Charles River Laboratories International, Inc.

outlook has increased by approximately $8 million to a range of $103 to $108 million, primarily attributable to short-term borrowings to fund stock repurchases in the first quarter. At the end of the first quarter, our net leverage was 2.6 times. The non-GAAP tax rate in the first quarter was 22.5%, a decrease of 20 basis points year-over-year, due primarily to the favorable impact from last year's enactment of OB3, or the One Big Beautiful Bill. Our non-GAAP tax rate guidance for the full year remains unchanged at 22% to 23%, although it's currently trending towards the lower end of the range due to a favorable geographic mix. Free cash flow was negative $15 million in the first quarter, or a reduction of $127 million compared to the prior year period. This decline was expected and mainly driven by higher performance-based cash bonus payments for 2025, which are paid in the first quarter. CapEx declined modestly to $56 million, or approximately 5.6% of revenue in the first quarter, from $59 million last year. Our free cash flow outlook remains unchanged at $375 to $400 million in 2026. Turning to 2026 full-year guidance, we are reaffirming our organic revenue and non-GAAP earnings per share guidance, which had previously factored in the impact of the divestitures. All of our guidance referenced today assumes the planned divestiture of certain European discovery sites being completed in May, and as Birgit mentioned, we have completed the divestiture of the CDMO and cell solutions businesses this week. We continue to expect an organic revenue decline of 0.5% to 1.5% and non-GAAP earnings per share of $10.80 to $11.30 or 5% to 10% growth over 2025. This guidance includes earnings accretion of approximately $0.10 per share from the divestitures. On a reported basis, we reduced our revenue outlook by 50 basis points to a 4.0% to 5.5% decline because FX rates have become less favorable this year due to the recent strengthening of the U.S. dollar. From an earnings perspective, this FX headwind compared to our original outlook will be essentially offset by the accretion from stock repurchases. As a reminder, the acquisition of the assets of KF, or Charles River Cambodia, the divestitures, and incremental cost savings from our efficiency initiatives are expected to result in meaningful operating margin expansion this year. We expect approximately 120 to 150 basis points of improvement in 2026, with most of the benefit generated in the second half of the year. Combined with the abatement of the discrete margin headwinds in the first quarter, we expect the second half of the year operating margin will be over 500 basis points higher than the first six months of the year, with over half of this improvement being driven by completed acquisitions and divestitures, as well as the planned sale of certain European discovery sites. From a segment perspective, our organic revenue outlook for each of the segments remains unchanged from February. Our reported revenue outlook for the segments has been updated to reflect the impact of the divestitures, as well as less favorable FX impact. As a reminder, the divestitures are expected to reduce our reported revenue outlook by approximately 500 basis points in 2026. By segment, we now expect a reported revenue decrease in the low to mid single digits for the DSA segment and in the mid single digits for both RMS and manufacturing segments. We expect the most significant margin improvement in 2026 will come from the manufacturing and DSA segments. Moving to our second quarter outlook, as I mentioned earlier, we expect financial results to improve substantially on a sequential basis due primarily to operating margin improvement and normal seasonal trends in the DSA and biologic testing businesses. We expect reported revenue to decline at a mid to high single-digit rate year-over-year due primarily to the impact of the divestitures, while organic revenue is projected to decline at a low single-digit rate year-over-year similar to the first quarter. However, we expect second quarter earnings per share to improve significantly on a sequential basis, increasing at least 30% from the first quarter level of $2.06. The first quarter headwinds from the timing of NHP shipments in RMS and the NHP sourcing costs and study starts in the DSA segment are expected to subside in the second quarter. In addition, the manufacturing operating margin is expected to benefit from the CDMO divestiture. As a result, we expect all three segments will show a sequential improvement in operating margin in the second quarter. To conclude, as I step into the CFO role, I'm focused on driving initiatives to generate profitable growth through the disciplined execution of our pathway to purpose strategy. This includes advancing our M&A priorities, successfully integrating acquisitions, and delivering on our efficiency initiatives. Collectively, these efforts will strengthen our foundation and position us to deliver long-term shareholder value. Finally, I look forward to meeting many of you in the coming months. As Birgit mentioned, we plan to host an investor day in September where we will provide a more comprehensive update on our strategy priorities and long-term financial outlook. Thank you.

