Charles River Laboratories International, Inc. · NYSE:CRL
Charles River Laboratories International — Q1 2021 Earnings Presentation
52 slides from Charles River Laboratories International's earnings presentation, May 4, 2021
Slide 1: 1Q 2021 Results
1Q 2021 Results May 4, 2021 Charles River Laboratories EVERY STEP OF THE WAY © 2021 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 in 2020
Estimates of COVID-19 Impact in 2020 The Company has provided its estimates for the impact from the COVID-19 pandemic in 2020, including on the Company's revenue. These estimates were determined using methodologies and assumptions that vary depending on the specific reporting segment and situation.
Slide 4: Robust 1Q21 Performance
Robust 1Q21 Performance ▪ Robust 1Q21 financial performance – 13% organic revenue growth and 170 bps of non-GAAP operating margin improvement YOY – demonstrates: ─ Strength of the biopharmaceutical market environment ─ Power of our unique portfolio ─ Both of which we believe are as strong as they ha
Slide 5: Strategically Differentiating from the Competition
Strategically Differentiating from the Competition ▪ To further differentiate CRL from competition, strategically expanding portfolio in areas that deliver greatest value to clients and offer significant growth potential ▪ Already in 2021, have enhanced scientific capabilities for advanced drug moda
Slide 6: Strong Trends Support Outlook for 2021
Strong Trends Support Outlook for 2021 ▪ Believe strength of our portfolio and robust industry fundamentals are leading to unprecedented client demand across most of our businesses ▪ In 1Q21, experienced continuation of robust demand from the end of 2020, including, new, record booking and proposal
Slide 7: 1Q21 Revenue
1Q21 Revenue ($ in millions) 1Q21 1Q20 YOY Δ Revenue, reported $824.6 $707.1 16.6% (Increase)/decrease due to FX (2.9)% Contribution from acquisitions (0.7)% Revenue growth, organic 13.0% ▪ Quarterly revenue surpassed $800M for first time ▪ Organic revenue growth driven by double-digit growth across
Slide 8: 1Q21 Operating Margin
1Q21 Operating Margin 1Q21 1Q20 YOY Δ GAAP OM% 15.0% 13.3% 170 bps Non-GAAP OM% 20.7% 19.0% 170 bps ▪ Improvement driven by RMS and DSA ▪ Reflected operating leverage from robust revenue growth and continued efforts to drive efficiency ▪ Expect the same factors will drive non-GAAP operating margin i
Slide 9: 1Q21 EPS
1Q21 EPS 1Q21 1Q20 YOY Δ GAAP EPS $1.20 $1.02 17.6% Non-GAAP EPS $2.53 $1.84 37.5% ▪ Outstanding earnings growth principally reflected: ─ Double-digit revenue growth ─ Meaningful operating margin improvement 9 EVERY STEP OF THE WAY See ir.criver.com for reconciliations of GAAP to Non-GAAP results.
Slide 10: Increasing 2021 Guidance
Increasing 2021 Guidance ▪ Based on 1Q21 performance and positive outlook for remainder of the year, meaningfully increasing revenue growth and non-GAAP EPS for 2021 ▪ Normalized for last year’s COVID impact, would still expect low-double-digit organic revenue growth ▪ Non-GAAP EPS represents 20%-23
Slide 11: Increasing 2021 Guidance Including Cognate
Increasing 2021 Guidance Including Cognate CURRENT PRIOR Revenue growth, reported 19%-21% 16%-18% Contribution from acquisitions (4.5%)-(5.0%) (4.5%)-(5.0%) Decrease/(Increase) due to FX (~2.5%) (2.0%)-(2.5%) Revenue growth, organic 12%-14% 9%-11% GAAP EPS $5.95-$6.20 -- Acquisition-related amortiza
Slide 12: DSA Results – Revenue
DSA Results – Revenue ($ in millions) 1Q21 1Q20 YOY Δ Revenue, reported $501.2 $438.7 14.2% (Increase)/decrease due to FX (2.3)% Contribution from acquisitions (0.3)% Revenue growth, organic 11.6% ▪ Revenue growth driven by broad-based demand for both Discovery and Safety Assessment (SA) services 12
Slide 13: DSA Results - Safety Assessment (SA)
