Charles River Laboratories International, Inc. · NYSE:CRL
Charles River Laboratories International — Q4 2021 Earnings Presentation
53 slides from Charles River Laboratories International's earnings presentation, Feb 16, 2022
Slide 1: 4Q 2021 Results and 2022 Guidance
4Q 2021 Results and 2022 Guidance February 16, 2022 Charles River Laboratories EVERY STEP OF THE WAY © 2022 Charles River Laboratories International, Inc.
Slide 2: Safe Harbor Statement
Safe Harbor Statement 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,” “ex
Slide 3: Estimates of COVID-19 Impact
Estimates of COVID-19 Impact The Company has provided its assessment for the impact from the COVID-19 pandemic in 2020, including on the Company's revenue. This assessment was determined using methodologies, assumptions, and estimates that vary depending on the specific reporting segment and situati
Slide 4: Opening Remarks
Opening Remarks ▪ CRL is a stronger company today than ever before ▪ Extremely pleased to report 15% organic revenue growth for 2021 ─ Low-double-digit growth when normalizing for COVID-19 impact in 2020 ▪ 2nd consecutive year with 100 bps of operating margin expansion ▪ Seeing unprecedented demand
Slide 5: Opening Remarks, cont.
Opening Remarks, cont. ▪ Further differentiated CRL from the competition by strategically expanding portfolio to provide clients with critical capabilities they require to discover, develop, and safely manufacture new drugs ▪ Enhanced our scientific capabilities for advanced therapies in areas offer
Slide 6: 4Q21 and 2021 Revenue
4Q21 and 2021 Revenue ($ in millions) 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ Revenue, reported $905.1 $791.0 14.4% $3,540 $2,924 21.1% (Increase) Decrease due to FX 0.6% (1.8)% Contributions from acquisitions (5.9)% (4.6)% Impact from divestitures 1.4% 0.4% Revenue growth, organic 10.5% 15.1% ▪ Organic rev
Slide 7: 4Q21 and 2021 Operating Margin
4Q21 and 2021 Operating Margin 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ GAAP OM% 19.1% 16.3% 280 bps 16.7% 14.8% 190 bps Non-GAAP OM% 20.9% 20.8% 10 bps 21.0% 20.0% 100 bps ▪ Met our outlook of 21% non-GAAP operating margin, representing second consecutive year of 100 bps of improvement ▪ Demonstrates operat
Slide 8: 4Q21 and 2021 EPS
4Q21 and 2021 EPS 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ GAAP EPS $2.67 $2.81 (5.0)% $7.60 $7.20 5.6% Non-GAAP EPS $2.49 $2.39 4.2% $10.32 $8.13 26.9% ▪ 4Q21 strong revenue and operating income growth partially offset by a higher tax rate and interest expense ▪ For FY 2021, exceeded prior non-GAAP EPS guid
Slide 9: Reaffirmed 2022 Guidance
Reaffirmed 2022 Guidance 2022 Guidance Revenue growth, reported 13.0%-15.0% Contribution from acquisitions/divestitures, net --- Impact of 53rd week in 2022 ~(1.5)% (Increase)/Decrease due to FX ~1.0% Revenue growth, organic 12.5%-14.5% GAAP EPS $9.20-$9.45 Acquisition-related amortization $1.90-$2.
Slide 10: Reaffirmed 2022 Guidance, cont.
Reaffirmed 2022 Guidance, cont. ▪ Believe demand trend, combined with higher pricing, will drive organic revenue growth in a range of 12.5%-14.5% ▪ Expect non-GAAP EPS will be in a range of $11.50-$11.75 ─ Expected to grow at a similar rate to revenue, as modest operating margin improvement will be
Slide 11: DSA Results – Revenue
DSA Results – Revenue ($ in millions) 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ Revenue, reported $534.1 $495.0 7.9% $2,107.2 $1,837.4 14.7% (Increase)/decrease due to FX 0.4% (1.4)% Contribution from acquisitions (1.6)% (1.1)% Revenue growth, organic 6.7% 12.2% ▪ Biotech clients remained primary driver of DS
Slide 12: DSA – 2022 Revenue Outlook
DSA – 2022 Revenue Outlook ▪ Expect 2022 DSA organic revenue growth rate will be in the mid-teens ▪ Increase from 2021 growth rate based on our belief that sustained client demand will continue, and higher price increases than in 2021 will help offset higher compensation costs and other inflationary
Slide 13: DSA Results – Safety Assessment (SA)
DSA Results – Safety Assessment (SA) ▪ SA business continued to perform very well, benefiting from strong demand and price increases ▪ Bookings and proposal volume remain at record levels ─ Total DSA backlog increased 70% (or by $1B) to $2.4B at year-end 2021 ▪ Booking work into 2023, which translat
Slide 14: DSA Results – Discovery Services
DSA Results – Discovery Services ▪ Discovery Services continued to perform well, with strong performances for early discovery and CNS services ▪ Similar to SA business, accommodating robust client demand for discovery services by closely managing staffing levels and adding cutting-edge capabilities
Slide 15: DSA Results – Discovery Services, cont.
