Fortrea (FTRE) 8 Nov 242024 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Fortrea Third Quarter 2024 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 Hima Inguva, Head of Investor Relations and Corporate Development. Please go ahead.

morning. Good joining XXXX for conference third Fortrea's you earnings quarter call. Thank Investor Hima Corporate Inguva, am Relations Head I of and Fortrea. Development at

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

in Reform risks are make certain cause to meaning you and and X, uncertainties Securities forward-looking described represent We we these Litigation the reports release change. forward-looking the to subject estimates could update statement forward-looking in of statements filed our the the our strongly these These significant within posted press we'll SEC any regarding Act as that statements call, the and actual risk November assume XXXX. this presentation risks differ and in Please our of During that materially particular, encourage statements statements XXXX, if to that we of no current even website. with review statements forward-looking obligation Private that results views to from and we to are expectations. uncertainties, concerning factors that cautionary note those today,

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

Pike. it like CEO, our Tom? I'd to over to that, With turn Tom

Welcome to call. Good morning, everyone. the

saying our objectives. Let that execution progress solid and had on of strategic Fortrea me a quarter by start

Our delivered metrics well, and on anticipated. landed we key as other bookings

or Phase a we and leading probably provision, service provider I you pharmacology which know, is outsourcing. We're a development, serving call pure global through of X CRO X. functional clinical as play FSP Fortrea, Phases full-service

deep address in and Fortrea how is market. the we broad

some We relationships have and broad with have firms preferred large exposure biotech. to pharmaceutical

large business is and pharma XX-XX Our about overall between biotechs.

pharma world. types anywhere customers we were give our that biotech of scale value services value the small drive appreciate personal Both in of and experience large to have our to conduct customers The almost enough attention that clinical the Our partners agile they need customers years XX solutions. expertise. to sufficient

have out and especially spun Since of Promoter Scores recognition recently. too. customer Net Fortrea our our improved, getting external parent, We're

Global PharmaTimes an their a great Fortreans quarter, other including number for in-house recognized and This roles. work, of CRA, Project Manager

Awards. Data-Driven be been Scrip DEI for pretty In incredible, finalist given in awards independent addition, annual Excellence award Year in months. dashboard. Fierce category the in December. the only that announced our in Healthcare's we've XX Fortrea has the We're just early in also DEI finalist of a a been named CRO will All for Both is

larger book-to-bill pharmaceutical the biotechs. and here some closed a X.XX we with important with of quarter. success execution Now highlights number We progress customers, of quarter. for the We a achieved for projects during and had are

for opportunities is quarters Our pipeline the of next solid. X

environment. Our and servers exit to application the systems from parent sight nearly over independent our XX% with foreign our in is Fortrea migrated of

to the Our technology EBITDA business this and revenue uncover underperformed required our continue has were and finally, fix why people, in to process that. line expectations. and And with we financially

some these on Joe As some others. usual, highlights fill detail provide and with in I'll will of

as and relationship a some them, Last work other quarter, pharma new I footholds, large in of call larger companies. we discussed

early with requests This for quarter, including we responding made some progress getting customers, these proposals. started to

investigator the engagement. in won resulted in trial our specific a based on therapeutic full that attractive footholds This deep an is service our the Fortrea III expertise of project significant relationships. area one instance, and For Phase

Some also from through came planned other larger projects customers. larger long-time as

Biotech in areas. a therapeutic the wins number full quarter across featured companies service of our third also in strongly

biotech dermatology disease. diabetes, wins We have in and key oncology, autoimmune

in While building we're are such gene known position continue expertise areas wet as ophthalmology, as seen for our where and in oncology strong expertise other customer AMD mix, across strong differentiator. therapy our a skills a we

real-world in scientists customers. won consultants several for Fortrea's different evidence Asia virtually-designed and region Pac studies observational the pharma

consulting Our us differentiate. science help and

attractive have strong business pharmacology clinical Our and customers continues book-to-bills, to bookings with indications.

around we've the with and opportunities. That successfully with mix particularly for larger analysts, been firms ensure to the our executive spin team in softness in some past lead the saw has who transformed time of strong As has and the discussed CPS pharmaceutical successful attractive of a spending. pipeline biotech are

to continues qualified customers. a pipeline also business business CPS biotech solid new of Our have with

CRO important with selected and instance, expertise that solutions because I contract was a an able the in were new not quarter, Phase this about What incumbent we to the but focus for customer this our Alzheimer's for biotech study program. is a we initially unseat the of supporting secured significant its area. were program, award For

and Our our complex experience into programs Phase CPS helps Phase with I transition relationships II. Ib in us in strong

time, making rate. with As last there discussed progress we're we win an increasing

to We some projects. innovative productivity also ahead and technology with continue press

excitement. optimization. of to looking protocols amendments, have showed couple map complex to SOPs, as try continuous AI tools predictability of generated and also several some We practical such CRA and applications and is interesting by AI prospects to nice a in a a at Fortrea oversight utility cleaning. to quarter copilot and that and tool areas and improve being technology-made We're used other tools, tool of added our data tool. pharmaceutical for that's and customers firms We ML lot study a and this road

you I bookings. anticipate second Now address questions ask half the will about let me our

the pipeline of with prior average large into the pipeline told was than metric the higher biotech. prior fourth pharma quarter, than going of X our third quarter, X into same Coming average you, the the greater we and a of the held, mix the As quarters. nice was quarters the and

the continue through book-to-bill we that execute Consistent a to know We commentary, second with we our QX quarter. to half. for the need X.X target

Regarding light of the our EBITDA, execution. revenue and adjusted complexity, of spin-related I'm with in backdrop pleased

on quarter a new business, revenues. for strong to In expectations we delivered addition of

expand We work also but expected. do, continued making to that our continued know We we're we delivering margin, as EBITDA progress. we to have

me Let the with some to comments up Jill, year. wrap I'll of hand about then the remainder over Jill?