DSA Results - Safety Assessment (SA) ▪ Performance reflected robust demand from biotech and biopharma clients and price increases ▪ Bookings and proposal volume reach record highs in 1Q21, with strength across all regions and major service areas ▪ Bookings increased substantially more than target ▪
Slide 14: DSA Results – Discovery Services
DSA Results – Discovery Services ▪ Discovery Services had another exceptional quarter, led by broad-based demand for oncology, early discovery, and CNS services ▪ Efforts to broaden and strengthen discovery capabilities and enhance scientific expertise are enabling us to expand support for clients’
Slide 15: DSA Results – Operating Margin
DSA Results – Operating Margin 1Q21 1Q20 YOY Δ DSA GAAP OM% 18.1% 16.5% 160 bps DSA Non-GAAP OM% 23.8% 22.0% 180 bps ▪ Leverage from robust DSA revenue growth was primary driver of margin improvement ▪ Expect this trend to continue to propel DSA non-GAAP operating margin into the mid-20% range for 2
Slide 16: RMS Results – Revenue
RMS Results – Revenue ($ in millions) 1Q21 1Q20 YOY Δ Revenue, reported $176.9 $146.0 21.2% (Increase)/decrease due to FX (4.2)% Contribution from acquisitions (2.2)% Revenue growth, organic 14.8% ▪ Robust demand for research models in China was primary driver of 1Q21 revenue growth ▪ Higher revenue
Slide 17: RMS Results – Research Models
RMS Results – Research Models ▪ Demand trends for research models largely consistent with trends prior to pandemic ▪ Growth in China widely outpacing mature markets ─ Research models business in China had an exceptional 1Q21, even normalizing for last year’s COVID-19 impact ─ Driven by resurgence of
Slide 18: RMS Results – RM Services
RMS Results – RM Services ▪ RM Services also continued to perform well ▪ GEMS benefited from renewed outsourcing demand as clients seek greater flexibility and efficiency afforded them when we manage their proprietary colonies, as we did for many clients during the pandemic ▪ Also continuing to gene
Slide 19: RMS Results – HemaCare & Cellero
RMS Results – HemaCare & Cellero ▪ Cell supply revenue growth remained below targeted level in 1Q21, due to some limitations on donor access ─ Believe revenue will increase during 2021 as donor availability continues to improve ▪ Continuing to work diligently to expand donor base in the U.S. and add
Slide 20: RMS Results – Operating Margin
RMS Results – Operating Margin 1Q21 1Q20 YOY Δ RMS GAAP OM% 25.4% 18.7% 670 bps RMS Non-GAAP OM% 28.7% 23.0% 570 bps ▪ Significant margin improvement is due to: ─ Comparison to 23% non-GAAP operating margin in 1Q20 which was depressed by onset of COVID-related disruptions and resulting impact on res
Slide 21: Manufacturing Results – Revenue
Manufacturing Results – Revenue ($ in millions) 1Q21 1Q20 YOY Δ Revenue, reported $146.5 $122.4 19.7% (Increase)/decrease due to FX (4.1)% Revenue growth, organic 15.6% ▪ Revenue increase driven by double-digit growth in both Biologics Testing Solutions (Biologics) and Microbial Solutions 21 EVERY S
Slide 22: Manufacturing – Operating Margin
Manufacturing – Operating Margin 1Q21 1Q20 YOY Δ Manufacturing GAAP OM% 33.8% 33.6% 20 bps Manufacturing Non-GAAP OM% 35.5% 35.6% (10) bps ▪ Stable operating margin YOY is consistent with historical Q1 trends ▪ Non-GAAP operating margin outlook in line with revised expectations for 2021 of mid-30% w
Slide 23: Manufacturing Results – Microbial Solutions
Manufacturing Results – Microbial Solutions ▪ Microbial Solutions growth rate rebounded >10% in 1Q21, reflecting strong demand for Endosafe® endotoxin testing systems, cartridges, and core reagents in all geographic regions ▪ Continue to work through delayed instrument installations that resulted fr
Slide 24: Mfg Results – Biologics Testing Solutions
Mfg Results – Biologics Testing Solutions ▪ Biologics reported another exceptional quarter of strong, double-digit revenue growth ─ Principally driven by robust market demand for testing cell and gene therapies and COVID-19 therapeutics ▪ Believe cell and gene therapies will continue to drive signif