DSA Results – Discovery Services, cont. ▪ Intend to continue to build discovery portfolio, including through strategic partnerships and acquisitions ▪ Acquired in 2021, Retrogenix, with its proprietary cell microarray technology and off- target screening services, had very successful first year as p
Slide 16: Successful Partnership Strategy
Successful Partnership Strategy ▪ Partnership strategy has proven to be successful approach to staying current with cutting-edge technologies and adding innovative capabilities with limited up-front risk ▪ Recently signed new partnership with Valo Health to deliver a new type of offering that combin
Slide 17: DSA Results – Operating Margin
DSA Results – Operating Margin 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ DSA GAAP OM% 17.8% 18.4% (60) bps 19.3% 17.7% 160 bps DSA Non-GAAP OM% 23.1% 23.2% (10) bps 23.7% 23.4% 30 bps ▪ 4Q21 non-GAAP operating margin essentially unchanged despite a 40-bps FX headwind ▪ FY 2021 non-GAAP operating margin improv
Slide 18: RMS Results – Revenue
RMS Results – Revenue ($ in millions) 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ Revenue, reported $165.6 $156.7 5.7% $690.4 $571.2 20.9% (Increase) Decrease due to FX 0.4% (2.2)% Contribution from acquisitions --- (1.1)% Impact of divestitures 7.2% 1.9% Revenue growth, organic 13.3% 19.5% ▪ COVID impact in 20
Slide 19: RMS Outlook
RMS Outlook ▪ RMS outlook reflects continuation of strong, global demand for research models and associate services ▪ Generated by ongoing, robust, early-stage research activity in the biopharma industry, as well as at academic and government institutions ▪ 2022 outlook includes robust growth for In
Slide 20: RMS Results – Research Models
RMS Results – Research Models ▪ Research models remain foundational, regulatory required tools for early-stage research and toxicology, and vital component of our ability to support clients ▪ Revenue for research models increased globally during COVID pandemic, due to both higher pricing and improve
Slide 21: RMS Results – Services
RMS Results – Services ▪ Heightened level of research activity also driving demand for RM services, which continued to perform very well in 4Q21 and FY 2021 ▪ We are a natural partner for Genetically Engineered Models and Services (GEMS) and Insourcing Solutions (IS) services, with extensive animal
Slide 22: RMS Results – Operating Margin
RMS Results – Operating Margin 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ RMS GAAP OM% 24.3% 21.9% 240 bps 24.2% 18.0% 620 bps RMS Non-GAAP OM% 26.9% 25.1% 180 bps 27.3% 22.0% 530 bps ▪ 4Q21 non-GAAP operating margin increase driven by operating leverage from higher sales volume in the research models business
Slide 23: Manufacturing Results – Revenue
Manufacturing Results – Revenue ($ in millions) 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ Revenue, reported $205.3 $139.3 47.4% $742.5 $515.4 44.1% (Increase) Decrease due to FX 1.6% (2.2)% Contribution from acquisitions (27.8)% (21.3)% Revenue growth, organic 21.2% 20.6% ▪ 4Q21 organic revenue growth driven
Slide 24: Manufacturing Outlook
Manufacturing Outlook ▪ Expect mid-teens organic revenue growth for the Manufacturing segment ▪ Moderation from exceptional 2021 performance reflects: ─ Return to more normalized growth for Microbial Solutions business, after incremental benefit from COVID-related instrument and cartridge replenishm
Slide 25: Manufacturing Results – Microbial Solutions
Manufacturing Results – Microbial Solutions ▪ Microbial Solutions revenue growth rate in 4Q21 and FY 2021 remained well above 10%, reflecting strong demand across portfolio of critical quality-control testing solutions ▪ Pleased with strength of demand for endotoxin testing systems and cartridges, w
Slide 26: Manufacturing Results – Biologics
Manufacturing Results – Biologics ▪ Biologics reported another exceptional 4Q21 and FY 2021, with strong, double-digit revenue growth ▪ Robust demand for C> services continued to be primary growth driver, with COVID- 19 vaccines and traditional biologics also contributing meaningfully ▪ Expect COV
