Charles River Laboratories International : Q1 2026 Earnings Presentation

Published: 2026-05-07 07:38:38 ET CRL

Published on 05/07/2026 at 07:38 am EDT

Charles River Laboratories 1Q 2026 Results

May 7, 2026

Strengthen our World-Class Scientific Portfolio

Enhancing our capabilities in strategic locations by investing in core growth areas and providing scientific solutions that are critical to our clients, particularly in regulated drug development

Modernize our Company and our Industry

Building a future version of CRL that will be faster, more agile and connected, and data driven by driving greater efficiency, streamlining and simplifying processes, and creating an environment that allows scientific insights and information to move more quickly

A solid foundation that will enable CRL to drive profitable revenue growth, optimize its financial performance, and unlock additional shareholder value

MODERNIZE

STRENGTHEN

GROW

Deliver a Customized, Client-Centric Approach

Ensuring we remain a preferred partner to the biopharmaceutical industry by building even deeper, broader, and more customized relationships with our clients

Substantial progress to drive greater operating efficiency and optimize processes

Expect to generate >$100M in incremental cost savings in 2026

Cumulatively expect to generate >$300M in annualized cost savings from actions taken in recent years

(including restructuring)

Evaluating new initiatives to drive additional savings to generate meaningful operating margin expansion in the future

Progress on our efforts to further strengthen our leading scientific portfolio by refocusing on our core competencies, including through actions taken as part of comprehensive strategic review last year

This year, acquired the assets of K.F. (Cambodia) Ltd. (now Charles River Cambodia) to strengthen NHP supply and PathoQuest to advance our NAMs capabilities (new approach methodologies)

Completed the previously announced divestiture of our CDMO and Cell Solutions businesses on May 6th

Expect to complete the planned sale of certain European Discovery Services sites in May 2026

Divestitures and K.F. acquisition will drive significant operating margin expansion in 2026 and beyond

Strengthening our portfolio of NAMs capabilities through organic investments and M&A

Developed a pioneering approach to virtual control groups (VCGs) for safety assessment studies to reduce reliance on animal models in control groups

Our client-centric approach leverages technology, including AI, to improve sales effectiveness, KPI transparency, and lead generation

Investing in collaborative tools that enhance client engagement and generate better insights from

their data

Apollo cloud-based platform delivers a seamless, self-service client experience with real-time access to

scientific data and decision support tools

Differentiates CRL in the marketplace through the speed that we can work with our clients

Apollo's scope has expanded from RMS e-commerce and DSA pricing into study design, CRADL , and Manufacturing businesses, with further expansion underway

Basic

Research

AI will lead to more regulated drug development opportunities including an increase in IND approvals

Manufacturing Solutions

Discovery and Safety Assessment (DSA)

Research Models and Services (RMS)

Drug

Discovery

Non-Clinical

Development

Clinical

Development

Market

Approval

Commercial

Manufacture

AI FOCUS

AI has been evaluated and used in the drug discovery process1 for nearly a decade and that is likely the area where it may continue to gain the most traction

Target Identification

Molecular Design

Screening

Clinical Trial Optimization

AI EFFICIENCY GAINS REINVESTED IN R&D

Nearly 60% of R&D executives expect AI investments to result in an increase in Investigational New Drug (IND) approvals and a faster pace of drug discovery over the next two to three years2

Deutsche Bank's "Contract Research Organizations: Thoughts and Industry Feedback on AI" (March 2026)

Deloitte "Pharma's R&D lab of the future: Building a long-lasting innovation engine" (July 2025)

Biopharma demand environment stabilized and currently seeing pockets of improvement for both global biopharmaceutical and small and mid-sized biotechnology clients

Global Biopharma: Revenue to our global biopharmaceutical clients increased in 1Q26

Many of these clients have progressed through their restructuring and pipeline reprioritization activities and demand

trends have improved

Overall spending levels aren't yet back to historical levels

Small and Mid-Sized Biotech: Revenue from small and mid-sized biotech clients declined in 1Q26, primarily reflecting softer DSA booking activity last summer and normal lag between booking and revenue generation

Demand trends from biotech clients improved over past two quarters, as a result of reinvigorated funding environment

exiting 2025 and continued health in 2026

Recent increase in biopharma M&A activity has also provided another source of capital infusion or an exit strategy for biotechs

