Full Press Release Details
River Laboratories Announces Third-Quarter 2018 Results
Third-Quarter Revenue of $585.3 Million -
Third-Quarter GAAP Earnings per Share of $1.22 and Non-GAAP Earnings per
WILMINGTON, Mass.--(BUSINESS WIRE)--November 7, 2018--Charles River
Laboratories International, Inc. (NYSE: CRL) today reported its results
for the third quarter of 2018. For the quarter, revenue was $585.3
million, an increase of 26.1% from $464.2 million in the third quarter
of 2017. Revenue growth was driven by all three business segments,
particularly the Discovery and Safety Assessment segment.
Acquisitions, which included MPI Research, KWS BioTest, and Brains
On-Line, contributed 16.0% to consolidated third-quarter revenue growth.
The impact of foreign currency translation reduced reported revenue
growth by 0.6%. Excluding the effect of these items, organic revenue
On a GAAP basis, third-quarter net income from continuing operations
attributable to common shareholders was $60.4 million, an increase of
15.0% from net income of $52.5 million for the same period in 2017.
Third-quarter diluted earnings per share on a GAAP basis were $1.22, an
increase of 11.9% from $1.09 for the third quarter of 2017.
On a non-GAAP basis, net income from continuing operations was $75.4
million for the third quarter of 2018, an increase of 19.8% from $62.9
million for the same period in 2017. Third-quarter diluted earnings per
share on a non-GAAP basis were $1.53, an increase of 17.7% from $1.30
per share for the third quarter of 2017.
The GAAP and non-GAAP net income and earnings per share increases were
driven primarily by higher revenue and operating income, including the
contribution from the MPI acquisition, and a lower tax rate, partially
offset by higher interest expense. In addition, the increases in GAAP
net income and earnings per share were partially offset by higher
amortization of intangible assets, primarily related to the acquisition
of MPI Research. The gains on the Company's venture capital investments
were $0.08 per share in the third quarter of 2018, compared to gains of
$0.07 for the same period in 2017.
James C. Foster, Chairman, President and Chief Executive Officer, said,
"We are very pleased with our third-quarter 2018 results, which
demonstrate that clients continue to choose to partner with Charles
River for our scientific expertise and customized solutions. We have
differentiated Charles River from other early-stage CROs by continuing
to invest in our portfolio, our people, and our infrastructure, which
has positioned Charles River extremely well to support our clients'
increasingly complex research needs. The success of our strategy,
coupled with our belief that client demand has accelerated during the
second half of the year, is validated by our robust third-quarter
performance and supports our increased revenue growth and updated
earnings per share guidance for the year."
Third-Quarter Segment Results
Research Models and Services (RMS)
Revenue for the RMS segment was $126.8 million in the third quarter of
2018, an increase of 3.9% from $122.0 million in the third quarter of
2017. Organic revenue growth was 4.5%, driven primarily by higher
revenue for research model services, as well as increased demand for
research models in China.
In the third quarter of 2018, the RMS segment's GAAP operating margin
increased to 25.3% from 25.1% in the third quarter of 2017. On a
non-GAAP basis, the operating margin increased to 25.9% from 25.5% in
the third quarter of 2017. The GAAP and non-GAAP operating margin
increases were driven primarily by operating leverage from higher
revenue for research model services.
Discovery and Safety Assessment (DSA)
Revenue for the DSA segment was $352.3 million in the third quarter of
2018, an increase of 42.6% from $246.9 million in the third quarter of
2017. Acquisitions contributed 30.0% to DSA revenue growth, due
primarily to the revenue contribution from MPI Research. Organic revenue
growth of 13.1% was driven by both the Safety Assessment and Discovery
Services businesses. By client segment, the DSA revenue increase was
driven by robust demand from both biotechnology and global
biopharmaceutical clients.
In the third quarter of 2018, the DSA segment's GAAP operating margin
decreased to 17.9% from 18.8% in the third quarter of 2017. The GAAP
operating margin decline was driven primarily by amortization of
intangible assets related to the acquisition of MPI Research. On a
non-GAAP basis, the operating margin increased to 22.6% from 22.3% in
the third quarter of 2017. The non-GAAP operating margin increase was
driven primarily by operating leverage from higher revenue in the
Discovery Services business.
Manufacturing Support (Manufacturing)
Revenue for the Manufacturing segment was $106.2 million in the third
quarter of 2018, an increase of 11.5% from $95.3 million in the third
quarter of 2017. Organic revenue growth was 12.5%, driven primarily by
robust demand in the Microbial Solutions and Biologics Testing Solutions
In the third quarter of 2018, the Manufacturing segment's GAAP operating
margin decreased to 31.3% from 33.5% in the third quarter of 2017. On a
non-GAAP basis, the operating margin decreased to 33.4% from 36.5% in
the third quarter of 2017. The GAAP and non-GAAP operating margin
declines were driven primarily by costs associated with capacity
expansions, principally in the Biologics Testing Solutions business.
Updates 2018 Guidance
The Company is updating its 2018 financial guidance, which was
previously provided on August 8, 2018.
The Company is increasing its guidance for both reported and organic
revenue growth. The updated revenue guidance is driven primarily by
robust revenue growth in the third quarter, and the belief that the
strong demand trends will continue for the balance of the year. Foreign
exchange is now expected to contribute approximately 1.5% to reported
revenue growth, compared to the Company's prior outlook of an
approximate 2% benefit.
The Company is updating its guidance for GAAP and non-GAAP earnings per
share. The Company is increasing its GAAP earnings per share guidance,
driven primarily by the refinement of its estimate for amortization of
intangible assets related to the MPI acquisition and adjustments related
to the tax impact of U.S. tax reform and the CDMO divestiture. The