Slide 25: Cognate Acquisition
Cognate Acquisition ▪ Believe Cognate will be highly complementary to Biologics business and portfolio as a whole ▪ Cognate establishes CRL as a premier scientific partner for cell and gene therapy development, testing, and manufacturing ▪ Broader services will provide clients with integrated soluti
Slide 26: Broadening Portfolio & Scientific Expertise
Broadening Portfolio & Scientific Expertise ▪ Acquisition of Cognate is part of ongoing strategy to broaden our unique portfolio and scientific expertise in order to support new paradigms and therapeutic areas of research ▪ Biopharma clients seek to drive greater efficiency and leverage scientific b
Slide 27: Importance of Growth Strategy
Importance of Growth Strategy ▪ Will continue to move our growth strategy forward ▪ Disciplined M&A and strategic partnerships remain vital components, as we endeavor to further enhance scientific expertise, global reach, and innovative technologies we can offer clients across all three business seg
Slide 28: 1Q21 Results
1Q21 Results ($ in millions) 1Q21 1Q20 YOY Δ Organic Δ Revenue $824.6 $707.1 16.6% 13.0% GAAP OM% 15.0% 13.3% 170 bps Non-GAAP OM% 20.7% 19.0% 170 bps GAAP EPS $1.20 $1.02 17.6% Non-GAAP EPS $2.53 $1.84 37.5% ▪ Delivered strong revenue growth, well above the 10% level on an organic basis ▪ Encouragi
Slide 29: Increased 2021 Guidance Including Cognate
Increased 2021 Guidance Including Cognate Revenue growth, reported 19%-21% Revenue growth, organic 12%-14% GAAP EPS $5.95-$6.20 Non-GAAP EPS $9.75-$10.00 ▪ Increased 2021 guidance reflects the enhanced growth profile, including the strong 1Q21 performance and the addition of Cognate and other acquis
Slide 30: Revised 2021 Segment Revenue Outlook
Revised 2021 Segment Revenue Outlook 2021 Reported 2021 Organic Revenue Growth Revenue Growth RMS Low-20% range High teens DSA Mid-teens Low-double digits Manufacturing High-30% range Mid-teens Consolidated CRL 19%-21% 12%-14% ▪ Outlook for 2021 continues to reflect the strong business environment a
Slide 31: Revised 2021 Segment Operating Margin Outlook
Revised 2021 Segment Operating Margin Outlook ▪ RMS segment will continue to be a primary contributor to CRL’s overall margin improvement in 2021 ─ RMS non-GAAP operating margin meaningfully above 25% this year ▪ DSA non-GAAP operating margin is expected to increase over the prior year, into the mid
Slide 32: Unallocated Corporate Expenses
Unallocated Corporate Expenses ($ in millions) 1Q21 4Q20 1Q20 GAAP $61.6 $45.7 $46.5 Non-GAAP $51.2 $41.4 $39.8 ▪ Non-GAAP unallocated corporate costs were slightly higher than our expectations ─ 6.2% of total revenue in 1Q21, compared to 5.6% of total revenue in 1Q20 ▪ 1Q21 increase was primarily t
Slide 33: Tax Rate
Tax Rate 1Q21 4Q20 1Q20 GAAP 3.6% 16.4% 8.3% Non-GAAP 14.5% 17.8% 14.3% ▪ 1Q21 non-GAAP tax rate was 20 bps higher YOY and consistent with our outlook in February ─ Prior outlook (February): Mid-teens tax rate due to the gaiting of the excess tax benefit from stock-based compensation ▪ Continue to e
Slide 34: Net Interest Expense
Net Interest Expense ($ in millions) 1Q21 4Q20 1Q20 GAAP interest expense, net $29.7 $33.1 $14.8 Non-GAAP interest expense, net $3.7 $33.1 $14.8 Adjustments for foreign exchange forward contract and related interest expense(1) $13.4 ($16.1) $4.2 Adjusted net interest expense $17.1 $17.0 $19.0 ▪ Tota
Slide 35: Capital Structure
Capital Structure ▪ In March, issued $1B senior notes to further optimize capital structure and take advantage of attractive interest rate environment ▪ Proceeds of the bond offering were used to: ─ Redeem a previously issued, higher-rate $500M bond ─ Pay down the existing term loan and a portion of
Slide 36: Capital Structure (con’t.)
