Charles River Laboratories International, Inc. · NYSE:CRL
Charles River Laboratories International — Q4 2024 Earnings Presentation
52 slides from Charles River Laboratories International's earnings presentation, Feb 19, 2025
Slide 1: 4Q 2024 Results & 2025 Guidance
Charles River Laboratories 4Q 2024 Results & 2025 Guidance February 19, 2025 © 2025 Charles River Laboratories International, Inc.
Slide 2: Safe Harbor
Safe Harbor Caution Concerning Forward-Looking Statements. This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “in
Slide 3: Update on Market Environment
Update on Market Environment ▪ Our view of biopharma demand remains consistent with our last update ▪ Overall, DSA demand KPIs were stable compared to 3Q24 ̶ Including net book-to-bill ratio ▪ Expect similar trends throughout 2025 ▪ Many of our global biopharma clients continue to move forward with
Slide 4: Update on Market Environment, cont.
Update on Market Environment, cont. ▪ Closely monitoring trends: ̶ Clients’ R&D spending patterns ̶ Funding environment ̶ Interest rates ̶ New biotech company formations (which have slowed over past couple of years) ▪ Believe our expectations for 2025 are appropriately measured 4
Slide 5: 2025 Guidance
2025 Guidance ▪ Primary factors influencing 2025 outlook are as follows: ̶ Expect a stabilizing DSA demand environment, with anticipated headwind from lower DSA pricing throughout the year ̶ Lower commercial revenue in CDMO business which will reduce consolidated revenue by ~1% ̶ Site consolidation
Slide 6: 2025 Guidance, cont.
2025 Guidance, cont. Revenue growth, reported (7.0)%-(4.5)% Impact of divestitures/(acquisitions), net N/M (Favorable)/unfavorable impact of FX 1.0%-1.5% Revenue growth, organic (5.5)%-(3.5)% GAAP EPS estimate $4.30-$4.80 Acquisition-related amortization and other acquisition and ~$3.50 integration-
Slide 7: 4Q24 & FY 2024 Revenue
4Q24 & FY 2024 Revenue ($ in millions, except per Organic Organic 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ share amounts) Δ Δ Revenue $1,002.5 $1,013.5 (1.1)% (1.8)% $4,050.0 $4,129.4 (1.9)% (2.8)% ▪ Full-year revenue slightly outperformed the range we provided in November, led by a better-than-expected 4Q24
Slide 8: 4Q24 & FY 2024 Operating Margin
4Q24 & FY 2024 Operating Margin 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ GAAP OM% (16.7)% 13.1% NM 5.6% 14.9% (930) bps Non-GAAP OM% 19.9% 19.1% 80 bps 19.9% 20.3% (40) bps ▪ 4Q24 non-GAAP operating margin improvement principally driven by lower unallocated corporate costs and margin expansion in Manufacturi
Slide 9: 4Q24 & FY 2024 EPS
4Q24 & FY 2024 EPS 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ GAAP EPS ($4.22) $3.62 NM $0.20 $9.22 (97.8)% Non-GAAP EPS $2.66 $2.46 8.1% $10.32 $10.67 (3.3)% ▪ 4Q24 non-GAAP EPS improvement was due to: ̶ Operating margin expansion ̶ Favorable below-the-line items, including reductions in: • Interest expense •
Slide 10: DSA Results – Revenue
DSA Results – Revenue ($ in millions) 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ Revenue, reported $603.3 $625.8 (3.6)% $2,451.3 $2,615.6 (6.3)% (Favorable)/unfavorable impact of FX (0.1)% (0.2)% Impact of divestitures 0.2% 0.3% Revenue growth, organic (3.5)% (6.2)% ▪ Revenue decline reflected lower study volu
Slide 11: DSA Results, cont.
DSA Results, cont. ▪ DSA demand KPIs were stable in 4Q24, including net book-to-bill ratio and cancellation rate ▪ Net book-to-bill remained below 1x in 4Q24, with global biopharma and small and mid-sized biotech client segments in a similar range consistent with 3Q24 ▪ This followed a divergence in
Slide 12: 2025 DSA Outlook
2025 DSA Outlook ▪ DSA revenue expected to decline at a mid- to high-single-digit rate on an organic basis in 2025, slightly less favorable than in 2024 ▪ Both lower pricing and study volume expected to have a similar impact on the 2025 decline ▪ Expect study volume will be relatively stable sequent
Slide 13: Update on NHP Supply
Update on NHP Supply ▪ In recent weeks, non-human primate (NHP) supply has made headlines due to a recent proposal at the Standing Committee meeting of CITES (international body that oversees trade of animals including NHPs used in biomedical research) to potentially suspend trade of NHPs from Cambo
Slide 14: Update on NHP Supply, cont.
