Fortrea Holdings Inc. 10-Q

Item 1. Financial Statements (unaudited) FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) September 30, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 131.3 $ 118.5 Accounts receivable and unbilled services, net 663.2 659.5 Prepaid expenses and other 124.0 170.2 Total current assets 918.5 948.2 Property, plant and equipment, net 147.6 156.3 Goodwill, net 958.1 1,710.4 Intangible assets, net 635.4 655.7 Deferred income taxes 8.3 5.2 Other assets, net 74.2 103.4 Total assets $ 2,742.1 $ 3,579.2 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 49.5 $ 138.2 Accrued expenses and other current liabilities 369.6 369.8 Unearned revenue 411.6 353.3 Current portion of long-term debt 74.5 74.8 Short-term operating lease liabilities 9.2 13.4 Total current liabilities 914.4 949.5 Long-term debt, less current portion 1,052.1 1,049.7 Operating lease liabilities 51.5 60.6 Deferred income taxes and other tax liabilities 106.9 121.7 Other liabilities 36.4 35.3 Total liabilities 2,161.3 2,216.8 Commitments and contingent liabilities (Note 9) Equity Common stock, 92.2 and 89.7 shares outstanding at September 30, 2025 and December 31, 2024, respectively 0.1 0.1 Additional paid-in capital 2,101.8 2,042.2 Accumulated deficit ( 1,350.7 ) ( 397.0 ) Accumulated other comprehensive loss ( 170.4 ) ( 282.9 ) Total equity 580.8 1,362.4 Total liabilities and equity $ 2,742.1 $ 3,579.2 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Revenues $ 701.3 $ 674.9 $ 2,062.9 $ 1,999.4 Costs and expenses: Direct costs, exclusive of depreciation and amortization 578.6 526.6 1,690.2 1,606.1 Selling, general and administrative expenses, exclusive of depreciation and amortization 106.8 136.3 353.4 412.6 Depreciation and amortization 19.6 21.2 58.7 64.5 Goodwill and other asset impairments — — 797.9 — Restructuring and other charges 4.9 8.8 21.7 22.5 Total costs and expenses 709.9 692.9 2,921.9 2,105.7 Operating loss ( 8.6 ) ( 18.0 ) ( 859.0 ) ( 106.3 ) Other income (expense): Interest expense ( 22.6 ) ( 22.4 ) ( 68.2 ) ( 101.9 ) Foreign exchange loss ( 2.6 ) ( 0.2 ) ( 28.1 ) ( 7.0 ) Other, net 5.1 4.8 7.9 15.1 Loss from continuing operations before income taxes ( 28.7 ) ( 35.8 ) ( 947.4 ) ( 200.1 ) Income tax (benefit) expense ( 12.8 ) ( 17.3 ) 6.3 ( 2.5 ) Loss from continuing operations ( 15.9 ) ( 18.5 ) ( 953.7 ) ( 197.6 ) Loss from discontinued operations, net of tax — ( 9.4 ) — ( 69.7 ) Net loss $ ( 15.9 ) $ ( 27.9 ) $ ( 953.7 ) $ ( 267.3 ) Earnings (loss) per common share Basic and diluted earnings (loss) per share from continuing operations $ ( 0.17 ) $ ( 0.21 ) $ ( 10.53 ) $ ( 2.21 ) Basic and diluted earnings (loss) per share from discontinued operations — ( 0.10 ) — ( 0.78 ) Basic and diluted earnings (loss) per share $ ( 0.17 ) $ ( 0.31 ) $ ( 10.53 ) $ ( 2.99 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (in millions, except per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net loss $ ( 15.9 ) $ ( 27.9 ) $ ( 953.7 ) $ ( 267.3 ) Foreign currency translation adjustments ( 14.9 ) 73.4 113.1 38.0 Unrealized gain (loss) on derivative instruments 0.1 ( 3.3 ) ( 0.8 ) ( 0.8 ) Other comprehensive (loss) income before tax ( 14.8 ) 70.1 112.3 37.2 Benefit for income tax related to items of comprehensive income — 0.8 0.2 0.2 Other comprehensive (loss) income, net of tax ( 14.8 ) 70.9 112.5 37.4 Comprehensive (loss) income $ ( 30.7 ) $ 43.0 $ ( 841.2 ) $ ( 229.9 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in millions) (unaudited) Common Stock Shares Amounts Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Balance at December 31, 2024 89.7 $ 0.1 $ 2,042.2 $ ( 397.0 ) $ ( 282.9 ) $ 1,362.4 Net loss — — — ( 562.9 ) — ( 562.9 ) Other comprehensive income, net of tax — — — — 44.7 44.7 Stock compensation — — 14.6 — — 14.6 Issuance of common stock under employee stock plan 0.8 — — — — — Balance at March 31, 2025 90.5 0.1 2,056.8 ( 959.9 ) ( 238.2 ) 858.8 Net loss — — — ( 374.9 ) ( 374.9 ) Other comprehensive income, net of tax — — — — 82.6 82.6 Stock compensation — — 22.7 — — 22.7 Issuance of common stock under employee stock plan 0.3 — — — — — Balance at June 30, 2025 90.8 0.1 2,079.5 ( 1,334.8 ) ( 155.6 ) 589.2 Net loss — — — ( 15.9 ) ( 15.9 ) Other comprehensive loss, net of tax — — — — ( 14.8 ) ( 14.8 ) Stock compensation — — 22.3 — — 22.3 Issuance of common stock under employee stock plans 1.4 — — — — — Balance at September 30, 2025 92.2 $ 0.1 $ 2,101.8 $ ( 1,350.7 ) $ ( 170.4 ) $ 580.8 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in millions) (unaudited) Common Stock Shares Amounts Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Balance at December 31, 2023 88.8 $ 0.1 $ 1,998.0 $ ( 68.5 ) $ ( 215.5 ) $ 1,714.1 Net loss — — — ( 101.0 ) — ( 101.0 ) Other comprehensive loss, net of tax — — — — ( 26.1 ) ( 26.1 ) Stock compensation — — 15.1 — — 15.1 Issuance of common stock 0.6 — — — — — Net share settlement tax payments from issuance of stock to employees — — ( 10.4 ) — — ( 10.4 ) Other — — 0.2 — — 0.2 Balance at March 31, 2024 89.4 0.1 2,002.9 ( 169.5 ) ( 241.6 ) 1,591.9 Net loss — — — ( 138.4 ) — ( 138.4 ) Other comprehensive loss, net of tax — — — — ( 7.4 ) ( 7.4 ) Stock compensation — — 15.0 — — 15.0 Issuance of common stock 0.1 — — — — — Balance at June 30, 2024 89.5 0.1 2,017.9 ( 307.9 ) ( 249.0 ) 1,461.1 Net loss — — — ( 27.9 ) — ( 27.9 ) Other comprehensive income, net of tax — — — — 70.9 70.9 Stock compensation — — 13.0 — — 13.0 Issuance of common stock under employee stock plans 0.2 — — — — — Net share settlement tax payments from issuance of stock to employees — — ( 3.6 ) — — ( 3.6 ) Balance at September 30, 2024 89.7 $ 0.1 $ 2,027.3 $ ( 335.8 ) $ ( 178.1 ) $ 1,513.5 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) Nine Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 953.7 ) $ ( 267.3 ) Adjustments to reconcile net loss to net cash (used for) provided by operating activities: Depreciation and amortization 58.7 66.1 Stock compensation 59.6 43.1 Credit loss expense 13.5 17.0 Operating lease right-of-use asset expense 8.6 10.8 Operating lease right-of-use asset impairment 1.3 4.8 Goodwill and other asset impairments 797.9 24.0 Deferred income taxes ( 24.4 ) ( 23.2 ) Unrealized foreign exchange movements 38.8 4.2 Loss on sale of business — 23.2 Write-off of debt issuance costs — 12.2 Other, net 2.2 4.7 Changes in assets and liabilities: (Increase) decrease in accounts receivable and unbilled services, net ( 10.6 ) 290.9 Decrease (increase) in prepaid expenses and other 43.8 ( 33.3 ) (Decrease) increase in accounts payable ( 89.7 ) 5.8 Increase in unearned revenue 54.6 106.4 Decrease in accrued expenses and other ( 16.2 ) ( 43.7 ) Net cash (used for) provided by operating activities ( 15.6 ) 245.7 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 17.7 ) ( 28.7 ) Proceeds from sale of business, net 39.6 276.6 Proceeds from sale of assets — 0.2 Net cash provided by investing activities 21.9 248.1 