Expect small and mid-sized biotech revenue to improve in the coming quarters given our recent biotech demand KPIs (e.g. net bookings)

Mid-sized biotechs have better access to capital as they approach IND or enter the clinic

Startup biotech demand remains tepid because earlier-stage and seed funding environment remains constrained despite a recent uptick in IPO activity

Academic/Government: Revenue from global academic and government clients remained stable in 1Q26 despite government funding pressure, reflecting essential nature of our research solutions

($ in millions, except per share amounts)

1Q26

1Q25

YOY Δ

Organic Δ

Revenue

$995.8

$984.2

1.2%

(1.5)%

GAAP OM%

12.0%

7.6%

440 bps

Non-GAAP OM%

16.3%

19.1%

(280) bps

GAAP EPS

$(0.30)

$0.50

Non-GAAP EPS

$2.06

$2.34

(12.0)%

Highlights from the quarter:

Delivered 1Q26 results despite the anticipated pressure from several discrete margin headwinds

1Q26 margin headwinds: Lower NHP revenue in RMS due to timing of shipments; higher stock compensation expense

related to CEO transition; higher NHP sourcing costs and study starts in DSA

Projecting meaningful non-GAAP operating margin improvement in 2Q26 and beyond

DSA demand environment remained solid and continues to support a return to DSA organic revenue growth in 2H26

Demonstrated by DSA net book-to-bill of 1.04x in 1Q26

Expect to generate significant operating margin expansion of ~120-150 bps in 2026 due to execution of strategic initiatives around acquisitions, divestitures, and efforts to modernize our operations

Repurchased 1.1M shares for $200M in 1Q26 under Board's $1B stock repurchase authorization

8 See ir.criver.com for reconciliations of GAAP to Non-GAAP results

($ in millions, except per share amounts)

1Q26

1Q25

YOY Δ

Organic Δ

RMS Revenue

$208.4

$213.1

(2.2)%

(5.5)%

RMS GAAP OM%

23.9%

20.5%

340 bps

RMS Non-GAAP OM%

24.7%

27.1%

(240) bps

Small models: Lower revenue for small models primarily driven by lower sales volume in North America,

partially offset by solid demand for small models in China from mid-tier biotech and CRO clients

Large models (NHPs): Lower revenue was primarily affected by timing of NHP shipments, with NHP unit volume in 1Q26 expected to be the lowest point for the year

Non-GAAP operating margin: Decline was driven by unfavorable revenue mix primarily related to the timing of NHP shipments and lower sales volume for small models in North America

9 See ir.criver.com for reconciliations of GAAP to Non-GAAP results

($ in millions, except per share amounts)

1Q26

1Q25

YOY Δ

Organic Δ

DSA Revenue

$596.9

$592.6

0.7%

(1.4)%

DSA GAAP OM%

17.4%

15.9%

150 bps

DSA Non-GAAP OM%

21.0%

23.9%

(290) bps

Revenue: Decline (organic) primarily driven by lower revenue for discovery services

Discovery: Decline due in part to prior site consolidation activities

Safety Assessment (SA): Revenue essentially unchanged in 1Q26 YOY

Non-GAAP operating margin: Decline primarily due to increased study-related direct costs (higher NHP sourcing costs and study starts)

DSA demand environment tracking to our expectations; Net bookings remained above the $600M level

driven by continued strength from our small and mid-sized biotech client base

Biotech net book-to-bill and net bookings over last 2 quarters were at the highest levels in >2 years

Demand trends for global biopharmaceutical clients remained solid in 1Q26, but declined moderately YOY after pharma bookings rebounded meaningfully to start 2025 following period of budget cuts

10 See ir.criver.com for reconciliations of GAAP to Non-GAAP results

DSA proposal activity posted a healthy increase in 1Q26

- Signal that positive bookings momentum may continue

Remain cautiously optimistic that net book-to-bill will average >1x for FY26 and support the upper end of DSA outlook

- As a reminder, our business isn't linear so net book-to-bill may not be >1x every quarter

Period

Qtr-End Backlog*

($ in billions)

Net Bookings*

($ in millions)

Net Book-to-Bill**

(Quarterly)

1Q26

$1.92

$622

1.04x

4Q25

$1.86

$665

1.12x

3Q25

$1.80

$494

0.82x

2Q25

$1.93

$506

0.82x

1Q25

$1.99

$616

1.04x

* Changes in backlog and net bookings may not foot due primarily to quarterly FX impacts, as well as other reconciling items.

