Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

66K characters. Original on sec.gov · Markdown

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2024 as filed with the SEC on February 19, 2025. The following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in Item 1A, “Risk Factors” included elsewhere within this Form 10-Q. Certain percentage changes may not recalculate due to rounding.

Overview

We are a leading, full service, non-clinical global drug development partner. For over 75 years, we have been in the business of providing the research models required in the research and development of new drugs, devices, and therapies. Over this time, we have built upon our original core competency of laboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and safety assessment services, both Good Laboratory Practice (GLP) and non-GLP, that supports our clients from target identification through non-clinical development. We also provide a suite of products and services to support our clients’ manufacturing activities. Utilizing our broad portfolio of products and services enables our clients to create a more efficient and flexible drug development model, which reduces their costs, enhances their productivity and effectiveness, and increases speed to market.

Our client base includes major global pharmaceutical companies, many biotechnology companies; agricultural and industrial chemical, life science, veterinary medicine, medical device, diagnostic and consumer product companies; contract research and contract manufacturing organizations; and other commercial entities, as well as leading hospitals, academic institutions, and government agencies around the world.

Segment Reporting

Our three reportable segments are Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions (Manufacturing).

Our RMS reportable segment includes the products and services offered within Research Models, Research Model Services, and Cell Solutions. Research Models includes the commercial production and sale of small research models, as well as the supply of large research models. Research Model Services includes: Insourcing Solutions (IS), which provides colony management of our clients’ research operations (including recruitment, training, staffing, and management services) within our clients’ facilities as well as our own vivarium space, utilizing our Charles River Accelerator and Development Lab (CRADL™) offerings, Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models; and Research Animal Diagnostic Services (RADS), which provides health monitoring and diagnostics services related to research models; and Cell Solutions which provides controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood and bone marrow as well as cells from disease state donors.

Our DSA segment is comprised of Discovery and Safety Assessment services. We provide regulated and non-regulated DSA services to support the discovery, development, and regulatory-required safety testing of potential new drugs, including in vitro (non-animal) and in vivo (in research models) studies, laboratory support services, including bioanalytical and strategic non-clinical consulting and program management to support product development.

Our Manufacturing reportable segment includes Microbial Solutions, which provides in vitro lot-release testing products, microbial detection products, and species identification services and Biologics Solutions (Biologics), which performs specialized testing of biologics (Biologics Testing Solutions) as well as contract development and manufacturing products and services (CDMO).

Fiscal Quarters

Our fiscal year is typically based on 52-weeks, with each quarter composed of 13 weeks ending on the last Saturday on, or closest to, March 31, June 30, September 30, and December 31. A 53rd week in the fourth quarter of the fiscal year is occasionally necessary to align with a December 31 calendar year-end.

Global Market Environment

We are continuing to see a cautious spending environment from our client base, principally within our DSA segment related to our global biopharmaceutical and biotechnology clients, as they reassess their budgets, reprioritize their drug pipelines, and manage their cost structures. As we continue to navigate these challenges in the current macroeconomic environment, DSA backlog declined slightly to $1.8 billion as of September 27, 2025 from $2.0 billion as of December 28, 2024.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

In response to recent trends observed across each of our businesses in the global market environment, we have undertaken and will continue to implement restructuring actions at various locations across North America, Europe and Asia. This includes workforce right-sizing actions, resulting in severance and transition costs; and costs related to the consolidation of facilities to optimize our global footprint and drive greater operating efficiency across the company, resulting in asset impairments, accelerated depreciation, and other site consolidation charges. During fiscal year 2023, we began taking restructuring actions as a result of these emerging business trends. We incurred restructuring charges of $17.3 million and $73.3 million, during the three and nine months ended September 27, 2025, respectively, and $107.0 million and $29.7 million during fiscal 2024 and fiscal 2023, respectively. We expect that these effectuated actions, as well as other upcoming planned actions designed to optimize our global footprint to drive greater operating efficiency, will result in approximately $225 million of cost savings on an annualized basis, of which approximately $175 million will impact fiscal year 2025.

Strategic Review

In November 2025, we announced as part of our Board of Directors’ comprehensive strategic review of our business and growth prospects, that we will focus on strategic initiatives to strengthen our leading scientific portfolio within our core markets through strategic acquisitions, partnerships, and internal investments; divest certain underperforming or non-core assets, which represent approximately 7% of the Company’s estimated 2025 revenue; maximize our financial performance, including by implementing additional initiatives aimed at driving greater operating efficiency, which are expected to generate incremental net cost savings of approximately $70 million annually, which will be fully realized in 2026; and maintain a disciplined approach to capital deployment through regularly evaluating the optimal balance between strategic acquisitions, stock repurchases, debt repayment, and other uses of capital.

