Fortrea Holdings Inc. Common Stock 2026 Q3 Earnings Call

Good morning, everyone, and welcome to Fortrea's third quarter 2026 earnings conference call. With me today on the call are Anshul Thakral, Chief Executive Officer, and Jason Knoblauch, Chief Financial Officer. Before we begin, please note this call is being webcast. There is an accompanying slide presentation which can be found on the investor relations section of our website, fortrea.com. During this call, we will make certain forward-looking statements within the meaning of the 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, and particularly those that are described in the cautionary statement concerning forward-looking statements and risk factors in our press release and presentation, which are posted on our website.

Please note that any forward-looking statements represent our views as of today, October 29, 2026, and that we assume no obligation to update the forward-looking statements even if estimates change. During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to nor a replacement for the comparable GAAP measures, but we believe these measures provide investors with a more complete understanding of results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and the presentation slides that are provided in connection with today's call. Lastly, I would also like to note that Anshul, Jason, and I will be participating in the Jefferies Global Healthcare Conference in London on November 17. A live webcast and replay of our fireside chat will be available on the investor relations section of our website.

Investors interested in meeting with us at the conference should contact their Jefferies representative or reach out to me directly. With that, I would like to turn the call over to Anshul, Chief Executive Officer.

Please go ahead. Thank you, Tracy.

Good morning, everyone, and thank you for joining us to discuss our third quarter 2026 results. Before we start, I would like to formally introduce our Chief Financial Officer, Jason Knoblauch, who many of you have already met. Jason has quickly made a strong contribution to Fortrea, and I am confident his leadership and experience will help shape our journey in the near and longer term. Turning to our performance, we are pleased to report another quarter of progress on our return-to-growth strategy, which is focused on revenue growth and margin expansion. Our third quarter results reflect continued execution across our three pillars: commercial excellence, operational excellence, and financial excellence. They also reflect an important evolution for Fortrea as we focus on the next chapter of our journey, translating improved demand, stronger execution, and disciplined investment into sustainable, profitable growth.

For the third quarter, we delivered revenue of $691.5 million, adjusted EBITDA of $58 million and net new business awards of $773 million, resulting in a book-to-bill ratio of 1.12 times and a trailing 12-month book-to-bill ratio of 1.12 times. We delivered a strong third quarter, reflecting continued progress against our strategic priorities. With continued execution against those priorities, we raised the midpoint of our full year revenue and adjusted EBITDA guidance while narrowing both ranges. We also recently completed our acquisition of the Early Phase Services business from Worldwide Clinical Trials, expanding our clinical pharmacology capacity, bringing our total beds across the U.S. and U.K. to more than 570 and adding dedicated bioanalytical and safety lab capabilities. This strategic investment strengthens our early clinical development platform, enhances our ability to deliver integrated solutions to customers, and supports our long-term growth strategy.

Our progress this quarter reflects the work we have done to expand our commercial pipeline, strengthen operational execution, and improve financial performance. Our focus is clear. Expand our opportunity set, execute with greater consistency, and build a model that creates meaningful operating leverage as growth returns. I will now walk through our progress against each of these three pillars of excellence. Let's start with commercial excellence. Our progress is becoming more repeatable and process-driven. Over the past year, we have enhanced our commercial capabilities by focusing on talent, analytical tools, and integrated account management. Our tailored and flexible offerings resonate with customers. Fortrea can operate across multiple service models, which is an advantage as sponsors want providers capable of combining FSO, FSP, and point solutions, rather than forcing customers into a single operating model.

