Fortrea Reports Second Quarter 2024 Results
August 12, 2024 6:00 AM EDT
For the three months ended June 30, 2024, from continuing operations:

Revenues of $662.4 million
GAAP net loss of $(99.3) million
Adjusted EBITDA of $55.2 million
GAAP and adjusted diluted loss per share of $(1.11) and $(0.03), respectively
Book-to-bill ratio of 0.96x, resulting in 1.16x book-to-bill for the trailing 12 months
Completed divestiture of assets relating to the Endpoint Clinical and Patient Accessbusinesses
Debt paydown of $504 million in the quarter using initial divestiture and securitization proceeds
Revised full-year guidance
DURHAM, N.C., Aug. 12, 2024 (GLOBE NEWSWIRE) -- Fortrea (Nasdaq: FTRE) (the “Company”), a leading global contract research organization(“CRO”), today reported financial results for the second quarter ended June 30, 2024.
“Fortrea continues to make progress with customers and our business, which is not reflected in the headline numbers,” said Tom Pike, chairman and
CEO of Fortrea. “We won some important opportunities this quarter. We have increased our focus as an innovative, global pure-play clinical services
organization. We have now exited 60 percent of our Transition Services Agreement and are making good progress on the most difficult part, the IT
systems, and managing the related one-time costs. We have reduced our debt. We have our margin improvement actions in focus. We aretransforming. I’m confident we’re headed in the right direction to deliver value for all our stakeholders, delivering solutions that bring new treatments topatients faster.”
All commentary in this press release relates to continuing operations unless otherwise noted.
Second Quarter 2024 Financial Results
Revenue for the second quarter was $662.4 million, compared to $725.1 million in the second quarter of 2023.
Second quarter GAAP net loss was $(99.3) million and diluted loss per share was $(1.11) compared to second quarter of 2023 GAAP net income of$25.0 million and diluted earnings per share of $0.28. Second quarter adjusted EBITDA was $55.2 million, compared to second quarter 2023 adjusted
EBITDA of $71.9 million. Adjusted EBITDA increased sequentially by 103.7% in the quarter.
Backlog as of June 30, 2024, was $7.366 billion, and the book-to-bill ratio for the quarter was 0.96x.
First Half 2024 Financial Results
Revenue for the first half was $1,324.5 million, compared to $1,419.0 million in the first half of 2023.
First half GAAP net loss was $(179.1) million and diluted loss per share was $(2.01) compared to first half of 2023 GAAP net income of $33.0 million
and diluted earnings per share of $0.37. First half adjusted EBITDA was $82.3 million, compared to first half of 2023 adjusted EBITDA of $118.7
million.
The Company’s cash and cash equivalents were $126.2 million, and gross debt was $1,142.0 million on June 30, 2024. Operating cash flow for the six
months ended June 30, 2024, was $248.1 million, and free cash flow was $227.6 million.
Full-Year 2024 Guidance
For the full year 2024, the Company is revising its revenue guidance to a range of $2,700 million to $2,750 million and adjusted EBITDA guidance to arange of $220 million to $240 million. The reduction in revenue is primarily due to lower pass-through revenues and, to a lesser extent, lower
service-fee revenues in the second half as a result of lower net new business in the first half of 2024. The update to the adjusted EBITDA range isdriven by the lower service-fee revenues. The guidance assumes foreign currency exchange rates as of December 31, 2023, remain in effect for theforecast period and has been updated to reflect revised anticipated performance.
Earnings Call and Replay
Fortrea will host its quarterly conference call on Monday, August 12, 2024, at 9:00 am ET to review its second quarter performance. The conference
can be accessed through the Fortrea Investor Relations website or the following earnings webcast link. To avoid potential delays, please join at least
10 minutes prior to the start of the call. A replay of the live conference call will be available shortly after the conclusion of the event and accessible on
the events and presentations section of the Fortrea website. A supplemental slide presentation will also be available on the Fortrea Investor Relations
website prior to the start of the call.
About Fortrea
Fortrea (Nasdaq: FTRE) is a leading global provider of clinical development solutions to the life sciences industry. We partner with emerging and large
biopharmaceutical, biotechnology, medical device and diagnostic companies to drive healthcare innovation that accelerates life changing therapies topatients. Fortrea provides phase I-IV clinical trial management, clinical pharmacology and consulting services. Fortrea’s solutions leverage threedecades of experience spanning more than 20 therapeutic areas, a passion for scientific rigor, exceptional insights and a strong investigator site
network. Our talented and diverse team working in about 100 countries is scaled to deliver focused and agile solutions to customers globally. Learn
more about how Fortrea is becoming a transformative force from pipeline to patient at Fortrea.com and follow us on LinkedIn and X (formerly Twitter).
Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, the Company’s 2024
financial guidance, exiting the remainder of the Transition Services Agreements and realizing the benefits of our margin improvement actions. In thiscontext, forward-looking statements often address expected future business and financial performance and financial condition, and often containwords such as “guidance,” “expect,” “assume,” “anticipate,” “intend,” “plan,” “forecast,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar
expressions, and variations or negatives of these words that are intended to identify forward-looking statements, although not all forward-looking
statements contain these identifying words. Actual results may differ materially from the Company’s expectations due to a number of factors, including,but not limited to, the following: if the Company does not realize some or all of the benefits expected to result from the spin-off of the Company (the“Spin”) from Laboratory Corporation of America Holdings (“Labcorp”), or if such benefits are delayed; risks and consequences that are a result of theSpin; the impacts of becoming an independent public company; the Company’s reliance on Labcorp to provide financial reporting and other financial