Recent Government Actions

On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act (“OBBBA”), which includes changes to a broad range of tax reform provisions including accelerated tax depreciation, expensing of research and development, and the U.S. international inclusions. We have analyzed the impacts of the OBBBA and reflected them in the current period. The enactment of the OBBBA did not have a material impact to the tax rate for the three and nine months ended September 27, 2025.

In February 2025 the U.S. government announced plans to enact increased tariffs on Canada, China and Mexico, later broadening the increase to various countries within Europe, Africa and Asia. As of the date of this report, a number of new tariffs remain in effect, including tariffs between the U.S., and countries from which we obtain significant supply, such as Vietnam, Mauritius and China. The extent and duration of these tariffs and the resulting impact on macroeconomic conditions and our business are uncertain and may depend on various factors including, but not limited to, negotiations between the U.S. and affected countries, reciprocal or retaliatory actions imposed by other countries, tariff exemptions, negative sentiment toward U.S. companies and products, and the availability of lower cost inputs that may be sourced domestically. While we plan to offset most of the estimated tariffs by passing along these higher costs, we will continue to evaluate the nature and extent of the impacts to our business and our operating results.

In April 2025, the U.S. Food and Drug Administration (FDA) announced plans to launch a pilot program to reduce animal testing in preclinical safety studies with scientifically validated cell-based and new approach methodologies (NAMs), such as organ-on-a-chip systems, computational modeling, and advanced in vitro assays. We support the FDA’s announcement as we believe the program aligns with the vision previously outlined in the FDA Modernization Act 2.0 and aims to develop a clearer regulatory pathway to streamline the drug development process and safely advance innovative technologies, including alternatives to the current animal based development process. As a leader in preclinical drug development, this vision is consistent with our long-standing mission to drive greater efficiency in the drug development process, enhance scientific innovation, and promote the responsible use of animals in biomedical research. We are continuously evaluating innovative approaches in drug development and have invested in virtual control groups for safety assessment studies and partnerships utilizing AI technologies to reduce animal use. Further, in April 2024, we launched our own Alternative Methods Advancement Project (AMAP), which is an initiative dedicated to developing alternatives to the use of animal testing within the drug development process. In October 2025, we announced the creation of a cross-functional Scientific Advisory Board to guide our strategic focus on NAMs. We remain committed to continuing to collaborate with regulatory agencies, including the FDA, the biopharmaceutical industry and other stakeholders, to help develop, validate, and implement an efficient process for our clients’ regulatory submissions that support the use of new, non-animal based technologies.

U.S. Government Investigations into the Non-Human Primate Supply Chain

On May 16, 2023, we received an inquiry from the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting us to voluntarily provide information, subsequently augmented with a document subpoena and additional inquiries, primarily related to the sourcing of non-human primates and related disclosures, and we are cooperating with the requests. Our Audit Committee has retained counsel to conduct an independent investigation into certain issues raised in the investigations, and that work is ongoing. We are not able to predict what action, if any, might be taken in the future by the SEC. The SEC has not provided us with any specific timeline or indication as to when the investigation will be concluded or

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

resolved. We cannot predict the timing, outcome or possible impact of the investigation, including without limitation any potential fines, penalties or liabilities.

Results of Operations

Consolidated Results of Operations and Liquidity

Revenue for three months ended September 27, 2025 decreased $4.9 million, or 0.5%, to $1,004.9 million compared to $1,009.8 million in the corresponding period in 2024. Revenue for nine months ended September 27, 2025 decreased $26.3 million, or 0.9%, to $3,021.2 million compared to $3,047.4 million in the corresponding period in 2024. The decreases in revenue for the three and nine months ended September 27, 2025 was primarily attributable to declines in our DSA and Manufacturing businesses, which experienced lower volume driven by continued cautious client spending as a result of the demand environment; partially offset by higher revenue in our RMS business, primarily driven by Noveprim, when compared to the corresponding periods in 2024.

For the three months ended September 27, 2025, our operating income and operating income as a percentage of revenue were $133.8 million and 13.3% respectively, compared to $117.4 million and 11.6% respectively, in the corresponding period of 2024. The increases in operating income and operating income as a percentage of revenue for the three months ended September 27, 2025 were primarily driven by lower severance costs, coupled with lower unallocated corporate employee compensation and benefits related costs when compared to the corresponding period in 2024.

