Q1 2026 Charles River Laboratories International Inc Earnings Call

May 7, 2026

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Charles River Laboratories First Quarter 2026 Earnings Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this period, you will need to press star 1 on your telephone keypad. If you want to remove yourself from the queue, please press star 2. Lastly, if you should need operator assistance, please press star 0. I would now like to turn the conference over to our host, Todd Spencer, Vice President of Investor Relations. Please go ahead.

Speaker #1: Please stand by, we're about to begin. Ladies and gentlemen, thank you for standing by, and welcome to the CHARLES RIVER LABORATORIES FIRST QUARTER 2026 EARNINGS CONFERENCE CALL.

Operator: Please stand by. We are about to begin. Ladies and gentlemen, thank you for standing by, and welcome to the Charles River Laboratories Q1 2026 Earnings Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this period, you will need to press star one on your telephone keypad. If you want to remove yourself from the queue, please press star two. Lastly, if you should need operator assistance, please press star zero. I would now like to turn the conference over to our host, Todd Spencer, Vice President of Investor Relations. Please go ahead.

Speaker #1: This call is being recorded. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

Speaker #1: To ask a question during this period, you will need to press *1 on your telephone keypad. If you want to remove yourself from the queue, please press *2.

Speaker #1: Lastly, if you should need operator assistance, please press *0. I would now like to turn the conference over to our host, Todd Spencer, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Good morning and welcome to CHARLES RIVER LABORATORIES FIRST QUARTER 2026 EARNINGS CONFERENCE CALL and webcast. This morning, I am pleased to be joined by Birknett Gershik, who became our Chief Executive Officer this week, and to introduce our new Executive Vice President and Chief Financial Officer, Glenn Coleman.

Todd Spencer: Good morning, and welcome to Charles River Laboratories Q1 2026 earnings conference call and webcast. This morning, I am pleased to be joined by Birgit Girshick, who became our Chief Executive Officer this week, and to introduce our new Executive Vice President and Chief Financial Officer, Glenn Coleman. They will comment on our results for Q1 2026, as well as our financial guidance. Following the presentation, they will respond to questions. There is a slide presentation associated with today's remarks, which will be posted on the investor relations section of our website at ir.criver.com. A webcast replay of this call will be available beginning approximately 2 hours after the call today and can also be accessed on the investor relations section of our website. The replay will be available through next quarter's conference call. I'd like to remind you of our safe harbor.

Speaker #2: They will comment on our results for the first quarter of 2026, as well as our financial guidance. Following the presentation, they will respond to questions.

Speaker #2: There is a slide presentation associated with today's remarks, which will be posted on the Investor Relations section of our website, at ir dot criver dot com.

Speaker #2: A webcast replay of this call will be available beginning approximately 2 hours after the call today, and can also be accessed on the Investor Relations section of our website.

Speaker #2: The replay will be available through next quarter's conference call. I'd like to remind you of our safe harbor. All remarks that we make about future expectations, plans, and prospects for the company constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995.

Todd Spencer: All remarks that we make about future expectations, plans and prospects for the company constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated. During the call, we will primarily discuss non-GAAP financial measures, which we believe help investors gain a meaningful understanding of our core operating results and guidance. The non-GAAP financial measures are not meant to be considered superior to or substitute for results of operations prepared in accordance with GAAP. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations on our investor relations section of our website. I will now turn the call over to Birgit Girshick.

Speaker #2: Actual results may differ materially from those indicated. During the call, we will primarily discuss non-gap financial measures, which we believe help investors gain a meaningful understanding of our core operating results and guidance.

Speaker #2: The non-gap financial measures are not meant to be considered superior to or substitute for results of operations prepared in accordance with GAAP. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations on our Investor Relations section of our website.

Speaker #2: I will now turn the call over to Birknett Gershik.

Speaker #3: Thank you, Todd. It is a privilege to speak to you today as the CEO of CHARLES RIVER. I would like to acknowledge Jim Foster for building this company, into an industry leader, and reiterate my gratitude for the mentorship that he has provided to me over the years.

Birgit Girshick: Thank you, Todd. It is a privilege to speak to you today as the CEO of Charles River. I would like to acknowledge Jim Foster for building this company into an industry leader and reiterate my gratitude for the mentorship that he has provided to me over the years. I step into this role with a clear understanding of Charles River today, what we can become, and the tremendous responsibility we have to our clients, to the patients who rely on us, to our nearly 20,000 employees worldwide, and also to you, our shareholders. I'm not taking this responsibility slightly, and I'm energized by what lies ahead as we continue to work to help create healthier lives, to capitalize on the significant opportunities ahead of us, both in science and in the marketplace, and to enhance shareholder value.

Speaker #3: I step into this role with a clear understanding of CHARLES RIVER today. What we can become, and the tremendous responsibility we have to our clients, to the patients who rely on us, to our nearly 20,000 employees worldwide, and also to you, our shareholders.

Speaker #3: I'm not taking this responsibility lightly. And I'm energized by what lies ahead, as we continue to work to help create healthier lives. We capitalize on the significant opportunities ahead of us, both in science and in the marketplace, and to enhance shareholder value.

Speaker #3: Our teams have already put forth significant efforts to plan for the future, and I'm proud to lead the company into its next chapter of growth and evolution.

Birgit Girshick: Our teams have already put forth significant efforts to plan for the future, and I'm proud to lead the company into its next chapter of growth and evolution. The world is changing rapidly around us. Science is advancing faster than it ever has, and our clients require greater speed, best science, and more collaboration. As the industry changes, Charles River will evolve alongside it and lead the way. Together as a company, we will create our own future by reimagining the way we operate and embracing the opportunities ahead of us. We will accomplish this through our refreshed strategic framework, which we are calling Pathway to Purpose. Pathway to Purpose is a disciplined approach to driving growth and shareholder value through the following key priorities. Modernizing our company and the industry. Strengthening our world-class scientific portfolio by enhancing our capabilities in strategic locations while delivering a customized client-centric approach.

Speaker #3: The world is changing rapidly around us. Science is advancing faster, than it ever has, and our clients require greater speed, best science, and more collaboration.

Speaker #3: As the industry changes, CHARLES RIVER will evolve alongside it, and lead the way. Together as a company, we will create our own future by reimagining the way we operate, and embracing the opportunities ahead of us.

Speaker #3: We will accomplish this through our refreshed strategic framework, which we are calling Pathway to Purpose. Pathway to Purpose is a disciplined approach to driving growth, and shareholder value, through the following key priorities.

Speaker #3: Modernizing our company and industry. Strengthening our workflows, scientific portfolio, by enhancing our capabilities, and strategic locations. While delivering a customized client-centric approach. We will also continue to maintain rigorous oversight on animal welfare, biosecurity, and regulatory compliance, as well as fostering an exceptional employee experience.

Birgit Girshick: We will also continue to maintain rigorous oversight on animal welfare, biosecurity, and regulatory compliance, as well as fostering an exceptional employee experience. We have already established a solid foundation, including through the execution of strategic initiatives and enhancements made over the past few years. This refreshed focus, Pathway to Purpose, will enable us to realize our full potential and ensure our future success. This will lead us to drive profitable revenue growth and optimize our financial performance. We will also continue to take a balanced and disciplined approach to capital deployment, including organic investments, M&A, and other uses of capital. We plan to take a much deeper dive into our overall Pathway to Purpose strategy and these priorities when we host an Investor Day in September. For now, I will provide a high-level overview of each priority as well as some of our recent accomplishments.

Speaker #3: We have already established a solid foundation, including through the execution of strategic initiatives and enhancement made over the past few years. And this refreshed focus, Pathway to Purpose, will enable us to realize our full potential, and ensure our future success.

Speaker #3: This will lead us to drive profitable revenue growth, and optimize our financial performance. We will also continue to take a balanced and disciplined approach to capital deployment, including organic investments, M&A, and other uses of capital.

Speaker #3: We plan to take a much deeper dive into our overall pathway to purpose strategy, and these priorities, when we host an investor day in September.

Speaker #3: For now, I will provide a high-level overview of each priority, as well as some of our recent accomplishments. First, we are diligently working on opportunities, to modernize CHARLES RIVER, by building a future version of the company, that will be faster, more agile, and connected and data-driven.

Birgit Girshick: First, we are diligently working on opportunities to modernize Charles River by building a future version of the company that will be faster, more agile, connected, and data-driven. We endeavor not only to transform operationally by driving greater efficiencies and streamlining and simplifying processes, but by creating an environment that allows scientific insights and information to move more quickly. This will enable us to partner even more seamlessly with our clients and expedite the speed at which we're able to deliver solutions, supporting their goals and deepening our relationship with them. We have already made substantial progress in our efforts to drive greater operating efficiencies and optimize processes. As previously discussed, we expect to generate at least $100 million in incremental cost savings this year above the 2025 levels, primarily driven by efficiency initiatives.

Speaker #3: We endeavor not only to transform operationally, by driving creative efficiencies and streamlining and simplifying processes, but by creating an environment that allows scientific insights, and information to move more quickly.

Speaker #3: This will enable us to partner even more seamlessly with our clients, and expedite the speed at which we're able to deliver solutions, supporting their goals, and deepening our relationship with them.

Speaker #3: We have already made substantial progress in our efforts to drive greater operating efficiencies and optimize processes. As previously discussed, we expect to generate at least 100 million dollars in incremental cost savings this year, above the 2025 levels, primarily driven by efficiency initiatives.

Birgit Girshick: Cumulatively, we expect to generate over $300 million in cost savings on an annualized basis from actions taken over the past few years. However, our pursuit of operating efficiency does not stop here. We are evaluating new initiatives designed to enable us to continue to modernize the company and how we operate and drive additional savings to generate meaningful operating margin expansion in the future. We have already made great progress on our efforts to further strengthen our leading scientific portfolio, including through actions taken as part of our comprehensive strategic review last year. As we mentioned last quarter, our acquisition of the assets of K.F. (Cambodia) Ltd. earlier this year, now Charles River Cambodia, further strengthens and secures the non-human primate supply chain for our safety assessment operations.

Speaker #3: Cumulatively, we expect to generate over 300 million dollars in cost savings, on an annualized basis, from actions taken over the past few years. However, our pursuit of operating efficiency does not stop here.

Speaker #3: We are evaluating new initiatives, designed to enable us to continue to modernize the company, and how we operate. And drive additional savings to generate meaningful operating margin expansion in the future.

Speaker #3: We have already made great progress on our efforts to further strengthen our leading scientific portfolio, including through actions taken as part of our comprehensive strategic review last year.

Speaker #3: As we mentioned last quarter, our acquisition of the assets of KF Cambodia earlier this year, now CHARLES RIVER Cambodia, further strengthens and secures the non-human primate supply chain for our safety assessment operations.

Birgit Girshick: Combined with Noveprim, in which we acquired a controlling stake in 2023, we own and expect to internally source most of our future NHP supply requirements for the DSA segment. In April, we completed the acquisition of PathoQuest to continue advancing our NAMs, or New Approach Methodologies, capabilities by adding this in vitro next generation sequencing platform for quality control testing for biologics drugs. We are pleased to have completed the previously announced divestiture of the CDMO and cell solutions businesses on 6 May. We also expect to complete the planned sale of our certain European discovery sites later this month in May. These strategic transactions will help us refine and refocus our portfolio on our core competencies and drive synergistic growth in areas in which we have differentiated scientific expertise, including drugs development testing.

Speaker #3: Combined with Novotrin, in which we acquired a controlling stake in 2023, we own and expect to internally source most of our future NHP supply requirements for the DSA segment.

Speaker #3: In April, we completed the acquisitions of PathAquest, to continue advancing our names or new approach methodologies, capabilities. By adding this in vitro, next-generation sequencing platform for quality control testing for biologic drugs.

Speaker #3: We are pleased to have completed the previously announced divestiture of the CDMO and cell solutions businesses on May 6th. We also expect to complete the planned sale of our certain European discovery sites, later this month, in May.

Speaker #3: These strategic transactions will help us refine and refocus our portfolio on our core competencies, and drive synergistic growth in areas in which we have differentiated scientific expertise, including drugs development testing.

Speaker #3: In addition to our efforts to modernize the company, and drive incremental efficiency savings, these divestitures and the KF acquisitions are expected to be meaningful levers for future operating margin improvement, including the principal drivers of margin expansions for the year.

Birgit Girshick: In addition to our efforts to modernize the company and drive incremental efficiency savings, these divestitures and the K.F. acquisitions are expected to be meaningful levers for future operating margin improvement, including the principal drivers of margin expansion for the year. As we move forward, providing the best science will remain paramount at Charles River. With the combined strengths of our core capabilities and scientific rigor, we intend to set new standards for what modern science can achieve and to help our clients enhance the efficiency and speed to market for their life-saving therapeutic programs. We will continue to build our world-class portfolio by investing in core growth areas and providing scientific solutions that are critical to our clients.

