Fortrea (FTRE) 11 Mar 242023 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Fortrea Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Hima Inguva, Head of Investor Relations and Corporate Development. Please go ahead.

Good morning, and thank you for joining Fortrea's Fourth Quarter 2023 Earnings Conference Call. Head Relations Inguva, in Corporate Hima Fortrea. am of and Investor Development I

with CEO, fortrea.com. webcasted today our the page been me On call Investor our are accompanying presentation McConnell. Relations call posted to slides our CFO, The Tom is the being website, and of today's have Jill and Pike;

could you statements the in to Litigation Reform that particular, Act During regarding those this we press that forward-looking presentation actual certain and Securities our make statements cautionary cause to statements within on with risks in XXXX. differ these Private our described are These the are forward-looking in to the release website. call, and review SEC the we'll the subject posted reports that significant statements meaning strongly materially we of expectations. current results uncertainties, factors risks of encourage the uncertainties risk and from concerning file We and

of our estimates change. Please note to if forward-looking even that as no statements assume that update any XX, represent the obligation forward-looking views and we XXXX, today, statements March

During measures referring believe to connection in such Pike. it investors non-GAAP not in A Tom financial call. With reconciliation a non-GAAP to like replacement press today's release this but the GAAP available to earnings measures directly and presentation or are measures comparable Tom? more over for is most CEO, to GAAP superior to provided with the that, measures our understanding call these measures. slides These measures we'll comparable of results. call, turn we I'd also financial be help complete non-GAAP gain certain of

joining everyone. quarter morning, fourth call. Good Hima. earnings today's you, you Thank for Thank

the stand-alone we in well comments division parent we're company, This level at our a growth with progress within on ended our XXXX our last talk that market company Let about achieve completed spin from making events. I commitments current our just year. the before division few on about go a a me feel spin a separating stakeholders. making a of were time the as and to time toward X. attractive ability will year, billion July preparing delivering to work XXXX great same in impressive all sell team enterprise to larger we a on Fortrea at completed less midnight and much out as the improving progress its an a parent couple of operations. while as demonstrating as a This than the of a believe We public $X it speed, rates, begin

that of the As industry leadership great part an parent outstanding process, time, bringing seasoned and we At leaders we assembled Directors. the former team, same recruited in a Board of experienced combining from executives.

in for operations a that did During road activities. the that team assured data a I'm disrupted our not established spin map customers independent customers' any our way of spin-related were no to because customer and say we and projects lose projects. protected ongoing process, proud

to our hit critical hard decisions to pace. continue has around works makes at of we organization our not that a a it This world pace and It's independent of matter from Fortrea We created our to a debut and just a our in as morphed whole months. a July and green company X, company launched brand, few new on blue the an transformation fast the testament milestones. slowed. team Since

of X.XXx more our delivering great results. book-to-bill tangible than Our our pleased transformation a of X organization. months book-to-bill us X.Xx, is with fourth for the off start as to for bringing to already We're commercial first a an ratio quarter independent

growth the this to year. company Given later to the between revenue, and expect bookings lag we return

win quarter, fourth attractive therapeutic our areas, across an the in biotech, bookings the large and it's and at specifically the mix. Looking awards pharma

other growing across as X, all businesses, in in strong X full be I. the been seen selling and both Phase GLP-X oncology clinical have areas and We Phase our We've service solutions to such continue of and through wins successful also FSP.

and has value the key us in a Our ability player forward positioned products deliver projects to critical industry. globally, as strategic add -- partnerships

quarter strategic of The carried to with is company. looking a strong of former a call the well. We're had few the execute if about for and more help quarter. at application benefit added QX with can the experienced hybrid we will pipeline To TSAs, selected us move a help momentum parent global agreements, We've global providers which fourth through year, and end we the best-in-class By our this TSAs, from consolidate CRO. made solidify quarter as our TSAs in partners. Cognizant our us with exited exiting progress infrastructure, to position XX% We savvy we deeply this partner technology services our service technology so solid we transition cloud and leading information a who far. X support.

system. help planning is resource services us new to security Accenture enterprise transition our a will both partner and managed

While infrastructure, our we're and TSAs also drive in to investments exiting differentiation our making we're selective building growth.