For the nine months ended September 27, 2025, our operating income and operating income as a percentage of revenue were $308.6 million and 10.2% respectively, compared to $395.0 million and 13.0% respectively, in the corresponding period of 2024. The decreases in operating income and operating income as a percentage of revenue for the nine months ended September 27, 2025 were primarily driven by the acceleration of amortization expense recognized as a result of a decrease in the remaining useful life of certain CDMO client relationships due to a loss of key customers, increased restructuring activities, including higher asset impairments and site consolidation charges, and higher third-party legal and advisory costs when compared to the corresponding period in 2024.

Net income available to Charles River Laboratories International, Inc., common shareholders decreased to $54.4 million in the three months ended September 27, 2025, from $68.7 million in the corresponding period of 2024. Net income available to Charles River Laboratories International, Inc., common shareholders decreased to $132.2 million in the nine months ended September 27, 2025, from $226.0 million in the corresponding period of 2024. The decrease in net income available to common shareholders for the three months ended September 27, 2025 was due principally to higher net losses and impairments on our venture capital and strategic equity investments; partially offset by the increase in operating income described above compared to the corresponding period in 2024. The decrease in net income available to common shareholders for the nine months ended September 27, 2025 was due principally to the decrease in operating income described above coupled with higher net losses and impairments on our venture capital and strategic equity investments compared to the corresponding period in 2024.

During the nine months ended September 27, 2025, our cash flows from operations were $590.1 million compared with $575.2 million for the same period in 2024. The increase was primarily driven by lower payments of variable compensation and favorable timing of payments to our suppliers and vendors, partially offset by higher purchases of inventory to support our DSA reportable segment.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Three Months Ended September 27, 2025 Compared to the Three Months Ended September 28, 2024

Revenue and Operating Income

The following tables present consolidated revenue by type and by reportable segment:


	Three Months Ended
	September 27, 2025		September 28, 2024		$ change		% change
	(in thousands, except percentages)
Service revenue	$	808,042	$	832,463	$	(24,421)	(2.9)	%
Product revenue	196,810		177,300		19,510		11.0	%
Total revenue	$	1,004,852	$	1,009,763	$	(4,911)	(0.5)	%


	Three Months Ended
	September 27, 2025		September 28, 2024		$ change		% change		Impact of FX
	(in thousands, except percentages)
RMS	$	213,474	$	197,824	$	15,650	7.9	%	1.4	%
DSA	600,685		615,060		(14,375)		(2.3)	%	1.2	%
Manufacturing	190,693		196,879		(6,186)		(3.1)	%	2.0	%
Total revenue	$	1,004,852	$	1,009,763	$	(4,911)	(0.5)	%	1.3	%

The following table presents operating income by reportable segment:


	Three Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
RMS	$	34,553		$	27,544		$	7,009	25.4	%	3.6	%
DSA	123,153			126,436			(3,283)		(2.6)	%	0.8	%
Manufacturing	39,926			40,188			(262)		(0.7)	%	2.7	%
Unallocated corporate	(63,833)			(76,763)			12,930		(16.8)	%	0.5	%
Total operating income	$	133,799		$	117,405		$	16,394	14.0	%	2.4	%
Operating income % of revenue	13.3		%	11.6		%			170 bps

The following presents and discusses our consolidated financial results by each of our reportable segments:

RMS


	Three Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Revenue	$	213,474		$	197,824		$	15,650	7.9	%	1.4	%
Cost of revenue (excluding amortization of intangible assets)	148,004			137,906			10,098		7.3	%
Selling, general and administrative	24,934			26,453			(1,519)		(5.7)	%
Amortization of intangible assets	5,983			5,921			62		1.0	%
Operating income	$	34,553		$	27,544		$	7,009	25.4	%	3.6	%
Operating income % of revenue	16.2		%	13.9		%			230 bps

RMS revenue increased $15.7 million primarily driven by an increase in large research model product revenue, notably from Noveprim and within China, and the effect of changes in foreign currency exchange rates.

RMS operating income increased $7.0 million compared to the corresponding period in 2024. RMS operating income as a percentage of revenue for the three months ended September 27, 2025 was 16.2%, an increase of 230 bps from 13.9% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue increased primarily due to the increase in revenue described above; partially offset by an increase in cost of revenue related to the amortization of an inventory step up and certain biological assets from the Noveprim acquisition compared to the corresponding period in 2024.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

DSA


	Three Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Revenue	$	600,685		$	615,060		$	(14,375)	(2.3)	%	1.2	%
Cost of revenue (excluding amortization of intangible assets)	408,112			409,684			(1,572)		(0.4)	%
Selling, general and administrative	56,266			63,260			(6,994)		(11.1)	%
Amortization of intangible assets	13,154			15,680			(2,526)		(16.1)	%
Operating income	$	123,153		$	126,436		$	(3,283)	(2.6)	%	0.8	%
Operating income % of revenue	20.5		%	20.6		%			(10) bps

DSA revenue decreased $14.4 million primarily due to lower volume driven by continued cautious client spending as a result of the current demand environment; partially offset by the effect of changes in foreign currency exchange rates compared to the corresponding period in 2024.

