FTRE

• Leadership Transition and Governance Updates: New CFO Jason Nadlock cannot currently serve in the role due to an ongoing restrictive covenant dispute with his former employer. Board member David Smith, former CFO of Charles River Laboratories and prior audit committee chair, will serve as interim CFO, with Aaron Russell taking over as audit committee chair to maintain continuity. Longtime CFO Jill McConnell, who built Fortria's financial foundation after the spin-off, is stepping down after eight years with the company. It has been one year since CEO Anshul Thakral joined Fortria, and the company marked three years as an independent organization during the quarter.

• Commercial Strategy and Performance: Management runs the business around three core pillars: commercial excellence, operational excellence, and financial excellence. Commercial strategy is focused on the three Rs: Reach (expand customer relationships and opportunity pipeline), Relevance (deliver differentiated scientific and therapeutic expertise), and Repeat (earn follow-on work via consistent execution). Q2 2026 net new business was $720.4 million (weighted toward biotech clients), producing a book-to-bill ratio of 1.06x, the fourth consecutive quarter above 1.0x. Trailing 12-month book-to-bill is 1.12x, and first half 2026 net new business awards increased 19% year-over-year, reflecting sustained momentum. RFP volume and value increased across both large pharma and biotech segments, with improving customer engagement as biotech funding strengthens and large pharma procurement normalizes. Large pharma remains a core cornerstone client base, while new and existing biotech clients are delivering encouraging growth.

• Operational Excellence: Management prioritizes consistent, high-quality execution, on-time delivery, and improved customer satisfaction, which has shown continued positive trajectory. Fortrea Intelligent Technology (FIT), the company's AI-integrated clinical trial intelligence ecosystem, launched externally in April 2026, with early adoption showing tangible efficiency gains: the FIT CRM mobile app is deployed in over 50 countries, cutting site visit preparation time by nearly 30 minutes per visit in one Spanish study. AI is positioned as a force multiplier, not a replacement for employee expertise, and all 14,000 employees have been provided access to Microsoft Copilot alongside a company-wide AI literacy program to upskill teams.

• Financial Discipline: The company has delivered consistent cost savings, with $18 million in new gross cost savings in Q2 2026 bringing year-to-date gross savings to $34 million; $10 million in new net cost savings brought year-to-date net savings to $19 million. Since the spin-off, Fortria has paid down approximately 35% of original debt, ending Q2 with available liquidity exceeding $500 million and no revolver borrowings in the first half of 2026. Days sales outstanding (DSO) improved 26 days year-over-year to 70 days, driven by improved order-to-cash processes.

• Management upgraded full-year 2026 guidance, reflecting solid first-half performance, improving backlog mix, ongoing operational optimization, and increased confidence in the business. The new revenue guidance range is $2.62 billion to $2.69 billion.
• Adjusted EBITDA guidance is set to a range of $200 million to $205 million.
• Management expects the company to remain free cash flow positive for the remainder of 2026 and for the full year.
• Management anticipates relatively stable, flat performance across the second half of 2026, after a projected and realized modest step-up in revenue and activity in Q2 2026, aligned with the updated full-year guidance range.

No detailed segmented financial performance (revenue by segment or percentage contribution) was provided in the transcript. Overall company-level results for Q2 2026 are: total revenue of $678.2 million (4.5% year-over-year decrease), adjusted EBITDA of $58.7 million (up from $54.9 million year-over-year), net loss of $13.2 million (compared to a $374.9 million net loss in Q2 2025, which included a large non-cash goodwill impairment charge), operating cash flow of $28.9 million, and free cash flow of $19.9 million. The Clinical Pharmacology Services (CPS) segment was highlighted as an area of strength, with service fee growth driven by increased net new business and a more favorable study mix, partially offsetting lower pass-through costs that pulled down overall year-over-year revenue. The Functional Service Provider (FSP) segment continued to experience headwinds that negatively impacted overall revenue performance.

• The company faces uncertainty related to the CFO leadership transition, as incoming CFO Jason Nadlock is unable to perform his role due to ongoing litigation regarding restrictive covenants with his former employer, though interim leadership is in place to maintain continuity.
• All forward-looking statements and guidance are subject to material risks and uncertainties that could cause actual results to differ materially from current expectations, as detailed in the company's SEC filings.
• The contract clinical research industry remains highly competitive, requiring consistent execution to win new business.
• AI integration into complex, highly regulated clinical development processes is expected to take time to deliver measurable commercial and operational benefits, with no guarantee of the expected efficiency or competitive gains from current AI investments.

Q: How long will FSP headwinds continue, and what will drive margin contributions going forward? / A: Management noted that right-sizing cost structures is on track, particularly for SG&A and non-billable expenses. As new, higher-margin bookings grow and diversify the backlog, higher-margin projects are now burning off into revenue. Continued operational discipline across both global clinical development and CPS segments keeps execution within expected parameters, supporting gross margin improvements going forward. When asked about second-half free cash flow, management confirmed they expect to remain free cash flow positive for the rest of the year.

Q: Has competitive industry behavior changed as overall market demand has improved over the past year? / A: Management stated that the entire industry is seeing broad improvement in underlying demand, which is positive for drug development overall. The sector has always been highly competitive, but the irrational pricing behavior seen in the FSP segment in prior years has subsided, with a return to normal, rational pricing activity from both competitors and clients in 2026. Management still emphasizes that every new deal must be won via focused, high-intensity execution.

Q: What changes have been made to support commercial excellence, and does the historical 1.2 book-to-bill for mid-single-digit growth algorithm still hold post-pandemic? / A: Management upgraded commercial talent, revised incentive compensation and territory planning, and shifted to a cross-functional go-to-market model that integrates sales, operational, and medical expertise to serve clients, rather than relying solely on dedicated sales reps. The core algorithm still holds, but the only necessary adjustment is to account for the impact of pass-through costs in booking and backlog mix, which varies across companies and trial types and can alter the relationship between book-to-bill and revenue growth.

Q: Do clients prioritize AI capabilities in RFP processes, and how is Fortrea's AI roadmap positioned competitively? / A: Most new RFPs now explicitly ask about AI capabilities and roadmaps, so having a thoughtful, credible strategy with tangible early results is already a positive competitive differentiator for Fortrea. At the same time, clients are not yet making vendor decisions where AI capabilities override core factors like operational experience, therapeutic area expertise, and team track record, as meaningful impact from AI integration in the highly regulated clinical development space is still expected to take time to materialize.