recently continue as advertising impressive a of as make We well investments raise brand. campaign off our our industry at events. heritage XX raising of to visibility development. in in awareness kicked to drug our We years new We're brand our

speaking going June. to I'm Bio For be at instance, in

trial industry property announced and Recently our strategies, where which approach, integrated add currently a we technology leaders and We're represents complementary making leaders. own X experience. key clinical We investigator is Advisory partnering on established data patient value. XXX includes and Board that developing countries solution site-centric Advarra, and with an site over industry pharma sites the across intellectual Veeva, area involve a investment that progress Another Site effectiveness. our streamlines

we're machine research experts sharing to are intelligence to operational efficiency improve more We'll on CRAs and support hiring and improve early groups using be population customers where an trip this. In innovation and soon investments AI, partnership a Fortrea now ML AI review to report selectively our development for announced studio our of going artificial November, for our other from diverse using Medidata scheduling our accelerate establishing learning units. we studies. access among to with years Medidata, further has participation in dedicated pushing clinical who and been forward. bed AI things We're to clinical

While critical not diversity this this only that addresses the made as research, area. advance a today's in it's requirement we've partnership of

from executing leadership developed already plans. expertise epidemiological for Our has that plan visibly delivering we've in delivery instance The terms and a leverages team this becoming that's most template and made assembled. of to is the consulting disciplined for and with in comprehensive in focus in small inclusion development would team, our we area improvement an diversity strategic new have results, you of are expertise and support Fortrea sponsors. Across Fortrea, demand we're from large of seasoned that investing our plan expect business. differentiation that This changes

today, Earlier Last of and focusing journey. X to access our Phase announced and to on experience, brings evidence which helpful importance consulting, is step investments did in another fall, we strategic a clinical forward the real-world including to market capabilities research our we innovation review, deepens services, X drug pointed our which which development.

they Services focus. Looking Enabling at needed businesses, our while that less aligned with were segment, good

with services in also happy important as IV It Arsenal will focus equity company. companies just clinical and businesses agreement that Phase capital I I'm transform endpoint, divest Capital to patient to we definitive healthcare. firm that, Fortrea Fortrea on access structure. This clinical help we market-leading signed our to improve a helps a management Following our report Partners, to our private to

nurture As in talent improve their that I and patient delivering and strengthen I'm Arsenal, press release this to Fortrea is all while from solutions top-tier commented lives, able that with position, market mission access the be in endpoint morning, capabilities invest which new a we patients' confident share. will resources

our disclosure. to pass been quarter I expense want the the which that in the I prior incurred with connection our a financial do ongoing describe GAAP review to customer, Before Jill has was in subject performance, to work for with of fourth

For vendor, a programming which a X of is of associated third-party data not X-arm made with trial. error from discovered, the arms Fortrea, a background, when XXXX, usefulness limited that in

this or January, our processes. expert of As we determined noted the Fortrea in reviewer not our was independent fault

with expenses third-party incremental significant error. rare incurred we this However, associated

and facilitate This multiparty of you of but earnings, working hand part on wrote adjusted over off some due the trials. more with reflected in part we amount other will to GAAP be to now as a not certain to its detail nature. Jill, work provided discounted EBITDA in As I'll solution ongoing receivables, for customer, numbers. considerations unusual the

you everyone Thank and for you, to joining Tom, thank today. us

introduced. with revenue guidance We are we midpoint of range, fiscal for milestones exceeded delivering at or XXXX, shared you achieving we time we the former our were slightly the our revenue that parent. X than with of pleased and spin, reported driven the quarters achieved a year a in with our exiting greater TSAs book-to-bill achievements These our deliberate X.Xx by roughly changes XX% of row

infrastructure a sales organization incentivizing mentality and entire and customer across managing fostering example, the For our cost enterprise activity our base. effectively, more tightly

full our XXXX to Turning year results.

Our grew announced services sequentially, lower fourth of the X.X% revised clinical billion quarter elevated that at agreement our ending the weighed on infrastructure costs $X.X we under spin-year results. with headwinds quarter methodology The the and results. full-service backlog continued quarter backlog second our sales, transition

track quantity by to and higher growth a partially with Enabling to million margin. Revenues patient headwinds call the studies period XXXX grew new lower million $XXX.X improvement The at million June last versus to in July revenues of year. XXXX, quarter, year-on-year, and XX% our with ran due endpoint revenues on shared XXXX run material a in the driven through longer EBITDA X.X%, of lower results were moving reduced X.X% fourth volume rate to pass-through year shift revenues. fourth target pass-through business we increase during partially by Note solid currency offset the a some $XXX.X lower from of of mitigate not adjusted mix exiting fee working $XX.X access. around be Clinical the our are Services driven center We was revenues, the a previously revenue, XXXX that expect in in to these duration. representing platform quarter. impact service along entering offset a of fee service and were same services wins by higher by revenues increased X.X% the that spin margin