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit facilities 453.9 617.0 Payments on revolving credit facilities ( 453.9 ) ( 617.0 ) Debt issuance costs ( 0.6 ) — Principal payments of long-term debt — ( 482.7 ) Payments for taxes related to net share settlement of stock awards — ( 14.0 ) Net cash used for financing activities ( 0.6 ) ( 496.7 ) Effect of exchange rate changes on cash and cash equivalents 7.1 ( 0.4 ) Net change in cash and cash equivalents 12.8 ( 3.3 ) Cash and cash equivalents at beginning of period 118.5 108.6 Cash and cash equivalents at end of period $ 131.3 $ 105.3 The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 1. BASIS OF FINANCIAL STATEMENT PRESENTATION Description of Business Fortrea Holdings Inc. (“Fortrea” or the “Company”), a Delaware corporation incorporated on January 31, 2023, is a leading global contract research organization (“CRO”) providing biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology and medical device customers. The Company offers customers highly flexible delivery models that include Full Service, Functional Service Provider, and Hybrid Service structures. The Company has a rich history of providing clinical development services for more than 30 years across more than 20 therapeutic areas. The Company leverages its global scale, clinical data insights, scientific and therapeutic expertise, technology innovation, industry network and decades of experience as a standalone company and as a business unit prior to its spin-off from Labcorp Holdings Inc. to deliver tailored solutions to its customers. With what the Company believes is a distinctive market offering, Fortrea meets growing global demand for clinical development services. The Company has established access to all key markets worldwide through a strategic footprint of primary office locations in five countries (the United States, the United Kingdom, China, India and Japan) with field operations in other jurisdictions worldwide. Reportable Segment The Company manages its business in one reportable segment, Clinical Services, that provides development and consulting services across the clinical pharmacology and clinical development spectrum. On March 9, 2024, the Company, together with its wholly-owned subsidiary, Fortrea Inc., entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, to sell the operations of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries; which are all collectively referred to as the Enabling Services Segment. The Transaction closed during the second quarter of 2024. Refer to Note 2, “Discontinued Operations” for further discussion . For all periods presented, the Company's consolidated revenues from continuing operations were generated from the Clinical Services segment, which provides phase I-IV clinical trials, including clinical pharmacology and comprehensive clinical development capabilities. The Company’s chief operating decision maker allocates resources and assesses performance for the Clinical Services segment. For further financial information about the segment, see Note 14, “Business Segment Information”. Discontinued Operations In accordance with the definition of discontinued operations, the Company's decision to sell the assets relating to the Enabling Services Segment represented a strategic shift that had a major effect on the Company's results of operations for the periods presented. The operations of the Enabling Services Segment have been classified as income (loss) from discontinued operations on the condensed consolidated statements of operations for all periods presented. Unless otherwise noted, discussion within these notes to the condensed consolidated financial statements relates to the Company’s continuing operations. 8 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Unaudited Interim Financial Information The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments necessary for a fair statement of results of operations, cash flows, and financial position have been made. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for a full year. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated and combined financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and unbilled services. The Company maintains cash and cash equivalents with various major financial institutions. These financial institutions are generally highly rated and geographically dispersed. The Company evaluates the relative credit standing of these financial institutions and has not sustained credit losses from instruments held at financial institutions. Substantially all of the Company’s accounts receivable and unbilled services are with companies in the pharmaceutical, biotechnology and medical device industries. As of September 30, 2025, one pharmaceutical customer accounted for approximately 23.4 % of the Company's combined gross accounts receivable and unbilled services. As of December 31, 2024, two pharmaceutical companies accounted for approximately 22.2 % and 13.8 % of the Company's combined gross accounts receivable and unbilled services. Additionally, for the three months ended September 30, 2025, one customer accounted for approximately 19.8 % of revenues, and for the nine months ended September 30, 2025, one customer accounted for approximately 18.3 % of revenues. For the three months ended September 30, 2024, one customer accounted for approximately 15.1 % of revenues, and for the nine months ended September 30, 2024, two customers accounted for approximately 14.2 % and 10.4 % of revenues. Concentrations of credit risk are mitigated due to the number of the Company’s customers as well as their dispersion across many different geographic regions. Additionally, the Company applies assumptions and judgments, including historical collection experience and reasonable and supportable forecasts, for assessing collectability and determining allowances for doubtful accounts. Recently Issued and Adopted Accounting Standards In December 2023, the FASB issued guidance to require qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The new guidance requires disclosure of certain costs and expenses in the notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The disclosures required under the guidance can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures. 9 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software . The new guidance simplifies the accounting for internally developed software by replacing the existing phase-based capitalization model with a principles-based approach that focuses on management’s authorization and the probability of project completion. The guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. Entities may apply the guidance using a prospective, retrospective, or modified transition approach, and early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures. 2. DISCONTINUED OPERATIONS On March 9, 2024, the Company entered into the Purchase Agreement with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, pursuant