CHARLES RIVER LABORATORIES INTERNATIONAL, INC. (CRL)

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

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2025 as filed with the SEC on February 18, 2026. The following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in Item 1A, “Risk Factors” included elsewhere within this Form 10-Q. Certain percentage changes may not recalculate due to rounding.

Overview

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

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

Segment Reporting

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

Our RMS reportable segment includes the products and services offered within Research Models, Research Model Services, and Cell Solutions. Research Models includes the commercial production and sale of small research models, as well as the supply of large research models. Research Model Services includes: Insourcing Solutions (IS), which provides colony management of our clients’ research operations (including recruitment, training, staffing, and management services) within our clients’ facilities as well as our own vivarium space, utilizing our Charles River Accelerator and Development Lab (CRADL™) offerings, Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models; and Research Animal Diagnostic Services (RADS), which provides health monitoring and diagnostics services related to research models. In May 2026, we sold the Cell Solutions business, reported in the RMS segment, which provided controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood and bone marrow as well as cells from disease state donors.

Our DSA segment is comprised of Discovery and Safety Assessment services. We provide regulated and non-regulated DSA services to support the discovery, development, and regulatory-required safety testing of potential new drugs, including in vitro (non-animal), in vivo (in research models) and in silico studies, laboratory support services, including bioanalytical and strategic non-clinical consulting and program management to support product development. In May 2026, we sold certain European Discovery Services businesses.

Our Manufacturing reportable segment includes Microbial Solutions, which provides in vitro lot-release testing products, microbial detection products, and species identification services and Biologics Solutions (Biologics), which performs specialized testing of biologics (Biologics Testing Solutions). In May 2026, we sold the contract development and manufacturing products and services (CDMO) business, reported in the Manufacturing segment.

Fiscal Quarters

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

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Global Market Environment

We are continuing to see a cautious, but improving, spending environment from our client base, principally within our DSA segment as the challenging demand environment experienced in the recent prior quarters has persisted. As we continue to navigate these challenges in the current macroeconomic environment, DSA backlog increased slightly to $2.0 billion as of June 27, 2026 from $1.9 billion as of December 27, 2025.

In response to recent trends, we continue to implement cost savings initiatives focused on driving greater efficiencies, as well as restructuring actions that have been implemented over the past three years that were focused on workforce right-sizing and site optimization. More recently, efficiency initiatives have targeted incremental savings through process improvements, procurement synergies, and implementation of a global business services model. Collectively, these actions are expected to generate approximately $300 million in cumulative, annualized cost savings by the end of 2026, of which more than $175 million benefitted fiscal year 2025. Workforce right-sizing actions resulted in severance and transition costs while costs related to the consolidation of facilities to optimize our global footprint and drive greater operating efficiency across the company resulted in asset impairments, accelerated depreciation, and other site consolidation charges. We incurred restructuring charges of $23.1 million and $54.6 million during the three and six months ended June 27, 2026, and $99.8 million and $107.0 million during the fiscal years 2025 and 2024, respectively.

Recent Acquisitions

We make strategic acquisitions designed to expand our portfolio of products and services to support the drug discovery and development continuum. We maintain an acquisition strategy that focuses on augmenting internal growth of existing businesses with complementary acquisitions. Our recent transactions are described below.

On April 17, 2026, we completed the acquisition of an additional 79% equity interest in PathoQuest SAS (PathoQuest), for $67.6 million. The acquisition was funded through a combination of available cash and proceeds from the Credit Facility. This business is reported as part of our Manufacturing reportable segment. For more details, please see Note 2 – Acquisitions and Divestitures in Part I, Item 1.

On January 14, 2026, we completed the acquisition of certain assets of K.F. Cambodia Ltd (Cambodian NHP Supplier), a leading supplier of non-human primates (NHPs) located in Cambodia. The preliminary purchase price for the Cambodian NHP Supplier was $507.3 million, consisting of $335.0 million paid at closing and $172.3 million representing the acquisition date fair value of deferred consideration, which is payable upon the satisfaction of certain post-close conditions. As of June 27, 2026, $105.0 million of deferred consideration remains to be paid which is recorded in Accrued liabilities on the unaudited condensed consolidated balance sheets. The acquisition was funded through a combination of available cash and proceeds from our Credit Facility. This business is reported as part of our DSA reportable segment for NHPs vertically integrated into the DSA supply chain and the RMS reportable segment for those NHPs sold to third party customers. For more details, please see Note 2 – Acquisitions and Divestitures in Part I, Item 1.