DSA operating income decreased $3.3 million during the three months ended September 27, 2025 compared to the corresponding period in 2024. DSA operating income as a percentage of revenue for the three months ended September 27, 2025 was 20.5%, a decrease of 10 bps from 20.6% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue decreased primarily due to the lower revenue described above, partially offset by lower severance costs, compared to the corresponding period in 2024.

Manufacturing


	Three Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Revenue	$	190,693		$	196,879		$	(6,186)	(3.1)	%	2.0	%
Cost of revenue (excluding amortization of intangible assets)	109,944			113,152			(3,208)		(2.8)	%
Selling, general and administrative	32,556			32,737			(181)		(0.6)	%
Amortization of intangible assets	8,267			10,802			(2,535)		(23.5)	%
Operating income	$	39,926		$	40,188		$	(262)	(0.7)	%	2.7%
Operating income % of revenue	20.9		%	20.4		%			50 bps

Manufacturing revenue decreased $6.2 million primarily due to decreased revenue in our Biologics Solutions business, driven by decreased demand for CDMO and Biologics Testing services; partially offset by increased revenue in our Microbial Solutions business driven by higher product revenue associated with endotoxin product revenue and identification services revenue and the effect of foreign currency exchange rates.

Manufacturing operating income decreased $0.3 million during the three months ended September 27, 2025 compared to the corresponding period in 2024. Manufacturing operating income as a percentage of revenue for the three months ended September 27, 2025 was 20.9%, an increase of 50 bps from 20.4% for the corresponding period in 2024. Operating income decreased primarily due the lower revenue described above; partially offset by lower amortization related to acquisitions and severance charges compared to the corresponding period in 2024. Operating income as a percentage of revenue increased primarily due to lower severance charges and amortization related to acquisitions compared to the corresponding period in 2024.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Unallocated Corporate


	Three Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Unallocated corporate	$	63,833		$	76,763		$	(12,930)	(16.8)	%	0.5	%
Unallocated corporate % of revenue	6.4		%	7.6		%			(120) bps

Unallocated corporate costs consist of selling, general and administrative expenses that are not directly related or allocated to the reportable segments. The decrease in unallocated corporate costs of $12.9 million, or 16.8%, compared to the corresponding period in 2024 is primarily due to lower employee compensation and benefits related costs. Costs as a percentage of revenue for the three months ended September 27, 2025 was 6.4%, a decrease of 120 bps from 7.6% for the corresponding period in 2024.

Other Income (Expense)


	Three Months Ended
	September 27, 2025		September 28, 2024		$ change		% change
	(in thousands, except percentages)
Other income (expense):
Interest income	$	1,422	$	1,528	$	(106)	(6.9)	%
Interest expense	(25,403)		(30,284)		4,881		(16.1)	%
Other income (expense), net	(22,618)		2,592		(25,210)		(972.6)	%
Total other expense, net	$	(46,599)	$	(26,164)	$	(20,435)	78.1	%

Interest income for the three months ended September 27, 2025 was $1.4 million, a decrease of $0.1 million, or 6.9%, driven primarily from lower interest rates and interest-earning asset balances.

Interest expense for the three months ended September 27, 2025 was $25.4 million, a decrease of $4.9 million, or 16.1%, compared to $30.3 million in the corresponding period in 2024 due primarily to lower average debt balances.

Other expense, net for the three months ended September 27, 2025 was $22.6 million compared to Other income, net of $2.6 million for the corresponding period in 2024 primarily due to $21.1 million of net losses and impairments on our venture capital and strategic equity investments compared to $2.5 million of net gains in the corresponding period in 2024.