Figures are presented on a reported basis, not adjusted for FX.

11 ** Note: DSA net book-to-bill calculated by taking quarterly net bookings divided by quarterly DSA revenue.

($ in millions, except per share amounts)

1Q26

1Q25

YOY Δ

Organic Δ

MFG Revenue

$190.5

$178.5

6.8%

2.9%

MFG GAAP OM%

24.6%

(4.8)%

MFG Non-GAAP OM%

25.9%

23.1%

280 bps

Microbial Solutions: Strong revenue growth for Microbial Solutions, primarily driven by Endosafe® and

Celsis® manufacturing quality-control testing platforms

Biologics Testing: Biologics revenue growth rate expected to rebound as the year progresses after anniversary of a client-specific challenge that has been a headwind for past several quarters

CDMO: 1Q26 CDMO revenue growth rate negatively impacted by the loss of large commercial client in 2025

CDMO business reduced Manufacturing organic growth rate by ~350 bps in 1Q26

Comparison will no longer have a meaningful impact to organic growth going forward because of completion of the CDMO divestiture on May 6th

Non-GAAP operating margin: Improvement driven by leverage from higher revenue and the benefit from cost savings

12 See ir.criver.com for reconciliations of GAAP to Non-GAAP results

GAAP

Non-GAAP

RMS revenue

Mid-single-digit decline

Low- to mid-single-digit organic decline

DSA revenue

Low to mid-single-digit decline

Low-single-digit decline to slightly positive organic growth

Manufacturing revenue

Mid-single-digit decline

Low-single-digit organic growth

Revenue growth/(decrease)

(5.5)% - (4.0)% reported decline

(1.5)% - (0.5)% organic decline(2)

Operating margin

Low-teens OM%

~120-150 bps increase vs. 2025

Diluted earnings per share (EPS)

$5.35-$5.85

$10.80-$11.30

Reaffirmed 2026 non-GAAP guidance metrics above

- Non-GAAP EPS accretion from 1Q26 stock repurchases will be essentially offset by earnings impact of FX headwind

Changes to 2026 GAAP guidance primarily reflect the impact of divestitures, as well as ~50 bps reduction to reported revenue from less favorable FX rates

Expect 2H26 non-GAAP operating margin will be >500 bps higher than expected 1H26 level

- Over half of 2H26 margin improvement expected to be driven by completed acquisitions and divestitures (incl. planned

sale of certain European Discovery Services sites in May)

(1) 2026 guidance assumes divestitures will be completed in May 2026. Non-GAAP guidance above was reaffirmed from February 25th and/or February 18th updates, respectively.

13 (2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions, divestitures, and foreign currency translation. See ir.criver.com for reconciliations of GAAP to Non-GAAP results

($ in millions)

1Q26

1Q25

2026

Guidance

Comments

Unallocated corporate - GAAP

$80.6

$54.3

~6.5%

of revenue

Anticipated 1Q26 non-GAAP increase to 6.4% of revenue primarily due to timing of stock compensation expense related to the CEO transition

2026 non-GAAP outlook unchanged

Unallocated corporate - Non-GAAP

$63.2

$52.4

~5.5%

of revenue

Net interest expense

$25.7

$26.5

$103-$108

2026 guidance increased by ~$8M primarily attributable to short-term borrowings to fund 1Q26 stock repurchases

Tax rate - GAAP

50.6%

28.1%

26.5%-27.5%

Slight 1Q26 non-GAAP decline due primarily to favorable impact from last year's enactment of the One Big Beautiful Bill (OB3)

2026 non-GAAP outlook trending to lower end of range

Tax rate - Non-GAAP

22.5%

22.7%

22.0%-23.0%

Free cash flow (FCF)

($14.8)

$112.4

$375-$400

Expected 1Q26 FCF decrease primarily driven by higher performance-based cash bonus payments for 2025 (paid in 1Q26)

2026 FCF and capex outlooks unchanged

Capital expenditures (capex)

$55.9

$59.3

~$200

Gross leverage ratio

2.6x

2.5x

Net leverage ratio

2.6x

2.4x

14 See ir.criver.com for reconciliations of GAAP to Non-GAAP results

2Q26 Outlook

Reported revenue (YOY)

Mid- to high-single-digit decline

Organic revenue (YOY)

