Fortrea Holdings Inc. 10-Q

Item 1. Financial Statements (unaudited) FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) June 30, 2026 December 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 168.6 $ 174.6 Accounts receivable and unbilled services, net 654.4 589.7 Prepaid expenses and other 100.6 132.9 Total current assets 923.6 897.2 Property, plant and equipment, net 156.2 149.5 Goodwill, net 950.3 960.0 Intangible assets, net 586.8 622.0 Deferred income taxes 6.2 6.2 Other assets, net 91.8 80.8 Total assets $ 2,714.9 $ 2,715.7 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 54.2 $ 29.7 Accrued expenses and other current liabilities 380.8 395.8 Unearned revenue 502.7 473.8 Current portion of long-term debt 17.1 4.8 Short-term operating lease liabilities 8.9 9.2 Total current liabilities 963.7 913.3 Long-term debt, less current portion 1,037.2 1,048.0 Operating lease liabilities 54.3 54.0 Deferred income taxes and other tax liabilities 97.0 97.6 Other liabilities 38.5 39.3 Total liabilities 2,190.7 2,152.2 Commitments and contingent liabilities (Note 8) Equity Common stock, 95.1 and 93.1 shares outstanding at June 30, 2026 and December 31, 2025, respectively 0.1 0.1 Additional paid-in capital 2,140.6 2,116.6 Accumulated deficit ( 1,420.0 ) ( 1,383.2 ) Accumulated other comprehensive loss ( 196.5 ) ( 170.0 ) Total equity 524.2 563.5 Total liabilities and equity $ 2,714.9 $ 2,715.7 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenues $ 678.2 $ 710.3 $ 1,314.7 $ 1,361.6 Costs and expenses: Direct costs, exclusive of depreciation and amortization 539.0 576.8 1,051.9 1,111.6 Selling, general and administrative expenses, exclusive of depreciation and amortization 102.1 124.8 202.6 246.6 Depreciation and amortization 19.6 19.6 39.4 39.1 Goodwill and other asset impairments — 309.1 — 797.9 Restructuring and other charges 2.7 10.3 9.4 16.8 Total costs and expenses 663.4 1,040.6 1,303.3 2,212.0 Operating income (loss) 14.8 ( 330.3 ) 11.4 ( 850.4 ) Other income (expense): Interest expense ( 19.3 ) ( 23.3 ) ( 38.4 ) ( 45.6 ) Foreign exchange gain (loss) 3.5 ( 19.9 ) 13.2 ( 25.5 ) Other, net ( 0.2 ) 2.8 0.3 2.8 Loss before income taxes ( 1.2 ) ( 370.7 ) ( 13.5 ) ( 918.7 ) Income tax expense 12.0 4.2 23.3 19.1 Net loss $ ( 13.2 ) $ ( 374.9 ) $ ( 36.8 ) $ ( 937.8 ) Earnings (loss) per common share Basic and diluted $ ( 0.14 ) $ ( 4.14 ) $ ( 0.39 ) $ ( 10.37 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in millions) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net loss $ ( 13.2 ) $ ( 374.9 ) $ ( 36.8 ) $ ( 937.8 ) Foreign currency translation adjustments ( 1.3 ) 82.8 ( 27.2 ) 128.0 Unrealized gain (loss) on derivative instruments 0.3 ( 0.2 ) 0.9 ( 0.9 ) Other comprehensive (loss) income before tax ( 1.0 ) 82.6 ( 26.3 ) 127.1 (Provision) benefit for income tax related to items of comprehensive income ( 0.1 ) — ( 0.2 ) 0.2 Other comprehensive (loss) income, net of tax ( 1.1 ) 82.6 ( 26.5 ) 127.3 Comprehensive loss $ ( 14.3 ) $ ( 292.3 ) $ ( 63.3 ) $ ( 810.5 ) 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, 2025 93.1 $ 0.1 $ 2,116.6 $ ( 1,383.2 ) $ ( 170.0 ) $ 563.5 Net loss — — — ( 23.6 ) — ( 23.6 ) Other comprehensive loss, net of tax — — — — ( 25.4 ) ( 25.4 ) Stock compensation — — 11.4 — — 11.4 Issuance of common stock under employee stock plan 1.5 — — — — — Balance at March 31, 2026 94.6 0.1 2,128.0 ( 1,406.8 ) ( 195.4 ) 525.9 Net loss — — — ( 13.2 ) — ( 13.2 ) Other comprehensive loss, net of tax — — — — ( 1.1 ) ( 1.1 ) Stock compensation — — 12.6 — — 12.6 Issuance of common stock under employee stock plan 0.5 — — — — — Balance at June 30, 2026 95.1 $ 0.1 $ 2,140.6 $ ( 1,420.0 ) $ ( 196.5 ) $ 524.2 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 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 FORTREA HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) Six Months Ended June 30, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 36.8 ) $ ( 937.8 ) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 39.4 39.1 Stock compensation 24.0 37.3 Credit loss expense 4.0 9.0 Operating lease right-of-use asset expense 4.1 6.0 Operating lease right-of-use asset impairment — 1.2 Goodwill and other asset impairments — 797.9 Deferred income taxes 0.9 ( 16.8 ) Unrealized foreign exchange movements ( 8.7 ) 37.7 Other, net 2.5 2.3 Changes in assets and liabilities: Increase in accounts receivable and unbilled services, net ( 70.0 ) ( 77.5 ) Decrease in prepaid expenses and other 17.5 24.5 Increase (decrease) in