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

all unless As a following our Fortrea Enabling otherwise. my continuing divestiture I reminder, Services remarks operations of of to relate businesses, the note

delivered start versus X.X% revenues. fee the I'll lower expected. by has as of and Revenues was The year pass-through declined $XXX.X this service reduction that year-on-year. driven saying we million by quarter prior

we our factors, awards decline normalize in had pass-throughs called portfolio. the is new by continuing by mix the the along to biomarker previously on revenue lower pass-through business of its pre-spin The study primarily out, life lower given a stage in which is the fee period of cycle. service driven studies later-stage Our continues longer-duration project be to impacted in combination with and

costs onetime in costs personnel a the in basis, an professional due well TSA by an costs the fees GAAP partially offset costs, increase X.X% lower along the related quarter as receivable On was quarter. initiated yield increase to decreased incremental the we in and quarter primarily professional XX.X%, due program as incurred direct by SG&A exiting the to securitization costs second fees. in to stock for and pass-through higher with year-over-year in the lower year-over-year primarily compensation

from the million year technology and expense $XX reclassified company related to period comparison prior certain facility costs primarily costs direct to charges. in SG&A nonclinic information The

For see at basis the third will on XX.X%. of you quarter, revenue a percent as SG&A a GAAP

impact costs revenue of impact exclude former the related approximately you the with onetime SG&A last a million of quarters. worth if of to related of the quarter's $XX underlying the separation consistent incremental of X our yield from and cost, was percent full a However, the continued to as expense parent

expense compared annual securitization and annualized on Loan quarter to were Net interest we during the million, to XXXX, the interest the $XX.X interest in prior a million total at A we the estimated benefiting the When the be decrease the quarter are B was the of and costs looking approximately year, Term at of rates third effect securitization using Loan quarter. repayments XXXX. outstanding lower from XX% expense versus during annualized for start $XX.X cash debt, second and Term made costs incurring usage

our to our relative of operations for an tax the effective benefit reflecting rate. foreign The forecast. continuing versus quarter XX.X%, was tax a earnings rate domestic latest Turning for updated to split of

on the tax loss, quarter, recognized third benefit of due continuing forecasted tax by During the valuation carryforward disallowed related deferred and primarily operations, expense. asset our a a we of update million interest to allowance partially offset in $XX.X to pretax this

consider to improve continue time. position overall expect over our could we tax that We initiatives

the quarter XX was months trailing X.XXx for and book-to-bill for X.XXx. Our this is

of XX increased adjusted on sequential $XX.X decreased $XX.X the period. line our X.X% grown compared has billion expectations. prior EBITDA $X.X around year-over-year at that for in XX.X% quarter over months. in EBITDA past Adjusted backlog EBITDA adjusted with basis, the X.X% Note to the million of year a Our million

Adjusted by higher in quarter SG&A X.X% the from along program in public XXXX. costs which margin partially revenues continued of was quarter quarter the negatively the a compared lower we period. in into as for prior service EBITDA to by restructuring post spin the company. the initiated was XXXX, benefit third to These was the impacted in the third with fee X.X%, margin Adjusted EBITDA year quarter, the were support offset operations

was net income of of current the $XX.X of both increased quarter and million year income prior compared quarter period. and in net prior In adjusted $XX.X basic year period net for the Adjusted third million XXXX, share the to diluted adjusted for income and the $X.XX. X%

Turning to customer concentration.

revenues. XX.X% revenues. of third top XX% quarter One XX XXXX for represented Our customer customers accounted of

note on have I cash operations. Fortrea we flows to segregated As total discontinued in from relate comment these flow, not as cash

we in sale decrease months flow receivables and compared facility in reported in under million benefited offset partially the to from an net increase prior million revenue, XX, of X $XXX unearned activities the cash the For ended the operating XXXX, securitization generated the in by from September year. income. flow $XXX.X Cash

X were million accounts for in XX, receivable as XXXX, XXXX. Free $XXX September was months compared of XXXX. Net December XX, $XXX.X as operations million services cash first to and unbilled $XXX.X to of of million million $XXX.X compared flow the continuing

we XX, sales continue reduction XX, balance our our the terms lower than second is as continuing was due days in operations to September XX outstanding contracting versus services from Days XXXX. unbilled and as processes. enhance X to XXXX, June The of primarily reductions quarter days

improvement our our changes We DSO profile time. processes make over enable order-to-cash and continue to to contracting to further to

of fully We covenant with $X.X our the quarter. than the more the We billion compliant the liquidity. with credit quarter maintenance are of as of agreement financial of ended end

timely parent, former improve targeting infrastructure our agreement allocation investments focusing near exit and capital with drive then debt of productivity unchanged, the repayment. growth investments for on the in to priorities and Our term transition services organic are

program. transformation our on update an provide will I Now,

make the our improving to profitability of Fortrea. on continue journey progress growth We towards and longer-term

our to to relationships Our competitive our business and team, winning leverage we entire and leadership is primary awards enhance new partnerships experiences with approach customers. our the objective their of regularly

operational is for On our execution, first delivering our customers. work priority high-quality

on At the We study believe execute speed investments continue our and time same productivity measured that specific time, and startup delivery. revenue to enhance require areas operational actions we to milestone growth to are improvements and ensure that there effectiveness.

