Deslande v. Fortrea Holdings Inc. — Entry #65

Case 1:25-cv-04630-KPF   Document 65-9   Filed 01/28/26   Page 1 of 23


                  Exhibit I


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                                   Q2 2024 Fortrea Holdings Inc Earnings Call - Final


                        Q2 2024 Fortrea Holdings Inc Earnings Call - Final
                                            FD (Fair Disclosure) Wire
                                             August 12, 2024 Monday


Copyright 2024 Electronic format, layout and metadata, copyright 2023 VIQ Media Transcript, Inc. ALL RIGHTS
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Length: 11392 words

Body


Corporate Participants
* Hima Inguva
Fortrea Holdings Inc - Head of IR & Corporate Development
* Tom Pike
Fortrea Holdings Inc - CEO, President & Chairman
* Jill McConnell
Fortrea Holdings Inc - CFO
Conference Call Participants
* Dave Windley
Jefferies LLC - Analyst
* Patrick Donnelly
Citigroup Inc. - Analyst
* Luke Sergott
Barclays - Analyst
* Elizabeth Anderson
Evercore ISI - Analyst
* Justin Bowers
Deutsche Bank - Analyst


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                                Q2 2024 Fortrea Holdings Inc Earnings Call - Final

* Max Smock
William Blair - Analyst
* Charles Rhyee
TD Cowen - Analyst
* Wilhelm Meyer
Goldman Sachs - Analyst
* Eric Coldwell Coldwell
Robert W. Baird & Co. Incorporated - Analyst
* Michael Ryskin
BofA Securities - Analyst
Presentation
OPERATOR: Ladies and gentlemen, thank you for standing by, and welcome to Fortrea second 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 your speaker today, Hima Inguva, Head of Investor
Relations and Corporate Development. Please go ahead.
HIMA INGUVA, HEAD OF IR & CORPORATE DEVELOPMENT, FORTREA HOLDINGS INC:
Good morning, and thank you for joining Fortrea's second quarter 2024 earnings conference call. I am
Hima Inguva, Head of Investor Relations and Corporate Development at Fortrea. On the call with me
today are our CEO, Tom Pike; CFO, Jill McConnell. The call is being webcasted and the slides
accompanying today's presentation have been posted to our Investor Relations page fortrea.com.
During this call, we'll make certain forward-looking statements within the meaning of Private Securities
Litigation Reform Act of 1995. These statements are subject to significant risks and uncertainties that
could cause actual results to differ materially from our current expectations.
We strongly encourage you to review the reports filed with the SEC regarding these risks and
uncertainties, in particular, those that are described in the cautionary statement regarding forward-looking
statements and risk factors in our press release and presentation that we posted on the website.
Please note that any forward-looking statements represent our views as of today August 12, 2024, and that
we assume no obligation to update the forward-looking statements even if estimates change. During this
call, we'll also be referring to certain non-GAAP financial measures.
These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures, but
we believe these measures help investors gain a more complete understanding of results. A reconciliation
of such non-GAAP financial measures to the most directly comparable GAAP measures is available in the
earnings press release and earnings call presentation slides provided in connection with today's call.
With that, I'd like to turn it over to our CEO, Tom Pike. Tom?


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                                Q2 2024 Fortrea Holdings Inc Earnings Call - Final

TOM PIKE, CEO, PRESIDENT & CHAIRMAN, FORTREA HOLDINGS INC: Good morning,
everyone. Welcome to the call. Let me start by saying that Fortrea had a solid quarter of execution and
progress on our strategic objectives despite some difficulty predicting when biotech opportunities with
contract that impacted our book to bill.
As you know, Fortrea is a pure-play CRO that offers end to end solutions for clinical trials across Phases 1
through IV. We have a strong track record of delivering high quality services to our customers, ranges
from small biotech startups to large pharma companies.
We believe we have a strong value proposition in the market as we combined 30 years of experience, deep
scientific expertise, operational excellence and innovative technology to deliver faster, better, more cost-
effective outcomes for our customers. We also have a diversified and balanced portfolio of projects and a
healthy mix of short and long-term contracts as well as broad exposure to different geographies and
indications.
In the second quarter, we saw some positive signs of improvements in our business. Let me share with
you some of the highs and lows of the quarter and then we'll talk in more detail about what we see for our
second half bookings.
First, the highlights. We signed several deals and partnerships with top 20 pharma customers, including
one new full-service outsourcing partnership. The other deals are solid footholds into larger customers.
Our pipeline of opportunities continues to improve in both value and mix, and our win rates are solid.
More on that on a couple of minutes.
We've exited about 60% of the TSA agreements with our former parent and are making good progress on
the most difficult part, the transition of software, servers and other technology. We delevered the balance
sheet and finally, we have a clear line of sight to improving our margins while delivering quality work and
started planning for 2025.
I will give you some detail on some of these highlights and Jill will fill in on others. Our new offerings
and approaches to partnering with large pharma are gaining traction. This quarter, we beat out four of the
big six CROs to be selected as one of only two providers in an attractive full-service partnership with a
larger pharmaceutical firm.
The customer noted how Fortrea showed up differently to the opportunities than others under
consideration. The increased bookings and revenue from this win should be felt in 2025. As I mentioned,
we had some nice wins in a couple of other large pharma firms too.
In one situation would be two larger incumbents take over an important clinical services opportunity and
consolidate what was three vendors into one. We also got a nice win at foothold and a third even larger
pharmaceutical firm. We've begun to see additional opportunities from these customers.
Our clinical pharmacology business continues to be strong with attractive book to bills, customers and
indications. We're also seeing increasing momentum in transferring the impressive relationships we have
in clinical pharmacology and Phase Ib and II. We have a significant number of opportunities and have
increased our win rate where decisions have been made.
These relationships are based on the deep scientific knowledge we've brought to the table working in
some inspiring new modalities that include metabolic, neuro-degenerative, immunology and more. We
had some good wins in biotech in areas such as oncology, ophthalmology and dermatology.
Recently, I met with the CEO of an ophthalmology biotech, who has a great product, and they raved about
our success to date with an important and challenging trial.


