Charles River Laboratories (CRL) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $1.03 billion, down 3.2% year-over-year, with Manufacturing growth offset by declines in DSA and RMS segments; organic revenue also declined 3.2%.

• 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 cost controls and lower performance-based compensation accruals.

• GAAP EPS was $1.74 (down 7.9% YoY); net income attributable to common shareholders was $90.0 million, down from $97.0 million in Q2 2023.

• 2024 guidance was revised downward due to persistent demand softness, especially in DSA, and no improvement is expected in the second half.

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

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).

• Free cash flow in Q2 2024 was $154.1 million, up from $80.7 million in Q2 2023; CapEx was $39.5 million, down from $67.4 million.

• Net leverage ratio at quarter-end was 2.2x; net interest expense declined to $29.8 million.

• Q2 2024 effective tax rate was 21.2%, down from 22.7% in Q2 2023.

• 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%.

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

• DSA segment revenue expected to decline high single digits organically for FY24; RMS outlook reaffirmed at 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 YoY; non-GAAP EPS to decline low double digits YoY.

• Demand from small/mid-sized biotech and global biopharma clients expected to remain soft in H2 2024.