investments we making our For our need of operational areas these We margins, given to select current investments. organization, fund in savings example, deliver SG&A. certain parts elsewhere and to know we that commercial are

year-end. the year-end, XXXX to limited exited majority early to vast a XXXX number TSA exit ensure the in of with expect services continuity business by being through We

including continuing of largely attributable resources while with needs are intended improvement our specific projects lower this targeted in quarter pockets of to is The reduce reducing costs overall productivity. these EBITDA We to adjusted the to better programs with programs programs. align

to SG&A plans functions. supporting our across We are our reduce continuing costs with

in XXXX We us independence believe versus ramp benefit ways up how were to full from these to more our parent expect will these historically the functions deliver delivered. from that they former during as efficient we enable

trends guidance, The is $X.XXX updated $X.X by what our XXXX have consistent of to range Regarding guidance primarily we lower pass-throughs, I in discussed reduction end billion range driven the to with earlier. in billion. revenue top the

systems. devices million $XXX not are we and that around to in a the moving Our fourth of and customer-facing million parts There remains IT internal adjusted unchanged. number transition key technology of EBITDA impact the do transitions closely, such $XXX quarter. of range and guidance are systems These as managing navigating

awards certainty parent, the having XXXX. more of and focus We fourth guidance expect backlog, on from new a by XXXX. efforts in first leadership the informed drive exiting the team. be of exact our specifically Building will XXXX of to primary they to quarter TSA net commenting of timing not better with the pipeline expansion, business heading to along on the quarter margin our services XXXX continue our along provide with targets former be of into as I'm opportunities sense

our Before I effectively. operate making towards to infrastructure to well are conclude, as new us the to the a moment as to the I progress services acknowledge take exiting teams significant want that enable more transition agreement fully efficiently and will build

Tom mentioned, and track our than transitioned, HCM As are servers and date. for of IT their go-live January teams our been respective implementations and leading the on more XX% applications December and ERP have

It's easy to long-term are and create we've putting profitability with This value is strengthen this the under But all of blocks think, challenging tasks done what's laying Fortrea. work agility demonstrates There our of be place have to we stakeholders. difficult done, our to circumstances. for in teams growth determination effort, is our long-term to the to next? but building okay, still execute position foundation the that combined and the for work capital

With the have the $X.X of margin committed than and talented laid year, XX,XXX we attractive expansion. of foundation are past we to longer-term solid global more and in growth nearly billion professionals, a backlog team

with along are the scores, by innovation focus satisfaction, new unlocking opportunities, improving execution, and to enhancing our as on our NPS in commitment shown customer position our market. Our

We over for and value time. improve are customers, ability shareholders significant our and employees our margins confident in deliver to

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

In thoughts remainder let the a Thank the about year. closing, provide you, Joe. me few of

should mentioned, predictable. more sufficient opportunities grown Regarding XXXX, which We're the X.X pharma, our large fourth of in quarter half. as targeting has second be of and book-to-bill a pipeline I the has

qualified at for at looked solid have and it is opportunities We point. QX feel this

environment. Medidata, see to new Our already be such Fortrea's as customer systems, Veeva are system quarter. in excited and I'll our in implemented transitioning ERP production this

turn to Fortrea. teams year, Next for making attention hardworking their improvements our will

doing. quarter a got had with reports I senior-level consistent larger and the our are pharma customers. our this strong to job of of Moving meetings number customers teams

through pharma environment to in organizations spend for While them decrease our R&D, larger they to to increase need whatever some uncertain best is their the causing we're do. doing or help companies

goals their quality many know clinical teams and points I've Fortrea Fortrea bullish research. They're as their and goals, customers, on data with assets are their also with complex achieve therapeutic provide for executive met prospects well touch often to the can well. regulators. packages biotech them delivering multiple and We top provide help

in growth to Report, solid our safety, Responsibility published fairness and we do. that QX, we Social In inaugural execution value future. everything Corporate summary, we're environmental stewardship, underscoring positioned had our In governance ethical creation in for progress, commitment and the Fortrea a quarter of well

a would I company and needs demands the startup. can like be working world. our at the team to It to Fortrea of competing challenging balance XX-year-old the of energy around a with recognize

ahead. far I'm deliver customers developing and treatments work of achieved team years we've Our excited committed to what bring the the is we so patients solutions to sooner. important that can what in and of proud about remain

please Thank questions? the you line can you. open Operator, for up

Baird. And will our question come with first Coldwell Instructions] Eric from [Operator

pull you to about did. wanted as ask in particular. XQ in clinpharm Good job I to

going overall You strength seeing weight They're but a is? as units. year. of are nature on have the really quite are overall in getting few the a your curious and read What's I them. type loss, this Is GLP-X well? category? strong not in a if you talk transitioned you Or that's categories therapeutic lift quite I'm there Phase because studies how studies clinpharm of -- how other market your all could of about few what of the various diabetes