Update on NHP Supply, cont. ▪ We will continue to work diligently to diversify and secure our supply chain by procuring NHPs under various supply arrangements outside of Cambodia ̶ Including through our controlling interest in Noveprim in Mauritius ▪ Will be able to utilize an increasing number of M
Slide 15: DSA Results – Operating Margin
DSA Results – Operating Margin 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ DSA GAAP OM% 10.4% 20.2% (980) bps 18.1% 23.2% (510) bps DSA Non-GAAP OM% 24.7% 26.0% (130) bps 25.7% 27.5% (180) bps ▪ Both 4Q24 and FY 2024 non-GAAP operating margin declines were driven primarily by lower revenue, partially offset by
Slide 16: RMS Results – Revenue
RMS Results – Revenue ($ in millions) 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ Revenue, reported $204.3 $195.8 4.3% $829.4 $792.3 4.7% (Favorable)/unfavorable impact of FX 0.1% 0.2% Contribution from acquisitions (4.8)% (5.0)% Revenue growth, organic (0.4)% (0.1)% ▪ For both 4Q24 and FY 2024, lower revenue f
Slide 17: RMS 2025 Outlook – Research Models
RMS 2025 Outlook – Research Models ▪ For 2025, RMS revenue is expected to increase at a low-single-digit rate, driven primarily by: ̶ Higher pricing in North American and European small models businesses ̶ Improved growth prospects for research model services (including CRADL ) ̶ Higher NHP sales to
Slide 18: RMS 2025 Outlook – Services
RMS 2025 Outlook – Services ▪ Demand for RM services expected to rebound and become a notable contributor to RMS revenue growth in 2025 ▪ GEMS expected to get back on track as clients increasingly utilize these services to support complex research efforts and maintenance of their genetically modifie
Slide 19: RMS Results – Operating Margin
RMS Results – Operating Margin 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ RMS GAAP OM% 6.7% 18.9% (1,220) bps 13.8% 19.5% (570) bps RMS Non-GAAP OM% 22.8% 23.1% (30) bps 23.7% 23.0% 70 bps ▪ For FY 2024, non-GAAP operating margin improvement was due to: ̶ Higher pricing for small research models ̶ Cost savings
Slide 20: Manufacturing Results – Revenue
Manufacturing Results – Revenue ($ in millions) 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ Revenue, reported $194.9 $191.9 1.6% $769.3 $721.4 6.6% (Favorable)/unfavorable impact of FX 0.5% 0.2% Revenue growth, organic 2.1% 6.8% ▪ Slower 4Q24 growth rate primarily driven by lower commercial revenue in CDMO busi
Slide 21: Manufacturing Outlook – CDMO
Manufacturing Outlook – CDMO ▪ As mentioned recently, expect lower revenue from two commercial CDMO clients will reduce revenue in 2025: ̶ Consolidated revenue by ~1% ̶ Manufacturing segment revenue by >5% ▪ Despite commercial setbacks, believe our efforts over past two years to enhance CDMO operati
Slide 22: Manufacturing Outlook – Microbial Solutions
Manufacturing Outlook – Microbial Solutions ▪ Microbial Solutions reported strong year-end performance with solid growth across all three testing platforms: ̶ Endosafe® endotoxin testing ̶ Celsis® bioburden testing ̶ Accugenix® microbial identification solutions ▪ Endosafe® continued to lead the way
Slide 23: Manufacturing Results – Operating Margin
Manufacturing Results – Operating Margin 4Q24 4Q23 YOY Δ 2024 2023 YOY Δ Manufacturing GAAP OM% (93.6)% 18.5% NM (9.3)% 12.2% NM Manufacturing Non-GAAP OM% 28.7% 25.4% 330 bps 27.4% 21.8% 560 bps ▪ Non-GAAP operating margin expansion was driven by operating leverage from improved demand in Microbial
Slide 24: Concluding Remarks
Concluding Remarks ▪ Currently operating in a challenging biopharma demand environment with continued constrained client spending, but believe demand trends are stabilizing ▪ On the positive side, biotechs are trending favorably and have not seen signs of further deterioration from global biopharmac
Slide 25: Strategic Actions in Three Main Areas
To Ensure Future Success, We Continue to Make Progress on Strategic Actions in Three Main Areas 1. Restructuring and other initiatives to manage costs and generate greater efficiency by: • Reducing staffing levels to align with pace of demand • Optimizing global footprint • Streamlining processes an
Slide 26: Strategic Actions in Three Main Areas, cont.