That concludes our comments. We will now take your questions.

Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. In the interest of time, we ask that you limit yourself to one question and one follow-up question. Once again, that is star 1 to signal and star 2 to remove yourself. I'll pause for just a moment to allow questions to queue. We'll take our first question from Elizabeth Anderson with Evercore ISI. Please go ahead.

Hi, guys. Good morning, and thank you so much for the question. Welcome, Glenn. Nice to be with you again. For my question, I wanted to just sort of double-click maybe on the demand environment. I appreciate all of the questions or comments about the environment. Can you talk about the typical seasonality that we sort of think about in terms of the demand cycle. I know we've typically seen a little bit of a slower start to the year sometimes as people get ramped up in January and February, and then it sort of seems to do that, plus obviously what you were talking about, about some of the funding environment. And then as a follow-up question, I was wondering if you could comment on sort of NAMs and what you're sort of seeing, any updates in terms of demand conversation with clients. Thank you.

Certainly. Thanks, Elizabeth. Happy to update on domain seasonality and names. So let me start maybe with the seasonality. So we have several of our business see somewhat seasonality in terms of bookings, even proposal volume. Our DSA business is one of them where we're seeing proposals and bookings starting a little slow in the beginning of the year. sometimes also on the revenue basis that we see a slow start. And it generally has to do with budgets being approved, our clients coming back to work often in January. There's a reprioritization of programs. So it just takes a little while to ramp up. We have a couple other businesses. Our biologics testing business definitely has a seasonality. They support manufacturing of biologics and More often than not, the Christmas time is the time that manufacturing is closed down for maintenance and revalidations, and so we are not seeing the same amount of samples coming in. Our microbial business is another one where we see definite seasonality into the fourth quarter, actually, for this business, where The business is ramping up often in the fourth quarter because companies may have budgets they want to use up. And because this is basically an arrangement you can keep on the shelf in inventory, often we see a spike in businesses there. So nothing abnormal. We have seen the same seasonality in some manner this year. It's expected, and we generally consider that when we do our budgets and our guidance here. As far as the demand environment, I think we all share cautious optimism. BioTech funding, quite a bit better over the last couple quarters. IPO reopening, again, cautiously optimistic that this will continue. And then our pharma clients have definitely worked through a lot of their restructuring, reprioritization of programs. Any discussions we have with them is about speeding up their work, getting more programs through the pipeline rather than holds and reprioritization. So from that perspective, we're quite comfortable what we're seeing. But certainly it's early stage and we always will be cautious about going too far over on our skis. Then let me jump into the names or new approach methods. So names and new approach methods are a part of what we do. So they're part of a toxicology study. And we have spent basically three decades on reduction of animals. NAMs have always been a part of that. NAMs availability has accelerated a little bit over the last maybe decade. We have made some acquisitions in this space. We just did one literally a month ago, so the Path Request acquisition is squarely in the NAMs category. So as we continue to evolve our business, we will continue to bring names into our business model, either through organic development, in-licensing, or M&A. And as technology evolves, as maybe the ability of AI to predict insights evolves, we will evolve our business model with it. It's an evolution. It's not a revolution. So it will take time, but you will hear more and more and more about us bringing those technologies in. What I want to point out, it's not a separate business. It will always be part of our DSA and other divisions' revenue model, and it will just continue to grow. I hope I answered your question.

Yeah, that was super helpful. Thank you.

We'll turn now to Max Smock with William Blair. Please go ahead.

Hi, Glenn. Maybe just following up on that prior question around activities so far here, there was some commentary in the deck around seeing a healthy increase in proposals in the first quarter. I wonder if we could just get some more color around what proposals look like year over year and sequentially, and then just more detail around how proposals trended among each client segment would be helpful. Thank you.

Yeah, happy to. So we've been quite happy with the proposal volume year over year. In both segments, so both in our global biopharmaceutical as well as in our biotech segment, proposals were up quite nicely in the, I would say, high single digits, which gives us a lot of confidence that our booking trend will continue to and our netbook to build trend will continue. So it does show us that there is a lot of clients that are ready to get restarted on work and smaller clients, and that our pharmaceutical clients, as they have indicated verbally to us, are looking to put more work, more programs through the pipeline to get to more INDs, to get to more programs into the clinic. So quite happy to see that.

