チャールズ・リバー・ラボラトリーズ（CRL）2026年第3四半期決算説明会：DSAの成長加速に伴い業績見通しを引き上げ

主要ポイント

• チャールズ・リバー・ラボラトリーズの2026年第3四半期のオーガニック売上高成長率は4.7%を記録し、創薬・安全性評価（DSA）および製造部門が牽引する形で過去3年間で最高の伸びとなりました。
• Non-GAAP EPSは前年同期比27.2%増の3.09ドルとなりました。Non-GAAP営業利益率は23.0%に達し、前年同期比で330ベース・ポイント（bp）、前四半期比で250bp上昇しました。
• DSAのオーガニック売上高は5.9%増加しました。純新規受注額（ネットブッキング）は前年同期比32%増の6億5,200万ドルとなり、ネット・ブック・ツー・ビル比率は1.09倍、受注残高は20億3,000万ドルに拡大しました。
• 製造部門のオーガニック売上高は7.4%増加し、微生物ソリューション事業とバイオロジクス試験事業も同様の成長を示しました。同部門の営業利益率は38.6%に上昇しました。
• 経営陣は通期のオーガニック売上高成長率見通しを少なくとも1.5%へと引き上げ、Non-GAAP EPSの見通しも11.35〜11.55ドルに上方修正しました。
• 経営陣は、好調な市場動向が維持されれば、2027年にオーガニック成長が緩やかに改善し、2028年からは売上高成長率が長期目標である5%〜7%のレンジに達すると予想しています。

主要財務データ

事業および業績の動向

創薬・安全性評価（DSA）

DSAが主な成長ドライバーとなりました。規制対象の安全性評価試験の受託量増加は、非ヒト霊長類を用いた試験やバイオアナリシス（生体試料分析）サービスに対する継続的な需要を反映しています。

同部門の純新規受注額（ネットブッキング）は前年同期比32%増の6億5,200万ドルに達しました。ネット・ブック・ツー・ビル比率は1.09倍となり、4四半期連続で1倍を上回り、同期間の平均は約1.1倍となりました。受注残高は前四半期比、前年同期比ともに増加し、20億3,000万ドルに達しました。

経営陣によると、提案活動件数は前年同期比で5四半期連続増加しました。グローバル製薬企業および中小バイオテクノロジー企業の双方からの売上高がオーガニックに成長しました。

DSAの利益率は、試験受託量の増加とカンボジア産非ヒト霊長類の調達コスト低下の恩恵を受けました。チャールズ・リバーは自社所有の農場により予想非ヒト霊長類使用量の約80%をカバーしていると述べており、経営陣はこれをサプライチェーン上の優位性および競合上の強みと見なしています。

製造部門

製造部門は7.4%のオーガニック成長に回帰しました。微生物ソリューション事業は、PTS迅速測定カートリッジを含むエンドトキシン試験試薬の需要に支えられました。チャールズ・リバーは当四半期中に自動測定装置「Endosafe Nexus」を9台導入しており、将来的にカートリッジ使用量のさらなる増加につながると経営陣は期待しています。

バイオロジクス試験事業は、インビトロ（試験管内）でのバイオセーフティおよび分析試験に牽引され、1桁台後半のオーガニック成長率を記録しました。また同事業は、2025年半ば以降業績の重荷となっていた特定顧客固有の問題を一巡しました。

同部門の利益率は、営業レバレッジおよびCDMO（医薬品開発製造受託）事業の売却効果が四半期を通じて寄与したことにより、38.6%に達しました。

研究モデル・サービス（RMS）

RMSのオーガニック売上高は0.6%減少しました。中国での小型モデル需要の2桁成長や政府契約獲得によるインソーシング・ソリューション事業の売上増加があったものの、北米での小型研究モデル需要の低下およびサードパーティ製非ヒト霊長類の出荷タイミングの影響がこれを相殺しました。

経営陣によると、学術機関および政府関連の顧客がRMS売上高の約40%を占めています。政府資金調達の不確実性と、初期段階のバイオテクノロジー企業の設立状況の改善が限定的であることが、引き続き成長の抑制要因となりました。

近代化と科学技術能力

チャールズ・リバーの自動Endosafeカートリッジ製造設備は、製造管理、デジタル追跡可能性、労働生産性を向上させつつ、生産能力を14%引き上げました。

同社はまた、実験室のワークフローをデジタル化し顧客との接続性を向上させるため、Autolomousと共同で「Apollo Orchestrate」を立ち上げました。これらのプロジェクトは「Create the Future」プログラムの一環であり、経営陣は4年間で累計3億ドル以上の削減効果をもたらすと見込んでいます。

その他の取り組みとしては、薬物乱用可能性評価用前臨床ツールの検証に関するFDA（米国食品医薬品局）との連携、業界標準の20週間から生産期間を40%短縮するよう設計された迅速セルバンキングプログラム、およびGLP（優良試験所基準）に準拠したイプセン（Ipsen）社の安全性評価試験における仮想対照群の活用などが含まれます。

経営陣による業績見通し（ガイダンス）

2026年第4四半期について、経営陣はDSAのオーガニック成長率が1桁台半ばを維持し、製造部門の成長率が1桁台後半を維持すると予想しています。RMSの成長は減速する見込みです。

同社は第4四半期に、非ヒト霊長類の調達コスト低下、付加給付関連費用の好転、微生物ソリューション事業における例年通りの年末売上高に主として牽引され、営業利益率が前四半期比で約150ベース・ポイント改善すると予測しています。経営陣は第4四半期のNon-GAAP EPSが前年同期比で約30%〜40%増加すると見込んでいます。

2027年について、経営陣はオーガニック成長の緩やかな改善と、2030年まで議論されていた年平均75ベース・ポイントを上回る営業利益率の拡大を見込んでいます。この見通しは、2026年の買収および売却による効果、営業レバレッジ、「Create the Future」によるコスト削減を前提としています。正式な2027年ガイダンスは、2月に第4四半期決算とともに発表される予定です。

リスクと注目領域

• DSAの成長は現在、数量増加が主導しています。新価格が適用された試験が受注残高を通過して反映される必要があるため、経営陣は少なくとも2027年後半までは大幅な価格改定効果を期待していません。
• 学術機関および政府の資金調達に関する不確実性は、特に北米においてRMSにとって引き続き逆風となっています。
• 初期段階のバイオテクノロジー企業の設立およびスタートアップの活動状況は、まだ顕著な改善を見せていません。
• 経営陣は、需要混乱の可能性に備え、インフレ、原油価格、金利、より広範なマクロ経済状況、およびバイオテクノロジー分野の資金調達動向を注視しています。
• DSAの受託量増加を維持するには、十分な人員配置と非ヒト霊長類の供給が必要です。経営陣は、現在の供給量は長期財務目標を達成するのに十分であると述べています。
• DSA試験の時期や構成（ミックス）が2027年の成長に影響を与える可能性があり、経営陣はより詳細な情報を提供する前に、同年の後半に対する見通しをより明確にしたいと考えています。