to which Fortrea Inc. agreed to sell, and to cause its affiliates to sell, net assets relating to its Enabling Services Segment (the “Transaction”), specifically its Patient Access and Endpoint businesses, including the sale of equity interests of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries. The final adjusted purchase price for the Transaction was $ 340.0 , subject to customary purchase price adjustments, with $ 295.0 paid at closing and $ 45.0 to be paid upon achievement of certain transition-related milestones. The Transaction closed during the second quarter of 2024. The first milestone payment in the amount of $ 20.0 was received in the first quarter of 2025. The second and final milestone payment in the amount of $ 25.0 was received in the third quarter of 2025. Financial Information of Discontinued Operations The following table summarizes the significant line items included in income (loss) from discontinued operations, net of income tax in the condensed consolidated statements of operations for the three and nine months ended September 30, 2024: Three Months Ended September 30, Nine Months Ended September 30, 2024 2024 Revenues $ — $ 106.4 Costs and expenses: Direct costs, exclusive of depreciation and amortization — 66.4 Selling, general and administrative expenses, exclusive of depreciation and amortization — 25.4 Depreciation and amortization — 1.6 Long-lived and goodwill asset impairments — 24.0 Restructuring and other charges — 0.5 Total costs and expenses — 117.9 Operating loss — ( 11.5 ) Other expense: Foreign exchange gain — 0.1 Loss on sale of a business — ( 23.2 ) Other, net — 0.1 Loss from discontinued operations before income taxes — ( 34.5 ) Income tax expense 9.4 35.2 Loss from discontinued operations, net of tax $ ( 9.4 ) $ ( 69.7 ) 10 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2024 Loss from operations of discontinued component $ ( 9.4 ) $ ( 46.5 ) Loss on disposal of discontinued operations — ( 23.2 ) Loss on discontinued operations $ ( 9.4 ) $ ( 69.7 ) In the first quarter of 2024, as a result of the negotiated sale price of the Patient Access and Endpoint businesses, the Company evaluated the Enabling Services Segment for impairment and determined that it was more likely than not that the carrying value of the assets exceeded its fair value. Accordingly, an impairment analysis was performed, which resulted in a goodwill impairment charge of $ 24.0 . The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. The following table summarizes depreciation and amortization, capital expenditures and the significant cash flow and noncash items from discontinued operations for the nine months ended September 30, 2024: Nine Months Ended September 30, 2024 Depreciation and amortization $ 1.6 Goodwill impairment 24.0 Loss on sale of business 23.2 Capital expenditures 7.4 There were no significant operating or investing noncash items related to discontinued operations for the nine months ended September 30, 2024. 3. REVENUES The Company’s revenues by geography for the three and nine months ended September 30, 2025 and 2024 are as follows: Three Months Ended September 30, 2025 Three Months Ended September 30, 2024 North America Europe Other Total North America Europe Other Total Revenues $ 332.7 $ 213.2 $ 155.4 $ 701.3 $ 319.7 $ 191.8 $ 163.4 $ 674.9 Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024 North America Europe Other Total North America Europe Other Total Revenues $ 986.5 $ 632.2 $ 444.2 $ 2,062.9 $ 944.4 $ 595.1 $ 459.9 $ 1,999.4 11 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Revenue from the United States comprises substantially all revenue in North America. Contract Costs The following table provides information about contract asset balances: September 30, 2025 December 31, 2024 Sales commission assets $ 21.0 $ 22.1 Deferred contract costs 0.5 1.1 Total $ 21.5 $ 23.2 Amortization related to sales commission assets for the three months ended September 30, 2025 and 2024 was $ 3.0 and $ 2.9 , respectively, and for the nine months ended September 30, 2025 and 2024 was $ 8.9 and $ 8.5 , respectively. Amortization related to deferred contract costs for the three months ended September 30, 2025 and 2024 was $ 0.2 and $ 0.6 , respectively, and for the nine months ended September 30, 2025 and 2024 was $ 0.6 and $ 1.5 , respectively. The Company applies the practical expedient to n ot recognize the effect of financing in its contracts with customers when the difference in timing of payment and performance is one year or less. Accounts Receivable, Unbilled Services and Unearned Revenue The following table provides information about accounts receivable, unbilled services and unearned revenue from contracts with customers: September 30, 2025 December 31, 2024 Accounts receivable $ 163.4 $ 156.5 Unbilled services 549.4 542.3 Less: allowance for credit losses ( 49.6 ) ( 39.3 ) Total $ 663.2 $ 659.5 Unearned revenue $ 411.6 $ 353.3 Revenue recognized during the period that was included in the unearned revenue balance at the beginning of the period was $ 217.9 and $ 147.6 for the nine months ended September 30, 2025 and 2024, respectively. Additionally, as of the quarter ended September 30, 2025, the Company had sold $ 300.0 of receivables as described in the Receivables Securitization Program section below. Credit Loss Rollforward The Company estimates future expected losses on accounts receivable and unbilled services over the remaining collection period of the instrument. The rollforward for the allowance for credit losses for the nine months ended September 30, 2025 is as follows: Allowance for credit losses as of December 31, 2024 $ 39.3 Credit loss expense 13.5 Write-offs ( 3.2 ) Allowance for credit losses as of September 30, 2025 $ 49.6 12 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Performance Obligations Under Long-Term Contracts As of September 30, 2025, approximately $ 4,547.7 of revenues are expected to be recognized from remaining performance obligations. The Company expects to recognize approximately 29 % of the existing performance obligations as of September 30, 2025 as revenue over the next 12 months and the remaining balance thereafter. The Company’s long-term contracts generally range from one to eight years . During the three and nine months ended September 30, 2025, there were reductions of approximately $ 10 and $ 26 , respectively, in revenue related to performance obligations partially satisfied in previous periods. For the three months ended September 30, 2025, the majority of the change was associated with changes in estimated effort to complete customer contract obligations and a smaller portion related to changes in scope or price. For the nine months ended September 30, 2025, the change was associated with both changes in estimated effort to complete customer contract obligations and changes in scope or price. For the three months ended September 30, 2025, the change in estimate