accounts payable 24.6 ( 46.8 ) Increase in unearned revenue 28.7 23.2 Decrease in accrued expenses and other ( 18.3 ) ( 1.7 ) Net cash provided by (used for) operating activities 11.9 ( 102.4 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 17.0 ) ( 10.4 ) Proceeds from sale of business, net — 19.0 Proceeds from sale of assets 2.0 — Net cash (used for) provided by investing activities ( 15.0 ) 8.6 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit facilities — 316.4 Payments on revolving credit facilities — ( 266.4 ) Debt issuance costs — ( 0.6 ) Net cash provided by financing activities — 49.4 Effect of exchange rate changes on cash and cash equivalents ( 2.9 ) 7.1 Net change in cash and cash equivalents ( 6.0 ) ( 37.3 ) Cash and cash equivalents at beginning of period 174.6 118.5 Cash and cash equivalents at end of period $ 168.6 $ 81.2 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 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. On March 9, 2024, the Company, together with its wholly-owned subsidiary, Fortrea Inc., entered into an Asset 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; collectively referred to as the Enabling Services Segment (the “Transaction”). 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. Reportable Segment The Company manages its business in one reportable segment, Clinical Services, 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 13, “Business Segment Information”. 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, 2025. 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. 7 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Substantially all of the Company’s accounts receivable and unbilled services are with companies in the pharmaceutical, biotechnology and medical device industries. As of June 30, 2026, one pharmaceutical customer accounted for approximately 18.2 % of the Company's combined gross accounts receivable and unbilled services. As of December 31, 2025, one pharmaceutical customer accounted for approximately 18.3 % of the Company's combined gross accounts receivable and unbilled services. Additionally, for the three months ended June 30, 2026, one customer accounted for approximately 16.8 % of revenues, and for the six months ended June 30, 2026, one customer accounted for approximately 17.0 % of revenues. For the three months ended June 30, 2025, one customer accounted for 19.5 % of revenues, and for the six months ended June 30, 2025, one customer accounted for approximately 17.5 % 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 November 2024, the Financial Accounting Standards Board (“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. 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 financial statements and disclosures. In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This ASU establishes guidance on the recognition, measurement, and presentation of government grants received by business entities. The guidance is intended to improve consistency and transparency by providing a comprehensive accounting framework for government grants under U.S. GAAP. The guidance is effective for fiscal years beginning after December 15, 2028, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its financial statements and disclosures. . 2. REVENUES The Company’s revenues by geography for the three and six months ended June 30, 2026 and 2025 are as follows: Three Months Ended June 30, 2026 Three Months Ended June 30, 2025 North America Europe Other Total North America Europe Other Total Revenues $ 319.7 $ 219.7 $ 138.8 $ 678.2 $ 344.3 $ 218.7 $ 147.3 $ 710.3 8 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 North America Europe Other Total North America Europe Other Total Revenues $ 616.5 $ 433.6 $ 264.6 $ 1,314.7 $ 653.8 $ 419.0 $ 288.8 $ 1,361.6 Revenue from the United States comprises substantially all revenue in North America. Contract Costs The following table provides information about contract asset balances: June 30, 2026 December 31, 2025 Sales commission assets $ 18.7 $ 21.4 Deferred contract costs 0.2 0.4 Total $ 18.9 $ 21.8 Amortization related to sales commission assets for the three months ended June 30, 2026 and 2025 was $ 2.8 and $ 2.8 , respectively, and for the six months ended June 30, 2026 and 2025 was $ 6.1 and $ 5.9 , respectively. Amortization related to deferred contract costs for the three months ended June 30, 2026 and 2025 was $ 0.1 and $ 0.2 , respectively, and for the six months ended June 30, 2026 and 2025 was $ 0.2 and $ 0.4 , respectively. Th e Company applies the practical expedient to not 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: June 30, 2026 December 31, 2025 Accounts receivable $ 189.0 $ 113.6 Unbilled services 503.4 517.3 Less: allowance for credit losses ( 38.0 ) ( 41.2 ) Total $ 654.4 $ 589.7 Unearned revenue $ 502.7 $ 473.8 Revenue recognized during the period that was included in the unearned revenue balance at the beginning of the period was $ 229.8 and $ 157.5 for the six months ended June 30, 2026 and 2025, respectively. Additionally, as of June 30, 2026, 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. 