Our ability to be agile in providing tailored solutions means we can be a strong partner to innovative large pharma and smaller biotech companies. I remain pleased with the balanced mix of business that we are winning across therapeutic areas, customer types, and geography. Our strategy remains grounded in the three Rs: reach, relevance, and repeat. Reach means increasing the aperture of our customer relationships and opportunities. Relevance means bringing differentiated scientific, regulatory, therapeutic, and operational expertise into the process earlier. Repeat means earning follow-on work by delivering consistently and creating a better client experience. We are seeing progress across each dimension. We are expanding our reach and generating more demand, with the value of our pipeline increasing both sequentially and year over year. The breadth of activity is important. It shows that Fortrea is competing at a stronger position across a broader customer set. China is another important area of opportunity.

China continues to be a meaningful source of innovation within the global drug development ecosystem. We're seeing Chinese biotech companies and global sponsors that are partnering with Chinese innovators seek experienced partners to advance differentiated assets into global development. We appointed a new leader in China over the summer with a mandate to leverage our strong position and drive growth with both China-headquartered biotechs and multinationals. Stepping back, I would characterize our commercial position this way. The market is becoming more supportive, but our progress is not simply a function of market recovery. It reflects deliberate changes to our go-to-market model, a sharper focus of where Fortrea can differentiate, and greater coordination across our teams. We still have work to do, but the quality and the breadth of our pipeline gives us confidence that we're building a stronger foundation for growth. Our second pillar is operational excellence.

In the services business, as I have said before, consistency is paramount. Clients judge us not only by our ideas or scale, but really by our ability to execute. We remain focused on improving delivery across the areas that matter most: project management, site activation, enrollment, quality, and predictability, just to mention a few. These represent the daily discipline required to turn backlog into revenue, protect margins, and earn repeat business. Clinical pharmacology continues to be an important example of differentiated execution for Fortrea. Our business benefits from strong scientific capabilities, an integrated global network, and demand for studies that typically convert to revenue more quickly than later-stage programs. We remain focused on building on our leadership position through targeted investment. We recently closed on our acquisition of the Early Phase Services business from Worldwide Clinical Trials.

This transaction is strategically important and signifies our growing confidence as we invest opportunistically for growth. Last week, I had a chance to visit our new sites in San Antonio and Austin, Texas, and welcome our new colleagues. The feedback from clients has been very positive in terms of the added capacity and added capabilities. Our bioanalytical laboratory in Austin allows us to perform testing in-house rather than relying on third parties. Our clients have been asking for this capability as part of our solutions, and now we can deliver it for them. This in-house capability also gives us greater control over execution and allows us to convert certain pass-through activity into service fee revenue. Our new 200-bed San Antonio facility that includes a safety laboratory, combined with our Dallas unit, creates a 300-bed Texas network and expands our ability to conduct larger bioequivalence and high-capacity studies.

Across the global network, the transaction means that Fortrea now has more than 570 beds, adding to the scale and speed of our integrated early phase offering. Technology is another important enabler of operational excellence. We launched Fortrea Intelligent Technology, or FIT, earlier this year. It combines our data foundation and Xcellerate platform with analytics, machine learning, risk intelligence, and AI embedding intelligence into workflows our colleagues use to deliver clinical trials. We're delighted to be shortlisted for best use of AI in clinical development and trial innovation in the Scrip Awards 2026. Our approach is pragmatic, outcomes-focused, and responsible, and we continue to make good progress in its adoption. We are developing FIT intentionally, module by module, workflow by workflow, persona by persona.

Our CRA Mobile App is now deployed across more than 49 countries, and early data points indicate that it is delivering greater monitoring efficiency, creating capacity for higher value, quality-focused site management. These tools do not replace accountability or judgment. They help our people prepare more effectively, identify risks earlier, and work with greater consistency. As I have said before, our goal with AI is not automation for the sake of automation. It is to create a force multiplier for our people and our clients. Automation can improve efficiency; judgment improves outcomes. Our strategy brings the two together with appropriate human leadership in a highly regulated environment. That is also the purpose of a unique internal program that we call Felix. We launched Felix over the summer, connecting AI literacy, practical adoption, and measurable value. Felix combines self-paced learning, instructor-led sessions, and role-specific support.