Charles River Laboratories International, Inc.

Q2 reported revenue was not explicitly stated in the prepared remarks, but management said organic revenue increased 0.1% year over year, versus prior guidance for a low-single-digit decline. Non-GAAP EPS was $3.02, up 47% sequentially and above the prior outlook. Operating margin was 20.5%, up 420 basis points sequentially; DSA operating margin was 25.6%, RMS margin was 24.5%, and Manufacturing margin was 37.8%. DSA revenue was $607 million, down 1.9% reported and up 0.2% organic; RMS revenue was $209 million, down 1.4% organic; Manufacturing revenue was $188 million, up 1.3% organic. Net bookings were $701 million, backlog was $1.97 billion, free cash flow was $149 million, capex was $31 million, and the company repurchased $100 million of stock in the quarter, bringing year-to-date repurchases to $300 million. For 2026, Charles River raised organic revenue guidance to flat to up 1%, reported revenue guidance to down 2.5% to 3.5%, and non-GAAP EPS guidance to $11.15 to $11.45. It also raised free cash flow guidance to $400 million to $420 million. For Q3, it expects reported revenue down about 4% to 6%, organic revenue up about 1% to 3%, operating margin up about 200 basis points sequentially, and EPS of $2.90 to $3.00.

Birgit Girshick framed the quarter as evidence that the company’s “Pathway to Purpose” strategy is working: simplifying the portfolio, modernizing operations, and focusing on core regulated testing. She emphasized stronger biopharma demand, especially in DSA, the move back to organic growth, and collaborations such as Lilly TuneLab and Arovella as examples of how Charles River wants to combine traditional lab expertise with AI-enabled and digital capabilities. Her tone was upbeat but measured, repeatedly stressing that the recovery should be gradual even as momentum improves.

Glenn Coleman focused on the mechanics behind the quarter’s beat and the guidance raise. He cited $3.02 of non-GAAP EPS, 20.5% operating margin, $701 million of bookings, $1.97 billion backlog, $149 million of free cash flow, and $100 million of Q2 share repurchases; leverage ended at 2.5x. He said full-year 2026 EPS guidance rose to $11.15-$11.45, free cash flow to $400 million-$420 million, and the tax rate outlook moved up to 23%-24%, creating about a $0.20 EPS headwind. He also said Q3 should see a modest DSA margin benefit from K.F. Cambodia, with the larger benefit arriving in Q4, while unallocated corporate costs are now expected around 6.0% of revenue for the full year.

Analysts focused on whether AI could change preclinical demand, and management said AI should be a tailwind because it can increase molecule throughput into validation and regulated safety assessment, though any material impact will take time and likely build over the next couple of years. Questions also centered on portfolio changes and capital allocation; management said there is no imminent divestiture plan, but it remains open to M&A and has balance-sheet capacity to do deals while also buying back stock. Another major topic was NHP supply and cadence: management said the K.F. Cambodia benefit will be minimal in Q3 but meaningful in Q4 because of import, quarantine, and study placement timing. Analysts also asked about China, pricing, and academic/government weakness; management said pricing is stable, China early-stage work is not a major part of its current regulated portfolio, and academic/government demand remains stable but not growing due to constrained NIH/grant dynamics.