resulted in an estimated reduction to revenue of $ 7 , and an increase in loss from continuing operations of $ 4 and in loss per share of $ 0.04 . For the nine months ended September 30, 2025, the change in estimate resulted in an estimated reduction to revenue of $ 13 , and an increase in loss from continuing operations of $ 13 and in loss per share of $ 0.14 . During the three and nine months ended September 30, 2024, there were reductions of approximately $ 6 and $ 58 , respectively, in revenue related to performance obligations partially satisfied in previous periods. For the three months ended September 30, 2024, the majority of the change was associated with changes in estimated effort to complete customer contract obligations and a smaller portion related to changes in scope or price. For the three months ended September 30, 2024, the change in estimate resulted in an estimated reduction to revenue of $ 4 , and an increase in loss from continuing operations of $ 2 and in loss per share of $ 0.02 . For the nine months ended September 30, 2024, the change in estimate resulted in an estimated reduction to revenue of $ 25 , and an increase in loss from continuing operations of $ 25 and in loss per share of $ 0.28 . The Company applies the practical expedient and does not disclose information about remaining performance obligations where (i) the performance obligation is part of a contract that has an original expected duration of one year or less or (ii) when the Company recognizes revenue from the satisfaction of the performance obligation in accordance with the right-to-invoice practical expedient. Receivables Securitization Program On May 6, 2024, the Company entered into a three-year $ 300.0 accounts receivable securitization program (the “Receivables Facility”). Under this program, Fortrea Inc. conveys receivable balances to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”), who in turn, may sell receivables to a third-party financial institution in exchange for cash. The facility is without recourse to the Company or any subsidiaries of the Company, other than with respect to limited indemnity obligations of Fortrea Inc., in respect to the character of the receivables sold and as to the performance of its duties as servicer and a limited performance guaranty by the Company. All unsold accounts receivable held by the SPE are pledged as collateral to secure the collectability of the sold receivables. The Receivables Facility is scheduled to terminate on May 6, 2027, unless terminated earlier pursuant to its terms. As of September 30, 2025, the Company had sold $ 300.0 of receivables, which were derecognized from the Company’s consolidated balance sheet as described in the Accounts Receivable, Unbilled Services and Unearned Revenue section above. Total costs associated with the sale were $ 4.5 and $ 13.4 for the three and nine months ended September 30, 2025, and $ 5.3 and $ 7.4 for the three and nine months ended September 30, 2024, respectively. These costs are included within selling, general and administrative costs in the condensed consolidated statements of operations. 13 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 4. RESTRUCTURING AND OTHER CHARGES In the fourth quarter of 2024, the Company approved a restructuring plan to streamline its operations and eliminate redundant positions. This plan, which relates primarily to severance benefits, was accounted for under ASC 712, Compensation - Nonretirement Postemployment Benefits . Action under this restructuring plan is expected to continue through 2025. The following represents the Company’s restructuring accrual activities for the periods indicated: Severance and Other Employee Costs Facility and Other Costs Total Balance as of December 31, 2024 $ 23.1 $ 0.6 $ 23.7 Restructuring charges 10.5 2.2 12.7 Cash payments and other adjustments ( 22.8 ) ( 2.2 ) ( 25.0 ) Balance as of September 30, 2025 $ 10.8 $ 0.6 $ 11.4 Severance and Other Employee Costs Facility and Other Costs Total Balance as of December 31, 2023 $ 1.1 $ 3.2 $ 4.3 Restructuring charges 16.0 0.7 16.7 Reduction of prior restructuring accruals ( 0.9 ) ( 3.0 ) ( 3.9 ) Cash payments and other adjustments ( 14.2 ) ( 0.6 ) ( 14.8 ) Balance as of September 30, 2024 $ 2.0 $ 0.3 $ 2.3 The restructuring liabilities are current as of September 30, 2025 and December 31, 2024 and are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets. 5. EARNINGS (LOSS) PER SHARE Basic earnings per share is computed by dividing net earnings attributable to the Company by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net earnings including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the earlier of the date of issuance or the beginning of the period presented. Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units (“RSUs”), and performance share units (“PSUs”). The following represents the computation of basic and diluted earnings (loss) per share from continuing operations per share. Three Months Ended September 30, 2025 2024 Earnings Shares Per Share Amount Earnings Shares Per Share Amount Basic and diluted earnings (loss) from continuing operations per share: Net earnings (loss) $ ( 15.9 ) 91.2 $ ( 0.17 ) $ ( 18.5 ) 89.6 $ ( 0.21 ) 14 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Nine Months Ended September 30, 2025 2024 Earnings Shares Per Share Amount Earnings Shares Per Share Amount Basic and diluted earnings (loss) from continuing operations per share: Net earnings (loss) $ ( 953.7 ) 90.6 $ ( 10.53 ) $ ( 197.6 ) 89.4 $ ( 2.21 ) The following represents the computation of basic and diluted earnings (loss) per share from discontinued operations per share. Three Months Ended September 30, 2025 2024 Earnings Shares Per Share Amount Earnings Shares Per Share Amount Basic and diluted earnings (loss) from discontinued operations per share: Net earnings (loss) $ — — $ — $ ( 9.4 ) 89.6 $ ( 0.10 ) Nine Months Ended September 30, 2025 2024 Earnings Shares Per Share Amount Earnings Shares Per Share Amount Basic and diluted earnings (loss) from discontinued operations per share: Net earnings (loss) $ — — $ — $ ( 69.7 ) 89.4 $ ( 0.78 ) Diluted earnings per share represent the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. These potential shares include dilutive stock options and unissued restricted stock awards. Potential common shares are also considered antidilutive in the event of a net loss from operations. There were no dilutive common shares for any period presented as the inclusion would be antidilutive. The following table summarizes the potential common shares not included in the computation of diluted earnings per share because their impact would have been antidilutive: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Employee stock options and awards 5.5 2.8 5.4 2.0 Antidilutive employee stock options and awards excluded based on reporting a net loss for the period 2.6 0.5 1.4 0.9 6. GOODWILL The Company's policy is to assess goodwill for impairment annually as of October 1, with more frequent assessments if events or changes in circumstances indicate the carrying amount may not be recoverable. Based on the annual test performed on October 1, 2024, it was previously determined that the fair values of the Company’s reporting units were greater than the carrying values, resulting in no impairment. For the Clinical Development reporting unit, the fair value of the business exceeded the carrying value by approximately 10 % as of October 1, 2024. 