To Ensure Future Success, We Continue to Make Progress on Strategic Actions in Three Main Areas, cont. 3. Taking a balanced approach to capital allocation and regularly revisiting best uses of capital ̶ Very pleased that leverage remains low, in the low 2x range ̶ As have routinely done, continue to
Slide 27: Concluding Remarks, cont.
Concluding Remarks, cont. ▪ We have navigated challenges before, and believe our strategic actions will enable us to emerge from this period as a stronger, leaner, and more profitable company, and an even more responsive partner for our clients ▪ Have always distinguished ourselves through our exqui
Slide 28: 4Q24 Results
4Q24 Results ($ in millions, except per share amounts) 4Q24 4Q23 YOY Δ Organic Δ Revenue $1,002.5 $1,013.5 (1.1)% (1.8)% GAAP OM% (16.7)% 13.1% NM Non-GAAP OM% 19.9% 19.1% 80 bps GAAP EPS ($4.22) $3.62 NM Non-GAAP EPS $2.66 $2.46 8.1% ▪ 4Q24 revenue and non-GAAP EPS were slightly better than annual
Slide 29: Decisive Actions We Have Taken to Navigate Headwinds
Decisive Actions We Have Taken to Navigate Headwinds ▪ Aggressive actions to rationalize costs and align infrastructure with the current demand ̶ Restructuring initiatives are expected to result in ~$225M in annualized cost savings in 2026, including >$175M realized this year, slightly ahead of our
Slide 30: 2025 Guidance
2025 Guidance 2025 Guidance Revenue growth/(decrease), reported (7.0)%-(4.5)% Revenue growth/(decrease), organic (5.5)%-(3.5)% GAAP EPS $4.30-$4.80 Non-GAAP EPS $9.10-$9.60 ▪ Constrained biopharmaceutical spending environment is expected to persist into 2025 ▪ FX is expected to be a 1.0%-1.5% headwi
Slide 31: 2025 Segment Revenue Outlook
2025 Segment Revenue Outlook 2025 Reported 2025 Organic Revenue Growth Revenue Growth(1) RMS Approximately flat Low-single-digit growth DSA High-single-digit decline Mid- to high-single-digit decline Manufacturing Low-single-digit decline Approximately flat Consolidated (7.0)%-(4.5)% decline (5.5)%-
Slide 32: Operating Margin
Operating Margin ▪ 2025 consolidated non-GAAP operating margin will be modestly lower from 19.9% in 2024 ̶ Cost savings associated with restructuring initiatives will not fully offset the lower revenue ̶ Particularly true in the DSA segment, for which we expect an operating margin decline ̶ Opportun
Slide 33: Unallocated Corporate Expenses
Unallocated Corporate Expenses ($ in millions) 4Q24 4Q23 2024 2023 GAAP $61.8 $65.9 $258.1 $231.8 Non-GAAP $51.9 $62.6 $231.3 $219.5 ▪ Expect non-GAAP unallocated corporate expenses in 2025 to be approximately 5% of total revenue ─ Corporate costs expected to decrease in 2025 because of benefits fro
Slide 34: Tax Rate
Tax Rate ($ in millions) 4Q24 4Q23 2024 2023 GAAP 1.4% 9.5% 72.8% 17.4% Non-GAAP 19.5% 21.6% 21.3% 22.1% ▪ Non-GAAP tax rate for 2025 expected to be in the range of 22.5%-23.5%, an increase from 21.3% in 2024 ▪ Anticipated increase is principally due to an increase in the Global Minimum Tax, as well
Slide 35: Net Interest Expense
Net Interest Expense ($ in millions) 4Q24 4Q23 2024 2023 Interest expense, net $26.4 $32.0 $117.7 $131.5 ▪ Total adjusted net interest expense in 2025 expected to be in a range of $112M-$117M, compared to $117.7M in 2024 ̶ Slight decrease will be primarily driven by lower interest rates on floating-
Slide 36: Cash Flow
Cash Flow ($ in millions) 4Q24 4Q23 2024 2023 2025 Guidance Free cash flow (FCF) $83.7 $142.6 $501.6 $365.4 $350-$390 Capex $75.6 $78.3 $233.0 $318.5 ~$230 Depreciation $48.4 $46.5 $190.2 $176.7 ~$180 Amortization (1) $53.7 $34.0 $171.5 $137.4 ~$230 ▪ Expect 2025 FCF will be in a range of $350-$390M
Slide 37: 2025 Guidance Summary
2025 Guidance Summary GAAP Non-GAAP Revenue growth/(decrease) (7.0)%-(4.5%) reported (5.5)%-(3.5)% organic(1) Unallocated corporate >5% of revenue ~5% of revenue Modestly below 2024 Operating margin Low-teens OM% level of 19.9% Net interest expense $112M-$117M $112M-$117M Tax rate 23%-24% 22.5%-23.5
Slide 38: 1Q25 Outlook
1Q25 Outlook 1Q25 Outlook Reported revenue YOY Mid-to-high-single-digit decline Organic revenue YOY Mid-single-digit decline Non-GAAP EPS At least $2.00 ▪ 1Q25 revenue outlook reflects typical seasonality impact in the DSA and Biologics Testing businesses, as well as a modest headwind from the timin
Slide 39: Closing Remarks
Closing Remarks ▪ We are confident in our ability to emerge from this period of softer demand as a stronger, more agile organization ▪ Our decisive actions, including aggressive cost optimization initiatives, stock repurchases, and a disciplined approach to capital management, demonstrate our commit
Slide 40: 4Q24/FY24 Regulation G Financial Reconciliations & Appendix
4Q24/FY24 Regulation G Financial Reconciliations & Appendix © 2025 Charles River Laboratories International, Inc.
