[Executive Summary](index=1&type=section&id=Executive%20Summary) [Second-Quarter 2024 Financial Highlights](index=1&type=section&id=Second-Quarter%202024%20Financial%20Highlights) Charles River Laboratories reported revenue of **$1.03 billion** in Q2 2024, a **3.2%** year-over-year decrease, with GAAP diluted EPS at **$1.74** and non-GAAP diluted EPS at **$2.80**, alongside a new **$1 billion** stock repurchase authorization and revised full-year 2024 guidance Key Financial Data for Q2 2024 | Metric | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue ($) | $1.03 Billion | $1.06 Billion | -3.2% | | GAAP Operating Margin (%) | 14.8% | 15.6% | -0.8 pp | | Non-GAAP Operating Margin (%) | 21.3% | 20.4% | +0.9 pp | | GAAP Net Income ($) | $90.0 Million | $97.0 Million | -7.2% | | Non-GAAP Net Income ($) | $144.9 Million | $138.3 Million | +4.8% | | GAAP Diluted EPS ($) | $1.74 | $1.89 | -7.9% | | Non-GAAP Diluted EPS ($) | $2.80 | $2.69 | +4.1% | - The company's Board of Directors approved a new **$1 billion** stock repurchase authorization[1](index=1&type=chunk) - The company revised its full-year 2024 financial guidance[1](index=1&type=chunk) [CEO's Strategic Outlook and Response](index=2&type=section&id=CEO's%20Strategic%20Outlook%20and%20Response) CEO James C. Foster noted that despite in-line H1 financial performance, forward-looking data indicates no improvement in H2 DSA business demand, particularly from global biopharmaceutical clients, prompting the company to actively manage costs, innovate business transformation, invest prudently, and strengthen commercial efforts - DSA business demand is not expected to improve in H2 2024, but rather decline, primarily impacted by global biopharmaceutical clients[5](index=5&type=chunk) - The company will implement the following strategic measures to address weak demand: * Actively manage cost structure * Initiate new innovative approaches for business transformation * Invest prudently * Strengthen commercial efforts to win new business[5](index=5&type=chunk) - The company believes clients will continue to seek treatments for rare diseases and other unmet medical needs, prompting further measures to help clients achieve their goals with a stronger, leaner posture[5](index=5&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) [Research Models and Services (RMS)](index=2&type=section&id=Research%20Models%20and%20Services%20(RMS)) The RMS segment reported Q2 revenue of **$206.4 million**, a **1.7%** year-over-year decrease, with organic revenue down **3.9%**, primarily due to reduced non-human primate (NHP) revenue from China and lower research model services and cell solutions, partially offset by growth in small research model sales RMS Segment Performance for Q2 2024 | Metric | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue ($) | $206.4 Million | $209.9 Million | -1.7% | | Organic Revenue Growth (%) | -3.9% | - | - | | GAAP Operating Margin (%) | 14.5% | 23.3% | -8.8 pp | | Non-GAAP Operating Margin (%) | 23.1% | 26.4% | -3.3 pp | - Revenue decline primarily due to reduced non-human primate (NHP) revenue from China, and lower revenue from research model services and cell solutions businesses[6](index=6&type=chunk) - The revenue decline was partially offset by increased sales of small research models, particularly in Europe and China[6](index=6&type=chunk) - The decrease in GAAP operating margin also reflects higher costs associated with the company's restructuring plan, including site consolidation costs for the California CRADL business[7](index=7&type=chunk) [Discovery and Safety Assessment (DSA)](index=2&type=section&id=Discovery%20and%20Safety%20Assessment%20(DSA)) The DSA segment's Q2 revenue was **$627.4 million**, a **5.4%** year-over-year decrease, with organic revenue down **5.0%**, driven by reduced revenue from discovery services and safety assessment businesses, leading