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In the second quarter, we also announced two offerings that reflect areas of strength Fortrea. The first was
our diversity and inclusion solution, which is designed to expand patient access to clinical trials and
address the US FDA requirements to increase enrollment of underrepresented populations in clinical
trials.
This solution incorporates our consulting expertise, real-world evidence data, comprehensive planning,
implementation and measurement methodology. We've had a very nice response to this solution and have
gained significant experience in this area, working on more than 40 diversity action plans in the past year.
Greater productivity in clinical trials has become critical for the industry and Fortrea is centering itself on
this value proposition. We are developing changes to roles, processes, partnerships and technology. As
part of this effort, another offering that we announced in the second quarter was the launch of our AI
Innovation Studio which will develop and deploy AI and ML technologies to drive productivity, quality
and enhance site and patient experiences as well as safety and clinical research.
Fortrea's Innovation Studio is a fresh take on AI for CROs, very forward looking and collaborative, it's
still cost effective. I'm looking forward to seeing what productivity ideas emerge from the studio in
collaboration with our forward-leaning customers. We're hoping to share some of this with investors and
analysts later this year.
In another development, our therapeutic strategy leaders who are some of our key medical doctors now
prepare strategies for increasing our impact and share in various therapeutic areas to identify the movers
and shakers, interesting mechanisms as well as what we need to do and offerings we need to have to
increase our share of the pie with biotechs and large pharma.
Overall, we're strengthening our offerings, and it's getting noticed. Fortrea was recognized in the second
quarter for the first time as an independent company with CRO Leadership Awards sponsored by clinical
leader in four categories capabilities, expertise, quality and reliability. These awards are based on an
independent survey, which compiled feedback that customers provide on CROs that they have worked
with on a project during the past 16 months.
Now let me address the low light of the quarter that spills into some of our other results. Our book-to-bill
for this quarter was just under [1.] Since we're a new public company, we'll drive to give you more color
on what happened.
During Q2, we said to you if we execute, we can meet our target of 1.2 book-to-bill. Let me explain why
we thought that our pipeline at the beginning of Q2 was larger than any quarter since the beginning of
2022. In fact, it was 11% higher than the average of the three prior quarters, and our win rates have been
solid.
Overall, about half of our work is with biotechs. We're experienced at working with biotech companies
and are optimistic about our capability to deliver attractive biotech solutions that fuel growth for Fortrea.
At the same time, contracting in this space can be uncertain, and we're finding it is harder to predict when
the final contract will be executed.
In the first half, our mix was slanted toward biotech. We're making changes to address the disappointing
predictions and bookings these past two quarters. Unfortunately, two quarters of sub 1.2 bookings impacts
our guidance and some other key targets.
Now let me turn to our pipeline for the back half of the year. As I mentioned, our pipeline beginning of
Q2 was 11% greater than our average of the prior three quarters. In Q3 and Q4 of last year, we delivered


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that 1.2 book-to-bill or better. The pipeline at the beginning of this quarter Q3 is even greater than it was
in Q2.
In fact, it's 7.5% greater than it was. It also as more large pharma, which is encouraging. We're seeing our
large pharma partners coming through their internal processes with RFP flow returning. We also feel good
about Q4.
As we sit here today, the second half overall has more qualified opportunities than any upcoming two
quarters since we've been public, the pipeline is very attractive. In addition, the new and refreshed
partnership should contribute more opportunities in 2025.
Now let me hand over to Jill, she will comment on the numbers in more detail on our transformation and
margin improvement programs. Then I'll wrap up with some comments about the remainder of the year
and 2025.
JILL MCCONNELL, CFO, FORTREA HOLDINGS INC: Thank you, Tom, and thank you to everyone
for joining us today. Before we get into the details of the quarter, I want to acknowledge some of the work
we have already done over the past year, exiting around 60% of our TSA services with our former parent,
completing the divestiture of our non-core Enabling Services businesses and materially improving our
balance sheet.
These are important building blocks for us to create long-term value for all our stakeholders. Upon the
closing of the Enabling Services divestiture and executing on our receivables securitization facility in the
quarter. We significantly reduced our balance sheet leverage by paying down around $500 million of spin-
related debt.
We have improved our capital structure and have ample headroom between our current ratios and our debt
covenants. We have laid the right foundation for continued transformation. I will start with providing a
detailed breakdown of the financial performance of our core business this quarter. Then I will walk you
through the components that we are using to enhance profit margins and the adjusted EBITDA margin
bridge we provided.
I will share progress on our commercial transformation and expectations for the remainder of 2024,
including the components that are driving improved adjusted EBITDA margins for the second quarter and
that we believe will drive improved EBITDA margins for the second half of 2024. And finally, I will
discuss our outlook for 2025.
As a reminder, all of my remarks relate to continuing operations following the divestiture of our Enabling
Services businesses unless I note otherwise, revenues of $662.4 million declined 8.6% year on year. This
was driven by lower pass-through revenues compared to historical highs and lower service fee revenues.
The pass-through decline is largely driven by lower pass-throughs on the biomarker studies we have
previously called out, which are now normalizing given their stage in the project lifecycle.
Our second quarter service fee revenue continues to be impacted by a combination of factors, primarily
lower new business awards in the pre-spin period, along with the mix shift towards later stage and longer
duration studies, particularly in oncology. Note that we did see mid-single digit sequential growth in
service fees in line with our expectations.
On a GAAP basis, direct costs in the quarter decreased 7.6% year over year, primarily due to lower pass-
through costs. SG&A in the quarter was higher year over year by 59.7%, primarily due to incremental
one-time costs incurred for exiting the TSA with our former parent.


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The company reclassified $33.1 million from direct costs to SG&A expenses in the prior year comparison
period, primarily related to information technology costs and certain non-clinic facility charges. For the
second quarter, you will see SG&A as a percentage of revenue on a GAAP basis at 23.6%.
However, it contains approximately $54 million of one-time costs related to the continued separation from
our former parent. Excluding spin-related one-time costs in both quarters, underlying SG&A as a
percentage of revenue was relatively flat to the first quarter. We see significant potential to expand
margins by reducing SG&A expense as a percentage of revenue over time once we fully exit the TSA
services and can transition to lower cost replacement infrastructure.
Net interest expense for the quarter was $45.2 million. However, this is comprised of actual interest
expense of approximately $33 million and the remainder being the write-off of a portion of the debt
issuance discount based on the debt prepayment in the quarter.
As noted previously, we are targeting quarterly interest and related fees expense to decline substantially
going forward due to the debt paydown. When looking at the annualized interest expense using debt
outstanding, securitization usage and rates in effect at the end of the second quarter 2024, estimated
annual total cash interest and securitization costs are targeted to be approximately 18% lower compared to
the annualized cost at the end of the first quarter of 2024.
Turning to our tax rate, the effective tax rate for continuing operations for the quarter was negative 12.1%,
primarily due to the combined effect of a forecasted pretax loss in 2024 given our large one-time costs, a
change in the valuation allowance and earnings mix.
During the second quarter, we recognized tax expense of $10.7 million in continuing operations, primarily
due to a forecasted valuation allowance on our deferred tax asset related to disallowed interest expense.
We have plans that we expect could improve our overall tax position over time.
Our book-to-bill for the trailing 12 months since the spin is 1.16 times and for this quarter it was 0.96
times. Our backlog at around $7.4 billion has grown 5.6% since the spin. As part of our work in the first
quarter of this year to disentangle the Enabling Services businesses for reporting as discontinued
operations, we became aware of historical misstatements of certain financial line items, which we
identified.
The overall impact of these adjustments is not considered material to any given year. As previously
discussed, we are continuing to bolster our financial control environment through personnel additions and
process improvements.
Continuing operations, adjusted EBITDA for the quarter of $55.2 million decreased 23.2% year over year
compared to adjusted EBITDA of $71.9 million in the prior year period. Note that adjusted EBITDA more
than doubled compared to the first quarter of 2024, increasing by 103.7% on a sequential basis.
Adjusted EBITDA margin for the second quarter was 8.3% compared to 9.9% in the prior year period.
Adjusted EBITDA margin in the quarter was negatively impacted by lower service fee revenues from the
lower awards during the pre-spin year, the mix of longer duration studies and higher SG&A costs post
spin to support operations as a public company.
These were partially offset by the benefit from the restructuring program we initiated in the third quarter
of 2023, which is continuing into 2024. In the second quarter of 2024, adjusted net loss of $2.3 million
decreased 105% compared to adjusted net income of $46.1 million in the prior year period. Adjusted net
loss for both basic and diluted share for the quarter was $0.03 compared to adjusted net income of $0.52
in the prior year period.