アナリスト質疑応答のハイライト

価格改定の回復

チャールズ・リバーは、提案活動の伸びと獲得率を維持しつつ、新しいDSA提案における割引率を緩やかに引き下げ始めています。経営陣によると、第3四半期の受注にはまだ顕著な価格引き上げ効果は含まれていません。大半の価格設定は顧客との交渉を必要としますが、一部の顧客はより自動的な調整が行われる料金表（レートカード）を使用しています。

人工知能（AI）と医薬品開発

経営陣は、AIが将来的に規制対象となる医薬品開発や安全性評価に進むプロジェクト数を増加させると期待しています。AIによって設計された分子も同様の規制検証や安全性試験要件に直面するため、経営陣はプロジェクト当たりのチャールズ・リバーの売上高に差はないと見ています。

創薬企業全体でAIツールの活用が進んでいるため、同社はAI関連の受注を明確に区分・把握することができません。経営陣は、AI主導型（AIネイティブ）企業がプラットフォームの性能を証明するために、検証段階へより多くのプロジェクトを投入する可能性があると述べましたが、受注への具体的な寄与額については数値を明らかにしませんでした。

仮想対照群

経営陣はイプセン社の試験について、検証段階から規制上の利用に向けた重要な一歩であると説明しました。仮想対照群は科学的に適切な場合に実験動物の使用量を減らすことができますが、従来の対照群と比較して大幅な追加収益機会を生み出すとは予想していません。

バイオアナリシスの拡大

チャールズ・リバーは、開発の各段階を通じて同じ測定法、プラットフォーム、顧客関係を活用し、前臨床バイオアナリシスの立場から臨床バイオアナリシスへの拡大を目指しています。現在、臨床試験関連の業務はバイオアナリシス売上高の少数にとどまっています。現在5件の能力拡張が進められており、経営陣は適切な買収対象があればM&Aも検討する可能性があると述べています。

生産・試験能力（キャパシティ）

経営陣は、成長率、試験の構成、地域にもよりますが、同社は少なくとも今後数年間は十分なインビボ（生体内）能力を備えていると述べました。また、既存の施設には需要の増加に応じて段階的に転用可能な拡張スペースが存在します。

決算説明会全文文字起こし

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Charles River Laboratories Third Quarter 2026 Earnings Conference Call. This conference call is being recorded.

[Operator Instructions]

I would now like to turn the conference over to our host, Mr. Todd Spencer, Vice President, Investor Relations. Please go ahead, sir.

Todd Spencer

Good morning, and welcome to Charles River Laboratories Third Quarter 2026 Earnings Conference Call and Webcast. This morning, I am pleased to be joined by Birgit Girshick, our Chief Executive Officer; and by Glenn Coleman, our Executive Vice President and Chief Financial Officer.

They will comment on our results for the third quarter of 2026 as well as our financial guidance. Following the presentation, they will respond to questions. There is a slide presentation associated with today's remarks which will be posted on the Investor Relations section of our website at ir.criver.com. A webcast replay of this call will be available beginning approximately 2 hours after the call today and can also be accessed on the Investor Relations website. The replay will be available through next quarter's conference call.

I'd like to remind you of our safe harbor. All remarks that we make about future expectations, plans and prospects for the company constitute forward-looking statements under federal securities law, including the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated. During this call, we will primarily discuss non-GAAP financial measures, which we believe help investors gain a meaningful understanding of our core operating results and guidance. The non-GAAP financial measures are not meant to be considered superior to or a substitute for results prepared in accordance with GAAP.

In accordance with Regulation G, you can find the comparable GAAP measures and the reconciliations on the Investor Relations section of our website. I will now turn the call over to Birgit Girshick.

Birgit Girshick

Thank you, Todd, and good morning. We are pleased today to report another solid quarter with revenue and non-GAAP earnings per share that exceeded our prior outlook, continued momentum in the improving biopharmaceutical demand environment and additional progress towards the execution of our pathway to purpose strategic vision. It was wonderful to see many of you at our Investor Day just over 1 month ago, and I hope that you found it to be an informative discussion about our strategic initiatives designed to enhance our operational excellence and strengthen our scientific leadership as well as our future growth drivers and long-term financial targets.

As I mentioned, our focus is to simplify the company and move faster, invest where we can win and continue to lead as a scientific partner of choice for the critical work that our clients do. By executing on these goals, we believe it will translate into higher growth and operating margins and drive long-term shareholder value creation. We have made meaningful progress in recent months on initiatives to support our pathway to purpose strategy, which includes working to modernize our company and the industry strengthening our world-class scientific portfolio and offering a customized client-centric approach to drive growth.

I will now provide you with highlights that demonstrate some of this progress as well as our third quarter performance. We were encouraged by the acceleration of our revenue growth rate in the third quarter as we had anticipated, including solid mid-single-digit organic growth in the DSA segment and high single-digit organic growth in the Manufacturing segment. The solid DSA performance was supported by a net book to bill of 1.09x in the third quarter, which marks the fourth consecutive quarter that the net book-to-bill has been above 1x averaging approximately 1.1x over this period.

Both the third quarter and trailing 12 months DSA booking performance were consistent with the levels needed to support our long-term financial targets of 5% to 7% growth in the DSA segment. With the CDMO business having been divested for a full quarter, we were also pleased to clearly see the underlying growth and margin trends emerge for the Manufacturing segment and believe the outlook remains favorable for our comprehensive manufacturing, quality controlled testing solutions. We expect these collective trends to support the improvement to mid-single-digit organic growth for the company in the second half of this year as well as the projected margin improvement.

To enhance our ability to take advantage of improving the main trends, we are also working on our modernization efforts to drive greater efficiency including through our Create the Future transformation program. As an example, in July, we implemented a fully automated manufacturing suite for our Endosafe endotoxin cartridge technology to increase cartridge production capacity, strengthen manufacturing controls and enhanced digital traceability. This upgrade improves quality and labor productivity and also increases cartridge production capacity by 14%.

Also in our Manufacturing segment, we partnered with Autolomous to launch Apollo Orchestrate to digitize laboratory workflows and enhance client connectivity. This is a new capability for our Apollo platform, which will transform laboratory execution systems increase efficiency and provides greater transparency and collaboration for clients. These are 2 examples of progress in our Creative Future transformation program which is expected to generate over $300 million in cumulative savings over the next 4 years and will be a key component to drive meaningful operating margin improvement in 2027 and beyond.