Now we just add their sequential basis. We've seen proposals come up three quarters in a row sequentially. So positive trend sequentially as well.

Got it. So the high single digit was year over year for both cohorts. And then, Glenn, you're saying you've also seen some improvement sequentially as well.

Correct.

We're three quarters in a row. Okay. Maybe another question. unrelated question here on AI. Birgit, it sounded like, you know, your comments, your prepared remarks, it sounded like you feel pretty comfortable with this idea that AI investments in drug discovery are going to lead to more preclinical testing longer term. Are you seeing that play out at all yet, or is that more something that, you know, we really probably don't see until, you know, we get a couple years into the future here?

Yeah, thanks for that question. So, I'm actually personally very excited about AI and what it will do for the In particular, so right now the sample set of AI discovered or assisted, I should say, drug programs is very, very small. So it's hard to make a real conclusion from that. What I can tell you is that AI assisted drug discovery companies generally work on a lot of different programs rather than one program at a time. And as we're working with most of them, all of them, on their programs as their web lab, I'm optimistic that this trend will show itself and that we will see more programs coming through from AI. It also should still need to be seen. lower the cost of early discovery. And with that, there's more money for reinvestment. But again, it's very early days. There's so few programs in the pipeline that are AI-assisted. But just theoretically, hypothetically, we know that AI will have a nice impact on that.

Thanks again for taking our questions.

Certainly. Okay. We'll move next to Patrick Donnelly with Citi. Please go ahead. Your line is open.

Hey, guys. Thank you for taking the questions. Glenn, maybe one for you on the margin side. Certainly appreciate the color on the 2H step up. And, again, it feels like you guys have real tangible reasons to kind of do that build. Can you just talk through a little bit? It sounds like half of it's M&A, half of it's some of the other moving pieces. Can you just talk through kind of the bridge there on 2H and And then any reason why that momentum wouldn't kind of continue to build into, obviously it's our way to talk 27, but just going forward, you know, given the KF acquisition, what that means to the margins, any reason that momentum wouldn't continue into the go forward?

Sure. No, thanks for the question. If we look at the first half of the year, obviously year over year, we're expecting to be down, but we do expect a pretty significant sequential increase in our margins going from Q1 to Q2 that supports the greater than 30% increase in earnings per share. So we do expect a pretty meaningful step up in our operating margins. That being said, when we look at the half-to-half numbers, we're going to be in the high teens margin-wise in the first half of the year and expect 500 basis points improvement in the second half of the year. I did mention in my prepared remarks over half of that improvement just coming from acquisitions and divestitures. In addition, if you look at our corporate costs, the one-time discrete items in Q1 that don't recur and some cost savings initiatives, that will drive another big portion of the half-to-half improvement, coupled with the timing of the NHP shipments in RMS and some additional lower costs for expecting to come out of DSA. So we've got a clear line of sight. I know it's a big jump when you look at the half-to-half numbers, but we feel very confident in the numbers. and we've got a clear line of sight about how we get there. Relative to 2027, I think the only comment I'll make is from an acquisition and divestiture point of view, we've already given numbers around the annualized impact of acquisitions and divestitures. So we said for acquisitions on an annualized basis, about $0.60 from KF, and for divestitures, it's $0.30. And for this year, in 2026, Equivalent numbers on a part-year basis is 25 cents for acquisitions and 10 cents for divestitures. So said differently, if you take the 90 cents less than 35, you can expect roughly 50 to 55 cents of accretion just from the acquisitions and divestitures in 2027 versus 2026. I think that's the only comments we're going to make around the 27 margin numbers.

Yep, makes a lot of sense. Thank you. And then, Birgit, maybe just, you know, On the demand side, certainly appreciate all the color you've given. Can you just talk about that kind of small, midsize, early biotech portion, what you're seeing there? Obviously, to your point, the funding has looked really healthy here for a couple quarters. How much improvement are you seeing in those conversations? Are those dollars really starting to show up? Where are we in the cycle of that early piece from your perspective? Thank you guys so much.

