0001100682-26-000038
SEC filingQ1 revenue grew 1.2% YoY to $995.8M, driven by Manufacturing, while a $118M divestiture loss drove a net loss.
For the three months ended March 28, 2026, total revenue increased 1.2% to $995.8 million from $984.2 million in the same period of 2025. The growth was driven by a 6.8% increase in Manufacturing Solutions revenue, primarily from higher Microbial Solutions endotoxin product sales, and a 0.7% increase in DSA revenue. These gains were partially offset by a 2.2% decline in RMS revenue, attributable to decreases in large and small research model product revenue. Operating income rose significantly by 60.6% to $119.9 million, and operating margin expanded 440 basis points to 12.0%. This improvement was primarily driven by a $38.5 million pre-tax gain on the sale of certain assets at the Wilmington, Massachusetts site, the absence of accelerated amortization expense (particularly in Manufacturing), and lower third-party legal costs. However, net income swung to a net loss of $14.8 million from net income of $25.5 million in the prior year, due principally to a $118.0 million pre-tax loss on assets held for sale related to the CDMO and Cell Solutions Divestiture.
Management noted a continued cautious spending environment, particularly in the DSA segment, with DSA backlog holding steady at $1.9 billion. Restructuring and efficiency initiatives remain a key focus: $31.6 million in restructuring charges were incurred in Q1 FY26, and cumulative annualized cost savings of approximately $300 million are expected by the end of 2026 (over $175 million already benefited FY25). Recent acquisitions (PathoQuest, Cambodian NHP Supplier) and divestitures (agreement to sell European Discovery Services for $145 million, completed sale of CDMO and Cell Solutions) indicate portfolio reshaping. No formal quantitative guidance was provided for future periods.
Cash and equivalents totaled $191.8M at March 28, 2026, down from $213.8M at year-end 2025. Total debt (net) increased to $2.66B from $2.14B, driven by $912.5M of new borrowings offset by $355.7M of repayments (net +$556.8M). Shareholders' equity decreased to $2.94B from $3.16B due to a net loss and $208.3M of treasury stock repurchases. Inventory rose to $359.7M (up $60.6M) primarily from the Cambodian NHP supplier acquisition. Remaining performance obligations (backlog) stood at $702.2M, with 50% expected to be recognized within 12 months.
The filing does not disclose traditional purchase commitments (e.g., supply or capacity agreements). The most notable contractual obligation is $105.0M of deferred consideration for the Cambodian NHP supplier acquisition, recorded within accrued liabilities. Additionally, contingent consideration of $30.0M (max payout) is accrued, reflecting a 100% probability of achievement. The company also has a $2.0B revolving credit facility (undrawn? Actually $1.165B drawn at quarter-end) maturing December 2029.
During Q1 2026, the company repurchased 1.1 million shares for $200.0M under the $1.0B program authorized October 29, 2025, leaving $800.0M remaining. No dividends were declared. Capital expenditures totaled $55.9M (5.6% of revenue), with DSA receiving the largest share ($37.5M). Debt activity included $912.5M of gross proceeds (primarily from the revolver) and $355.7M of repayments. The weighted average interest rate on debt was 3.95%.
Revenue was generated 54.6% in the U.S., 27.9% in Europe, 11.0% in Canada, 5.6% in Asia Pacific, and 0.9% in other regions. The DSA segment contributed 59.9% of total revenue, followed by RMS (20.9%) and Manufacturing (19.1%). Segment operating income was $200.5M, with DSA representing 51.8% of the total, RMS 24.8%, and Manufacturing 23.4%. Unallocated corporate costs were $80.6M, primarily related to senior executives and corporate functions.
Operating cash flow (CFO) of $41.1M was significantly below net income of ($14.8M), indicating weak cash generation relative to earnings. The primary driver was a large net loss, but also substantial working capital outflows: trade receivables and contract assets increased by $65.3M, accrued compensation fell by $83.8M, and other liabilities declined. These were partially offset by a $26.0M inventory reduction and a $20.5M increase in accounts payable. A $118.0M loss on divestitures (non-cash) further depressed net income but did not affect cash.
Capital expenditures of $55.9M were 1.36x CFO, indicating high capex intensity relative to operating cash flow. Free cash flow (CFO minus capex) was negative $14.8M, meaning the company did not generate enough internal cash to cover its investment spending.
Capital returns: Share repurchases of $208.3M were funded primarily by $912.5M in new debt proceeds, as financing activities provided $347.7M net. No dividends were paid. The company relied heavily on external financing to support both capex and shareholder returns.
Anomalies: The large divestiture loss ($118.0M) and a $29.4M deferred tax benefit were notable non-cash adjustments. The $83.8M drop in accrued compensation suggests a significant cash payout of bonuses or other liabilities during the quarter.