We have also taken steps to continue to strengthen our scientific capabilities. We announced a collaboration with the FDA to validate preclinical screening tools to quantify and rank the abuse potential of new drugs. This collaboration is aimed at a proven public health by helping to ensure the safety of drugs. As part of our efforts to further advance our alternative methods advancement project initiative, or AMAP, we also introduced a new rapid cell banking program designed to significantly accelerate product release timelines in the Biologics Testing business.

By combining rapid cell bank and release packages with advanced characterization using in vitro next-generation sequencing capabilities, we will be able to reduce cell bank production timelines by 40% versus the industry standard of 20 weeks, enabling clients to develop advanced therapies to reach key milestones and bring their innovative treatments to patients faster. In addition, we continue to pioneer and space of virtual control groups, or VCGs, to selectively reduce animal use where scientifically appropriate.

Last week, we announced that our VCG database and methodology will now be used in a GLP-compliant safety assessment study for Ipsen, a biopharmaceutical client. This moves the use of VCGs from concept to regulatory submission. The execution of these kind of initiatives is already benefiting us with clients. Because of our client-centric approach and the value that we provide to our clients through the global breadth and scientific depth that we are able to offer, we recently extended our relationship with a top 10 biopharmaceutical company to serve as a primary strategic partner for safety assessment services. The incremental work will transition to us over the next 12 to 18 months and meaningfully expand our relationship with this client.

With regard to overall demand trends, we are pleased that the improving biopharmaceutical demand environment has remained consistent in recent months and continues to show positive momentum. We are monitoring developments related to inflation, oil prices, interest rates and the general macroeconomic environment as well as biotech funding trends for any signs of disruption. But to date, we continue to expect the demand environment to trend favorably.

This view is further supported by our [indiscernible] KPIs, which I will discuss in more detail shortly. Our revenue from both global biopharmaceutical and small and mid-sized biotechnology clients increased on an organic basis in the third quarter. There are several factors contributing to these positive trends.

First, many of our large biopharmaceutical clients have progressed through the restructuring activities and are reinvesting in their R&D pipelines, including their preclinical or IND-enabling programs, which is a positive indicator for future demand. In addition, as has been well chronicled, the biotech funding environment has improved meaningfully since the middle of last year with trailing 12-month funding remaining just below $100 billion despite a modest slowdown in the third quarter. We are not seeing any signs of slowdown in our client interest, supported by another strong increase in DSA proposal activity in the third quarter. This is an indicator that supports our belief that favorable demand trends will continue.

And finally, the DSA bookings improvement over the past 4 quarters during during which time our net book to bill has averaged approximately 1.1x has begun to work through the backlog, and we're beginning to see the benefits as demonstrated by the improvement in the third quarter revenue growth to the mid-single digits organically for the DSA segment and total company.

I will now provide some highlights from our financial performance before Glenn provides additional detail: First, we are pleased that our third quarter results exceeded our prior outlook for revenue and non-GAAP earnings per share. Third quarter revenue increased 4.7% to the highest level since the second quarter of 2023 with a solid performance in both the DSA and Manufacturing segments. The operating margin increased 330 basis points year-over-year and 250 basis points sequentially to 23% due to operating leverage from higher study volume and lower nonhuman primate sourcing costs in the DSA segment and the full quarter impact of the divestitures, particularly in the Manufacturing segment. Non-GAAP earnings per share of $3.09 increased 27% year-over-year and also exceeded our prior outlook due to the strong top line performance and a lower tax rate. Based on our strong third quarter financial performance, we are raising our full year revenue guidance by 100 basis points to organic growth above 1.5% and non-GAAP earnings per share by $0.15 at midpoint to $11.35 to $11.55.

As we discussed at our Investor Day, we are pleased to see earnings power return as our growth rate accelerates, and we generate meaningful operating margin expansion. The organic revenue growth rate in each of our business segments also improved from second quarter levels. DSA revenue growth improved to 5.9% organically in the third quarter primarily driven by robust demand for safety assessment studies utilizing nonhuman primates as well as growth for bioanalysis services.

As we discussed at our Investor Day, we believe that we have competitive advantages in the areas of nonhuman primate supply and preclinical bioanalysis services. They are expected to be important growth drivers and differentiators for Charles River in the future, particularly as demand for biologics and other complex therapies continues to intensify. Regarding the DSA pricing environment, we are beginning to modestly reduce the level of discounting in recent proposals. Our goal over time will be to cover annual cost inflation through price increases and receive the value of services that we provide to our clients. While we are early in this process, and I'm not yet seeing it benefit DSA revenue, we are winning proposals and maintained our capture rate during the third quarter.

Assuming the positive trends hold, we do not expect to see any benefit fit from pricing until at least the second half of next year due to the normal lag as newly booked studies worked through the backlog. As I've already mentioned, from a demand perspective, we were pleased to see continued strength in the DSA demand KPIs in the third quarter.

Net bookings increased 32% year-over-year to $652 million as we anniversaried the softer bookings that occurred through the third quarter of last year. This resulted in a net book-to-bill of 1.09x as well as both year-over-year and sequential increases in the DSA backlog to $2.03 billion. This continues to firmly support our long-term financial targets, including 5% to 7% DSA organic revenue growth. As I mentioned, proposal showed a strong increase again marking the fifth consecutive quarter of year-over-year improvement. These trends collectively support our expectation for continued mid-single-digit DSA organic growth in the fourth quarter of this year.

Both global biopharmaceutical and small and mid-sized biotechnology clients continue to be key contributors to the demand improvement. Manufacturing revenue rebounded to 7.4% organic growth with similar growth rates in both the Microbial Solutions and Biologics Testing Solutions businesses. We were pleased to see the growth rate return to levels that are consistent with our long-term target for this segment. Our manufacturing quality control testing portfolio leverages many of the strengths of our DSA offering, including enabling clients to drive greater speed and efficiency and also creates additional growth opportunity by deepening our client relationships across the drug development life cycle.

Now that we have divested the CDMO business and anniversary the client-specific issue that has been a headwind for the Biologics Testing business. Since mid-2025, we are more clearly seeing the revenue growth and margin potential for the Manufacturing segment. RMS revenue declined 0.6% organically. The trends have remained consistent all year with strong growth in China, offset by softer demand in North America. Revenues from academic and government accounts was relatively stable globally for the entire RMS segment in the third quarter as higher revenue in the In-sourcing Solutions business related to government contract awards was offset by lower small model volumes in North America, reflecting continued pressure from uncertainty in government funding.

This is one of the reasons that the RMS growth rate has not yet begun to reaccelerate as it has in the DSA and manufacturing segments because global academic and government clients represent a larger portion of RMS revenue at nearly 40%. AI has gotten a lot of attention in recent weeks.

