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CHARLES RIVER LABORATORIES INTERNATIONAL, INC. (CRL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $1.003B (-1.1% YoY; -1.8% organic) and non-GAAP EPS was $2.66 (+8.1% YoY) while GAAP EPS was a loss of $(4.22) driven by a $215M non-cash goodwill impairment in Biologics Solutions and losses on venture investments .
  • Non-GAAP operating margin expanded to 19.9% (+80 bps YoY) on lower unallocated corporate costs and strength in Microbial Solutions; GAAP operating margin was -16.7% due to impairment .
  • 2025 guidance: reported revenue down (7.0)%–(4.5)%, organic down (5.5)%–(3.5)%; non-GAAP EPS $9.10–$9.60; company plans ~$350M buybacks, and expects DSA pricing headwinds and lower CDMO commercial revenue to weigh on growth .
  • Management narrative: demand stabilizing with biotech “stable to slightly improved,” but large pharma restructuring continues; DSA net book-to-bill remains <1x and backlog declined to $1.97B, implying limited near-term growth catalysts absent bookings acceleration .

What Went Well and What Went Wrong

What Went Well

  • Microbial Solutions delivered a “robust year-end” with strong instrument placements and consumables demand; Manufacturing non-GAAP margin expanded to 28.7% in Q4 (+330 bps YoY) and 27.4% for 2024 (+560 bps YoY) .
  • Cost actions: restructuring initiatives expected to yield ~$225M annualized savings by 2026 (> $175M in 2025); 2024 free cash flow was $501.6M on disciplined capex and working capital management .
  • CEO tone on demand: “We believe these trends are stabilizing... biotechnology demand trends will be stable to slightly improved this year,” and the company intends ~$350M stock repurchases to protect shareholder value .

What Went Wrong

  • GAAP loss: $(4.22) EPS in Q4 from a $215M goodwill impairment related to Biologics Solutions (loss of key customers reduced outlook); additional $27M NHP inventory write-down in DSA and venture losses also weighed .
  • DSA softness: Q4 DSA revenue -3.5% organic on lower study volume and slightly lower pricing; non-GAAP margin down to 24.7% from 26.0% YoY; backlog fell to $1.97B (from $2.12B in Q3) and net book-to-bill remained <1x .
  • CDMO headwinds: management expects lower commercial revenues from two clients to cut 2025 consolidated revenue by ~1% and Manufacturing growth by >5%; impairment reflected these pressures .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$1,026.1 $1,009.8 $1,002.5
GAAP EPS ($)$1.74 $1.33 $(4.22)
Non-GAAP EPS ($)$2.80 $2.59 $2.66
GAAP Operating Margin %14.8% 11.6% (16.7)%
Non-GAAP Operating Margin %21.3% 19.9% 19.9%
Segment Revenue ($USD Millions)Q2 2024Q3 2024Q4 2024
RMS$206.4 $197.8 $204.3
DSA$627.4 $615.1 $603.3
Manufacturing$192.3 $196.9 $194.9
Segment Non-GAAP Operating Margin %Q2 2024Q3 2024Q4 2024
RMS23.1% 21.0% 22.8%
DSA27.1% 27.4% 24.7%
Manufacturing26.6% 28.7% 28.7%
KPIsQ3 2024Q4 2024
DSA Backlog ($USD Billions)$2.12 $1.97
Net Book-to-Bill (DSA)Below 1x; improved vs Q2, stable QoQ Below 1x; stable sequentially

Note: Wall Street consensus estimates from S&P Global for Q4 2024 revenue/EPS were unavailable due to data access limits during retrieval.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue growth (reported)FY 2025N/A(7.0)% – (4.5)% New
Revenue growth (organic)FY 2025N/A(5.5)% – (3.5)% New
FX impact (reported)FY 2025N/A1.0% – 1.5% unfavorable New
GAAP EPSFY 2025N/A$4.30 – $4.80 New
Non-GAAP EPSFY 2025N/A$9.10 – $9.60 New
Tax rate (non-GAAP)FY 2025N/A22.5% – 23.5% New
Adjusted net interest expenseFY 2025N/A$112M – $117M New
Free cash flowFY 2025N/A$350M – $390M New
CapExFY 2025N/A6% of revenue ($230M) New
Unallocated corporate costsFY 2025N/A~5% of revenue New
Stock repurchasesFY 2025N/A~$350M planned New
Non-GAAP EPSQ1 2025N/AAt least $2.00 New
FY 2024 Non-GAAP EPSFY 2024$10.10 – $10.30 (Q3 guide) Actual: $10.32 Beat vs guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 press release)Previous Mentions (Q3 2024 call)Current Period (Q4 2024 call)Trend
DSA demand & pricingDSA revenue -5.0% organic; pricing moderating; guide cut on biopharma weakness Net book-to-bill improved but <1x; pricing flat-to-slightly down expected Q4 Net book-to-bill stable <1x; 2025 DSA pricing headwind and lower volume; backlog fell to $1.97B Stabilizing demand; pricing headwind intensifying
Biotech fundingCautious; lack of expected H2 recovery Funding improving; biotech revenue stable QoQ “Stable to slightly improved” biotech demand in 2025 Gradual improvement
Large pharma restructuringSoftening expected H2; reprioritization cited Restructuring pressured H2; stabilization signs Continued reprioritization constraining early-stage spend in 2025 Persistent headwind
Cost actions & savingsInitiatives >$150M annualized savings in 2024 Annualized savings ~$200M by 2026; FCF record Savings ~$225M by 2026; >$175M realized in 2025; FCF $501.6M in 2024 Expanding savings
CDMO & Biologics SolutionsManufacturing margin expansion; CDMO strong Q2 CDMO robust; >50% attach to Biologics Testing Lower commercial CDMO revenue to cut 2025 consolidated revenue by ~1%; goodwill impairment tied to loss of key customers Near-term headwind; long-term opportunity
NHP supply & regulatoryDOJ investigations noted NHP KPIs improved; capacity consolidation CITES deferred Cambodia trade suspension; reiterates criticality of NHPs; diversifying supply via Mauritius (Noveprim) Regulatory overhang persists
Technology initiatives—Apollo platform & RMS e-commerce; digitization & GBS model Leverage Apollo; client-centric enhancements; dynamic pricing strategy Execution continuing
Macro/tariffs/new administration—Election impact watch (IRA, rates, IPO market) Potential pharma import tariffs; RFK FDA stance speculative Uncertain macro tail risks

