Financial Data and Key Metrics Changes - The company reported revenue of $1,030 million in Q2 2025, a 0.6% increase year over year, with nearly half of the revenue outperformance driven by foreign exchange [9][10] - Organic revenue declined by 0.5%, primarily due to a low single-digit decline in the DSA segment, partially offset by low single-digit increases in RMS and manufacturing segments [10][12] - The operating margin improved to 22.1%, an increase of 80 basis points year over year, reflecting cost savings from restructuring and better sales volume [10][11] Business Line Data and Key Metrics Changes - DSA segment revenue was $618 million, a 2.4% decrease year over year on an organic basis, driven by lower revenue for discovery services [13] - RMS revenue increased by 2.3% on an organic basis to $213.3 million, primarily driven by the timing of NHP shipments and higher revenue for research model services [21][22] - Manufacturing segment revenue was $200.8 million, a 2.9% increase on an organic basis, driven by growth in microbial solutions [25][26] Market Data and Key Metrics Changes - Revenue for small and mid-sized biotech clients improved slightly for the third consecutive quarter, while revenue for global biopharmaceutical clients remained below last year's level but improved sequentially [10][21] - The demand environment for global biopharmaceutical clients appears to be stabilizing, with proposal activity increasing both year over year and sequentially [15][50] - The academic and government client segments saw revenue increases despite potential NIH budget cuts, with only a minor impact observed [22] Company Strategy and Development Direction - The company is focused on expanding its NAMS portfolio and enhancing scientific capabilities to support biopharmaceutical companies in transitioning to alternative technologies [19][20] - A strategic review is underway to evaluate avenues for value creation, including portfolio and capital allocation strategies [28][29] - The company aims to generate over $175 million in cost savings this year, contributing to improved financial performance [11][44] Management's Comments on Operating Environment and Future Outlook - Management noted that the global biopharmaceutical demand trends appear to have bottomed and are beginning to slowly move upward [7] - The company raised its revenue and non-GAAP earnings per share guidance due to outperformance in Q2, reflecting a more favorable demand environment [12][33] - There is recognition of ongoing uncertainty in the healthcare landscape, but management remains optimistic about stabilization in demand [8][9] Other Important Information - The company experienced a slight decline in DSA backlog to $1.93 billion, with gross and net bookings improving at mid-single-digit rates year over year [14] - The non-GAAP tax rate increased to 22.7%, primarily due to stock-based compensation, but was more favorable than expected [40][41] - Free cash flow for Q2 was strong at $169.3 million, driven by higher earnings and improved working capital [42][43] Q&A Session Summary Question: Current demand environment and pharma's perspective - Management indicated that the demand situation is stabilizing for pharma, with some demand trends having bottomed [48] - Revenue and proposals are up, but cancellations have also increased, particularly for longer-term post-IND work [49][50] Question: Clarification on revenue guidance and book-to-bill ratio - Management stated that the current book-to-bill ratio is expected to remain in the range of 0.8 to 0.93, which does not require improvement to meet guidance [55] Question: CDMO performance and revenue impact - The CDMO revenue headwind is expected to be around $20 million due to the wind-down of a client relationship, with higher margins noted in the first half [62][63] Question: Backlog conversion and revenue support - Management believes the backlog is stable and robust, allowing for continued drawing from it to replace studies that slip or cancel [72][74] Question: Hiring confidence and future growth - Management expressed confidence in hiring to meet current demand, with improvements in the overall demand curve expected to support future growth [78][79] Question: Pricing stability and margin implications - Pricing in DSA remains stable, with mix favorability contributing positively to margins [82][84] Question: Cancellations in longer-term work - Cancellations are not expected to significantly impact margins, as the margin profile for different types of work is often comparable [86]