Yes.

do a Fortrea largest the here I exposure saying think given start at of kind and the CROs breadth, biotechs world. marketplace. particular by firms our think large have our the the have And as is given we of in to is I different I'd size the we Phase about some attractive we one exposure things to than that around pharmaceutical in as the well

business that target market. we're kind we've really trying ourselves those those are so And we combination of of how the of well. And in X, that terms organizations the respliced spending target to in

GLP-Xs also -- broad some it's we do across we exposure on the have business. Eric, work but do, Interestingly,

I the we another mentioned have actually, that interesting autoimmune didn't had on. I in, add U.K. in I and that As that we're point an -- working compound

wide We work variety we that of things a have through.

array GLP-X across it's actually oriented, sophisticated wide scientific So it's less a and of oriented therapies. more

in could That's mentioned good to to up, it hear. give those? And Put you Tom, rate the there scores the metrics or was around Net you Promoter win Are stats that... any comparison up. us

that -- rates I'd not specifics quite good the yes, our have next are up but particular, win and rather we we our CPS since and talking give -- you'll me as win rates spin are then it. because year, ask were about in time basically but

so the spun. returns for -- And I think Scores Net Promoter also taken better have since the we and

forward. things we're pretty those of So proud move as we

Great. If Jill, your changing, I lot technical with With could a of pieces with the moving facility rates lot one interest A in just on last squeeze and TSAs, just one the a the moving one. expense. here.

You gave could rate the you us of into What's that a sense some quarterly. curious 'XX? as you where the improvements see on interest on we normalized on go if year-over-year. exit expense metrics I'm give sort

Yes.

write-off a the were debt the that had a take in well, expense. think impacted but had bit QX remember, portion cost the that of paydown which consistent we yield was because we amortizing also little I during is debt quarter, this original you unusual from Eric, you and happened a the we saw the quarter, that we pretty in had what as to interest -- quarter,

on forward. move. to And be rates out if a saw will or But XX%, So we in is it on the quarter. and representative also is going quarter I revolver in a what the in generally think plus bit this decent it need somewhere do of this range, depend would might XX% minus how what depend you we and approximation

Hopefully, minus.

we'll Hopefully minus, but see.

comes question next with from Citi. Donnelly Patrick the And

Tom, the on bookings level. the maybe book-to-bill the X.XX just really to see environment, nice in come it's at

in quarter build, Can guess, with think what frame right, back this commentary a XQ much prior for I with you still just a X.X half so Maybe just was changed be what what then that, about, building the better? for that I would And XQ. kind the of talk helpful. sounds you far the lower, in into X.X saw higher like that the you've half. second XQ it quarter up seen us, was

Patrick. Thanks, about the good half. feel Yes. We back

I have we've saw QX, the QX think given which of and But QX, in commentary nice gives mix I have you firms looking with predictability remarks, what the mentioned pharmaceutical we QX. our do holiday prior really done biotech, get and you we're holiday uncertainty as large a with second period as have half. we given a in have, more little to decided the X.X that average that prepared stick large to in bit us many the But for there. that given a lot we schedule know, a in

comfortable But pretty QX. well. feel we've that I'll looked pretty QX and as comfortable I add also with we we with And think overall, feel QX, at

we we at with So prior can deliver out, feel comfortable that if but look we my execute, as remarks, pretty average. X.X I'd we stick

the And the to much for second pretty quarter I which It contingent talked level just XX% around XX% on Okay. year. talk through, high confidence helpful the good this good. book-to-bill at just least that. big half, at at on kind Jill, through kind the prior half it's be then, about the that of you next just, maybe we EBITDA least second looking was front. margin obviously, the a were the in Again, in through know margin EBITDA. level, I X.X know Very one piece, guys That's of the commentary to helpful. bookings feel would

So level talk the through EBITDA pieces just the commentary. confidence moving prior again, maybe the and just in

not are give We XXXX right guidance now. saying, going we're Patrick. to Sure, specifically

see will in We're very depend we QX it's and into we yes. achieved have half. the much pleased, had going the deliver quarter. it X.XX third guidance quarter important, because we first the you'll the recall earlier have our the again, from year, to very we obviously, based first and think we landed to on I the in also what where mix this with But that fact in change on

year-end, they looks but So also that I us timing good generation live, And mentioned, track believe terms and of And go mix understand ready into but We the the really those TSA a important of for It is moment, systems moving getting of I like. think big in essential work. still those to exits we're also essential. to are for the improvement. because X absolutely are looks it's really at on obviously, for SG&A there's as lot the is what important. pipeline next us critical of

wait on lot rather would now in parts clarity rather like that have say look we moving than, of something a more things and still what So has it.

or So bit I'm going next Justin of from quarter. And explained one answering feedback you pause in we're DB. from question update to of why, take first that comes directly, our and that but the with Bowers little going refrain give the to

you. just one Tom, for

of of where something You've been or is we we large environment, have two? the could you the the as year sense especially in industry you in now? closer help maybe finish some we're line the long this anyone. next seeing what reprioritizations? of characterize do as And for a and restructurings here? with the pharma to in endures are terms think Are And that just Or we

the rapidly full-service even opportunities I outsourcing are the who started say. last much of on Justin, talk and of time and it, the top our industry some that it's of competitors And about into spending projects heard groups. out new spilling and we've They things the We a industry. XX, and categorize are are spend R&D. rapidly guess, they very I'd that successful growing frankly, for few those mentioned X you to so into

or to slower described, are ones flat. that the And groups other other And really X flat group then have we easily the of they're declining of kind growth doing those level are have of is restructuring. some groups both and one other

exposed amount So depends you're to. a huge who

mix. of If most exposed largest you're that to the one of CROs, probably you're

you have complex fairly a So puzzle.