from Direct the of quarter increased X.X% parent year-over-year, SG&A by removal pass-through, the primarily Let the by operational our year-over-year and adjustments was $XX.X carve-out on restructuring was million. and the commenced interest program offset base. quarter quarter prior for and in primarily expense in partially benefit costs, to stand-alone to cost due quarter due in the provide the higher personnel and that XX.X% Net TSA third corporate me the former costs received to detail higher spin. more costs. the allocations TSA

with associated we Tom programming as who our services in which not XXXX that of to expenses relating is made vendor, providing addition, by the incurred one rare third-party error customers customer's mentioned, Fortrea, to In a impacted is a trial.

a As income to part and unusual agreed working discounts to consideration costs and and as we of from We solution. these nature. These make with net the excluded costs adjusted recorded EBITDA customer million customer, to $X.X XXXX. are in part this multiparty for of concessions adjusted their provide other due

Turning full tax $X.X year our large and book a basis as million volume expenses. a had We on rate. to spin-related a income pretax of of onetime result

tax full Our X-month spin, led effective there by with XXX.X%. It million low is to along recognize an ended expense. foreign of XXXX, that are compensation year tax driven full the nondeductibility different. was certain and two the because year December that on of for This the important $X.X are nondeductible domestic essentially distinctly tax XX, of executive periods to expense earnings expenses was rate

primarily This the to R&D improved tax credits. XX.X%. was tax X-month due December the our For effective favorable XXXX, forecast, period has prior versus XX, adjusted rate ended

quarter to XX.X% compared prior adjusted margin compared program $XXX.X both million period. were was million XXXX, basic compared operations. $XXX.X earnings adjusted XXXX rate XXXX to adjusted income for We the $XX.X of for net $X.XX compared the income compared to to $X.XX impacted for to year $X.XX for of of period. full to negatively our period. period. the the revenues, Adjusted for adjusted in year the million of restructuring was quarter in EBITDA of by with period. the were cost XXXX in benefit mix margin for EBITDA million and the quarter by net year million prior of XX% full the $XX.X $XXX.X share decreased in Full $XX.X per margin million third detailed share was effective year the year decreased and to and plans to and earnings stand-alone duration $XXX.X Full net EBITDA net X.X% year income year we advisers our quarter both Adjusted longer XXXX. In in fee adjusted XX.X% the revenues, prior portfolio higher Adjusted year-to-date X.X% on year-over-year year diluted to decreased to basic EBITDA year basic pass-through in XXXX compared costs Full the income lower year-over-year which prior in to XX.X% over XXXX. tax support the EBITDA million million, time. Adjusted base quarter. fourth partially year adjusted year per Full share compared continue work and XX.X% adjusted of income in offset prior spin compared post prior adjusted XX.X% initiated $XXX.X improve of service both the EBITDA fourth for inherited was higher the quarter the SG&A These from studies, was net diluted diluted EBITDA higher adjusted decreased the period. $X.XX

Turning to customer concentration.

XX half and Our our XXXX nearly represented revenues one top of accounted XX.X% revenues. customers of for customer

we to $XXX.X million $XX.X million Regarding in used generated Cash liquidity, compared the in from deferred and the decrease by cash cash cash generated from in year, and million earlier net flow lower year. moderation revenue, services expenses, of prior in million activities partially lower to growth flow for $XXX.X along operations a cash with benefited unbilled accrued Free in XXXX. $XX.X incentive income. including operating in offset payouts was from flows in compared the XXXX,

for flat Net day third the receivable primarily XXXX. including quarter prior is due the that billion of revenues, as XXXX. higher our services XX one to December company sales through December XXXX, in were working than $X.XX compared unbilled process were $X.XX as billion The of the higher XX, previously to as and Days was of items pass-through XX, year-end increase of impact December to versus and accounts transition XX, XXXX, outstanding transactions. December the days XX,

of performance. our a months, Over contracts seeing reflected initiatives number to those DSO XX last over the we there years, in services multiple a provide is our lag our changes commenced have position. in Because improve

our time. leverage continues results, pro the initiatives. including over additional benefits them Under add-backs turn for than to trailing We expect EBITDA quarter account, Taking costs, based We these improve our full spin-related we be to X.Xx lower. adjusted covenant our and more X.Xx company net target adjusted over credit beyond have agreement, costs net the public DSO our our compliance leverage on and ended of purposes ratio XX-month profile forma ratio the for was to savings from cost one leverage into term. with Xx EBITDA medium

