consolidated net income that is also reported in the condensed consolidated statements of operations as net income. The measure of segment assets is reported in the condensed consolidated balance sheets as total assets.

The following table represents consolidated net income reported by segment revenue, segment profit or loss, and significant segment expenses (in thousands):

12. Subsequent Events

On May 1, 2025, CRA announced that its Board of Directors declared a quarterly cash dividend of $0.49 per common share, payable on June 13, 2025 to shareholders of record as of May 27, 2025.