Management Commentary

  • “Throughout 2024, we have launched initiatives to generate more revenue, aggressively reduce costs... we see many of our global biopharmaceutical clients continuing... to constrain early-stage spending... small and mid-sized biotechnology clients... stable to slightly improved this year.” — CEO Jim Foster .
  • “We intend to repurchase approximately $350 million in stock over the next month or 2... we believe allocating free cash flow to stock repurchases this year will be prudent in light of our low leverage levels and our current valuation.” — CFO Flavia Pease .
  • “We expect DSA revenue will decline at a mid- to high single-digit rate on an organic basis [in 2025]... both lower pricing and steady volume will have a similar impact.” — CEO Jim Foster .
  • “Third quarter [and Q4] forward-looking KPIs were stable; net book-to-bill remained below 1x... cancellations remained at lower levels.” — CEO Jim Foster .
  • “We are taking decisive action... eliminating over 5% of our cost structure... annualized cost savings of approximately $225 million in 2026.” — CEO Jim Foster .

Q&A Highlights

  • Bookings/Backlog: Net book-to-bill remained essentially flat QoQ in Q4; backlog declined ~$150M to $1.97B, reinforcing stable but sub-1x demand dynamics .
  • DSA Pricing: Spot prices stable exiting 2024, but previously booked lower pricing now flowing through revenue, creating a 2025 headwind; expected half price/half volume drag on DSA .
  • CDMO: Margin protection via rightsizing; some contractual obligations to mitigate client terminations are embedded in 2025 guidance .
  • NHP/CITES: Trade suspension deferred; CRL diversifying supply, with Mauritius (Noveprim) increasing after 2026; emphasizes scientific necessity of NHPs .
  • Macro: Potential tariff impacts discussed; broader regulatory tone uncertain under new administration; management not forecasting recovery in 2025 for large pharma .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 (revenue and EPS) were unavailable due to data access limits during retrieval. As a result, beats/misses versus Street could not be quantified this cycle.
  • Guidance implies likely estimate downgrades for FY 2025 given organic revenue decline of (5.5)%–(3.5)% and non-GAAP EPS of $9.10–$9.60 vs 2024 actual $10.32; DSA pricing headwinds and lower CDMO commercial revenue are the key drivers .

Key Takeaways for Investors

  • Quality of earnings: Despite a GAAP loss on impairment, underlying non-GAAP EPS growth (+8% YoY) and stable 19.9% non-GAAP margin demonstrate resilient execution amid demand softness; focus near-term on margin preservation rather than top-line growth .
  • 2025 setup is cautious: Organic decline guided (5.5)%–(3.5)% led by DSA pricing and volume; watch bookings trajectory and pricing normalization to gauge reacceleration potential .
  • Manufacturing remains a relative bright spot: Microbial Solutions strength and margin expansion offset CDMO headwinds; impairment largely tied to CDMO customer losses rather than Biologics Testing fundamentals .
  • Cost-savings provide downside support: >$175M savings in 2025 and ~$225M annualized by 2026 should cushion margin pressure and support EPS despite lower revenue .
  • Capital allocation tailwind: ~$350M buyback early in 2025 plus low-2x leverage could support per-share EPS and sentiment; monitor timing and magnitude vs. free cash flow generation .
  • Regulatory watch: NHP supply chain and CITES risk remains an overhang; deferral reduces near-term tail risk, but resolution later in 2025 could move the stock and operations .
  • Trading implications: Near-term, shares may be sensitive to DSA bookings/net book-to-bill trends and evidence of pricing stabilization; medium-term thesis hinges on biotech funding recovery, large pharma pipeline reprioritization conclusion, and margin leverage from cost and mix .