Speaker #3: As we move forward, providing the best science will remain paramount at CHARLES RIVER. With the combined strengths of our core capabilities and scientific rigor, we intend to set new standards for what modern science can achieve and to help our clients enhance the efficiency, and speed to market for their life-saving therapeutic programs.

Speaker #3: We will continue to build our world-class portfolio by investing in core growth areas, and providing scientific solutions that are critical to our clients. In particular, we will further strengthen our capabilities in a regulated testing environment, including early-stage drug development, where we remain the industry leader, and in complementary testing opportunities to support the clinical and commercial phases.

Birgit Girshick: In particular, we will further strengthen our capabilities in a regulated testing environment, including early-stage drug development, where we remain the industry leader, and in complementary testing opportunities to support the clinical and commercial phases. We have identified areas of future growth, including in vitro and related testing services, to extend our existing capabilities, as well as adding additional NAM solutions and continuing to evaluate our geographic presence, particularly in Asia. To further enhance our growth profile, we're doubling down on our client-centric approach with a go-to-market model that deepens and further customizes client relationships and reinforces our position as a preferred partner to the biopharmaceutical industry.

Speaker #3: We have identified areas of future growth, including in vitro and related testing services, to extend our existing capabilities, as well as adding additional NAM solutions and continuing to evaluate our geographic presence.

Speaker #3: Particularly in Asia. To further enhance our growth profile, we are doubling down on our client-centric approach with a go-to-market model that deepens and further customizes client relationships and reinforces our position as a preferred partner to the biopharmaceutical industry.

Birgit Girshick: We are leveraging technology, including AI, to improve sales effectiveness, KPI transparency, and lead generation while investing in collaborative tools that enhance how we engage with clients and generate insights. Our Apollo cloud-based platform has already been a core enabler of our client-centric strategy and differentiates us in the marketplace through the speed that we can work with our clients. Apollo delivers a seamless self-service client experience with real-time access to scientific data and decision support tools. Its scope has expanded from RMS e-commerce and DSA pricing into study design, CRADL, and our manufacturing businesses, with further expansion underway. Technology is embedded throughout our strategy and in everything that we do.

Speaker #3: We are leveraging technology, including AI, to improve sales effectiveness, KPI transparency, and lead generation, while investing in collaborative tools that enhance how we engage with clients, and generate insights.

Speaker #3: Our Apollo cloud-based platform has already been a core enabler of our client-centric strategy, and differentiates us in the marketplace through the speed that we can work with our clients.

Speaker #3: Apollo delivers a seamless, self-service client experience with real-time access to scientific data, and decision support tools. Its scope has expanded from RMS e-commerce and DSA pricing into study design, cradle, and our manufacturing businesses, to further expansion underway.

Speaker #3: Technology is embedded throughout our strategy, and in everything that we do. We are investing in broadly using technology, to help harmonize and streamline processes, including through digitizing core work streams and lab automation, which will enable us to gain better data insights, enhance connectivity with our clients, and accelerate their speed to market.

Birgit Girshick: We are investing in broadly using technology to help harmonize and streamline processes, including through digitizing core work streams and lab automation, which will enable us to gain better data insights, enhance connectivity with our clients, and accelerate their speed to market. AI has been a particular focus in the recent months. Our view is quite simple. AI will support the work that we and our clients do. We believe the efficiencies gained from AI over time will be reinvested in R&D by our biopharmaceutical clients, enabling them to work on more programs throughout the regulated drug development process, including safety assessment.

Speaker #3: AI has been a particular focus in the recent months. Our view is quite simple. AI will support the work that we and our clients do.

Speaker #3: We believe the efficiencies gained from AI over time will be reinvested in R&D by our biopharmaceutical clients, enabling them to work on more programs throughout the regulated drug development process, including safety assessment.

Birgit Girshick: To support this constructive view, recent discussions with our clients and industry surveys indicate that large biopharmaceutical companies are primarily utilizing AI in R&D to enhance the speed and efficiency of the early discovery process, including target identification, drug design, and screening capabilities, and also around clinical trial monitoring and logistics. In addition, a Deloitte survey last year indicated that nearly 60% of surveyed biopharmaceutical R&D executives expect AI and lab automation investments will result in an increase in R&D approvals, due in part to a faster pace of drug discovery over the next several years. Like NAMs, the use of AI will be an exciting but gradual evolution led by science and the proper validation of new capabilities.

Speaker #3: To support this constructive view, recent discussions with our clients and industry surveys indicate that large biopharmaceutical companies are primarily utilizing AI in R&D to enhance the speed and efficiency of the early discovery process, including target identification, drug design, and screening capabilities, and also around clinical trial monitoring and logistics.

Speaker #3: In addition, a Deloitte survey last year indicated that nearly 60% of surveyed biopharmaceutical R&D executives expect AI and lab automation investments will result in an increase in R&D approvals to impart to a faster pace of drug discovery over the next several years.

Speaker #3: Like NAMs, the use of AI will be an exciting but gradual evolution led by science, and the proper validation of new capabilities. We are leveraging AI and machine learning across the company, including as part of our strategic priority to strengthen our NAMs portfolio, through our pioneering approach to virtual control groups, or VCGs, for safety assessment studies.

Birgit Girshick: We are leveraging AI and machine learning across the company, including as part of our strategic priority to strengthen our enhanced portfolio through our pioneering approach to virtual control groups, or VCGs, for safety assessment studies. A recent independent scientific review demonstrated the effectiveness of our VCG process, which preserves scientific integrity with no observed adverse effects compared to traditional control groups, while reducing reliance on animal models. The VCG program is guided by our Alternative Methods Advancement Project, or AMAS initiative, focused on reducing the use of animals in research, and is also a key priority for our scientific advisory board, led by our Chief Scientific and Innovation Officer, Dr. Namandjé Bumpus. Before I discuss our Q1 financial performance, let me provide a brief update on the end market trends.

Speaker #3: The recent independent scientific review demonstrated the effectiveness of our VCG process, which preserves scientific integrity with no observed adverse effects compared to traditional control groups, while reducing reliance on animal models.

Speaker #3: The VCG program is guided by our alternative methods advancement project, or AMAP initiative, focused on reducing the use of animals in research, and is also a key priority for our scientific advisory board, led by our chief scientific and innovation officer, Dr. Namanji Bampis.

Speaker #3: Before I discuss our first quarter financial performance, let me provide a brief update on the end-market trends. The overall biopharma demand environment stabilized last year, and we are currently seeing pockets of improvement for both global biopharmaceutical and small- and mid-sized biotechnology clients.

Birgit Girshick: The overall biopharma demand environment stabilized last year, and we are currently seeing pockets of improvement for both global biopharmaceutical and small and mid-sized biotechnology clients. Many of our global biopharma clients progress through their restructuring and pipeline reprioritization activities, and demand trends have improved even so overall spending levels are not yet back to historical norms. Revenue from our global biopharmaceutical client segment increased in Q1. From a biotech perspective, demand trends from our biotech clients improved over the past 2 quarters as a result of the reinvigorated funding environment as we exited 2025 and continued health in 2026. The recent increase in biopharma and M&A activity has also provided another source of capital infusion for an exit strategy for biotechs, which we also view favorably.

Speaker #3: Many of our global biopharma clients' progress through their restructuring and pipeline reprioritization activities and demand trends have improved even so overall spending levels aren't yet back to historical norms.

Speaker #3: Revenue from our global biopharmaceutical client segment increased in the first quarter. From a biotech biotech clients improved over the past two quarters, as a result of the reinvigorated funding environment as we exited 2025, and continued health in 2026.

Speaker #3: The recent increase in biopharma and M&A activity has also provided another source of capital infusion for an exit strategy for biotechs, which we also feel favorably.

Birgit Girshick: Mid-sized or the more mature biotechs have better access to capital as they approach IND or enter the clinic, while demand from startup biotechs remains tepid because the earlier stage and seed funding environment remains constrained despite a recent uptick in IPO activity. Overall, revenue from our small and mid-sized biotechs declined in Q1, primarily reflecting softer DSA booking activity last summer and the normal lag between booking and revenue generation. However, given the recent biotech KPIs, we expect the revenue trends to improve in the next upcoming quarters. Government uncertainty, including funding-based pressures at the NIH, has modestly impacted client spending levels. Revenue from our global academic and government client base remained stable in Q1, reflecting the essential nature of research solutions that we provide to them. Moving to our financial performance, let me start by providing several key takeaways from Q1.

Speaker #3: Mid-sized or the more mature biotechs have better access to capital as they approach R&D or enter the clinic, while demand from startup biotechs remains tepid because the earlier stage and seed funding environment remains constrained.

Speaker #3: Despite a recent uptick in IPO activity, overall, revenue from our small and mid-sized biotechs declined in the first quarter primarily reflecting softer DSA booking activity last summer, and the normal lap between booking and revenue generation.

Speaker #3: However, given the recent biotech KPIs, we expect the revenue trend to improve in the next upcoming quarters. Government uncertainty, including funding-based pressures at the NIH, has modestly impacted client spending levels, but revenue from our global academic and government client base remains stable, and the first quarter reflecting the essential nature of research solutions that we provide to them.

Speaker #3: Moving to our financial performance, let me start by providing several key takeaways from the first quarter. First, we delivered our first quarter results despite the anticipated pressure from several discrete margin headwinds, and now have a clear line of sight into the meaningful operating margin improvement that we had forecasted in the second quarter and beyond.

Birgit Girshick: First, we delivered our Q1 results despite the anticipated pressure from several discrete margin headwinds and now have a clear line of sight into the meaningful operating margin improvements that we had forecasted in Q2 and beyond. In addition, the DSA demand environment remains solid, as demonstrated by a net book-to-bill of 1.04 times in Q1, and continues to support a return to DSA organic revenue growth in H2. Finally, due to the execution of our strategic initiatives around acquisitions, planned divestitures, and efforts to modernize our operations, we continue to expect to generate significant operating margin expansion of approximately 120 to 150 basis points in 2026, which supports our goal of driving profitable growth for many years to come.

Speaker #3: In addition, the DSA demand environment remains solid as demonstrated by a net book-to-bill of 1.04 times in the first quarter. And continues to support a return to DSA organic revenue growth in the second half of the year.

Speaker #3: And finally, due to the execution of our strategic initiatives around acquisitions, planned divestitures, and efforts to modernize our operations, we continue to expect to generate significant operating margin expansion of approximately 120 to 150 basis points in 2026, which supports our goal of driving profitable growth for many years to come.

Birgit Girshick: Overall, Q1 results were in line to slightly favorable compared to our prior outlook. In Q1, and as expected, revenue declined 1.5% on an organic basis. The non-GAAP operating margin declined 280 basis points to 16.3% and the non-GAAP earnings per share declined 12% to $2.06. The quarterly operating margin earnings decline were largely driven by several discrete factors, including higher stock compensation expense, NHP study-related costs in the DSA segment, as well as lower NHP revenue in the RMS segment, primarily due to the timing of shipments. RMS revenue declined 5.5% organically, driven principally by lower revenue for small models in North America and for NHPs due to the timing of shipments.

Speaker #3: Overall, the first quarter results were in line to slightly favorable compared to our prior outlook. In the first quarter, and as expected, revenue declined 1.5% on an organic basis, the non-GAAP operating margin declined 280 basis points to 16.3%, and a non-GAAP earnings per share declined 12% to $2.06.

Speaker #3: The quarterly operating margin earnings decline were largely driven by several discrete factors, including higher stock compensation expense, NHP study-related costs in the DSA segment, as well as lower NHP revenue in the RMS segment, primarily due to the timing of shipments.

Speaker #3: RMS revenue declined 5.5% organically driven principally by lower revenue for small models in North America, and for NHPs due to the timing of shipments.

Birgit Girshick: However, these declines were partially offset by solid demand for small models in China from mid-tier biotech and CRO clients. DSA revenue declined 1.4% organically, driven by lower revenue for discovery services, although revenue for safety assessment services was essentially unchanged in the quarter. As previously mentioned, we are encouraged that the overall DSA demand environment is tracking to our expectation, resulting in a net book-to-bill of 1.4x and a slight sequential increase in backlog to $1.92 billion at the end of Q1. Net bookings totaled a solid $622 million, remaining above the $600 million threshold, driven by continued strength from our small and midsize biotech client base.

Speaker #3: However, these declines were partially offset by solid demand for small models in China from mid-tier biotechs and CRO clients. DSA revenue declined 1.4% organically driven by lower revenue for discovery services, although revenue for safety assessment services was essentially unchanged in the quarter.

Speaker #3: As previously mentioned, we are encouraged that the overall DSA demand environment is tracking to our expectation, resulting in a net book-to-bill of 1.04 times and a slight sequential increase in backlog to 1.92 billion dollars at the end of the first quarter.

Speaker #3: Net bookings totaled a solid 622 million dollars, remaining above the 600 million dollar threshold driven by continued strengths from our small and mid-sized biotech client base.

