What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-11-05 · 72 added, 137 removed, 108 unchanged (66% of the section changed)

2 unchanged sentences

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 included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”) and our unaudited condensed consolidated financial statements and corresponding notes in Item 1.

“Financial Statements.” Unless otherwise noted, the following information and discussion relates to our continuing operations.

“Financial Statements.”

Cautionary Statement Concerning Forward-Looking Statements

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Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include, among other things:

our limited operating history as an independent public company;

our dependence on third parties generally to provide services critical to our businesses;

the risk that establishment of our accounting and other management systems, and our efforts to improve them, could cost more than anticipated or impact internal controls;

the impact of building our brand and increasing our value;

our ability to successfully implement our business strategies and execute our long-term value creation strategy;

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our customer or therapeutic area concentrations;

our adoption and use of technology within our business and the risks that we may not be able to capture the anticipated benefits of such technology or that such technology may have negative effects;

the outcome and impact of pending or future litigation;

any deterioration in the macroeconomic environment, which could lead to defaults or cancellations by our customers;

any deterioration in the macroeconomic environment, particularly within the pharmaceutical and biotechnology industries, which could lead to defaults or cancellations by our customers;

the risk that our backlog and net new business may not grow to the extent we anticipate over a specified period of time, that such measures may not be indicative of our future revenues and that we might not realize all of the anticipated future revenue reflected in our backlog;

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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 more than 14,500 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 team of approximately 14,000 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.

Sale of Assets Relating to the Enabling Services Segment

On March 9, 2024, the Company, together with its wholly-owned subsidiary, Fortrea Inc.

(the “Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, pursuant to which the Seller agreed to sell, and to cause its affiliates to sell, certain assets relating to its Enabling Services Segment (the “Transaction”), 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, which includes certain services provided through a Transition Services Agreement.

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.

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 condensed consolidated 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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We adjust backlog for foreign currency fluctuations and exclude from backlog amounts that have been recognized as revenue in our statements of operations.

Our backlog was $7.6 billion as of September 30, 2025.

Our backlog was $7.8 billion as of March 31, 2026.

We do not believe that, as a sole measure, our backlog is a consistent indicator of future revenue because it has been, and likely will continue to be, affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, and changes to the scope of work during the course of projects.

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For a further discussion of the risks relating to our business, see the “Risk Factors” section of our Annual Report on Form 10-K.

RESULTS OF CONTINUING OPERATIONS

Three and Nine Months Ended September 30, 2025 compared with Three and Nine Months Ended September 30, 2024

RESULTS OF OPERATIONS

Three Months Ended March 31, 2026 compared with Three Months Ended March 31, 2025

The following tables present the financial measures that management considers to be the most significant indicators of the Company's performance.

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

The Company defines organic growth as the change in revenues and direct costs excluding the year over year impact of foreign currency translation.

Three Months Ended March 31,

2026 2025 Change

$ 636.5 $ 651.3 (2.3) %

The Company’s revenues for the three months ended September 30, 2025 were $701.3, an increase of 3.9% from revenues of $674.9 in the corresponding period in 2024.

The change in revenues was due to an increase in organic revenues of 3.5% and favorable foreign currency translation of 0.4%.

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

The 3.5% increase in organic revenues was primarily driven by increases in revenue in both our clinical pharmacology and clinical development businesses.

The increase in clinical pharmacology was primary driven by higher demand and study mix, including higher levels of pass through costs.

Clinical development growth was driven by net new business, including higher pass through costs as projects progress through their lifecycle.

These increases were partially offset by changes in portfolio mix on longer duration studies as well as lower functional service provider revenue.

The Company’s revenues for the nine months ended September 30, 2025 were $2,062.9, an increase of 3.2% from revenues of $1,999.4 in the corresponding period in 2024.

The change in revenues was due to an increase in organic revenues of 3.0% and favorable foreign currency translation of 0.2%.

The 3.0% 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.

The Company’s revenues for the three months ended March 31, 2026 were $636.5, a decrease of 2.3% from revenues of $651.3 in the corresponding period in 2025.

The change in revenues was due to a decrease in organic revenues of 3.2% and favorable foreign currency translation of 0.9%.

The 3.2% decrease in organic revenues was due to lower pass through costs as well as lower demand for our functional service provider business.

These decreases were partially offset by an increase in full service revenue, driven by an increase in net new business.

