Charles River Laboratories International Q4 Earnings Call Highlights

Key Points

• Q4/2025 results and 2026 guidance: Q4 revenue was $994.2M (‑2.6% organic) and full‑year revenue $4.02B (‑1.6% organic) with 2025 non‑GAAP EPS of $10.28; management guides 2026 organic revenue flat to down ~1% but raised non‑GAAP EPS to $10.70–$11.20 (4%–9% growth) backed by margin improvements and an estimated ~$0.25 contribution from the K.F. Cambodia acquisition.
• Leadership and portfolio moves: Chair/CEO Jim Foster will retire in May with COO Birgit Girshick succeeding as CEO, new CFO Glenn Coleman and CLO Carrie Daly are joining, and the company plans to divest ~7% of 2025 revenue by mid‑2026, expected to be accretive to non‑GAAP EPS (~$0.30 annualized).
• Bookings, NHP supply and margin dynamics: Discovery & Safety Assessment (DSA) bookings improved in Q4 (book‑to‑bill 1.12x, backlog $1.86B) but margins were pressured by higher non‑human primate (NHP) sourcing and timing differences across RMS and DSA; management expects K.F. Cambodia to strengthen NHP supply and reduce sourcing costs, supporting sequential margin recovery after Q1.

Charles River Laboratories International NYSE: CRL reported fourth-quarter and full-year 2025 results that landed at the high end of management’s November outlook, while outlining 2026 guidance that assumes improving demand trends but a muted near-term revenue picture. Executives emphasized a stabilizing biopharma environment, a rebound in Discovery and Safety Assessment (DSA) bookings late in 2025, and expected margin benefits from the company’s recently closed acquisition of K.F. Cambodia, which is intended to strengthen its non-human primate (NHP) supply chain and reduce sourcing costs over time.

Leadership transition and strategic actions

Chair, President and CEO Jim Foster said he will retire in May, remaining on the board, and that COO Birgit Girshick will become CEO. Girshick used her prepared remarks to frame 2026 priorities around operational efficiency, selective M&A aligned with core competencies, and continued investment in scientific innovation, including new approach methodologies (NAMs).

Foster also reiterated progress on a plan to divest businesses representing roughly 7% of 2025 revenue, with negotiations ongoing and an expectation that divestitures will be completed by mid-2026. He said the divestitures are expected to be accretive to non-GAAP EPS by $0.30 on an annualized basis, but closer to $0.10 for partial-year 2026, depending on the timing of closing and improvements in operating performance ahead of sale.

Management also announced two incoming senior leaders: Glenn Coleman, who will join as CFO on April 6, and Carrie Daly, who will join as Chief Legal Officer on March 30.

Q4 and full-year 2025 results

For the fourth quarter of 2025, Charles River reported revenue of $994.2 million, down 2.6% organically year over year, with declines across all three segments. Full-year 2025 revenue was $4.02 billion, down 1.6% organically, primarily due to lower DSA and manufacturing revenue.

Consolidated operating margin in Q4 decreased 100 basis points to 18.1%, which Foster attributed mainly to lower revenue, higher staffing and NHP sourcing costs in DSA, and the timing of NHP shipments in the Research Models and Services (RMS) segment. Full-year operating margin was 19.8%, down 10 basis points, as restructuring and efficiency initiatives helped offset lower revenue.

Non-GAAP EPS was $2.39 in Q4, down 10.2% from $2.66 a year earlier, with a higher tax rate cited as an additional headwind. Full-year non-GAAP EPS was $10.28 versus $10.32 in 2024, as cost savings largely offset the revenue decline. Management said higher 2025 taxes were primarily offset by lower interest expense and a lower share count from repurchases earlier in the year.

Segment performance: bookings improve, NHP dynamics diverge

DSA: Q4 DSA revenue was $591.6 million, down 3.3% organically, reflecting lower study volume (particularly discovery services) with relatively stable pricing and mix. Full-year DSA revenue fell 2.6% organically. DSA operating margin was 20.1% in Q4, down 460 basis points year over year, and 24.2% for the full year, down 150 basis points, driven by lower revenue and higher NHP sourcing and staffing costs.

Management highlighted a significant improvement in DSA demand indicators in Q4, including net book-to-bill of 1.12x on net bookings of $665 million, up from 0.82x in Q3. Backlog ended the year at $1.86 billion, up modestly from $1.80 billion at the end of Q3. Foster said the company expects to see the revenue benefit of stronger Q4 bookings more fully in Q2 due to the normal lag between booking and study start.