Birgit Girshick: Over the past 2 quarters, biotech net book-to-bill and net bookings were at the highest level in over 2 years, showing a resurgence in demand on the heels of the robust funding environment. Demand trends for global biopharmaceutical clients also remained solid in Q1, but declined moderately year-over-year after pharma bookings rebounded to start 2025 following period of budget cuts. Proposal activity posted a healthy increase in Q1, a signal that the positive bookings momentum may continue. The strong bookings performance at the end of 2025 and a continuation of favorable trends to start this year leave us cautiously optimistic that the net book-to-bill will average about 1 times for the year and support the upper end of our DSA outlook, including a return to organic revenue growth in H2.

Speaker #3: Over the past two quarters, biotech net book-to-bill and net bookings were at the highest level in over two years. Showing a resurgence in demand on the heels of the robust funding environment.

Speaker #3: Demand trends for global biopharmaceutical clients also remain solid in the first quarter, but decline moderately year over year after pharma bookings rebounded to start 2025 following a period of budget cuts.

Speaker #3: Proposal activity posted a healthy increase in the first quarter, a signal that the positive bookings momentum may continue. The strong bookings performance at the end of 2025 and a continuation of favorable trends to start this year leave us cautiously optimistic that the net book-to-bill will average above one times for the year and support the upper end of our DSA outlook including a return to organic revenue growth in the second half; however, as a reminder, our business isn't linear, so this does not mean net book-to-bill will be above one times every quarter.

Birgit Girshick: However, as a reminder, our business isn't linear, so this does not mean net book-to-bill will be above 1x every quarter. Manufacturing revenue increased 2.9% organically, driven by continued solid demand for microbial solutions. Overall, underlying demand trends for microbial solutions and biologics testing, our manufacturing quality control testing business, remained strong as clients continue to advance their late-stage development and commercial programs. The biologics growth rate is expected to rebound as the year progresses after we anniversary a client-specific challenge that has been a headwind for the past several quarters. As we look ahead, I'm energized by our refreshed strategic vision, and I am confident in the path we are taking to create the future for Charles River. Our focus remains on enhancing our client's experience, delivering results, and increasing long-term shareholder value.

Speaker #3: Manufacturing revenue increased 2.9% organically driven by continued solid demand for microbial solutions. Overall, underlying demand trends for microbial solutions and biologics testing our manufacturing quality control testing business remain strong as clients continue to advance their late-stage development and commercial programs.

Speaker #3: The biologics growth rate is expected to rebound as the year progresses, after we anniversary a client-specific challenge that has been a headwind for the past several quarters.

Speaker #3: As we look ahead, I'm energized by our refreshed strategic vision and I am confident in the path we're taking to create the future for CHARLES RIVER.

Speaker #3: Our focus remains on enhancing our clients' experience delivering results and increasing long-term shareholder value; I also want to thank our employees for their continued dedication hard work and commitment to our clients and mission.

Birgit Girshick: I also want to thank our employees for their continued dedication, hard work, and commitment to our clients and mission, as well as our shareholders for their continued support. I am pleased to welcome our new CFO, Glenn Coleman, who joined Charles River on 6 April. As I mentioned last quarter, Glenn is a seasoned financial leader and operationally oriented CFO with over a decade of experience in the healthcare industry. Glenn has been CFO for three public companies and also has extensive international operating experience. Glenn will help to ensure that we continue to take a balanced and disciplined approach to capital deployment, including M&A, and also ensure we maintain the rigor to drive additional cost savings and efficiencies across the company. I will turn the call over to Glenn to provide more details on our Q1 financial performance as well as our 2026 guidance. Thank you.

Speaker #3: As well as our shareholders for their continued support. I'm pleased to welcome our new CFO, Glenn Coleman, who joined Charles River on April 6th.

Speaker #3: As I mentioned last quarter, Glenn is a seasoned financial leader and operationally oriented CFO with over a decade of experience in the healthcare industry.

Speaker #3: Glenn has been CFO for three public companies and also has extensive international operating experience. Glenn will help to ensure that we continue to take a balanced and disciplined approach to capital deployment including M&A and also ensure we maintain the rigor to drive additional cost savings and efficiencies across the company.

Speaker #3: Now I will turn the call over to Glenn to provide more details on our first quarter financial performance as well as our 2026 guidance.

Speaker #3: Thank you.

Glenn Coleman: Thank you, Birgit, and good morning. I'm pleased to be joining the Charles River team as Chief Financial Officer. I was drawn to the company because of its mission-driven culture and its position as a leader in the life sciences industry. Over the past three decades, I have led global organizations through financial and operational leadership roles and have been committed to instilling operational and financial discipline, effective capital allocation, and driving long-term shareholder value. I look forward to leveraging that expertise and experience as I partner with Birgit and the leadership team to build upon Charles River's strong foundation. As I step into this role, my priorities are clear and fully aligned with supporting our Pathway to Purpose strategy and driving profitable growth.

Speaker #2: Thank you, Birgit, and good morning. I'm pleased to be joined in at CHARLES RIVER team as Chief Financial Officer. I was drawn to the company because of its mission-driven culture and its position as a leader in the life sciences industry.

Speaker #2: Over the past three decades, I have led global organizations through financial and operational leadership roles and have been committed to instilling operational and financial discipline, effective capital allocation, and driving long-term shareholder value.

Speaker #2: I look forward to leveraging that expertise and experience as I partner with Birgit and the leadership team to build upon CHARLES RIVER's strong foundation.

Speaker #2: As I step into this role, my priorities are clear and fully aligned with supporting our pathway to purpose strategy and driving profitable growth. I'll be focused on continuing to efficiently manage costs including the delivery of over 100 million dollars in incremental savings this year and identifying new areas of efficiency and process improvement to generate additional savings and drive future operating margin expansion.

Glenn Coleman: I'll be focused on continuing to efficiently manage costs, including the delivery of over $100 million in incremental savings this year on identifying new areas of efficiency and process improvement to generate additional savings and drive future operating margin expansion. We will maintain a disciplined and balanced approach to our capital priorities and invest to drive our growth strategy forward. This includes executing on M&A opportunities that strengthen our core capabilities, ensuring the successful integration of acquisitions, and regularly evaluating all areas for capital deployment, including organic investments, stock repurchases, and debt repayment. Before discussing our financial results, I'll remind you that I'll be speaking primarily to non-GAAP results, which exclude amortization and other acquisition and divestiture-related adjustments, costs related primarily to restructuring and efficiency initiatives, and certain other items.

Speaker #2: We will maintain a disciplined and balanced approach to our capital priorities and invest to drive our growth strategy forward. This includes executing on M&A opportunities that strengthen our core capabilities ensuring the successful integration of acquisitions, and regularly evaluating all areas for capital deployment including organic investments, stock repurchases, and debt repayment.

Speaker #2: Before discussing our financial results, I'll remind you that I'll be speaking primarily to non-GAAP results which exclude amortization and other acquisition and divestiture-related adjustments plus related primarily to restructuring and efficiency initiatives and certain other items.

Glenn Coleman: Many of my comments will also refer to organic revenue growth, which excludes the impact of acquisitions, divestitures, and foreign currency translation. I'll now provide highlights of our Q1 2026 performance. Overall, our financial performance in the quarter was in line or slightly better than expected across our key financial metrics. We reported revenue of $996 million, representing growth of 1.2% compared to last year. On an organic basis, revenue declined 1.5% and was in line with our February outlook of a low single-digit organic decline. The operating margin was 16.3%, a decrease of 280 basis points year-over-year.

Speaker #2: Many of my comments will also refer to organic revenue growth which excludes the impact of acquisitions, divestitures, and foreign currency translation. I'll now provide highlights of our first quarter 2026 performance.

Speaker #2: Overall, our financial performance in the quarter was in line or slightly better than expected across our key financial metrics. We reported revenue of $996 million representing growth of 1.2% compared to last year.

Speaker #2: On an organic basis, revenue declined 1.5% and was in line with our February outlook of a low single-digit organic decline. The operating margin was 16.3%, a decrease of 280 basis points year over year.

Glenn Coleman: The expected decline was primarily driven by lower NHP third-party revenue in the RMS segment, the timing of stock compensation related to the CEO transition, and higher NHP sourcing costs and study starts in our DSA segment. As I will discuss in more detail shortly, we do expect the Q2 operating margin to improve meaningfully from these levels as many of these Q1 discrete margin headwinds subside and we begin to see a margin benefit from divestitures. Earnings per share were $2.06 in the Q1, a decrease of 12% from the Q1 of last year, primarily driven by the lower operating margin. This exceeded our prior outlook of a high teens decline, largely due to better-than-expected operating performance in the manufacturing and RMS segments.

Speaker #2: The expected decline was primarily driven by lower NHP third-party revenue in the RMS segment, the timing of stock compensation related to the CEO transition, and higher NHP sourcing costs and study starts in our DSA segment.

Speaker #2: As I will discuss in more detail shortly, we do expect the second quarter operating margin to improve meaningfully from these levels as many of these first quarter discrete margin headwinds subside and we begin to see a margin benefit from divestitures.

Speaker #2: Earnings per share were $2.06 in the first quarter, a decrease of 12% from the first quarter of last year, primarily driven by the lower operating margin.

Speaker #2: This exceeded our prior outlook of a high teens decline largely due to better than expected operating performance in the manufacturing and RMS segments. Another highlight from the first quarter is the repurchase of approximately 200 million dollars in shares under the $1 billion stock repurchase authorization approved last October.

Glenn Coleman: Another highlight from Q1 is the repurchase of approximately $200 million in shares under the $1 billion stock repurchase authorization approved last October. This supports our balanced and disciplined approach to capital deployment as well as the confidence we have in our long-term growth and strategic plan. Moving to details on our segment performance. DSA revenue was $597 million in Q1, a decrease of 1.4% on an organic basis compared to Q1 2025. Lower revenue for discovery services, due in part to prior site consolidation activities, was partially offset by stable revenue for safety assessment services. The DSA operating margin decreased 290 basis points to 21.0% in the quarter, mostly due to increased study-related direct costs, including higher NHP sourcing costs and study starts.

Speaker #2: This supports our balanced and disciplined approach to capital deployment as well as the confidence we have in our long-term growth and strategic plan. Moving to details on our segment performance, DSA revenue was $597 million in the first quarter, a decrease of 1.4% on an organic basis compared to the first quarter of 2025.

Speaker #2: Lower revenue for discovery services due in part to prior site consolidation activities was partially offset by stable revenue for safety assessment services. The DSA operating margin decreased 290 basis points to 21.0% in the quarter mostly due to increased study-related direct costs including higher NHP sourcing costs and study starts.

Glenn Coleman: In RMS, revenue was $208 million, representing an organic decline of 5.5% year-over-year due to lower sales of small and large models as well as research model services. Small models revenue was pressured by lower volume in North America, partially offset by a solid increase in China volume. As previously anticipated, large model revenue is primarily affected by the timing of NHP shipments, with NHP unit volume in Q1 expected to be the lowest point for the year.

Speaker #2: In RMS, revenue was $208 million representing an organic decline of 5.5% year over year due to lower sales of small and large models as well as research model services.

Speaker #2: Small models revenue was pressured by lower volume in North America partially offset by a solid increase in China volume. As previously anticipated, large model revenue is primarily affected by the timing of NHP shipments with NHP unit volume in the first quarter expected to be the lowest point for the year.

Glenn Coleman: The RMS operating margin declined by 240 basis points to 24.7% in Q1, due largely to an unfavorable revenue mix from the timing of NHP shipments and lower sales volume of small models in North America. The Manufacturing segment reported Q1 revenue of $191 million, an increase of 2.9% on an organic basis due to strong growth from the microbial solutions business, primarily driven by Endosafe and Celsis manufacturing quality control testing platforms. The segment operating margin improved by 280 basis points to 25.9%, driven largely by leverage from higher revenue and the benefit from cost savings. As a reminder, the Q1 CDMO growth rate was negatively impacted by the loss of a large commercial client last year.

Speaker #2: The RMS operating margin declined by 240 basis points to 24.7% in the first quarter due largely to an unfavorable revenue mix from the timing of NHP shipments and lower sales volume of small models in North America.

Speaker #2: The manufacturing segment reported first quarter revenue of $191 million and increase of 2.9% on an organic basis due to strong growth from the microbial solutions business primarily driven by endosafe and cell cyst manufacturing quality control testing platforms.

Speaker #2: The segment operating margin improved by 280 basis points to 25.9% driven largely by leverage from higher revenue and the benefit from cost savings. As a reminder, the first quarter CDMO growth rate was negatively impacted by the loss of a large commercial client last year and as a result, the CDMO performance reduced the manufacturing organic revenue growth rate by approximately 350 basis points in the first quarter.

Glenn Coleman: As a result, the CDMO performance reduced the manufacturing organic revenue growth rate by approximately 350 basis points in Q1. However, this comparison will no longer have a meaningful impact going forward because of the completion of the CDMO divestiture this week. Moving on to other financial metrics. Unallocated corporate costs totaled $63 million in Q1 or 6.4% of revenue, compared to 5.3% last year. The anticipated increase was primarily due to the timing of stock-based compensation expense related to the CEO transition. For the full year, we continue to expect unallocated corporate costs will be approximately 5.5% of total revenue. Net interest expense was $26 million in Q1, a decline of $0.8 million year over year.