Direct Costs, Exclusive of Depreciation and Amortization

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

Three Months Ended March 31,

2026 2025 Change

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80.6 % 82.1 %

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 increased 9.9% during the three months ended September 30, 2025 as compared with the corresponding period in 2024.

Direct costs increased as a percentage of revenues to 82.5% during the three months ended September 30, 2025 as compared to 78.0% in the corresponding period in 2024.

The increase in direct costs was primarily due to an increase in pass through costs and stock compensation, as well as lower research and development tax credits.

This increase was partially offset by lower headcount and personnel costs.

Direct costs increased 5.2% during the nine months ended September 30, 2025 as compared with the corresponding period in 2024.

Direct costs increased as a percentage of revenues to 81.9% during the nine months ended September 30, 2025 as compared to 80.3% in the corresponding period in 2024.

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

This increase was partially offset by lower headcount and personnel costs.

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

Direct costs decreased 4.1% during the three months ended March 31, 2026 as compared with the corresponding period in 2025.

The change in direct costs was due to a decrease in organic direct costs of 6.3% and unfavorable foreign currency translation of 2.2%.

Direct costs decreased as a percentage of revenues to 80.6% during the three months ended March 31, 2026 as compared to 82.1% in the corresponding period in 2025.

The 6.3% decrease in organic direct costs was primarily due to lower pass through and stock-based compensation costs, as well as lower personnel costs, including the benefit of restructuring actions.

These decreases were partially offset by a year over year increase in variable compensation expense.

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

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

Three Months Ended March 31,

2026 2025 Change

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$ 100.5 $ 121.8 (17.5) %

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, administrative travel and credit loss provisions.

Selling, general and administrative expenses decreased by 21.6% during the three months ended September 30, 2025 as compared with the corresponding period in 2024.

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

Selling, general and administrative expenses decreased by 14.3% during the nine months ended September 30, 2025 as compared with the corresponding period in 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 costs associated with the receivable securitization program.

Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, information technology costs, other facility charges, advertising and promotional expenses, administrative travel and credit loss provisions.

Selling, general and administrative expenses decreased by 17.5% during the three months ended March 31, 2026 as compared with the corresponding period in 2025.

The decrease was primarily due to lower information technology and personnel costs, including the benefit of restructuring actions.

These decreases were partially offset by a year over year increase in variable compensation expense.

Depreciation Expense

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

Three Months Ended March 31,

2026 2025 Change

1 unchanged sentence

$ 5.2 $ 5.0 4.0 %

The decrease in depreciation expense for the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024, was due to a decrease in depreciable property, plant and equipment, primarily IT assets.

The change in depreciation expense for the three months ended March 31, 2026, as compared to the corresponding period in 2025, was not significant.

Amortization Expense

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

Three Months Ended March 31,

2026 2025 Change

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$ 14.6 $ 14.5 0.7 %

T he change in amortization of intangibles and other assets during the three and nine months ended September 30, 2025 , as compared to the corresponding periods in 2024, was due to certain intangible assets reaching the end of their useful lives during the first quarter of 2025.

T he change in amortization of intangibles and other assets during the three months ended March 31, 2026 , as compared to the corresponding period in 2025, was not significant.

Goodwill and Other Asset Impairments

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

Three Months Ended March 31,

2026 2025 Change

Goodwill and other asset impairments

$ — $ — nm $ 797.9 $ — nm

Goodwill impairment for the three and nine months ended September 30, 2025 was $— and $797.9, respectively.

The impairment for the nine months ended September 30, 2025 was specific to the Clinical Development reporting unit.

There were no goodwill and other asset impairments for the three and nine months ended September 30, 2024.

$ — $ 488.8 nm

There were no goodwill and other asset impairments for the three months ended March 31, 2026.

Goodwill impairment for the three months ended March 31, 2025 was $488.8 and was specific to the Clinical Development reporting unit.

Restructuring and Other Charges

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

Three Months Ended March 31,

2026 2025 Change

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$ 6.7 $ 6.5 3.1 %

During the three and nine months ended September 30, 2025, the Company recorded net restructuring charges of $4.9 and $21.7, respectively, which are reflected within restructuring and other charges in the condensed consolidated statements of operations.

These charges are associated with Company actions to streamline its operations and eliminate redundant positions including $3.2 in impairment of facility related assets during the nine months ended September 30, 2025.

During the three and nine months ended September 30, 2024, the Company recorded net restructuring charges of $8.8 and $22.5, respectively.

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

The change in restructuring and other charges for the three months ended March 31, 2026, as compared to the corresponding period in 2025, was not significant.

