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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-03-03 · 102 added, 118 removed, 212 unchanged (51% of the section changed)

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The following discussion and analysis is intended to provide a summary of significant factors relevant to the financial performance and condition of Fortrea Holdings Inc., which we refer to in this discussion and analysis as “Fortrea,” the “Company,” “our” and “we”.

Prior to the spin-off (the “Spin” or “the Separation”), Fortrea existed and functioned as part of Labcorp Holdings Inc., which we refer to in this discussion and analysis as “Labcorp” or “Former Parent.” The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated and combined financial statements and corresponding notes and other financial information included elsewhere in this Annual Report on Form 10-K.

Prior to the spin-off which was completed on June 30, 2023 (the “Spin” or “the Separation”), Fortrea existed and functioned as part of Labcorp Holdings Inc., which we refer to in this discussion and analysis as “Labcorp” or “Former Parent.” The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated and combined financial statements and corresponding notes and other financial information included elsewhere in this Annual Report on Form 10-K.

This discussion contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances.

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With what we believe is a distinctive market offering, Fortrea meets growing global demand for clinical development services.

Our team of approximately 15,500 employees conducts operations in approximately 100 countries and delivers comprehensive phase I – IV clinical trial management, clinical pharmacology, and consulting services for our customers.

Our team of approximately 14,300 employees is able to conduct operations in approximately 100 countries and delivers comprehensive phase I – IV clinical trial management, clinical pharmacology, and consulting services for our customers.

Our offering is scaled to deliver focused and agile solutions to customers globally, streamlining the biopharmaceutical product, and medical device development process.

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FTRE) on July 3, 2023.

Subsequent Event

Credit Agreement Amendment

On February 28, 2025, the Company entered into an amendment (the “Second Credit Amendment”) to modify a financial covenant to provide the Company with additional flexibility under the Company’s credit agreement dated as of June 30, 2023 and as amended on May 3, 2024 (the “Existing Credit Agreement”), by and among the Company, certain subsidiaries of the Company and Goldman Sachs Bank USA (as administrative agent and collateral agent), governing the Company’s existing senior credit facility.

The Second Credit Amendment increased the Company’s maximum quarterly Total Leverage Ratio (as defined in the Existing Credit Agreement) from 5.30:1.00 to 6.00:1.00 for the fiscal quarters ending on September 30, 2025 through June 30, 2026, decreasing to 5.75:1.00 for the fiscal quarter ending on September 30, 2026, further decreasing to 5.50:1.00 for the fiscal quarter ending on December 31, 2026, and reverting to 5.30:1.00 thereafter.

In consideration of this adjustment, the Company paid a fee to consenting lenders and has agreed during the covenant adjustment period to certain additional limitations with respect to investments, restricted payments and liens.

Incremental Independent Public Company Expenses

The consolidated and combined statements of operations include costs for certain centralized functions and programs provided and administered by Labcorp that were allocated to us in the periods presented prior to the Spin.

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Actual costs that may have been incurred if we had been a standalone company would depend on a number of factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as IT and infrastructure.

For a period following the Separation, however, some of these functions have been provided by Labcorp under the Transition Services Agreement.

For a period following the Separation, however, some of these functions were provided by Labcorp under the Transition Services Agreement.

The actual costs of services represented by these allocations may vary significantly from the amounts allocated to us in the accompanying financial statements.

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The Transaction closed during the second quarter of 2024.

Estimated proceeds of $285.2, resulted in a loss on disposal of $19.6, subject to further adjustment based on customary purchase price adjustments.

The decision to sell such assets relating to the Enabling Services Segment represented a strategic shift that had a significant effect on the Company's results and operations and assets and liabilities for the periods presented.

As a result, the Company has classified the assets related to the Enabling Services Segment as assets from discontinued operations and liabilities from discontinued operations on the consolidated balance sheet as of December 31, 2023.

The operations of the Enabling Services Segment have been classified as income or loss from discontinued operations on the consolidated and combined statements of operations for all periods presented.

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.

The Transaction resulted in a loss on disposal of $19.6.

The decision to sell such assets relating to the Enabling Services Segment represented a strategic shift that had a significant effect on the Company's results and operations for the periods presented.