15 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) During the first and second quarters of 2025, due to sustained declines in the Company’s share price and uncertainties in global macroeconomic conditions, the Company determined that indicators of impairment existed. As a result, the Company performed interim impairment tests as of March 31, 2025 and June 30, 2025. There were no indicators of impairment for the three months ended September 30, 2025. Based upon the results of the quantitative assessment as of March 31, 2025, the Company concluded that the fair value of the Clinical Development reporting unit was less than its carrying value and recorded a goodwill impairment of $ 488.8 . Based upon the results of the quantitative assessment as of June 30, 2025, the Company concluded that the fair value of the Clinical Development reporting unit was less than its carrying value and recorded a goodwill impairment of $ 309.1 . For the goodwill impairment tests, the fair values of the Clinical Development and Clinical Pharmacology reporting units were computed using both income-based and market-based valuation methods. The income-based approach is based on the reporting unit's forecasted future cash flows that are discounted to the present value using the reporting unit's weighted average cost of capital. The discount rate used reflects the risks inherent in realizing the forecasted cash flows and considers the risk-free rate of return on long-term treasury securities, the risk premium associated with investing in equity securities of comparable companies, the beta obtained from the comparable companies and the cost of debt for investment grade issuers. The discount rate used for the Clinical Development reporting unit quantitative assessments as of March 31, 2025 and June 30, 2025 was 10.0 % and 10.5 %, respectively. The increase in the discount rate was primarily the result of macroeconomic and market factors and impacted the impairment during the second quarter of 2025 by approximately $ 60 . For the market-based approach, the Company utilizes a number of factors such as publicly available information regarding the market capitalization of the Company as well as operating results, business plans, market multiples, and present value techniques. Based upon the range of estimated values developed from the income and market-based methods, the Company determines the estimated fair value for the reporting unit. The resulting estimated fair values of the combined reporting units are reconciled to the Company's market capitalization including an estimated implied control premium. The share price used to calculate the Company’s market capitalization was $ 7.55 per share and $ 4.94 per share as of March 31, 2025 and June 30, 2025, respectively. The changes in the carrying amount of goodwill for the nine months ended September 30, 2025 and 2024 are as follows: Balance as of December 31 $ 1,710.4 $ 1,739.4 Impairment ( 797.9 ) — Foreign currency impact and other adjustments to goodwill 45.6 27.6 Balance as of September 30 $ 958.1 $ 1,767.0 16 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 7. DEBT The current portion of long-term debt consisted of the following: September 30, 2025 December 31, 2024 Current portion of 7.5 % senior notes due 2030 $ 75.7 $ 76.0 Debt issuance discount and fees ( 1.2 ) ( 1.2 ) Total short-term borrowings and current portion of long-term debt $ 74.5 $ 74.8 Long-term debt consisted of the following: September 30, 2025 December 31, 2024 7.5 % senior notes due 2030 $ 494.3 $ 494.0 Senior secured term loan A due 2028 417.3 417.3 Senior secured term loan B due 2030 154.7 154.7 Senior secured revolving credit facility — — Debt issuance discount and fees ( 14.2 ) ( 16.3 ) Total long-term debt $ 1,052.1 $ 1,049.7 During the three and nine months ended September 30, 2024, the Company paid down $ 0.0 and $ 70.2 , respectively, on its senior secured term loan A due 2028 (“term loan A”) and $ 0.0 and $ 412.5 , respectively, on its senior secured term loan B due 2030 (“term loan B”). Additionally, in the second quarter of 2024, the Company wrote off $ 12.2 of unamortized debt issuance costs associated with the pay down of debt, which were recorded in interest expense in the condensed consolidated statements of operations during the nine months ended September 30, 2024. Senior Notes On June 27, 2023, the Company issued $ 570.0 aggregate principal amount of 7.50 % senior notes due 2030 (the “Notes”). Interest on these notes is payable semi-annually on January 1 and July 1 of each year. Net proceeds from the offering of the Notes were $ 560.2 after deducting expenses of the offering. The bond indenture for the Notes contains an asset sale covenant that effectively requires the Company to utilize a prorated portion of the Net Cash Proceeds from an Asset Sale, each as defined in the indenture, to retire Notes at par. As a result of Fortrea’s sale of assets relating to its Enabling Services Segment, Fortrea intends to repurchase up to $ 75.7 of the Notes in accordance with the terms of the indenture by the end of November 2025, which amount has been classified as current portion of long-term debt in the consolidated balance sheet as of September 30, 2025. Credit Facilities On June 30, 2023, Fortrea entered into a credit agreement (as amended, the “Credit Agreement”) providing for (i) a senior secured revolving credit facility in the principal amount of up to $ 450.0 ; (ii) a five-year $ 500.0 first lien senior secured term A loan facility; and (iii) a seven-year $ 570.0 first lien senior secured term B loan facility. The initial revolving facility includes a $ 75.0 swingline sub-facility and a $ 75.0 letter of credit sub-facility. The Company drew on the term loan A and term loan B on June 30, 2023. The net proceeds received for the term A and term B loans were $ 491.8 and $ 552.9 , respectively after deducting underwriting discounts and other expenses. The term A and term B loans will mature on June 30, 2028 and June 30, 2030, respectively. The term loans accrue interest at a per annum rate equal to the sum of, at the option of the Company, a Base Rate or a Term SOFR Rate and the Applicable Margin as defined by the Credit Agreement. As of September 30, 2025, the effective interest rate on the term loan A and term loan B was 6.26 % and 8.06 %, respectively. 