Yeah, happy to. So when we talk about our biotech clientele, there's obviously considerable size differences between the clients. A lot of the funding we're currently seeing, IPOs are a little bit bigger companies, later stage. They have easier access to funding. That's definitely also where we're seeing quite a bit of an uptick. in their demand. I would say the smaller biotech, very early stage, that is still a little sluggish and we see that the funding is a little lower and then also the discussions are still more cautious in that regard. We do see that clients often, when they see just general funding come in, get more confidence in their ability to get funding later on and start spending. So we're seeing that a little bit. But we still have this segment that early companies start being a little bit lower than we would like to see. So we have areas of our business, like our Gradle business unit, where we don't see the demand being where we would like to see it yet. So still a little bit mixed and still opportunity for improvement there.

Thank you.

We'll hear next from Callum Titchmarsh with Morgan Stanley. Please go ahead.

Great. Thanks a lot for the question, guys. Just as we think about the business review and some of the acquisitions and diversities announced over the past six months or so, Any incremental ambitions to add or subtract from the business today, or can we assume most impactful changes have been actioned? And obviously seeing the buybacks too, so maybe just level setups on capital allocation ambitions from here.

Yeah, happy to, Callum. So we will continue and always have to look at our businesses to see which ones are synergistic to the business, which are profitable, where should we be located, what solutions should we provide to our clients. So that will be an ongoing review that we do with our board. And at times you will see certainly that we will either consolidate a site or close a site or divestitures could come up again. So that is just the nature of how we run our business. From an M&A perspective, you already saw a couple of M&As this year. We have a clear roadmap of where we believe the company should be investing in, in terms of M&A and a couple other smaller partnerships. That is hard to predict, as you quite never know when the target is available. Can you actually acquire the target? Does it make sense from a returns perspective? And then we continue to invest organically in our business. And then you already mentioned the buyback. So we will continue to look at all areas of capital allocation. and make decisions for the best returns for long-term strategy execution as well as shareholder value.

Great. And I think you called out $200 million of annual DSA revenue from NAMS before. I'm not quite sure where that is post these acquisitions and divestitures, but could you just give us a sense of the latest size and how that's been growing? Thanks a lot.

Yeah, so that was the number we had provided, I think, in 2020, late 2024, 2025. And since then, we have added a few different programs and actually in M&A, so the Path Request acquisition is squarely in the NAMS space where we are replacing in vivo virology work with next generation sequencing, a really good technology. And then you're right, with the divestiture of the discovery assets in Europe, there is roughly, we will retain roughly two-thirds of the names revenues that we had called out. So if you take those two together, a little bit of organic investment we had done in other areas, we're probably kind of back to where we were. but we will continue to drive that, and our focus is on the regulated space here where most of our business is. So it continues to be a very strong commitment of Childs River, and we have established a scientific advisory board under Dr. Pambas, and we have a lot of activities going on in that space right now. So you will continue to hear about technologies how we look at this, how we bring new technologies in, what it will replace. We also just made an announcement on virtual control groups and was actually part of our remarks. Just another example how we look at names for our business and we see it as an integrated approach where we will bring in more and more technologies and run them as hybrid studies together with our conventional approach.

Thank you. We'll hear next from Justin Bowers with Deutsche Bank.

Please go ahead.

Hi, good morning, everyone. So two-parter from me. One, can you talk about the conversion rates and the velocity of decision-making that you're seeing across the increasing proposal volume over the last three quarters? And then part two, I just wanted to clarify on the comment on large pharma verbally saying that they want to put more work into the INDs. Does that imply that pharma is increasing their overall budget or intend to for preclinical spend this year and beyond?