9 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) The rollforward for the allowance for credit losses for the six months ended June 30, 2026 is as follows: Allowance for credit losses as of December 31, 2025 $ 41.2 Credit loss expense 4.0 Write-offs ( 7.2 ) Allowance for credit losses as of June 30, 2026 $ 38.0 Performance Obligations Under Long-Term Contracts As of June 30, 2026, approximately $ 4,442.5 of revenues are expected to be recognized from remaining performance obligations. The Company expects to recognize approximately 26 % of the existing performance obligations as of June 30, 2026 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 . The customer contract transaction price allocated to the remaining performance obligations differs from backlog in that it does not include wholly unperformed contracts under which the customer has a unilateral right to cancel the arrangement. During the three and six months ended June 30, 2026, there were reductions of approximately $ 2 and $ 3 in revenue related to performance obligations partially satisfied in previous periods. For the three months ended June 30, 2026, the change was associated with changes in estimated effort to complete customer contract obligations. For the six months ended June 30, 2026, the majority of the change was associated with changes in estimated effort to complete customer contract obligations of $( 7 ), partially offset by changes in scope or price of $ 4 . During the three and six months ended June 30, 2025, there were reductions of approximately $ 1 and $ 16 in revenue related to performance obligations partially satisfied in previous periods. For the three months ended June 30, 2025, the majority of the change was associated with changes in estimated effort to complete customer contract obligations of $( 3 ), partially offset by changes in scope or price of $ 2 . For the six months ended June 30, 2025, the majority of the change was associated with changes in scope or price of $( 11 ) and a smaller portion related to changes in estimated effort to complete customer contract obligations of $( 5 ). 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”), which 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. 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. As of June 30, 2026, 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 $ 4.1 and $ 8.8 for the three and six months ended June 30, 2026 and, $ 4.5 and $ 8.9 for the three and six months ended June 30, 2025, respectively, and are included within selling, general and administrative costs in the condensed consolidated statements of operations. 10 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 3. RESTRUCTURING AND OTHER CHARGES In the fourth quarters of 2024 and 2025, the Company approved restructuring plans to streamline its operations and eliminate redundant positions. These plans, which relate primarily to severance benefits, were accounted for under ASC 712, Compensation - Nonretirement Postemployment Benefits . Actions under these restructuring plans are expected to continue through 2026. 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, 2025 $ 22.9 $ 0.5 $ 23.4 Restructuring charges 5.7 1.1 6.8 Cash payments and other adjustments ( 21.1 ) ( 1.1 ) ( 22.2 ) Balance as of June 30, 2026 $ 7.5 $ 0.5 $ 8.0 Severance and Other Employee Costs Facility and Other Costs Total Balance as of December 31, 2024 $ 23.1 $ 0.6 $ 23.7 Restructuring charges 8.8 1.4 10.2 Cash payments and other adjustments ( 17.9 ) ( 1.4 ) ( 19.3 ) Balance as of June 30, 2025 $ 14.0 $ 0.6 $ 14.6 The current portion of the restructuring liabilities is included in the condensed consolidated balance sheets in accrued expenses and other current liabilities. The non-current portion of the restructuring liabilities is included in the condensed consolidated balance sheets in other liabilities. The non-current portion of the restructuring liabilities as of June 30, 2026 and December 31, 2025 was $ 0.5 and $ — , respectively. 