So in closing, I want to reaffirm our views on the potential benefits of AI. First, as I noted at our Investor Day, we believe AI will be a tailwind to our business in the coming years and increase the number of programs that progress through the regulated drug development process, including safety assessment. However, gauging the potential impact of AI on the R&D process will take time because the measure of success will be when more drugs discovered using AI progress through the IND-enabling process and into the clinic. But as I said, we are well positioned to take part in this process as demonstrated by our recent collaboration with Eli Lilly's 2 lab initiatives and the scientific breadth and depth of our portfolio.

Beyond the potential benefits of AI, we are encouraged by the continued strength of the underlying biopharmaceutical demand environment. While there are still pockets that have not yet begun to improve from DSA pricing and start-up biotech activity to academic and government client demand, we are pleased with the progress that we have made and the growth prospects ahead. We also see significant opportunities to further strengthen Charles River's competitive position.

With our financial strength, focused strategy and deep expertise in regulated testing across the drug development continuum, we are well positioned to meet growing client demand for scientific innovation speed and efficiency. Through pathway to purpose, we are building a more agile client-centric organization that would deepen client relationships expand engagement across our portfolio and increase our share of R&D spend as demand trends continue to improve.

Now I will turn the call over to Glenn Coleman, to provide more details on our third quarter financial performance as well as to update our 2026 guidance.

Glenn Coleman

Thank you, Birgit, and good morning. As a reminder, my comments on financial performance will largely be related to non-GAAP results, which exclude amortization and other acquisition and divestiture-related adjustments, cost related primarily to restructuring and efficiency initiatives and certain other items. Many of my comments will also refer to organic revenue growth, which excludes the impact of acquisitions, divestitures and foreign currency translation. We were pleased with our solid third quarter financial results as both revenue and non-GAAP earnings per share exceeded our prior outlook.

Organic revenue increased 4.7% year-over-year marking our strongest growth in 3 years. This exceeded our prior outlook of 1% to 3% organic growth with strength across our portfolio, particularly in the DSA segment. The non-GAAP operating margin improved 250 basis points sequentially to 23% driven by the DSA and Manufacturing segments as well as lower corporate costs. Non-GAAP earnings per share of $3.09 increased 27.2% year-over-year, which was above our prior outlook of $2.90 to $3 as a result of the stronger-than-expected operating income driven by higher revenue as well as a lower tax rate.

Moving to segment details. Revenue was $596 million in the third quarter, an increase of 5.9% on an organic basis, driven by higher volume for regulated safety assessment services, including the continued strong demand for nonhuman primate related studies and bioanalysis services. This is the second consecutive quarter of revenue growth in the DSA segment as we continue to see the benefits of the improved biopharmaceutical demand trends, which began at the end of last year. As Birgit mentioned, we continue to see strong demand, including the third quarter net book-to-bill of 1.09x and strong proposal growth.

Year-over-year, the DSA operating margin increased by 140 basis points to 26.8%, primarily due to improved operating leverage as a result of the higher study volume and the benefit of lower sourcing costs for Cambodia nonhuman primates. Looking ahead, we expect the DSA operating margin to continue to improve sequentially in the fourth quarter as we expect to realize further benefits from Cambodia and HP sourcing and also lower fringe benefit costs, which are typically more favorable later in the year.

Shifting to the Manufacturing segment, third quarter revenue of $179 million increased 7.4% on an organic basis. The strong performance was driven by both the Microbial Solutions and Biologics Testing businesses. Microbial Solutions delivered organic revenue growth similar to the segment average, reflecting continued strong demand across our 3 major geographic regions for endotoxin testing reagents including our PTS rapid testing cartridges. In addition, we were pleased by the placement of 9 automated Endosafe Nexus instruments in the third quarter, which we expect will drive meaningful incremental cartridge use over time. Our Celsis bioburden testing platform also reported solid revenue growth from both reagents and instrument placements which supports pharmaceutical clients broader microbial testing needs. The placement of the new systems demonstrates the value of our comprehensive rapid testing solutions and helping clients improve the speed and efficiency of manufacturing quality control and product release testing.

The Biologics testing business also grew at a high single-digit organic rate primarily driven by strong demand for in vitro biosafety and analytical testing. We also anniversaried a client-specific challenge that had been a headwind since the middle of last year. The manufacturing operating margin improved to 38.6% representing an improvement of 80 basis points sequentially and nearly 1,200 basis points year-over-year driven primarily by the full quarter benefit of the CDMO divestiture as well as operating leverage from the strong top line performance.

We continue to expect manufacturing will be an important contributor to overall operating margin improvement with continued progress expected in the fourth quarter approaching 40%.

Wrapping up the segment discussion, RMS reported revenue of $208 million in the quarter, representing an organic decline of 0.6% year-over-year. The decline was largely driven by lower revenue for small research models in North America as well as lower revenue for nonhuman primates sold to third parties due primarily to the timing of shipments. We also plan to use more nonhuman primates on internal DSA studies going forward. The decline was largely offset by strong demand for small models in China, which grew at a double-digit rate as there continues to be significant investment in R&D in China.

The RMS segment also benefited from higher revenue for research model services driven by the Insourcing Solutions business, which has benefited this year from new government contract awards. Cradle operations have been stable, but have not returned to growth as the early-stage biotech environment, including new biotech company starts has yet to meaningfully improve. RMS operating margin declined by 60 basis points year-over-year to 24.4%, due largely to unfavorable revenue mix, both geographically as we continue to experience higher growth in China than in North America, and also the lower nonhuman primate revenue. We expect the RMS margin to be modestly lower sequentially in the fourth quarter due primarily to normal seasonality in the business.

Moving on to other financial metrics. For the third quarter, unallocated corporate costs totaled $54 million or 5.5% of revenue compared to 5.9% in the prior year period. As we anticipated, the decrease was primarily driven by lower fringe-related costs, including stock compensation and deferred compensation expense. We continue to expect unallocated corporate costs of approximately 6% of revenue for the full year. Net interest expense was $26 million in the third quarter, an increase of $2.5 million year-over-year. At the end of the third quarter, gross and net leverage improved sequentially to 2.3x due primarily to lower debt levels and improved earnings. This improvement reflected our continued focus on disciplined capital allocation, including the balanced use of cash to fund strategic acquisitions earlier this year and our ability to quickly repay debt.

For the full year, our net interest expense outlook is expected to be at the upper end of our previous guidance range of $103 million to $108 million on a non-GAAP basis, due in part to higher interest rates. The third quarter non-GAAP tax rate was 22.8%, a decrease of 550 basis points year-over-year. The higher tax rate in the prior year period resulted from the enactment of the One Big Beautiful Bill or OB3 and the enactment of certain global minimum tax provisions. For the full year, we expect a non-GAAP tax rate of approximately 23%, which is at the lower end of our prior guidance range as the impact of the tax legislation changes in the foreign jurisdiction that I discussed during the second quarter earnings call were more favorable than anticipated.