Interest Expense

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

Three Months Ended March 31,

2026 2025 Change

Interest expense $ 19.1 $ 22.3 (14.3) %

$ 22.6 $ 22.4 0.9 % $ 68.2 $ 101.9 (33.1) %

The increase in interest expense for the three months ended September 30, 2025, as compared with the corresponding period in 2024, was not significant.

The decrease in interest expense for the nine months ended September 30, 2025, as compared with the corresponding period in 2024, was 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, during the six months ended June 30, 2024.

Foreign Exchange Loss

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change

The decrease in interest expense for the three months ended March 31, 2026, as compared with the corresponding period in 2025, was due to lower average debt outstanding during the first quarter of 2026, driven by the repurchase of $75.7 of senior secured notes in 2025 and zero borrowing on the revolver in the quarter, as well as lower effective interest rates on term loan A and term loan B.

Foreign Exchange Gain (loss)

Three Months Ended March 31,

2026 2025 Change

Foreign exchange loss

$ (2.6) $ (0.2) 1200.0 % $ (28.1) $ (7.0) 301.4 %

The foreign exchange loss for the three and nine months ended September 30, 2025 compared to the foreign exchange loss for three and nine months ended September 30, 2024 was primarily due to the fluctuations in the U.S.

Foreign exchange gain (loss) $ 9.7 $ (5.6) (273.2) %

The change in foreign exchange gain (loss) for the three months ended March 31, 2026 compared to the foreign exchange gain (loss) for three months ended March 31, 2025, was primarily due to the fluctuations in the U.S.

Dollar against the British Pound and the Euro.

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Change 2025 2024 Change

Other, net $ 5.1 $ 4.8 6.3 % $ 7.9 $ 15.1 (47.7) %

The increase in other, net for the three months ended September 30, 2025, as compared with the corresponding period in 2024, was not significant.

The decrease in other, net for the nine months ended September 30, 2025, as compared with the corresponding period in 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 (Benefit) Expense

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Income tax (benefit) expense $ (12.8) $ (17.3) $ 6.3 $ (2.5)

Income tax (benefit) expense as a % of loss before tax 44.6 % 48.3 % (0.7) % 1.2 %

For the three months ended September 30, 2025, the Company's effective tax rate was 44.6% compared to the 2024 tax rate of 48.3%.

For the nine months ended September 30, 2025, the Company's effective tax rate was (0.7)% compared to the 2024 tax rate of 1.2%.

The fluctuations in the quarter-to-date and year-to-date periods were primarily due to goodwill impairment with no tax benefit, withholding taxes on 2025 non-U.S.

earnings that are not permanently reinvested, U.S.

operating losses with a partial valuation allowance, and non-deductible compensation expense.

Three Months Ended March 31,

2026 2025 Change

Other, net $ 0.5 $ — nm

The change in other, net for the three months ended March 31, 2026, as compared with the corresponding period in 2025, was not significant .

Income Tax Expense

Three Months Ended March 31,

Income tax expense

Income tax expense as a % of loss before tax

For the three months ended March 31, 2026, the Company's effective tax rate was (91.9)% compared to (2.7)% for the corresponding period in 2025.

The fluctuation was primarily due to goodwill impairment with no associated tax benefit and BEAT for the three months ended March 31, 2025 and the impact of valuation allowance primarily related to expected interest deductibility limitations for the three months ended March 31, 2026.

Liquidity, Capital Resources and Financial Position

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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.

During the nine months ended September 30, 2024, we paid down $70.2 on term loan A and $412.5 on term loan B.

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 6, “Debt” to our condensed consolidated financial statements.

As of September 30, 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 nine months ended September 30, 2025 and 2024, respectively.

On October 20, 2025, the Company commenced a tender offer to repurchase up to $75.7 of the Company’s outstanding 7.50% Senior secured notes due 2030.

The tender offer, which expires on November 18, 2025, is intended to comply 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.

The above is a summary provided for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any securities of the Company.

The full details of the debt tender offer, including complete instructions on how to tender notes, are included in the offer to purchase which we distributed to noteholders.

As of March 31, 2026, there was no balance 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 $— and $98.5 during the three months ended March 31, 2026 and 2025, 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.

As of September 30, 2025, the Company had sold $300.0 of receivables, which were derecognized from the Company’s consolidated balance sheet.

As of March 31, 2026, 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.

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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.

Cash Flows for the nine months ended September 30, 2025 and 2024

The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows and the discussion of the cash flow activity.