to declines in both GAAP and non-GAAP operating margins DSA Segment Performance for Q2 2024 | Metric | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue ($) | $627.4 Million | $663.5 Million | -5.4% | | Organic Revenue Growth (%) | -5.0% | - | - | | GAAP Operating Margin (%) | 22.1% | 24.3% | -2.2 pp | | Non-GAAP Operating Margin (%) | 27.1% | 27.6% | -0.5 pp | - Revenue decline primarily driven by reduced revenue from discovery services and safety assessment businesses[9](index=9&type=chunk) - Operating margin decline primarily impacted by lower sales volume, partially offset by reduced performance-based compensation accruals[9](index=9&type=chunk) - The decrease in GAAP operating margin also reflects higher costs associated with the company's restructuring plan and higher adjustments related to the Noveprim acquisition[9](index=9&type=chunk) [Manufacturing Solutions](index=3&type=section&id=Manufacturing%20Solutions) The Manufacturing Solutions segment reported Q2 revenue of **$192.3 million**, a **3.1%** year-over-year increase, with organic revenue up **3.7%**, reflecting growth across all businesses and significant improvements in both GAAP and non-GAAP operating margins due to enhanced profitability and reduced legal costs Manufacturing Solutions Segment Performance for Q2 2024 | Metric | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue ($) | $192.3 Million | $186.5 Million | +3.1% | | Organic Revenue Growth (%) | +3.7% | - | - | | GAAP Operating Margin (%) | 19.4% | 13.1% | +6.3 pp | | Non-GAAP Operating Margin (%) | 26.6% | 22.9% | +3.7 pp | - Organic revenue growth reflects revenue growth across all businesses in the segment[10](index=10&type=chunk) - Operating margin growth primarily benefited from improved profitability across all businesses[10](index=10&type=chunk) - GAAP operating margin growth also benefited from reduced third-party legal costs related to the microbial solutions business and lower acquisition-related adjustments[10](index=10&type=chunk) [Corporate Actions & Outlook](index=3&type=section&id=Corporate%20Actions%20%26%20Outlook) [New Stock Repurchase Authorization](index=3&type=section&id=New%20Stock%20Repurchase%20Authorization) The company's Board of Directors approved a new **$1 billion** stock repurchase authorization, replacing the prior **$1.3 billion** authorization which had **$129.1 million** remaining - The company's Board of Directors approved a new **$1 billion** stock repurchase authorization[11](index=11&type=chunk) - This new authorization replaces the prior **$1.3 billion** stock repurchase authorization which had **$129.1 million** remaining[11](index=11&type=chunk) [Revised 2024 Financial Guidance](index=3&type=section&id=Revised%202024%20Financial%20Guidance) The company revised its 2024 financial guidance, reflecting the continued lack of recovery in demand from small and mid-sized biotech clients and increasing weakness from global biopharmaceutical clients, no longer expecting overall demand trends to improve in the second half, significantly impacting the DSA segment outlook - The primary reasons for the revised guidance are the continued lack of recovery in demand from small and mid-sized biotech clients and increasing weakness from global biopharmaceutical clients[12](index=12&type=chunk) - The company no longer expects overall demand trends to improve in the second half, which will significantly impact the DSA segment's outlook[12](index=12&type=chunk) - The company is implementing a restructuring plan, expected to save over **$150 million** annually, with approximately **$100 million** realized in 2024[12](index=12&type=chunk) Revised 2024 Financial Guidance Comparison | Metric | Current Guidance | Prior Guidance | | :--- | :--- | :--- | | Reported Revenue Growth/(Decline) (%) | (4.5)% – (2.5)% | 1.0% – 4.0% | | Organic Revenue Growth/(Decline) (%) | (5.0)% – (3.0)% | 