Free cash flow was $207 million in the third quarter, an increase of $29 million compared to the prior year period. This increase was largely driven by the timing of working capital. CapEx increased to $47 million or approximately 4.8% of revenue in the third quarter from $36 million last year as we continued to invest in growth and margin expansion initiatives. For 2026, we continue to expect CapEx will be approximately $200 million, unchanged from our prior outlook and in line with our long-term target level of 5% to 6% of revenue. Our free cash flow outlook also remains unchanged at $400 million to $420 million.

Turning to full year 2026 P&L guidance. We are increasing both the reported and organic revenue outlook due to better-than-expected top line performance across all 3 segments in the third quarter, particularly the DSA segment. We now expect a reported revenue decline of 1.5% to 2%, with the year-over-year decline driven by the impact of completed divestitures. We're also raising our organic revenue growth guidance for the year to be at least 1.5% growth, which represents a 100 basis point improvement compared to our prior guidance. We are narrowing and modestly increasing our organic revenue growth outlook for each segment and now expect DSA to be above 2% growth, manufacturing at a mid-single-digit growth rate and RMS at a low single-digit organic decline.

Moving to profitability. We continue to expect operating margin expansion of approximately 120 to 150 basis points in 2026 with the Manufacturing and DSA segments driving the year-over-year increase. We are increasing our non-GAAP earnings per share guidance by $0.15 at the midpoint to a range of $11.35 to $11.55, which represents 10% to 12% year-over-year growth. The increase reflects the top line outperformance in the third quarter dropping through to earnings as well as a lower-than-expected tax rate. With one quarter remaining, our fourth quarter outlook is effectively embedded in our full year guidance.

Looking at the revenue trends, we expect the DSA and Manufacturing segment's organic growth will remain at mid-single-digit and high single-digit rates, respectively, in the fourth quarter, while we have forecasted a modest reduction in the RMS growth rate. We expect continued sequential operating margin improvement of approximately 150 basis points due largely to the benefit of lower sourcing costs for Cambodia nonhuman primates in the DSA segment, favorable fringe-related costs and higher sales volume related to normal year-end order patterns in microbial solutions. This is expected to result in non-GAAP earnings per share growth of approximately 30% to 40% year-over-year.

Before I conclude, I'd like to address how we are positioning our financial performance for next year. We expect to provide our 2027 financial guidance with our fourth quarter earnings in February. Our view towards 2027 is the same as I discussed at our Investor Day in September. At this time, we expect a gradual improvement in 2027 from the organic growth rate in 2026 and assuming the favorable market trends continue, revenue growth increasing to the targeted 5% to 7% range starting in 2028.

In 2027, we expect operating margin improvement will be higher than the 75 basis point average through 2030 that we discussed at the Investor Day, largely due to a full year benefit of acquisitions and divestitures completed in 2026 as well as top line leverage and our create the future cost savings initiatives.

To conclude, the third quarter financial results demonstrate the strength of our streamlined portfolio and our continued focus on operational execution. We are encouraged by the improving end market demand trends and our execution against key strategic initiatives, both of which we expect will support gradual progress towards our long-term financial targets. Our pathway to purpose priorities will modernize how we work, strengthen our scientific leadership and portfolio and enhance our client-centric approach as we continue to position Charles River to deliver profitable growth and long-term shareholder value. Thank you.

Todd Spencer

Thanks, Glenn. That concludes our comments, and we will now take your questions.

Operator

[Operator Instructions]

We'll go first this morning to Elizabeth Anderson with Evercore ISI.

質疑応答

Elizabeth Anderson

I appreciate the comments on the demand environment is, obviously, you have a lot of different business sides and lots of different things are happening. If you're talking about -- you talked about for 2027, that gradual improvement towards the 5% to 7% in 2028. Can you just talk to us a little bit more maybe, sort of, operationally, sort of, like what improves what is improving maybe towards the later part of that? Maybe even if it's a qualitative commentary, I think that would just help us to understand the pace of improvement and sort of what you're seeing in the market from there.

Birgit Girshick

Yes, certainly. Happy to. So yes, so what we're looking at right now is what we are actually seeing, right? So we are looking at our proposals overall. They have been increasing net book-to-bill continues to be strong for the trailing 12 months, 1.1 as an average. So definitely, helping our -- or supporting the long-range target that we have. And what we are also seeing is a return to revenue growth now for the second quarter. The Q2 was kind of moderate, but the third quarter revenue growth is right where we expected it a little bit better actually and so what we are looking for and what we are currently seeing in all our forward-looking metrics, including proposals, gross bookings, net bookings, even capture rates is a gradual return to growth, building on the pretty good revenue growth rate that we have been seeing in Q3 going into next year. What we -- most of that or just about all of that right now is volume driven. And what we have not yet seen really is a return to pricing power, particularly not in the DSA segment.

As we said in our prepared remarks, we are gradually reducing the discounting. We are maintaining our proposal growth. We are maintaining our capture rates. So all looking really good. But even from a timing perspective, if this holds and accelerates, we won't see much of an impact before the second half of next year. And otherwise, we are seeing good growth rates now back in our manufacturing segment, right, where we expected to see for our long-range financial targets is coming along with the exception, as I said, of pricing.

And then for research models and services, we still have some headwinds that we need to work through. A lot of that comes from academic and government offset by strong growth in China, and we expect that to take a little while before it works itself out. So really, everything we're seeing is positively improving setting us up for a gradual improvement, working through itself by the second half of next year. And then with a little bit more pricing power, we think we're right there where we wanted to be or what we said at the Investor Day, getting to our long-range financial target. Did that answer your question, Elizabeth?

Elizabeth Anderson

Yes. That was super helpful. And I know probably you just, sort of, updated us on the call a couple of weeks ago regarding AI. But as we start to see those molecules, we've heard seed reports molecules in discovery [indiscernible] using AI. Is that -- what kind of trajectory in general, does that take to sort of get molecules from that discovery phase into safety and sort of to see that? Is that kind of '28? Is that longer sort of like -- and obviously, I know the answer pens, but just sort of directionally speaking, how does that does that work? Sorry, that's a bit of an unfair question.

Birgit Girshick

No, no, no, not at all. So I mean the work with AI didn't start this year. It started literally a decade ago. And so what we are seeing right now is obviously an acceleration. We do work with quite a few of the AI discovery companies. And so they are -- they have programs in the preclinical phase, some even in the clinical phase. But what we are expecting to see is just an improving rate or more of those companies, more programs coming into the validation space or the validation process that we are doing for those companies. So we are seeing some now where we'll see an improving amount of those companies.

And then frankly, I would say in 2 years, it's going to be hard to tell who's AI native and who uses AI and who doesn't use AI, I think just about everybody will turn into a nearly AI-native company and the positive thing about all of that, it's bringing a lot of interest into the space, into the health care space, biotech companies seeing more funding partially or maybe to a good amount because of AI. And so eventually, this will just all kind of mix itself into just an accelerated amount of IND-enabling programs strengthening our pipeline, ending up in our backlog, so all positive.