Speaker #2: However, this comparison will no longer have a meaningful impact going forward because of the completion of the CDMO divestiture this week. Moving on to other financial metrics.

Speaker #2: On allocated corporate costs totaled $63 million in the first quarter or 6.4% of revenue compared to 5.3% last year. The anticipated increase was primarily due to the timing of stock compensation expense related to the CEO transition.

Speaker #2: For the full year, we continue to expect unallocated corporate costs will be approximately 5.5% of total revenue. Net interest expense was $26 million in the first quarter a decline of 0.8 million dollars year over year.

Glenn Coleman: For the full year, our net interest expense outlook has increased by approximately $8 million to a range of $103 to $108 million, primarily attributable to short-term borrowings to fund stock repurchases in Q1. At the end of Q1, our net leverage was 2.6 times. The non-GAAP tax rate in Q1 was 22.5%, a decrease of 20 basis points year over year, due primarily to the favorable impact from last year's enactment of OB3 or the One Big Beautiful Bill. Our non-GAAP tax rate guidance for the full year remains unchanged at 22% to 23%, although it's currently trending towards the lower end of the range due to a favorable geographic mix.

Speaker #2: For the full year, our net interest expense outlook has increased by approximately $8 million to a range of 103 to 108 million dollars primarily attributable to short-term borrowings to fund stock repurchases in the first quarter.

Speaker #2: At the end of the first quarter, our net leverage was 2.6 times. The non-GAAP tax rate in the first quarter was 22.5% a decrease of 20 basis points year over year due primarily to the favorable impact from last year's enactment of OB3 or the one big beautiful bill.

Speaker #2: Our non-GAAP tax rate guidance for the full year remains unchanged at 22 to 23 percent although it's currently trending towards a lower end of the range due to a favorable geographic mix.

Glenn Coleman: Free cash flow was -$15 million in Q1 or a reduction of $127 million compared to the prior year period. This decline was expected and mainly driven by higher performance-based cash bonus payments for 2025, which are paid in Q1. CapEx declined modestly to $56 million or approximately 5.6% of revenue in Q1 from $59 million last year. Our free cash flow outlook remains unchanged at $375 million to $400 million in 2026. Turning to 2026 full year guidance, we are reaffirming our organic revenue and non-GAAP earnings per share guidance, which had previously factored in the impact of the divestitures. All of our guidance referenced today assumes the planned divestiture of certain European discovery sites being completed in May.

Speaker #2: Free cash flow was negative 15 million dollars in the first quarter or a reduction of 127 million dollars compared to the prior year period.

Speaker #2: This decline was expected and mainly driven by higher performance-based cash bonus payments for 2025 which are paid in the first quarter. CAPEX declined modestly to 56 million dollars or approximately 5.6% of revenue in the first quarter from 59 million dollars last year.

Speaker #2: Our free cash flow outlook remains unchanged at 375 to 400 million dollars in 2026. Turning to 2026 full year guidance, we are reaffirming our organic revenue and non-GAAP earnings per share guidance which had previously factored in the impact of the divestitures.

Speaker #2: All of our guidance referenced today assumes the planned divestiture of certain European discovery sites being completed in May and as Burget mentioned, we have completed the divestiture of the CDMO and cell solutions businesses this week.

Glenn Coleman: As Birgit mentioned, we have completed the divestiture of the CDMO and cell solutions businesses this week. We continue to expect an organic revenue decline of 0.5% to 1.5% and non-GAAP earnings per share of $10.80 to $11.30 or 5% to 10% growth over 2025. This guidance includes earnings accretion of approximately $0.10 per share from the divestitures. On a reported basis, we reduced our revenue outlook by 50 basis points to a 4.0% to 5.5% decline because FX rates have become less favorable this year due to the recent strengthening of the US dollar. From an earnings perspective, this FX headwind compared to our original outlook will be essentially offset by the accretion from stock repurchases.

Speaker #2: We continue to expect an organic revenue decline of 0.5% to 1.5% and non-GAAP earnings per share of $10.80 to $11.30 or 5 to 10 percent growth over 2025.

Speaker #2: This guidance includes earnings accretion of approximately 10 cents per share from the divestitures. On a reported basis, we reduced our revenue outlook by 50 basis points to a 4.0% to 5.5% decline because FX rates have become less favorable this year due to the recent strengthening of the US dollar.

Speaker #2: From an earnings perspective, this FX headwind compared to our original outlook will be essentially offset by the accretion from stock repurchases. As a reminder, the acquisition of the assets of KF or Charles River Cambodia the divestitures and incremental cost savings from our efficiency initiatives are expected to result in meaningful operating margin expansion this year.

Glenn Coleman: As a reminder, the acquisition of the assets of KF or Charles River Cambodia, the divestitures and incremental cost savings from our efficiency initiatives are expected to result in meaningful operating margin expansion this year. We expect approximately 120 to 150 basis points of improvement in 2026, with most of the benefit generated in H2 of the year. Combined with the abatement of the discrete margin headwinds in Q1, we expect H2 of the year operating margin will be over 500 basis points higher than H1 of the year, with over half of this improvement being driven by completed acquisitions and divestitures, as well as the planned sale of certain European discovery sites. From a segment perspective, our organic revenue outlook for each of the segments remains unchanged from February.

Speaker #2: We expect approximately 120 to 150 basis points of improvement in 2026 with most of the benefit generated in the second half of the year.

Speaker #2: Combined with the abatement of the discrete margin headwinds in the first quarter, we expect second half of the year operating margin will be over 500 basis points higher than the first six months of the year, with over half of this improvement being driven by completed acquisitions and divestitures, as well as the planned sale of certain European discovery sites.

Speaker #2: From a segment perspective, our organic revenue outlook for each of the segments remains unchanged from February. Our reported revenue outlook for the segments has been updated to reflect the impact of the divestitures, as well as less favorable FX impact.

Glenn Coleman: Our reported revenue outlook for the segments has been updated to reflect the impact of the divestitures as well as a less favorable FX impact. As a reminder, the divestitures are expected to reduce our reported revenue outlook by approximately 500 basis points in 2026. By segment, we now expect a reported revenue decrease in the low to mid-single digits for the DSA segment and in the mid-single digits for both RMS and manufacturing segments. We expect the most significant margin improvement in 2026 will come from the manufacturing and DSA segments. Moving to our Q2. As I mentioned earlier, we expect financial results to improve substantially on a sequential basis due primarily to operating margin improvement and normal seasonal trends in the DSA and biologic testing businesses.

Speaker #2: As a reminder, the divestitures are expected to reduce our reported revenue outlook by approximately 500 basis points in 2026. By segment, we now expect a reported revenue decrease in the low to mid-single digits for the DSA segment and in the mid-single digits for both RMS and manufacturing segments.

Speaker #2: We expect the most significant margin improvement in 2026 will come from the manufacturing and DSA segments. Moving to our second quarter outlook, as I mentioned earlier, we expect financial results to improve substantially on a sequential basis due primarily to operating margin improvement and normal seasonal trends in the DSA and biologic testing businesses.

Glenn Coleman: We expect reported revenue to decline at a mid to high single-digit rate year-over-year, due primarily to the impact of the divestitures, while organic revenue is projected to decline at a low single-digit rate year-over-year, similar to Q1. However, we expect Q2 earnings per share to improve significantly on a sequential basis, increasing at least 30% from the Q1 level of $2.06. The Q1 headwinds from the timing of NHP shipments in RMS and the NHP sourcing costs and study starts in the DSA segment are expected to subside in Q2. In addition, the manufacturing operating margin is expected to benefit from the CDMO divestiture. As a result, we expect all three segments will show a sequential improvement in operating margin in Q2.

Speaker #2: We expect reported revenue to decline at a mid to high single digit rate year over year due primarily to the impact of the divestitures while organic revenue is projected to decline at a low single digit rate year over year similar to the first quarter.

Speaker #2: However, we expect second quarter earnings per share to improve significantly on a sequential basis increasing at least 30% from the first quarter level of $2.06.

Speaker #2: The first quarter headwinds from the timing of NHP shipments and RMS and the NHP sourcing costs and study starts in the DSA segment are expected to subside in the second quarter.

Speaker #2: In addition, the manufacturing, operating margin is expected to benefit from the CDMO divestiture. As a result, we expect all three segments will show a sequential improvement in operating margin in the second quarter.

Glenn Coleman: To conclude, as I step into the CFO role, I'm focused on driving initiatives to generate profitable growth through the disciplined execution of our Pathway to Purpose strategy. This includes advancing our M&A priorities, successfully integrating acquisitions, and delivering on our efficiency initiatives. Collectively, these efforts will strengthen our foundation and position us to deliver long-term shareholder value. Finally, I look forward to meeting many of you in the coming months. As Birgit mentioned, we plan to host an investor day in September, where we will provide a more comprehensive update on our strategy, priorities, and long-term financial outlook. Thank you.

Speaker #2: To conclude, as I step into the CFO role, I'm focused on driving initiatives to generate profitable growth through the disciplined execution of our pathway to purpose strategy this includes advancing our M&A priorities, successfully integrating acquisitions, and delivering on our efficiency initiatives.

Speaker #2: Collectively, these efforts will strengthen our foundation and position us to deliver long-term shareholder value. Finally, I look forward to meeting many of you in the coming months as Burget mentioned, we plan to host an investor day in September where we will provide a more comprehensive update on our strategy, priorities, and long-term financial outlook.

Speaker #2: Thank you. That concludes our comments. We will now take your questions.

Todd Spencer: That concludes our comments. We will now take your questions.

Operator: Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. In the interest of time, we ask that you limit yourself to one question and one follow-up question. Once again, that is star one to signal and star two to remove yourself. I'll pause for just a moment to allow questions to queue. We'll take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead.

Speaker #1: Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two.

Speaker #1: In the interest of time, we ask that you limit yourself to one question and one follow-up question. Once again, that is star one to signal and star two to remove yourself.

Speaker #1: I'll pause for just a moment to allow questions to queue. We'll take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead.

Elizabeth Anderson: Hi, guys. Good morning. Thank you so much for the question. Welcome, Glenn. Nice to be with you again. For my question, I wanted to just sort of double-click maybe on the demand environment. I appreciate all of the questions or comments about the environment. Can you talk about the typical seasonality that we sort of think about in terms of the demand cycle? I know you know, we've typically seen a little bit of a slower start to the year sometimes as people get ramped up in January and February. Then it sort of seems to do that, plus obviously what you were talking about some of the funding environment.

Speaker #3: Hi, guys. Good morning, and thank you so much for the question. Welcome, Glenn. Nice to be with you again. For my question, I wanted to just sort of double-click maybe on the demand environment.

Speaker #3: I appreciate all of the environment questions or comments about the environment. Can you talk about the typical seasonality that we sort of think about in terms of the demand cycle?

Speaker #3: I know we typically see in a little bit of a slower start to the year sometimes as people get ramped up in January and February, and then it sort of seems to do that.

Speaker #3: Plus, obviously, what you were talking about—about some of the funding environment. And then, as a funding follow-up question, I was wondering if you could comment on sort of NAMS and what you’re seeing; any updates in terms of demand conversations with clients?

Elizabeth Anderson: As a funding and follow-up question, I was wondering if you could comment on sort of NAMs and what you're sort of seeing, any updates in terms of demand conversation with clients. Thank you.

Speaker #3: Thank you.

Birgit Girshick: Certainly. Thanks, Elizabeth. Happy to update on demand seasonality and NAMs. Let me start maybe with the seasonality. We have several of our business see somewhat seasonality in terms of bookings, even proposal volume. Our DSA business is one of them, where we're seeing proposals and bookings starting a little slow in the beginning of the year, sometimes also on a revenue basis that we see a slow start. It generally has to do with budgets being approved, our clients coming back to work. Often in January, there's a reprioritization of programs, so it just takes a little while to ramp up. We have a couple other businesses. Our biologics testing business definitely has a seasonality.

Speaker #4: Certainly. Thanks, Elizabeth. Happy to update on demand seasonality and NAMS. So let me start maybe with the seasonality. So we have several of our business see somewhat seasonality in terms of bookings even proposal volume.

Speaker #4: Our DSA business is one of them where we're seeing proposals and bookings starting a little slow in the beginning of the year, sometimes also on the revenue basis that we see a slow start.

Speaker #4: And it generally has to do with budgets being approved our clients coming back to work, often in January. There's a reprioritization of programs so it just takes a little while to ramp up.

Speaker #4: We have a couple other businesses. Our biologics testing business definitely has a seasonality they support manufacturing of biologics and more often than not, the Christmas time is a time that manufacturing is closed down for maintenance and revalidations and so we are not seeing the same amount of samples coming in.