0.0% – 3.0% | | GAAP EPS Estimate ($) | $5.65 – $5.95 | $7.60 – $8.10 | | Non-GAAP EPS Estimate ($) | $9.90 – $10.20 | $10.90 – $11.40 | [Financial Statements](index=9&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Income](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The unaudited condensed consolidated statements of income show total revenue of **$1.026 billion** for Q2 2024, down from **$1.059 billion** in the prior year, with GAAP net income attributable to common shareholders of **$89.988 million** and diluted EPS of **$1.74** Condensed Consolidated Statements of Income Summary (Q2 2024) | Metric | Q2 2024 (USD thousands) | Q2 2023 (USD thousands) | | :--- | :--- | :--- | | Service Revenue | 842,900 | 874,891 | | Product Revenue | 183,217 | 185,046 | | **Total Revenue** | **1,026,117** | **1,059,937** | | Operating Income | 151,652 | 164,945 | | Net Income | 94,261 | 99,443 | | Net Income Attributable to Common Shareholders | 89,988 | 97,020 | | Diluted EPS ($) | $1.74 | $1.89 | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 29, 2024, total assets were **$7.948 billion**, a decrease from **$8.195 billion** at December 30, 2023, with total liabilities at **$4.175 billion** and total equity at **$3.727 billion** Condensed Consolidated Balance Sheets Summary (as of June 29, 2024) | Metric | June 29, 2024 (USD thousands) | Dec 30, 2023 (USD thousands) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 179,213 | 276,771 | | Accounts Receivable and Contract Assets, Net | 762,221 | 780,375 | | Inventories | 349,111 | 380,259 | | **Total Current Assets** | **1,499,273** | **1,608,662** | | Property, Plant and Equipment, Net | 1,613,895 | 1,639,741 | | Goodwill | 3,079,693 | 3,095,045 | | Intangible Assets, Net | 800,129 | 864,051 | | **Total Assets** | **7,948,283** | **8,195,001** | | **Total Current Liabilities** | **947,519** | **1,055,082** | | Long-Term Debt, Net and Finance Leases | 2,409,380 | 2,647,147 | | **Total Liabilities** | **4,175,189** | **4,536,003** | | Equity Attributable to Charles River Laboratories International, Inc. | 3,722,729 | 3,596,882 | | **Total Equity** | **3,727,018** | **3,602,276** | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 29, 2024, net cash provided by operating activities was **$323.4 million**, net cash used in investing activities was **$147.7 million**, and net cash used in financing activities was **$267.5 million**, with cash and cash equivalents at period-end totaling **$181.0 million** Condensed Consolidated Statements of Cash Flows Summary (Six Months Ended June 29, 2024) | Metric | Six Months Ended June 29, 2024 (USD thousands) | Six Months Ended July 1, 2023 (USD thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 323,423 | 257,505 | | Net Cash Used in Investing Activities | (147,658) | (245,227) | | Net Cash Used in Financing Activities | (267,512) | (46,223) | | Effect of Exchange Rate Changes | (11,729) | 1,508 | | Net Change in Cash and Cash Equivalents | (103,476) | (32,437) | | Cash and Cash Equivalents at End of Period | 181,004 | 208,777 | [Non-GAAP Reconciliations & Disclosures](index=6&type=section&id=Non-GAAP%20Reconciliations%20%26%20Disclosures) [Non-GAAP Financial Measures Explanation](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) Non-GAAP financial measures are reported to exclude one-time and non-operating items, providing investors with a clearer understanding of core operating results and future prospects, with organic revenue growth defined as reported revenue growth adjusted for foreign currency translation, acquisitions, and divestitures - Non-GAAP financial measures aim to exclude one-time expenses and non-operating items, providing a deeper understanding of core operating results and future prospects[18](index=18&type=chunk) - Items excluded from non-GAAP metrics include intangible asset amortization, acquisition