Operator

We'll go next now to Ryan Halsted with RBC.

Ryan Halsted

Maybe just sticking with AI. A lot of investors focus on the topic. So I appreciate asking -- the question is around your bookings and the strong book-to-bill. I mean is there a way to gauge just how much of your bookings and book-to-bill is just the improving sort of biotech environment and R&D spend? And how much is really coming from AI already? That's kind of my first question.

Birgit Girshick

Yes, Ryan, it's a really, really good question and one we literally just talked about. So it's really hard because, as I said, there are typical AI companies that you would definitely all of us would say they are AI native. And then there are most discovery company, I would say, using our AI in some form or fashion. So it's -- it would be extremely manual and not an accurate science to really try to say what comes from AI companies and what doesn't.

Yesterday, there was actually a report that was quite helpful. And I thought, well done that kind of split out the AI discovery funding from the normal biotech funding. And that's probably the best number we would give you, which was for the last quarter over $900 million. But in our order book, it's really difficult because everybody is now using AI, and it doesn't really make a lot of sense to really split out AI versus non-AI, what I'm looking for is AI is driving interest in the sector. It's driving interest in investments, and that will benefit all of us.

Ryan Halsted

Very helpful. I appreciate that. And then maybe my follow-up, just switching gears to NAMs. You talked about the virtual control groups moving from concept to practice. I guess just any more thoughts on how meaningful do you expect to be incorporating virtual control groups into your work across all of your customers?

Birgit Girshick

Yes. Happy to. So NAMs is the right ethical and scientific direction. So obviously, we are very committed of reducing the number of animals and studies. Therefore, virtual control group is an incredible, important and rewarding program that we have and to see it now coming out of basically validation and proof of concept into actually using it on a real study and providing that data to the FDA is really great to see. So it's a big, big milestone.

From a scientific perspective, we are looking to provide our clients with better answers, better insights, better data, virtual control groups can provide that in certain instances. So another important point. From a revenue perspective, we are looking to -- for getting paid for our investment. I wouldn't look at it as a huge revenue upside. I would say it's probably right alongside the -- being paid for regular control groups. So it does kind of even out, but scientifically and from a direction of reducing the number of animals. That's -- it's a great milestone.

Operator

We'll go next now to Luke Sergott with Barclays.

Luke Sergott

Just wanted to talk a little bit and continue on the AI trend and demand that you guys are seeing and I understand that everybody is going to be using it. But can you give us a sense of the difference in dollar per program or dollar per molecule, any changes from amount of services being used or anything like that from like one of these native AI biotech customers versus kind of what you saw legacy? Because there's a argument against it is that it's just going to reduce overall volumes. Longer term, it will -- I think everybody understands that increased efficiency, et cetera, you'll see overall volumes in the long term, but there's a small payer contingent talking about near-term disruption to lower -- to overall lower dollar value.

Birgit Girshick

Yes, happy to. So Luke, the way we are seeing that so the AI discovered molecules that is really, really early stage. So target identification, designing better molecules that may disrupt a little bit the chemistry space, and that's an area that we divested earlier this year. So we don't expect any impact on our revenues. And then all of those molecules, they are now much easier to develop the molecules are easier to spin out. That's why everybody says, okay, that's cheaper, that's more efficient, more productive. That will translate into more programs.

All of those programs still need to be validated and safety tested. And that's the area that we are strong in, we are focusing on. That's the work we do. So from a dollar amount of per program, there is no difference for us. So it doesn't matter if it's AI designed, doesn't matter if it is from an AI native company or non AI-native company. They come in with the same regulatory process requirement than any other program would have. In terms of more programs or less programs qualitatively, what we're seeing is that often companies with AI platforms that they want to validate, they come in with more programs than generally a biotech company that is a non-AI company. And the reason is a couple of different things: Number one, they have an AI platform that they now need to validate. And the only way to validate is with shots on goal. So more programs. So if you have only 1 program, it fails, your AI platform fails. If you have 20 programs, 15 of those succeed, you have a big, strong selling point.

So they just need to have more volume going through that validation space to teach the platform, but then also to validate the platform. Biotech companies that are non-AI-native generally come in with one program, maybe a backup program but a lot fewer programs. So that's more qualitatively because as I said, the boundaries are changing quite a bit because everybody starts using AI.

The other thing is that we are seeing, and I think that some of the data out there is confirming that, if you have AI in your name or in your description of the company, funding seems to be a little bit easier to get. So AI native companies have a lot of cash, a lot of funds. And with that, they can actually run a lot more programs and with that doubling their potential for success of that AI platform. So again, there -- it's more qualitatively than quantitatively, but we do see on a smaller scale kind of those effects.

Luke Sergott

Great. That's helpful. And then I guess on the -- changing gears, I want to talk a little bit about the NHP supply and demand and how that's shaking out. We're getting channel checks here that supply is getting super tight again, people locking up multiyears out from when project is going to start. So talk about what you're seeing there. And just update us on the exposure across RMS and DSA there as we think about probably back half '27 and '28 when the pricing dynamics start to play out.

Birgit Girshick

Yes, certainly. So just to level set everybody again. So we use nonhuman primates in our safety assessment studies for our clients. And that is the primary reason we have backwards integrated into our supply chain -- we now own farms, and we are happy to say that about roughly 80% of our estimated usage is covered by our own supply from our own farms. And that gives us -- that's a big differentiator and is a big competitive advantage in our opinion. Now you're asking about tighter supply. There is definitely a lot of discussion in China about very tight supply of nonhuman primates in China. And we have a farm in China and because we can't export the animals for our own safety assessment studies, we're actually selling them through our research models and services business in China. That's a relatively small amount, relatively small revenue base, but we are hearing a lot and seeing a lot that there is definitely a need for more nonhuman primates in China and that there is a lot of interest in that space. As I said, not necessarily very material for us, but we're watching that market to see where the need goes and then certainly also where pricing goes. This year, pricing improved in China moderately to levels that we have seen before in recent years, and we're going to see what happens in 2027. Otherwise, we continue to really focus on operational improvement, better control of our supply chain, making sure logistics is in place and just providing our clients with that differentiator of having nonhuman primate supply for their studies at the best quality and the best health status possible. And again, as I said, we see that as a differentiator.

I just want to point out that when we basically sell a safety assessment study, we are selling the whole study. So the animal is included. So we don't necessarily split out the animal itself. What we have seen this year is an increased need for nonhuman primate studies in the marketplace. And it makes sense because of a lot of complex maturities, a lot of biologics being a priority for -- in the pipelines of many of our clients. And we'll have to just see where that continues. We have currently enough supply to meet our long-range financial targets. And the rest of it, we'll just have to see where the marketplace goes, where the science goes and where our clients need go. Did that answer the question?