to infrastructure general, expect organic debt on drive repayment. our XXXX are investments for current to and investments the with accounting transition priorities Based exit beyond. add-backs, and targeted services the compliant our we remain for timely covenants forecast additional throughout agreement, In capital and of allocation our growth

announcement getting clinical divest touch for businesses. our access made want the guidance XXXX, and our morning earlier on we agreement to endpoint into patient regarding this Before to I

targeted majority for As financial using of a We our pay announced, the and existing the divestiture strategic down quarter further our debt. flexibility. XXXX. is will price million. anticipate We allow of believe CRO Closing us our as proceeds focus the was sharpen to improve this pure-play $XXX second the to

XXXX. second I discuss the perspective. will year the to and our Moving for guidance both first from half this full half,

$X.XX billion targeting billion total of XXXX We in revenue total full year billion. $X.XX range revenue compared of XXXX are the $X.XX to to

million. compared million are to million adjusted EBITDA $XXX of of XXXX in range $XXX adjusted to EBITDA We targeting $XXX.X the

assumes December as pre-divestiture rates is of exchange XX, effect foreign XXXX. in guidance and Our

an purposes, interest For XXXX rate to million estimated view modeling of the year based in EBITDA. We impact million post revenue can fluctuations. you $XXX adjusted divestiture $XX million expectations for use interest market in approximately $XXX current and total full on of expense anticipate

underlying operational provide the awards, focused plan and the efforts our productivity volume will I reduction. cost a SG&A remain be that year We discussed numerous of efforts. Now year third for our mix right and call. transformation through to enhancements and return Fortrea, XXXX execute margin we transformational marks to quarter a growth business These continue growth on expansion update highly to improvements. I on where an on new

our profile improving service, are that pharmacology clinical of efforts by growth We increasing around our contracts business balance targeted mix with and awards. deliver full FSP proportional our between

translating in near able into growth be to expect term, higher We for the margins the to Fortrea. absorb directly

It of Now story revenue let a me halves. expected be cover XXXX X earnings. and our will

XXXX. revenue of new July the June business result decline a that net along favorable of half less in is fee XXXX. year first awards, spin through the service during in expect ran XXXX with mix We a a from decline This the of in

we of new anticipate line at we improve this revenue year. seeing business X% to market to the to which growth Assuming at growth second in currently XXXX meet net continue X.Xx, ratios with of growth half to deliver X% throughout awards bring half rates, for quarterly second to book-to-bill roughly are least

our We follow similar to margins are a anticipating path.

to Turning adjusted EBITDA.

consider with costs we expect In delivered the on X/X half, half, X/X weigh near-term will the of value of the quarter, half range, second the you roughly second reintroduction first retention TSA the the of second half. and the should variable of If in remaining anticipation annual in in the the pay, margin. the staff weighted expect midpoint more to you first ongoing the growth be to in our the

growth revenue the of we from expect anticipated the initiatives returning including to infrastructure, our our empower exit, in half TSA TSA from streamlined and this optimized targeting more the resource and reduce efficiently rates with the will from post in margin along realize faster employee late our to improvement year. In productivity We transformation improved a improve market growth deliver to customers. and us increased the cost market on to us rates exits with our for growth benefit margin expenses SG&A and revenue XXXX, utilization. and We are enable with to line second automation cost base reduction believe projects

ability to adjusted consistent and we Assuming of target full quarterly a on to of margins per book-to-bill XXXX exiting current our XX%. least TSAs drive at would XXXX with our EBITDA our plans, approximately metrics continue basis year X.Xx

that customers, improve and maximizing development, for the solutions committed and shareholders. employees With seasoned our clinical of team leadership the efficiency we're value to innovative relentlessly

a to device path as is and journey pharmaceutical, medical are the clear just choice on Fortrea establishing We beginning. and top for CRO growth biotech our companies

are to against capture focus laid delivering to executing We our and We're expansion margin improvement opportunity the and the have our plan business us. before out. plans growth margin core at CRO unprecedented our streamlining pace we we're transformation

Tom it remainder turn to for I'll Now his of back the remarks.