and divestiture-related expenses and adjustments, restructuring costs, investment gains/losses, and certain legal costs[18](index=18&type=chunk) - Organic revenue growth is defined as reported revenue growth adjusted for foreign currency translation, acquisition, and divestiture impacts[18](index=18&type=chunk) [Reconciliation of GAAP to Non-GAAP Segment Information](index=12&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Segment%20Information) The company provides a detailed reconciliation of GAAP to non-GAAP operating income for each business segment, with non-GAAP adjustments primarily including acquisition-related amortization, acquisition-related adjustments, severance, site consolidation, impairment charges, and third-party legal costs, to offer a clearer view of segment operational performance Reconciliation of GAAP to Non-GAAP Operating Income Summary (Q2 2024) | Segment | GAAP Operating Income (USD thousands) | Total Non-GAAP Adjustments (USD thousands) | Non-GAAP Operating Income (USD thousands) | GAAP Operating Margin (%) | Non-GAAP Operating Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | RMS | 29,948 | 17,753 | 47,701 | 14.5% | 23.1% | | DSA | 138,376 | 31,765 | 170,141 | 22.1% | 27.1% | | Manufacturing Solutions | 37,230 | 13,973 | 51,203 | 19.4% | 26.6% | | **Total** | **151,652** | **66,903** | **218,555** | **14.8%** | **21.3%** | - Non-GAAP adjustments primarily include acquisition-related amortization, acquisition-related adjustments, severance, site consolidation and impairment charges, and third-party legal costs[34](index=34&type=chunk) [Reconciliation of GAAP to Non-GAAP Earnings](index=14&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Earnings) The company provides a detailed reconciliation of GAAP to non-GAAP earnings per share, with non-GAAP adjustments including redeemable non-controlling interest adjustments, incremental dividends to non-controlling interest holders, non-GAAP operating income adjustments, investment gains/losses, divestiture gains/losses, and tax impacts, to present a more accurate view of core profitability Reconciliation of GAAP to Non-GAAP EPS Summary (Q2 2024) | Metric | Q2 2024 (USD thousands) | Q2 2023 (USD thousands) | | :--- | :--- | :--- | | GAAP Net Income Attributable to Common Shareholders | 89,988 | 97,020 | | Total Non-GAAP Adjustments | 65,576 | 51,256 | | Investment Gains/(Losses) | (902) | 1,873 | | Divestiture Gains/(Losses) | 0 | 1,003 | | Tax Impact | (13,816) | (13,463) | | Non-GAAP Net Income Attributable to Common Shareholders | 144,939 | 138,285 | | GAAP Diluted EPS ($) | $1.74 | $1.89 | | Non-GAAP Diluted EPS ($) | $2.80 | $2.69 | - Non-GAAP adjustments include redeemable non-controlling interest adjustments, incremental dividends to non-controlling interest holders, non-GAAP operating income adjustments, investment gains/losses, divestiture gains/losses, and tax impacts[36](index=36&type=chunk) [Reconciliation of GAAP to Non-GAAP Revenue Growth, Organic](index=15&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Revenue%20Growth%2C%20Organic) The company provides a detailed reconciliation of GAAP reported revenue growth to non-GAAP organic revenue growth, which is calculated by adjusting for foreign currency exchange rate impacts, acquisition contributions, and divestiture impacts to reflect the actual growth of the core business Reconciliation of GAAP to Non-GAAP Organic Revenue Growth Summary (Q2 2024) | Metric | Total Company | RMS Segment | DSA Segment | Manufacturing Solutions Segment | | :--- | :--- | :--- | :--- | :--- | | Reported Revenue Growth (%) | (3.2)% | (1.7)% | (5.4)% | 3.1% | | Foreign Currency Exchange Rate Impact (%) | 0.3% | 0.5% | 0.1% | 0.6% | | Acquisition Contribution (%) | (0.5)% | (2.7)% | —% | —% | | Divestiture Impact (%) | 0.2% | —% | 0.3% | —% | | **Non-GAAP Organic Revenue Growth (%)** | **(3.2)%** | **(3.9)%** | **(5.0)%** | **3.7%** | - Organic revenue growth is calculated by adjusting for foreign currency exchange rate impacts, acquisition contributions, and divestiture impacts to reflect the actual growth of the core business[38](index=38&type=chunk) [Caution Concerning Forward-Looking Statements](index=7&type=section&id=Caution%20Concerning%20Forward-Looking%20Statements) This press release contains forward-looking statements, based on current expectations and beliefs, involving risks and uncertainties that could cause actual results to differ materially, including NHP supply constraints, global economic changes, acquisition integration, R&D spending trends, and regulatory changes - Forward-looking statements are based on the company's current expectations and beliefs, involving difficult-to-predict risks and uncertainties[21](index=21&type=chunk) - Risks and uncertainties that could cause actual results to differ materially from forward-looking statements include: * Non-human primate (NHP) supply constraints and the impact of U.S. government investigations * Changes in global economic and financial markets * Ability to successfully integrate acquired businesses, including Noveprim * Negative trends in R&D spending and outsourcing service levels * Regulatory changes, loss of key personnel, interest rate and foreign exchange fluctuations[21](index=21&type=chunk)[23](index=23&type=chunk) - The company undertakes no obligation to update the information contained in this press release, except as required by law[23](index=23&type=chunk) [Company Information](index=8&type=section&id=Company%20Information) [About Charles River](index=8&type=section&id=About%20Charles%20River) Charles River Laboratories International, Inc. provides essential products and services to global pharmaceutical and biotechnology companies, government agencies, and leading academic institutions to accelerate their research and drug development efforts - Charles River provides products and services to global pharmaceutical and biotechnology companies, government agencies, and leading academic institutions to accelerate research and drug development[24](index=24&type=chunk) - The company focuses on helping clients discover, early develop, and safely manufacture new therapies through scientific expertise and flexible solutions[24](index=24&type=chunk) [Investor & Media Contacts](index=8&type=section&id=Investor%20%26%20Media%20Contacts) Contact information is provided for investor relations and the Chief Communications Officer - Investor Contact: Todd Spencer, Corporate Vice President, Investor Relations, Phone: 781.222.6455, Email: todd.spencer@crl.com[25](index=25&type=chunk) - Media Contact: Amy Cianciaruso, Corporate Vice President, Chief Communications Officer, Phone: 781.222.6168, Email: amy.cianciaruso@crl.com[25](index=25&type=chunk)

Earnings Surprise History Q2 Estimates The Zacks Consensus Estimate for earnings per share of $2.39 indicates an 11.2% decline year over year. Estimates for Charles River's second-quarter earnings have remained unchanged at $2.39 per share in the past 30 days. Factors at Play Note that there was a timing shift with NHP shipments that accelerated into the first quarter. This might have acted as a headwind in the second quarter. In the previous reported quarter, CRL's Insourcing Solutions, or IS, generated hi ...

Charles River Laboratories International, Inc. (CRL) recently announced a contract development and manufacturing organization (CDMO) agreement with the Italy-based clinical-stage biotechnology company, AAVantgarde. The collaboration will produce GMP plasmid DNA to help advance AAVantgarde's platform for treating Stargardt's disease — a condition with significant unmet needs. Significance of the Partnership Charles River will leverage its two-decade-long expertise in manufacturing GMP plasmid DNA to support ...