As a result, the operations of the Enabling Services Segment have been classified as loss from discontinued operations on the consolidated and combined statements of operations.

Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed.

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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our results of operations for the years ended December 31, 2025 and 2024.

For a comparison of our results of operations for the fiscal years ended December 31, 2024 and 2023, see “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 3, 2025.

Results of Continuing Operations for the years ended December 31, 2025 and 2024

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Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

Revenues $ 2,723.4 $ 2,696.4 1.0 %

The Company’s revenues for the year ended December 31, 2024, were $2,696.4, a decrease of 5.1% over revenues of $2,842.5 in the corresponding period in 2023.

The change in revenues was due to a decrease in organic revenues of 5.2%, partially offset by favorable foreign currency translation of 0.1%.

The Company defines organic growth as the change in revenues excluding the year over year impact of acquisitions, divestitures and currency.

The 5.2% decrease in organic revenues was driven by decreased pass through costs and lower service revenues resulting from the lower quantity of new business wins prior to the Spin, along with the slower backlog burn rate and the mix of mature and longer duration studies in our portfolio.

The decrease was partially offset by an increase in revenue from clinical pharmacology services.

The Company’s revenues for the year ended December 31, 2025, were $2,723.4, an increase of 1.0% over revenues of $2,696.4 in the corresponding period in 2024.

The increase in revenues was due to organic growth of 0.1% and favorable foreign currency translation of 0.1%.

The increase in organic revenues was primarily driven by an increase in pass through costs offset by the mix and quantity of new business wins prior to the Spin and by the impact of a prior year FSP cancellation.

The change in revenues was due to an increase in organic revenues of 0.8%, and favorable foreign currency translation of 0.2%.

The Company defines organic growth as the change in revenues excluding the year over year impact of acquisitions, divestitures and currency.

The 0.8% increase in organic revenues was primarily driven by an increase in revenue in our clinical pharmacology business, including higher pass through costs.

This increase was partially offset by lower clinical development revenues resulting primarily from the mix of complex and longer duration studies in our portfolio as well as lower functional service provider revenue, which more than offset revenue from net new business, including higher pass through costs as projects progress through their lifecycle.

Direct Costs, Exclusive of Depreciation and Amortization

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

$ 2,219.6 $ 2,162.2 2.7 %

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Direct costs consist primarily of payroll and related benefits for project-related employees, reimbursable expenses (pass through costs), transition services agreement costs, information technology costs, and other direct costs.

Direct costs decreased 4.0% in 2024 as compared with 2023 and increased as a percentage of revenues to 80.2% in 2024 as compared to 79.2% in 2023.

The decrease in direct costs was primarily due to lower pass through costs as well as cost efficiencies gained from restructuring actions, which has better aligned our resource levels and geographic footprint with project requirements.

These declines were partially offset by an increase in stock compensation and professional fees.

Direct costs increased 2.7% in 2025, as compared with 2024, and increased as a percentage of revenues to 81.5% in 2025, as compared to 80.2% in 2024.

The increase in direct costs was primarily due to higher pass through costs, transition services agreement costs and personnel costs partially offset by the removal of Former Parent corporate allocations and carve-out adjustments Fortrea received prior to the Spin.

The increase in direct costs was primarily due to an increase in pass through costs, stock compensation and direct study related expenses, the reintroduction of variable compensation, and lower research and development tax credits.

This increase was partially offset by lower headcount and personnel costs, including the benefit of restructuring actions.

Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

Selling, general and administrative expenses

$ 456.4 $ 560.7 (18.6 %)

Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, transition services agreement costs, information technology costs, other facility charges, advertising and promotional expenses, and administrative travel.

Selling, general and administrative expenses increased 25.1% in 2024 compared to 2023.

The increase was primarily due to an increase in professional fees and other costs to support the exit of the Transition Services Agreement with Labcorp and personnel and information technology costs as a stand-alone company.

Selling, general and administrative expenses increased 7.7% in 2023 compared to 2022.