Income Taxes


	Three Months Ended
	September 27, 2025			September 28, 2024			$ change		% change
	(in thousands, except percentages)
Provision for income taxes	$	31,644		$	20,946		$	10,698	51.1	%
Effective tax rate	36.3		%	23.0		%			1,330 bps

Income tax expense for the three months ended September 27, 2025 was $31.6 million, an increase of $10.7 million compared to $20.9 million for the corresponding period in 2024. Our effective tax rate was 36.3% for the three months ended September 27, 2025 compared to 23.0% for the corresponding period in 2024. The increase in our effective tax rate in the three months ended September 27, 2025 compared to the corresponding period in 2024 was primarily attributable to an increase in net U.S. taxation of foreign operations, as well as the current and deferred impact of tax legislation enacted in the third quarter of fiscal 2025 in a foreign jurisdiction.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Nine Months Ended September 27, 2025 Compared to Nine Months Ended September 28, 2024

Revenue and Operating Income

The following tables present consolidated revenue by type and by reportable segment:


	Nine Months Ended
	September 27, 2025		September 28, 2024		$ change		% change
	(in thousands, except percentages)
Service revenue	$	2,446,801	$	2,492,225	$	(45,424)	(1.8)	%
Product revenue	574,354		555,215		19,139		3.4	%
Total revenue	$	3,021,155	$	3,047,440	$	(26,285)	(0.9)	%


	Nine Months Ended
	September 27, 2025		September 28, 2024		$ change		% change		Impact of FX
	(in thousands, except percentages)
RMS	$	639,818	$	625,120	$	14,698	2.4	%	0.5	%
DSA	1,811,323		1,847,931		(36,608)		(2.0)	%	0.5	%
Manufacturing	570,014		574,389		(4,375)		(0.8)	%	0.7	%
Total revenue	$	3,021,155	$	3,047,440	$	(26,285)	(0.9)	%	0.5	%

The following table presents operating income by reportable segment:


	Nine Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
RMS	$	113,944		$	100,641		$	13,303	13.2	%	0.9	%
DSA	339,886			379,651			(39,765)		(10.5)	%	1.5	%
Manufacturing	43,367			111,099			(67,732)		(61.0)	%	0.7	%
Unallocated corporate	(188,595)			(196,357)			7,762		(4.0)	%	0.2	%
Total operating income	$	308,602		$	395,034		$	(86,432)	(21.9)	%	1.8	%
Operating income % of revenue	10.2		%	13.0		%			(280) bps

The following presents and discusses our consolidated financial results by each of our reportable segments:

RMS


	Nine Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Revenue	$	639,818		$	625,120		$	14,698	2.4	%	0.5	%
Cost of revenue (excluding amortization of intangible assets)	430,435			421,773			8,662		2.1	%
Selling, general and administrative	77,509			84,943			(7,434)		(8.8)	%
Amortization of intangible assets	17,930			17,763			167		0.9	%
Operating income	$	113,944		$	100,641		$	13,303	13.2	%	0.9	%
Operating income % of revenue	17.8		%	16.1		%			170 bps

RMS revenue increased $14.7 million primarily driven by increases in large research model product revenue, notably from Noveprim, small model product revenue in Europe and China, GEMS and Insourcing Solutions service revenue, and the effect of changes in foreign currency exchange rates; partially offset by a decrease in Cell Supply product revenue.

RMS operating income increased $13.3 million compared to the corresponding period in 2024. RMS operating income as a percentage of revenue for the nine months ended September 27, 2025 was 17.8%, an increase of 170 bps from 16.1% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue increased primarily due to the higher revenue described above, lower charges related to restructuring activities, including asset impairments and site

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

consolidation charges; partially offset by an increase in cost of revenue related to the amortization of an inventory step up and certain biological assets from the Noveprim acquisition compared to the corresponding period in 2024.

DSA


	Nine Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Revenue	$	1,811,323		$	1,847,931		$	(36,608)	(2.0)	%	0.5	%
Cost of revenue (excluding amortization of intangible assets)	1,250,162			1,246,560			3,602		0.3	%
Selling, general and administrative	181,829			174,598			7,231		4.1	%
Amortization of intangible assets	39,446			47,122			(7,676)		(16.3)	%
Operating income	$	339,886		$	379,651		$	(39,765)	(10.5)	%	1.5	%
Operating income % of revenue	18.8		%	20.5		%			(170) bps

DSA revenue decreased $36.6 million primarily due to lower volume driven by continued cautious client spending as a result of the current demand environment, partially offset by the effect of changes in foreign currency exchange rates.

DSA operating income decreased $39.8 million compared to the corresponding period in 2024. DSA operating income as a percentage of revenue for the nine months ended September 27, 2025 was 18.8%, a decrease of 170 bps from 20.5% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue decreased primarily due to the lower revenue described above, increased restructuring activities, including asset impairments and site consolidation charges, and certain third-party legal costs incurred in connection with the investigations by the U.S. government into the non-human primate supply chain; partially offset by lower severance costs and a decrease in amortization expense, as compared to the corresponding period in 2024.