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                                Q2 2024 Fortrea Holdings Inc Earnings Call - Final

Turning to customer concentration. In our continuing operations, our top 10 customers represented
slightly more than half of our second quarter 2024 revenues. One customer accounted for 13.2% of
revenues. As I comment on cash flows, note these relate to Fortrea in total as we have not segregated cash
flows from discontinued operations.
For the first six months ended June 30, 2024, we reported $248.1 million in cash flow from operating
activities compared to $148.1 million generated in the prior year. Cash flow benefited from the sale of
receivables under the securitization facility and an increase in unearned revenue, partially offset by the
decrease in net income.
Free cash flow was $227.6 million compared to $122.3 million in the first six months of 2023. Net
accounts receivable and unbilled services for continuing operations were $637.9 million as of June 30,
2024, compared to $941 million as of March 31, 2024. Days sales outstanding from continuing operations
was 54 days as of June 30, 2024, 43 days lower than March 31, 2024.
The reduction versus the first quarter is primarily due to the sale of receivables through our securitization
facility, lower average billings and to a lesser extent, an increase in advances. We continue to make
changes to our contracting and order-to-cash processes to enable further improvements to our DSO profile
over time.
During the quarter, we prepaid $275 million of term loans from the initial divestiture proceeds with the
majority $211 million used to prepay term loan B, which has a higher cost of debt. We also used $229
million of the proceeds from our securitization facility to further pay down term loan B and our revolver.
And as a result, reduced total debt by $504 million from the end of the first quarter, ending the second
quarter with $1.14 billion in gross debt.
We have been and for the foreseeable future, we expect to be fully compliant with the financial
maintenance covenants of our credit agreement. We have considerable room under our covenant ratios
due to the debt paydown, the exclusion of securitization usage from the calculations and the benefit of the
add-backs permitted under the credit agreement. We ended the quarter with more than $0.5 billion of
liquidity.
Our capital allocation priorities are unchanged focusing in the near term on infrastructure investments for
timely exit of the transition services agreement with our former parent, targeted investments to drive
organic growth and improved productivity and then debt repayment. Our target for net leverage ratio
continues to be 2.5 to 3 times over the medium term.
Now I will provide an update on our transformation program. We continue to make progress on our
journey towards improving financial results, while we increase the longer-term health and performance of
Fortrea. We've now exited around 60% of our TSA services with our former parent, and we have robust
plans in place to exit the majority of the remaining TSA services by year end with a limited number of
being exited early in 2025 to ensure business continuity through year-end.
We are continuing with programs to reduce costs, including a restructuring program we introduced in the
third quarter of 2023, which is continuing into 2024. The improvement in overall adjusted EBITDA this
quarter is benefiting from these programs as the service fee revenue growth we delivered dropped through
strongly to the bottom line as we expected.
On SG&A, while we have made initial progress in IT already, we are continuing to prepare for more
efficient supporting organizations over time. In a few areas, we began -- we expect to begin to see benefits
emerge towards the end of the year with other improvements planned for 2025 and beyond as we fully


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exit the TSA and adopt these more efficient infrastructures. As you can see from our SG&A expense line
item, this is critical for us to be competitive with our peers.
On operational execution, we continue to enhance productivity by compressing our time to study start-up
and accelerating achievement of milestones through targeted investments and project management
capabilities. We remain laser focused on building our backlog with the right mix and volume of new
business awards.
To that end, we are continuing to invest in resources and tools for our commercial organization and are
ensuring senior leadership are intrinsically involved in the competitive selling process by leveraging their
relationships and experiences.
I will now cover our updated guidance for continuing operations. For full year 2024, we are lowering the
midpoint of our revenues to $2.725 billion with a range of $2.7 billion to $2.75 billion. The adjustment to
revenue guidance largely reflects the lower recent pass-through trends we have been seeing, in particular
due to the biomarker studies I mentioned earlier, and the impact to service revenues due to the lower-than-
expected new business awards in the first half of the year.
As a result of these headwinds, we now expect to have an overall revenue decline versus 2023 of around
4% with the second half being improved versus the first half, but down slightly versus the prior year.
Given that a portion of the revenue reduction is expected to be service fee revenues, we are reducing our
adjusted EBITDA target to a range of $220 million to $240 million. In spite of the lower adjusted
EBITDA range, we are targeting to show continued improvement sequentially through the remainder of
the year, both in service fee revenue and in adjusted EBITDA.
Let me bridge this improvement for you as seen on slide 9 of our investor presentation. You'll see that we
delivered $82.3 million of adjusted EBITDA in the first half of the year. Using this as a run rate would
give you a full year adjusted EBITDA of around $165 million.
To get to our revised midpoint of $230 million, we are targeting service fee revenue growth to contribute
$40 million to $50 million, along with continued operational and SG&A optimization to contribute $15
million to $25 million.
Margin optimization is anticipated to be a combination of gross margin improvements, given the
restructuring programs we have implemented improvements in facilities and other operating costs and
reductions in our IT spend. In achieving this, we would target to deliver an adjusted EBITDA margin in
the 11% to 12% range for the fourth quarter of 2024.
Now, let me share some implications of our results and these guidance changes to our view of 2025
adjusted EBITDA based on our modeling. We are now targeting the adjusted EBITDA margin for 2025 to
be more likely in the 11% to 12% range. While this is below the 13% we had been targeting previously, it
would represent a roughly 300 basis points improvement at the midpoint versus 2024 and broadly a 30%
to 40% increase in adjusted EBITDA dollars delivered.
In addition, we are targeting a return to positive cash flow in 2025, given the expected reduction in spend
related to the separation from our former parent. The challenges of the separation and the time it is taking
to optimize our commercial approach and operational execution has led to a slower return to growth and
margin expansion than we originally anticipated.
But make no mistake, with a backlog of more than $7 billion, a global talented team of more than 16,000
clinical development professionals and full independence to unlock future optimization insight, we remain