Operator

We'll go next now to Justin Bowers with Deutsche Bank.

Justin Bowers

Rust piggybacking on that last question. What are you seeing in terms of therapeutic areas? One is just around vaccines and infectious disease. Are you seeing increased interest in investment there? And then part 2 would be your comment around the partnership with top 10 pharma. Just at a high level, are you starting to see pharma invest more in preclinical and then with acquired biotechs, are they starting to expand the number of assets or programs from those acquisitions?

Birgit Girshick

Yes. So maybe I'll start with the -- well, let me start with the therapeutic area. So what we are definitely seeing is a high interest and a high amount of programs in the biologics complex modality space. We're seeing continued interest in vaccines, but I wouldn't say an accelerated interest. So it is more about mRNA, maybe ADC, things like that, that is is the complex work and actually supports our competitive differentiation as a specialty provider less or the vaccine space, but that hopefully will change too, and we might see an uptick there in the outer years. As far as pharma, so we announced that we have expanded a relationship with one of our -- the top 10 biopharmaceutical companies, that's a great outcome and a great milestone.

We are now really the preferred partner for just about all of the big clients of ours just showcasing the breadth and depth of our portfolio, our client-centric approach with our clients. And so we are really, really happy with that. Global biopharmaceutical clients have really for the last, I would say, 18 months increase the amount of work coming out of their restructuring activities. Bookings are strong, proposals are strong. We see quite a bit of growth in that space. So all the indicators, including the revenue that we are seeing are quite healthy from global biopharmaceutical companies. So we're definitely refocusing on internal development and getting more drug programs into IND-enabling studies and into the clinic. So just great to see that.

And then from a biotech perspective, our indicators are all healthy, too, seeing really great bookings from them. The proposal rates are good. Capture rates are good and also seeing a return to revenue growth. Funding overall is good. There are certainly some soft spots that we still would like to fill in, such as early company formation. But I think that will come over time as well. So overall, we believe that the demand environment is healthy. It's supporting our outlook for this year and our long-range financial targets that we have provided. And we're not seeing any disruption either macroeconomically or in our domain KPIs at this point.

Operator

We'll go next now to Dave Windley of Jefferies.

David Windley

I'm going to move off the primary topic here and ask a question, Birgit, about bioanalytical. You have highlighted that an expansion there. In your comments today, you talked about preclinical bio way, some of the areas where I think you're expanding or just try to capture or retain business as it moves into clinical. So I'd just ask you to broaden the commentary or perspective about the progress you're seeing in bioway across both preclinical and clinical.

Birgit Girshick

Yes. Great catch. Yes, Dave, definitely. So what we said in our prepared remarks was that we have a particularly strong differentiation right now in the preclinical space. You're right that our interest extends also into the clinical bioanalytical space, and the reason for that is it's the same platform. It's the same assays. It's the same clientele, and that particularly with increasingly complexity of assays and drug programs, we can provide our clients with kind of that consistency across both the preclinical and into the clinical. We have the science, we have the partnerships, and I think we can take some time out of their development timeline by just not having to change partners midstream when you go from the preclinical into the clinical process. So definitely interested in both areas.

Right now, our clinical part of our revenues in bioanalysis is the minority, but we are looking to grow that over time. So we currently have organic expansions ongoing in our organization where we're building out existing footprint to increase capacity for bioanalytical both for preclinical and clinical. And we also said at the Investor Day that we would certainly be interested in potential M&A, when and if we find the right target.

David Windley

Great. My follow-up, a little bit of a technical one, but it comes back to the NHP discussion. I think you're describing that you're expecting progressive benefit from the lower-cost NHPs having internalized your supply chain a little bit in 3Q, a little more in 4Q. I guess I was expecting to see that show up in gross margin, and I do see a little but maybe not as much as I had expected. And when we look at how the numbers are falling out from the filing, it looks like DSA SG&A is really low in the quarter. And so I wondered if perhaps the geography of where that benefit being acquisition-driven is landing. Is there something going on there? And relatedly, when you say discount -- your narrowing discounts on bids, that is some amount of price improvement. Is it not? I just want to clarify on NHP.

Birgit Girshick

Yes. Let me take the pricing question and then I'll let Glenn go into the margin question. So yes, so technically, if you narrowed the discounts, you're getting some pricing power back. And we just wanted to point out that we are in the process of doing that. We are moving from strategically using discounts to win work to kind of testing the market to make -- to see that we can continue to win work, with getting paid for inflation and for the work we do, but we also wanted to caution that because of this being in a proposal stage, we'll have -- need some time to work it through our backlog into revenues in the coming years. So that's why I said don't expect anything major until the second half of 2027 before we really see some pricing power here.

Glenn Coleman

On the margin question, I would just say we would expect to see a benefit on gross margin, especially in Q4 with the lower sourcing costs coming from KF Cambodia. So that is a big part of the overall operating margin improvement from Q3 to Q4, along with lower fringe costs. And we did see lower fringe costs also in Q3 to help to drive some of the SG&A down. If you're looking at our 10-Q filings, you'll see a pretty significant drop in SG&A. That's associated with a non-GAAP item with a tax release and reserve reversal that we did, which obviously we don't include as part of our non-GAAP numbers, but you'll see a big adjustment there for that. So you're probably looking at that.

Operator

We'll go next now to Casey Woodring with JPMorgan.

Casey Woodring

I guess my first one is just on capacity expansion. Just given the anticipated increased demand from AI, I'm wondering how you're thinking about expanding capacity and what your utilization is currently?

Birgit Girshick

Yes, Casey. So currently, we have a good amount of capacity available for our in vivo work. So -- and -- the reason for that, obviously, is the volume declines that we've seen in the past years. And when we went into those volume declines, we did have adequate space for a little bit of growth we are comfortable with that for at least a couple of years, hard to say, obviously, it depends on the growth rate and the mix and geography. And if that changes or when that changes, I should say, it will change, obviously, then we have some space at our sites that we can expand in. So we are well set. We have some empty expansion space that we can convert relatively quickly and we watch this literally month to month to month to make sure that we are on top of it that we don't miss that window. But that speaks to the the way we have expanded over the last few years in increments, small steps, a few more rooms here, a few more rooms there. It is the best way for us and the best discipline for us to expand.

From our bioanalytical capacity, we are, as I said, currently expanding because we have seen growth over the last few years in that space when in vivo work actually declined. And we see this as a higher growth area going forward. So those 5 expansions that are currently underway will give us the necessary capacity that we are looking for. So this isn't always, always. We are very disciplined about the capacity expansion trying to always have enough space, but not to be too far ahead.

Casey Woodring

Got it. That's helpful. And maybe just two quick ones as follow-ups. The first is just would you expect seasonal trends from 3Q to 4Q in bookings to hold this year in terms of that normal step-up in bookings you see in 4Q? And then just as backlog goes up, how should we expect burn rate to trend kind of into '27? Should we expect that to tick down?