X short company. Thank I'm how come we've and as beyond this you, months Jill. team in an of proud far independent

are of We winning profitability Growth, the pure-play spin better. our We're year. We're the delivery are now and CRO. headwinds more running refocusing a as We're past business getting priorities. company the business. the

as a CRO has the position industry. a in great Fortrea

the solid years. and leader geographic XX an medical, for industry our We been that have from predecessor operational has root CRO systems Covance, over

need number but want with critical. a assets serve for funding support potential, might be a small. We the for and Our good are looking thus scale to We care. is with special Time overlooked size and customers that large have and future. by frames tremendous understand big and and pharma in are alignment fit more of biotechs that biotechs serve

a expertise, financial the needs. Jill few have into meet also moving XXXX We XXXX. and manageable to their of unique scale elements described touch but agility, high

infrastructure. be our continuing customers of to work, our parent's innovating fulfilling and exiting transformation, year but our XXXX commercial former largely expect We another hard with

from believe is year of and it We that margins a we'll will Our demonstrate up. we this business can serve with company be continuing will X trajectory tale there. unleash customers opportunities better to and this better XXXX, run improve in Financially, them halves. both

want people all engagement industry. our the have to prioritizing growth at ahead. by We're forward, We survey the inspired culture and We our by Guided most Fortrea around powering extraordinary is meaningful. feedback and employees are driven sometimes team we opportunity purpose of what at customer the have the levels best an world, in patient us call who from the Fortreans.

been a Our people that us values that's focusing. and critical, are strategy where we've distinctive told vision, and

commitment is lift pleased I'm the that above report to for our far, to continuing and a better, and prepandemic. business is transform index industry but is heavy team than It's committed. lower this for we're success, and engagement creates and our benchmarks been confident so the attrition up our confidence

an Fortrea place is exciting be. to

open up operator, for please. Now questions, let's

[Operator Windley comes Jefferies. David first with question Instructions] Their from

But for number guess you I that I So one a given to $XXX to understood simpler start expected margin higher that's for businesses and maybe and in I to that million higher of for mean, businesses. I hear understand higher decision want the And profitability I core. forth. revenue the make that would the presume understand how on business to want I and million so EBITDA correctly, is, $XX -- the to than so an have I with divestitures, performing, than divest in the if did divested performing been wanted XXXX. wanted sure commented that's I annualized on it the had I focus if kind

question. thanks Dave, for the Yes,

for management by start CRO I'd team. at we a pure-play we is the when right business, being the looked focus that think I saying believe really our

what so is to our and we frankly. customers our And for want value maximize for the do investors,

These to and in that businesses, them, segment. really And while are that interesting so want we to absolutely like core attractive not I mission. focus businesses,

we decided It on us Fortrea best more the thing for our give in divest does flexibility more as management capital structure focus was well And team. to as so them.

businesses for not think we'd indicate modeling we forward. are as $XX But purposes, of numbers because modeling we're giving that, yes, necessarily you associated -- million. numbers, to that's for remember, I question, give you $XXX contribution the terms we do that fair kind that EBITDA. and factors those does purposes move those would correlate that there of modeling purposes, for thing those directly with The not EBITDA is million In of your other Dave, the

your on fourth Okay. perhaps your as book-to-bill broadening above it, was quarter expectations RemainCo, And out call core, well. target, above then the market in maybe the

had the had the situation bookings your independent on some may Acceleron you that that impact done the and around or highlighted it the of review into year early You end of highlighted XQ. had the have and progression

And so maybe add of little if to things. couple a a you detail could more bit

the then One, that that how independent you to us efforts broadly light and start two, of the and you you the review net assess for concessions giving are more those outcome; progress that XXXX? did have the your to what why would describe -- in situation effect you made -- of or bookings progress or commercial of what in on

Yes.

Let key were little me couple to we attributed regard question there softness was this. announced with as discussed, there And in pipeline, think your as with JPMorgan, lost the that With of December second in first at to a then Dave. I may biotech bookings, situation. that opportunities a we be probably there, we start associated which

As we key is that who Fortrea not you that those. the terms she an cause determined X the expert of issues we, described, of independent in and really did was bring in

result. And pleased so with we're that

believe that what the we we X.Xx In desired in remarks it, we this in to continue execute we solid have on those of mentioned a my effect And book pipeline. is to bills. we can deliver quarter, if terms that

So it's been solid.