17 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) The revolving credit facility is permitted, subject to certain covenant restrictions, to be used for general corporate purposes, including working capital and capital expenditures. There were no balances outstanding on the Company’s revolving credit facility and there were $ 2.3 in letters of credit issued under the letter of credit sublimit, resulting in $ 447.7 available for borrowing as of September 30, 2025. No balances were outstanding as of December 31, 2024. As of September 30, 2025, the effective interest rate on the revolving credit facility was 6.16 %, assuming a one-month interest election. There is an annual agency fee associated with the Credit Agreement ($ 0.1 paid in quarterly installments) and a variable commitment fee associated with the revolving credit facility based on the Company’s Total Leverage Ratio as defined under the Credit Agreement. As of September 30, 2025, the commitment fee was 0.30 % (per annum and paid quarterly). The credit facility matures on June 30, 2028. Under the Credit Agreement, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for similarly rated borrowers, and the Company is required to maintain certain net leverage and interest coverage ratios. The Company is permitted to make adjustments, such as excluding certain costs, from the calculation of leverage and interest coverage ratios for compliance purposes. On February 28, 2025, the Company entered into an amendment to modify certain financial covenants for additional flexibility under the Credit Agreement. The Company was in compliance with all covenants in the Credit Agreement at September 30, 2025 and believes it will be in compliance with all covenants for a period of at least 12 months from the date these financial statements are issued. 8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Summary of Derivative Instruments The Company addresses its exposure to market risks, principally the market risk associated with changes in interest rates and foreign currency exchange rates, through a program of risk management that includes, from time to time, the use of derivative instruments such as foreign currency forward contracts and interest rate swap agreements. The Company does not hold or issue derivative instruments for trading purposes. The derivative instrument contracts are with major investment grade financial institutions and the Company does not anticipate any material non-performance by any of the counterparties. The Company does not believe that its exposure to market risk is material to the Company’s financial position or results of operations. 18 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) The fair value of the Company’s interest rate swaps and foreign currency forward contracts are determined based on observable market inputs (Level 2). The table below presents the fair value of the Company’s derivatives on a gross basis and the balance sheet classification of those instruments: September 30, 2025 December 31, 2024 Balance Sheet Classification Asset Liability Asset Liability Derivatives designated as hedging instruments: Interest rate swaps Accrued expenses and other $ — $ ( 0.9 ) $ 0.1 $ ( 0.2 ) Other liabilities — ( 0.4 ) — ( 0.4 ) Derivatives not designated as hedging instruments: Foreign currency forward contracts Prepaid expenses and other $ 1.2 $ — $ — $ — Accrued expenses and other — ( 0.1 ) — ( 1.2 ) The notional amounts of the Company’s interest rate swaps and foreign currency forward contracts were $ 150.0 and $ 308.6 as of September 30, 2025 and $ 150.0 and $ 468.6 as of December 31, 2024, respectively. The following table presents the pre-tax effects of cash flow hedges included in the Company’s condensed consolidated statements of comprehensive (loss) income: Pre-Tax Gain (Loss) Included in Other Comprehensive (Loss) Income Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Interest rate swaps $ 0.1 $ ( 2.9 ) $ ( 0.7 ) $ 0.4 The following table presents amounts reclassified out of accumulated other comprehensive loss and recognized in the condensed consolidated statements of operations: Amounts Reclassified from Other Comprehensive (Loss) Income into Earnings Three Months Ended September 30, Nine Months Ended September 30, Statement of Operations Classification 2025 2024 2025 2024 Interest rate swaps Interest expense $ — $ ( 0.4 ) $ ( 0.1 ) $ ( 1.2 ) The estimated amount of pre-tax net losses included in other comprehensive (loss) income that is expected to be reclassified into earnings over the twelve months following September 30, 2025, is $ 0.9 . Refer to Note 10, “Preferred Stock and Common Shareholders' Equity” for the impact of the Company’s derivative instruments included in accumulated other comprehensive loss. The following table presents a summary of the gain (loss) for derivative contracts not designated as hedges included in the Company’s condensed consolidated statements of operations: Gain (Loss) on Derivatives Recognized in Earnings Three Months Ended September 30, Nine Months Ended September 30, Statement of Operations Classification 2025 2024 2025 2024 Foreign currency forward contracts Foreign exchange loss $ 1.3 $ 1.0 $ 2.3 $ 0.6 19 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 9. COMMITMENTS AND CONTINGENT LIABILITIES The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. These matters may include commercial and contract disputes, employee-related matters, and professional liability claims. In accordance with FASB ASC 450, Contingencies , the Company establishes reserves for claims and legal actions when those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, the Company does not establish reserves. The outcomes of such proceedings are inherently unpredictable and subject to significant uncertainties. When the Company determines that it has a meritorious defense to any claims asserted, the Company defends itself vigorously; however the Company also considers and enters into discussions regarding settlement of disputes, and may enter into settlement agreements, if in management’s judgment, it is in the best interest of the Company to do so. For the three and nine months ended September 30, 2025, the Company recorded legal expenses of $ — and $ 1.9 , respectively, related to the settlement of legal matters initiated prior to the spin. The Company does not believe that any liabilities resulting from claims and legal actions will have a material effect on its financial condition, results of operations or cash flows. On June 2, 2025, a purported shareholder class action complaint captioned Lucas Deslande v. Fortrea Holdings Inc., et al. , No 1:25-sv-04630 was filed in the U.S. District Court for the Southern District of New York, naming the Company and certain of its current and former officers as defendants. The complaint alleges that defendants made omissions and misrepresentations to investors that they claim violated certain securities laws. The Construction Industry Laborers Pension Fund and City of Pontiac Reestablished General Employees