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Core Insights - Kirby McInerney LLP is investigating potential claims against Fortrea Holdings Inc. regarding possible violations of federal securities laws and unlawful business practices [1][3] Financial Performance - On March 3, 2025, Fortrea reported its fourth quarter and full year 2024 financial results, indicating that projects from before its spinoff from LabCorp are "late in their life cycle" with lower revenue and profitability than expected for 2025 [3] - The company stated that "post-spin work is not coming on fast enough to offset the pre-spin contract economics," leading to a negative impact on financial performance throughout 2025 [3] - Following the announcement, Fortrea's share price fell by $3.74, approximately 25%, from $13.85 on February 28, 2025, to $10.38 on March 3, 2025 [3]

Financial Performance - Fortrea's revenues for the year ended December 31, 2024, were $2,696.4 million, a decrease of 5.1% compared to $2,842.5 million in 2023, primarily due to a 5.2% decrease in organic revenues [284]. - The company experienced a decrease in organic revenues in 2024 due to lower service revenues and a slower backlog burn rate [285]. - Revenues for 2024 were $2,696.4 million, a decrease of 5.1% from $2,842.5 million in 2023 [376]. - Operating loss for 2024 was $(161.9) million, compared to an operating income of $32.0 million in 2023 [376]. - Net loss for 2024 was $(328.5) million, significantly higher than the net loss of $(25.2) million in 2023 [378]. - Basic and diluted earnings per share from continuing operations for 2024 were $(3.03), compared to $(0.36) in 2023 [376]. - Comprehensive loss for 2024 was $(395.9) million, compared to a comprehensive income of $34.1 million in 2023 [378]. Expenses and Costs - Direct costs for 2024 were $2,162.2 million, a decrease of 4.0% from $2,251.9 million in 2023, with direct costs as a percentage of revenues increasing to 80.2% [287]. - Selling, general and administrative expenses increased by 25.1% in 2024 to $560.7 million, driven by higher professional fees and costs associated with exiting the Transition Services Agreement with Labcorp [290]. - Total costs and expenses increased to $2,858.3 million in 2024, up from $2,810.5 million in 2023, reflecting a rise of 1.7% [376]. - Restructuring and other charges increased significantly to $50.1 million in 2024, a 136.3% rise from $21.2 million in 2023, and down from $25.9 million in 2022 [294]. - Interest expense rose to $123.8 million in 2024, a 77.6% increase from $69.7 million in 2023, primarily due to a higher debt balance and a $12.2 million write-off of debt issuance costs [297]. Cash Flow and Liquidity - Net cash provided by operating activities for 2024 was $262.8 million, an increase of $94.4 million from $168.4 million in 2023 [311]. - Net cash provided by investing activities was $251.6 million in 2024, a significant turnaround from $(31.8) million in 2023, primarily due to proceeds from the sale of the Enabling Services Segment [313]. - Net cash used for financing activities increased to $(497.8) million in 2024 from $(140.8) million in 2023, mainly due to principal payments on term loans [315]. - Cash and cash equivalents at December 31, 2024, totaled $118.5 million, up from $108.6 million in 2023 [310]. Assets and Liabilities - As of December 31, 2024, total assets decreased to $3,579.2 million from $4,332.6 million in 2023, reflecting a decline of approximately 17.3% [374]. - Current liabilities increased to $949.5 million in 2024, up from $778.4 million in 2023, representing a rise of about 21.9% [374]. - Long-term debt, less current portion, decreased to $1,049.7 million in 2024 from $1,565.9 million