Low-single-digit decline

Non-GAAP EPS (Sequential)

At least 30% sequential growth vs. $2.06 in 1Q26

Expect 2Q26 financial results to improve substantially on a sequential basis over 1Q26

Primarily driven by operating margin improvement and normal seasonal trends in the DSA and Biologic Testing businesses

Expect 2Q26 non-GAAP EPS to improve significantly on a sequential basis

1Q26 headwinds from the timing of NHP shipments in the RMS segment and from NHP sourcing costs and study starts

in the DSA segment are expected to subside in 2Q26

Manufacturing non-GAAP operating margin is expected to benefit from CDMO divestiture

Expect all three segments to show sequential improvement in 2Q26 non-GAAP operating margin

CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP

SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1)

(in thousands, except percentages)

Three Months Ended

March 28, 2026 March 29, 2025

Research Models and Services

Revenue

208,367

213,073

Operating income

49,773

43,605

Operating income as a % of revenue

23.9 %

20.5 %

Add back:

Amortization related to acquisitions

7,380

12,687

Acquisition, integration, and divestiture-related adjustments (3)

Severance

789

229

Asset impairment

15,561

319

Cost savings and efficiency initiatives (4)

(21,964)

876

Total non-GAAP adjustments to operating income

$ 1,766

$ 14,125

Operating income, excluding non-GAAP adjustments

$ 51,539

$ 57,730

Non-GAAP operating income as a % of revenue

24.7 %

27.1 %

Depreciation and amortization

$ 16,140

$ 21,761

Capital expenditures

$ 11,568

$ 7,286

Discovery and Safety Assessment

Revenue

596,923

592,609

Operating income

103,875

93,952

Operating income as a % of revenue

17.4 %

15.9 %

Add back:

Amortization related to acquisitions

16,497

18,171

Acquisition, integration, and divestiture-related adjustments (3)

2,542

1,061

Severance

2,626

4,979

Asset impairment

9,786

Cost savings and efficiency initiatives (4)

4,987

2,777

Third-party legal and advisory costs and certain related items (5)

(5,455)

10,970

Total non-GAAP adjustments to operating income

$ 21,197

$ 47,744

Operating income, excluding non-GAAP adjustments

$ 125,072

$ 141,696

Non-GAAP operating income as a % of revenue

21.0 %

23.9 %

Depreciation and amortization

$ 39,914

$ 42,084

Capital expenditures

$ 37,509

$ 34,521

Manufacturing Solutions

Revenue

$ 190,540

$ 178,486

Operating income (loss)

46,839

(8,620)

Operating income (loss) as a % of revenue

24.6 %

(4.8)%

Add back:

Amortization related to acquisitions (2)

1,945

46,077

Severance

(868)

2,204

Asset impairment

201

Cost savings and efficiency initiatives (4)

1,371

1,306

Total non-GAAP adjustments to operating income

$ 2,448

$ 49,788

Operating income, excluding non-GAAP adjustments

$ 49,287

$ 41,168

Non-GAAP operating income as a % of revenue

25.9 %

23.1 %

Depreciation and amortization

$ 8,399

$ 54,623

Capital expenditures

$ 6,274

$ 17,279

17 CONTINUED ON NEXT SLIDE

CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP

SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1)

(in thousands, except percentages)

CONTINUED FROM PREVIOUS SLIDE

Three Months Ended

March 28, 2026 March 29, 2025

Unallocated Corporate Overhead

(80,590)

(54,268)

Add back:

Acquisition, integration, and divestiture-related adjustments (3)

16,589

730

Severance

3,671

1,002

Cost savings and efficiency initiatives (4)

(2,915)

166

Total non-GAAP adjustments to operating expense

$ 17,345

$ 1,898

Unallocated corporate overhead, excluding non-GAAP adjustments

$ (63,245)

$ (52,370)

Total

Revenue

$ 995,830

$ 984,168

Operating income

119,897

74,669

Operating income as a % of revenue

12.0 %

7.6 %

Add back:

Amortization related to acquisitions (2)

25,822

76,935

Acquisition, integration, and divestiture-related adjustments (3)

19,131

1,805

Severance

6,218

8,414

Asset impairment

15,561

10,306

Cost savings and efficiency initiatives (4)

(18,521)

5,125

Third-party legal and advisory costs and certain related items (5)

(5,455)

10,970

Total non-GAAP adjustments to operating income

$ 42,756

$ 113,555

Operating income, excluding non-GAAP adjustments

$ 162,653

$ 188,224

Non-GAAP operating income as a % of revenue

16.3 %

19.1 %

Depreciation and amortization

$ 67,151

$ 120,364

Capital expenditures

$ 55,908

$ 59,324

(1) Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of often-one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company's performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2) Amortization related to acquisitions for the three months ended March 29, 2025 includes $35.5 million of accelerated amortization of certain client relationships in the Biologics Solutions reporting unit within the Manufacturing Solutions reportable segment.

