Fortrea Holdings Inc.

Previous wording

Fortrea, a Delaware corporation incorporated on January 31, 2023, is a leading global contract research organization (“CRO”) providing biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology and medical device customers. We offer customers highly flexible delivery models that include Full Service, Functional Service Provider (“FSP”), and Hybrid Service structures. We have a rich history of providing clinical development services for over 30 years across more than 20 therapeutic areas, first as Covance and later as Labcorp Drug Development. On June 30, 2023, we completed the Spin from Labcorp. We leverage our global scale, scientific and therapeutic expertise, clinical data insights, technology innovation, industry network and decades of experience as a standalone company and as a business unit prior to the Spin to deliver tailored solutions to our customers. With what we believe is a distinctive market offering, Fortrea meets growing global demand for clinical development services.

Current wording

Fortrea, a Delaware corporation incorporated on January 31, 2023, is a leading global contract research organization (“CRO”) providing biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology and medical device customers. We offer customers highly flexible delivery models that include Full Service, Functional Service Provider (“FSP”), and Hybrid Service structures. We have a rich history of providing clinical development services for over 30 years across more than 20 therapeutic areas, first as Covance and later as Labcorp Drug Development. On June 30, 2023, we completed the Spin from Labcorp. We leverage our global scale, scientific and therapeutic expertise, clinical data insights, technology innovation (including Fortrea Intelligent Technology TM), industry network and decades of experience as a standalone company and as a business unit prior to the Spin to deliver tailored solutions to our customers. With what we believe is a distinctive market offering, Fortrea meets growing global demand for clinical development services.

Previous wording

Three Months Ended March 31, 2026 compared with Three Months Ended March 31, 2025

Current wording

Three and Six Months Ended June 30, 2026 compared with Three and Six Months Ended June 30, 2025

Previous wording

The Company’s revenues for the three months ended March 31, 2026 were $636.5, a decrease of 2.3% from revenues of $651.3 in the corresponding period in 2025. The change in revenues was due to a decrease in organic revenues of 3.2% and favorable foreign currency translation of 0.9%. The 3.2% decrease in organic revenues was due to lower pass through costs as well as lower demand for our functional service provider business. These decreases were partially offset by an increase in full service revenue, driven by an increase in net new business.

Current wording

The Company’s revenues for the three months ended June 30, 2026 were $678.2, a decrease of 4.5% from revenues of $710.3 in the corresponding period in 2025. The change in revenues was due to a decrease in organic revenues of 4.9%, partially offset by favorable foreign currency translation of 0.4%. The 4.9% decrease in organic revenues was due to lower pass through costs as well as lower demand for our functional service provider business. These decreases were partially offset by an increase in our clinical pharmacology business, driven by an increase in net new business and study mix.

Previous wording

Direct costs decreased 4.1% during the three months ended March 31, 2026 as compared with the corresponding period in 2025. The change in direct costs was due to a decrease in organic direct costs of 6.3% and unfavorable foreign currency translation of 2.2%. Direct costs decreased as a percentage of revenues to 80.6% during the three months ended March 31, 2026 as compared to 82.1% in the corresponding period in 2025. The 6.3% decrease in organic direct costs was primarily due to lower pass through and stock-based compensation costs, as well as lower personnel costs, including the benefit of restructuring actions. These decreases were partially offset by a year over year increase in variable compensation expense.

Current wording

Direct costs decreased 6.6% during the three months ended June 30, 2026 as compared with the corresponding period in 2025. The change in direct costs was due to a decrease in organic direct costs of 7.4%, partially offset by unfavorable foreign currency translation of 0.8%. Direct costs decreased as a percentage of revenues to 79.5% during the three months ended June 30, 2026 as compared to 81.2% in the corresponding period in 2025. The 7.4% decrease in organic direct costs was primarily due to lower pass through and stock-based compensation costs, as well as lower personnel costs, including the benefit of restructuring actions. These decreases were partially offset by a year over year increase in variable compensation expense and clinical pharmacology study related costs.

Previous wording

Selling, general and administrative expenses decreased by 17.5% during the three months ended March 31, 2026 as compared with the corresponding period in 2025. The decrease was primarily due to lower information technology and personnel costs, including the benefit of restructuring actions. These decreases were partially offset by a year over year increase in variable compensation expense.

Current wording

Selling, general and administrative expenses decreased by 18.2% during the three months ended June 30, 2026 as compared with the corresponding period in 2025. The decrease was primarily due to lower information technology and personnel costs, including the benefit of restructuring actions, as well as lower credit loss provisions. These decreases were partially offset by a year over year increase in variable compensation expense.

Previous wording

The change in depreciation expense for the three months ended March 31, 2026, as compared to the corresponding period in 2025, was not significant.

Current wording

The change in depreciation expense for the three and six months ended June 30, 2026, as compared to the corresponding periods in 2025, was not significant.

Previous wording

The change in amortization of intangibles and other assets during the three months ended March 31, 2026, as compared to the corresponding period in 2025, was not significant.

Current wording

The change in amortization of intangibles and other assetsfor the three and six months ended June 30, 2026, as compared to the corresponding periods in 2025, was not significant.

Previous wording

There were no goodwill and other asset impairments for the three months ended March 31, 2026. Goodwill impairment for the three months ended March 31, 2025 was $488.8 and was specific to the Clinical Development reporting unit.

Current wording

There were no goodwill and other asset impairments for the three and six months ended June 30, 2026. Goodwill impairment for the three and six months ended June 30, 2025 was $309.1 and $797.9, respectively. This impairment was specific to the Clinical Development reporting unit.

Previous wording

The decrease in interest expense for the three months ended March 31, 2026, as compared with the corresponding period in 2025, was due to lower average debt outstanding during the first quarter of 2026, driven by the repurchase of $75.7 of senior secured notes in 2025 and zero borrowing on the revolver in the quarter, as well as lower effective interest rates on term loan A and term loan B.

Current wording

The decrease in interest expense for the three and six months ended June 30, 2026, as compared with the corresponding periods in 2025, was due to lower average debt outstanding during the first and second quarters of 2026, driven by the repurchase of $75.7 of senior secured notes in 2025 and no borrowings on the revolving credit facility during the first half of 2026, as well as lower effective interest rates on term loan A and term loan B.

Previous wording

The change in foreign exchange gain (loss) for the three months ended March 31, 2026 compared to the foreign exchange gain (loss) for three months ended March 31, 2025, was primarily due to the fluctuations in the U.S. Dollar against the British Pound and the Euro.

Current wording

The change in foreign exchange gain (loss) for the three and six months ended June 30, 2026 compared to the foreign exchange gain (loss) for three and six months ended June 30, 2025, was primarily due to the fluctuations in the U.S. Dollar against the British Pound and the Euro.

Previous wording

The change in other, net for the three months ended March 31, 2026, as compared with the corresponding period in 2025, was not significant.

Current wording

The decline in other, net for the three and six months ended June 30, 2026, as compared with the corresponding periods in 2025, was primarily due to income recognized in the prior-year periods related to services provided under transition services agreements that terminated in 2025.

Previous wording

For the three months ended March 31, 2026, the Company's effective tax rate was (91.9)% compared to (2.7)% for the corresponding period in 2025. The fluctuation was primarily due to goodwill impairment with no associated tax benefit and BEAT for the three months ended March 31, 2025 and the impact of valuation allowance primarily related to expected interest deductibility limitations for the three months ended March 31, 2026.

Current wording

For the three months ended June 30, 2026, the Company's effective tax rate was (1000.0)% compared to (1.1)% for the corresponding period in 2025. For the six months ended June 30, 2026, the Company's effective tax rate was (172.6)% compared to (2.1)% for the corresponding period in 2025. The fluctuations in the quarter-to-date and year-to-date periods were primarily due to goodwill impairment with no associated tax benefit and BEAT for the three and six months ended June 30, 2025 and the impact of valuation allowance primarily related to expected interest deductibility limitations for the three and six months ended June 30, 2026.

Previous wording

The Company manages cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments. In connection with the Spin, we incurred indebtedness in an aggregate principal amount of $1,640.0, which consists of borrowings under senior secured term loan facilities and senior secured notes. We have also entered into a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 6, “Debt” to our condensed consolidated financial statements. As of March 31, 2026, there was no balance outstanding on the Company’s revolving credit facility and there were $2.3 in letters of credit issued under the letter of credit sublimit, resulting in $447.7 available for borrowing. The maximum revolver borrowing outstanding was $— and $98.5 during the three months ended March 31, 2026 and 2025, respectively.

Current wording

The Company manages cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments. In connection with the Spin, we incurred indebtedness in an aggregate principal amount of $1,640.0, which consists of borrowings under senior secured term loan facilities and senior secured notes. We have also entered into a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 6, “Debt” to our condensed consolidated financial statements. As of June 30, 2026, there was no balance outstanding on the Company’s revolving credit facility and there were $2.3 in letters of credit issued under the letter of credit sublimit, resulting in $447.7 available for borrowing. The maximum revolver borrowing outstanding was $— and $135.5 during the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Cash Flows for the three months ended March 31, 2026 and 2025

Current wording

Cash Flows for the Six months ended June 30, 2026 and 2025

Previous wording

Cash and cash equivalents at March 31, 2026 and 2025 totaled $147.5 and $101.6, respectively. Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits and other money market instruments, which have maturities when purchased of three months or less.

Current wording

Cash and cash equivalents at June 30, 2026 and 2025 totaled $168.6 and $81.2, respectively. Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits and other money market instruments, which have maturities when purchased of three months or less.

Previous wording

During the three months ended March 31, 2026, the Company’s operations used $17.0 of cash as compared to $124.2 of cash used by operations during the three months ended March 31, 2025. The decrease in cash used of $107.2 for the three months ended March 31, 2026 was primarily due to an increase in cash received from accounts receivable, a decrease in cash used for accounts payable, and an increase in net income exclusive of non-cash goodwill and other asset impairments. These cash increases were partially offset by higher use of cash for accrued expenses, including variable compensation.

Current wording

During the six months ended June 30, 2026, the Company’s operations provided $11.9 of cash as compared to $102.4 of cash used by operations during the six months ended June 30, 2025. The increase in cash provided of $114.3 for the six months ended June 30, 2026 was primarily due to a decrease in cash used for accounts payable and interest, as well as an improvement in net loss excluding non-cash income and expense items. These cash increases were partially offset by higher use of cash for accrued expenses.

Previous wording

Net cash used for investing activities for the three months ended March 31, 2026 was $8.0 as compared to net cash provided by investing activities of $16.1 for the three months ended March 31, 2025. The $24.1 decrease in net cash (used for) provided by investing activities for the three months ended March 31, 2026 was primarily due to receipt of the first milestone payment related to the sale of the Enabling Services Segment during the three months ended March 31, 2025 and a period over period increase in capital expenditures. Capital expenditures were $8.0 and $2.9 for the three months ended March 31, 2026 and 2025, respectively. Capital expenditures for the three months ended March 31, 2026 were 1.3% of revenues, primarily in connection with projects to support growth in the Company's core businesses. The Company intends to continue to pursue selective investments in key therapeutic areas, business areas and geographies to drive growth and to improve efficiency of the Company's operations. Such expenditures are expected to be funded by cash flow from operations.

Current wording

Net cash used for investing activities for the six months ended June 30, 2026 was $15.0 as compared to net cash provided by investing activities of $8.6 for the six months ended June 30, 2025. The $23.6 increase in net cash used for investing activities for the six months ended June 30, 2026 was primarily due to receipt of the first milestone payment related to the sale of the Enabling Services segment during the six months ended June 30, 2025 and a period over period increase in capital expenditures. Capital expenditures were $17.0 and $10.4 for the six months ended June 30, 2026 and 2025, respectively. Capital expenditures for the six months ended June 30, 2026 were 1.3% of revenues, primarily in connection with projects to support growth in the Company's core businesses. The Company also intends to continue to pursue selective investments in key therapeutic areas, business areas and geographies to drive growth and to improve efficiency of the Company's operations. Such expenditures are expected to be funded by cash flow from operations.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2026 was $— compared to cash provided by financing activities of $88.4 for the three months ended March 31, 2025. Cash provided by financing activities for the three months ended March 31, 2025 was primarily related to net proceeds from the revolving credit facility. The Company did not draw on the revolving credit facility during the three months ended March 31, 2026.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2026 was $— compared to cash provided by financing activities of $49.4 for the six months ended June 30, 2025. Cash provided by financing activities for the six months ended June 30, 2025 was primarily related to net proceeds from the revolving credit facility. The Company did not draw on the revolving credit facility during the six months ended June 30, 2026.