Fortrea (FTRE) - 2025 Q2 - Quarterly Results

Highlights and Management Commentary Fortrea appointed Anshul Thakral as CEO, completed its spin-related transition, and reported sound Q2 fundamentals - Anshul Thakral joined Fortrea as CEO on August 4, 2025, succeeding the Interim CEO[4] - The company stated that the demands of the spin-related transition are now complete, allowing for a full focus on future value creation[4] Q2 2025 Key Highlights | Metric | Value | | :--- | :--- | | Revenues ($ millions) | $710.3 | | GAAP Net Loss ($ millions) | $(374.9) | | Adjusted EBITDA ($ millions) | $54.9 | | GAAP Diluted EPS ($) | $(4.14) | | Adjusted Diluted EPS ($) | $0.19 | | Book-to-bill (Quarter) | 0.79x | | Book-to-bill (TTM) | 1.10x | Financial Performance Fortrea reported Q2 and H1 2025 revenue growth, with GAAP results impacted by goodwill impairment, while adjusted metrics improved Second Quarter 2025 Results Q2 2025 revenue increased to $710.3 million, but a $(374.9) million GAAP net loss resulted from goodwill impairment, with adjusted net income improving Q2 2025 vs Q2 2024 Financial Results | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | | :--- | :--- | :--- | | Revenue | $710.3 | $662.4 | | GAAP Net Loss | $(374.9) | $(99.3) | | GAAP Diluted Loss per Share ($) | $(4.14) | $(1.11) | | Adjusted Net Income (Loss) | $17.6 | $(2.3) | | Adjusted Diluted Income (Loss) per Share ($) | $0.19 | $(0.03) | | Adjusted EBITDA | $54.9 | $55.2 | - The Q2 GAAP net loss included a significant non-cash goodwill impairment charge of $309.1 million, which impacted diluted loss per share by $(3.41)[7] First Half 2025 Results H1 2025 revenue grew to $1,361.6 million, but a substantial $(937.8) million GAAP net loss was recorded due to goodwill impairment, with adjusted net income improving H1 2025 vs H1 2024 Financial Results | Metric | H1 2025 ($ millions) | H1 2024 ($ millions) | | :--- | :--- | :--- | | Revenue | $1,361.6 | $1,324.5 | | GAAP Net Loss | $(937.8) | $(179.1) | | GAAP Diluted Loss per Share ($) | $(10.37) | $(2.01) | | Adjusted Net Income (Loss) | $19.5 | $(7.2) | | Adjusted Diluted Income (Loss) per Share ($) | $0.21 | $(0.08) | | Adjusted EBITDA | $85.2 | $82.3 | - The goodwill impairments recorded during the year were primarily a result of declines in the Company's share price and a market-driven increase in the discount rate[12] Backlog and Book-to-Bill Fortrea's backlog was $7,547 million as of June 30, 2025, with a Q2 book-to-bill ratio of 0.79x and a trailing twelve-month ratio of 1.10x - Backlog was $7,547 million as of June 30, 2025[9] - The book-to-bill ratio was 0.79x for the second quarter and 1.10x for the trailing 12 months[8][9] Full-Year 2025 Guidance Fortrea raised its full-year 2025 revenue guidance while affirming its adjusted EBITDA forecast, indicating higher expected revenues with maintained profitability Full-Year 2025 Guidance | Metric | Guidance Range ($ millions) | | :--- | :--- | | Revenue | $2,600 to $2,700 | | Adjusted EBITDA | $170 to $200 | - The revenue guidance was increased, while the adjusted EBITDA guidance was affirmed[13] Financial Statements The consolidated financial statements reflect significant GAAP net losses from goodwill impairments, reduced assets and equity, and a shift to cash used in operations for H1 2025 Condensed Consolidated Statements of Operations Q2 2025 operating loss widened to $(330.3) million due to a $309.1 million goodwill impairment, resulting in a $(374.9) million loss from continuing operations Q2 2025 Statement of Operations Highlights | Line Item | Q2 2025 ($ millions) | Q2 2024 ($ millions) | | :--- | :--- | :--- | | Revenues | $710.3 | $662.4 | | Total costs and expenses | $1,040.6 | $713.3 | | Goodwill and other asset impairments | $309.1 | $— | | Operating loss | $(330.3) | $(50.9) | | Loss from continuing operations | $(374.9) | $(99.3) | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $2,835.1 million from $3,579.2 million due to a goodwill reduction, leading to a sharp decline in total equity Balance Sheet Highlights | Line Item | June 30, 2025 ($ millions) | Dec 31, 2024 ($ millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $81.2 | $118.5 | | Goodwill, net | $965.2 | $1,710.4 | | Total assets | $2,835.1 | $3,579.2 | | Total liabilities | $2,245.9 | $2,216.8 | | Total equity | $589.2 | $1,362.4 | Condensed Consolidated Statements of Cash Flows Net cash used for operating activities was $(102.4) million for H1 2025, a reversal from the prior year, primarily due to net loss partially offset by non-cash charges Six Months Ended June 30 Cash Flow Highlights | Line Item | 2025 ($ millions) | 2024 ($ millions) | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(102.4) | $248.1 | | Net cash provided by investing activities | $8.6 | $256.2 | | Net cash provided by (used for) financing activities | $49.4 | $(482.7) | | Net change in cash and cash equivalents | $(37.3) | $17.6 | | Cash and cash equivalents at end of period | $81.2 | $126.2 | Non-GAAP Financial Measures and Reconciliations This section reconciles GAAP to non-GAAP measures like Adjusted EBITDA and Net Income, explaining their use to reflect underlying business performance by excluding non-recurring or non-cash items Explanation of Non-GAAP Measures Fortrea uses non-GAAP measures like Adjusted EBITDA and Net Income to provide a more meaningful view of core operating performance by excluding non-recurring and non-cash items - The company uses non-GAAP measures to focus on what it considers a more meaningful indicator of underlying operating performance[19] - Non-GAAP measures should not be considered in isolation or as a substitute for GAAP results[18][22] Net Income to Adjusted EBITDA Reconciliation Q2 2025 GAAP net loss of $(374.9) million was adjusted for a $309.1 million goodwill impairment to yield an Adjusted EBITDA of $54.9 million, similar to Q2 2024 Q2 Adjusted EBITDA Reconciliation | Line Item | Q2 2025 ($ millions) | Q2 2024 ($ millions) | | :--- | :--- | :--- | | Net loss from continuing operations | $(374.9) | $(99.3) | | Goodwill and other asset impairments | $309.1 | $— | | One-time spin-related costs | $10.4 | $53.9 | | Other adjustments | $63.3 | $45.4 | | Adjusted EBITDA ($ millions) | $54.9 | $55.2 | Net Income to Adjusted Net Income Reconciliation The Q2 2025 GAAP net loss of $(374.9) million was reconciled to an Adjusted Net Income of $17.6 million, primarily by excluding the $309.1 million goodwill impairment Q2 Adjusted Net Income Reconciliation | Line Item | Q2 2025 ($ millions) | Q2 2024 ($ millions) | | :--- | :--- | :--- | | Net loss from continuing operations | $(374.9) | $(99.3) | | Goodwill and other asset impairments | $309.1 | $— | | One-time spin-related costs | $10.4 | $53.9 | | Other adjustments | $77.8 | $47.8 | | Adjusted net income (loss) ($ millions) | $17.6 | $(2.3) | Free Cash Flow Reconciliation Fortrea's Free Cash Flow for the six months ended June 30, 2025, was negative $(112.8) million, derived from net cash used for operating activities and capital expenditures Free Cash Flow for Six Months Ended June 30, 2025 | Line Item | Amount ($ millions) | | :--- | :--- | | Net cash used for operating activities | $(102.4) | | Capital expenditures | $(10.4) | | Free cash flow ($ millions) | $(112.8) |