Core Insights - Charles River Laboratories' Research Models and Services (RMS) business is benefiting from the Charles River Accelerator and Development Labs (CRADL) initiative, although the global business environment remains challenging, impacting growth [1] Group 1: Acquisitions and Business Strategy - In November 2023, the company acquired an additional 41% stake in Noveprim, resulting in a 90% controlling interest, which supports its nonhuman primate (NHP) supply strategy [2] - The acquisition of Explora Biolabs in April 2022 complements the company's Insourcing Solutions business and enhances its CRADL footprint [2] - The company is expanding CRADL's footprint through both organic growth and acquisitions to meet client demand for flexible laboratory space [5] Group 2: Market Challenges - Foreign exchange fluctuations, particularly the strengthening of the euro and other developed market currencies, are negatively affecting the company's international revenue performance [3] - A significant portion of RMS and DSA revenues is generated in China, where trade policy conflicts could hinder business development [6] - The Manufacturing Solutions segment is experiencing softness due to a post-COVID slowdown in demand from biopharma manufacturers and CDMOs [6] Group 3: Demand and Growth - RMS services are in high demand for basic research and screening of non-clinical drug candidates, providing clients with greater flexibility and supporting increased scientific complexity [4] - The insourcing solutions business is witnessing strong growth, driven by the adoption of CRADL's flexible model [5] - The RMS segment is benefiting from higher NHP revenues and broad-based growth in small research models across all geographic regions [4] Group 4: Product and Service Expansion - The company is broadening its product and service offerings across drug discovery and early-stage development through focused acquisitions, including Retrogenix and Vigene Biosciences [10] - The Microbial Solutions business is facing challenges due to reduced testing volumes and investments, but the company believes destocking activities are largely complete [11]

Charles River's Plasma DNA and Viral Vector CDMO Following the agreement, Gates Institution will have access to Charles River's manufacturing platforms and viral vector CDMO center of excellence, leveraging a range of services, including process development evaluation of Gates Institute's LVV backbone, phase-appropriate research grade, high–quality (HQ) plasmid DNA production and GMP LVV manufacturing. Image Source: Zacks Investment Research Given the market potential, the collaboration between Charles Rive ...

More on the News Industry Prospect In June 2024, Charles River announced a collaboration with MatTek Corporation to develop a New Approach Methodology inhalation toxicology test to reduce reliance on traditional animal research methods. The program will be funded through $1.3 million grant. Charles River currently carries a Zacks Rank #3 (Hold). The Inogen stock has surged 32.4% year to date. In the past 60 days, the bottom-line estimate for 2024 has narrowed from a loss of $2.56 per share to a loss of $2.4 ...

Outlook's 08/30/2023 CRL opened up a world of pain for its shareholders This is my second Outlook Therapeutics (NASDAQ:OTLK) article after 04/2023's "Outlook Therapeutics: August PDUFA For Wet AMD Blockbuster". In that article, I pegged Outlook as a high risk high reward bet on a successful PDUFA. I took the bullish bet, rating Outlook a Buy. In doing so, I noted: There is no wiggle room here. What happens if the FDA extends its PDUFA date by three months as quite common? What happens if the FDA issues a CR ...

The VCG collaboration is a project guided by Charles River's Alternative Methods Advancement Project ("AMAP"), an initiative focused on reducing the use of animals in research. The development is likely to boost the company's Discovery and Safety Assessment ("DSA") segment. As the company enters the next frontier of drug development, AMAP will facilitate strategic and purposeful investing to pave the path where more patients receive needed treatments and medicines safely, swiftly and successfully. Upholding ...

SAN DIEGO, June 06, 2024 (GLOBE NEWSWIRE) -- Johnson Fistel, LLP (www.johnsonfistel.com), a shareholder rights law firm, announces its continuing investigation of whether certain directors and officers of Charles River Laboratories International, Inc. (NYSE: CRL) breached their fiduciary duties to CRL and its shareholders. What can I do? If you are a current Charles River shareholder, you may have legal claims that may be brought on behalf of the company, against CRL's directors and officers. If you wish to ...

Charles River Laboratories International, Inc. (CRL) is well-poised for the coming quarters, on the back of its impressive strategic acquisitions. Stabilization of demand trends within the DSA (Discovery and Safety Assessment) arm is encouraging. The company's sound solvency also instils optimism. However, concerns remain over the adverse impacts of macroeconomic challenges as well as currency fluctuations. In the past year, this Zacks Rank #3 (Hold) company's shares have risen 9.4% compared with 6.1% growt ...