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                                Q2 2024 Fortrea Holdings Inc Earnings Call - Final

a great partner for our growing customer base, a rewarding place to work for our employees and a long-
term value creation opportunity for our investors.
We are relentlessly focused on driving innovation and efficiency in clinical development, and we are
gaining significant traction with customers, which is opening doors to new opportunities. As a pure-play
CRO, we are diligently executing our transformation strategy to drive substantial margin expansion and
unlock significant value for our shareholders.
Now I'll turn it back to Tom for the remainder of his remarks.
TOM PIKE: Thank you, Jill. In closing, let me provide some thoughts about the remainder of the year and
2025. Regarding the second half of 2024, as I mentioned, our pipeline of opportunities has grown and has
more large pharma, which should be more predictable.
In both the third and fourth quarter, we have attractive qualified opportunities to close and contract. If we
execute, we feel confident that across the two upcoming quarters, we can average 1.2 book-to-bill. Q4
looks stronger than Q3. We will continue to do everything we can to meet a 1.2 book-to-bill or better in
the third and fourth quarters.
And let me pick up on Jill's discussion of 2025. We have a programmatic approach to increase sales and
improve operating margins for delivering for customers with quality. We now understand the investments
required and are planning to make them. If we hit our target book-to-bills, as Jill said, we're modeling
more than 30% improvement to adjusted EBITDA dollars next year.
In 2025, we'll complete our exit from our former parent and those heavy one-time costs. We also expect to
turn cash flow positive in 2025. I acknowledge this is a different financial trajectory than the one we had
hoped, but it is still a very attractive increase in adjusted EBITDA in a short period time.
Let me step back and tell you why I'm so confident in Fortrea. Because I get to see the Fortrea in action.
As I get direct customer feedback on our performance and how we show up from executives. We work
hard here. We press our innovative offerings, and we seek to exceed our customers' expectations.
When customers take the time to get to know us. They see us as innovative, agile and they know the
management team is accessible to them. Internally, I meet with teams working on exiting our former
parent, divesting Enabling Services and improving our delivery and margins.
They also work hard. They resolve issues and they meet deadlines. I meet with their AI and IT leaders
regularly. We push for practical innovation while reducing overall IT costs. There's work to do, but this is
the right team to do it.
For instance, Jill and I meet weekly with teams driving our sales process. We reviewed larger and more
important deals. We press for critical thinking and what I call ferocious debates among friends to develop
compelling solutions. We're getting better all the time.
In my career, I've turned around businesses and I've grown businesses. Let me share this services firms
and CROs in particular can be sort of like flywheels. If you know what a flywheel is, you know it takes
effort and time to get it spinning.
As Jim Collins has written, you put a great team in place, you confront the brutal facts and then you create
a culture of discipline around execution. We're doing that here at Fortrea. Once the flywheel is spinning,
momentum is a very powerful thing. We can go on a multiyear journey to create value. Other CROs have,
and we will too.


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                                 Q2 2024 Fortrea Holdings Inc Earnings Call - Final

In summary, Fortrea had a very solid quarter of execution and progress. We're well positioned for growth
and value creation in the future. We will get that flywheel going and build momentum. You think about it,
we de-levered. We doubled EBITDA from Q1 to Q2. We had some big relationship wins in large pharma.
We have a record pipeline as a public company, and we're anticipating more than a 30% increase in
adjusted EBITDA next year.
In closing, I'd like to recognize the tremendous team of professionals we have working here at Fortrea.
We have navigated our first year as an independent entity and the team has remained focused and
dedicated to our patients fired mission.
I appreciate their commitment and their expertise when we deliver solutions that bring life-changing
treatments to patients faster, creating value for all of our stakeholders.
Operator, can you please open the line up for questions? Thank you.
Questions and Answers
OPERATOR: (Operator Instructions) Dave Windley, Jefferies.
DAVE WINDLEY, ANALYST, JEFFERIES LLC: Hi, good morning. Thanks for taking my questions.
You did hit the doubling of EBITDA in 2Q, which I thought was going to be the hardest hurdle for you to
hit. I wanted to dig into some of the moving parts from the P&L on the first question.
So you mentioned that service fee revenue was up mid-single digits, which since total revenue is basically
flat, means that pass throughs were down by the same amount. Could you quantify that? And how much
should we think about that being a factor that continues through the second half? Thanks.
JILL MCCONNELL: Yeah. Thanks for the question, Dave. We won't quantify, but I will say those
biomarker studies in particular is really significant. What we saw at the end of Q -- in this period, same
quarter last year, we saw basically high single digits impact from that study and it kind of quadrupled over
the last few quarters and then was back down more in line with what we saw in the same quarter last year.
And so, in particular that one, we think most of the fluctuations of that we have now worked their way
through, and we have been saying all along that the key to us being able to drive the improvement in
adjusted EBITDA will come from service fee revenues growing.
And so that we're pleased to see that it was in line with what we expected for the quarter. And that's what
we're projecting as we look over, as you can see, you saw the bridge that took you from Q1 to Q2 on our
presentation. But obviously similar results, we're expecting in terms of that magnitude for the remainder
of the year.
DAVE WINDLEY: Another way to come out this maybe is, again, revenue basically flat sequentially,
operating costs down by about $28 million. What were the drivers of that? You had talked on the last
quarter about expanding some of the cost takeout the restructuring that you mentioned in the prepared
remarks, I assume some of it was that, did you get a full quarter impact of that? And how much of that
continues kind of laps into the second half or into the third quarter specifically?
JILL MCCONNELL: Yeah. We didn't get a full quarter of it because some of the additional pieces that
we've been tacking onto that program really started in the second quarter so that some of the additional
benefit that you'll see in Q3 and Q4 from that program actually has continued through the third quarter.
So you probably wouldn't see the full benefit of that until in the last quarter of the year, but that's part of
the improvement. We also -- I called out that there have been some improvements in our IT spend that


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we've seen as we've gone through the course of the year, most of the SG&A improvements are very back-
end heavy, but we are seeing some of those things help us as well.
And it's been just really tight cost management. I'm still meeting every single week to review every single
hire in the company, all the travel expense. So we really just been trying to be very disciplined about costs
in this period while revenues continue to be relatively suppressed.
DAVE WINDLEY: Okay. Last one for me. In the bookings numbers, again, wondering the composition
of this, was this just lower new wins or given some of the moving parts and changes in estimates,
including your forward revenue estimate around pass throughs.
Did you take like an outsized pass-through reset or effectively cancellation in the quarter that influence
the overall book to bill? Thanks. That's all for me.
TOM PIKE: Hi, Dave, it's Tom. It was really just normal bookings. There were no major cancellations
and no unusual events in terms of those pass throughs. But I think the bottom line there is just that we are
having some difficulty predicting exactly when biotechs are going to contract and we are finding with
them being about 50% of our exposure from a revenue standpoint, and in this quarter, they were much
higher exposure in terms of the opportunities.
We have to do a better job of understanding exactly what the timelines are and then figure out what we
can do to influence those timelines.
So as you heard, the pipeline is actually quite strong. I would worry about this business is if the pipeline
was strong, but the pipeline is strong. Some important wins from large pharma that will give us more of a
floor. But unfortunately, in this quarter, we just didn't deliver in terms of these biotech opportunities to the
level that I think we could have.
OPERATOR: Patrick Donnelly, Citi.
PATRICK DONNELLY, ANALYST, CITIGROUP INC.: Hey, guys. Thanks for taking the questions.
Tom, maybe to pick up on where you finished there. I mean, it sounds like you guys are feeling pretty
good about the pipeline to your point. Pipeline looks pretty good to start to Q2 and the book-to-bill came
in light.
You're talking about the building book-to-bill, certainly over one, two in 4Q. Can you just talk about, I
guess, the confidence level, the visibility just given the last couple of calls that come up, like in spite of
that stronger pipeline what gives you the confidence that book-to-bill does in fact build off of this
pipeline?
TOM PIKE: Yeah. Hi, Patrick. I think the difference is we've looked at it in a lot of detail. And you can
imagine that we're all over this given what's going on is that we look at that composition in terms of large
pharma opportunities, biotech opportunities. We also look at what's been awarded and needs to be
contracted versus what's more speculative.
And in these upcoming quarters, we have quite a number of midsize and larger opportunities from large
pharma. And we do have a number of things that are awarded and need to be contracted. And that gives us
more confidence in what we see.
Again, to some degree, I hate to acknowledge this, but we're learning a little bit more about having this
much biotech exposure, at least I am. And I think what we're doing is we're really revising our procedures
there to trying to really understand exactly what those dates are for contracting and then exactly what we