Birgit Girshick: They support manufacturing of biologics, more often than not, Christmastime is a time that manufacturing is closed down for maintenance and revalidations. We are not seeing the same amount of samples coming in. Our microbial business is another one where we see definite seasonality into Q4, actually, for this business, where the business is ramping up often in Q4 because companies may have budget they want to use up. Because this is their basically reagents you can keep on the shelf in inventory, often we see a spike in businesses there. Nothing abnormal. We have seen the same seasonalities in some manner this year. It is expected, and we generally consider that when we do our budgets and our guidance here.

Speaker #4: Our microbial business is another one where we see definite seasonality into the fourth quarter. Actually, for this business, the business is ramping up often in the fourth quarter because companies may have budget they want to use up, and because these are basically arrangements you can keep on the shelf in inventory. Often, we see a spike in business there.

Speaker #4: So nothing abnormal. We have seen the same seasonalities in some manner this year. It's expected and we generally consider that when we do our budgets and our guidance here.

Birgit Girshick: As far as the demand environment, I think we all share cautious optimism. Biotech funding, quite a bit better over the last couple quarters. IPO reopening, again, cautiously optimistic that this will continue. Our pharma clients have definitely worked through a lot of their restructuring, reprioritization of programs. Any discussions we have with them is about speeding up their work, getting more programs through the pipeline rather than holds and reprioritization. From that perspective, we're quite comfortable what we're seeing, but certainly it's early stage, and we always will be cautious about going too far over on our skis. Let me jump into the NAMs or New Approach Methodologies. NAMs and New Approach Methodologies are a part of what we do.

Speaker #4: As far as the demand environment, I think we all share cautious optimism biotech funding quite a bit better over the last couple quarters. IPO reopening again cautiously optimistic that this will continue and then our pharma clients have definitely worked through a lot of their restructuring, reprioritization of programs any discussions we have with them is about speeding up their work, getting more programs through the pipeline rather than holds and reprioritization.

Speaker #4: So from that perspective, we're quite comfortable what we're seeing but certainly it's early stage and we always will be cautious about going too far over on our skis.

Speaker #4: Then let me jump into the NAMS or new approach methods. So NAMS and new approach methods are a part of what we do. So they're part of a toxicology study.

Birgit Girshick: They are part of a toxicology study. We have spent basically 3 decades on reduction of animals. NAMs have always been a part of that. NAMs availability has accelerated a little bit over the last maybe decade. We have made some acquisitions in this space. We just did 1 literally a month ago. The PathoQuest acquisition is squarely in the NAMs category. As we continue to evolve our business, we will continue to bring NAMs into our business model either through organic development, in-licensing or M&A. As technology evolves, as maybe AI, the ability of AI to predict insights evolves, we will evolve our business model with it. It's an evolution.

Speaker #4: And we have spent basically three decades on reduction of animals, NAMS have always been a part of that. NAMS availability has accelerated a little bit over the last maybe decade.

Speaker #4: We have made some acquisitions in this space. We just did one literally a month ago so the path request acquisition is squarely in the NAMS category.

Speaker #4: So as we continue to evolve our business, we will continue to bring NAMS into our business model either through organic development, in-licensing, or M&A.

Speaker #4: And as technology evolves, as maybe AI the ability of AI to predict insights evolves, we will evolve our business model with it. It's a evolution.

Birgit Girshick: It's not a revolution, so it will take time, but you will hear more and more and more about us bringing those technologies in. What I want to point out, it's not a separate business. It will always be part of our DSA and other divisions' revenue model, and it will just continue to grow. I hope I answered the question.

Speaker #4: It's not a revolution. So it will take time but you will hear more and more and more about us bringing those technologies in. What I want to point out, it's not a separate business.

Speaker #4: It will always be part of our DSA and other divisions revenue model. And it will just continue to grow. I hope I answered your question.

Elizabeth Anderson: Yeah, that was super helpful. Thank you.

Speaker #3: Yeah. That was super helpful. Thank you.

Operator: We'll turn now to Max Smock with William Blair. Please go ahead.

Speaker #1: We'll turn now to Max Mock with William Blair. Please go ahead.

Max Smock: Birgit, hey, Glenn. Maybe just following up on that prior question around, you know, activity so far here to start the year. There was some commentary in the deck around, you know, seeing a healthy increase in proposals in Q1. Wondering if we could just get some more color around what proposals looked like year-over-year and sequentially, and then just more detail around how proposals trended among each client segment would be helpful. Thank you.

Speaker #5: Very good, Glenn. Maybe just following up on that prior question around activity so far here to start the year. There was some commentary in the deck around seeing a healthy increase in proposals in the first quarter.

Speaker #5: Wonder if we could just get some more color around what proposals looked like year over year and sequentially and then just more detail around how proposals trended among each client segment would be helpful.

Speaker #5: Thank you.

Birgit Girshick: Yeah, happy to. We've been quite happy with the proposal volume year over year in both segments. Both in our global biopharmaceutical as well as in our biotech segment, proposals were up quite nicely in the, I would say, high single digits, which gives us a lot of confidence that our booking trend will continue and our net book-to-bill trend will continue. It does show us that there is a lot of clients that are ready to get restarted on work and smaller clients, and that our pharmaceutical clients, as they have indicated verbally to us, are looking to put more work, more programs through the pipeline to get to more INDs, to get to more programs into the clinic. Quite happy to see that.

Speaker #4: Yeah. Happy to. So we've been quite happy with the proposal volume year over year. In both segments, so both in our global biopharmaceutical as well as in our biotech segment, proposals were up.

Speaker #4: Quite nicely. In the, I would say, high single digits. And which would give us a lot of confidence that our booking trend will continue and our net book to build trend will continue.

Speaker #4: So it does show us that there is a lot of clients that are ready to get restarted on work and the smaller clients. And that our pharmaceutical clients as they have indicated verbally to us are looking to put more work, more programs through the pipeline to get to more INDs, to get to more programs into the clinic.

Speaker #4: So quite happy to see that.

Glenn Coleman: I would just add.

Speaker #5: And I would just add there sequential basis we've seen proposals come up three quarters in a row sequentially. So positive trend sequentially as well.

Birgit Girshick: Please

Max Smock: Please

Glenn Coleman: sequential basis, we've seen proposals come up 3 quarters in a row sequentially. Positive trends sequentially as well.

Max Smock: Got it. The high single digit was year over year for both cohorts. Glenn, you are saying you have also seen some improvement sequentially as well?

Speaker #1: Got it. So the high single digit was year-over-year for both cohorts, and then, Glenn, you're saying you've also seen some improvement sequentially as well.

Glenn Coleman: Correct. For 3 quarters in a row.

Speaker #5: Correct. For three quarters in a row.

Max Smock: Okay, maybe another unrelated question here on AI. Birgit, it sounded like, you know, your comments, your prepared remarks, you sounded like you feel pretty comfortable with this idea that AI investments in drug discovery are gonna lead to more preclinical testing longer term. Are you seeing that play out at all yet, or is that more something that, you know, we really probably don't see until, you know, we get a couple years into the future here?

Speaker #1: Okay. Maybe another unrelated question here on AI. Birgit, it sounded like your comments you're prepared remarks. It sounded like you feel pretty comfortable with this idea that AI investments in drug discovery are going to lead to more preclinical testing longer term.

Speaker #1: Are you seeing that play out at all yet or is that more something that we really probably don't see until we get a couple of years into the future here?

Birgit Girshick: Yeah. Thanks for that question. I'm actually personally very excited about AI and what it will do for the industry and for Charles River in particular. Right now, the sample set of AI discovered or assisted, I should say, drug programs is very, very small, so it's hard to make a real conclusion from that. What I can tell you is that AI-assisted drug discovery companies generally work on a lot of different programs rather than one program at a time. As we working with all of them on their programs as their wet lab, I'm optimistic that this trend will show itself and that we will see more programs coming through from AI.

Speaker #4: Yeah. Thanks for that question. So I'm actually personally very excited about AI and what it will do for the industry and for childhood in particular.

Speaker #4: So right now, the sample set of AI discovered or assisted, I should say, drug programs is very, very small. So it's hard to make a real conclusion from that.

Speaker #4: What I can tell you is that AI-assisted drug discovery companies generally work on a lot of different programs rather than one program at a time.

Speaker #4: And as we're working with most of them, all of them, on their programs as they are web lab, I'm optimistic that this trend will show itself and that we will see more programs coming through from AI.

Birgit Girshick: It also should still needs to be seen, lower the cost of early discovery. With that, there's more money for reinvestment. Again, it's very early days. There's so few programs in the pipeline that are AI-assisted. Just theoretically, hypothetically, we know that AI will have a nice impact on that.

Speaker #4: It also should still need to be seen—lower the cost of early discovery, and with that, there's more money for reinvestment. But again, it's very early days.

Speaker #4: There's so few programs in the pipeline that are AI-assisted. But just theoretically, hypothetically, we know that AI will have a nice impact on that.

Max Smock: Thanks again for taking our questions.

Speaker #1: Thanks again for taking our questions.

Birgit Girshick: Certainly.

Speaker #4: Certainly.

Operator: We'll move next to Patrick Donnelly with Citi. Please go ahead. Your line is open.

Speaker #1: We'll move next to Patrick Donnelly with Citi. Please go ahead. Your line is open.

Patrick Donnelly: Hey, guys. Thank you for taking the questions. Glenn, maybe one for you on the margin side. Certainly appreciate the color on the H2 step-up, and then again, it feels like you guys have real tangible reasons to kind of do that build. Can you just talk through a little bit? It sounds like half of it's M&A, you know, half of it's some of the other moving pieces. Can you just talk through kind of the bridge there on H2? Any reason why that momentum wouldn't kind of continue to build into, obviously it's early to talk 2027, but just going forward, you know, given the K.F. acquisition and what that means to the margins, any reason that momentum wouldn't continue into the go forward?

Speaker #6: Hey, guys. Thank you for taking the questions. Glenn, maybe one for you on the margin side. Certainly appreciate the color on the 2H step up.

Speaker #6: And again, it feels like you guys have real tangible reasons to kind of do that build. Can you just talk through a little bit?

Speaker #6: It sounds like half of it's M&A. Half of it's some of the other moving pieces. Can you just talk through kind of the bridge there on 2H?

Speaker #6: And then any reason why that momentum wouldn't kind of continue to build into obviously, it's early to talk 27, but just going forward, given the KF acquisition and what that means to margins, any reason that momentum wouldn't continue into the go-forward?

Glenn Coleman: Sure. No, thanks for the question. If we look at H1, obviously year-over-year, we're expecting to be down. We do expect a pretty significant sequential increase in our margins going from Q1 to Q2, that supports the greater than 30% increase in earnings per share. We do expect a pretty meaningful step up in our operating margins. That being said, when we look at the half-to-half numbers, we're going to be in the high teens margin-wise in H1 and expect 500 basis points improvement in H2. I did mention in my prepared remarks, over half of that improvement just coming from acquisitions and divestitures.

Speaker #5: Sure. No, thanks for the question. If we look at the first half of the year, obviously, year over year, we're expecting to be down.

Speaker #5: But we do expect a pretty significant sequential increase in our margins going from Q1 to Q2. That supports the greater than 30% increase in earnings per share.

Speaker #5: So we do expect a pretty meaningful step up in our operating margins. That being said, when we look at the half-to-half numbers, we're going to be in the high teens margin-wise in the first half of the year and expect 500 basis points improvement in the second half of the year.

Speaker #5: I did mention in my prepared remarks, over half of that improvement just coming from acquisitions and divestitures. In addition, if you look at our corporate costs, the one-time discrete items in Q1 that don't recur and some cost savings initiatives, that will drive another big portion of the half-to-half improvement.

Glenn Coleman: In addition, if you look at our corporate costs, the one-time discrete items in Q1 that don't recur and some cost savings initiatives, that will drive another big portion of the half-to-half improvement, coupled with the timing of the NHP shipments in RMS and some additional lower costs we're expecting to come out of DSA. We've got clear line of sight. I know it's a big jump when you look at the half-to-half numbers, we feel very confident in the numbers, and we've got a clear line of sight about how we get there. Relative to 2027, I think the only comment I'll make is from an acquisition and divestiture point of view, we've already given numbers around the annualized impact of acquisitions and divestitures. We said for acquisitions on an annualized basis, about $0.60 from K.F., and for divestitures, it's $0.30.

Speaker #5: Coupled with the timing of the NHP shipments in RMS and some additional lower costs we're expecting to come out of DSA. So we've got clear line of sight.

Speaker #5: I know it's a big jump when you look at the half-to-half numbers, but we feel very confident in the numbers. And we've got a clear line of sight about how we get there.

Speaker #5: Relative to 2027, I think the only comment I'll make is from an acquisition and divestiture point of view, we've already given numbers around the annualized impact of acquisitions and divestitures.

