Charles River Returns to Organic Growth, Lifts Guidance
Charles River Laboratories reported organic revenue growth of 0.1% in the second quarter, its first positive reading since the third quarter of 2023.
Charles River Laboratories International (CRL) reported organic revenue growth of 0.1% in the second quarter, the highest level since the third quarter of 2023, and raised its full-year outlook as demand in its largest business showed signs of stabilizing. The contract research and drug-development services provider had posted organic declines of 1.5% in the first quarter and 2.6% in the fourth quarter of 2024.
The improvement centered on the Discovery and Safety Assessment (DSA) segment, where book-to-bill reached its highest level in nearly four years, representing a broad-based pickup across global biopharma and small and mid-size biotech clients. That marked a shift from the first quarter, when management characterized DSA demand as merely tracking to expectations. DSA organic revenue grew 0.2% in the quarter, turning positive after several quarters of flat or negative growth.
Non-GAAP operating margin rose to 20.5% in the second quarter, up 420 basis points sequentially from 16.3% in the first quarter, though still below the 22.1% margin posted a year earlier. GAAP operating margin held roughly steady at 11.9%, compared with 12.0% in the first quarter, but improved from 9.7% in the second quarter of 2024. Non-GAAP earnings per share climbed to $3.02 from $2.06 in the first quarter, though that was down 3.2% from $3.12 a year earlier.
On a GAAP basis, Charles River reported a loss of $(0.03) a share, narrower than the $(0.30) loss in the first quarter but a reversal from GAAP income of $1.06 a share in the second quarter of 2024. The loss was driven by a $63.7 million, or $1.40 a share, charge tied to the divestiture of its CDMO and Cell Solutions businesses, which closed in May 2025 alongside the sale of certain European Discovery Services sites. Net income attributable to common shareholders swung to a loss of $(1.5) million from income of $52.3 million a year earlier, following a $(14.8) million loss in the first quarter that had been driven by a larger $118.0 million loss on assets held for sale.
Segment results diverged. Manufacturing organic revenue grew 1.3%, led by Microbial Solutions, even as reported revenue fell 6.3% to $188.1 million because of the CDMO divestiture. Manufacturing's non-GAAP operating margin expanded to 37.8% from 32.8% a year earlier, and its GAAP margin jumped to 34.9% from 6.0%, both reflecting the divestiture's removal of a lower-margin business from the mix. RMS organic revenue declined 1.4%, a smaller drop than the 5.5% decline in the first quarter, though RMS non-GAAP margin fell to 24.5% from 25.3% a year earlier, its third straight quarter of compression. DSA margin also compressed, to 25.6% from 27.4%, on higher study-related direct costs, a pressure point management has flagged for two consecutive quarters.
Charles River raised its full-year 2025 organic revenue guidance by 150 basis points at the midpoint, to a range of 0.0% to 1.0% from negative 1.5% to negative 0.5%, and lifted its non-GAAP EPS guidance midpoint by $0.25, to $11.15-$11.45 from $10.80-$11.30, citing improving DSA demand and better Manufacturing performance. GAAP EPS guidance was cut sharply, to $3.05-$3.35 from $5.35-$5.85, reflecting the net loss booked on the CDMO/Cell Solutions and European Discovery Services divestitures. The company also disclosed a partial reversal of a $27 million non-human-primate inventory charge originally taken in 2024, reflecting utilization of previously written-down inventory.
Share repurchases slowed to $100 million in the quarter from $200 million in the first quarter, bringing year-to-date buybacks to $300 million with $700 million remaining under the company's $1.0 billion authorization.