Retirement System were appointed as lead plaintiffs on September 3, 2025 and the lead plaintiffs have until November 10, 2025 to file an amended complaint, to which the Company will respond. The Company believes it has valid defenses to the claims alleged and intends to vigorously defend itself, but there is no guarantee that the Company will prevail. The case is at a very early stage and the Company is unable to estimate the possible loss or range of loss, if any, associated with this action. It was previously disclosed that there was an issue in a customer’s trial caused by a third-party vendor not affiliated with the Company. As part of working with this customer, the Company made concessions and provided discounts and other consideration to the customer in the amount of $ 12.5 as part of a multi-party solution to facilitate the ongoing trials, of which $ 0.9 and $ 3.0 were recorded as a reduction of revenue for the three and nine months ended September 30, 2024. There were no related reductions of revenue during the three and nine months ended September 30, 2025, as the agreed-upon amount had been satisfied. The Company believes that it is in compliance in all material respects with all statutes, regulations, and other requirements applicable to its drug development support services. The drug development industry is, however, subject to extensive regulation, and the courts have not interpreted many of the applicable statutes and regulations. Therefore, the applicable statutes and regulations could be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that would adversely affect the Company. Potential sanctions for violation of these statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, and/or additional liabilities from third-party claims. Fortrea obtains insurance coverage for certain catastrophic exposures as well as those risks required to be insured by law or contract. The Company is covered by those policies but is responsible for the uninsured portion of losses related primarily to general, professional and vehicle liability, certain medical costs and workers’ compensation. The self-insured retentions are on a per-occurrence basis without any aggregate annual limit. Provisions for losses expected under these programs are recorded based upon the Company’s estimates of the aggregated liability of claims incurred. 20 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 10. PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY The Company is authorized to issue up to 265.0 shares of common stock, par value $ 0.001 per share. The Company is authorized to issue up to 30.0 shares of preferred stock, par value $ 0.001 per share. There were no preferred shares outstanding as of September 30, 2025 and December 31, 2024. Stockholder Rights Plan On June 11, 2025, the Company’s Board of Directors adopted a limited duration stockholder rights plan (the “Rights Agreement”). Pursuant to the Rights Agreement, on June 11, 2025, the Company’s Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $ 0.001 per share, of the Company (the “Common Shares”) outstanding on June 23, 2025 to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one thousandth of a share of Series A Preferred Stock, par value $ 0.001 per share, of the Company (the “Preferred Shares”) at a price of $ 50.00 per one one thousandth of a Preferred Share represented by a Right, subject to adjustment. Initially, the Rights will be attached to all Common Share certificates and no separate certificates evidencing the Rights will be issued. Until the Distribution Date (as defined per the Rights Agreement), the Rights will be transferred with and only with the Common Shares. As long as the Rights are attached to the Common Shares, the Company will issue one Right with each new Common Share so that all such Common Shares will have Rights attached. The Rights are generally exercisable only in the event that a person or group of affiliated or associated persons (such person or group being an “Acquiring Person”), acquires (or commences a tender offer or exchange offer the consummation of which would result in) beneficial ownership of 10 % or more of the outstanding Common Shares. In such case (with certain limited exceptions), each holder of a Right (other than the Acquiring Person, whose Rights shall become void) will have the right to receive, upon exercise at the then current exercise price of the Right, Common Shares (or, if the Board so elects, cash, securities, or other property) having a value equal to two times the exercise price of the Right. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. The Rights will expire at the close of business on June 10, 2026. 21 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows: Foreign Currency Translation Adjustments Net Benefit Plan Adjustments Unrealized Gain (Loss) on Derivative Instruments Accumulated Other Comprehensive Loss Balance at December 31, 2024 $ ( 276.0 ) $ ( 6.5 ) $ ( 0.4 ) $ ( 282.9 ) Current quarter foreign exchange adjustments 45.2 — — 45.2 Unrealized loss on derivative instruments — — ( 0.7 ) ( 0.7 ) Amounts reclassified from accumulated other comprehensive loss — — — — Tax effect of adjustments — — 0.2 0.2 Balance at March 31, 2025 ( 230.8 ) ( 6.5 ) ( 0.9 ) ( 238.2 ) Current quarter foreign exchange adjustments 82.8 — — 82.8 Unrealized loss on derivative instruments — — ( 0.1 ) ( 0.1 ) Amounts reclassified from accumulated other comprehensive loss — — ( 0.1 ) ( 0.1 ) Tax effect of adjustments — — — — Balance at June 30, 2025 ( 148.0 ) ( 6.5 ) ( 1.1 ) ( 155.6 ) Current quarter foreign exchange adjustments ( 14.9 ) — — ( 14.9 ) Unrealized gain on derivative instruments — — 0.1 0.1 Amounts reclassified from accumulated other comprehensive loss — — — — Tax effect of adjustments — — — — Balance at September 30, 2025 $ ( 162.9 ) $ ( 6.5 ) $ ( 1.0 ) $ ( 170.4 ) 22 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Foreign Currency Translation Adjustments Net Benefit Plan Adjustments Unrealized Gain (Loss) on Derivative Instruments Accumulated Other Comprehensive Loss Balance at December 31, 2023 $ ( 206.7 ) $ ( 7.4 ) $ ( 1.4 ) $ ( 215.5 ) Current quarter foreign exchange adjustments ( 27.7 ) — — ( 27.7 ) Unrealized gain on derivative instruments — — 2.5 2.5 Amounts reclassified from accumulated other comprehensive loss — — ( 0.4 ) ( 0.4 ) Tax effect of adjustments — — ( 0.5 ) ( 0.5 ) Balance at March 31, 2024 ( 234.4 ) ( 7.4 ) 0.2 ( 241.6 ) Current quarter foreign exchange adjustments ( 7.7 ) — — ( 7.7 ) Unrealized gain on derivative instruments — — 0.8 0.8 Amounts reclassified from accumulated other comprehensive loss — — ( 0.4 ) ( 0.4 ) Tax effect of adjustments — — ( 0.1 ) ( 0.1 ) Balance at June 30, 2024 ( 242.1 ) ( 7.4 ) 0.5 ( 249.0 ) Current quarter foreign exchange adjustments 73.4 — — 73.4 Unrealized loss on derivative instruments — — ( 2.9 ) ( 2.9 ) Amounts reclassified from accumulated other comprehensive loss — — ( 0.4 ) ( 0.4 ) Tax effect of