Manufacturing


	Nine Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Revenue	$	570,014		$	574,389		$	(4,375)	(0.8)	%	0.7	%
Cost of revenue (excluding amortization of intangible assets)	326,967			331,530			(4,563)		(1.4)	%
Selling, general and administrative	99,004			99,397			(393)		(0.4)	%
Amortization of intangible assets	100,676			32,363			68,313		211.1	%
Operating income	$	43,367		$	111,099		$	(67,732)	(61.0)	%	0.7	%
Operating income % of revenue	7.6		%	19.3		%			(1,170) bps

Manufacturing revenue decreased $4.4 million primarily due to decreased revenue in our Biologics Solutions business, driven by decreased demand for CDMO and Biologics Testing services; partially offset by an increase in our Microbial Solutions business driven by higher product revenue associated with endotoxin product revenue and identification services revenue and the effect of changes in foreign currency exchange rates.

Manufacturing operating income decreased $67.7 million compared to the corresponding period in 2024. Manufacturing operating income as a percentage of revenue for the nine months ended September 27, 2025 was 7.6%, a decrease of 1,170 bps from 19.3% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue decreased primarily due to accelerated amortization expense as a result of a decrease in the remaining useful life of certain client relationships due to a loss of key customers within the CDMO business and restructuring activities, including asset impairments and site consolidation charges, and due to the lower revenue described above compared to the corresponding period in 2024.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Unallocated Corporate


	Nine Months Ended
	September 27, 2025			September 28, 2024			$ change		% change		Impact of FX
	(in thousands, except percentages)
Unallocated corporate	$	188,595		$	196,357		$	(7,762)	(4.0)	%	0.2	%
Unallocated corporate % of revenue	6.2		%	6.4		%			(20) bps

Unallocated corporate costs consist of selling, general and administrative expenses that are not directly related or allocated to the reportable segments. The decrease in unallocated corporate costs of $7.8 million, or 4.0%, compared to the corresponding period in 2024 is primarily due to lower employee compensation and benefits related costs; partially offset by higher third-party legal and advisory costs incurred in connection with execution of a Cooperation Agreement entered into with a shareholder earlier this year. Costs as a percentage of revenue for the nine months ended September 27, 2025 were 6.2%, a decrease of 20 bps from 6.4% for the corresponding period in 2024.

Other Income (Expense)


	Nine Months Ended
	September 27, 2025		September 28, 2024		$ change		% change
	(in thousands, except percentages)
Other income (expense):
Interest income	$	3,923	$	6,740	$	(2,817)	(41.8)	%
Interest expense	(83,254)		(98,054)		14,800		(15.1)	%
Other income (expense), net	(34,675)		6,185		(40,860)		(660.6)	%
Total other expense, net	$	(114,006)	$	(85,129)	$	(28,877)	33.9	%

Interest income for the nine months ended September 27, 2025 was $3.9 million, a decrease of $2.8 million, or 41.8%, driven primarily from lower interest rates and interest earning asset balances.

Interest expense for the nine months ended September 27, 2025 was $83.3 million, a decrease of $14.8 million, or 15.1%, compared to $98.1 million in the corresponding period in 2024 due primarily to lower average debt balances.

Other expense, net for the nine months ended September 27, 2025 was $34.7 million compared to Other income, net of $6.2 million for the corresponding period in 2024 due primarily to venture capital investment losses and impairments of $10.3 million as compared to gains of $8.4 million coupled with strategic equity investment losses and impairments of $23.7 million as compared to $9.4 million of net losses and impairments in the corresponding period in 2024.

Income Taxes


	Nine Months Ended
	September 27, 2025			September 28, 2024			$ change		% change
	(in thousands, except percentages)
Provision for income taxes	$	60,469		$	70,867		$	(10,398)	(14.7)	%
Effective tax rate	31.1		%	22.9		%			820 bps

Income tax expense for the nine months ended September 27, 2025 was $60.5 million, a decrease of $10.4 million compared to $70.9 million for the corresponding period in 2024. Our effective tax rate was 31.1% for the nine months ended September 27, 2025 compared to 22.9% for the corresponding period in 2024. The increase in our effective tax rate in the nine months ended September 27, 2025 compared to the corresponding period in 2024 was primarily attributable to an increase in net U.S. taxation of foreign operations, as well as the current and deferred impact of tax legislation enacted in the third quarter of fiscal 2025 in a foreign jurisdiction.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Liquidity and Capital Resources

Liquidity and Cash Flows

In general we require cash to fund our working capital needs, capital expansion, acquisitions, debt payments, lease payments, venture capital and strategic equity investments, restructuring initiatives, and pension obligations. Our principal sources of liquidity have been our cash flows from operations supplemented by long-term borrowings. Based on our current business plan, we believe that our existing funds, when combined with cash generated from operations and our access to financing resources, are sufficient to fund our operations for the foreseeable future.