the matter. those I and It their when pleased wouldn't be to talked But headlines. them to spent CEO, I further. get We well. about cognizant. comment in we since January. for I to kinds wish of resolve appropriate us excited with and of specific say you time we're cognizant their the will I'm company, And haven't we're seen incremental potential We were effects

question. the One next moment for

Our comes question Anderson from Elizabeth with Evercore. next

Tom, environment demand you demand of sort in terms the obviously, the environment. book-to-bill world described, and the of

your think Obviously, maybe a I demand Obviously, environment? your from has been in terms biotech seeing December. in little you sort the sort about about the heard of the quite of question, to bit then funding prior talk a profile environment bit what you're solid. stronger. Can of comments I since us

of helpful. move of into quarter? sort very that biotech sort between And be pharma fourth and does how you So as differences translate major any would the

Elizabeth. things. And that pipeline quarter because seen solid you, of Thank deliver business. seen. that's A our been Yes. year, -- for able book-to-bills last to about we've a been of couple Since these you've we've second that, solid

word funding looks we would the the We've of funding biotech. and we for seen use is attractive solid. In terms the think XXXX for biotech, see I

We continue there. see to a from solid flow

In of mix there a as flow see a terms we pharma, solid big see business. from well. of nice We

we of full plus FSP. So mix a see service

solid is see think the the I best that biotech for in us we're term of December. to So continuing in with that flow exception softness that

get to enough your So does that close Elizabeth? question,

your course the do follow-up, weighting versus obviously, we And that side? And making improvements Yes. this split and of How that from about maybe of the of sort across how do comments back between some of improvements gross is think that, the take That's in the about helpful. about the year. Jill. for growth maybe you're mix the as and SG&A I we of off business getting leverage for the sort efficiencies think a of you're -- you've there talked half the and improvement margins margin of

Elizabeth. Sure,

I think back year. that the because when see the TSA revenue a exits more half, you in be growth think about little later bit happening are you'll it the to weighted

in there in be we're growth. resource some on that see of coming commented, SG&A, from will holding I you'll it improvement of So to had revenue as because anticipation more but

to some the resource to more much in SG&A, lot will the a that have weighted to least growth, you at additional then be in but improvement support year. expect wouldn't it's the of we add going So And to see near end to of term.

The William moment next comes Blair. question Smock from One next Max for question. the with

the Just front little follow margin bit up wanted to a on here.

any you color understand So for just can there more cadence, the help us XXXX.

detail at I aggressive basis here? for then a end midpoint the around the walk you're about exiting progression the Can about really you more the into at the guide provide year, but just I X.X% margin then expecting year, ramp of and through this the that think some drivers behind the XX%. on you year quarterly different said believe

Sure, Yes. Max.

you the think that the So in when the going second not But the think first is come quarter you give to X/X second quarter. to I quarter. first and I'm going X/X about half the the than in amount the and by half more in half from in X/X much the commentary, exact first

year The I we've that to in the of of to soft pretty net half. in little some business book-to-bill. because had a the about second the more we is new quarter spin start know the and quarter into quarters nature see fact, talked of improve be to soft you, impact of that predominantly much good going year second turn first talked in around to one that doesn't book-to-bill as expect will the bit of then we But we X

the on We get although way. to improve and continue you when think I pronounced to to an but ascending obviously half, exactly. more would second a such little balanced, trajectory, QX a not be not it in will QX see

entirely like teens guide the of in looking total points say of here. XXX-plus should this think, I That's detail exiting expansion mean, then for X.X%. And helpful. at implies margin it maybe sort year? it any XXXX? even If get calling dissimilar around for next about can you least, year provide and on we further at and this QX, that low we guess in I basis to in year the QX is fair I range. ahead margins what of And not you it. about for kind sounds Got think XX%,

Yes.

the expect for trying deliver year think of my that to and the that of hold XX%, XX% I if we're that full trajectory remarks, year I that in would say XXXX. exiting we to was at

were definitely you the year. basis get to compared So guiding points we least would where this XXX at for

Sorry, Jill, be would laid because be XX%. just kind I holding clear, I'm beyond to trying a worst-case to understand guess that, just I that that think you've of scenario? path like out

is a... So it

go would the points. year think just changes we make it, appreciating I bit terms value to significant of that TSA some a slightly through a how improve to XXX-plus more total the at we SG&A, things start in is But the the Yes, around obviously, dollar much allow but basis expect that of in us come those as because of of will the exits little to course ramp.

not be be that's But going will to on fully later to hope would SG&A really I think this unlocking with obviously, improvement. key that, on I TSA that. share at our we point, greater commit more we're to the we'll anything we're trajectory confirm because to you there But exit upside. this that able than once we year say,

you as model. something imagine, progression, Jill working be naturally, give Yes. Max, can we'll to to but wanted you toward

that. appreciate certainly Yes,

One moment next next Justin with from question The the Bowers comes for question. DB.