The change in selling, general and administrative expenses was primarily due to an increase in personnel costs, credit loss provisions, transition service agreement costs and professional fees partially offset by elimination of prior year Former Parent corporate allocations and carve-out adjustments Fortrea received prior to the Spin.

Selling, general and administrative expenses decreased 18.6% in 2025, as compared to 2024.

The decrease was primarily due to lower transition service agreement and information technology costs.

This decrease was partially offset by an increase in costs to support the establishment of our corporate functions as a stand-alone company as well as the reintroduction of variable compensation.

Goodwill and Other Asset Impairments

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

Goodwill and other asset impairments

During 2022, the Company recorded intangible asset impairment charges of $9.8.

The Company concluded that the fair value was less than carrying value for one of its acquired technology related assets and recorded an asset impairment.

Goodwill impairment for 2025 was $797.9.

The impairment was specific to the Clinical Development reporting unit.

There were no goodwill and other asset impairments for the year 2024.

Depreciation Expense

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

Depreciation expense

$ 24.5 $ 28.6 $ 23.0 (14.3 %) 24.3 %

The decrease in depreciation expense for 2025, as compared to 2024, was due to a decrease in depreciable property, plant and equipment, primarily IT assets.

The increase in depreciation expense for 2023, as compared to 2022, was primarily due to the increase in of property, plant and equipment, primarily IT assets, as part of the Spin.

Amortization Expense

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

Amortization of intangibles and other assets

$ 58.3 $ 60.8 (4.1) %

The increase in amortization of intangibles and other assets in 2024, as compared to 2023, was not significant.

The decrease in amortization of intangibles and other assets in 2023, as compared to 2022, is primarily the result of the impairment of technology assets that occurred in the fourth quarter of 2022.

The decrease in amortization of intangibles and other assets in 2025, as compared to 2024, was due to certain intangible assets reaching the end of their useful lives during the first quarter of 2025.

Restructuring and Other Charges

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

Restructuring and other charges

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During the years ended December 31, 2025 and 2024, the Company recorded net restructuring charges of $44.1 and $50.1, respectively, which are reflected within Restructuring and other charges in the consolidated and combined statements of operations.

These charges are associated with Company actions to align resources and restructure certain operations which includes eliminating redundant positions and aligning resources and facilities for cost improvements and to meet customer requirements.

In addition, in the fourth quarter of 2024, the Company approved a restructuring plan to streamline its operations and eliminate redundant positions.

The Company recorded a restructuring charge of $21.3 related to this 2024 plan, which relate primarily to severance benefits and are accounted for under ASC 712, Compensation - Nonretirement Postemployment Benefits .

Actions under these restructuring plans are expected to continue through 2025.

These charges are associated with Company actions to streamline its operations and eliminate redundant positions, including $3.2 and $4.8 of impairment of facility related assets during 2025 and 2024, respectively.

Interest Expense

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

Interest expense $ 123.8 $ 69.7 $ 0.2 77.6 % nm 1

The increase in interest expense for year ended December 31, 2024, as compared with the corresponding period in 2023, is primarily due to the higher overall debt balance, and the write-off of $12.2 of debt issuance costs associated with the pay down of debt in the quarter ended June 30, 2024, including the pay down of $70.2 on term loan A and $412.5 on term loan B.

The increase in interest expense for year ended December 31, 2023, as compared with the corresponding period in 2022, is primarily due to the incurrence of indebtedness in June 2023, consisting of borrowings under the senior secured term loan facilities and the senior secured notes.

Foreign Exchange Gain (Loss)

2025 2024 change

Interest expense $ 91.4 $ 123.8 (26.2) %

The decrease in interest expense for year ended December 31, 2025, as compared with the corresponding period in 2024, is primarily due to the pay down of $70.2 on term loan A and $412.5 on term loan B, and the write-off of $12.2 of debt issuance costs associated with the pay down, which occurred during the six months ended June 30, 2024.

Foreign Exchange (Loss) Gain

Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

Foreign exchange gain (loss) $ (10.6) $ 0.3 $ (2.0) nm 115.0%

The change in foreign exchange gain (loss) for the year ended December 31, 2024, as compared to the year ended December 31, 2023, changed primarily due to the relative weakening of the U.S.

