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CHARLES RIVER LABORATORIES INTERNATIONAL, INC. (CRL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $1.03B (+0.6% YoY reported; -0.5% organic) and non-GAAP EPS was $3.12, driven by margin improvements across all segments; GAAP EPS was $1.06 as accelerated amortization, restructuring, and legal/advisory costs weighed on GAAP results .
  • Charles River raised FY2025 guidance: non-GAAP EPS to $9.90–$10.30 (from $9.30–$9.80) and organic revenue decline now (3.0)%–(1.0)% (from (4.5)%–(2.5)%); FX assumed ~ (0.5)% tailwind vs ~1.0% prior .
  • Wall Street estimates were materially beaten: EPS $3.12 vs $2.55* and revenue $1,032.1mm vs $989.6mm*, with most outperformance operational, plus ~$0.12 EPS benefit from a lower tax rate (per slides) .
  • DOJ and civil investigations into Cambodia-sourced NHP shipments were closed, removing a legal overhang; U.S. FWS cleared late-2022/early-2023 NHP shipments for legal entry .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based non-GAAP margin expansion (22.1% vs 21.3% YoY) with segment margin improvements; manufacturing non-GAAP OM rose to 32.8% on CDMO commercial payments and Microbial leverage .
    • Strong beat vs consensus: Q2 non-GAAP EPS $3.12 vs $2.55*, revenue $1,032.1mm vs $989.6mm*; most upside was operational, plus ~$0.12 EPS tax benefit .
    • Legal overhang improved: U.S. DOJ and parallel civil investigations closed; FWS cleared certain Cambodia NHP shipments, supporting DSA stability narrative .
    • Management quote: “We are continuing to see clear signs that the biopharmaceutical demand is stabilizing…solid second-quarter financial performance, driven principally by favorable results in our DSA segment.” — James C. Foster .

  • What Went Wrong

    • Organic revenue declined (-0.5%) as DSA revenue fell 2.4% organically (reported -1.5%); lower discovery and regulated safety volumes persisted .
    • GAAP profitability compressed (OM 9.7% vs 14.8% YoY) on accelerated amortization of CDMO client relationships, restructuring, and legal/advisory costs .
    • Sequential bookings softness in global biopharma and increased cancellations vs recent quarters; DSA net book-to-bill fell to 0.82x (from 1.04x in Q1), though YoY bookings improved mid-single digit .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$1,002.5 $984.2 $1,032.1
GAAP Operating Margin %(16.7)% 7.6% 9.7%
Non-GAAP Operating Margin %19.9% 19.1% 22.1%
GAAP EPS ($)$(4.22) $0.50 $1.06
Non-GAAP EPS ($)$2.66 $2.34 $3.12
Segment (Q2 2025)Revenue ($USD Millions)GAAP OM %Non-GAAP OM %Organic Revenue Growth YoY
Research Models & Services (RMS)$213.3 16.8% 25.3% +2.3%
Discovery & Safety Assessment (DSA)$618.0 19.9% 27.4% (2.4)%
Manufacturing Solutions$200.8 6.0% 32.8% +2.9%
DSA Demand KPIsQ2 2024Q3 2024Q4 2024Q1 2025Q2 2025
Quarter-End Backlog ($B)$2.16 $2.12 $1.97 $1.99 $1.93
Net Bookings ($MM)$482 $522 $510 $616 $506
Net Book-to-Bill (x)0.77x 0.85x 0.85x 1.04x 0.82x
Consensus vs ActualQ4 2024Q1 2025Q2 2025
EPS Consensus ($)$2.53*$2.07*$2.55*
EPS Actual ($)$2.66 $2.34 $3.12
EPS Surprise ($ / %)+$0.13 / +5.2%*+$0.27 / +13.0%*+$0.57 / +22.4%*
Revenue Consensus ($MM)$983.6*$941.9*$989.6*
Revenue Actual ($MM)$1,002.5 $984.2 $1,032.1
Revenue Surprise ($MM / %)+$18.9 / +1.9%*+$42.2 / +4.5%*+$42.5 / +4.3%*

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (May 7, 2025)Current Guidance (Aug 6, 2025)Change
Revenue growth (reported)FY2025(5.5)% – (3.5)% (2.5)% – (0.5)% Raised
Revenue growth (organic)FY2025(4.5)% – (2.5)% (3.0)% – (1.0)% Raised
FX impact (reported)FY2025~1.0% ~(0.5)% More favorable
GAAP EPSFY2025$4.35 – $4.85 $4.25 – $4.65 Lowered (GAAP)
Non-GAAP EPSFY2025$9.30 – $9.80 $9.90 – $10.30 Raised
Acquisition-related amortization & integrationFY2025~$3.50 ~$3.60 Higher
Restructuring costsFY2025~$1.00 ~$1.40 Higher
VC/strategic investment (losses)/gainsFY2025~$0.15 ~$0.17 Higher loss
Other itemsFY2025~$0.30 ~$0.50 Higher