with sticking margins the just here. Jill,

the to Just trying and there's into -- But XXXX. get basic. really have there for you going sounds and And some the and Is on is going ratios are like out. normalize? base us to things when the what continue what that costs Is of shake in some some of -- -- could help is direct the there the question, and my understanding to of sense -- the costs that you just guide that midpoint reallocation embedded are where does understand then investments from previous it's SG&A? a it

Yes.

made going at cost -- that from see, all we the space. play so trajectory, to to in investments, through those to that near dollar will very investments I of in need but our along thoughtful that sales don't investments, are there -- second really They're are that things continue us from not a probably address and about what do perspective. we things We've them term customers of been But to we've competitiveness half. really in the consistent are need and the those huge from a making think continue. been huge you're and least improving any outsized I that think will terms

challenge there or sales. at largely a improvement assets. for Having there, the you I of won't of see of this earlier, on huge even remainder comments until year, we're And you'll the some having lot improvement said the of early of the cost But revenue least end SG&A the of doing. on amount should the without based based again, that, a improve that right see really timing is more improve because the resource as there of that add into naturally made the at should grows, cost QX what sales the XXXX. of TSA QX, to they're

in SG&A of you'll think before I SG&A back then really improvement sales, will see of margin half the and So start year XXXX. cost more the in and this up pick accelerate to in

then, they the sort that aligned the costs -- peers into will direct costs, way SG&A, the industry? you Okay. XXXX, will your And in and and of the have be of line with then be you will reporting sort

Yes, that's great question. a

actually, SG&A will Sorry, to showing have we able be that our going you'll improve our consistent But results, over as cost with that clearly our then see And of we I that. both could believe manner a more in report XXXX yes, is those hopefully, you're when QX peers. see we and our to sales added time. be trajectory

save the follow-ups. for will I Great. Okay. rest

moment Donnelly next The Patrick the with comes One next Citi. question. for question from

you bit on for just seeing? you're you talk there about But you on. that uncertainty just just touched can Obviously, December the one a you talk maybe little Can pricing what Tom, landscape. competitive helpful. accelerant But in competitive the the had environment you the release, about landscape, competitive be well? to the concessions talked on in piece. seeing the what about specific Obviously, as and that landscape you're the seems just the side press just would pricing you --

Patrick. you, Thank Yes.

and remarks, is mixture a Fortrea to we opportunities, about and some capabilities We or we and scale nice at say, worry know that new how size Fortrea not know the opportunities. the are FSP I And bit Covance have it's I as may that service and continuing may in people the my at good to times are. we full mentioned with a that a know talked of and little we're not brand, see table,

So working that. on we're

firms, being the larger they we understand lot and that biotechs, the have. But who capabilities a of said, are the we pharmaceutical

about we good that. feel So very

key have office the We tomorrow. -- in some customer a

So exciting. very

up being not fronts competitive There's specifically, down pricing report change. the with The for it. on all at much we're now table. think there I to with associated pricing isn't regard or much us, the to

near manage from this any our seeing term our So the can pressure at and just really particular deals, competing you no pricing pressure we that effective try nothing which as usual we're unusual party what we're to one as cost industry, be in in Patrick. have the with this we but carefully in all structures is point, pricing things,

bookings Okay. And up earlier That's one the just then helpful. of on following some questions. maybe

quarter, year, on in but end the clearing just the pretty here to sound into in and a I terms here that with bookings situation we're for on in the make confident And pass. weeks booking are want here little like, you're of about in the left of little track. so book-to-bill X on to you XQ, close I confident guys is with kind of again, sounds uncertainty talking of probably about again, you're trajectory environment well kind where unique You mostly bit coming January sure environment. of a that again, you March that the XQ bit guess talked the It And start that a XQ or the to piece?

you to continue better sufficient drive the your in Thanks. Whenever have cautious business, to us book-to-bill. be have X.Xx to pipeline the but you're execute, we about and is to third Yes. or quarter for because talking this you're

set seeing. we're We tell about customers And feel value good this feel can to we you again, good and about delivering at their reaction we're I So point. the that it. that for the opportunity the

So that. I think good about we feel

numbers. with industry you've quarter, as think hard. is of don't always to too. CRO, I and execute, the And last and say, got pretty are, we But got you you Otherwise, month at those the that to good make that, like the you work

Bruin Derik from America. question. of Bank The next the for moment One with next question De comes

points. couple to I clarify wanted of just a

So -- XXXX sure so I the at excluding the Just of were comments. mean XXXX your or I EBITDA of for That we're that, all, including guide on excludes sort numbers -- to want you sort margin of are your the divestiture right? we also the divestiture. apples-to-apples just first doing comments the -- XXXX. on the -- on on make the divestiture

that case, in -- margin. saying We XX% Sure. we're

margin that getting or So to divestiture it's committed -- seeing be to of we'd we're irrespective -- not.