Recent Divestitures

We routinely evaluate the strategic fit and fundamental performance of our global businesses, divesting operations that do not meet key business criteria. As part of this ongoing assessment, we determined that certain capital could be better deployed in other long-term growth opportunities.

On May 22, 2026, we sold certain European Discovery Services businesses (European Discovery Divestiture) to IQVIA Inc. (IQVIA) for a preliminary purchase price of $125.2 million in cash, net of costs to sell and subject to certain customary closing adjustments. We may also earn up to $10.0 million of contingent payments, which are tied to future performance. The contingent payments have been valued at $2.8 million using a discounted probability weighted model. The results of the European Discovery Services businesses were reported in our DSA reportable segment. During the three and six months ended June 27, 2026, we recorded a gain on the divestiture of $0.3 million within Other (expense) income, net on the unaudited condensed consolidated statements of income (loss).

On May 6, 2026, we sold our CDMO and Cell Solutions businesses (CDMO and Cell Solutions Divestiture) to GI Partners (GI) for net cash paid to the buyer of $12.4 million, net of costs to sell and subject to certain customary closing adjustments. Additionally, we may be required to fund up to $45.0 million of future EBITDA losses and capital expenditures of the divested businesses over a four year period, which is expected to be fully used by GI. Conversely, we may also earn up to $50.0 million of contingent payments, which are tied to future performance and achievement of milestones. The contingent payments receivable have been valued at $15.7 million using a discounted probability weighted model. The results of the CDMO and Cell Solutions businesses were reported in our Manufacturing reportable segment and RMS reportable segment, respectively. During the three and six months ended June 27, 2026, we recorded a loss on the divestiture of $63.7 million and $181.7 million, respectively, within Other (expense) income, net on the unaudited condensed consolidated statements of income (loss).

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In March 2026, we completed the sale of certain assets located at our Wilmington, Massachusetts site. The assets consisted of office, laboratory and mixed-use buildings within our RMS segment and unallocated corporate, and was sold to an unrelated third party for cash consideration of $60.1 million, net of costs to sell. In conjunction with the sale, we entered into a long-term operating lease for certain buildings to support RMS and unallocated corporate operations. Upon meeting the criteria for sale leaseback, we derecognized the book value of $21.6 million and recognized a pre-tax gain of approximately $38.5 million. The gain was recognized within our RMS reportable segment and unallocated corporate for $23.2 million and $15.3 million, respectively, and is included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income (loss).

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

Results of Operations

Consolidated Results of Operations and Liquidity

Revenue for the three months ended June 27, 2026 decreased $28.1 million, or 2.7%, to $1,004.1 million compared to $1,032.1 million in the corresponding period in 2025. Revenue for the six months ended June 27, 2026 decreased $16.4 million, or 0.8%, to $1,999.9 million compared to $2,016.3 million in the corresponding period in

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and related notes appearing in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. A discussion of our results of operations for the fiscal year ended December 28, 2024 and a comparison of our results for the fiscal years ended December 28, 2024 and December 30, 2023 was included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the SEC on February 19, 2025. In addition to historical consolidated financial information, the following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Certain percentage changes may not recalculate due to rounding.

Overview

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

Our client base includes major global pharmaceutical companies, many biotechnology companies; agricultural and industrial chemical, life science, veterinary medicine, medical device, diagnostic and consumer product companies; contract research and contract manufacturing organizations; and other commercial entities, as well as leading hospitals, academic institutions, and government agencies around the world. We currently operate in over 120 sites and in over 20 countries worldwide, which numbers exclude certain Insourcing Solutions (IS) sites.

Segment Reporting

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

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

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

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

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Fiscal Quarters

Our fiscal year is typically based on 52-weeks, with each quarter composed of 13 weeks ending on the last Saturday on, or closest to, March 31, June 30, September 30, and December 31. A 53rd week in the fourth quarter of the fiscal year is occasionally necessary to align with a December 31 calendar year-end, which occurred in fiscal year 2022.

Business Trends

In fiscal year 2025, demand from biopharmaceutical clients stabilized and began to show early signs of improvement as clients continued to navigate a challenging and evolving environment. Demand from larger biopharmaceutical clients began to improve early in the year following the prior year’s constrained budgetary spending as a result of restructuring initiatives and reprioritization of their drug development programs. Meanwhile, small and mid-sized biotechnology clients experienced a gradual improvement in funding over the course of fiscal year 2025, particularly in the second half of the year, that led to an improvement in DSA demand trends as we exited the year.