Slide 27: Manufacturing Results – CDMO
Manufacturing Results – CDMO ▪ CDMO business continuing to make great progress on integrations and gaining traction on business development activities to support robust growth outlook in 2022 ▪ Have established an end-to-end, gene-modified cell therapy solution, which we believe is critical to suppo
Slide 28: Manufacturing – Operating Margin
Manufacturing – Operating Margin 4Q21 4Q20 YOY Δ 2021 2020 YOY Δ Manufacturing GAAP OM% 44.6% 35.3% 930 bps 33.2% 35.2% (200) bps Manufacturing Non-GAAP OM% 35.7% 37.3% (160) bps 34.2% 37.4% (320) bps ▪ 4Q21 and FY 2021 non-GAAP operating margin declines primarily reflect inclusion of CDMO acquisiti
Slide 29: Concluding Remarks
Concluding Remarks ▪ Will continue to move our growth strategy forward in 2022 ▪ Disciplined M&A and strategic partnerships remain vital components of our strategy, as we endeavor to further enhance the scientific expertise, global reach, and innovative technologies we can offer clients across all t
Slide 30: Reaffirmed 2022 Guidance
Reaffirmed 2022 Guidance 2022 Guidance Revenue growth, reported 13.0% - 15.0% Revenue growth, organic 12.5% - 14.5% GAAP EPS $9.20 - $9.45 Non-GAAP EPS $11.50 - $11.75 ▪ Revenue growth supported by the continuation of unprecedented client demand and a healthy funding environment, along with price in
Slide 31: 2022 Segment Revenue Outlook
2022 Segment Revenue Outlook 2022 Reported 2022 Organic Revenue Growth Revenue Growth(1) RMS Low- to mid-single digits High-single digits (reflects RMS Japan divestiture) DSA Mid-to-high teens Mid-teens Manufacturing ~20% Mid-teens Consolidated CRL 13.0%-15.0% 12.5%-14.5% ▪ RMS: Continued robust, gl
Slide 32: Foreign Exchange (FX) Impact
Foreign Exchange (FX) Impact ▪ FX is expected to provide a headwind of 2021 2022E (% of total revenue) Revenue FX Rates ~100 bps to reported revenue growth guidance in 2022 U.S. Dollar 66% -- ─ Strengthening of the U.S. dollar Euro 18% 1.13 ▪ FX rate estimates based on bank forecasts British Pound 7
Slide 33: 2022 Operating Margin Outlook
2022 Operating Margin Outlook ▪ Pleased with FY 2021 non-GAAP operating margin of 21.0%, the second consecutive year with 100 bps of margin improvement ▪ Remain well positioned to drive modest margin improvement in FY 2022, although improvement will be less that the prior two years due to: ─ Higher
Slide 34: Unallocated Corporate Expenses
Unallocated Corporate Expenses ($ in millions) 4Q21 4Q20 2021 2020 GAAP $54.0 $45.7 $230.3 $177.4 Non-GAAP $52.4 $41.4 $199.9 $163.7 ▪ Expect unallocated corporate expenses to be in the mid-5% range, at or slightly below the FY 2021 level of 5.6% of revenue (non-GAAP) ─ Expect corporate expenses to
Slide 35: Tax Rate
Tax Rate 4Q21 4Q20 2021 2020 GAAP 14.6% 16.4% 17.0% 18.3% Non-GAAP 23.3% 17.8% 18.9% 18.9% ▪ FY 2022 tax rate is expected to be in the low-20% range (GAAP and non-GAAP) ▪ Increase principally due to discrete tax benefits in FY 2021 associated with R&D tax credits and a favorable excess tax benefit r
Slide 36: Net Interest Expense
Net Interest Expense ($ in millions) 4Q21 4Q20 2021 2020 GAAP interest expense, net $11.2 $33.1 $73.3 $85.6 Non-GAAP interest expense, net $11.2 $33.1 $47.2 $85.6 Adjustments for foreign exchange forward contract and related interest expense(1) $9.2 ($16.1) $31.8 ($11.9) Adjusted net interest expens
Slide 37: Capital Priorities
Capital Priorities ▪ Total debt balance at end of 4Q21 was $2.7B, equating to gross and net leverage ratios of ~2.5x(1) ▪ Continuously evaluate our capital priorities and intend to deploy capital to the areas that will generate the greatest returns ─ Strategic acquisitions remain top priority ─ Abse
Slide 38: Cash Flow
Cash Flow ($ in millions) 2021 2020 2022 Outlook Free cash flow (FCF) $532.0 $380.0 ~$450 Capex $228.8 $166.6 ~$360 Depreciation $140.7 $123.0 ~$160-$165 Amortization (1) $124.9 $111.9 ~$145-$150 4Q21 4Q20 Free cash flow (FCF) $130.5 $50.5 Capex $98.8 $87.8 Depreciation $37.0 $32.9 Amortization (1)
Slide 39: Cash Flow, cont.
