Charles River Laboratories International NYSE: CRL reported first-quarter 2026 results that management said were in line to slightly ahead of its prior outlook, while reaffirming its full-year organic revenue and non-GAAP earnings guidance and outlining a refreshed strategic framework under new Chief Executive Officer Birgit Girshick.
Girshick, who became CEO during the week of the call, said the company is entering a new phase under a strategic plan called “Pathway to Purpose,” focused on modernizing operations, strengthening its scientific portfolio, deepening client relationships and improving profitability.
“The world is changing rapidly around us. Science is advancing faster than it ever has, and our clients require greater speed, best science, and more collaboration,” Girshick said. She said Charles River plans to provide more detail on the strategy at an Investor Day in September.
First-quarter revenue rises on reported basis, declines organically
Executive Vice President and Chief Financial Officer Glenn Coleman, who joined the company in April, said Charles River reported first-quarter revenue of $996 million, up 1.2% from a year earlier. On an organic basis, revenue declined 1.5%, which Coleman said was consistent with the company’s February outlook for a low single-digit organic decline.
Non-GAAP operating margin fell 280 basis points year over year to 16.3%. Non-GAAP earnings per share declined 12% to $2.06, though Coleman said EPS exceeded the company’s prior outlook for a high-teens decline because of better-than-expected operating performance in the Manufacturing and Research Models and Services segments.
Management attributed the margin decline to several discrete factors, including lower non-human primate, or NHP, third-party revenue in the RMS segment, the timing of stock compensation expense tied to the CEO transition, and higher NHP sourcing costs and study starts in the Discovery and Safety Assessment segment.
Charles River also repurchased approximately $200 million of shares during the quarter under a $1 billion stock repurchase authorization approved last October. Coleman said net leverage was 2.6 times at quarter-end.
Segment performance mixed as Manufacturing margin improves
In Discovery and Safety Assessment, or DSA, revenue was $597 million, down 1.4% organically from the prior-year quarter. Coleman said lower revenue for discovery services, partly due to prior site consolidation activities, was partially offset by stable safety assessment revenue. DSA operating margin declined 290 basis points to 21.0%, primarily because of higher study-related direct costs, including NHP sourcing costs and study starts.
Research Models and Services revenue was $208 million, down 5.5% organically. The decline reflected lower sales of small and large models, as well as research model services. Management said small model revenue was pressured by lower North American volume but partially offset by solid growth in China. RMS operating margin fell 240 basis points to 24.7%, largely due to unfavorable revenue mix from NHP shipment timing and lower small model sales in North America.
Manufacturing revenue was $191 million, up 2.9% organically, driven by growth in the Microbial Solutions business, including the Endosafe and Celsis manufacturing quality control testing platforms. Manufacturing operating margin improved 280 basis points to 25.9%, which Coleman attributed to revenue leverage and cost savings.
Guidance reaffirmed, with margin expansion expected later in 2026
Charles River reaffirmed its 2026 outlook for an organic revenue decline of 0.5% to 1.5% and non-GAAP earnings per share of $10.80 to $11.30, representing 5% to 10% growth over 2025. The guidance includes approximately $0.10 per share of earnings accretion from divestitures.
On a reported basis, Coleman said the company reduced its revenue outlook by 50 basis points to a decline of 4.0% to 5.5%, citing less favorable foreign exchange rates due to the recent strengthening of the U.S. dollar. He said the FX headwind to earnings is expected to be essentially offset by accretion from share repurchases.
The company continues to expect operating margin expansion of about 120 to 150 basis points in 2026, with most of the improvement coming in the second half of the year. Coleman said the second-half operating margin is expected to be more than 500 basis points higher than the first-half level, with more than half of the improvement driven by completed acquisitions and divestitures, along with the planned sale of certain European discovery sites.
For the second quarter, Coleman said Charles River expects reported revenue to decline at a mid- to high-single-digit rate year over year, primarily due to divestitures. Organic revenue is projected to decline at a low-single-digit rate, similar to the first quarter. EPS is expected to increase at least 30% sequentially from the first-quarter level of $2.06.
Strategic transactions reshape portfolio
Girshick said Charles River completed the divestiture of its CDMO and Cell Solutions businesses on May 6 and expects to complete the planned sale of certain European discovery sites later in May. She said the transactions are intended to refine the company’s portfolio around core competencies and improve future operating margins.
The company also acquired assets of K.F. Cambodia earlier this year, now called Charles River Cambodia, which Girshick said strengthens and secures the NHP supply chain for safety assessment operations. Combined with Noveprim, in which Charles River acquired a controlling stake in 2023, the company expects to internally source most of its future NHP supply requirements for DSA.
In April, Charles River completed the acquisition of PathoQuest, adding an in vitro next-generation sequencing platform for quality control testing of biologic drugs. Girshick described the acquisition as part of the company’s effort to expand New Approach Methodologies, or NAMs.
Management cites stable demand with pockets of improvement
Girshick said the overall biopharma demand environment stabilized last year, and Charles River is seeing “pockets of improvement” among both global biopharmaceutical and small and mid-sized biotechnology clients. She said revenue from global biopharmaceutical clients increased in the first quarter, while revenue from small and mid-sized biotech clients declined, primarily reflecting softer DSA booking activity last summer and the typical lag between bookings and revenue.
DSA net book-to-bill was 1.04 times in the quarter, and backlog increased slightly on a sequential basis to $1.92 billion. Net bookings totaled $622 million. Girshick said biotech net bookings and net book-to-bill over the past two quarters were at their highest levels in more than two years.
During the question-and-answer session, Girshick said proposal volumes were up in the high single digits year over year across both global biopharmaceutical and biotech client segments. Coleman added that proposals had increased sequentially for three consecutive quarters.
Girshick also discussed artificial intelligence, saying she expects AI to support the industry over time by improving the speed and efficiency of early discovery. However, she said the number of AI-assisted drug programs remains small and that any impact on Charles River’s preclinical testing business is still in early stages.
“It’s very early days,” Girshick said. “There’s so few programs in the pipeline that are AI assisted.”
She said Charles River is also applying AI and machine learning internally, including in its Virtual Control Groups program for safety assessment studies, which is intended to preserve scientific integrity while reducing reliance on animal models.
About Charles River Laboratories International NYSE: CRL
Charles River Laboratories International, Inc is a leading provider of research models and preclinical and clinical support services for the pharmaceutical, biotechnology and medical device industries. The company's core offerings include discovery, safety assessment, toxicology, and pathology services, as well as supply of laboratory animals and related diagnostics. Services extend across in vivo and in vitro testing, biologics testing, and support for advanced therapies, helping clients accelerate drug development from early discovery through regulatory submission.
Founded in 1947 in Wilmington, Massachusetts, Charles River has grown through strategic investments and acquisitions to establish a broad portfolio of capabilities.
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