Speaker #5: So we said for acquisitions, on an annualized basis, about 60 cents from KF. And for divestitures, it's 30 cents. And for this year in 2026, the equivalent numbers on a part-year basis is 25 cents for acquisitions and 10 cents for divestitures.

Glenn Coleman: For this year in 2026, the equivalent numbers on a part year basis is $0.25 for acquisitions and $0.10 for divestitures. Said differently, if you take the $0.90 less the $0.35, you can expect roughly $0.50 to $0.55 of accretion just from the acquisitions and divestitures in 2027 versus 2026. I think that's the only comments we're going to make around the 2027 margin numbers.

Speaker #5: So said differently, if you take the 90 cents less the 35, you can expect roughly 50 to 55 cents of accretion just from the acquisitions and divestitures in 2027 versus 2026.

Speaker #5: And I think that's the only comments we're going to make around the 27 margin numbers.

Patrick Donnelly: Yep. Makes a lot of sense. Thank you. Birgit, maybe just, you know, on the demand side, certainly appreciate all the color you've given. Can you just talk about that kind of small, mid-size early biotech, you know, portion, what you're seeing there? Obviously, to your point, you know, the funding has looked really healthy here for a couple quarters. How much improvement are you seeing in those conversations? Are those dollars really starting to show up? Where are we in the cycle of that early piece, from your perspective? Thank you guys so much.

Speaker #6: Yep. Makes a lot of sense. Thank you. And then Birgit, maybe just on the demand side, certainly appreciate all the color you've given can you just talk about that kind of small, midsize, early biotech portion, what you're seeing there?

Speaker #6: Obviously, to your point, the funding has looked really healthy here for a couple of quarters. How much improvement are you seeing in those conversations?

Speaker #6: Are those dollars really starting to show up? Where are we in the cycle of that early piece from your perspective? Thank you guys so much.

Birgit Girshick: Yeah, happy to. When we talk about our biotech clientele, there's obviously considerable size differences between the clients. A lot of the funding we're currently seeing, IPOs are a little bit bigger companies, later stage. They have easier access to funding. That's definitely also where we're seeing quite a bit of an uptick in their demand. I would say the smaller biotech, or very early stage, that is still a little sluggish. We see that the funding is a little lower. Also, the discussions are still more cautious in that regard. We do see that clients often when they see just general funding come in, get more confidence in their ability to get funding later on and start spending.

Speaker #4: Yeah. Happy to. So the when we talk about our biotech clientele, there's obviously considerable size differences between the clients. A lot of the funding we're currently seeing IPOs are a little bit bigger companies, later stage.

Speaker #4: They have easier access to funding. That's definitely also where we're seeing quite a bit of an uptick in their demand. I would say the smaller biotech very early stage, that is still a little sluggish.

Speaker #4: And we see that the funding is a little lower. And then also the discussions are still more cautious in that regard. We do see that clients often when they see just general funding come in, get more confidence in their ability to get funding later on and start spending.

Birgit Girshick: We're seeing that a little bit. We still have this segment, was that early company starts, being a little bit lower than we would like to see. We have areas of our business, like our CRADL business unit that where we don't see the demand being where we would like to see it yet. Still a little bit mixed and still opportunity for improvement there.

Speaker #4: So we're seeing that a little bit. But we still have this segment was that early companies starts being a little bit lower than we would like to see.

Speaker #4: So we have areas of our business like our cradle business unit where we don't see the demand being where we would like to see it yet.

Speaker #4: So still a little bit mixed. And still opportunity for improvement there.

Patrick Donnelly: Thank you.

Speaker #6: Thank you.

Operator: We'll hear next from Kallum Titchmarsh with Morgan Stanley. Please go ahead.

Speaker #1: We'll hear next from Callum Titchmarsh with Morgan Stanley. Please go ahead.

Kallum Titchmarsh: Great. Thanks a lot for the question, guys. Just as we think about the business review and some of the acquisitions and divestitures announced over the past 6 months or so, any incremental ambitions to add or subtract from the business today, or can we assume most impactful changes have been actioned? Obviously seeing the buybacks too. Maybe just level set us on capital allocation ambitions from here.

Speaker #7: Great, thanks a lot for the question, guys. Just as we think about the business review and some of the acquisitions and divestitures announced over the past six months or so, any incremental ambitions to add or subtract from the business today, or can we assume the most impactful changes have been actioned?

Speaker #7: And obviously, seeing the buybacks too. So maybe just level setups on capital allocation ambitions from here.

Birgit Girshick: Yeah. Happy to, Kallum. We will continue and always have to look at our businesses to see which ones are synergistic to the business, which are profitable, where should we be located, what solutions should we provide to our clients. That will be an ongoing review that we do with our board. At times, you will see certainly that we will either consolidate a site or close a site or divestitures could come up again. That is just the nature of how we run our business. From an M&A perspective, you already saw a couple of M&As this year. We have a clear roadmap of where we believe the company should be investing in in terms of M&A and a couple other smaller partnerships.

Speaker #4: Yeah. Happy to, Callum. So we will continue and always have to look at our businesses to see which ones are synergistic to the business, which are profitable, where should we be located, what solutions should we provide to our clients.

Speaker #4: So that will be an ongoing review that we do with our board. And at times, you will see certainly that we will either consolidate a site or close a site or divestitures could come up again.

Speaker #4: So that is just the nature of how we run our business. From an M&A perspective, you already saw a couple of M&As this year.

Speaker #4: We have a clear roadmap of where we believe the company should be investing in in terms of M&A and a couple of other smaller partnerships.

Birgit Girshick: That is hard to predict, as you quite never know when the target is available. Can you actually acquire the target? Does it make sense from a returns perspective? And then we continue to invest organically in our business. And then you already mentioned the buyback. We will continue to look at all areas of capital allocation and make decisions for the best returns for long-term strategy execution as well as shareholder value.

Speaker #4: That is hard to predict as you quite never know when the target is available. Can you actually acquire the target? Does it make sense from returns perspective?

Speaker #4: And then we continue to invest organically in our business. And then you already mentioned the buyback. So we will continue to look at all areas of capital allocation and make decisions for the best returns for long-term strategy execution as well as shareholder value.

Kallum Titchmarsh: Great. I think you called out $200 million of annual DSA revenue from NAMs before. I am not quite sure where that is post these acquisitions and divestitures, could you just give us a sense of the latest size and how that has been growing? Thanks a lot.

Speaker #7: Great. And I think you called out 200 million dollars of annual DSA revenue from NAMS before. I'm not quite sure where that is post these acquisitions and divestitures, but could you just give us a sense of the latest size and how that's been growing?

Speaker #7: Thanks a lot.

Birgit Girshick: Yeah. That was a number we had provided, I think, in 2020, late 2024, 2025. Since then, we have added a few different programs and actually an M&A. The PathoQuest acquisition is squarely in the NAMs space where we are replacing in vivo virology work with next-generation sequencing, a really good technology. You're right, with the divestiture of the discovery assets in Europe, we will retain roughly two-thirds of the NAMs revenues that we had called out. If you take those two together, a little bit of organic investment we had done in other areas, we're probably kind of back to where we were, we will continue to drive that.

Speaker #4: Yeah. So that was a number we had provided, I think, in 2020, late 2024, 2025. And since then, we have added a few different programs and actually an M&A.

Speaker #4: So the path request acquisition is squarely in the NAMS space where we are replacing in vivo virology work with next-generation sequencing, a really good technology.

Speaker #4: And then you're right with the divestiture of the discovery assets in Europe. There is roughly we will retain roughly two-thirds of the NAMS revenues that we had called out.

Speaker #4: So if you take those two together, a little bit of organic investment we had done in other areas, we're probably kind of back to where we were.

Speaker #4: But we will continue to drive that. And our focus is on the regulated space here where most of our business is. So it's continues to be a very strong commitment of child delivery.

Birgit Girshick: Our focus is on the regulated space here, where most of our business is. It continues to be a very strong commitment of Charles River, and we have established a scientific advisory board under Dr. Pambus. We have a lot of activities going on in that space right now. You will continue to hear about technologies and how we look at this, how we bring new technologies in, what it will replace. We also just made an announcement on Virtual Control Groups, and was actually part of our remarks. Just another example how we look at NAMs for our business, and we see it as an integrated approach where we will bring in more and more technologies, and run them as hybrid studies together with our conventional approach.

Speaker #4: And we have a established scientific advisory board under Dr. Pumbas. And we have a lot of activities going on in that space right now.

Speaker #4: So you will continue to hear about technologies and how we look at this, how we bring new technologies in, what it will replace. We also just made an announcement on virtual control groups.

Speaker #4: And I was actually part of our remarks. Just another example of how we look at NAMS for our business. And we see it as an integrated approach where we will bring in more and more technologies and run them as hybrid studies together with our conventional approach.

Operator: Thank you. We'll hear next from Justin Bowers with Deutsche Bank. Please go ahead.

Speaker #1: Thank you. We'll hear next from Justin Bowers with Deutsche Bank. Please go ahead.

Justin Bowers: Hi. Good morning, everyone. Two-parter from me. One, can you talk about the conversion rates and the velocity of decision-making that you're seeing across the increasing proposal volume over the last 3 quarters? Part two, I just wanted to clarify on the comment on large pharma verbally saying that they want to put more work into the INDs. Does that imply that pharma is increasing their overall budget or intend to for preclinical spend this year and beyond?

Speaker #8: Hi. Good morning, everyone. So two-parter from me. One, can you talk about the conversion rates and the velocity of decision-making that you're seeing across the increasing proposal volume over the last three quarters?

Speaker #8: And then part two, I just wanted to clarify on the comment on large pharma verbally saying that they want to put more work into the INDs.

Speaker #8: Does that imply that pharma is increasing their overall budget or intend to for preclinical spend this year and beyond?

Birgit Girshick: Yeah, happy to. Let me start with the conversion rates. If you look back to the, I guess the COVID timelines, where capacity was quite tight, companies had to plan way ahead. Discussions were, like, literally 2 years ahead of placing a study. Really long. Customers booked out very long because they had to. What we're seeing currently is quite an acceleration of when clients come in, want a proposal, and then book and place the study. Generally, when we model it, we're saying from a discussion to proposal to bookings, it's 1 to 2 quarters and then maybe 1 to 2 quarters to get to revenue.

Speaker #4: Yeah. Happy to. So let me start with the conversion rates. So if you look back to the, I guess, the COVID timelines, where capacity was quite tight, companies had to plan way ahead discussions were literally two years ahead of placing a study.

Speaker #4: So really long customers spoke down very long because they had to. What we're seeing currently is a quite an acceleration of when clients come in, want to propose and then book and place the study.

Speaker #4: Generally, when we model it, we're saying from a discussion to proposal to bookings, it's one to two quarters and then maybe one to two quarters to get to revenue.

Birgit Girshick: However, in some instances, particularly with customers we have a long-term relationship with, that often accelerates because they got scientific data, or they're reprioritizing a program, and we sometimes see literally from a proposal to getting revenue within the same quarter. Conversion rates are obviously generalized, accelerated. This is actually something that gives us a better quality of our backlog because we know that those programs are actually being run and not being canceled later on because the prioritization of budgets have changed. To the second questions about the INDs, as you can imagine, every pharma company we talk to talks about more programs into IND, more programs into the clinic.

Speaker #4: However, in some instances, particularly with customers we have a long-term relationship with, that often accelerates because they got scientific data, or they’re reprioritizing a program, and we sometimes see, literally, from a proposal to getting revenue within the same quarter.

Speaker #4: And so conversion rates are obviously generalized accelerated. And this is actually something that gives us a better quality of our backlog because we know that those programs are actually being run and not being canceled later on.

Speaker #4: Because we prioritization of budgets have changed. To the second questions about the INDs, as you can imagine, every pharma company we talk to talks about more programs into IND, more programs into the clinic.

Birgit Girshick: Our counterparts, our contacts will always talk about, But we have to do it with the same budget. You can imagine that's obviously not possible. We do see a refocus on the preclinical and earlier stage efforts in those companies. Otherwise, they would not get the programs to the clinic.

Speaker #4: And our counterparts, our contacts will always talk about, "But we have to do it with the same budget." But you can imagine that's obviously not possible.

Speaker #4: But we do see a refocus on the preclinical and earlier stage efforts in those companies. Otherwise, they would not get the programs to the clinic.

Justin Bowers: Thank you, Birgit.

Speaker #8: Thank you, Birgit.

Birgit Girshick: Thank you.

Operator: We'll hear next from Josh Waltman with Cleveland Research. Please go ahead.

Speaker #4: Thank you.

Speaker #1: We'll hear next from Josh Waldman with Cleveland Research. Please go ahead.

Operator: We'll hear next from Josh Waltman with Cleveland Research. Please go ahead.

Josh Waltman: Morning. Thanks for taking my questions. Birgit, I wondered if you could comment more on what you are seeing from global pharma accounts here to start the year. Were bookings from these accounts any better or worse than you expected? Did the trend improve through the quarter? It sounded like you saw a slow start, I am curious if you were more encouraged based on what you saw here in March and April.