The following table presents our cash, cash equivalents and short-term investments:


	September 27, 2025		December 28, 2024
	(in thousands)
Cash and cash equivalents:
Held in U.S. entities	$	7,255	$	4,219
Held in non-U.S. entities	199,842		190,387
Total cash and cash equivalents	207,097		194,606
Short-term investments:
Held in non-U.S. entities	65		62
Total cash, cash equivalents and short-term investments	$	207,162	$	194,668

The following table presents our net cash provided by operating activities:


	Nine Months Ended
	September 27, 2025		September 28, 2024
	(in thousands)
Net income	$	134,127	$	239,038
Adjustments to reconcile net income to net cash provided by operating activities	448,690		324,110
Changes in assets and liabilities	7,309		12,067
Net cash provided by operating activities	$	590,126	$	575,215

Net cash provided by cash flows from operating activities represents the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income for (1) non-cash operating items such as depreciation and amortization, stock-based compensation, goodwill impairment, debt financing costs, deferred income taxes, write downs of inventories, provisions of credit losses, long-lived asset impairment changes, gains and/or losses on venture capital and strategic equity investments, gains and/or losses on divestitures, changes in fair value of contingent consideration, as well as (2) changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.

The following table presents our net cash used in investing activities:


	Nine Months Ended
	September 27, 2025		September 28, 2024
	(in thousands)
Capital expenditures	$	(130,202)	$	(157,351)
Investments, net	(6,907)		(5,794)
Proceeds from sale of businesses and assets, net	17,441		—
Acquisition of businesses and assets, net of cash acquired	—		(5,479)
Other, net	3,154		(358)
Net cash used in investing activities	$	(116,514)	$	(168,982)

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Investing activities primarily consist of cash used to fund capital expenditures to support the growth of our business, purchases and sales of investments related to our venture capital and strategic equity investment portfolios, and asset and business acquisitions, periodically offset by cash from divestitures.

For the nine months ended September 27, 2025, cash used in investing activities was primarily driven by capital expenditures partially offset by proceeds from divestitures of certain site and business assets. Capital expenditures decreased for the nine months ended September 27, 2025 as compared to the same period in 2024, as a result of disciplined spend management in light of the global economic environment.

For the nine months ended September 28, 2024, cash used in investing activities was primarily driven by capital expenditures, an immaterial asset acquisition, and net purchases and sales in investments related to certain venture capital and strategic equity investments.

The following table presents our net cash used in financing activities:


	Nine Months Ended
	September 27, 2025		September 28, 2024
	(in thousands)
Proceeds from long-term debt and revolving credit facility	$	1,070,861	$	976,783
Payments on long-term debt, revolving credit facility, and finance lease obligations	(1,141,500)		(1,316,990)
Proceeds from exercises of stock options	3		23,110
Purchase of treasury stock	(360,577)		(119,051)

Payment of contingent consideration	(21,822)		—
Purchase of remaining equity interest of other redeemable noncontrolling interest	(19,140)		(12,000)
Other, net	(12,687)		(26,900)
Net cash used in financing activities	$	(484,862)	$	(475,048)

Financing activities primarily consist of the proceeds and repayments of debt and certain equity related transactions including treasury stock purchases and employee stock option exercises.

For the nine months ended September 27, 2025, net cash used in financing activities was primarily driven by the following activity:

Net repayments of $60.5 million from our Credit Facility
Treasury stock purchases of $350.0 million associated with our stock repurchase program and $9.9 million due to the netting of common stock upon vesting of stock-based awards in order to satisfy individual statutory tax withholding requirements
Payment of $21.8 million associated with contingent consideration related to the acquisition of Noveprim
Payment of $19.1 million for the remaining 8% equity interest in Vital River

For the nine months ended September 28, 2024, net cash used in financing activities was primarily driven by the following activity:

Net repayments of $346.2 million from our Credit Facility
Treasury stock purchases of $100.7 million associated with our stock repurchase program and $18.4 million due to the netting of common stock upon vesting of stock-based awards in order to satisfy individual statutory tax withholding requirements
Net proceeds from exercises of employee stock options of $23.1 million
Net dividend payments to noncontrolling interest holders of $14.5 million
Payment of $12.0 million for the remaining 10% equity interest in an other redeemable noncontrolling interest

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Financing and Market Risk

We are exposed to market risk from changes in interest rates and currency exchange rates, which could affect our future results of operations and financial condition. We manage our exposure to these risks through our regular operating and financing activities.