RMS: Q4 RMS revenue was $206.3 million, down 0.9% organically, while full-year RMS revenue increased 1.2% organically. The Q4 decline was driven by lower NHP revenue (timing of shipments that were accelerated earlier in the year) and lower North American small model volume, which management said reflects in-house research activity among large pharma and mid-sized biotech clients that “has not fully recovered.” Academic and government accounts were described as stable, though growth has slowed amid government uncertainty, including NIH budgets. RMS operating margin was 21.9% in Q4, down 90 basis points, but improved 110 basis points for the full year to 24.8%.

Manufacturing Solutions: Q4 revenue was $196.4 million, down 2.1% organically; full-year revenue declined 1.6% organically. Executives attributed the weakness primarily to lower CDMO revenue after losing a commercial cell therapy client, whose revenue declined by nearly $25 million in 2025. Microbial Solutions grew across Endosafe, Celsis and Accugenix, though management said Q4 ordering patterns were less robust than the prior year. Biologics testing returned to growth in Q4 after earlier impacts from lower sample volumes tied to client delays and regulatory challenges. Segment operating margin improved to 32.1% in Q4 (up 340 basis points) and 28.8% for the year (up 140 basis points).

In Q&A, executives addressed investor questions about what appeared to be conflicting NHP trends between RMS and DSA. Management said the RMS headwind largely reflects shipment timing and some lower volumes, while DSA faced higher sourcing costs because more NHP studies arrived than expected, requiring open-market purchases at higher prices. They also pointed to complexity in matching internal supply across different sourcing regions with study demand timing.

2026 outlook: flat-to-down revenue, higher EPS on margin and tax rate

Girshick guided to 2026 organic revenue ranging from down 1% to at least flat, with consolidated operating margin expected to improve 20–50 basis points from 2025’s 19.8%. Non-GAAP EPS was guided to $10.70–$11.20, representing 4%–9% growth, including an estimated $0.25 contribution from the K.F. Cambodia acquisition.

Interim CFO Michael Knell added that, on a reported basis, revenue is expected to be at least flat to up 1.5%, including a 1%–1.5% tailwind from foreign exchange and a small contribution from PathoQuest once closed. Segment expectations included:

• RMS: low- to mid-single-digit organic decline, driven by lower NHP revenue (about a 200 bps headwind) due to shipment timing that favored 2025, plus reduced NHP volume commitments to some third-party clients and continued pressure on cradle occupancy.
• DSA: slightly positive to low single-digit organic decline for the year, with management expecting a return to organic growth in the second half if bookings momentum continues. Girshick said reaching the top end would require net book-to-bill averaging above 1x for the year, though not necessarily each quarter.
• Manufacturing: low single-digit organic growth, aided by lapping the prior cell therapy client loss and continued mid-single-digit Microbial Solutions growth, with modest improvement expected in biologics testing as client-specific challenges ease.

Knell said Q1 2026 will be pressured, with revenue expected to be flat to slightly negative reported and down low single digits organically. He guided to a mid-teens operating margin in Q1, citing an unfavorable mix from RMS NHP shipment timing, accelerated stock-based compensation expense tied to the CEO transition (about a $0.15 EPS headwind in Q1), and continued elevated DSA NHP sourcing and staffing costs. He said these factors are expected to ease after Q1, with sequential improvement supported by cost savings, reduced NHP sourcing costs as K.F. benefits ramp, and better conversion of late-2025 bookings into revenue.

For below-the-line items, Knell guided to a 22%–23% non-GAAP tax rate in 2026, down from 24.6% in 2025, citing benefits related to the “One Big Beautiful Bill Act (OB3)” and geographic mix. Adjusted net interest expense was guided to $95 million–$100 million (down from $102.1 million), despite higher average debt balances following acquisitions. The company ended Q4 with $2.1 billion of outstanding debt and leverage ratios around 2.0x net, and said it expects leverage to remain below 3x after funding K.F. and PathoQuest.

NAMs and AI: management says evolution, not disruption

Executives also pushed back on the notion that artificial intelligence and NAMs represent an imminent disruption to Charles River’s business, describing AI as an enabling technology and emphasizing that client behavior has not materially changed beyond “more frequent conversations” about NAMs. Foster said the company expects a gradual, science-led evolution, particularly in regulated safety assessment environments where validation is critical. Management highlighted existing capabilities such as Retrogenix’s cell microarray platform, machine-learning-based virtual control groups, and PathoQuest’s next-generation sequencing approach for biologics quality control testing.

During the call, management reiterated cautious optimism that improving biotech funding—highlighting a record $28 billion raised in Q4 2025—along with stabilizing demand among global biopharma clients, could support a return to organic revenue growth in the second half of 2026.

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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