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can do about them because the ability to influence them is a key part of what we tried to do as a sales
team.
But this upcoming two quarters with more large pharma exposure gives us some confidence because large
pharma firms have a tendency to be more consistent in their scheduling and more predictable because of
the amount of experience they have and how they've done their approval process.
So that's what makes us feel good about second half of the year. Certainly, I'm disappointed with the Q2
number. But again, the pipeline looks strong and then the mix of opportunities in some of these larger
pharma relationships give us some internal confidence that we're in a good position as we go forward.
PATRICK DONNELLY: Maybe one for Jill, just on the 2025 conversation there. It sounds like margin in
anymore in that 11% to 12% range. But still, to your point, I think 30%, 40% dollar growth. Can you just
talk about the levers to get there. I mean, how much of it is contingent on a certain level of top line growth
versus cost outs. If you can talk gross margins, SG&A, that's all comparable, but I just want to talk a little
bit about the bridge to get to that new margin number. Thank you, guys.
JILL MCCONNELL: Yeah. Sure, Patrick. So it's really going to come from two things, right. In terms of
the use, roughly [300], it'll be split about half and half based on what we see today, half coming from
gross margin improvements, but more so from really driving productivity and improving our processes in
the project delivery space.
And then the other half will come from SG&A improvements. We've been talking about the fact that we
need to get really through those TSAs and be fully exited to start to see some of that value and the dollars
coming out in SG&A. And so, we're expecting it to be split between those two things.
OPERATOR: Luke Sergott, Barclays.
LUKE SERGOTT, ANALYST, BARCLAYS: Great, thanks. I just wanted to follow up on Patrick's
question there from -- on the 25 number. So I think if you kind of just do the math there and back it out of
35% midpoint growth in EBITDA and you had like 11.5% operating margin. That implies roughly a
revenue number around $2.7 billion, which is comes into the low end of your guide.
So one is that it is my math correct there? And then two, is it like something to do with expected elevated
pass-through coming off continuing to come off as we saw in this quarter? And just any color there,
what's actually going on between the dynamics?
JILL MCCONNELL: Yeah. I think it is -- you're right. It's really that mix as we continue to expect pass
throughs to moderate as we go through the course of the year and then servicing revenues fees picking up.
We did have strong book-to-bills in the back half of last year. So we're starting to see some of that come
through but in terms of top line numbers, it's been largely offset by what we're seeing in terms of lower
pass-through trends.
LUKE SERGOTT: Okay, great. And then I guess more high level on market demand side, can you talk --
we've seen like some weakness here in drug discovery side, especially on the safety assessment, and you
guys just talked about seeing good bookings in clin pharm. So kind of where does that fit within the
overall workflow?
I know it's more late-phase focused, but study starts continues to be softer. Just kind of where you start
seeing -- if there is going to be any pressure there on the late-stage pipeline?


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TOM PIKE: Yeah. What we see is pretty consistent with actually what Dave Windley wrote in one of his
recent notes and that's at the early (technical difficulty) what am I going to say? But it's true, but we see
pretty consistent. So in early -- so in Phase I, it is a little bit soft demand among biotechs.
But what we've done over the past year is to continue to increase our exposure to some of the more
attractive larger players in pharma. And what we see is there is a group of pharmaceutical firms that are
actually spending quite a bit more on R&D, and we're pretty well positioned with the number of those
firms plus picking up some new customers in the Phase I spot that are out of again larger pharma.
So I think for us what's happening is we're just well viewed and well positioned, and that's giving us a bit
of an advantage we look at the clinical pharmacology. That being said, we also see the same thing that's
generally being discussed in the industry that Phase II and Phase III is being prioritized.
And so, given that it's being prioritized, we're seeing for company like ours with the exposure we have,
we're seeing plenty of demand for Phase II, Phase III type studies. So I think I generally agree with that
commentary that's out there about how the industry is going. But again, given that we're mostly exposed
to Phase II, III and IV, that is benefit for us.
OPERATOR: Elizabeth Anderson, Evercore.
ELIZABETH ANDERSON, ANALYST, EVERCORE ISI: Maybe just piggybacking off of what Luke
was just asking, how have you found the pricing environment in the recent -- maybe pipeline and some of
your recent wins and if you could differentiate between biotech and pharma for that? That would be super
helpful.
TOM PIKE: Yeah. Thanks, Elizabeth. In terms of biotech pricing, I think it continues to be consistent
with what it's been and that's good market-based pricing. And we occasionally see somebody step in to
buy something there in biotech but for the most part, it's solid, disciplined pricing in that marketplace.
And then in large pharma, similar to the commentary of some of our competitors, we generally are seeing
full-service outsourcing be reasonable market-based pricings. You should know that Fortrea tries to go for
market-based pricing. And what I mean by that is there's probably some band at reasonable prices out
there and we tried to be in that band where we maintain our margins, but we deliver good value for the
customer.
We do see in FSP some situations where a competitor is really lowering prices. Luckily, as we've
discussed on prior calls, we're not as exposed to these really large volume FSP deals as some of our
competitors are. And so, personally I have been around this industry for a while, I don't think that's
sustainable. But we are seeing FSP in the largest situations be very, very competitive. So does that help,
Elizabeth?
ELIZABETH ANDERSON: That's super great commentary. Thank you for that. Maybe just as a follow
up. The back half guide, I think implies a backlog burn of about 9.4%-ish. And I just mean it obviously
that's a little bit of an acceleration versus what we saw in the first half of the year, but down year on year.
So how do we just and you think about that and why is that [kind of the right] level? Is there sort of
studies that are coming forward that you know, that have started to burn already. Like you could just give
us any more color on why that's the right burn rate, that would be great.
JILL MCCONNELL: Sure, Elizabeth. Yeah. I think it's two things. One, as you say, I mentioned what we
won in the second half of last year is starting to come into the pipeline. And we are being really focused
on those new projects in particular and ensuring we execute them as rapidly as fast as possible, getting


