Charles River Laboratories Announces Fourth-Quarter and Full-Year 2021 Results - Fourth-Quarter Revenue of $905.1 Million and Full-Year Revenue of $3.54 Billion - - Fourth-Quarter GAAP Earnings per Share of $2.67 and Non

- Fourth-Quarter Revenue of $905.1 Million and Full-Year Revenue of $3.54 Billion -

- Fourth-Quarter GAAP Earnings per Share of $2.67 and Non-GAAP Earnings per Share of $2.49 -

- Full-Year GAAP Earnings per Share of $7.60 and Non-GAAP Earnings per Share of $10.32 -

- Reaffirms 2022 Guidance -

WILMINGTON, Mass.--(BUSINESS WIRE)--February 16, 2022--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the fourth-quarter and full-year 2021 and reaffirmed guidance for 2022. For the quarter, revenue

was $905.1 million, an increase of 14.4% from $791.0 million in the fourth quarter of 2020.

Acquisitions contributed 5.9% to consolidated fourth-quarter revenue growth. The divestiture of the Research Models and Services operations in Japan (RMS Japan) in October 2021 reduced reported revenue growth by 1.4%. The impact of foreign

currency translation reduced reported revenue growth by 0.6%. Excluding the effect of these items, organic revenue growth was 10.5%, driven by contributions from all three business segments, led by the Manufacturing segment. The comparison to

the COVID-19-related impact in 2020 increased both the reported and organic revenue growth rates by 0.5% in the fourth quarter of 2021.

On a GAAP basis, fourth-quarter net income attributable to common shareholders was $137.6 million, a decrease of 3.9% from $143.2 million for the same period in 2020. Fourth quarter diluted earnings per share on a GAAP basis were $2.67, a

decrease of 5.0% from $2.81 for the fourth quarter of 2020. The decreases in GAAP net income and earnings per share primarily reflected a loss from the Company's venture capital and other strategic investments of $0.19 per share in the fourth

quarter of 2021, compared to a gain of $1.01 per share for the same period in 2020. The decreases were partially offset by acquisition-related adjustments associated with contingent consideration and a gain on the sale of RMS Japan.

On a non-GAAP basis, net income was $128.4 million for the fourth quarter of 2021, an increase of 5.2% from $122.1 million for the same period in 2020. Fourth-quarter diluted earnings per share on a non-GAAP basis were $2.49, an increase of

4.2% from $2.39 per share for the fourth quarter of 2020. The increases in non-GAAP net income and earnings per share were primarily driven by higher revenue and operating income, partially offset by a higher tax rate and net interest

James C. Foster, Chairman, President and Chief Executive Officer, said, "2021 was another exceptional year for Charles River, with robust revenue and earnings growth, significant operating margin expansion, and meaningful cash flow

generation. This performance reflects the unprecedented demand that we are seeing across most of our businesses, as well as the breadth and scientific depth of our leading, non-clinical portfolio.

"We believe that Charles River is a stronger company today than it has ever been. We have built the leading safety assessment franchise in the world; established an integrated, end-to-end discovery offering for both small and large

molecules; and most recently, a comprehensive, scientifically advanced solution for our clients' complex biologics and cell and gene therapies. We believe that the strength of our portfolio, coupled with robust industry fundamentals and the

investments that we are making to accommodate client demand, will fuel low-teens revenue growth in 2022 and enable us to achieve our strategic and financial goals," Mr. Foster concluded.

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $165.6 million in the fourth quarter of 2021, an increase of 5.7% from $156.7 million in the fourth quarter of 2020. The impact of the RMS Japan divestiture reduced revenue by 7.2%, and the impact of foreign

currency translation reduced revenue by 0.4%. Organic revenue growth of 13.3% was primarily driven by robust demand for research models, particularly in China, as well as higher revenue for research model services. Fourth quarter revenue for

the cell supply business, which consists of HemaCare and Cellero, continued to be impacted by donor access and availability. The comparison to the COVID-19-related impact in 2020 increased both the reported and organic revenue growth rates by

2.3% in the fourth quarter of 2021.

In the fourth quarter of 2021, the RMS segment's GAAP operating margin increased to 24.3% from 21.9% in the fourth quarter of 2020, and on a non-GAAP basis, the operating margin increased to 26.9% from 25.1%. The GAAP and non-GAAP operating

margin increases were driven primarily by operating leverage from higher research models sales volume.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $534.1 million in the fourth quarter of 2021, an increase of 7.9% from $495.0 million in the fourth quarter of 2020. The impact of foreign currency translation reduced revenue by 0.4%, and acquisitions

contributed 1.6% to DSA revenue growth. Organic revenue growth of 6.7% was driven principally by the Safety Assessment business, with the Discovery Services business also contributing.

