Fortrea Holdings Inc. Q2 FY2025 earnings call

• Peter Neupert noted the second quarter showed solid delivery, with revenue at $710.3 million and adjusted EBITDA at $54.9 million. Backlog was $7.5 billion as of June 30, 2025. • Clinical pharmacology unit delivered a bioequivalence trial ahead of schedule. • Second quarter delivery in later phase clinical projects was strong with flawless track record in site initiation visits and patient enrollment. • Introduced 3 new modules in the Accelerate software platform, including Risk Radar for AI-powered risk management. • Progressed against $150 million gross cost reduction target, with over $50 million in gross savings captured year-to-date.

Fortrea's second quarter revenue was $710.3 million. The clinical pharmacology reporting unit was in high demand, contributing to revenue growth. Clinical development revenue was relatively flat, with increases from recent net new business awards offset by lower FSP revenue. Adjusted EBITDA was $54.9 million, supported by margin optimization initiatives.

• Increased revenue range to $2.6 billion to $2.7 billion for 2025. • Reaffirmed adjusted EBITDA range of $170 million to $200 million. • Projected operating cash flow to be positive across remaining quarters of 2025. • FSP revenue expected to be a headwind in 2025, but rekindling efforts including launching a dedicated sales team in Q3. • Anticipated continuation of first half trends in backlog burn in the second half.

• Customer hesitancy, particularly among new to Fortrea biotech customers, affected net new business wins. • Macro-economic uncertainty posing challenges in pricing and new business acquisition. • Impact of leadership transition on perceptions and decisions of new to Fortrea customers. • Competition in the pricing environment affecting margin management.

Q: About smaller newer to Fortrea hesitant biotech clients, did they go a different direction or delay?

A: Candidly, those biotechs went in a different direction.

Q: Anshul, comments on commercial style and building commercial operation?

A: I approach it as a professional services business, focusing on delivering high-quality results and bending the time cost curve. It's day 3, so more insights in 90 days.

Q: Demand environment in pharma and biotech?

A: Cautiously optimistic, seeing RFPs and pipelines trending upwards, with strong biotech pipeline and no over-indexing to one customer segment.

Q: Bookings environment and cancellations?

A: Cancellations in line with historic trends, even slightly lower than first quarter. Win rates consistent for existing large pharma and biotech customers, but down for new to Fortrea biotech.

Q: Outlook for back half of year and EBITDA?

A: Revenues expected to be more in line with first quarter, with better margins due to cost savings initiatives. EBITDA guidance maintained with continued progress against margin expansion initiatives.