2025 2024 change

Foreign exchange (loss) gain $ (26.9) $ (10.6) (153.8 %)

The change in foreign exchange (loss) gain for the year ended December 31, 2025, as compared to the year ended December 31, 2024, was primarily due to the fluctuations in the U.S.

Dollar against the British Pound and the Euro.

The change in foreign exchange gain (loss) for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to the relative strengthening of the U.S.

Dollar against the British Pound and the Euro, and the allocation of hedging losses from the Former Parent hedging program for 2023.

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Years Ended December 31,

2024 2023 2022 2024/2023 change 2023/2022 change

2025 2024 change

$ 7.9 $ 21.3 (62.9 %)

The increase in other, net for the year ended December 31, 2024, as compared to year ended December 31, 2023, is primarily related to the recognition of a contingent consideration payment on a sale of a facility to a third party and income related to services provided under Transition Services Agreements.

The increase in other, net for the year ended December 31, 2023, as compared to year ended December 31, 2022, is primarily related to a gain on sale of assets sold in 2023.

Income Tax Expense

The decrease in other, net for the year ended December 31, 2025, as compared to year ended December 31, 2024, was primarily related to a change in the estimated amount of the contingent consideration payment on a sale of a facility to a third-party.

This decrease was partially offset by income related to services provided under Transition Services Agreements.

Income Tax Expense (Benefit)

Years Ended December 31,

2024 2023 2022

Income tax (benefit) expense $ (3.5) $ 1.2 $ 41.1

Income tax (benefit) expense as a % of income before tax 1.3 % (3.8 %) 22.0 %

For the year ended December 31, 2024, the Company’s effective tax rate was 1.3% compared to (3.8)% for the year ended December 31, 2023.

The effective tax rate for the year ended December 31, 2024 was lower than the Company’s statutory tax rate primarily due to an increase in the valuation allowance, non-deductible employee benefits, foreign earnings taxed at rates higher than the U.S.

statutory rate and U.S.

tax on foreign income inclusions, partially offset by the U.S.

R&D credit and certain state tax benefits.

The effective tax rate for the year ended December 31, 2023 was lower than the Company’s statutory tax rate primarily due to foreign earnings taxed at rates higher than the U.S.

statutory rate, U.S.

tax on foreign income inclusions, the base erosion and anti-abuse tax (“BEAT”) and non-deductible employee benefits, partially offset by the U.S.

R&D credit and certain state tax benefits.

For the year ended December 31, 2023, the Company's effective tax rate was (3.8)% compared to 22.0% for the year ended December 31, 2022.

The effective tax rate for the year ended December 31, 2022 was higher than the Company’s statutory tax rate primarily due to foreign earnings taxed at rates higher than the U.S.

statutory rate, U.S.

taxes on foreign income inclusions and state taxes, partially offset by benefits for permanently non-deductible items, employee benefits, the U.S.

R&D credit and certain state benefits.

The Organization for Economic Cooperation and Development has introduced new global minimum tax regulations, known as Pillar Two, that came into effect beginning on January 1, 2024.

Income tax expense (benefit) $ 3.2 $ (3.5)

Income tax expense (benefit) as a % of income before tax (0.3) % 1.3 %

For the year ended December 31, 2025, our effective tax rate was (0.3)% compared to 1.3% for the year ended December 31, 2024.

The effective tax rate for the year ended December 31, 2025 was lower than our statutory tax rate primarily due to goodwill impairment with no tax benefit, an increase in the valuation allowance, non-deductible employee benefits, withholding taxes on 2025 non-U.S.

earnings that are not permanently reinvested and foreign earnings taxed at rates higher than the U.S.

rate, partially offset by R&D credits and certain state tax benefits.

The fluctuation in the effective tax rate for the year-to-date period was primarily due to goodwill impairment with no tax benefit, increased withholding taxes on 2025 non-U.S.

earnings that are not permanently reinvested and increased non-deductible employee benefits offset by a reduction in the charge for valuation allowance.

The Organization for Economic Co-operation and Development (the "OECD") has introduced new global minimum tax regulations, known as Pillar Two, that came into effect beginning on January 1, 2024.

We will continue to monitor this development and its potential impact on our future tax rate.

