During the 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. We reported another solid financial performance in the second quarter, meaningfully exceeding our prior outlook, due primarily to favorable DSA results. To a lesser extent, favorable movements in foreign exchange also contributed to the outperformance in the second quarter and to our increased outlook for the year. We have continued to see clear signs that the demand environment is stabilizing.
DSA demand trends, coupled with constructive discussions with our biopharmaceutical clients, have also reinforced our belief that the preclinical demand environment is stabilizing. We never expected a straight line recovery in the net book-to-bill or broader DSA demand trends, and in fact, have often said that the sustained improvement in our businesses will not be linear. The DSA business and our overall non-GAAP financial results continue to significantly outperform our expectations, and we are making gradual progress towards achieving a return to organic revenue growth. As a result, we continue to take a measured and prudent approach to our outlook.
While we have not factored in further demand improvements this year, it is encouraging that the overall demand environment shows signs of stabilization. Before I provide more details on these trends, let me provide highlights of our second quarter performance and updated outlook for the year. We reported revenue of $1.03 billion in the second quarter of 2025, a 0.6% increase over last year, with nearly half of the revenue outperformance driven by foreign exchange. On an organic basis, revenue declined 0.5%, driven by a low single-digit decline in the DSA segment, partially offset by low single-digit revenue increases in the RMS and manufacturing segments.
| Metric | Period | Current guidance |
|---|---|---|
| Organic revenue | FY2025 | decline 1%-3% (raised 150 bps) |
| Reported revenue | FY2025 | decline 0.5%-2.5% (raised) |
| Non-GAAP EPS | FY2025 | $9.90-$10.30 (raised $0.55 at midpoint) |
| DSA organic revenue | FY2025 | low to mid-single-digit decline (improved) |
| Operating margin | FY2025 | flat to 30 bps decline (improved) |
| Net interest expense | FY2025 | $100M-$105M (lowered $7M-$12M) |
| Unallocated corporate costs | FY2025 | approximately 5.5% of revenue (upper end) |
| FX impact to revenue | FY2025 | approx 50 bps tailwind (150 bps benefit) |
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +0.6% reported, -0.5% organic | Favorable DSA results and FX, offset by low single-digit DSA organic decline |
| EPS | +11.4% | Operating margin improvement plus a $0.12 benefit from a lower-than-expected tax rate |
| Operating margin | +80 bps to 22.1% | Cost savings from prior restructuring and operating leverage from better-than-expected first-half volume |
| DSA revenue | -2.4% organic | Lower sales volume in discovery and safety assessment, partially offset by favorable mix of higher-price, longer-duration, specialty studies |
| Non-GAAP tax rate | +160 bps to 22.7% | Primarily the impact from stock-based compensation |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| DSA demand environment | Bottoming, uncertain | Stabilizing, slowly moving upward | Improving |
| Net book-to-bill | 0.93x H1 2025 average | 0.82x in Q2 | Improving over 18 months but lumpy quarter-to-quarter |
| Biotech segment | Mixed | Stable but mixed; smaller biotechs cash constrained, mid-sized performing better | Stable |
| DSA hiring | Restructuring/reductions | Investing back into headcount to meet demand | Improving |
| Spot pricing | Stable | Stable; mix favorable | Stable |
| CDMO commercial revenue | Two commercial clients winding down | One relationship ended, ~$20M H1 revenue will not repeat in H2 | Deteriorating |