adjustments — — 0.8 0.8 Balance at September 30, 2024 $ ( 168.7 ) $ ( 7.4 ) $ ( 2.0 ) $ ( 178.1 ) 11. INCOME TAXES For the three months ended September 30, 2025 and 2024, the Company recognized income tax benefits of $ 12.8 and $ 17.3 , respectively, which resulted in effective tax rates of 44.6 % and 48.3 %, respectively. The effective tax rate for the three months ended September 30, 2025 was higher than the Company’s statutory tax rate primarily due to an increase in the Company’s U.S. operating losses partially offset by non-deductible compensation expenses, Base Erosion and Anti-Abuse Tax (“BEAT”), an increase in valuation allowance and withholding taxes for 2025 non-U.S. earnings that are not permanently reinvested. The effective tax rate for the three months ended September 30, 2024 was higher than the Company’s statutory tax rate primarily due to the geographic mix of earnings, partially offset by a forecasted valuation allowance on the deferred tax asset for the carryforward of disallowed interest expense, which impacts the annualized effective tax rate of the Company by approximately 14.8 %. This deferred tax asset exists due to limitations imposed under the Internal Revenue Code on the annual deductibility of business interest expense. For the nine months ended September 30, 2025, the Company recognized income tax expense of $ 6.3 resulting in an effective tax rate of ( 0.7 )%. For the nine months ended September 30, 2024, the Company recognized income tax benefit of $ 2.5 resulting in an effective tax rate of 1.2 %.The effective tax rate for the nine months ended September 30, 2025 was lower than the Company’s statutory tax rate primarily due to impairment of goodwill that has no tax benefit, non-deductible compensation expenses, BEAT, an increase in valuation allowance and withholding taxes for 2025 non-U.S. earnings that are not permanently reinvested. The effective tax rate for the nine months ended September 30, 2024 was lower than the Company’s statutory tax rate primarily due to the valuation allowance recognized on the deferred tax asset for the carryforward of disallowed interest expense and non-deductible compensation expenses. 23 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) On July 4, 2025, new legislation commonly referred to as the One Big Beautiful Bill Act of 2025 (the “Tax Act”) was signed into law. The Tax Act includes substantial changes to the U.S. federal tax code and broader fiscal policy for tax year 2025 and forward. The Company has recorded any applicable impacts to its three months ended September 30, 2025 tax provision, which were not significant. There are several provisions of the Tax Act that do not go into effect until future tax years but are also not expected to have a significant impact on tax positions as currently recorded. 12. STOCK COMPENSATION PLANS The Company granted 1.3 and 7.2 of restricted stock units, respectively, during the three and nine months ended September 30, 2025 with weighted average grant date fair values of $ 6.63 and $ 9.65 per share. The Company granted 1.3 and 1.8 of performance share units during the three and nine months ended September 30, 2025 with weighted average grant date fair values of $ 5.89 and $ 6.56 per share. Total stock-based compensation expense and the associated income tax benefits recognized by the Company in the condensed consolidated statements of operations were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Direct costs $ 17.2 $ 11.2 $ 46.0 $ 32.5 Selling, general and administrative expenses 5.1 1.8 13.6 9.4 Total stock compensation expense $ 22.3 $ 13.0 $ 59.6 $ 41.9 Income tax benefits $ 3.1 $ 2.1 $ 8.5 $ 6.4 13. SUPPLEMENTAL CASH FLOW INFORMATION Nine Months Ended September 30, 2025 2024 Supplemental schedule of cash flow information: Cash paid during period for: Interest $ 74.1 $ 98.3 Income taxes, net of refunds 15.2 56.8 Disclosure of non-cash investing activities: Change in accrued property, plant and equipment — ( 0.5 ) Fair value of contingent consideration related to the sale of assets — 39.6 14. BUSINESS SEGMENT INFORMATION The following table is a summary of segment information for the three and nine months ended September 30, 2025 and 2024. The segment information is based upon the way the management of the Company organizes segments within an enterprise for making operating decisions and assessing performance. Financial information is reported on the basis that it is used internally by the chief operating decision maker (“CODM”) for evaluating segment performance and deciding how to allocate resources to segments. The Fortrea Chief Executive Officer has been identified as the CODM. 24 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) The CODM allocates resources and assesses performance based on the underlying businesses which determines the Company's operating segments. When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. Subsequent to the sale of the Enabling Services Segment in 2024, the Company reports its business in one reportable segment: Clinical Services, which provides phase I-IV clinical trials, including clinical pharmacology and comprehensive clinical development capabilities. The measure of segment profit or loss that the CODM uses to evaluates performance and allocate resources is segment operating income. The CODM uses segment operating income to monitor budget versus actual results and to make decisions about resources to be allocated to the segment and assess its performance. In accordance with ASU 2023-07, Improvements to Reportable Segment Disclosures , significant expenses included within segment operating income have been assessed and disclosed in the table below. Corporate costs not included in the segment operating income measure provided to the CODM are included within “Corporate costs not included in segment operating income.” Segment asset information is not presented because it is not used by the CODM at the segment level. Segment operating income for the three and nine months ended September 30, 2025 and 2024 is reconciled to loss from continuing operations before income taxes as follows: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Revenues $ 701.3 $ 674.9 $ 2,062.9 $ 1,999.4 Less: Pass through costs 280.0 228.0 796.2 677.9 Direct costs 298.5 299.0 891.3 927.2 Selling, general and administrative expenses 96.9 102.1 306.6 306.3 Depreciation 4.8 6.0 14.8 18.9 Segment operating income 21.1 39.8 54.0 69.1 Corporate costs not included in segment operating income 10.0 33.8 49.5 107.3 Amortization 14.8 15.2 43.9 45.6 Goodwill and other asset impairments — — 797.9 — Restructuring and other charges 4.9 8.8 21.7 22.5 Operating loss ( 8.6 ) ( 18.0 ) ( 859.0 ) ( 106.3 ) Interest expense ( 22.6 ) ( 22.4 ) ( 68.2 ) ( 101.9 ) Foreign exchange loss ( 2.6 ) ( 0.2 ) ( 28.1 ) ( 7.0 ) Other, net 5.1 4.8 7.9 15.1 Loss from continuing operations before income taxes $ ( 28.7 ) $ ( 35.8 ) $ ( 947.4 ) $ ( 200.1 ) 25 Table of Contents