Despite the current, challenging market environment, many of our pharmaceutical and biotechnology clients continued to benefit from the long-term value of strategic outsourcing to improve their operating efficiency and to access capabilities that they do not maintain internally. Many of our large biopharmaceutical clients have continued to rely on relationships with outsourced partners like Charles River to enhance their drug discovery and early-stage development efforts, and biotechnology companies to assist them in bringing new drugs to market. Because of a continued cautious view with regard to early-stage R&D spending, revenue to both large biopharmaceutical clients and small and mid-sized biotechnology clients declined in fiscal year 2025. However, our ability to continue to deliver our leading suite of research, non-clinical development, and clinical bioanalytical solutions has endeavored our clients to continue to choose to partner with us for our flexible and efficient outsourcing solutions, broad scientific capabilities, and global scale.

Revenue for DSA declined in fiscal year 2025 as demand trends resulted in lower study volumes in both discovery and safety assessment services, driven by both large biopharmaceutical and small and mid-sized biotechnology clients. Despite the revenue declines, DSA demand trends, including net bookings, for large biopharmaceutical clients meaningfully improved in fiscal year 2025 as clients worked through a period of restructuring and pipeline reprioritization. Net bookings from small and mid-sized biotechnology clients showed modest improvement, consistent with improving funding levels later in the year. DSA backlog decreased to $1.9 billion as of December 27, 2025 from $2.0 billion as of December 28, 2024.

Revenue for RMS increased in fiscal year 2025 due largely to higher revenue from large research models and increased pricing for small research models. Additionally, revenue from research model services improved modestly driven by the IS and GEMS businesses. Despite pressures from early-stage biotechnology and government funding in North America, as well as a focus on alternative methodologies, we are confident that research models and services will remain essential tools for our clients’ drug discovery and early-stage development efforts.

Within the Manufacturing segment, the Microbial Solutions business saw robust growth benefitting from strong demand across the comprehensive manufacturing quality-control testing portfolio, including Accugenix® microbial identification services, led by increased AxxessTM instrument placements; share gains for our Endosafe® endotoxin testing platform; and higher sales of Celsis® microbial detection products. Biologics Testing was impacted by lower sample volumes from both biopharmaceutical and CDMO clients, particularly several large clients facing project delays or regulatory challenges. The CDMO business was challenged due to lower commercial revenue in fiscal year 2025, including a relationship with one commercial cell therapy client that ended during the year.

In response to recent trends, we continue to implement cost savings initiatives focused on driving greater efficiencies, as well as restructuring actions that have been implemented over the past three years that were focused on workforce right-sizing and site optimization. More recently, additional efficiency initiatives have targeted incremental savings through process improvement, procurement synergies, and implementation of a global business services model. Collectively, these actions are expected to generate approximately $300 million in cumulative, annualized cost savings by the end of 2026, of which more than $175 million benefitted fiscal 2025. Workforce right-sizing actions resulted in severance and transition costs while costs related to the consolidation of facilities to optimize our global footprint and drive greater operating efficiency across the company resulted in asset impairments, accelerated depreciation, and other site consolidation charges. We incurred restructuring charges of $99.8 million and $107.0 million during the fiscal years 2025 and 2024, respectively.

In fiscal 2025, we announced as part of our Board of Directors’ comprehensive strategic review of our business and growth prospects, that we will focus on strategic initiatives to strengthen our leading scientific portfolio within our core markets through strategic acquisitions, partnerships, internal investments, and divestments of certain non-core assets, which represent approximately 7% of our 2025 revenue.

Despite the near-term market pressures that led to a modest revenue decline in fiscal year 2025, we believe clients will continue to benefit from the long-term value of strategic outsourcing to improve their operating efficiency and to access capabilities that

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they do not maintain internally. We believe that our comprehensive scientific capabilities and global scale, as well as the breadth and depth of our scientific expertise, quality, and responsiveness remain key criteria when our clients make the decision to outsource to us. As the scientific partner of choice to accelerate biomedical research, we are committed to driving greater efficiency and speed while providing exceptional service to our clients.

Recent Acquisitions

We make strategic acquisitions designed to expand our portfolio of products and services to support the drug discovery and development continuum. We maintain an acquisition strategy that focuses on augmenting internal growth of existing businesses with complementary acquisitions. Our recent transactions are described below.

On January 9, 2026, we announced we have exercised our option to acquire the remaining 79% equity interest in PathoQuest SAS (PathoQuest) for €51.6 million (or approximately $60 million based on current exchange rates), subject to customary closing adjustments. PathoQuest is a p

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