Yeah, I'm happy to... So let me start with the conversion rates. So if you look back to the, I guess the COVID timelines where capacity was quite tight, companies had to plan way ahead. Discussions were like literally two years ahead of placing a study. So really long Customers booked out very long because they had to. What we're seeing currently is quite an acceleration of when clients come in on a proposal and then book and place the study. Generally, when we model it, we're saying from a discussion to proposal to bookings, it's one to two quarters and then maybe one to two quarters to get to revenue. However, in some instances, particularly with customers we have a long-term relationship with, that often accelerates because they got scientific data or they're reprioritizing a program. And we sometimes see literally from a proposal to getting revenue within the same quarter. And so conversion rates are obviously generalized. accelerated, and this is actually something that gives us a better quality of our backlog because we know that those programs are actually being run and not being canceled later on because the prioritization of budgets have changed. To the second questions about the INDs, as you can imagine, every pharma company we talk to talks about more programs into IND, more programs into the clinic. And our counterparts, our contacts, will always talk about, but we have to do it with the same budget. But you can imagine that's obviously not possible. But we do see a refocus on the preclinical and earlier stage efforts in those companies. Otherwise, they would not get the programs to the clinic.

Thank you, Birgit.

Thank you.

We'll hear next from Josh Waldman with Cleveland Research. Please go ahead.

Morning. Thanks for taking my questions. Birgit, I wondered if you could comment more on what you're seeing from global pharma accounts here to start the year. Were bookings from these accounts any better or worse than you expected? Did the trend improve through the quarter? It sounded like you saw a slow start, but I'm curious if you were more encouraged based on what you saw here in March and April.

Yeah, so for the global biopharma, booking specifically was below last year's bookings. But let me take you back to last year. We had an incredible booking quarter last year because a lot of the global pharma companies had literally reprioritized for months, and then early in the year they got their new budgets, and there was just a slew of bookings that came in. So this isn't something we didn't expect. We feel bookings are adequate, and they are supporting what we're hearing from them, that they want to do more work. So with that, I would say that overall this is a segment that is quite stable and increasing for us. We also see proposals up for them, which tells us basically that in the next quarters we should see that bookings rate to come up.

Okay. And then you mentioned more biotech M&A being favorable in terms of funding for these accounts. But I'm curious, in the past, have you seen higher M&A activity drive improved access to biotech wallet share? I guess just given your stronger share position in large pharma, do you think large pharma accounts acquiring small biotech ultimately means you get better access to these accounts? Is this a dynamic you've seen historically?

Yeah, so a lot of times we actually do work with those small biotechs before they get acquired from pharma. And in that case, we retain the work and we'll continue to work with them. Some cases they get acquired and we work with a pharma company and any new programs we get access to. So it's a little bit of a mixed model. So as long as they continue the program, and that's why they're actually acquiring them, we will get our share of Our focus is certainly on making sure that we get a higher and higher share of the wallet from our particular pharmaceutical companies. And that is why our client centricity program, our initiative of making working with our clients easy and easier, providing them with better solutions and faster timelines is so important. It could go either way, but in general, it's not a headwind. It is either a tailwind or it's just net neutral.

Got it. Thanks for taking my question.

We'll turn next to Cassidy Van Epps with Jefferies. Please go ahead.

Hi. Cassidy on for David Windley today. Thanks for taking the question. So digging a little bit more into margins, so with most of your NHP supply now internally owned? How should we think about the margin impact, specifically within DSA? And does this change management's longer-term margin framework for the segment?

You know, I'll jump in and take this one. Just keep in mind, we're still working through some higher NHP costs, really for the first half of the year. It'll get a little bit better in the second quarter, but the real big improvement is Q4 for our DSA segment. We're not going to specifically call out the margin improvement. I think a big part of the reason why we bought KF was the supply chain resiliency and giving us better predictability of the supply chain. And obviously, with that should come improvements in our financial performance, but we'll give more guidance on 2027 and what it means when we get to February of next year.

Okay, perfect. And then following up, so with how much of the NHP P-supply from Novoprim and KF is still obligated to external customers, and then when does that fully become available to Charles River? Thank you.

Yeah, I can talk about that. So the external customer that you're referring to is actually from our Mauritius farms, and When we bought the Mauritius farm, we bought the external relationship with the supply. Ultimately, the goal is to use the animals on safety assessment studies and moving them over. And that will kind of be a transition over the next few years. And as you can see, you'll probably see that we already have more and more animals on our safety study. And then that will kind of end over the next few quarters.

Perfect. Thank you. We'll turn now to Casey Woodring with J.P. Morgan. Please go ahead.