Speaker #9: Good morning. Thanks for taking my questions. Birgit, I wondered if you could comment more on what you're seeing from global pharma accounts here to start the year.

Speaker #9: We're booking from these accounts any better or worse than you expected? And then did the trend improve through the quarter? It sounded like you saw a slow start, but I'm curious if you were more encouraged based on what you saw here in March and April.

Birgit Girshick: Yeah. For the global biopharma, bookings specifically was below last year's bookings. Let me take you back to last year. We had an incredible booking quarter last year because a lot of the global pharma companies had literally reprioritized for months, and then in early in the year, they got their new budgets, and there was just a slew of bookings that came in. This isn't something we didn't expect. We feel bookings are adequate and they are supporting what we're hearing from them, that they wanna do more work. With that, I would say that overall this is a segment that is quite stable and increasing for us.

Speaker #4: Yeah. So for the global biopharma, booking specifically was below last year's bookings. But let me take you back to last year. We had an incredible booking quarter.

Speaker #4: Last year, because a lot of the global pharma companies had literally reprioritized for months and then they early in the year, they got their new budgets and there was just a slew of bookings that came in.

Speaker #4: So this isn't something we didn't expect. We feel bookings are adequate and there are supporting what we're hearing from them that they want to do more work.

Speaker #4: So with that, I would say that overall, this is a segment that is quite stable and increasing fast. We also see proposals up for them, which will which tells us basically that in the next quarters, we should see that bookings rate to come up.

Birgit Girshick: We also see proposals up for them, which tells us basically that in the next quarters, we should see that bookings rate to come up.

Josh Waltman: Okay. You mentioned more biotech M&A being favorable in terms of funding for these accounts. I'm curious, in the past, have you seen higher M&A activity drive improved access to biotech wallet share? I guess just given your stronger share position in large pharma, do you think large pharma accounts acquiring small biotech ultimately means you get better access to these accounts? Is this a dynamic you've seen historically?

Speaker #9: Okay. And then you mentioned more biotech M&A being favorable in terms of funding for these accounts, but I'm curious, in the past, have you seen higher M&A activity drive improved access to biotech wallet share?

Speaker #9: I guess just given your stronger share position in large pharma, do you think large pharma accounts, acquiring small biotech, ultimately means you get better access to these accounts?

Speaker #9: Is this a dynamic you've seen historically?

Birgit Girshick: Yeah. A lot of times we actually do work with those small biotechs before they get acquired from pharma, and in that case, we retain the work, and we'll continue to work with them. Some cases they get acquired, and we work with a pharma company, and any new programs we get access to. It's a little bit of a mixed model. As long as they continue the program, and that's why they're actually acquiring them, we will get our share. Our focus is certainly on making sure that we get a higher and higher share of the wallet from our, particular from pharmaceutical companies. That is why our client centricity program, our initiative of making working with our clients easy and easier, providing them with better solutions and faster timelines is so important.

Speaker #4: Yeah. So a lot of times, we actually do work with those small biotechs before they get acquired from pharma and in that case, we retain the work and we'll continue to work with them.

Speaker #4: In some cases, they get acquired and we actually work with the pharma company, and any new programs we get access to. So it's a little bit of a mixed model.

Speaker #4: So as long as they continue the program, and that's why they're actually acquiring them, we will get our share our focus is certainly on making sure that we get a higher and higher share of the wallet from our particular from pharmaceutical companies.

Speaker #4: And that is why our client centricity program, our initiative of making working with our clients easy and easier, providing them with better solutions and faster timelines is so important.

Birgit Girshick: It could go either way, but in general, it's not a headwind. It is either a tailwind or it's just net neutral.

Speaker #4: So it could go either way, but in general, it's not a headwind. It is either a tailwind or it's just net neutral.

Josh Waltman: Got it. Thanks for taking my question.

Speaker #9: Got it. Thanks for taking my questions.

Operator: We'll turn next to Cassidy Vanepps with Jefferies. Please go ahead.

Speaker #1: We'll turn next to Cassidy Van Epps with Jefferies. Please go ahead.

Cassidy Vanepps: Hi, Cassidy on for David Windley today. Thanks for taking the question. Digging a little bit more into margins, with most of your NHP supply now internally owned, how should we think about the margin impact, specifically within DSA? Does this change management's longer-term margin framework for the segment?

Cassidy VanEpps: Hi, Cassidy on for David Windley today. Thanks for taking the question. Digging a little bit more into margins, with most of your NHP supply now internally owned, how should we think about the margin impact, specifically within DSA? Does this change management's longer-term margin framework for the segment?

Speaker #10: Hi, Cassidy on for David Wendley today. Thanks for taking the question. So digging a little bit more into margins, so with most of your NHP supply now internally owned, how should we think about the margin impact specifically within DSA?

Speaker #10: And does this change management's longer-term margin framework for the segment?

Glenn Coleman: You know, I'll jump in and take this one. Just keep in mind we're still working through some higher NHP costs really for the H1 of the year. It'll get a little bit better in the Q2, but the real big improvement is Q4 for our DSA segment. We're not gonna specifically call out the margin improvement. I think a big part of the reason why we bought KF was the supply chain resiliency and giving us better predictability of the supply chain. Obviously, with that should come improvements in our financial performance, but we'll give more guidance on 2027 and what it means when we get to February 2025.

Speaker #9: I'll jump in and take this one. Just keep in mind we're still working through some higher NHP costs, really for the first half of the year.

Speaker #9: It'll get a little bit better in the second quarter, but the real big improvement is Q4 for our DSA segment. We're not going to specifically call out the margin improvement.

Speaker #9: I think a big part of the reason why we bought KF was the supply chain resiliency and giving us better predictability of the supply chain.

Speaker #9: And obviously, with that, you come improvements in our financial performance, but we'll get more guidance on 2027 and what it means when we get to February of next year.

Cassidy Vanepps: Okay. Perfect. Following up, how much of the NHP supply from Noveprim and KF is still obligated to external customers, and when does that fully become available to Charles River? Thank you.

Cassidy VanEpps: Okay. Perfect. Following up, how much of the NHP supply from Noveprim and KF is still obligated to external customers, and when does that fully become available to Charles River? Thank you.

Speaker #10: Okay. Perfect. And then following up, so with how much of the NHP supply from Nova Prim and KF is still obligated to external customers?

Speaker #10: And then when does that fully become available to Charles River? Thank you.

Birgit Girshick: Yeah. I can talk about that. The external customer that you are referring to is actually from our Mauritius farms. When we bought the Mauritius farm, we bought the external relationship with the supply. Ultimately, the goal is to use the animals on safety assessment studies and moving them over, and that will kind of be a transition over the next few years. As you can see, you probably see that we already have more and more animals on our safety study, and then that will kind of end over the next few quarters.

Speaker #4: Yeah. I can talk about that. So the external customer that you're referring to is actually from our Mauritius farms. And the and when we bought the Mauritius farm, we bought the external relationship with the supply.

Speaker #4: The ultimately, the goal is to use the animals on safety assessment studies and moving them over. And that will kind of be a transition over the next few years.

Speaker #4: And as you can see, you're probably see that we already have more and more animals on our safety study. And then that will kind of end over the next few quarters.

Cassidy Vanepps: Perfect. Thank you.

Cassidy VanEpps: Perfect. Thank you.

Speaker #10: Perfect. Thank you.

Operator: We'll turn now to Casey Woodring with J.P. Morgan. Please go ahead.

Speaker #1: We'll turn now to Casey Woodring with JPMorgan. Please go ahead.

Sebastian Sandler: Hi, this is Sebastian Sandler on for Casey. Thanks for taking my question. I wanted to first double-click on expectations for biotech revenue pacing over the balance of the year. Within that bigger later stage client segment that's been benefiting from M&A and funding starting towards the end of last year, do you expect this specific segment to return to growth in Q2, maybe ahead of smaller biotechs and biopharma? Should we just expect more of a H2 rebound consistent with your expectation for total DSA growth?

Speaker #11: Hi. This is Sebastian Sandler on for Casey. Thanks for taking my question. I wanted to first double-click on expectations for biotech revenue pacing over the balance of the year.

Speaker #11: Within that bigger later-stage client segment that's been benefiting from M&A and funding starting towards the end of last year, do you expect this specific segment to return to growth in Q2, maybe ahead of smaller biotechs and biopharma, or should we just expect more of a back half rebound consistent with your expectation for total DSA growth?

Birgit Girshick: Yeah. What we're currently seeing in Q1 is that this segment from a revenue perspective is still down. That is coming from the lower bookings last year. We believe that we'll rebound over the next quarter or two because of the bookings we're currently seeing. There's a lag of about a quarter to two. We will definitely see this segment to rebound to more of a growth rate as we enter, I would say Q3, Q4 for sure.

Speaker #4: Yeah. So if you see, what we're currently seeing in Q1 is that this segment, from a revenue perspective, is still down. That is coming from the lower bookings last year.

Speaker #4: And we think, we believe, that we'll rebound over the next quarter or two, because of the bookings we're currently seeing. So there's a lag of about a quarter to two.

Speaker #4: And so we will definitely see this segment to rebound to more of a growth rate as we enter I would say Q3, Q4 for sure.

Sebastian Sandler: Thanks. You called out strength in research models in China. Can you remind us of the revenue base in China within RMS? What that grew in the quarter and just expectations for the full year. More broadly, how are you thinking about your current exposure to the China market within RMS and DSA outside of the recent NHP acquisitions.

Speaker #11: Thanks. And then you call that strength in research models in China. Can you remind us of the revenue base in China within RMS, what that grew in the quarter, and then just expectations for the full year?

Speaker #11: And then more broadly, how are you thinking about your current exposure to the China market within RMS and DSA outside of the recent NHP acquisitions?

Glenn Coleman: What is your overall level of interest in expanding that through M&A in the future? Thank you.

Sebastian Sandler: What is your overall level of interest in expanding that through M&A in the future? Thank you.

Speaker #11: And what is your overall level of interest in expanding that through M&A in the future? Thank you.

Birgit Girshick: Our RMS China business is a small part of overall Charles River revenue. It's approximately 5% or actually less than 5%. It is a critical asset for us as it provides us access to the Chinese market. The Chinese RMS business is one of the leaders in the industry for providing research models as well as many services that we also offer here in the Western part. From other services and solutions, specifically this DSA that you asked, we currently don't have any facilities in China. We do get some work from companies that work in China or wanna file INDs in China, but not a physical presence.

Speaker #4: Yeah. So our RMS China business is a small part of overall Charles River revenue. It's approximately 5%. And or actually less than 5%. But it is a critical asset for us as it provides us access to the Chinese market.

Speaker #4: So the Chinese RMS business is one of the leaders in the industry for providing research models. As well as many services that we also offer here in the Western part.

Speaker #4: From another services and solutions specifically, the DSA that you asked, we currently don't have any facilities in China. We do get some work from companies that work in China or want to file INDs in China.

Speaker #4: But not a physical presence. We are continuing to watch this market very closely. As a lot of the drug programs are in license from China, because of the accelerated innovation.

Birgit Girshick: We are continuing to watch this market very closely, as a lot of the drug programs are in license from China, because of the accelerated innovation. We certainly will continue to look at this to see if we should expand our structure in China, based on customer demand, growth rates, but also looking at the geopolitical risk on that.

Speaker #4: And we certainly will continue to look at this to see if we should expand our structure in China based on customer demand growth rates but also looking at the geopolitical risk on that.

Glenn Coleman: Great. Thank you.

Sebastian Sandler: Great. Thank you.

Speaker #11: Great. Thank you.

Operator: Our next question will come from Ann Hynes with Mizuho Securities. Please go ahead.

Speaker #1: Our next question. We'll come from Anne Heintz with Mizuho Securities. Please go ahead.

Ann Hynes: Good morning. Thank you. Your $300 million cost program, can you remind us what you'll be annualizing as we exit 2026 and any incremental uptake for 2027 and 2028? Secondly, just on, you know, AI, this has been in the news a lot, some of the big pharma companies investing in AI. I know during the Great Recession, a lot of the big pharmaceutical manufacturers closed their capacity for early development. Do you think there could be a risk that they increase their capacity again over the next few years? Thanks.

Speaker #12: Good morning. Thank you. Your $300 million cost program, can you remind us what you'll be annualizing as we exit 2026? And any incremental uptake for 2027 and 2028?

Speaker #12: And then secondly, just on AI and this been in the news a lot. Some of the big pharma companies investing in AI. And I know during the Great Recession, a lot of the big pharmaceutical manufacturers closed their capacity for early development.

Speaker #12: Do you think there could be a risk that they increase their capacity again over the next few years? Thanks.

Birgit Girshick: Let me start, and then on the cost savings, and then I will move over to AI. If Glenn has any additional add-ons to the cost saving, I will ask him to chime in here. The cost savings are roughly $300 million of cost that we have taken out over the last several years, about 5% of our cost base. For this year, we said it's an incremental $100 million. It's too early to talk about 2027 and 2028, but as we said, we are continuing to look for cost efficiencies, modernizing the company, seeing how we can reduce timelines, making the operations more efficient.