XX%, that prior incremental that that is to Or are And -- question, also there just -- I opportunity points prior you that I might to basis know XX%? beyond -- XX%? the misheard or beyond The you this. XXXX? talked clarify it. Is I Okay. going XXX about in and -- what's want to that captured so [indiscernible] have upside the answer a on saying is then just that so -- already

a It's Yes. question. fair very

that, depend how maintaining we still we're we It's additional more accelerate revenue our that some quickly with operations in the convert there the a lot book-to-bill. nice depend are exit going we of that do business transformational do get again I it projects plan, the while looking 'XX and able think it a more growth to will us a we at of just strength that. from it to It's those you on opportunity. things. again execute to gives and on be There's it TSAs. on runway The can also If revenue, and to drive X.Xx perspective, over how that. likely quickly

quarters quite these year, we'll make confidence. more we're then point, to more have exiting again, to and TSAs until the in continue commit upside. But this to we not be these we're because firm, But hope other then in on and some can further I and get the So will some are and of the we are get changes, we are certainly think as ready able later not book-to-bill, along yet. as year those at the there just just certain plan, it have of we we that

Derik, term same targets. the longer we think In still I have Yes.

costs. associated CRO other there's right upper are changed general, our the that nothing's bit move scale of the able mid-teens. should a So costs large to with little in into competitors like some But very of some believe we to and we benefit being corporate be

at the And sort I that. the out Can you asset little -- your Yes. what where Thanks, little margin on I is called talk at a uniqueness what the looked services, -- Day. wasn't that of and of sort the that guess was that clarify implied sort as mean, looking Analyst just Tom. of they the to what was of valuation to was enabling just bit That's it? of just the valuation surprised you were I bit I why process given you've how given of on business given why a where I curious is are it. and the was about one. multiples

price that type And you're and in specifically the general of about asking thing?

sort like of price a described. the The of to the just what how looks relative were little low deal. It assets

go These did a through process. Yes. are transactions. complex full We

it selection down in due amount had of was to it. through went and down down deep normal then selected We a fair and and the assets announced that diligence one. selected process do these Barclays interest and think a then us I helped ultimately to couple

I will tell I'm really it's you, Arsenal. that pleased

to think have invest willingness time. over businesses, businesses a I demonstrated in grow they

So I've I'm to we're and pleased really those pleased that for better got and businesses. know team

Derik. we aspect to review, there's all timing necessary this. have to strategic And need the really the just a our think be when to investments better CRO did From we And maximize those to our will the investments of of becoming standpoint, make choice. situated we Arsenal concentrate on I assets,

let given capital, investments is what the would cycles, able of they they we be available to to investing nature those there what that businesses do. our just faster may be see can able do So make to

real for investors. positive us the hand, a On there's our other and

our to that and to Some really proceeds pay of our like debt-to-EBITDA the you and things investors capital XX% use require covenants structure and know look us about see multiples would debt down. our And for at lower. us may

at little as a our debt, I other we well. get which of are us. to is positive things think some going are And room we So looking bit on for

clinical We attractive on. this you I We a really business, think lot this transaction. on because look going we've I focused the focus the So IV. Phase team across to management business got

our able can And term. in let the management the being to structure. organizations then focus and concerns some about to they because margins. business address the that a and drive team be they probably attention we we on deserve shorter So raise get all capital potential investment be investor those businesses We they

to So think we've you look got across those four and to I Derik, win here. really me,

but the answered leverage that. Well, my next be going implications, was question on to you

Appreciate So it. thank you much. very

I at back for time. show turn call Pike Tom would the like no closing further remarks. to to questions I this

Well, today. thanks, everybody, for joining

our here our And We investors. I for the doing great work and customers for continue job. a Fortrea hard at team think to is

appreciate we our So Thanks. continued your in support journey.

This your concludes today's conference call. for participation. Thank you

now disconnect. may You