Birgit Girshick

Yes. So from a seasonal trend, so we do often see higher bookings in Q4, particularly compared to the Q3 bookings, which is the summer ones, which is often has a little bit of a seasonality in there. And we have -- but it depends a little bit on the business that we have to. So -- and where some of our global biopharmaceutical clients are in terms of finishing up their budgets and are ready to prioritize the programs that are coming in. So overall, yes, we might see that. And as I said, we are -- our net to bill, particularly is not linear. We see quarter-over-quarter changes.

And then it also depends obviously on the revenue base that we are seeing. But overall, should be seeing strong demand going forward. We do see, maybe to point out, healthy proposal levels. We have the fifth consecutive quarter was increasing proposal levels now. And that is certainly a good metric for us, particularly with capture rates staying strong for us, and that should translate into good bookings.

Operator

We'll go next now to Jared Haase with William Blair.

Jared Haase

Maybe I'll go back to -- I appreciate some of the color you shared on examples of your modernization efforts and the work that you're doing ground automation as part of the long-term strategic goals. I guess I was just curious if there's any incremental call outs in terms of opportunities or specific workflows that you point to that you think can move the needle either financially or operationally over the next handful of quarters?

Birgit Girshick

Yes. Actually, we pointed out a couple maybe from the prepared remarks that we felt are interesting examples. One is the automation of our production line for LAL reagents that increases 14% capacity for our production capacity for those reagents and also allows us to drive production with basically fewer resources. So we will have an impact on our -- a positive impact on our material cost.

Another one is the Apollo Orchestrate. So Apollo is the platform that we use in all our businesses to communicate with our clients. And when I say communicate, it's -- that's where they see their samples that are submitted, they see their test results. They see where the study is currently and what we're going to do with Apollo Orchestrate in our biologics business is actually digitizing the whole workflow from sample submission through the lab, scheduling, execution of the samples, test results back to the client.

That is another great example of how we're using modernization to create more efficiencies. We talked about the cost savings of $300 million in the Investor Day over the next few years, but also to improve our clients' enthricity, make it easier for the clients to communicate and with us and to see the test results, but then also make it easier for our employees to execute on the work. So those are 2 great examples, and we have 500 initiatives ongoing. Some are pretty complex and pretty impactful. And all of them will have some level of improvement. So I really look forward to the execution of those initiatives.

Jared Haase

Okay. Got it. That's really helpful. And then I just wanted a clarification. When you talk about pricing and sort of longer term, you think about the lever there is sort of be the goal to cover the cost of inflation. Is that effectively a mechanical relationship or you could sort of benchmark price to a specific measure of inflation? Or does it require a little bit more negotiation or handling with customers to sort of be on the same page.

Birgit Girshick

Yes. So when we do proposals, they are a point in time for the -- most of our customers, and it does require a measure of negotiation and making sure that you continue to win the work, even so the price is slightly higher. So it -- we do have clients, some clients with rate cards where it is more automatic, but for the majority of our work. It is an interaction with a client talking about the pricing, talking about the inflationary increases and how working with us will have substantial benefits other than -- and not just a pricing benefit, yes.

Operator

We'll go next now to Yujin Park with Baird.

Yujin Park

Just adding on to the pricing questions. I noticed that pricing has yet to impact DSA revenue, but was there any impact on net bookings this quarter?

Glenn Coleman

Yes. No, I would just say, on the whole, the answer is no. We're just now starting to see some discounting in the proposal. So in terms of the bookings for Q3, the answer is no, we haven't seen that yet.

Yujin Park

Got it. Makes sense. And as a follow-up, in RMS, what do you see on price increases for small models is -- is that -- could that be a lever that can offset volume decline moving forward? Or do we need government and academic end market to improve meaningfully?

Birgit Girshick

Yes. So over the past, we have always been able to use price to offset some of the volume declines in research models. As you know, research models volume has declined for decades because of the 3 initiatives that we as a company and the industry have initiated. So we will continue -- we expect to continue to see price in research models. The level depends really on what we are going to see, as you said, in academic and government and then also in some of our services areas. So this was one of the first years where the pricing did not offset the growth.

The revenue growth or the decline in other areas, but it was less the decline in research model volume versus a decline in the services. So what we want to see is a return to growth in some of our services such as cradle. And then we should see also some price here.

Operator

And we'll take our final question today from Charles Rhyee of TD Cowen.

Charles Rhyee

Yes. Maybe if I could just go back to sort of just looking at book-to-bill here in the quarter on the slides, it looks like 3Q bookings doesn't include any adjustments. We had adjustment last quarter for the divestiture. Just is it right to think that 3Q book-to-bill sort of a clean number that doesn't have any sort of headwinds from the European drug discovery sale and therefore, is that sort of the base bookings or backlog number to think of going forward? And then as a follow-up, you're expecting sort of DSA rev growth of mid-single digits in 4Q. Is there any reason why this level of growth shouldn't at least continue into '27 given sort of trailing 12-month book-to-bill of 1.1.

Glenn Coleman

Yes. Relative to the divestiture question in the backlog, divestitures are no longer in the backlog numbers. So that's a clean number, so to speak. I would also just highlight we were really happy with the net book-to-bill number for Q3 at [ 10 9 ]. It's seasonally usually a very weak quarter. And so it's a strong number, especially given the revenue outperformance and if you look at the actual net bookings year-over-year for Q3, we're actually up 32%. So it was a really strong number.

Relative to how we see this mid-single-digit growth for Q4 being consistent with Q3 as kind of how we outlined the guidance. And then going into next year, I think we just have to look at a couple of things around some of the timing and mix of studies that could affect the growth rates for DSA. We want to make sure we've got more visibility into the second half of 2027. And obviously, having a few more months under our belt will get us that visibility that we want to see for the second half of next year.

And then finally, we talked about the DSA growth all right now coming from volume. And with that volume ramp, we want to make sure we have availability of resources, and that's resources from the people side and ramping resources to support the studies that are needed and also the NHP piece of the supply chain. So those are all things that we're working through. We don't want to comment too much more around the DSA growth rates for next year. But obviously, we're very encouraged by the strong net book-to-bill numbers for the last 4 quarters, the proposal volumes, and it was great to see DSA return to mid-single-digit growth here in the third quarter, and we expect to see it again in the fourth quarter.

Operator

Thank you. At this time, Mr. Spencer, I'll turn things back to you, sir, for any closing comments.

Todd Spencer

Great. Thank you, everyone, for joining the conference call this morning. This concludes the call. Thanks again.

Operator

Thank you very much. Again, ladies and gentlemen, this does conclude Charles River Laboratories Third Quarter 2026 Earnings Call. Thank you for your participation today. You may now disconnect.