In the fourth quarter of 2021, the DSA segment's GAAP operating margin decreased to 17.8% from 18.4% in the fourth quarter of 2020. The decrease was primarily due to acquisition-related adjustments associated with contingent consideration.

On a non-GAAP basis, the operating margin was essentially unchanged at 23.1%, compared to 23.2% in the fourth quarter of 2020. The impact of foreign currency translation reduced the DSA operating margin by approximately 40 basis points.

Manufacturing Solutions (Manufacturing)

Revenue for the Manufacturing segment was $205.3 million in the fourth quarter of 2021, an increase of 47.4% from $139.3 million in the fourth quarter of 2020. The acquisitions of Cognate BioServices (Cognate) and Vigene Biosciences

(Vigene) contributed 27.8% to Manufacturing revenue growth, while the impact of foreign currency translation reduced revenue by 1.6%. Organic revenue growth of 21.2% was driven primarily by robust demand across the Biologics Testing

Solutions, Microbial Solutions, and Avian Vaccine businesses. The comparison to the COVID-19-related impact in 2020 increased the reported and organic revenue growth rates in the fourth quarter of 2021 by 1.1% and 0.9%, respectively.

In the fourth quarter of 2021, the Manufacturing segment's GAAP operating margin increased to 44.6% from 35.3% in the fourth quarter of 2020, primarily due to acquisition-related adjustments associated with contingent consideration. The

non-GAAP operating margin decreased to 35.7% from 37.3% in the fourth quarter of 2020, driven primarily by the addition of the Cognate and Vigene CDMO businesses.

For 2021, revenue increased by 21.1% to $3.54 billion from $2.92 billion in 2020. Organic revenue growth was 15.1%. The comparison to the COVID-19-related impact in 2020 increased the reported and organic revenue growth rates in 2021 by

2.9% and 2.8%, respectively.

On a GAAP basis, net income attributable to common shareholders was $391.0 million in 2021, an increase of 7.3% from $364.3 million in 2020. Diluted earnings per share on a GAAP basis in 2021 were $7.60, an increase of 5.6% from $7.20 in

2020. On a GAAP basis, the Company recorded a loss from venture capital and other strategic investments totaling $0.44 per share in 2021, compared to a gain of $1.51 in 2020.

On a non-GAAP basis, net income was $530.5 million in 2021, an increase of 28.9% from $411.5 million in 2020. Diluted earnings per share on a non-GAAP basis in 2021 were $10.32, an increase of 26.9% from $8.13 in 2020.

Research Models and Services (RMS)

For 2021, RMS revenue was $690.4 million, an increase of 20.9% from $571.2 million in 2020. Organic revenue growth increased 19.5%. The comparison to the COVID-19-related impact in 2020 increased the reported and organic revenue growth

rates in 2021 by 10.1% and 9.8%, respectively.

On a GAAP basis, the RMS segment operating margin increased to 24.2% in 2021 from 18.0% in 2020. On a non-GAAP basis, the operating margin increased to 27.3% in 2021 from 22.0% in 2020.

Discovery and Safety Assessment (DSA)

For 2021, DSA revenue was $2.11 billion, an increase of 14.7% from $1.84 billion in 2020. Organic revenue growth was 12.2%. The comparison to the COVID-19-related impact in 2020 increased both the reported and organic revenue growth rates

On a GAAP basis, the DSA segment operating margin increased to 19.3% in 2021 from 17.7% in 2020. On a non-GAAP basis, the operating margin increased to 23.7% in 2021 from 23.4% in 2020.

Manufacturing Solutions (Manufacturing)

For 2021, Manufacturing revenue was $742.5 million, an increase of 44.1% from $515.4 million in 2020. Organic revenue growth was 20.6%. The comparison to the COVID-19-related impact in 2020 increased the reported and organic revenue growth

rates in 2021 by 2.5% and 2.1%, respectively.

On a GAAP basis, the Manufacturing segment operating margin decreased to 33.2% in 2021 from 35.2% in 2020. On a non-GAAP basis, the operating margin decreased to 34.2% in 2021 from 37.4% in 2020.

Reaffirms 2022 Guidance

The Company is reaffirming its 2022 financial guidance, which was originally provided on January 11, 2022. As previously mentioned, the Company expects to benefit from a continuation of the robust client demand that it experienced last year

and price increases, which is expected to drive low-teens revenue growth in 2022. On a non-GAAP basis, earnings per share growth in 2022 is expected to be similar to revenue growth, as modest operating margin improvement will be largely

offset by less favorable below-the-line items, including a higher tax rate.

The Company's 2022 guidance for revenue growth, earnings per share, and cash flow is as follows:

Footnotes to Guidance Table:

(1) The contribution from acquisitions/divestitures (net) reflects only those transactions that were completed in 2021. The partial-year revenue impact from acquisitions, principally Cognate BioServices, Retrogenix, and Vigene Biosciences,

is expected to be offset by the impact from the divestitures of RMS Japan and CDMO Sweden.