Cash Flow, cont. ▪ FY 2021 FCF of $532M increased 40% from FY 2020 and above prior outlook of ~$500M, due to: ─ Strong operating performance ─ Working capital management ▪ Expect FY 2022 FCF to be ~$450M, a decrease of $80M from FY 2021 ─ Decrease due entirely to an anticipated ~$130M increase in ca
Slide 40: 2022 Guidance Summary
2022 Guidance Summary GAAP Non-GAAP Revenue growth 13.0%-15.0% reported 12.5%-14.5% organic(1) Improvement Modest improvement Operating margin from 16.7% in 2021 from 21.0% in 2021 Mid-5% range Mid-5% range Unallocated corporate as a % of revenue as a % of revenue Net interest expense $83M-$87M $83M
Slide 41: 1Q22 Outlook
1Q22 Outlook 1Q22 Outlook Reported and organic revenue growth YOY Approaching 10% growth vs. 1Q21 Non-GAAP EPS growth YOY High-single-digit growth vs. $2.53 in 1Q21 ▪ 1Q22 DSA revenue growth is expected to improve from 4Q21 level, offset by a lower RMS revenue growth rate reflecting the comparison t
Slide 42: Concluding Remarks
Concluding Remarks ▪ Very pleased with our FY 2021 financial performance and well positioned to have another strong year in FY 2022 ▪ Expected FY 2022 performance reflects ongoing focus on ─ Disciplined investing to support the growth of our businesses ─ Efforts to drive efficiency ─ Speed and respo
Slide 43: 4Q21/FY21 Regulation G Financial Reconciliations
4Q21/FY21 Regulation G Financial Reconciliations EVERY STEP OF THE WAY © 2022 Charles River Laboratories International, Inc.
Slide 44: 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 Twelve Months Ended December 25, 2021 December 26, 2020 December 25, 2021 December 26, 2020 Research Models an
Slide 45: Reconciliation of GAAP to Non-GAAP: Segment Information, continued
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 25, 2021 December 26, 2020 December 25, 2021 December 26, 2020 CONTINUED FROM PRE
Slide 46: 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 25, 2021 December 26, 2020 December 25, 2021 December 26, 2020 Net income attributable to common s
Slide 47: Reconciliation of GAAP Revenue Growth to Non-GAAP Organic Growth
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP REVENUE GROWTH TO NON-GAAP REVENUE GROWTH, ORGANIC (UNAUDITED) (1) For the three months ended December 25, 2021 Total CRL RMS Segment DSA Segment MS Segment Revenue growth, reported 14.4 % 5.7 % 7.9 % 47.4 % Decrease (increase) du
Slide 48: 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 31, 2022E 2022 GUIDANCE Revenue growth, reported 13.0% – 15.0% Contribution from acquisitions/divestitures, net (1) -- Impact of 53rd w
Slide 49: 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 25, 2021 December 26, 2020 December 25, 2021 December 26, 2020 Income before income taxes & noncontrolling interests $ 16
Slide 50: Reconciliation of GAAP to Non-GAAP Net Interest Expense
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP NET INTEREST EXPENSE(1) (in thousands) Three Months Ended Twelve Months Ended Fiscal Year Ended December 25, 2021 December 26, 2020 December 25, 2021 December 26, 2020 December 31, 2022E GAAP Interest expense, net $ 11
Slide 51: 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 25, December 26, December 28, December 29, December 30, December 31, December 26, December 27, Decemb
Slide 52: 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 Fiscal Year Ended December 25, 2021 December 26, 2020 December 25, 2021 December 26, 2020 December 31, 2022E Net cash provided by operating activities
Slide 53: EVERY STEP OF THE WAY © 2022 Charles River Laboratories International, Inc.
EVERY STEP OF THE WAY © 2022 Charles River Laboratories International, Inc.
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