Capital Structure (con’t.) ▪ On a pro forma basis, including CRL Capitalization ($ in MM) 4/24/2021 Cognate and Retrogenix, gross 4.25% Senior notes due 2028 $500 leverage ratio was just under 3x and total outstanding debt was ~$3B 3.75% Senior notes due 2029 $500 ▪ For 2021, total adjusted net inte
Slide 37: Cash Flow
Cash Flow ($ in millions) 1Q21 1Q20 2021 Outlook Free cash flow (FCF) $142.2 $42.9 ~$435 Capital expenditures $28.0 $25.7 ~$220 Depreciation $32.7 $29.4 $145-$150 Amortization $28.8 $27.9 $145-$160 ▪ Significant increase in FCF from last year was due to the strong 1Q21 operating performance, along w
Slide 38: 2021 Revised Guidance Summary (Including Cognate)
2021 Revised Guidance Summary (Including Cognate) GAAP Non-GAAP Revenue growth 19%-21% reported 12%-14% organic(1) Operating margin Comparable to 2020 level Approaching 21% ~6% Mid-5% range Unallocated corporate as a % of revenue as a % of revenue Net interest expense (total) $96M-$99M $83M-$86M Tax
Slide 39: 2Q21 Outlook (Including Cognate)
2Q21 Outlook (Including Cognate) 2Q21 Outlook Reported revenue growth YOY At or near 30% including Cognate Organic revenue growth YOY At or near 20% Non-GAAP EPS growth YOY More than 50% vs. 2Q20 ▪ 2Q21 updated outlook reflects a continuation of strong demand environment ▪ 2Q21 revenue growth reflec
Slide 40: Concluding Remarks
Concluding Remarks ▪ Very pleased with our strong 1Q21 performance, which included robust revenue, earnings and free cash flow growth ▪ Remain confident about our prospects for the year, and our ability to consistently grow the top-line, bottom-line, and cash flow generation ─ Reflected in the subst
Slide 41: 1Q21 Regulation G Financial Reconciliations
1Q21 Regulation G Financial Reconciliations EVERY STEP OF THE WAY © 2021 Charles River Laboratories International, Inc.
Slide 42: Reconciliation of GAAP to Non-GAAP: Segment Information
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP (1) SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (in thousands, except percentages) Three Months Ended March 27, 2021 March 28, 2020 Research Models and Services Revenue $ 176,910 $ 145,996 Operating income 44,935
Slide 43: Reconciliation of GAAP to Non-GAAP: Segment Information (continued)
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP (1) SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (in thousands, except percentages) Three Months Ended March 27, 2021 March 28, 2020 CONTINUED FROM PREVIOUS SLIDE Unallocated Corporate Overhead $ (61,618) $ (46,48
Slide 44: 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 March 27, 2021 March 28, 2020 Net income attributable to common shareholders $ 61,530 $ 50,769 Add back: Non-GAAP adjustments t
Slide 45: 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) Three Months Ended March 27, 2021 Total CRL RMS Segment DSA Segment MS Segment Revenue growth, reported 16.6 % 21.2 % 14.2 % 19.7 % Increase due to foreign exchang
Slide 46: 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 25, 2021E 2021 GUIDANCE INCLUDING COGNATE CURRENT PRIOR Revenue growth, reported 19% – 21% 16% – 18% Less: Contribution from acquisitio
Slide 47: 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) Three Months Ended December 26, 2020 Unallocated Corporate Overhead $ (45,747) Add back: Severance and executive transition costs 375 (2) Acquisition
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 March 27, 2021 December 26, 2020 March 28, 2020 Income from operations before income taxes & noncontrolling interests $ 66,302 $ 172,427 $ 55,459 Add
Slide 49: 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 Fiscal Year Ended March 27, 2021 December 26, 2020 March 28, 2020 December 25, 2021E GAAP Interest expense, net $ 29,684 $ 33,084 $ 14,751 $96,000-$99,000 Exclu
Slide 50: 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) March 27, December 26, December 28, December 29, December 30, December 31, December 26, December 27, December
Slide 51: Reconciliation of Free Cash Flow (Non-GAAP)
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF FREE CASH FLOW (NON-GAAP) (1) (in thousands) Three Months Ended Fiscal Year Ended March 27, 2021 March 28, 2020 December 25, 2021E Net cash provided by operating activities $ 170,229 $ 68,590 ~$655,000 Less: Capital expenditures (28,03
Slide 52: EVERY STEP OF THE WAY © 2021 Charles River Laboratories International, Inc.
EVERY STEP OF THE WAY © 2021 Charles River Laboratories International, Inc.
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