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Demand stabilization (DSA, biotech vs biopharma)View unchanged: global biopharma restructuring constrains early-stage spend; biotech stable to slightly improved . Q1: DSA bookings highest in two years; guidance increased modestly .Biopharma demand stabilizing; sequential bookings down as expected; proposal activity healthy; biotech demand stable; YoY bookings mid-single-digit increase .Improving gradually
Pricing/mixQ4: Slight pricing pressure in DSA . Q1: DSA non-GAAP margin up despite lower revenue, cost savings help .Favorable mix (longer-duration/specialty studies) supports revenue/margins; spot pricing stable; mix does not imply broader pricing increase .Stable pricing; favorable mix
CDMO/ManufacturingQ4: Microbial strength; CDMO weaker; goodwill impairment in Biologics Solutions . Q1: Manufacturing non-GAAP OM down; CDMO pressured .Non-GAAP OM 32.8% aided by commercial CDMO payments unlikely to repeat in 2H; Microbial leverage continues .Mixed; 2H normalization expected
Legal/regulatory (NHP)Q4: NHP write-down; ongoing investigations . Q1: Higher third-party legal costs; investigations ongoing .DOJ and parallel civil investigations closed; FWS cleared certain shipments; legal overhang reduced .Positive resolution
Staffing & cost actionsQ4/Q1: Restructuring/cost savings actions underway; margin support .Modest DSA hiring to support improved outlook; ~$10M 2H25 headwind vs 1H25 from increased headcount costs .Near-term cost headwind

Management Commentary

  • “We are continuing to see clear signs that the biopharmaceutical demand is stabilizing…solid second-quarter financial performance, driven principally by favorable results in our DSA segment.” — James C. Foster, Chair, President & CEO .
  • “The sustained improvement in our businesses may not be linear…we are pleased that the DSA business – and our overall, non-GAAP financial results – will perform substantially better than we had initially expected this year.” — James C. Foster .
  • “The first quarter demonstrated continued signs of demand stabilization…notable improvement in DSA booking activity to the highest level in two years…we are modestly increasing our financial guidance for 2025.” — James C. Foster (Q1) .
  • “We see many of our global biopharmaceutical clients continuing to move forward with their restructuring…we believe these trends are stabilizing…biotechnology demand trends will be stable to slightly improved this year.” — James C. Foster (Q4) .

Q&A Highlights

  • Non-GAAP performance upside primarily operational; additional $0.12 EPS benefit from a lower-than-expected tax rate in Q2 .
  • CDMO commercial client payments boosted Manufacturing margins in 1H but are largely not expected to repeat in 2H25, tempering 2H margin trajectory .
  • DSA staffing modestly increasing to support improved demand outlook; expected ~$10M 2H25 headwind vs 1H25 from higher headcount costs .
  • 2025 DSA outlook now low- to mid-single-digit revenue decline (improved from mid-single-digit decline); plan does not assume book-to-bill returns to 1x .

Estimates Context

  • Q2 2025 delivered a significant beat: EPS $3.12 vs $2.55* (+22.4%), revenue $1,032.1mm vs $989.6mm* (+4.3%). This follows beats in Q1 and Q4, suggesting estimates may need to reflect stronger non-GAAP margin execution and stabilized demand .
  • FY2025 non-GAAP EPS guidance raised by $0.55 at midpoint; given operational outperformance and FX tailwind ($0.14 benefit vs May), consensus EPS likely to move higher, while GAAP EPS lowered due to higher restructuring and amortization .
    Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Strong operational momentum led to a third consecutive beat vs consensus; margin initiatives are working, and demand indicators point to stabilization, especially within DSA .
  • Guidance raise is a clear positive catalyst; non-GAAP EPS up while legal overhang materially improved with DOJ closure—de-risking the story .
  • Watch 2H dynamics: manufacturing margin tailwinds from CDMO payments fade and DSA staffing adds ~$10M headwind; expect narrower margin expansion vs 1H .
  • DSA pricing stable; favorable mix (longer-duration/specialty studies) supports revenue quality but does not imply broad pricing strength—book-to-bill normalization not assumed .
  • RMS resilience continued with organic growth and margin expansion; Microbial Solutions remains a key lever within Manufacturing .
  • Track FX (~(0.5)% tailwind vs prior ~1.0% headwind) and tax rate variability, which influenced Q2 EPS by ~$0.12; below-the-line items can sway quarterly EPS .
  • Near term, narrative centers on demand stabilization and execution; medium term, a leaner cost base and improved legal backdrop set up for gradual recovery in organic growth and sustained non-GAAP margin strength .