Hi, this is Sebastian Sandler on for Casey. Thanks for taking my question. I wanted to first double-click on expectations for biotech revenue pacing over the balance of the year. Within that bigger, later-stage client segment that's been benefiting from M&A and funding starting towards the end of last year, do you expect this specific segment to return to growth in 2Q, maybe ahead of smaller biotechs and biopharma, or should we just expect more of a back-half rebound consistent with your expectation for total GSA growth?

Yeah, so what we're currently seeing in Q1 is that this segment, from a revenue perspective, is still down. That is coming from the lower bookings last year. And we believe that we'll rebound over the next quarter or two because of the bookings we're currently seeing. So there's a lack of about a quarter to two. And so we will definitely see this segment to rebound to more of a growth rate as we enter, I would say, Q3, Q4 for sure.

Thanks. And then you call out strength and research models in China. Can you remind us of the revenue base in China within RMS, what that grew in the quarter, and then just expectations for the full year? And then more broadly, how are you thinking about your current exposure to the China market within RMS and DSA outside of the recent NHP acquisitions? And what is your overall level of interest in expanding that through M&A in the future? Thank you.

Yeah, so our RMS China business is a small part of overall child-driven revenue. It's approximately 5%, or actually less than 5%. But it is a critical asset for us as it provides us access to the Chinese market. So the Chinese RMS business is one of the leaders in the industry for providing research models, as well as many services that we also offer here in the western part. From other services and solutions, specifically the DSA that you asked, We currently don't have any facilities in China. We do get some work from companies that work in China or want to file INDs in China, but not a physical presence. We are continuing to watch this market very closely as a lot of the drug programs are in license from China. because of the accelerated innovation. And we certainly will continue to look at this to see if we should expand our structure in China based on cost of demand, growth rates, but also looking at geopolitical risk on that.

Great. Thank you.

Our next question will come from Anne Hines with Mizuho Securities. Please go ahead.

Good morning. Thank you. Your $300 million cost program, can you remind us what you'll be annualizing as we exit 2026 and any incremental uptake for 2027 and 2028? And then secondly, just on AI, and this has been in the news a lot, some of the big pharma companies investing in AI. And I know during the Great Recession, a lot of the big pharmaceutical manufacturers invested close their capacity for early development. Do you think there could be a risk that they increase their capacity again over the next few years? Thanks.

Yeah, let me start and then on the cost savings and then I will move over to AI. And if Glenn has any additional add-ons to the cost saving, I will ask him to chime in here. So the cost savings are roughly $300 million of cost that we have taken out over the last several years, about 5% of our cost base. For this year, we said it's an incremental $100 million. It's too early to talk about $27 and $28, but as we said, we are continuing to look for cost efficiencies, modernizing the company, seeing how we can reduce timelines, making the operations more efficient. So you should continue to think about us having cost efficiencies, but we're not in a position right now to give you any specific numbers on 27 and 28. We will provide long-range financial numbers probably in our investor days, and we will also talk more about where those cost efficiencies are coming from. AI is an interesting topic, both for cost efficiencies, but then also for how drug development is being performed. So for us specifically, we invest in AI in multiple areas to A, be more efficient, maximize our capacity, streamline our communication with our clients, and also to reduce the number of animals needed on a drug program. Our clients are investing primarily in the early stage and a little bit in the clinical space. In the early stage, that is things like target identification, molecular design. That will allow them, hopefully at some point, if AI delivers, to bring drugs into the regulated safety assessment space faster and maybe more programs. I do not think that our clients will want to insource any of the work that we are doing. So our work that we do is very highly outsourced and not a lot of companies still have capacity nor the skill set to do the work. So from what we're hearing with our clients in the discussions, they are actually looking more for a collaboration on how they can utilize AI in the earlier stage, so before we get the work, rather than doing the work that we are doing. So you might see more of insourcing in the really early or even in the clinical trials, but definitely I would not expect it in the preclinical stage. That's just so many complexities and capacity and regulated expertise that is required. It would not make any sense.