(2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions, divestitures, the 53rd week in 2022, and foreign currency translation.

(3) These adjustments are related to the evaluation and integration of acquisitions and divestitures, and primarily include transaction, advisory, and certain third-party integration costs, as well as certain costs associated with

acquisition-related efficiency initiatives.

(4) These items primarily relate to charges of approximately $0.10 associated with U.S. and international tax legislation that necessitated changes to the Company's international financing structure.

Charles River has scheduled a live webcast on Wednesday, February 16, at 8:30 a.m. ET to discuss matters relating to this press release. To participate, please go to ir.criver.com and select the webcast link. You can also find the

associated slide presentation and reconciliations of GAAP financial measures to non-GAAP financial measures on the website.

Citi's 2022 Virtual Healthcare Conference Presentation

Charles River will virtually present at Citi's 2022 Virtual Healthcare Conference, on Wednesday, February 23rd, at 9:30 a.m. ET. Management will provide an overview of Charles River's strategic focus and business developments.

A live webcast of the presentation will be available through a link that will be posted on ir.criver.com. A webcast replay will be accessible through the same website shortly after the presentation and will remain available for

approximately two weeks.

Non-GAAP Reconciliations

The Company reports non-GAAP results in this press release, which exclude often-one-time charges and other items that are outside of normal operations. A reconciliation of GAAP to non-GAAP results is provided in the schedules at the end of

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, such as non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP free cash flow. Non-GAAP financial measures

exclude, but are not limited to, exclude the amortization of intangible assets, and other charges related to our acquisitions and divestitures; expenses associated with evaluating and integrating acquisitions and divestitures, as well as fair

value adjustments associated with contingent consideration; charges, gains, and losses attributable to businesses or properties we plan to close, consolidate, or divest; severance and other costs associated with our efficiency initiatives;

the impact of the termination of the Company's U.S. pension plan; the write-off of deferred financing costs and fees related to debt financing; third-party costs associated with the remediation of unauthorized access into our information

systems detected in March 2019; investment gains or losses associated with our venture capital and other strategic equity investments; certain costs in our Microbial Solutions business related to environmental litigation; and adjustments

related to the recognition of deferred tax assets expected to be utilized as a result of changes to the our international financing structure and the revaluation of deferred tax liabilities as a result of foreign tax legislation. This press

release also refers to our revenue in both a GAAP and non-GAAP basis: "organic revenue growth," which we define as reported revenue growth adjusted for foreign currency translation, acquisitions, divestitures, and the impact of the 53rd

week in 2022. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. There are limitations in using non-GAAP financial measures, as they are not presented in accordance with generally

accepted accounting principles, and may be different than non-GAAP financial measures used by other companies. In particular, we believe that the inclusion of supplementary non-GAAP financial measures in this press release helps investors to

gain a meaningful understanding of our core operating results and future prospects without the effect of these often-one-time charges, and is consistent with how management measures and forecasts the Company's performance, especially when

comparing such results to prior periods or forecasts. We believe that the financial impact of our acquisitions and divestitures (and in certain cases, the evaluation of such acquisitions and divestitures, whether or not ultimately

consummated) is often large relative to our overall financial performance, which can adversely affect the comparability of our results on a period-to-period basis. In addition, certain activities and their underlying associated costs, such as

business acquisitions, generally occur periodically but on an unpredictable basis. We calculate non-GAAP integration costs to include third-party integration costs incurred post-acquisition. Presenting revenue on an organic basis allows

investors to measure our revenue growth exclusive of acquisitions, divestitures, and foreign currency exchange fluctuations more clearly. Non-GAAP results also allow investors to compare the Company's operations against the financial results

of other companies in the industry who similarly provide non-GAAP results. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations presented in

accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations. Reconciliations of the non-GAAP financial measures used in this press release

to the most directly comparable GAAP financial measures are set forth in this press release, and can also be found on the Company's website at ir.criver.com.

Caution Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "anticipate," "believe," "expect,"

"intend," "will," "would," "may," "estimate," "plan," "outlook," and "project," and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements also include

statements regarding the impact of the COVID-19 pandemic; the projected future financial performance of Charles River and our specific businesses; client demand, particularly the future demand for drug discovery and development products and

services, including our expectations for future revenue trends; our expectations with respect to pricing of our products and services; our expectations with respect to future tax rates and the impact of such tax rates on our business; our

expectations with respect to the impact of acquisitions and divestitures completed in 2020 and 2021 on the Company, our service offerings, client perception, strategic relationships, revenue, revenue growth rates, and earnings; the