(3) These adjustments are related to the evaluation and integration of acquisitions and divestitures, and primarily include transaction, advisory, certain third-party integration, certain compensation costs, and related costs; as well as fair value adjustments associated with contingent consideration arrangements.

(4) Cost savings and efficiency initiatives in 2026 primarily include site consolidation charges related to recent site optimization activities, cost of professional services related to certain improvement initiatives, and a pre-tax gain of $38.5 million in connection with the sale of certain assets in Wilmington, Massachusetts. The gain was recognized within RMS reportable segment and unallocated corporate for $23.2 million and $15.3 million, respectively.

(5) Within the DSA business, third-party legal and advisory costs incurred during fiscal 2025 relate to U.S. government investigations into the NHP supply chain, which were concluded in fiscal 2025. Also included within DSA results for fiscal 2026 is the utilization of previously written-down NHP inventory, resulting in partial reversals of the $27 million inventory charge recorded in fiscal

18 2024 following the resolution of the matter in fiscal 2025.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP EARNINGS (LOSS) TO NON-GAAP EARNINGS (UNAUDITED)(1)

(in thousands, except per share data)

Three Months Ended

March 28, 2026 March 29, 2025

Net income (loss) available to Charles River Laboratories International, Inc. common

shareholders

(14,843)

25,469

Add back:

Non-GAAP adjustments to operating income (2)

41,710

112,393

Venture capital and strategic equity investment losses and impairments, net

1,752

9,969

(Gain) loss on divestitures (3)

117,981

(3,376)

Tax effect of non-GAAP adjustments:

Tax impact of divestitures

(43,069)

Interest on acquired uncertain tax positions

4,969

Tax effect of the remaining non-GAAP adjustments

(6,804)

(25,345)

Net income available to Charles River Laboratories International, Inc. common shareholders, excluding non-GAAP adjustments

$ 101,696

$ 119,110

Weighted average shares outstanding - Basic

48,951

50,677

Effect of dilutive securities:

Stock options, restricted stock units and performance share units

402

176

Weighted average shares outstanding - Diluted

49,353

50,853

Earnings (loss) per share attributable to common shareholders:

Basic

$ (0.30)

$ 0.50

Diluted (4)

$ (0.30)

$ 0.50

Basic, excluding non-GAAP adjustments

$ 2.08

$ 2.35

Diluted, excluding non-GAAP adjustments

$ 2.06

$ 2.34

(2) This amount excludes non-GAAP adjustments attributable to noncontrolling interest holders.

(3) The amount included in 2026 relates to a pre-tax loss on assets held for sale in connection with the CDMO and Cell Solutions Divestiture while the amount included in 2025 relates to a gain on the sale of a DSA site.

(4) Net loss available to Charles River Laboratories International, Inc. per common share excludes the effect of dilution and is computed using

19 basic weighted-average number of shares outstanding for the three month period ended March 28, 2026.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP REVENUE GROWTH

TO NON-GAAP REVENUE GROWTH, ORGANIC (UNAUDITED) (1)

Three Months Ended March 28, 2026

Total CRL

RMS Segment

DSA Segment

MS Segment

Revenue growth, reported

1.2 %

(2.2)%

0.7 %

6.8 %

(Increase) decrease due to foreign exchange

(2.8)%

(3.3)%

(2.2)%

(3.9)%

Impact of divestitures (2)

0.1 %

- %

0.1 %

- %

Non-GAAP revenue growth, organic (3)

(1.5)%

(5.5)%

(1.4)%

2.9 %

(2) Impact of divestitures relates to the sale of a site within DSA.

(3) Organic revenue growth is defined as reported revenue growth adjusted for divestitures and foreign exchange.

Disclaimer

Charles River Laboratories International Inc. published this content on May 07, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 07, 2026 at 11:37 UTC.