Okay. The only thing I would add to your comments is a lot of the great work the team has done over the last couple years of taking out all of these costs and $300 million of costs has been needed to preserve margins because the top line has not been growing. And so a lot of the cost increases that we see in the business for inflation and normal increases across the business have been offset by these initiatives and cost reductions. I just wanted to make that point.

Thanks for your question. Thanks.

We'll turn next to Yujin Park with Baird. Please go ahead.

Hi. Thanks for taking my question. You mentioned that for RMS, 1Q saw increased demand in small models from CRO clients. Was that comment specifically on China, or was it broad-based geographically? And is this a normal pattern, or could this be a signal of improving market dynamics?

So that comment was specifically to China. We have said that we saw much better demand in China and specifically for CROs and biotech. So we see this as an indication that the Chinese market is is rebounding and accelerating and for the need and the demand of the research models that we're providing to them. So a positive indication for the business.

We'll move next to Charles Rhee with TD Callen. Please go ahead.

Oh, yeah. Well, thanks for getting me in here. I'll just leave with one question here, and it's just kind of going back to the demand environment. You know, Brigitte, you kind of mentioned in the slides, biotech kind of highest levels you've seen in the last two years, maybe more large pharma, you know, kind of slowly rebounding, or maybe it's just more of a year-over-year comps. It kind of suggests maybe that biotech is going to present more opportunities, perhaps, over the next couple of years, and Does that change at all your go-to-market strategy and maybe any kind of impact on how it may give sense and how any of those businesses are priced on either side of that? And any kind of comments on that and where you see that mix going? Thank you.

Yeah, so we are pretty balanced in our revenue stream from pharma versus biotech. So we have... Historically, we have a very big share with the pharmaceutical clients, but we also have a considerable share with the biotech industry. So our go-to-market strategy for years has focused on a customized approach to make sure that we cater to both small as well as large companies, making sure that they get the collaboration they need. that our teams are basically on the same table no matter if it's a small or a large company. And that won't change. However, we are investing in a lot of tools and platforms and training to make sure that we continue to improve this go-to-market customer centricity program that we have in place so we can be an even better partner for our clients but also get more of a share of their wallet. In terms of pricing, we see a pretty stable pricing environment. It has really not changed over the last couple of years. Discounting is still strategically, it's still happening. Pricing will change when capacity is changing. So something that will come probably automatically But at the current time, we are making sure that we stay competitive and that we get the share of the wallet that we want from our clients. And from our proposal volumes, bookings, and capture rates, I think we're on the right track here.

Great. Thanks a lot, and congrats on the results. Thank you.

Our final question will come from Ryan Halstead with RBC. Please go ahead.

Thanks. Good morning. And thanks for taking the question. Maybe going back to the discussion on Asia, but asking it from a different perspective, from a competitive standpoint, a lot of attention, I think, has been made on, you know, competition from Asia and drug development work, and just would appreciate your perspectives on the competitive landscape for the business.

Yeah, thanks, Ryan. Interesting question. So, yes, so from an Asia perspective, specifically China, a little bit in India, there definitely has been a trend of more outsourcing, early-stage routine work outsourcing going to lower-cost countries. And this is something that we have evaluated for quite a while. We still don't see a lot of outsourcing going to China in complex work or regulated work where we do most of our revenues, but we are evaluating that. And that is also why we said a couple times now that overall we're looking at the Chinese market to see how or when we should play in a larger scale there. and what are the solutions that we have the right to play with in a marketplace like that. From another perspective, obviously the in-licensing of more programs from China into the U.S., into global biopharma is another area that we are watching. A lot of times we actually get to work on some of those programs but it will have an impact on the industry itself and we'll need to see where this is playing out too. So definitely China, a little bit India outsourcing is a focus areas of us to make sure that we understand what's going on there. But at this point, our core market and our core relationships are very, very strong here in North America. the EU and a little bit in Asia, and we will continue to double down on that.

Thank you.

Thank you. With no further questions in queue, I will turn the conference back to Todd Spencer for closing remarks.

Thank you for joining us on the call, and we look forward to seeing you at upcoming investor events. This will now conclude the call. Thank you.

Thank you. That does conclude today's Charles River Laboratories first quarter 2026 earnings call. Thank you for your participation. You may now disconnect.