Charles River Laboratories — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported third-quarter revenue of $982.7 million, a 2.2% decrease from $1,004.9 million in the third quarter of 2025, primarily driven by the impact of May 2026 divestitures.
• Organic revenue growth was 4.7% year-over-year, marking the second consecutive quarter of organic growth.
• GAAP earnings per share (EPS) were $6.86, compared to $1.10 in the third quarter of 2025.
• Non-GAAP EPS were $3.09, a 27.2% increase from $2.43 in the third quarter of 2025.
• GAAP operating margin increased to 20.6% from 13.3% in the prior year period.
• Non-GAAP operating margin increased to 23.0% from 19.7% in the prior year period.
• GAAP net income available to common shareholders was $333.1 million, compared to $54.4 million in the third quarter of 2025.
• Non-GAAP net income was $150.1 million, a 24.8% increase from $120.3 million in the third quarter of 2025.
• GAAP net income and EPS included a $245.6 million benefit ($5.06 per share) from the reversal of acquired tax reserves.
• Total assets were $7,451.5 million as of September 26, 2026, compared to $7,135.4 million as of December 27, 2025.
• Long-term debt, net and finance leases were $2,443.5 million as of September 26, 2026, compared to $2,136.4 million as of December 27, 2025.
• Deferred revenue was $204.2 million as of September 26, 2026, compared to $210.4 million as of December 27, 2025.
• Net cash provided by operating activities for the nine months ended September 26, 2026, was $474.9 million, compared to $590.1 million in the same period in 2025.
• Net cash used in investing activities for the nine months ended September 26, 2026, was $369.5 million, compared to $116.5 million in the same period in 2025.
• Net cash used in financing activities for the nine months ended September 26, 2026, was $71.1 million, compared to $484.9 million in the same period in 2025.

Guidance and Future Outlook:

• Increased 2026 revenue guidance to a reported decrease of 2.0% to 1.5%, up from a prior range of 3.5% to 2.5%.
• Increased 2026 organic revenue growth guidance to at least +1.5%, up from a prior range of 0.0% to 1.0%.
• Increased 2026 GAAP EPS guidance to $8.15–$8.35, up from a prior range of $3.05–$3.35.
• Increased 2026 Non-GAAP EPS guidance to $11.35–$11.55, up from a prior range of $11.15–$11.45.
• Guidance increases are primarily driven by third-quarter outperformance, specifically better-than-expected performance in the DSA segment and a lower tax rate.

Business Segments and Product Lines:

• Discovery and Safety Assessment (DSA): Revenue was $596.3 million, a 0.7% decrease from the prior year; organic revenue increased 5.9% driven by higher study volume for regulated safety assessment services. Non-GAAP operating margin increased to 26.8% from 25.4%.
• Manufacturing Solutions: Revenue was $178.9 million, a 6.2% decrease from the prior year due to the CDMO divestiture; organic revenue increased 7.4% driven by strong demand in Biologics Testing Solutions and Microbial Solutions. Non-GAAP operating margin increased to 38.6% from 26.7%.
• Research Models and Services (RMS): Revenue was $207.5 million, a 2.8% decrease from the prior year due to the Cell Solutions divestiture; organic revenue decreased 0.6% due to lower revenue for small research models in North America and large research models, partially offset by growth in China and Insourcing Solutions. Non-GAAP operating margin decreased to 24.4% from 25.0%.
• Launched Endosafe® Cartridge Technology Automated Manufacturing Suite to increase production capacity and strengthen manufacturing controls.
• Partnered with Autolomous to launch Apollo Orchestrate™, a new capability within the Apollo® platform to digitize and transform laboratory workflows.
• Announced an industry collaboration with the U.S. FDA to validate preclinical screening tools to quantify and rank the abuse potential of new drugs.
• Introduced a new rapid cell banking program for the Biologics Testing Solutions business to accelerate product release timelines using in vitro next-generation sequencing.
• Utilized Virtual Control Group (VCG) database and methodology in an upcoming GLP-compliant safety assessment study for Ipsen.

Market and Competitive Landscape:

• Management noted continued strength in the biopharmaceutical demand environment.
• DSA net bookings and proposals continued to show robust year-over-year increases.
• The company aims to deepen client relationships and increase its share of R&D spend as demand trends improve.

Risks and Challenges:

• Forward-looking statements include risks such as NHP supply constraints, changes in the global economy, geopolitical conflicts, and integration risks associated with acquisitions.
• Risks include negative trends in R&D spending, outsourcing levels, or cost reduction actions by clients.
• Potential impacts from new displacement technologies, USDA and FDA regulations, and changes in tax laws.
• Risks related to unauthorized access to information systems, loss of key personnel, and interest rate or foreign currency exchange rate fluctuations.

Management Commentary and Tone:

• CEO Birgit Girshick expressed encouragement regarding the continued strength of the biopharmaceutical demand environment and the company's financial results outperforming prior expectations.
• Management highlighted meaningful progress toward strategy and long-term financial targets.
• The company is building a more agile, client-centric organization through its "Pathway to Purpose" strategy to expand engagement across its portfolio.

Other Key Points:

• Unveiled the "Pathway to Purpose" strategic vision and "Create the Future™" initiative at the 2026 Investor Day to enhance operational excellence and drive long-term value creation.
• Completed divestitures of the CDMO business, Cell Solutions business, and certain European Discovery Services sites during the period.
• The Company advanced modernization efforts through the implementation of its Endosafe® Cartridge Technology Automated Manufacturing Suite.
• The Company announced an industry collaboration with the U.S. FDA to validate preclinical screening tools.
• The Company introduced a new rapid cell banking program for its Biologics Testing Solutions business.
• The Company utilized its Virtual Control Group (VCG) database and methodology in an upcoming GLP-compliant safety assessment study for Ipsen.
• The Company purchased treasury stock totaling $324.1 million for the nine months ended September 26, 2026.
• The Company recognized a pre-tax gain of $38.5 million in connection with the sale of certain assets in Wilmington, Massachusetts.
• The Company resolved U.S. government investigations into the NHP supply chain, resulting in the utilization of previously written-down NHP inventory and partial reversals of a $27 million inventory charge.
• The Company recorded a $44.6 million tax benefit in the DSA segment from the reversal of acquired non-income tax reserves following newly enacted tax legislation.