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sites initiated, getting to those patient enrollment milestones where we can start to also build in addition to
recognizing revenue.
So those are important things. So you have the combination of that plus the work. Tom and I talked --
Tom talked about us being on the sales call. We're also on weekly project review calls and we're going
through and looking at all large projects come forward every week and we talk through and understanding
where they are and trying to do what we can to get any barriers out of the way, whether it's resourcing or
leadership engagement or working with customers in terms of trying to get decisions.
So those two things are really allowing us to start to drive some momentum and how we're burning
through our backlog. It's a little bit of an uptick. It's a constant -- it's a constant battle that we're making
into trying to grow revenue. But against those two things, we're seeing some initial progress.
OPERATOR: Justin Bowers, DB.
JUSTIN BOWERS, ANALYST, DEUTSCHE BANK: Hi, good morning, everyone. Tom, can you talk a
little bit how you're positioning Fortrea in biotech versus large pharma and maybe discuss some of the
steps you're taking in terms of the commercial transformation and how are you going to market?
TOM PIKE: Yeah. Thanks, Justin. In terms of biotech, we have this strong medical expertise that we
inherited from Covance over time and some excellent physicians, excellent strategists. We were just on a
call the other day where our lead strategist actually did her PhD in this specific mechanism, an indication
of the project and had some really innovative ideas.
So when it comes to biotech, what we're really trying to do is figure out how we can with quality shorten
their time lines and really bring the medical scientific expertise, how we can help them with the protocol
development to make sure that we reduce protocol amendments and give them the site investigator
relationships and access that it's hard to get to small biotech.\
With large pharma, it's interesting. They're -- as I just alluded to in my comments, they're very interested
in productivity right now. We're seeing some of the consultants for the industry really pushing
productivity. It's a discussion topic, whether they're increasing their spending on R&D or not.
And so, what we're really doing is leaning into how does Fortrea with being a relatively agile company,
how do we help them be more productive? And so, as I said in my remarks, we've decided this is
something I've been passionate about for a long time. And so, we've really decided to center ourselves.
So not just -- for instance, investing in AI generally, but how do we improve the productivity of some of
the more expensive parts of the clinical trial, such as the interaction with CRAs around sites or reducing
protocol amendments around that has secondary effect costs throughout the trial. So with big pharma,
we're really trying to center ourselves in this productivity discussion.
With biotech, it's more acceleration, scientific support, real-world evidence to integration, those types of
things. Does that help Justin? I know it's a little detailed for an earnings call, but maybe it gives you a
sense.
JUSTIN BOWERS: Yeah, appreciate it. And then just a follow-up for maybe you and Jill, on the
bookings, were there any delays or pushouts from 2Q into second half of the year? I mean, you talked
about some awards that were not yet contracted.
And then, should we just think of this is being just given the size of the organization and where you are
now, like is -- should we just think of the bookings as just being a little more volatile from quarter to


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quarter. But at the end of the year, you can maybe get back to the 1.2 on average, is that like where we are
in the cycle right now over the next, call it, like four to six quarters?
TOM PIKE: Let me start on that. I do think that we are -- to your last point there, we're trying to get to a
point where we have a trailing 12 months of 1.2 so that we have that ongoing amount of bookings that
really helps us grow. And so, I do think for better or worse, what you're seeing in fact is a little more
volatility than we would like.
But again, the key thing is the pipeline is strong right now. I don't know, Jill, if you'd comment more on
that. But I think we should be able to with the efforts we're doing at predictability and then the
relationships we're developing, I think we're expecting to be able to get greater consistency here.
JILL MCCONNELL: That's obviously the target. I think we called out the one in the first quarter because
it happened so late and it was it was large, and we had had confirmation from them that it was going to
happen and then it didn't at the last minute.
So I think I don't want to be talking about pushes from quarter to quarter. We're just targeting consistently
getting to that 1.2 over time. And with the pipeline that we see for the second half, we believe we've got
the mechanism to do that.
OPERATOR: Max Smock, William Blair.
MAX SMOCK, ANALYST, WILLIAM BLAIR: Thanks for taking my questions. Wanted to just drill in a
little bit more into your commentary around small biotech and decision-making process there. Can you
give us a sense for just how those decision-making timelines have change across this year? It seems like
funding really trailed off in June and July.
Just wondering if you're seeing biotech becoming even more cost conscious in the last couple of months
in particular? And what do you get the sense these customers are waiting to see in order to feel more
comfortable about moving these programs forward here in the near future? Thank you.
TOM PIKE: Yeah. I think cost consciousness was -- they've always been pretty cost conscious because
there are on a budget year, maybe 2021, '22 is a little bit of an exception, but generally, they've been
pretty cost conscious.
I do think we're seeing more involvement of different elements of the organization, whether it's the board,
whether it's more interaction with the top executives in the company that are causing the biotechs to just
some have an anticipated schedule. And then at least from what we're seeing, then have that anticipated
schedule slip through these further discussions.
As Jill said, it's difficult. I don't think -- the fact that we now have a larger pipeline because of some of
these slower processes doesn't make us want to promise you anymore, but there's no question that the
decision for us is over the last say four to six quarters have gotten a little bit slower in biotech because
they're just a little bit more careful with their budgets.
MAX SMOCK: Understood. Thank you. And then maybe just a quick follow-up from me here on burn
rate. Wondering if employee retention, if you can get some commentary around how that has tracked so
far here in 2024 and what impact turnover has had on the lower-than-expected burn rate that we've seen
over the last couple of quarters here. Thank you.
JILL MCCONNELL: So I know we've been talking towards the end of last year and early this year that
we were seeing attrition levels well below pre-COVID norms. They may be moved up just slightly, but