Speaker #4: Yeah. Let me start and then on the cost savings and then I will move over to AI. And as Glenn has any additional add-ons to the cost saving, I will ask him to chime in here.

Speaker #4: But so the cost savings are roughly $300 million of cost that we have taken out over the last several years. But 5% of our cost base for this year, we said it's an incremental 100 million.

Speaker #4: It's too early to talk about 27 and 28. But as we said, we are continuing to look for cost efficiencies, modernizing the company. Seeing how we can reduce timelines making the operations more efficient.

Birgit Girshick: You should continue to think about us having cost efficiencies, but we're not in a position right now to give you any specific numbers on 2027 and 2028. We will provide long-range financial numbers probably in our Investor Day. We will also talk more about where those cost efficiencies are coming from. AI is an interesting topic both for cost efficiencies, but then also for how drug development is being performed. For us specifically, we invest in AI in multiple areas to be more efficient, maximize our capacity, streamline our communication with our clients, and also to reduce the number of animals needed on a drug program.

Speaker #4: So you should continue to think about us having cost efficiencies, but we're not in a position right now to give you any specific numbers on '27 and '28.

Speaker #4: We will provide long-range financial numbers probably in our investor days and we will also talk more about where those cost efficiencies are coming from.

Speaker #4: AI is a interesting topic. Both for cost efficiencies. But then also for how drug development is being performed. So for us specifically, we invest in AI in multiple areas to A, be more efficient maximize our capacity streamline our communication with our clients.

Speaker #4: And also to reduce the number of animals needed on a drug program. Our clients are investing primarily in the early stage in the and a little bit in the clinical space in the early stage that is things like target identification, molecular design.

Birgit Girshick: Our clients are investing primarily in the early stage, a little bit in the clinical space. In the early stage, that is things like target identification, molecular design, that will allow them, hopefully at some point, if AI delivers, to bring drugs into the regulated safety assessment space faster, and maybe more programs. I do not think that our clients will want to insource any of the work that we are doing. Our work that we do is very highly outsourced and not a lot of companies still have capacity nor the skill set to do the work.

Speaker #4: That will allow them hopefully at some point if AI delivers to bring drugs into the regulated safety assessment space faster. And maybe more programs I do not think that our clients will want to insource any of the work that we are doing.

Speaker #4: So our work that we do is very highly outsourced. And not a lot of companies still have capacity nor the skill set to do the work.

Birgit Girshick: From what we're hearing for our clients in the discussions, they are actually looking more for a collaboration on how they can utilize AI in the earlier stage, so before we get the work, rather than doing the work that we are doing. You might see more of insourcing in the really early, or even in the clinical trials. Definitely I would not expect it in the preclinical stage. There's just so many complexities and capacity and regulated expertise that is required. It would not make any sense.

Speaker #4: So from what we're hearing with our clients in the discussions, they are actually looking more for a collaboration on how they can utilize AI in the earlier stage so before we get the work rather than doing the work that we are doing.

Speaker #4: So you might see more of insourcing in the really early or even in the clinical trials but definitely I would not expect it in the preclinical stage.

Speaker #4: There's just so many complexities and capacity and regulated expertise that is required. It would not make any sense.

Glenn Coleman: Birgit, the only thing I would add to your comments is a lot of the great work the team has done over the last couple of years of taking out all of these costs and $300 million of cost has been needed to preserve margins because the top line has not been growing. A lot of the cost increases that we see in the business for inflation and normal increases across the business, you know, have been offset by these initiatives and cost reductions. I just wanted to make that point.

Speaker #11: Very good. The only thing I would add to your comments is a lot of the great work the team has done over the last couple of years, taking out all of these costs, and $300 million of cost has been needed to preserve margins because the top line has not been growing.

Speaker #11: And so a lot of the cost increases that we've seen in the business for inflation and normal increases across the business have been offset by these initiatives and cost reductions.

Speaker #11: So I just wanted to make that point. Thanks for your question.

Birgit Girshick: Thanks for your question.

Glenn Coleman: Thanks for your question.

Yoojun Park: Thanks.

Ann Hynes: Thanks.

Speaker #12: Thanks.

Operator: We'll turn next to Yoojun Park with Baird. Please go ahead.

Speaker #1: We'll turn next to Yoojin Park with Baird. Please go ahead.

Yoojun Park: Hi, thanks for taking my question. You mentioned that for RMS, Q1 saw increased demand in small models from CRO clients. Was that comment specifically on China, or was it broad-based geographically and it's just a normal pattern or could this be a signal of improving market dynamics?

Yujin Park: Hi, thanks for taking my question. You mentioned that for RMS, Q1 saw increased demand in small models from CRO clients. Was that comment specifically on China, or was it broad-based geographically and it's just a normal pattern or could this be a signal of improving market dynamics?

Speaker #13: Hi. Thanks for taking my question. You mentioned that for RMS, Q1 saw increased demand in small models from CRO clients. Was that comment specifically on China, or was it broad-based geographically?

Speaker #13: And is this a normal pattern, or could this be a signal of improving market dynamics?

Birgit Girshick: That comment was specifically to China. We have said that we saw much better demand in China and specifically for CROs and biotech. We see this as an indication that the Chinese market is rebounding and accelerating and for the need and the demand of the research models that we're providing to them. A positive indication for the business. Do you have a follow-up question?

Speaker #4: So that comment was specifically to China. We have said that we saw much better demand in China and specifically for CROs and biotech. So we see this as an indication that the Chinese market is rebounding and accelerating and for the need and the demand of the research models that we're providing to them.

Speaker #4: So a positive indication for the business. We have a moment question.

Operator: We'll move next to Charles Rhyee with TD Cowen. Please go ahead.

Speaker #1: We'll move next to Charles Ree with TD Callen. Please go ahead.

Charles Rhyee: Oh, yeah. Well, thanks for getting me in here. I'll just leave it at 1 question here. It's just kind of going back to the demand environment. You know, Birgit, you kind of mentioned in the slides, biotech, kind of highest levels you've seen in the last 2 years, maybe more large pharma, you know, kind of slowly rebounding or maybe just more of a year-over-year comps. It kind of suggests maybe that biotech is going to present more opportunities perhaps over the next couple of years. Does that change at all sort of your go-to-market strategy, and maybe any kind of impact on how those businesses are priced on either side of that, and, you know, any kind of comments on that and where you see that mix going? Thank you.

Speaker #14: Oh, yeah. Well, thanks for getting me in here. I'll just leave it to one question here and this is just kind of going back to the demand environment.

Speaker #14: But you kind of mentioned the slides. Biotech kind of highest levels you've seen in the last two years. Maybe more large pharma kind of slowly rebounding and maybe it's just more of a year-over-year comps.

Speaker #14: It kind of suggests maybe that biotech is going to present more opportunities perhaps over the next couple of years and does that change at all sort of your go-to-market strategy?

Speaker #14: And maybe any kind of impact on how—maybe give a sense on how any of those businesses are priced on either side of that, and any kind of comments on that and where you see that mix going.

Speaker #14: Thank you.

Birgit Girshick: Yeah. We are pretty balanced in our revenue stream from pharma versus biotech. We have historically, we have a very big share with the pharmaceutical clients, but we are also have a considerable share with the biotech industry. Our go-to-market strategy for years has focused on a customized approach to make sure that we cater to both small as well as large companies, making sure that they get the collaboration they need and that our teams are basically on the same table with no matter if it's a small or a large company. And that won't change.

Speaker #4: Yeah. So we are pretty balanced. In our revenue stream from pharma versus biotech. So we have historically we have a very big share with the pharmaceutical clients.

Speaker #4: But we also have a considerable share with the biotech industry. So our go-to-market strategy for years has focused on a customized approach to make sure that we cater to both small as well as large companies.

Speaker #4: Making sure that they get the collaboration they need and that our teams are basically on the same table with no matter if it's a small or a large company.

Speaker #4: And that won't change. However, we are investing in a lot of tools, platforms, and training to make sure that we continue to improve this go-to-market customer centricity program that we have in place.

Birgit Girshick: However, we are investing in a lot of tools and platforms and training to make sure that we are continue to improve this go-to-market customer centricity program that we have in place so we can be an even better partner for our clients, but also get a more of a share of their wallet. In terms of pricing, we see a pretty stable pricing environment. It has really not changed over the last couple of years. Discounting is still strategically, it's still happening. Pricing will change when capacity is changing, so something that will come probably automatically. At the current time, we are making sure that we stay competitive and that we get the share of the wallet that we want from our clients.

Speaker #4: So we can be an even better partner for our clients, but also get more of a share of their wallet. As in terms of pricing, we see a pretty stable pricing environment.

Speaker #4: It has really not changed over the last couple of years. Discounting is still strategically it's still happening. Pricing will change when capacity is changing.

Speaker #4: So something that will come probably automatically. But at the current time, we are making sure that we stay competitive. And that we get the share of the wallet that we want from our clients.

Birgit Girshick: From our proposal volumes, bookings, and capture rates, I think we're on the right track here.

Speaker #4: And from our proposal volumes, bookings, and capture rates, I think we're on the right track here.

Charles Rhyee: Great. Thanks a lot and congrats on the results.

Speaker #14: Great. Thanks a lot. And congrats on the results.

Birgit Girshick: Thank you.

Speaker #4: Thank you.

Operator: Our final question will come from Ryan Halsted with RBC. Please go ahead.

Speaker #1: Our final question will come from Ryan Halston with RBC. Please go ahead.

Ryan Halsted: Thanks. Good morning, and thanks for taking the question. Maybe going back to the discussion on Asia, but asking it from a different perspective, from a competitive standpoint. A lot of attention, I think, has been made on competition from Asia and drug development work, and just would appreciate your perspectives on the competitive landscape for the business.

Speaker #11: Thanks. Good morning and thanks for taking the question. Maybe going back to the discussion on Asia but asking it from a different perspective from a competitive standpoint.

Speaker #11: A lot of attention I think has been made on competition from Asia and drug development work. And just would appreciate your perspectives on the competitive landscape for the business.

Birgit Girshick: Yeah. Thanks, Ryan. Interesting question. Yes. From an Asia Pacific perspective, specifically China, a little bit in India, there definitely has been a trend of more outsourcing, early-stage routine work outsourcing going to lower cost countries. This is something that we have evaluated for quite a while. We still don't see a lot of outsourcing going to China in complex work or regulated work where we do most of our revenues, but we are evaluating that. That is also why we said a couple of times now that overall, we're looking at the Chinese market to see how or when we should play in a larger scale there and what are the solutions that we have the right to play with in a marketplace like that.

Speaker #4: Yeah. Thanks, Ryan. Interesting question. So yes. So from an Asia perspective, specifically China, a little bit in India, they're definitely has been a trend of more outsourcing early-stage routine work outsourcing going to lower-cost countries.

Speaker #4: And this is something that we have evaluated for quite a while. We are still don't see a lot of outsourcing going to China in complex work or regulated work where we do most of our revenues.

Speaker #4: But we are evaluating that. And that is also why we said a couple of times now that in overall, we're looking at the Chinese market to see how or when we should play in a larger scale there.

Speaker #4: And what are the solutions that we have the right to play with in a marketplace like that? From another perspective, obviously, the in-licensing of more programs from China into the US, into global biopharma, is another area that we are watching.

Birgit Girshick: From another perspective, obviously the in-licensing of more programs from China into the US, into global biopharma is another area that we are watching. A lot of times we actually get to work on some of those programs, but it will have an impact on the industry itself, and we'll need to see where this is playing out, too. Definitely China, a little bit India outsourcing is a focus areas of us to make sure that we understand what's going on there. At this point, our core market and our core relationships are very, very strong here in North America, the EU and a little bit in Asia, and we will continue to double down on that.

Speaker #4: A lot of times we actually get to work on some of those programs but it will have an impact on the industry itself. And we'll need to see where this is playing out too.

Speaker #4: So definitely China a little bit India outsourcing. Is a focus areas of us to make sure that we understand what's going on there. But at this point, our core market and our core relationships are very, very strong here in North America.

Speaker #4: The EU and a little bit in Asia. And we will continue to double down on that.

Ryan Halsted: Thank you.

Speaker #11: Thank you.

Operator: Thank you. With no further questions in queue, I will turn the conference back to Todd Spencer for closing remarks.

Speaker #1: Thank you. With no further questions in queue, I will turn the conference back to Todd Spencer for a closing remarks.

Todd Spencer: Thank you for joining us on the call, and we look forward to seeing you at upcoming investor events. This will now conclude the call. Thank you.

Speaker #15: Thank you for joining us on the call. And we look forward to seeing you at upcoming investor events. This will now conclude the call.

Speaker #15: Thank you.

Operator: Thank you. That does conclude today's Charles River Laboratories Q1 2026 earnings call. Thank you for your participation. You may now disconnect.