Fortrea (FTRE) investor relations material

Strategic direction and leadership changes

• Recent acquisition of Worldwide Clinical Trials' clinical pharmacology and bioanalytical business aligns with a strategy to expand clinical pharmacology capabilities and reduce reliance on third parties.

• About 25%-30% of senior leaders are new, reflecting a significant management transition and a focus on growth.

• The acquisition adds a 200-bed unit in San Antonio and a bioanalytical lab in Austin, enhancing capacity and in-house capabilities.

• The company is now positioned to handle larger studies and reduce overflow to external sites.

• Leadership emphasizes a shift from post-spin stabilization to executing on new growth strategies.

Financial performance and margin outlook

• Targeting mid-teens EBITDA margins within 3-5 years, with current margins around 8%.

• Recent quarters have shown progress, with raised revenue and EBITDA targets, but near-term margins are impacted by planned investments in people and compensation.

• Margin improvement is expected to come from operational efficiency, business mix evolution, and leveraging existing infrastructure as top-line grows.

• Higher margin clinical pharmacology and FSO business are prioritized over lower margin FSP contracts.

• Operating leverage is anticipated as service revenue grows, especially at mid-single digit growth rates.

Market environment and bookings

• Bookings increased nearly 20% in the first half, with a strengthening demand environment and a growing pipeline.

• The company is seeing more RFPs and is being invited to new partnership opportunities, including with top 30 pharma and emerging biotechs.

• New client wins are coming from U.S. biotechs, European mid-pharmas, and Chinese companies expanding internationally.

• Pricing in the market is described as rational, and decision timelines are improving.

• Commercial strategies are taking hold, broadening the client base and increasing deal flow.