If be like to it we're a to of been and say we're exposed to way to date, somebody think, we've I manage you're able it, us, some -- would it.

your the -- think. associated and I'd market comments. what -- in with So with I growth there, Justin, And generally saw also report I said agree and I you

I think where that pharmaceutical in certain there And are front. on firms said general seems accelerating. backdrop, is solid We biotech R&D the it the prior quarters.

I think the recent September have as well. funding numbers, indicated for that instance,

So it seems solid, not spectacular, but solid.

so that against this can if execute And well. their manage commercial think firms I organizations

maybe to has the it. guys growth With respect what's Jill. the And revenue I that two savings. appreciate bridge Got have service And greatest any? one you fee to then one XQ for one bridge for buckets, the for and the in deck. cost one EBITDA if provide two, XQ, between interrelationship variability? from Which the you the

Yes.

Let me start.

we probably also of this that on quarter we the that were past SG&A generally, you'll come and well, That's still optimization, we as quarter, you from in think, variable that how out where look called saw will the range. this up people. to table, drive But a big buckets, the landing you X margin improvement down quarter, quarter-on-quarter. There's and bucket two. margin the and where really are a little or note, I the XX,XXX at saw think, kind that improvement a bit for that's in comp the year the really I was in of to piece end when related you I contributor big

our the think about sure very and And future so combination that set thoughtful manage ourselves up work it's prioritize we've while a for that in success, been the way projects. needs the the all a doing of needs business making to we of customers' and

I And headed step-up revenue going can second the in see we're sometimes volunteers as we the little won be into projects be holidays, talking step that continue the as related some in we've to of about that QX, around side, expecting we large half up And variable. although On earlier. had into a and QX. to the of at as had that things things we pharmacology was mentioned suite bit business been a clinical with did to QX, the the

So wanted moment, just depend that it We but feel much little could be just a over out it next think where will how to the bit range of do depending on bit we because there months. very good on about things we I little of couple there play at provide movement the land. of

So are range what's drivers driving terms buckets in those provided. the of in some big we of those that the X

question next Barclays. Sergott the with comes from And Luke

of guess pricing been recently-won for that we the dynamics the talk feedback have, that And about pricing I has fear some is extremely the can here? -- award guys you the like competitive. been has

this, of And associated much wins in how the so your coming are of with as one lower-cost providers?

improve calls, that general, experience, at our this capabilities in And can situation we market and based and we organization its margins. Yes. we win that belief projects. recognize to needs our prior we on said Luke, is the price as can on

organizations. some know noise I been there's different so And about out there

you our for the how decision time based to can They in But long on, solely make strategy that price. a study. in general, us, duration is deliver don't that the that about have, are for we we we patients if we it because required frames on market that probability base think believe price propose, customers we're the trying the the

customers of looking So at they're that. our really on choices quite to things, and enough shortsighted a make aren't number

Now I continues FSP be competitive. say, to will

right of for the there. us our a at There's moment FSP less this size in not everywhere. competitive that's business, top now. this But hear again, You'll pharma clinical those most differentiation focus situations, -- we're

intense think I you'll you'll hear area, hear focus in an people that So from are, on who price.

So...

the just driving -- that and broad-based? talk strength just this from follow-up then talked about Can it year? public perspective, or this about is the that's a that guys Okay. about like mean like you -- saw we've larger biotech you is bookings. And guys raises talk Or strategic seen recent biotech here. mostly you a strength the the I mostly from

the the and of others a CROs So and issues then have that just have seen. the really lot avoided trying of to of figure been guys other out you kind bookings rest choppy really like have

how market that guys differently pressure So positioned aren't like the you talk could you others than in or about you're the exposure? seeing really this

Yes.

us the manage I is this quarters is process. think and the the their that there question with over biotechs there. that. you around is the I organizations That some well And X, the of can saw nature decision-making really commercial X acknowledge for how in uncertainty beast and

effort commercial those forecasting. Luke, time, new You created heard a -- talk around better, decision that lot to organization of processes our for actually last trying we have us we put to process intense a understand trying

So we book-to-bill, but process, process terms third a starting in of quarter. the forecasting added had we late after a really the second new prior in quarter, -- in

And helping try manage and think that's to most we the that sure make point at manage us our really those decision resources expectations so process. the likely and I situations

One of business. with not get get the in with where administering management the just the customers, be back involved to you offices Fortrea entire is things the you involved team need we

frankly, makes and operations directly we're the leadership with to So the and I team involved teams, the get only a customers. difference. them not sales that And put trying think but when necessary

help, can you for how our organization Luke, we've what given Does several exposure solid again, execute is and that that, that? it your size, that said, being a consistency our environment. this seen some on help against create commercial saying biotech We've That been is there? quarters, really at does

Yes, it does.

