Charles River Laboratories (CRL) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $1.03 billion, down 3.2% year-over-year, with declines in DSA and RMS offset by growth in Manufacturing; results were in line with expectations.

• Non-GAAP EPS for Q2 2024 was $2.80, up 4.1% year-over-year and exceeded prior guidance by ~$0.40, mainly due to lower performance-based compensation accruals.

• 2024 guidance was sharply reduced due to persistent demand softness, especially in DSA, with no improvement expected in H2 2024.

• Aggressive cost-saving and restructuring initiatives are underway, targeting over $150 million in annualized savings, with $100 million realized in 2024.

• Board approved a new $1.0 billion stock repurchase authorization, replacing the prior plan, with repurchases to begin before Q3 end.

Financial highlights

• Q2 2024 GAAP operating margin was 14.8% (down 80 bps YoY); non-GAAP operating margin was 21.3% (up 90 bps YoY).

• Q2 2024 GAAP EPS was $1.74 (down 7.9% YoY); non-GAAP EPS was $2.80 (up 4.1% YoY).

• Free cash flow in Q2 2024 was $154.1 million, up from $80.7 million last year; CapEx declined to $39.5 million.

• Net leverage ratio at Q2 end was 2.2x; over 80% of $2.4 billion debt is fixed rate.

• Cash and cash equivalents at June 29, 2024, were $179.2 million.

Outlook and guidance

• 2024 reported revenue expected to decline 4.5% to 2.5%; organic revenue to decline 5.0% to 3.0%.

• 2024 GAAP EPS guidance lowered to $5.65–$5.95; non-GAAP EPS to $9.90–$10.20.

• DSA segment revenue expected to decline high single digits organically in FY24; RMS outlook flat to low single-digit growth; Manufacturing outlook raised to mid- to high-single-digit growth.

• Q3 2024 revenue expected to decline mid-single digits year-over-year; non-GAAP EPS to decline low double digits.

• Restructuring initiatives expected to yield over $150 million in annualized cost savings, with $100 million realized in 2024.