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they're really in line with the industry. Nothing significant there. We don't think that's a significant factor
in terms of the burn rate.
I mean, for us, it's really about continuing to focus on the productivity enhancements, greater execution
around and the delivery and making sure that we unlock the barriers and for our teams to be able to
deliver the projects as efficiently as possible. We're not seeing attrition be a big factor.
OPERATOR: Charles Rhyee, TD Cowen.
CHARLES RHYEE, ANALYST, TD COWEN: Thanks for taking the question. I wanted to -- Tom,
maybe just go into a little bit more. You talked about the cause just that biotech has always been mindful
of spending and obviously, some of your peers have also talked about some cautiousness. How much do
you think it's maybe on the macro environment that lack of the rate cuts that we have been seeing that
played a bigger part? Has that come up in discussions?
And then secondly, maybe for Jill, if we think about the EBITDA margin guide implied for the 2025
revenue growth, how much of that is predicated on hitting the 1.2 book-to-bill in the back half of the year,
like what -- maybe you can give us a sense on maybe some of the sensitivity. Can you still get there? If
you're a little short or is it that at least 1.2 is required? Thanks.
TOM PIKE: Thanks, Charles. I think I'd summarize the biotech market as being solid. So it is consistent
with prior quarters, consistent with this year that it is a solid environment. And then in terms of the larger
pharma, we really do see three groups of them. We see those that are growing, those that are slow growth
or flattish. And then those that are flat to declining.
We actually see different behaviors in those different groups. And so, we think about our targeting of
them very differently. And so, again, biotech being more than 60% of the R&D market these days and
being where a lot of the innovation is happening continues to be a big target, be solid and attractive for us
at Fortrea, big part of our history.
But then we're being very careful because the large pharma market is really pretty distinct and how it's
reacting with some actually increasing full-service outsourcing, some pressing for savings and
productivity and then some actually restructuring simultaneously. So Charles, that help on the market
overall and how we're thinking about it.
CHARLES RHYEE: Yeah. Maybe before Jill, you talk about the margins, just to follow up on that Tom,
you mentioned earlier in your comments, you went to big pharma engagement. And you said that the
comments that Fortrea presented differently. Maybe you can provide more details on how you presented
differently, like what did they kind of call out?
TOM PIKE: It's a number of factors. It's largely alignment with their values of where they're going. So
when you look at what we're trying to do at Fortrea, this focus on productivity, this focus on how we can
be more effective at supporting their need to accelerate drug development. We're getting very good
feedback about that.
And then the other, frankly, is that our management, it's not just me and Jill, frankly, it's as you go down
through levels of this organization it's all quite aligned. They do like what we're doing in artificial
intelligence.
We have some concepts here that we'd like to show to you guys later in the year associated with how we
think about technology, how we think about simplifying and making more efficient the CRA's job, how
we're trying to use hubbing and centralization to lower the overall cost and they're excited to collaborate


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with us over the coming few years in terms of how we can trying to get greater productivity into clinical
research.
CHARLES RHYEE: Okay. Let me now and I'll pick up on your question, I mean, yes, we are working
very hard to deliver on average across the back half that 1.2 times book-to-bill that will be very important.
We would have margin expansion if we are able to be a little bit less than that.
But I think to get to those levels, that's really important because, as you know, getting revenue through the
funnel is very critical and being able to bring in those new projects where we can apply the new
techniques and methodologies, we're doing is really important. So we are very much working towards
getting that 1.2 times to be able to get to the 2025 targets.
OPERATOR: Matt Sykes. Goldman Sachs.
WILHELM MEYER, ANALYST, GOLDMAN SACHS: Good morning. This is [Wilhelm Meyer] on for
Matt. Thank you for taking our questions. You touched on the cost savings a little bit on Dave's question,
but just to dig a little deeper there, is there scope to continue to drive costs lower than you previously
expected given the revenue and booking trends this year and maybe some overcapacity you've
experienced?
I guess, put differently, how are you thinking about balancing cutting costs and expanding margins while
being ready to absorb greater demand when it comes through?
JILL MCCONNELL: You've hit the nail on the head on that last point there, right. We are trying to be
very, very disciplined and think about how we balance improving the bottom line with making sure,
hearing the feedback from our customers and the things we need. We know when we show up,
particularly at large pharma opportunities, they expect you to have a global footprint and be able to
produce work in any country that they are looking for support.
So it is a balancing act. We know there's opportunity to take out further costs in SG&A. We're very
focused on that. We've talked about that historically. You can see it in our SG&A. Even the underline as a
percent of revenue, we've talked about the fact that in IT in particular, we're working hard to bring down
the cost.
But we're trying to be really thoughtful. Think about things like Tom had mentioned with the AI and ML,
how we can use that to also improve productivity. So it is a balancing act. We're certainly being mindful
of costs as we go forward, while we try to be prepared for what we hope will be significant growth in the
future.
WILHELM MEYER: That's helpful. Thank you. And then one more quick one on our side. Given the
dispersion between pharma and biotech in the discussions this quarter, longer term, how are you thinking
about the customer mix split between biotech and pharma? Are you still aiming for that [50-50] split? Or
is your thought process evolving there? Thank you.
TOM PIKE: Yeah. Thanks, Welh. I think we would like to continue on with this mix. We like this mix
because the large pharma gives you that consistency of opportunities. And clearly, as you can tell from
this call, we want to consistently deliver for you and for our people and our customers. So you get that
consistency with large pharma.
And frankly, we also think that some of the things that we're doing around productivity benefit the
biotechs as well on the other hand, the biotech market is rich. It is growing. It is getting investment, and it
is expected to continue to grow as a proportion of the overall R&D spend.


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I certainly in my discussions, big pharma, you certainly continue to have a lot of interest and trying to
look at the assets that are attractive and the large pharma is looking to biotech for a lot of its innovation.
And so, we think continuing to serve that market.
We have a history of it. You'll know that Covance had acquired Chiltern. Chiltern was very biotech, 100%
biotech focused, really. And so, we have a lot of good skills for biotechs and we hope to keep that [50-50]
mix going.
OPERATOR: Eric Coldwell, Baird.
ERIC COLDWELL COLDWELL, ANALYST, ROBERT W. BAIRD & CO. INCORPORATED: Thank
you. First, I think I have three questions. What was the breakdown of the $54 million spin-related cost
here in the quarter. Why was that up over 3x quarter over quarter? And what is the expected level in 3Q
and 4Q?
JILL MCCONNELL: Sure, Eric. I'll take that one. We were expecting it to increase. We're not expecting
to be at that level quarterly for the remainder of the year. But we knew that it was going to ramp over the
course of the year because of the fact that the heavy lift in terms of the, particularly the IT transitions that
we were doing, those were where the majority of the costs.
So the vast majority of that, probably 80% of it is IT related type costs and the rest would be supporting
the other groups. But I mean, it's all those things around transitioning servers. We've got about 30% of
those transitions. The team is working hard and there are more than 1,000 of those. It's the applications,
the hundreds of applications that we're working on.
We've talked openly about the fact they're replacing our ERP and HCM. So it's really all of the cost to
help support those coming across. So we are expecting we don't have spend on in Q3 and Q4, but not to
the extent we would (technical difficulty) at the moment, based on our projections, this will be the highest
quarter, but there still will be spent in the third and fourth quarters.
TOM PIKE: When you say less Jill, are you talking I mean, is it $40 million, $20 million, what -- could
you put a sense for how to go into the next quarter, what to --
JILL MCCONNELL: Yeah. I think it's probably still going to be -- it's not going to be as low as it was in
first quarter, but it won't be as high as it was in second quarter, just to -- I think if you think about the
average of that, that's probably a fair approximation.
TOM PIKE: Okay. And then was there a bonus reversal benefit to 2Q and is there an accrual reduction
impact that you would call out that's incremental driving the second half?
JILL MCCONNELL: There was a very small amount that we unwound in Q2, but that wasn't the biggest
driver of the improvement from an adjusted EBITDA perspective, it was really small. I mean, obviously,
yes, we have publicly said that we are reducing our future accruals because of the fact that we are below
where we were expecting to be for the year. So that is a little bit of a benefit in the second half, but it
wasn't a big driver of the 2Q performance from an adjusted EBITDA perspective.
ERIC COLDWELL COLDWELL: I'm just trying to get a sense on the comp as you go into 2025 and if
you were to move back to normal accruals in '25, obviously from a lower level than was previously
expected. But what kind of a year-over-year headwind might that be? And is that factored into the 11% to
12% EBITDA guidance?
JILL MCCONNELL: It is factored in (multiple speakers) yes, preliminary outlook. It is factored into that.
It will be a headwind that we'll have to work to overcome. And that's part of the work that we're doing