from next And question Windley Jefferies. the with comes David

has asked of to in heard one in some we've progress been themes heard what the addition What the of other in quarter. key have we've folks the already, the cancellations. quarter Impressive

talk Can about the standpoint like maybe that, you cancellations. changing lines, about the of to seeing to environment, what predominantly in their choppiness projects? clients move forward difficulty are but predict from decision-making seeing time on or not you So things intention mind

Yes. out Thanks, called David. hear one. saying, we this had I are closely, we the any cancellations. our in peers seen have because can obviously take what not looked We've We increase at and that really one.

not quarter, in any quarter kind the the You impacted remember late that have but book-to-bill, first we that first had of uptick.

it an obviously, doesn't kind rate, us, portfolio from customer. across looked seem be normal be seen this We've of our customer can situational We be to issue. the to for fortunately carefully. -- But very so it

pharmacology because come Yes. churn have In Jill call almost there it's there's it, and back about back usually to restrategize later. how but what to project talked to going are I'd sort where and cancellations, Dave, of just with full a pulling it's then in a clinical disclosure, just it. and add, our business, deal I'd I

that for And in I cancellation us, and about what's it CRL almost that. talks with early I'd out really so taking. are industry not different clinical development whether in the pharmacology. what call happening a strategies and It's rate, we've stuff into on and spills customers think a churn. But seen things based the it moving happened And it's

but numbers historical they're -- so look at And our norms. overall, is at overall, Jill you right. sort When of absolutely

Got it. appreciate And concept Tom, this your have while talked you, I you've there. comfort on qualified of I about pipeline,

it. and I you triage how think you think kind top about talked to Justin's of of question, XX the about

folks assume, maybe it, that that what's expressed to you're when you that. internally. at not pipeline confirm moving these about -- flesh and that are Maybe you like the of pipeline spending looking that going what's but the toward I'm bit maybe things of gives more, but less more restructuring qualified in what think comfort you that to out forward, and of of mired in more, that your all little a moving more leans that qualified more in going you I'm let

do interestingly, a Yes. we I'd say have Dave, mix.

to is our exposure who've -- ahead Even say about have But we segment, projects with moving So restructuring folks have with moving exposure but projects. that they're we I'd have, top the that ahead are in is that the talked Everybody important projects. mix. a do they the to industry that we given driving. love highly

terms So this what are work quarter customers from right how now, with that we I we're we're excellent got are in, large that, excellent helping feedback and pharma of that like some involved like us. our some delivering, some doing phrases

we large, some doing pharma, larger as but in be what we not are for. we're accolades getting So may

writing they your is own SG&A you margin support TSA areas the what the little but Can take that services the and me of appreciate that TSA, kind not expansion, manage that to your in timing you are Labcorp to your providing, critical. TSA as identify on to of removal that If a correct? you're out correct? understand to that bit? drives of to itself the the that sure kind just one emphasized rather and I business you've Is it. exits, in. flesh I Jill, said ability that the Got could out. systems more want cost sneak on of make my Is the check I I is for understanding

And about have know understanding is Yes. that's we do I No, talked important. your think before. David. it correct, I

So this and associated Obviously, additional really TSA, critical. there's is of the out getting exit onetime costs costs. there

paid track those shared everyone's billed, you costs things out, how see time through But vast the before, this -- by all way around by you. of the going of on coming first right believe benefit, we're onetime of it by year, for this majority see this about are still of nature to year, that the quarter, all I've and talking just to we're And the but the we of certainly you're with QX exit things go. will end the results the end

us is to then transactions really the working, that do on to effective live that go efficient more then of and be of systems, ways new bring And able and structures new different We'll volume allows processes, in more a and way. in important.

critical. really is that So

come we've TSA where IT get and of SG&A. more an doing some with that Cognizant, we our XXXX. exit work places, and over be reduced talked see give of lot a a particularly our not There improvements. will you we've of there about are for we But provide about, when infrastructure, year, more journey detail those before, next the that we're some out immediate with switch that as guidance It's about that massively we'll you'll because talked the course

next question Elizabeth the from with Evercore. comes Anderson And

with last years, want a the SG&A Congrats nice or quarter. X to Could out on and side. in understand And -- I on structurally that in a just your little question seen, talk at Traditionally, in fourth Maybe least you've a is. to the why guidance, follow-up. kind it's a in bit of remind quarter. shorter-term cost have the the start just of nice then step down your Obviously, that what I you embedded happens sort so expectations? us

little the -- you of Thanks would tend an you question. understand Elizabeth. things. tighter folks oftentimes, course We end get the to Sure, the the organization, for in to of typically and get get things, mean, the Yes. on right, I over year, do you year, that as bit a you're managing most

see that you of some that, So comes through.

think is that lands terms in us, do I course of operations, a well, the for the I But of out. comp highlight also around variable the been that's in making SG&A year. some the also one it I just mentioned, thoughtfully. changes where this how over headcount, not more of And I change as there the can of out drivers as do bit where we called year and parts we've plays that's

the a the closer and the that generally of is of get that year, organizations bit, over the -- end, So of But fourth -- full what's you to tighten fourth of there But the course the quarter happening the those you the we they've quarter quarter. go get as most things cumulative improvements think you the is of some the mentioned. driving we it's bit I a see up in course that. a as you into other benefit that then over been and impact year, the of

not able Having really we it's percent to in -- we've be need to different to of be those do said in to line with TSAs what year that, this be revenue, the exit of model. it as seen course a will the to really think broadly because start over going SG&A I drive

