• Fourth Quarter Revenue: $1 billion, a 1.8% decline on an organic basis.
• Full-Year Revenue: $4.05 billion, a 2.8% organic decrease.
• Fourth Quarter Operating Margin: Increased by 80 basis points to 19.9%.
• Full-Year Operating Margin: Declined by 40 basis points to 19.9%.
• Fourth Quarter Earnings Per Share (EPS): $2.66, an increase of 8.1% from the previous year.
• Full-Year EPS: $10.32, a decline of 3.3%.
• DSA Fourth Quarter Revenue: $603.3 million, a 3.5% organic decrease.
• DSA Full-Year Revenue: Decreased 6.2% on an organic basis.
• RMS Fourth Quarter Revenue: $204.3 million, a 0.4% organic decrease.
• RMS Full-Year Revenue: Essentially flat with a 0.1% organic decline.
• Manufacturing Solutions Fourth Quarter Revenue: $194.9 million, a 2.1% organic growth.
• Manufacturing Solutions Full-Year Organic Growth: 6.8%.
• Free Cash Flow: $501.6 million in 2024.
• 2025 Revenue Guidance: Expected decline of 4.5% to 7% on a reported basis, 3.5% to 5.5% on an organic basis.
• 2025 EPS Guidance: $9.10 to $9.60.
• 2025 Free Cash Flow Guidance: $350 to $390 million.

• Warning! GuruFocus has detected 4 Warning Sign with CRL.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Charles River Laboratories International Inc (NYSE:CRL) ended the year with a fourth-quarter performance that was slightly better than expected, with annual revenue and non-GAAP earnings per share exceeding guidance.
• The company has implemented restructuring initiatives expected to yield annualized savings of approximately $225 million by 2026, with over $175 million realized in 2025.
• Operating margin increased by 80 basis points year over year to 19.9% in the fourth quarter, driven by lower unallocated corporate costs and margin expansion in the Manufacturing segment.
• The Microbial Solutions business reported a strong year-end performance with solid growth across all three testing platforms.
• Charles River Laboratories International Inc (NYSE:CRL) plans to repurchase approximately $350 million in stock over the next month or two, exceeding their initial goal of $100 million last year to offset annual dilution from equity awards.

Negative Points

• Charles River Laboratories International Inc (NYSE:CRL) expects a revenue decline of 3.5% to 5.5% on an organic basis in 2025, with a reported revenue decline of 4.5% to 7% including a foreign exchange headwind.
• The company anticipates a modestly lower consolidated operating margin in 2025 due to the inability to fully offset the revenue decline, particularly in the DSA segment.
• DSA revenue is expected to decline at a mid- to high-single-digit rate on an organic basis in 2025, with both lower pricing and steady volume impacting the decline.
• The Manufacturing Solutions segment is expected to have essentially flat revenue in 2025 on an organic basis, with lower revenue from two commercial CDMO clients reducing consolidated revenue by approximately 1%.
• Free cash flow is expected to decrease to a range of $350 to $390 million in 2025, down from $501.6 million in 2024, driven by lower earnings and higher working capital needs.

Q & A Highlights

Q: Can you provide clarity on the book-to-bill ratio and your expectations for bookings in 2025? A: Flavia Pease, CFO, explained that the book-to-bill ratio was stable in the fourth quarter, with no significant deterioration or improvement. James Foster, CEO, added that while the first quarter is typically softer, they expect stable biopharmaceutical demand and slightly improved biotech demand throughout 2025.

Q: What is the impact of NIH funding changes on your RMS segment, and how significant is the academic market for you? A: James Foster, CEO, noted that direct NIH exposure is less than 2% of total revenue, with academic and government clients making up about 40% of the RMS segment. He mentioned that while there is speculation about funding changes, the impact is expected to be minimal due to the small percentage of revenue involved.

Q: How are you addressing the challenges in the CDMO business, and what are your expectations for margin expansion in the manufacturing segment? A: Flavia Pease, CFO, stated that they are right-sizing infrastructure and staffing in the CDMO business to align with lower sales. The manufacturing segment is expected to see margin expansion due to strong performance in microbial solutions and contractual obligations with clients.

Q: Can you elaborate on the potential impact of the CITES decision regarding NHP supply from Cambodia? A: James Foster, CEO, emphasized that Charles River is working to diversify its NHP supply chain and is optimistic about the CITES decision. They are sourcing NHPs from multiple geographies and providers to mitigate potential disruptions.

Q: What are your expectations for the DSA segment's pricing and volume trends in 2025? A: James Foster, CEO, indicated that the DSA segment will face a pricing headwind in 2025, with a decline in both price and volume. However, the volume decline is expected to be less severe than in 2024, and they anticipate stable demand throughout the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.