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across the teams. And we did talk a little bit about that the benefits of that restructuring program because
we're continuing to work through that through this quarter, not really seeing full benefits of that towards
the end of this year.
That will help offset some of that as we go into next year. But that is also a headwind that we're working
towards with the efficiency and productivity programs that we have in place. We know it's important to be
able to get back to that.
TOM PIKE: The demand is higher commencing as it's planned.
HIMA INGUVA: Yes, it is part of it.
ERIC COLDWELL COLDWELL: Okay. And I know I said I had three questions. I guess there's
probably a few more sub-parts to these, but on the last one, you've said you were making changes to get
the bookings going. You've talked a bit around that.
But are there any specific details you could give us, changes in the terms you're offering, changes pricing
changes in sales force focus leadership? Is there some kind of more specific detail you could give us
anecdotal commentary that we could track besides more of what I would say was a higher-level discussion
so far, at least it felt like that to me?
TOM PIKE: Yeah, Eric, I appreciate that. I'm glad you asked, too, because we are not making price
concessions to increase sales. We're not doing anything out of market associated with extending terms or
anything like that. So we are really trying to stay in market and has the value proposition of working with
us.
As I was alluding to in the earlier discussions with our strategies, with our medical expertise, with the
investigator relationships that we have, with the technologies, like the [ad board, Vivo] relationship, that's
pretty unique that we have. We're really trying to press into selling with that not by making price
concessions. So I'm glad you asked about that.
With respect to specifics, yeah, I think there are a couple of things. First, we are improving the discipline
of our weekly and monthly meetings associated with sales and the predictability. We're going to make a
couple of changes to how we predict the second half of the quarter and look at probabilities a little bit
differently than we have been.
We had gone into a certain methodology, and now we're going to use a couple of different methodologies
to try to predict. But the key is what you don't want to do is you don't want to predict you're going to be
0.96, what you want to do is figure out the way to get at 1.2. So the key is really working with the teams
to really try to understand the decision processes and then how we can influence them and make them
work.
The other thing that we're looking at and I'll calender for next year, and it's incorporated in the numbers
that Jill is describing is actually potential of increasing our resources associated with going after biotech in
particular. And do we inherited a sales force of a certain size and so we're thinking should we go ahead
and have more resources exposed to biotech in certain geographies. So we're looking at that right now.
So we've got a number of things. I guess the last thing I'd say is we are looking at the use of AI in both
targeting and RFP development. There are some tools out there that you may be aware of that incorporates
some elements. So we're looking at what those tools can do, but then also looking at how can we enhance
that with some of the skills we have in-house. So does that helps, Eric?
ERIC COLDWELL COLDWELL: Yeah. Thank you. That's helpful. I appreciate it.


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                                 Q2 2024 Fortrea Holdings Inc Earnings Call - Final

OPERATOR: Michael Ryskin, Bank of America Securities.
MICHAEL RYSKIN, ANALYST, BOFA SECURITIES: Great. Thanks for squeezing me in, I'll just limit
it to one given the time. I want to go back to this comment on pipeline converting to orders both in 2Q and
later in the year, talking about the swing between pharma and biotech.
So just I mean, it sounds like there is you talked about predicting -- differently predicting when biotechs
convert, but doesn't sound like those were canceled out right or fell through. So just to confirm all that
biotech that was in the pipeline that didn't convert in 2Q, is it still in the pipeline?
Is there still sort of part of your second half outlook as you talked about heavy biotech lean in 2Q, but
more pharma lean entering 3Q. So I'm just wondering if the biotech didn't convert and it's still there, is
that part of the equation for the second half? And then just how much does that really swing quarter to
quarter in terms of the pipeline, the composition of it because that's something that's been really volatile
and what are the factors driving that?
TOM PIKE: I mean, our reality is that a lot of it is delayed decision-making. So it is in fact, in the third
and fourth quarter. So that's one of the things that makes our pipeline look great. But what is addition to
that is that we have some things that we knew were going to be late in the year award and contract with
large pharma and those are coming into sight now too for Q3 and Q4. So that's what makes us feel good
about the second half of the year.
In terms of the volatility, I think we are finding there's a little seasonality. This seems to be -- perhaps it's
introduced by the reprioritization and some of the internal processes taking place in large pharma that are
causing more second half awards and first half awards, at least in the companies that we're working with.
But you saw this last year, you see it this year. I'm not sure I really want to call it a trend yet, though. It
may be more just a temporal thing that's happened in 2024 than it is a long-term trend because historically
pharma firms are pretty balanced through the year. Large pharma is pretty balanced through the year with
a potential of a little increase in Q4 as they're trying to finish up their budgets. So I don't want to call it a
long-term trend yet, but it certainly happens to be something that we saw in 2024.
OPERATOR: I show no further questions at the queue at this time. I would now like to turn the call back
over to Tom for closing remarks.
TOM PIKE: Thank you very much. We appreciate your interest in us and support. Again, it's been a good
quarter for things like de-levering, doubling EBITDA, some of these big relationship wins, and we have a
strong pipeline. So we appreciate your interest and support and look forward to talking to you next
quarter. Thank you.
OPERATOR: This concludes today's conference call. Thank you for participating. You may now
disconnect.
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                               Q2 2024 Fortrea Holdings Inc Earnings Call - Final

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Language: ENGLISH


Publication-Type: Transcript


Transcript: 081224a16060698.798


Subject: COMPANY ACTIVITIES & MANAGEMENT (92%); PRESS RELEASES (91%); BUSINESS
NEWS (90%); COMPANY EARNINGS (90%); EXECUTIVES (90%); HOLDING COMPANIES
(90%); TRANSCRIPTS (78%); FORTUNE 500 COMPANIES (77%); SECURITIES & OTHER
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Company: GOLDMAN SACHS GROUP INC (90%); CITIGROUP INC (84%); JEFFERIES LLC
(72%); ROBERT W BAIRD & CO INC (71%); DEUTSCHE BANK AG (57%)


Ticker: GS (NYSE) (90%); 8710 (TSE) (84%); C (BMV) (84%); C (NYSE) (84%); DB (NYSE) (57%);
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Load-Date: August 14, 2024


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                          Q2 2024 Fortrea Holdings Inc Earnings Call - Final


End of Document