But stabilizing/maybe I you're you're to a helpful. know little it maybe terms of some about we're sure better? like in seeing saying talked like biotech. a want understanding like seems sort you're what sort not little even variability Is question is this correctly, -- you just pivoting year, of of is the characterization? and slower that perhaps Dave's maybe fair I very sort just That's a And in that of that and it. then earlier in -- decision-making of make off starts trial Got bit bit,

Let me Elizabeth. that one, take

I quarter. we think we manage really tried that would hard say this to

to worked had sure time. So make understood minute. less we about you manage interactions can commercial decision we two talked the processes team better? at that, this had to biotech processes, do is factors. bit had executives, try hard the to the last try the little One stuff a with really We our last And right that,

on hard worked we So that.

things they with a is so does to little predictability, other tendency had Board And they bit have that then And a the don't decisions, they pharma on that large schedule, have thing, because in the intervene just have happen we biotechs. make the stay more frankly, mix. or can that don't --

really it's two the second our better about numbers. So makes the half in feel half combo us those of that second

be I -- think and at and managing cycles. everyone continues as those proportion a -- better we're as decision to industry, targeted to get has grow we beside an to to used as biotech But all by us, continues various get CROs

William And Max with Smock our next from question Blair. comes

to environment got healthy on you the in I here. the think wanted X on think XQ? the couple a of from average I pushout opportunities of those pushed book-to-bill XQ forward? decisions I environment was quarters or those next of that X.X strong. beyond you How wondering just enough you book-to-bill had the to you for that X.X it's kind couple is the the up about But pipeline mentioned support quarters, moving some on XQ think do if you follow solid quarter X.X. of the of commentary Or to is this bookings to really enough out your here. book-to-bill pipeline healthy mean the next last of the much quarters know support do

some that process. the been awarded and what with contracted, we the not will of we we at contracted. awarded look a it's look be -- We where still we there'll and size, we've essentially a process here what's have initiated try to where Max, the I and said, out in look stage, as be Yes. kind look at issue at got that we likelihood

that we've detail. in so quite bit of a And done

if And range that we so we next feel two of out that X.X. we when execute, can in we be over look targeted the quarters, that comfortable

year, time. further. that the such such pipeline look out us many a a -- because next it's is do it's Now frankly, XX-day so it's We difficult industry things on This there's industry. where in short-term response RFPs funny much for have little but in a for a to come things funny

this is volume know that you consistent, good news RFPs of structured the time. don't with deal who the manage that you all bad so much it's that The there's -- those these it. have short-cycle news it's around you For can well is and well, it's industry the fairly

two solid think systems quarter. our so year, then What first think are to these the comfortable that feel during get reporting -- and bit And guidance, and we'd on further the year. for pipeline really we'd like like next in understand I along, quarter because at get XXXX, saying we'd quarters TSAs, QX results talk finish out understand about pipeline. providing further the full where the to next we to have was And a around be Jill a frankly, referring little are

customers you not looks I is to -- want have probably tell small next very quarters. rigorous two And you and solid but hear, I what I the that's a process. our we for realize among we So what can what Max, see large

just Tom, your to some to time biotech behind small that improvement? decision-making commentary whether was still what decision-making wanted mentioned you've But And over you drivers actually you all if on wanted few so, follow some I last were just lines. months? better the of the those uncertainty get seen helpful, do on at biotech. think clarify small lines that Tom. there's Yes, time Also, up around

from is just rate that smaller funding cut, spending and the better to here? do past environment go need question the Or is think Now election that does get had confidence you another start funding some give we see and I guess really more okay? actually innovators do my again? to the we're ahead

Yes.

see if week. battlefield and on with this no you there question case And is that's with election this lower And near the this that more kind in question, comfortable of correlated in mergers still is think was about rates. I get general, an the part, in some sector. thinking second biotech tailwinds acquisitions, have we're SEC But fog biotech we could Max. to funding we I from

you if about, my talk better to live. the -- father-in-law -- assume we it to positive because used a way is What

think decision-making like And project in so of we a that see if Warp good did last same positive, Scott tailwinds assume things were Commissioner. we the we Speed, Gottlieb I time, kind us put HIV give some which like guy we did all FDA for see And crisis. you hoping saw the as the would during

IRA won't -- see we discussed. see expansion may we expansion the IRA and So the or that not was

here. to think they're the in I coming biotech possible the way more actually they see it's be Fortrea, needs increased. in we'll -- I it It's things So months are, right think environment attractive continue now, don't we're but progress that if for battlefield to fog. early, very

come again. August, funding our was IPOs we for we've more exposure, industry the in if in execute commercial for a funding long. given solid a us But as always Max? enough little think, of that and Does size certainly seen, beginning the think team, help, solid out our the well have September the I is are overall, It that numbers better. I

no, helpful. Yes. very That was -- no, That not was all.