Slide 41: Revenue FX Exposure and 2025E FX Rates
FX Exchange (FX) Impact 2024 2025E (% of total revenue) Revenue FX Rates U.S. Dollar 68% ― Euro 18% 1.04 British Pound 6% 1.25 Chinese Yuan (renminbi) 3% 0.14 Canadian Dollar 2% 0.69 Other currencies 3% ― 41
Slide 42: Updated NHP Supply Statistics - 2024
Updated NHP Supply Statistics - 2024 ▪ In 2024, slightly above 30% of DSA segment revenue was generated from NHP-related safety assessment studies ̶ Relatively consistent with 2022 and 2023 levels ▪ In 2024, CRL’s global NHP usage for safety assessment studies totaled ~11,000 models ̶ Compared to 10
Slide 43: Reconciliation of GAAP to Non-GAAP Selected Business Segment Information
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1) (in thousands, except percentages) Three Months Ended Twelve Months Ended December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023 Research Models and
Slide 44: Reconciliation of GAAP to Non-GAAP Selected Business Segment Information
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1) (in thousands, except percentages) Three Months Ended Twelve Months Ended December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023 CONTINUED FROM PREV
Slide 45: Reconciliation of GAAP Earnings to Non-GAAP Earnings
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (UNAUDITED) (1) (in thousands, except per share data) Three Months Ended Twelve Months Ended December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023 Net income (loss) available to Char
Slide 46: Reconciliation of GAAP Revenue Growth to Non-GAAP Organic Revenue Growth
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP REVENUE GROWTH TO NON-GAAP REVENUE GROWTH, ORGANIC (UNAUDITED) (1) Three Months Ended December 28, 2024 Total CRL RMS Segment DSA Segment MS Segment Revenue growth, reported (1.1)% 4.3 % (3.6)% 1.6 % (Increase) decrease due to for
Slide 47: Reconciliation of GAAP to Non-GAAP Revenue and EPS Guidance
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP REVENUE AND EARNINGS PER SHARE (EPS) Guidance for the Twelve Months Ended December 27, 2025E 2025 GUIDANCE Revenue growth/(decrease), reported (7.0)% – (4.5)% Impact of divestitures/(acquisitions), net N/M (Favorable)/
Slide 48: Reconciliation of GAAP Tax Rate to Non-GAAP Tax Rate
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TAX RATE TO NON-GAAP TAX RATE (UNAUDITED) (1) (in thousands) Three Months Ended Twelve Months Ended December 28, 2024 September 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023 Income (loss) before income taxes & non
Slide 49: Reconciliation of Gross/Net Leverage Ratio and Adjusted EBITDA
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GROSS/NET LEVERAGE RATIO, INCLUDING GAAP NET INCOME TO ADJUSTED EBITDA (1) (dollars in thousands, except for per share data) December 28, 2024 December 30, 2023 December 31, 2022 December 25, 2021 December 26, 2020 December 28, 2019 DE
Slide 50: Reconciliation of Free Cash Flow
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF FREE CASH FLOW (NON-GAAP) (1) (in thousands) Three Months Ended Twelve Months Ended 2025 Guidance December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023 FYE December 27, 2025E Net cash provided by operating activities
Slide 51: Reconciliation of GAAP to Non-GAAP Segment Information
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) (in thousands, except percentages) Three Months Ended September 28, 2024 Unallocated Corporate Overhead $ (76,763) Add back: Acquisition and integration-related adj
Slide 52: © 2025 Charles River Laboratories International, Inc.
© 2025 Charles River Laboratories International, Inc.
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