WILMINGTON, Mass.– Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the first quarter of 2024. For the quarter, revenue was $1.01 billion, a decrease of 1.7% from $1.03 billion in the first quarter of 2023.
The impact of foreign currency translation benefited reported revenue by 0.3%, and acquisitions contributed 1.5% to consolidated first-quarter revenue. A small divestiture of a Safety Assessment site reduced reported revenue by 0.2%. Excluding the effect of these items, organic revenue decreased 3.3%. On a segment basis, both the Manufacturing and Research Models and Services (RMS) business segments reported organic revenue growth, which was offset by lower revenue in the Discovery and Safety Assessment (DSA) segment.
In the first quarter of 2024, the GAAP operating margin decreased to 12.5% from 16.3% in the first quarter of 2023, and on a non-GAAP basis, the operating margin decreased to 18.5% from 21.2%. The GAAP and non-GAAP decreases were primarily driven by a lower operating margin in the DSA segment, as well as higher unallocated corporate costs. On a GAAP basis, costs associated with the Company’s restructuring initiatives also contributed to the decline.
On a GAAP basis, first-quarter net income attributable to common shareholders was $67.3 million, a decrease of 34.7% from $103.1 million for the same period in 2023. First-quarter diluted earnings per share on a GAAP basis were $1.30, a decrease of 35.3% from $2.01 for the first quarter of 2023. On a non-GAAP basis, net income was $117.6 million for the first quarter of 2024, a decrease of 17.7% from $143.0 million for the same period in 2023. First-quarter diluted earnings per share on a non-GAAP basis were $2.27, a decrease of 18.3% from $2.78 per share for the first quarter of 2024. The GAAP and non-GAAP net income and earnings per share decreases were driven primarily by lower revenue and operating income, as well as a higher tax rate.
James C. Foster, Chair, President and Chief Executive Officer, said, “Our first-quarter performance was a solid first step towards achieving our financial outlook for the year, particularly in our Manufacturing segment. Our DSA segment saw improved proposal activity and cancellations in the first quarter, and while encouraging, our outlook for the year remains appropriately measured. It will take time for this proposal activity and stronger biotech funding to translate into new DSA bookings and revenue generation; however, these trends are consistent with our expectations that demand will improve later this year.”
“The long-term industry fundamentals for the biopharmaceutical industry remain firmly intact, and we intend to capitalize on new business opportunities. We are implementing initiatives to maintain our leadership in the non-clinical drug development sector, including enhanced commercial efforts, actions to drive efficiency, and investing in innovative technologies. We are the logical outsourcing partner for our clients and are positioning ourselves to win the new business that will emerge as these clients reinvigorate their investments in their early-stage R&D programs,” Mr. Foster concluded.
Revenue for the RMS segment was $220.9 million in the first quarter of 2024, an increase of 10.6% from $199.8 million in the first quarter of 2023. The Noveprim acquisition contributed 7.6% to first-quarter RMS reported revenue, and the impact of foreign currency translation reduced revenue by 0.3% in the quarter. Organic revenue increased by 3.3%, due primarily to higher revenue for non-human primates (NHPs) in China, as well as higher sales of small research models in all geographic regions and higher revenue for research models services, including in the Insourcing Solutions business.
In the first quarter of 2024, the RMS segment’s GAAP operating margin decreased to 19.5% from 20.2% in the first quarter of 2023, driven primarily by higher amortization expense related to the Noveprim acquisition, and higher site consolidation costs related to restructuring initiatives. On a non-GAAP basis, the operating margin increased to 27.6% from 23.4%. The non-GAAP operating margin increase was driven primarily by product mix, specifically higher revenue for NHPs including in China and from Noveprim.
Revenue for the DSA segment was $605.5 million in the first quarter of 2024, a decrease of 8.6% from $662.4 million in the first quarter of 2023. Organic revenue decreased by 8.7%, driven by lower revenue in both the Discovery Services and Safety Assessment businesses, which included a challenging, prior-year growth comparison in the Safety Assessment business.
In the first quarter of 2024, the DSA segment’s GAAP operating margin decreased to 19.0% from 25.9% in the first quarter of 2023. On a non-GAAP basis, the operating margin decreased to 23.5% from 29.0% in the first quarter of 2023. The GAAP and non-GAAP operating margin decreases were driven primarily by lower sales volume and moderating price increases in both the Discovery Services and Safety Assessment businesses. On a GAAP basis, costs associated with restructuring initiatives also contributed to the decline.
Revenue for the Manufacturing segment was $185.2 million in the first quarter of 2024, an increase of 10.7% from $167.3 million in the first quarter of 2023. Organic revenue growth of 10.4% reflected higher revenue across each of the segment’s businesses, led by the CDMO business.
In the first quarter of 2024, the Manufacturing segment’s GAAP operating margin increased to 18.2% from 1.3% in the first quarter of 2023, and on a non-GAAP basis, the operating margin increased to 25.3%, from 13.7% in the first quarter of 2023. The GAAP and non-GAAP operating margin increases were driven primarily by improved profitability for each of segment’s businesses, as well as a favorable comparison to a lease impairment last year in the CDMO business.