Goldman with Sachs. next question Matt And Sykes the comes from

This is Will Ortmayer on for Matt.

rate. burn the on touch to wanted Just

backlog the in for fourth Given the your for XXXX? and step higher what up the going implied expectations that's burn into conversion are quarter, quarter

a business, back bit at see half it in I pharmacology I come one there, we'd has fourth in improvement did to the XXXX about of that some But will generally a QX. burning. bit which the and the you on improvement quarter in say, We'd as is did sneak burn fact a were QX to expect the far, to expected, due and we the so talk faster step-up in be you from going I Will. rate talk that thought QX tried of the in consistent. see be you would clinical little to to about

say to to productivity to focus and get ways faster this comment started the to at look continuing think except don't at and improve milestone XXXX that lines on rate, I can improving burn are on time I point, we projects delivery.

So on for 'XX hold it's until going guidance. a focus 'XX on but commenting off I'm give us, we to burn

had try That's in helpful. XXXX. I to

appreciate I it. know. I

You yes. did clever, That well there. was

about between as there cost of I efficiencies any one out margin side. call more we from backlog? the that guess forward? should about should thinking mix gross just mix that our we you When how about grow think moving the you be to And think are that and drivers dynamics improvement,

strongest want the been We do the beginning full-service necessarily margin the mix delivery. grow that, from business. clear wasn't I that all the we spin, prior from Yes. that we've really know think clinical places a to in really the to is the

focused And still so on we're that.

mentioned, seen that still like getting navigate We business in really really And though. We well, like revenue, clinpharm, the FSP earlier. more talked great Tom have business, as so we've it, as we steady It's very it we price strength we to about is it and competitive. still although all. more learned welcome and

mix is really the mix late-stage that think clinical, do I is. even therapeutic within important. But And

we've burn of tend some a as more peers more fact about the our specialized. -- You've get slower oncology do talked heard programs bit little have about talked they -- that and the

requirements. longer, follow-up are them have Some you of longer-term because

into -- want great breadth, on, inroads things cardiovascular to of going those, focus talked got continue therapeutic drugs. we've of So these we're that does want in the neurology, on all talked areas mix drive. making but to And We with obesity We've is but we've of critical. about to strong we about and some all the mix be really it. really

also I long we have a if year. slower-burning rates going to as into can part your studies, duration, book-to-bill. want that's next think to thoughtful So the go we you all really great it's in it's Because for But revenue be 'XX. a quarter, why impact of

clearly we of are looking really but that. late-stage we grow broad the all balance, to more of But do at So clinical. focus is want that

from Bank our with Michael of And next America. question Ryskin comes

Michael. for This is John on Kim

on exit the the have commercial us you track. But IT still So margin investments you and you've the to but organization TSA about today. the without also details, giving the you parts be to SG&A, investments infrastructure, if make, the and of that talked think seems mentioned SG&A about involves

So what entails. that I wonder

consistent. would percentage for percentage would fairly least percentage I'm of onetime earlier, EBITDA. a high what And of the wondering you that quarters, revenues was SG&A as next But at as the for those costs, two mentioned be a be

Okay. Sure.

call The because I think two there. did terms is it I things important investments, out of to -- that the in really understand.

and spin, out have As so that we've the could grow the we do right to we this come to of need of Fortrea. attention the we the one things on was did focus reasons

pipeline. And great and about out the investments underrepresented very certain opportunities our of we the we've areas that's or to like really previously, so might where go about are on sales organization, feel talked and there much work want have slightly -- this we're therapeutic after we commercial and focus more portfolio to in locations the

about, investment particularly commercial space. biotech the we're talking that's in the So

of I think wanting with tools, very Operationally, even is I And though investments the help an amount. term, to SG&A. margin there's other small areas, better on mentioned in bit really about a we've also focus a operational management SG&A longer resource investment. talked upfront which our

so in there much where changes places you sure can work you I'll generally, personally, making how of technology expertise best that just systems to -- do might finance, or and invest work. about that in. the I'll it's around say within had It we've significant But think be areas a there. not are couple SG&A, drive do you within invest technical to

those we're making. So investments of the types are

come completely go truly especially again was the In through things in get -- not onetime costs, half, those little QX, onetime related this there ones, it you spend those, disappear. down to spin-related a it expect the QX, because down. But highest, should it's we still did the come first step costs in will and quarter. Probably some will it's the that see are away will going first We happen. quarter bit down as

the really. on really up do not HCM, a there's the I be as to and track, on but stand lot -- significant. might And it's stand up in this it focus your to of effort And rebuild pleased. in obvious we are infrastructure, entire ERP, outside,

do phenomenal I about feel done job, are. and the have a think good we where really So teams we

moving of it's get in over and to a moving parts the few lot quarter. all Thankfully, have internal a We things parts. the line, they're

impact So on hopefully, it any have our doesn't customers.

navigate excited take in about turn that on really that a beyond. for to focus 'XX organization it there's our right in the But we us to fact the allows once lot here. way But how Fortrea we we're corner, and forward

then missed I terms the pharma sorry there? it, flow RFP And ahead? of in evenly. earlier I there. What's you. like expectation is split the large a trending how seems Got XX-XX versus awards -- if -- that it are it's But in biotech but the it's coming mentioned looking the think mix, And Tom your

prior it's continue grow. and be words, with we discussions to see us for John, choose able that think carefully We here. I to solid. opportunities to It's consistent are our adequate the

as well have. see win sustain rate against have to we pipeline the we our that and we what for those deliver So targets a just and solid

out So of I think time, operator. we're

had that you quarter out of solid close execution time. think, saying we your we And for of all I a and I'll progress. just by thank

call. This Thank participating. you concludes conference for today's

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