In 2024, we have calculated and accrued an additional top-up tax under the Pillar Two Framework in certain jurisdictions where the effective tax rate fell below the minimum threshold of 15%.

This amount was not significant to the total 2024 income tax provision for the Company.

In 2025, we did not accrue any top-up tax under the Pillar Two Framework as the effective tax rates for all our non-US jurisdictions exceeded 16%.

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.

We have recorded any applicable impacts to its tax provision for the year ended December 31, 2025, 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.

Liquidity, Capital Resources and Financial Position

The Company manages cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments.

In connection with the Spin, we incurred indebtedness in an aggregate principal amount of $1,640.0, which consists of borrowings under senior secured term loan facilities and senior secured notes.

We have also entered into a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 11, “Debt” to our consolidated and combined financial statements.

We manage cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments.

In connection with the Spin, we incurred indebtedness in an aggregate principal amount of $1,640.0, which consisted of borrowings under senior secured term loan facilities and senior secured notes.

During the fourth quarter of 2025, we completed a tender offer to repurchase $75.7 of the Company’s outstanding 7.50% Senior secured notes due 2030.

The tender offer complied with relevant provisions of the indenture governing the Notes relating to the Company’s requirement to repurchase a portion of the outstanding Notes following Fortrea’s sale of assets relating to its Enabling Services Segment.

During the year ended December 31, 2024, we paid down $70.2 on term loan A, and $412.5 on term loan B, respectively.

We also have access to a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 11, “Debt” to our consolidated and combined financial statements.

As of December 31, 2025, 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.

The maximum revolver borrowing outstanding was $138.0 and $75.5 during the years ended December 31, 2025, and 2024, respectively.

On May 6, 2024, we entered into a three-year $300.0 accounts receivable securitization program (the “Receivables Facility”).

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conveys receivable balances to a wholly-owned, bankruptcy-remote special purpose entity, which in turn, may sell receivables to a third-party financial institution in exchange for cash.

We have sold $300.0 of receivables with net proceeds of $297.9 under the Receivables Facility.

As of December 31, 2025, the Company had sold $300.0 of receivables, which were derecognized from the Company’s consolidated balance sheet.

On February 24, 2026, the Company amended its Receivables Facility, which had been scheduled to terminate on May 6, 2027.

The amended Receivables Facility is scheduled to terminate on February 23, 2029, unless terminated earlier pursuant to its terms.

We believe our existing cash and cash flows generated from operations, plus existing credit facilities, will be sufficient to cover the needs of our current and planned operations for at least the next 12 months.

From time to time, we routinely evaluate strategic opportunities, including potential acquisitions, joint ventures or investments in complementary businesses.

We may also access capital markets through the issuance of debt or equity, which we may use in connection with the acquisition of complementary businesses or other significant assets, or for other strategic opportunities, or general corporate purposes.

We may also access capital markets through the issuance of debt or equity, which we may use in connection with the acquisition of complementary businesses or other significant assets, for other strategic opportunities, or general corporate purposes.

Cash Flows for the Year’s Ended December 31, 2025 and 2024

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Years ended December 31,

2024 2023 2022

Net cash provided by operating activities $ 113.5 $ 262.8

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Cash Flows from Operating Activities

During the year ended December 31, 2024, the Company's operations provided $262.8 of cash as compared to $168.4 in 2023, an increase of $94.4.

This increase in cash flows from operating activities was primarily due to cash from accounts receivable, including the sale of receivables under the Receivables Facility, offset by the decrease in net income and higher use of cash for prepaid expenses.

During the year ended December 31, 2023, the Company's operations provided $168.4 of cash as compared to $82.7 in 2022, an increase of $85.7.

Cash flows from operating activities benefited from moderation in growth of unbilled services and deferred revenue, along with lower cash used for accrued expenses, including lower incentive compensation payments, partially offset by a decrease in net income.

During the year ended December 31, 2025, the Company's operations provided $113.5 of cash as compared to $262.8 in 2024, a decrease of $149.3.

This decrease in cash flows from operating activities was primarily due to decreases in cash received from accounts receivable, driven by the sale of receivables under the Receivables Facility during 2024, and an increase in cash used for accounts payable.