in 2023, a reduction of approximately 32.9% [374]. - The company reported an accumulated deficit of $397.0 million as of December 31, 2024, compared to $68.5 million in 2023, indicating a significant increase in losses [374]. - Accounts receivable and unbilled services decreased to $659.5 million in 2024 from $988.5 million in 2023, a decline of approximately 33.3% [374]. Spin-off and Corporate Structure - Fortrea completed its spin-off from Labcorp on June 30, 2023, and began trading as a separate public company on NASDAQ under the ticker FTRE on July 3, 2023 [273]. - Following the spin-off, Fortrea has established primary office locations in five countries, including the United States, the United Kingdom, China, India, and Singapore, to enhance its global market access [385]. - Fortrea's financial statements for periods prior to the spin-off were prepared on a "carve-out" basis, reflecting the historical financial position and results of operations derived from Labcorp's consolidated financial statements [393]. Goodwill and Impairment - The company recorded no goodwill and other asset impairments in 2024, compared to an impairment charge of $9.8 million in 2022 [291]. - The Company has recorded $1,710.4 million and $1,739.4 million of goodwill as of December 31, 2024 and 2023, respectively [332]. - The fair value of the Clinical Development reporting unit exceeded the book value by approximately 10% based on the annual goodwill impairment testing conducted on October 1, 2024 [340]. - The Company recognized a goodwill impairment charge of $24.0 million in the first quarter of 2024 related to the Enabling Services Segment [453]. Revenue Recognition and Contracts - The Company recognizes revenue from software-as-a-service (SaaS) arrangements on a straight-line basis over the contracted hosting period [323]. - The Company’s contracts generally take the form of fixed-price, fee-for-service, or software-as-a-service arrangements, with revenue recognized based on performance obligations [321]. - Fortrea's contracts typically include a single performance obligation, with revenue recognized based on the proportional-performance basis for fixed-price contracts [405]. Market Risks and Financial Flexibility - The Second Credit Amendment increased the maximum quarterly Total Leverage Ratio from 5.30:1.00 to 6.00:1.00 for certain fiscal quarters, providing additional financial flexibility [275]. - The company expects to continue facing market risks associated with interest rate movements on its variable rate debt, with a hypothetical 1% increase in interest rates potentially resulting in increased interest expenses of $5.7 million [349]. - The Company utilizes a program of risk management to address exposure to market risks, including foreign currency exchange rates and interest rates [344]. Customer Concentration - As of December 31, 2024, two pharmaceutical customers accounted for approximately 22.2% and 13.8% of the Company's combined gross accounts receivable and unbilled services [420]. - For the year ended December 31, 2024, two customers accounted for approximately 14.3% and 10.5% of revenue, compared to 11.6% and 11.4% for the year ended December 31, 2023 [420].

Q4 2024 Earnings Presentation 03.03.2025 Learn more at fortrea.com. ©2025 Fortrea Inc. All rights reserved. Fortrea Q4'2024 Earnings presentation FORWARD-LOOKING STATEMENTS & NON-GAAP FINANCIAL MEASURES Forward-Looking Statements Disclosure. Certain information in this presentation contains "forward-looking" statements. You should not place undue reliance on these statements. Forward-looking statements include information concerning our possible or assumed future results of operations, including description ...

Financial Data and Key Metrics Changes - For Q4 2024, revenues were $697 million, a decline of 1.8% year-on-year, primarily due to lower late-stage clinical service revenue, partially offset by higher service fee revenues from the Phase I Clinical Pharmacology business [30][31] - Full-year 2024 revenue was $2,696.4 million, down 5.1% from $2,842.5 million in 2023 [33] - Adjusted EBITDA for Q4 2024 was $56 million, compared to $58.9 million in the prior year, while full-year adjusted EBITDA was $202.5 million, down from $245.8 million in 2023 [36][38] - The net loss for Q4 2024 was $73.9 million, compared to a net loss of $48.6 million in the prior year, with a full-year net loss of $271.5 million compared to $31.7 million in 2023 [38] Business Line Data and Key Metrics Changes - The Phase I Clinical Pharmacology Services (CPS) business saw strong performance, contributing to the overall sales despite challenges in other areas [10][31] - The later-stage clinical business faced revenue declines due to a mix of projects that were later in their lifecycle and longer duration studies, particularly in oncology [32][46] Market Data and Key Metrics Changes - The backlog grew to approximately $7.7 billion, reflecting a 4.2% increase over the past twelve months [36] - The company reported a book-to-bill ratio of 1.35 for Q4 2024 and an average of 1.2 since the spin-off [9][35] Company Strategy and Development Direction - The company aims to transform its operations and improve efficiency by implementing new management systems and processes tailored for its size as an independent entity [24][50] - There is a focus on increasing investments in biotech and enhancing the commercial engine to drive growth [48][62] - The company plans to achieve net savings of $40 to $50 million in 2025 through various cost-reduction initiatives [50] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the financial performance in 2025 would be impacted by the mix of older pre-spin projects, which are less profitable, and emphasized the need to accelerate new business wins [21][22] - The management expressed confidence in the long-term growth of the CRO industry, driven by advancements in science and technology, particularly AI [62][66] Other Important Information - The company successfully exited most of the transition service agreements with its former parent, which is expected to reduce costs significantly moving forward [18][44] - The effective tax rate for continuing operations for Q4 2024 was a benefit of 1.2%, influenced by withholding taxes on non-US earnings [35] Q&A Session Summary Question: Trajectory from 2025 to 2026 - Management discussed the challenges in identifying the financial performance of pre-spin projects and the slower-than-expected start of new work, particularly in biotech and oncology [72][78] Question: Shareholder Return Opportunities - Management highlighted strong bookings and ongoing efforts to grow the clinical pharmacology business and optimize SG&A costs to enhance shareholder value [79][81] Question: Cost Structure and Top-Line Assumptions - Management confirmed a conservative approach to modeling burn rates and emphasized the importance of optimizing resources for ongoing projects [90][96] Question: Backlog and Burn Rate Concerns - Management reassured that the backlog is appropriate and that they are focused on completing existing projects while accelerating new work [108][118] Question: Current Market Environment - Management noted that cancellation rates are not elevated and expressed confidence in the pipeline of opportunities in both large pharma and biotech [121][125] Question: Analysis Catalyst and Resource Overlap - Management explained that the analysis was prompted by signs of potential revenue shortfalls, leading to a deeper examination of the backlog and project performance [129][130]

Financial Data and Key Metrics Changes - Fortria reported fourth quarter revenues of $697 million, a decline of 1.8% year-on-year, primarily due to lower late-stage clinical service fee revenue, partially offset by higher revenues from the Phase One clinical pharmacology business [20][21] - Full year 2024 revenue was $2.696 billion, down 5.1% from $2.842 billion in 2023 [22] - Adjusted EBITDA for the fourth quarter was $56 million, compared to $58.9 million in the prior year, with a full year adjusted EBITDA of $202.5 million versus $245.8 million in 2023 [25][26] - The net loss for the fourth quarter was $73.9 million, compared to a loss of $48.6 million in the prior year, with a full year net loss of $271.5 million compared to $31.7 million in 2023 [27] Business Line Data and Key Metrics Changes - The Phase One clinical pharmacology services business saw strong performance, contributing positively to sales, while later-stage clinical services faced challenges due to a mix of older projects with lower profitability [21][25] - The company achieved a book-to-bill ratio of 1.35 for the fourth quarter and 1.16 for the trailing twelve months, with a backlog of approximately $7.7 billion, reflecting a 4.2% growth over the past year [25][26] Market Data and Key Metrics Changes - The company reported solid sales in the Asia Pacific region, including significant wins in global oncology studies and medical device programs [8][9] - The consulting organization is implementing multiple real-world evidence studies in Asia Pacific for a large U.S.-based pharma firm [10] Company Strategy and Development Direction - Fortria aims to transform its operations and improve profitability by implementing new management systems and processes tailored for an independent company [16][34] - The company plans to focus on targeted investments to drive organic growth and improve productivity, alongside debt repayment [30] - A significant emphasis is placed on increasing investment in biotech in 2025, maintaining a balanced customer mix between large pharma and biotech [33][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the revenue and adjusted EBITDA trajectories for 2025 are not aligned with prior expectations due to the mix of older and newer projects [14][16] - The company is optimistic about its pipeline and believes it can achieve a 1.2 times average book-to-bill ratio in 2025 [33][34] - Management expressed confidence in the CRO industry and Fortria's role within it, highlighting ongoing opportunities in both large pharma and biotech sectors [42][91] Other Important Information - The company successfully exited most of the transition service agreements with its former parent, significantly reducing payments [12] - A restructuring charge of $21.3 million was recognized in the fourth quarter to support ongoing transformation efforts [35] Q&A Session Summary Question: Can you discuss the trajectory for 2025 into 2026 and the impact of pre-spin projects? - Management explained that the analysis of pre-spin projects revealed lower revenue and profitability than expected, which took time to confirm [49][52] Question: What are the shareholder return opportunities? - Management highlighted strong bookings and ongoing efforts to grow clinical pharmacology and FSP while transforming SG&A costs [54][56] Question: Can you provide insight into the current environment regarding pricing and demand? - Management noted that cancellation rates are not elevated and the pipeline remains solid, despite macroeconomic concerns [90][91] Question: What was the catalyst for the detailed analysis of backlog? - The catalyst was potential revenue shortfalls observed during budget preparations, prompting a deeper analysis of project forecasts [96][98]

Core Viewpoint - Fortrea Holdings Inc. reported quarterly earnings of $0.18 per share, missing the Zacks Consensus Estimate of $0.36 per share, representing a 50% earnings surprise [1] - The company has consistently failed to surpass consensus EPS estimates over the last four quarters [2] Financial Performance - Fortrea Holdings Inc. posted revenues of $697 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.63%, and down from $775.4 million year-over-year [2] - The company has only topped consensus revenue estimates once in the last four quarters [2] Stock Performance - Fortrea Holdings Inc. shares have declined approximately 25.7% since the beginning of the year, while the S&P 500 has gained 1.2% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.22 on revenues of $659.7 million, and for the current fiscal year, it is $1.28 on revenues of $2.72 billion [7] - The trend of estimate revisions for Fortrea Holdings Inc. has been unfavorable leading up to the earnings release [6] Industry Context - The Medical - Biomedical and Genetics industry, to which Fortrea Holdings Inc. belongs, is currently in the top 28% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [8]

Revenue Performance - Fourth quarter revenue was $697.0 million, a decrease of 1.9% from $709.7 million in Q4 2023[3] - Full year revenue for 2024 was $2,696.4 million, down 5.1% from $2,842.5 million in 2023[5] Net Loss and Earnings - Fourth quarter GAAP net loss was $(73.9) million, compared to a loss of $(48.6) million in Q4 2023, resulting in a diluted loss per share of $(0.82)[3] - Full year GAAP net loss was $(271.5) million, significantly higher than the $(31.7) million loss in 2023, with a diluted loss per share of $(3.03)[5] - Net income loss for the twelve months ended December 31, 2024, was $328.5 million, compared to a loss of $25.2 million in 2023, representing a significant increase in losses[24] Adjusted EBITDA - Adjusted EBITDA for Q4 2024 was $56.0 million, down from $58.9 million in Q4 2023[3] - Full year adjusted EBITDA was $202.5 million, compared to $245.8 million in 2023, reflecting a decrease of 17.6%[5] - Adjusted EBITDA from continuing operations for the twelve months ended December 31, 2024, was $202.5 million, down from $245.8 million in 2023, a decrease of about 17.6%[25] Cash and Debt Position - Cash and cash equivalents were $118.5 million, with gross debt of $1,142.0 million as of December 31, 2024[8] - Cash and cash equivalents increased to $118.5 million at the end of December 2024, up from $108.6 million at the end of December 2023, an increase of approximately 8.7%[24] Assets and Liabilities - Total assets decreased from $4,332.6 million in December 2023 to $3,579.2 million in December 2024, a decline of approximately 17.4%[22] - Total current liabilities rose from $778.4 million in December 2023 to $949.5 million in December 2024, an increase of about 21.9%[22] Impairments and Charges - The company recorded $24.0 million in goodwill and other asset impairments during the twelve months ended December 31, 2024[24] - Restructuring and other charges amounted to $51.2 million for the twelve months ended December 31, 2024, compared to $23.8 million in 2023, indicating increased restructuring efforts[25] Future Guidance - The company targets 2025 revenues in the range of $2,450 million to $2,550 million, with adjusted EBITDA guidance of $170 million to $200 million[9] - The company expects to complete its restructuring plan to reduce overcapacity by the end of 2025, with $21.3 million recorded in the fourth quarter related to this plan[26] Cash Flow and Investments - Proceeds from the sale of business amounted to $276.6 million in 2024, contributing positively to cash flows from investing activities[24] - Net cash provided by operating activities for the twelve months ended December 31, 2024, was $262.8 million[37] - Capital expenditures for the same period amounted to $25.5 million[37] - Free cash flow for the twelve months ended December 31, 2024, was $237.3 million[37] Operational Independence - The company has largely exited its Transition Services Agreement with its former parent company, enhancing operational independence[2]

Core Insights - Fortrea reported a GAAP net loss of $(73.9) million for Q4 2024, compared to a loss of $(48.6) million in Q4 2023, indicating a decline in profitability [3][10] - The company's full-year revenue for 2024 was $2,696.4 million, down from $2,842.5 million in 2023, reflecting a decrease in overall sales [5][10] - Fortrea's book-to-bill ratio for Q4 2024 was 1.35x, showing strong demand for its services [4][10] Financial Performance - Q4 2024 revenue was $697.0 million, a decrease from $709.7 million in Q4 2023 [3][10] - Full-year 2024 adjusted EBITDA was $202.5 million, down from $245.8 million in 2023 [5][10] - The trailing twelve-month book-to-bill ratio was 1.16x, with a backlog of $7,699 million as of December 31, 2024 [6][10] Cash Flow and Debt - As of December 31, 2024, the company had cash and cash equivalents of $118.5 million and gross debt of $1,142.0 million [7][10] - Operating cash flow for the full year was $262.8 million, with free cash flow of $237.3 million [7][10] 2025 Financial Guidance - For 2025, Fortrea targets revenues between $2,450 million and $2,550 million, with adjusted EBITDA guidance of $170 million to $200 million [8][10]

Core Points - Fortrea sponsors the SCRS Collaborate Forward working group to enhance collaboration and improve clinical trial efficiency [1][2] - The working group consists of 16 leading Global Impact Partner organizations focused on reducing administrative burdens in clinical research [1][2] - The initiative aims to optimize internal processes, promote sustainability in clinical research institutions, and enhance patient experiences [1][2] Company Overview - Fortrea is a leading global provider of clinical development solutions in the life sciences sector, collaborating with biopharmaceutical, biotechnology, medical device, and diagnostic companies [5] - The company offers management services for Phase I to IV clinical trials, clinical pharmacology, and consulting services, leveraging over 30 years of experience across more than 20 therapeutic areas [5] - Fortrea operates in approximately 100 countries with a diverse team, providing targeted and flexible solutions to global clients [5] Industry Context - The clinical trial landscape is becoming increasingly complex, necessitating innovation to ensure patient safety and streamline processes [2] - The Collaborate Forward working group will focus initially on startup research, sharing success stories and data-driven insights to demonstrate the benefits of collaboration [2] - SCRS invites sponsors and CROs committed to sustainable research practices to contribute to a more efficient and collaborative clinical research environment [3]