Amounts outstanding under our Credit Facility and our Senior Notes were as follows:


	September 27, 2025		December 28, 2024
	(in thousands)
Revolving facility	$	665,472	$	714,948
4.25% Senior Notes due 2028	500,000		500,000
3.75% Senior Notes due 2029	500,000		500,000
4.00% Senior Notes due 2031	500,000		500,000
Total	$	2,165,472	$	2,214,948

The Credit Facility provides for up to $2.0 billion of multi-currency revolving credit and has a maturity date of December 2029, with no required scheduled payment before that date. The interest rates applicable to the revolving facility are equal to (A) for revolving loans denominated in U.S. dollars, at our option, either the base rate (which is the higher of (1) the prime rate, (2) the federal funds rate plus 0.50%, or (3) the one-month adjusted SOFR rate plus 1.0%) or the adjusted SOFR rate, (B) for revolving loans denominated in euros, the adjusted EURIBOR rate and (C) for revolving loans denominated in sterling, the daily simple SONIA rate, in each case, plus an interest rate margin based upon our leverage ratio.

Our off-balance sheet commitments related to our outstanding letters of credit as of September 27, 2025 and December 28, 2024 were $22.0 million and $22.4 million, respectively.

Foreign Currency Exchange Rate Risk

We operate on a global basis and have exposure to foreign currency exchange rate fluctuations for our financial position, results of operations, and cash flows.

While the financial results of our global activities are reported in U.S. dollars, our foreign subsidiaries typically conduct their operations in their respective local currency. The principal functional currencies of our foreign subsidiaries are the Euro, British Pound, Canadian Dollar, Chinese Yuan Renminbi, and Mauritian Rupee. During the nine months ended September 27, 2025, the most significant drivers of foreign currency translation adjustment we recorded as part of Other comprehensive income (loss) were the Euro, British Pound, Canadian Dollar, Hungarian Forint, and Mauritian Rupee.

Fluctuations in the foreign currency exchange rates of the countries in which we do business will affect our financial position, results of operations, and cash flows. As the U.S. dollar strengthens against other currencies, the value of our non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally decline when reported in U.S. dollars. The impact to net income as a result of a U.S. dollar strengthening will be partially mitigated by the value of non-U.S. expenses, which will decline when reported in U.S. dollars. As the U.S. dollar weakens versus other currencies, the value of the non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally increase when reported in U.S. dollars. For the nine months ended September 27, 2025, our revenue would have decreased by $99.8 million, and our operating income would have decreased by $3.9 million, if the U.S. dollar exchange rate had strengthened by 10%, with all other variables held constant.

We attempt to minimize this exposure by using certain financial instruments in accordance with our overall risk management and our hedge policy. We do not enter into speculative derivative agreements.

Repurchases of Common Stock

During the nine months ended September 27, 2025, we repurchased 2.1 million shares of common stock for $350.0 million under the stock repurchase program. As of September 27, 2025, we had $549.3 million remaining on the authorized $1.0 billion stock repurchase program. On October 29, 2025, our Board of Directors approved a new stock repurchase authorization of $1.0 billion. This new authorization replaces the prior stock repurchase authorization of $1.0 billion that had $549.3 million remaining on the plan when it was terminated.

Additionally, our stock-based compensation plans permit the netting of common stock upon vesting of restricted stock, restricted stock units, and performance share units in order to satisfy individual statutory tax withholding requirements. During the nine months ended September 27, 2025, we acquired 0.1 million shares for $9.9 million through such netting.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reported periods, and the related disclosures. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on our historical experience, trends in the industry, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.

We believe that the application of our accounting policies, each of which require significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for fiscal year 2024 as filed with the SEC on February 19, 2025. There have been no changes in the Company’s critical accounting policies during the nine months ended September 27, 2025.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements please refer to Note 1, “Basis of Presentation,” in this Quarterly Report on Form 10-Q. Other than as discussed in Note 1, “Basis of Presentation,” we did not adopt any other new accounting pronouncements during the nine months ended September 27, 2025 that had a significant effect on our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous: Item 1. Financial Statements · Next: Item 3. Quantitative and Qualitative Disclosures about Market Risk