Cash Flows for the three months ended March 31, 2026 and 2025

In summary, the Company’s cash flows were as follows:

Nine Months Ended September 30,

Net cash (used for) provided by operating activities $ (15.6) $ 245.7

Net cash provided by investing activities 21.9 248.1

Net cash used for financing activities (0.6) (496.7)

Three Months Ended March 31,

Net cash used for operating activities $ (17.0) $ (124.2)

Net cash (used for) provided by investing activities (8.0) 16.1

Net cash provided by financing activities — 88.4

Effect of exchange rate changes on cash and cash equivalents (2.1) 2.8

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Cash and Cash Equivalents

Cash and cash equivalents at September 30, 2025 and 2024 totaled $131.3 and $105.3, respectively.

Cash and cash equivalents at March 31, 2026 and 2025 totaled $147.5 and $101.6, respectively.

Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits and other money market instruments, which have maturities when purchased of three months or less.

Cash Flows from Operating Activities

During the nine months ended September 30, 2025, the Company’s operations used $15.6 of cash as compared to $245.7 of cash provided by operations during the nine months ended September 30, 2024.

The increase in cash used of $261.3 for the nine months ended September 30, 2025 was primarily due to decreases in cash received from unearned revenue and accounts receivable, driven by the sale of receivables under the Receivables Facility during the nine months ended September 30, 2024, and an increase in cash used for accounts payable.

These cash decreases were partially offset by lower use of cash for prepaid expenses, interest and income taxes.

During the three months ended March 31, 2026, the Company’s operations used $17.0 of cash as compared to $124.2 of cash used by operations during the three months ended March 31, 2025.

The decrease in cash used of $107.2 for the three months ended March 31, 2026 was primarily due to an increase in cash received from accounts receivable, a decrease in cash used for accounts payable, and an increase in net income exclusive of non-cash goodwill and other asset impairments.

These cash increases were partially offset by higher use of cash for accrued expenses, including variable compensation.

Cash Flows from Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2025 was $21.9 as compared to $248.1 for the nine months ended September 30, 2024.

The $226.2 decrease in net cash provided by investing activities for the nine months ended September 30, 2025 was primarily due to $276.6 of net proceeds from the sale of the Enabling Services Segment during the nine months ended September 30, 2024 offset by receipt of the first and second milestone payments related to the sale during the nine months ended September 30, 2025, and a year over year decrease in capital expenditures.

Capital expenditures were $17.7 and $28.7 for the nine months ended September 30, 2025 and 2024, respectively.

Capital expenditures for the nine months ended September 30, 2025 were 0.9% of revenues, primarily in connection with projects to support growth in the Company's core businesses.

Net cash used for investing activities for the three months ended March 31, 2026 was $8.0 as compared to net cash provided by investing activities of $16.1 for the three months ended March 31, 2025.

The $24.1 decrease in net cash (used for) provided by investing activities for the three months ended March 31, 2026 was primarily due to receipt of the first milestone payment related to the sale of the Enabling Services Segment during the three months ended March 31, 2025 and a period over period increase in capital expenditures.

Capital expenditures were $8.0 and $2.9 for the three months ended March 31, 2026 and 2025, respectively.

Capital expenditures for the three months ended March 31, 2026 were 1.3% 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.

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Cash Flows from Financing Activities

Net cash used for financing activities for the nine months ended September 30, 2025 was $0.6 compared to cash used for financing activities of $496.7 for the nine months ended September 30, 2024.

Cash used for financing activities for the nine months ended September 30, 2025 was not significant.

Net cash provided by financing activities for the three months ended March 31, 2026 was $— compared to cash provided by financing activities of $88.4 for the three months ended March 31, 2025.

Cash provided by financing activities for the three months ended March 31, 2025 was primarily related to net proceeds from the revolving credit facility.

The Company did not draw on the revolving credit facility during the three months ended March 31, 2026.

Off-Balance Sheet Arrangements

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The accounting policies that involve the most significant estimates, assumptions and management judgments used in preparation of the condensed consolidated financial statements, or are the most sensitive to change due to outside factors, are discussed in Management’s Discussion and Analysis in the Form 10-K.

Our 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 our 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 book value by approximately 10% as of October 1, 2024.

During the first and second quarters of 2025, due to sustained declines in our share price and uncertainties in global macroeconomic conditions, we determined that indicators of impairment existed.

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

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 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.

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-Q

Item 2. Management’s Discussion and Analysis