Charles River Laboratories (CRL) 44th Annual J.P. Morgan Healthcare Conference summary

Business overview and market position

• Operates as a non-clinical CRO with 20,000 employees and 120 global locations, holding leading market shares in Research Models, Safety Assessment, and Microbial segments.

• 70% of revenue comes from the pharmaceutical industry, with $4.05B in LTM 2025 revenue and strong free cash flow.

• Three main segments: Research Models (~20-21%), Discovery and Safety Assessment (~60%), and Manufacturing Solutions (~19-20%).

• Holds a 40% share in Research Models and 30% in Safety Assessment, with significant capabilities in bioanalysis and specialty testing.

• 65% of Manufacturing Solutions revenue is recurring, driven by strong IP and a razor/razor blade model.

Financial performance and strategic actions

• LTM 2025 non-GAAP operating margin at 20.2% and non-GAAP EPS at $10.32, with free cash flow of $544M.

• Operating margin and EPS have improved despite declining sales, with $295M in annualized cost savings targeted by 2026.

• Announced divestiture of non-performing businesses representing 7% of revenue, expected to close by mid-year.

• Two acquisitions: a Cambodian NHP supplier ($500M+) and PathoQuest ($60M), both expected to be accretive to margins and EPS, closing in 1Q26.

• CapEx as a percentage of revenue reduced to 5.1%; $450M in stock buybacks last year and a new $1B authorization approved in October 2025.

Market trends and demand outlook

• Pharma demand stabilized in early 2025; biotech demand improved in late 2025, supported by record capital inflows in Q4.

• Book-to-bill ratio in DSA reached ~1.1 in Q4, driven by small and mid-size biotech clients.

• Proposal and booking volumes are up, cancellations are down, but biotech decision timelines remain measured.

• 2026 organic revenue growth expected to be at least flat, with upside if book-to-bill remains above one and backlog moves quickly.

• RMS and CDMO segments expected to benefit from improved biotech funding and loss of a large CDMO customer no longer a headwind.