These cash decreases were partially offset by lower use of cash for prepaid expenses, taxes and interest, and an increase in net income exclusive of non-cash goodwill and other asset impairments, primarily driven by a decrease in selling, general and administrative expenses.

Cash Flows from Investing Activities

Net cash provided by investing activities for the year ended December 31, 2024 was $251.6 as compared to net cash used for investing activities of $(31.8) for the year ended December 31, 2023.

The $283.4 increase in net cash provided by (used for) investing activities for the year ended December 31, 2024, was primarily due to $276.6 of net proceeds from the sale of the Enabling Services Segment and a year over year decrease in capital expenditures.

Net cash provided by investing activities for the year ended December 31, 2025 was $14.4 as compared to $251.6 for the year ended December 31, 2024.

The $237.2 decrease in net cash provided by investing activities for the year ended December 31, 2025, was primarily due to $276.6 of net proceeds from the sale of the Enabling Services Segment during the year ended December 31, 2024 offset by receipt of the first and second milestone payments related to the sale during the year ended December 31, 2025.

Capital expenditures were $25.2 and $25.5 for the years ended December 31, 2025 and 2024, respectively.

Capital expenditures in 2024 were 0.9% of revenues, primarily in connection with projects to support growth in the Company's core businesses.

Capital expenditures in 2025 and 2024 were 0.9% of revenues, primarily in connection with projects to support growth in the Company's core businesses.

The Company intends to continue to pursue selective investments in key therapeutic areas, business areas and geographies to drive growth and to improve efficiency of the Company's operations.

Such expenditures are expected to be funded by cash flow from operations.

Net cash used for investing activities for the year ended December 31, 2023 was $(31.8) as compared to net cash used for investing activities of $(54.0) for the year ended December 31, 2022.

The $22.2 decrease in net cash used for investing activities was primarily due to a year over year decrease in capital expenditures.

Capital expenditures were $40.3 and $54.4 for the years ended December 31, 2023 and 2022, respectively.

Capital expenditures in 2023 were 1.4% of revenues, primarily in connection with projects to support growth in the Company's core businesses.

Cash Flows from Financing Activities

Net cash used for financing activities for the year ended December 31, 2025 was $76.3 compared to cash used for financing activities of $497.8 for the year ended December 31, 2024.

Cash used for financing activities for December 31, 2024 was primarily related to principal payments on the term loan A and term loan B.

Net cash used for financing activities for the year ended December 31, 2023 was $140.8 compared to cash used for financing activities of $6.3 for the year ended December 31, 2022.

Financing activities for year ended December 31, 2023 included proceeds from term loans and senior note offerings which were more than offset by the net transfers to Former Parent in connection with the Spin.

Information regarding the net transfer is provided in Note 2, “Summary of Significant Accounting Policies ” and Note 19, “Transactions with Former Parent ” to the audited consolidated and combined financial statements.

Cash used for financing activities for the year ended December 31, 2025 was primarily related to the repurchase of a portion of the 7.50% Senior secured notes due 2030 as described above .

Cash used for financing activities for the year ended December 31, 2024 was primarily related to principal payments on the term loan A and term loan B.

Off-Balance Sheet Arrangements

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We apply these accounting policies in a consistent manner.

The Company’s critical accounting policies arise in conjunction with revenue recognition, business combinations, income taxes, and goodwill and indefinite-lived assets.

The Company’s critical accounting policies arise in conjunction with revenue recognition, business combinations, income taxes, goodwill, and indefinite-lived assets.

The application of these accounting policies requires that we make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, contingent assets and liabilities, and related disclosures.

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These estimates are reviewed periodically and any adjustments are recognized on a cumulative catch-up basis in the period they become known.

During the years ended December 31, 2024 and 2023, reductions of approximately $61 and $60, respectively, in revenue related to performance obligations partially satisfied in previous periods.

During the year ended December 31, 2022, revenue of approximately $72 was recognized from performance obligations that were partially satisfied in a previous period.

Substantially all of these adjustments were associated with changes in scope or price for full service clinical studies.