and accounting information for periods prior to the Spin through the end of the relevant transition agreements, as well as IT, accounting, finance, legal,
human resources, and other services critical to the Company’s businesses; the Company’s dependence on third parties generally to provide services
critical to the Company’s businesses throughout the transition period and beyond; the establishment of the Company’s accounting, enterprise
resource planning, and other management systems post the transition period, which could cost more or take longer than anticipated; the impact of therebranding of the Company; the Company’s ability to successfully implement the Company’s business strategies and execute the Company’s
long-term value creation strategy; risks and expenses associated with the Company’s international operations and currency fluctuations; theCompany’s customer or therapeutic area concentrations; any further deterioration in the macroeconomic environment, which could lead to defaults orcancellations by the Company’s customers; the risk that the Company’s backlog and net new business may not be indicative of the Company’s future
revenues and that the Company might not realize all of the anticipated future revenue reflected in the Company’s backlog; the Company’s ability togenerate sufficient net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract; if theCompany underprices its contracts, overruns its cost estimates, or fails to receive approval for, or experiences delays in documentation of changeorders; the Company’s realize the full benefits from the divestiture of Endpoint Clinical and Fortrea Patient Access businesses; and other factors
described from time to time in documents that the Company files with the SEC. For a further discussion of the risks relating to the Company’sbusiness, see the “Risk Factors” Section of the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the"SEC"), as such factors may be amended or updated from time to time in the Company’s subsequent periodic and other filings with the SEC, which areaccessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with theother cautionary statements that are included in this release and in the Company’s filings with the SEC. Comparisons of results for current and any
prior periods are not intended to express any future, or indications of future performance, unless expressed as such, and should only be viewed ashistorical data. All forward-looking statements are made only as of the date of this release and the Company does not undertake any obligation, otherthan as may be required by law, to update or revise any forward-looking statements to reflect future events or developments.
Note on Non-GAAP Financial Measures
This release includes information based on financial measures that are not recognized under generally accepted accounting principles in the UnitedStates ("GAAP"), such as Adjusted EBITDA, Adjusted Net Income, Adjusted Basic and Diluted EPS, and Free Cash Flow. Non-GAAP financial
measures are presented only as a supplement to the Company’s financial statements based on GAAP. Non-GAAP financial information is provided toenhance understanding of the Company’s financial performance, but none of these non-GAAP financial measures are recognized terms under GAAP,and non-GAAP measures should not be considered in isolation from, or as a substitute analysis for, the Company’s results of operations as
determined in accordance with GAAP.
The Company uses non-GAAP measures in its operational and financial decision making and believes that it is useful to exclude certain items in orderto focus on what it regards to be a more meaningful indicator of the underlying operating performance of the business. For example, in calculating
Adjusted EBITDA, the Company excludes all the amortization of intangible assets associated with acquired customer relationships and backlog,
databases, non-compete agreements and trademarks, trade names and other from non-GAAP expense and income measures as such amounts canbe significantly impacted by the timing and size of acquisitions. Although the Company excludes amortization of acquired intangible assets from theCompany’s non-GAAP expenses, the Company believes that it is important for investors to understand that revenue generated from such intangibles
is included within revenue in determining net income attributable to the Company. As a result, internal management reports feature non-GAAP
measures which are also used to prepare strategic plans and annual budgets and review management compensation. The Company also believes
that investors may find non-GAAP financial measures useful for the same reasons, although investors are cautioned that non-GAAP financial
measures are not a substitute for GAAP disclosures.
The non-GAAP financial measures are not presented in accordance with GAAP. Please refer to the schedules attached to this release for relevant
definitions and reconciliations of non-GAAP financial measures contained herein to the most directly comparable GAAP measures. The Company’s
full-year 2024 guidance measures (other than revenue) are provided on a non-GAAP basis without a reconciliation to the most directly comparable
GAAP measure because the Company is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures
without unreasonable efforts. Such items include, but are not limited to, acquisition-related expenses, restructuring and related expenses, stock-based
compensation and other items not reflective of the Company's ongoing operations.
Non-GAAP measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to
the Company, many of which present non-GAAP measures when reporting their results. Non-GAAP measures have limitations as an analytical tool.
They are not presentations made in accordance with GAAP, are not measures of financial condition or liquidity and should not be considered as analternative to profit or loss for the period determined in accordance with GAAP or operating cash flows determined in accordance with GAAP.
Non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider such
performance measures in isolation from, or as a substitute analysis for, the Company’s results of operations as determined in accordance with GAAP.
Fortrea Contacts
Hima Inguva (Investors) – 877-495-0816, hima.inguva@fortrea.com
Sue Zaranek (Media) – 919-943-5422, media@fortrea.com
Kate Dillon (Media) – 646-818-9115, kdillon@prosek.com

FORTREA HOLDINGS INC.
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(in millions, except per share data)(unaudited)

Revenues
Costs and expenses:
Direct costs, exclusive of depreciation and amortization (including costs
incurred from related parties of $0 and $0 during the three and six months
ended June 30, 2024 and $27.0 and $48.8 during the three and six months
ended June 30, 2023, respectively)
Selling, general and administrative expenses, exclusive of depreciation andamortization
Depreciation and amortization
Restructuring and other charges
Total costs and expenses
Operating income (loss)
Other income (expense):
Interest expense
Foreign exchange gain (loss)
Other, net
Income (loss) from continuing operations before income taxes
Provision for income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss)
Earnings (loss) per common share
Basic earnings (loss) per share continuing operations
Basic earnings per share discontinued operations
Basic earnings (loss) per share
Diluted earnings (loss) per share continuing operations
Diluted earnings per share discontinued operations
Diluted earnings (loss) per share

$

$

$
$
$
$

Three Months Ended
June 30,
2024
2023
662.4 $
725.1$

Six Months Ended
June 30,2024
2023
1,324.5 $1,419.0

525.3

568.7

1,079.5

1,110.2

156.2
21.4
10.4
713.3
(50.9)

97.8
23.4
3.6
693.5
31.6

276.3
43.3
13.7
1,412.8(88.3)

214.6
44.3
4.2
1,373.3
45.7(45.2)(1.5)
9.0(88.6)
10.7(99.3)(39.1)(138.4)

(0.7)
5.2
0.5
36.6
11.6
25.0
5.8
30.8

(79.5)(6.8)
10.3(164.3)14.8(179.1)(60.3)(239.4)

(0.6)
—
1.0
46.1
13.1
33.0
10.3
43.3

$

(1.11)(0.44)(1.55)$(1.11)(0.44)(1.55)

$

$

$

$

0.28
0.07
0.35

$

0.28
0.07
0.35

$

$

$

$

(2.01)(0.68)(2.69)$(2.01)(0.68)(2.69)

$

$

$

0.37
0.12
0.49
0.37
0.12
0.49

FORTREA HOLDINGS INC.
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS(dollars and shares in millions)(unaudited)
June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable and unbilled services, net
Prepaid expenses and other
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net
Goodwill, net
Intangible assets, net
Deferred income taxes
Other assets, net
Long-term assets of discontinued operations
Total assets
LIABILITIES AND EQUITYCurrent liabilities:
Accounts payable
Accrued expenses and other current liabilities
Unearned revenue
Current portion of long-term debt
Short-term operating lease liabilities
Current liabilities of discontinued operations
Total current liabilities

$

$

$

December 31, 2023

126.2
637.9
123.6
—
887.7
173.1
1,725.7
691.9
3.2
83.8
—
3,565.4

$

144.2
343.3
248.0
—
13.5
—
749.0

$

$

108.6
988.5
84.6
69.1
1,250.8
172.6
1,739.4
728.1
3.2
69.7
368.8
4,332.6

132.9
335.5
214.2
26.1
17.2
52.5
778.4

Long-term debt, less current portion
Operating lease liabilities
Deferred income taxes and other tax liabilities
Other liabilities
Long-term liabilities of discontinued operations
Total liabilities
Commitments and contingent liabilities
EquityCommon stock, 89.5 and 88.8 shares outstanding on June 30, 2024, and December 31, 2023,
respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total equity$
Total liabilities and equity

1,123.8
65.8
136.1
29.6
—
2,104.3

1,565.9
62.8
147.7
32.1
31.6
2,618.5

0.1
2,017.9(307.9)(249.0)1,461.1
3,565.4

0.1
1,998.0(68.5)(215.5)
1,714.1
4,332.6$

FORTREA HOLDINGS INC.
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS(in millions)(unaudited)
Six Months Ended June 30,
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:
Depreciation and amortization
Stock compensation
Operating lease right-of-use asset expense
Goodwill and other asset impairments
Deferred income taxes
Loss on sale of business
Write-off of debt issuance costs
Other, net
Changes in assets and liabilities:
Decrease in accounts receivable and unbilled services, net
Increase in prepaid expenses and other
Increase in accounts payable
Increase (decrease) in deferred revenue(Decrease) increase in accrued expenses and otherNet cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
Proceeds from sale of business, net
Proceeds from sale of assets
Net cash provided by (used for) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facilities
Payments on revolving credit facilities
Proceeds from term loans
Proceeds from issuance of senior notes
Debt issuance costs
Principal payments of long-term debt
Special payment to Former Parent
Net transfers (to) Former Parent
Net cash used for financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period$$(239.4)

$

43.3

44.9
30.1
11.9
24.0
(11.6)
23.2
12.2
(7.8)

48.6
16.1
14.3
—
(4.5)
—
—
6.5

359.4
(11.7)
13.0
34.2(34.3)
248.1

11.4(17.2)
19.9
(5.5)
15.2
148.1

(20.5)
276.6
0.1
256.2

(25.8)—
0.3(25.5)

474.5(474.5)———(482.7)——(482.7)
(4.0)
17.6
108.6
126.2

—
—
1,061.4
570.0
(26.4
—

$

The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated and combined
statements of cash flows.

RECONCILIATION OF NON-GAAP MEASURES)(1,595.0)(135.4)(125.4)
1.3
(1.5)
110.4
108.9

FORTREA HOLDINGS INC.
NET INCOME TO ADJUSTED EBITDA RECONCILIATION(in millions)(unaudited)
Trailing Twelve Months
Ended June 30,
2024
Adjusted EBITDA from Continuing Operations:
Net income (loss) from continuing operations
Provision for income taxes
Interest expense, net
Foreign exchange (gain) loss$

(243.8)
2.9
148.6
6.5

Three Months Ended
June 30,
2024
2023
$

(99.3)
10.7
45.2
1.5

$

Six Months Ended
June 30,
2024
2023

25.0
11.6
0.7
(5.2)

$

(179.1)
14.8
79.5
6.8

$

33.0
13.1
0.6
—

Depreciation and amortization (a)

88.3

21.4

23.4

43.3

44.3

Restructuring and other charges (b)Stock based compensation

34.0
54.2

11.0
15.4

3.6
8.8

14.4
28.9

4.2
15.1

Disposition-related costs (c)

1.4

1.4

—

1.4

—

One-time spin related costs (d)

102.2

53.9

—

70.9

—

Customer matter (e)

13.0

0.4

—

4.3

—

17.8
(15.7)
209.4

2.5
(8.9)
55.2

4.2
(0.2)
71.9

7.3
(10.2)
82.3

8.7
(0.3)
118.7

Enabling Services Segment costs not included indiscontinued operations (f)Other (g)Adjusted EBITDA from Continuing Operations

$

$

$

$

$

(a) Amortization represents amortization of intangible assets acquired as part of business acquisitions.
(b) Restructuring and other charges represent amounts incurred in connection with the elimination of redundant positions to reduce overcapacity, alignresources and restructure certain operations.
(c) Disposition-related costs are short-term incremental costs to support the transition services agreement associated with the sale of the Enabling
Services Segment.
(d) Represents one-time or incremental costs required to implement capabilities to exit the Transition Services Agreement with former parent.
(e) As part of working with a customer, the Company has agreed to make concessions and provide discounts and other consideration to the customer
as part of a multi-party solution.
(f) These adjustments remove the impact of the Enabling Services Segment, which the Company sold in the second quarter of 2024.
(g) Includes the recognition of a contingent consideration payment on a sale of a facility recorded in the second quarter of 2024 and income related toservices provided under the Transition Services Agreements.

FORTREA HOLDINGS INC.
NET INCOME TO ADJUSTED NET INCOME RECONCILIATION(dollars and shares in millions, except per share data)(unaudited)Three Months Ended
June 30,
2024
2023
Adjusted net income (loss) from continuing operations :Net income (loss)
Foreign exchange (gain)/loss$(99.3)
1.5$

Six Months Ended
June 30,
2024
2023

25.0
(5.2)

$

(179.1)
6.8

$

33.0
—

Amortization (a)

15.1

15.4

30.4

30.4

Restructuring and other charges (b)Stock based compensation

11.0
15.4

3.6
8.8

14.4
28.9

4.2
15.1

Disposition-related costs (c)

1.4

—

1.4

—

One-time spin related costs (d)

53.9

—

70.9

—

Customer matter (e)

0.4

—

4.3

—

Enabling Services Segment costs not included in discontinued operations (f)

2.5

4.2

7.3

8.7

Other (g)

(8.9)
4.7
(2.3)

(0.2)
(5.5)
46.1

(10.2)
17.7
(7.2)

(0.3)
(12.0)
79.1

Income tax impact of adjustments (h)Adjusted net income (loss) from continuing operations
Basic shares
Diluted shares
Adjusted basic EPS from continuing operations
Adjusted diluted EPS from continuing operations

$

$

89.4
89.4
$
$

$

88.8
88.8
(0.03)(0.03)

$
$

$

89.3
89.3
0.52
0.52

$
$

88.8
88.8
(0.08)(0.08)

$
$

0.89
0.89

(a) Represents amortization of intangible assets acquired as part of business acquisitions.
(b) Restructuring and other charges represent amounts incurred in connection with the elimination of redundant positions to reduce overcapacity, alignresources, and restructure certain operations.
(c) Disposition-related costs are short-term incremental costs to support the transition services agreement associated with the sale of the Enabling
Services Segment.
(d) Represents one-time or incremental costs required to implement capabilities to exit the Transition Services Agreement with former parent.
(e) As part of working with a customer, the Company has agreed to make concessions and provide discounts and other consideration to the customer
as part of a multi-party solution.
(f) These adjustments remove the impact of the Enabling Services Segment, which the Company sold in the second quarter of 2024.
(g) Includes the recognition of a contingent consideration payment on a sale of a facility recorded in the second quarter of 2024 and income related toservices provided under the Transition Services Agreements.
(h) Income tax impact of adjustments calculated based on the tax rate applicable to each item.

FORTREA HOLDINGS INC.
NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW RECONCILIATION(in millions)(unaudited)

Net cash provided by operating activities
Capital expenditures
Free cash flow

Six Months Ended June 30,
2024
$
248.1
(20.5)$
227.6

The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated and combined
statements of cash flows.