CRL · Earnings call · 2026Q2T · Full report
Operating Margin Drivers
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. · 2026-08-05 · Importance 42 · Surprise 40 · No source text
Non-GAAP operating margin increased 420 basis points sequentially to 20.5% in the second quarter. The improvement reflected reduced pressure from first-quarter discrete headwinds and partial-quarter benefits from completed divestitures. Manufacturing operating margin rose 500 basis points year over year to 37.8%, while DSA margin improved 460 basis points sequentially to 25.6% but declined 180 basis points year over year because of higher study-related direct costs. Lower Cambodian NHP sourcing costs are expected to begin benefiting DSA margin in the third quarter and contribute most significantly in the fourth quarter.
Key facts
- The company expects operating margin expansion of approximately 120 to 150 basis points in 2026, with Manufacturing and DSA segments driving the year-over-year increase and a clear line of sight into at least 500 basis points of second-half improvement compared to the first half.
- Third quarter operating margin is projected to improve approximately 200 basis points sequentially versus the second quarter due largely to lower corporate costs and a full quarter benefit from the divestitures.
- CHARLES RIVER LABORATORIES INTERNATIONAL, INC. said it called out at least 500 basis points impact in Q4 because of when nonhuman primates are coming through on the revenue line.
- CHARLES RIVER LABORATORIES INTERNATIONAL, INC. stated not to take the Q4 run rate as a run rate going forward and said they expect some margin expansion in 2027 from the full impact of divestitures and the Cambodia acquisition.
- Manufacturing segment operating margin improved 500 basis points year-over-year to 37.8%, driven primarily by the benefit of the CDMO divestiture.
- Second quarter operating margin improved 420 basis points sequentially to 20.5%.
- RMS operating margin declined 80 basis points to 24.5% in the second quarter due largely to lower sales volume and an unfavorable geographic revenue mix.
- DSA operating margin decreased 180 basis points year-over-year to 25.6% but increased 460 basis points sequentially from the first quarter.
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| margin | positive | committed | +4.3% | The company expects operating margin expansion of approximately 120 to 150 basis points in 2026, with Manufacturing and DSA segments… |
| margin | negative | probable | -2.5% | CHARLES RIVER LABORATORIES INTERNATIONAL, INC. said it called out at least 500 basis points impact in Q4 because of when nonhuman primates… |
| margin | positive | committed | +1.7% | Third quarter operating margin is projected to improve approximately 200 basis points sequentially versus the second quarter due largely… |
| margin | positive | committed | +1.1% | The company expects operating margin expansion of approximately 120 to 150 basis points in 2026, with Manufacturing and DSA segments… |
| margin | positive | probable | — | CHARLES RIVER LABORATORIES INTERNATIONAL, INC. stated not to take the Q4 run rate as a run rate going forward and said they expect some… |