The gross and net amounts of revenue recognized solely from changes in estimates were not material.

During the years ended December 31, 2025 and 2024, reductions of approximately $16 and $61, respectively, were recognized in revenue related to performance obligations partially satisfied in previous periods.

The 2025 adjustment was primarily driven by changes in estimated effort to complete customer contract obligations.

The 2024 adjustment was driven by both changes in estimated effort to complete customer contract obligations and changes in scope or price.

Fee-for-service contracts are typically priced based on transaction volume or time and materials.

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state income tax audits prior to 2017.

There are ongoing foreign income tax audits in various jurisdictions ranging from 2018 - 2022.

We are subject to ongoing foreign income tax audits as a separate taxpayer in various jurisdictions ranging from 2018 - 2022.

While we believe we have adequately accrued for all tax positions, amounts assessed by taxing authorities could be greater than what we have recorded in our financial statements.

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federal tax earning and profits (“E&P”) principles.

The determination of the amount of deferred tax liability that would be recorded for these earnings if they were not indefinitely reinvested is not practicable at this time.

In 2025, management has recorded a deferred tax liability related to applicable foreign withholding taxes on approximately $133.5 of undistributed U.S.

GAAP earnings of its foreign subsidiaries as these earnings will not be indefinitely reinvested outside the United States.

GAAP earnings and profits of its foreign subsidiaries as the Company does not intend to reinvest these earnings outside the United States.

The Company has recorded $960.0 and $1,710.4 of goodwill as of December 31, 2025 and 2024, respectively.

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Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the reporting units.

Management performed its annual goodwill impairment testing as of October 1, 2024.

The Company elected to perform a quantitative assessment on its two reporting units, Clinical Development and Clinical Pharmacology.

Based upon the results of the quantitative assessment, the Company concluded that the fair values of each of its reporting units were greater than the carrying values.

For the Clinical Development reporting unit, the fair value of the business exceeded the book value by approximately 10%.

For the Clinical Pharmacology reporting unit, the fair value of the business substantially exceeded the book value.

Although the Company believes that the current assumptions and estimates used in its goodwill analysis are reasonable, supportable, and appropriate, continued efforts to maintain or improve the performance of these businesses could be impacted by unfavorable or unforeseen changes which could impact the existing assumptions used in the impairment analysis.

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.

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 third and fourth quarters of 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.

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.

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.

For the Clinical Pharmacology reporting unit, the fair value of the business substantially exceeded the book value as of March 31, 2025 and June 30, 2025.

In performing its annual goodwill impairment test as of October 1, 2025, the Company elected to perform the qualitative assessment on its two reporting units, Clinical Development and Clinical Pharmacology.

Based on the results of the qualitative assessment, the Company concluded that the fair values of each of its reporting units were greater than the carrying values, resulting in no impairment.

Although we believe that the current assumptions and estimates used in our goodwill impairment analysis are reasonable, supportable, and appropriate, continued efforts to maintain or improve the performance of these businesses could be impacted by unfavorable or unforeseen changes which could impact the existing assumptions used in the impairment analysis.

Various factors could reasonably be expected to unfavorably impact existing assumptions:

primarily delays or lower demand resulting in lower contract bookings and the related delay or reduction in revenue, increases in customer termination activity or increases in operating costs.

Accordingly, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill impairment and intangible asset analysis will prove to be accurate predictions of future performance.

primarily delays in new customer bookings and the related delay in revenue from new customers, increases in customer termination activity or increases in operating costs.

Accordingly, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill impairment analysis will prove to be accurate predictions of future performance.

It is possible that our conclusions regarding impairment or recoverability of goodwill in any reporting unit could change in future periods.

There can be no assurance that the estimates and assumptions used in our goodwill impairment testing performed as of March 31, 2025 and June 30, 2025 will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2025 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.

The Company will continue to monitor the financial performance of and assumptions for its reporting units.

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A future impairment charge for goodwill or intangible assets could have a material effect on the Company’s consolidated financial position and results of operations.

If our share price was to suffer further sustained declines in the future, or other indicators of impairment are present in future reporting periods, additional impairment testing will be required, which could result in further impairment charges in future periods.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis