WILMINGTON, Mass.--(BUSINESS WIRE)--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the third quarter of 2020. For the quarter, revenue was $743.3 million, an increase of 11.3% from $668.0 million in the third quarter of 2019.

Acquisitions contributed 2.2% to consolidated third-quarter revenue growth. The impact of foreign currency translation benefited reported revenue growth by 1.3%. Excluding the effect of these items, organic revenue growth was 7.8%, driven primarily by the Discovery and Safety Assessment and Manufacturing Support segments, with Research Models and Services also contributing.

On a GAAP basis, third-quarter net income attributable to common shareholders was $102.9 million, an increase of 41.3% from net income of $72.8 million for the same period in 2019. Third-quarter diluted earnings per share on a GAAP basis were $2.03, an increase of 39.0% from $1.46 for the third quarter of 2019. The GAAP net income and earnings per share increases were driven primarily by higher revenue, operating margin improvement, and venture capital investment gains. GAAP earnings per share included a gain from the Company’s venture capital and other strategic investments of $0.29 per share in the third quarter of 2020, compared to a loss of $0.01 per share for the same period in 2019. The Company’s venture capital and other strategic investment performance has been excluded from non-GAAP results.

On a non-GAAP basis, net income was $118.0 million for the third quarter of 2020, an increase of 40.8% from $83.8 million for the same period in 2019. Third?quarter diluted earnings per share on a non-GAAP basis were $2.33, an increase of 37.9% from $1.69 per share for the third quarter of 2019. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue and operating margin improvement, as well as a lower tax rate.

James C. Foster, Chairman, President and Chief Executive Officer, said, “Our exceptional third-quarter performance is indicative of several important factors: that our flexible and reliable outsourced solutions resonate with clients even more today than ever before; that our research model clients are already resuming their research activities; that the market environment remains robust; and that we are generating greater operating leverage across our businesses as a result of our efforts to build a more scalable and nimble organization.”

“The COVID-19 crisis has emphasized the strength and resilience of our business model, our differentiated portfolio, and our unwavering focus on the client experience, which collectively are enhancing our position as the leading, early stage contract research organization. As our clients focus on scientific innovation and invest more in their preclinical pipelines, we believe we will remain their partner of choice to move their early-stage programs forward,” Mr. Foster concluded.

Third-Quarter Segment ResultsResearch Models and Services (RMS)

Revenue for the RMS segment was $151.9 million in the third quarter of 2020, an increase of 14.6% from $132.5 million in the third quarter of 2019. The HemaCare and Cellero acquisitions, which were completed in January 2020 and August 2020, respectively, contributed 11.1% to third-quarter RMS revenue. Organic revenue growth of 2.0% was driven primarily by higher research model services revenue, particularly the Genetically Engineered Models and Services (GEMS) business, as well as strong demand for research models in China, which rebounded from the COVID-19 pandemic earlier than other geographic regions. Demand for research models outside of China improved significantly on a sequential basis as clients resumed more normalized research activities following COVID-19-related disruptions earlier in the year. As a result, client ordering trends for research models moved closer to pre-COVID-19 levels during the third quarter, particularly in Europe, but remained moderately below prior-year levels.

In the third quarter of 2020, the RMS segment’s GAAP operating margin decreased to 24.4% from 25.9% in the third quarter of 2019. The decrease was primarily due to acquisition-related amortization costs associated with HemaCare and Cellero. On a non-GAAP basis, the operating margin increased to 27.7% from 26.5% in the third quarter of 2019, primarily due to operating leverage from higher revenue, as well as the benefit of operating efficiency initiatives, including cost controls associated with our COVID-19 response.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $461.2 million in the third quarter of 2020, an increase of 9.8% from $420.1 million in the third quarter of 2019. Organic revenue growth of 8.6% was driven by strong demand in both the Discovery Services and Safety Assessment businesses.

In the third quarter of 2020, the DSA segment’s GAAP operating margin increased to 19.6% from 15.5% in the third quarter of 2019. On a non-GAAP basis, the operating margin increased to 25.2% from 22.1% in the third quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from higher revenue and the benefit of operating efficiency initiatives.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $130.2 million in the third quarter of 2020, an increase of 12.9% from $115.3 million in the third quarter of 2019. Organic revenue growth was 11.5%, driven primarily by robust demand in the Biologics Testing Solutions (Biologics) business. Revenue for the Microbial Solutions business increased in the third quarter and the growth rate improved from the second-quarter level, due primarily to gradual improvement in the backlog of delayed instrument installations related to the COVID-19 pandemic.

In the third quarter of 2020, the Manufacturing segment’s GAAP operating margin increased to 37.1% from 34.0% in the third quarter of 2019. On a non-GAAP basis, the operating margin increased to 39.1% from 36.4% in the third quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from robust revenue growth in the Biologics business, as well as contributions from the Avian Vaccine business. The elimination of duplicate costs associated with last year’s transition to the new Biologics facility also benefited the year-over-year operating margin comparison.

Increases 2020 Guidance

The Company is increasing its 2020 financial guidance, which was previously provided on August 5, 2020, primarily as a result of the better-than-expected third quarter performance. The revenue loss from the COVID-19 pandemic will be approximately $70 million in 2020, which is favorable to its prior estimate of approximately $100 million.

About Charles River

Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them. To learn more about our unique portfolio and breadth of services, visit www.criver.com.