4. 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 stock units (“PSUs”). The following represents the computation of basic and diluted earnings (loss) per share. Three Months Ended June 30, 2026 2025 Earnings Shares Per Share Amount Earnings Shares Per Share Amount Basic and diluted earnings (loss) per share: Net earnings (loss) $ ( 13.2 ) 94.8 $ ( 0.14 ) $ ( 374.9 ) 90.6 $ ( 4.14 ) 11 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Six Months Ended June 30, 2026 2025 Earnings Shares Per Share Amount Earnings Shares Per Share Amount Basic and diluted earnings (loss) per share: Net earnings (loss) $ ( 36.8 ) 94.2 $ ( 0.39 ) $ ( 937.8 ) 90.4 $ ( 10.37 ) 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Employee stock options and awards 0.3 8.2 0.4 5.4 Antidilutive employee stock options and awards excluded based on reporting a net loss for the period 4.7 0.4 4.6 0.8 5. GOODWILL 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. 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. 12 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) The changes in the carrying amount of goodwill for the six months ended June 30, 2026 and 2025 are as follows: June 30, 2026 June 30, 2025 Balance as of December 31 $ 960.0 $ 1,710.4 Impairment — ( 797.9 ) Foreign currency impact and other adjustments to goodwill ( 9.7 ) 52.7 Balance as of June 30 $ 950.3 $ 965.2 6. DEBT The current portion of long-term debt consisted of the following: June 30, 2026 December 31, 2025 Current portion of senior secured term loan A facility due 2028 $ 17.3 $ 4.8 Debt issuance discount and fees ( 0.2 ) — Total current portion of long-term debt $ 17.1 $ 4.8 Long-term debt consisted of the following: June 30, 2026 December 31, 2025 7.5 % senior notes due 2030 $ 494.3 $ 494.3 Senior secured term loan A due 2028 400.0 412.5 Senior secured term loan B due 2030 154.7 154.7 Debt issuance discount and fees ( 11.8 ) ( 13.5 ) Total long-term debt $ 1,037.2 $ 1,048.0 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. 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 June 30, 2026, the effective interest rate on the term loan A and term loan B was 5.66 % and 7.16 %, respectively. 13 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 current 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 June 30, 2026 and December 31, 2025. As of June 30, 2026, the effective interest rate on the revolving credit facility was 5.64 %, 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 June 30, 2026, 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 June 30, 2026 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. 7. 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. 14 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: June 30, 2026 December 31, 2025 Balance Sheet Classification Asset Liability Asset Liability Derivatives designated as hedging instruments: Interest rate swaps Accrued expenses and other current liabilities $ — $ ( 0.3 ) $ — $ ( 1.2 ) Other liabilities — — — — Derivatives not designated as hedging instruments: Foreign currency forward contracts Prepaid expenses and other $ 0.1 $ — $ 0.3 $ — Accrued expenses and other current liabilities — ( 1.1 ) — ( 0.6 ) The notional amounts of the Company’s interest rate swaps and foreign currency forward contracts were $ 150.0 and $ 383.7 as of June 30, 2026 and $ 150.0 and $ 305.7 as of December 31, 2025, respectively. The following table presents the pre-tax effects of cash flow hedges included in the Company’s condensed consolidated statements of comprehensive loss: Pre-Tax Gain (Loss) Included in Other Comprehensive (Loss) Income Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Interest rate swaps $ 0.1 $ ( 0.1 ) $ 0.5 $ ( 0.8 ) 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 into Earnings Three Months Ended June 30, Six Months Ended June 30, Statement of Operations Classification 2026 2025 2026 2025 Interest rate swaps Interest expense $ 0.2 $ ( 0.1 ) $ 0.4 $ ( 0.1 ) 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 June 30, 2026, is $ 0.3 . Refer to Note 9, “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 gains and losses for derivative contracts not designated as hedges included in the Company’s condensed consolidated statements of operations: (Loss) Gain on Derivatives Recognized in Earnings Three Months Ended June 30, Six Months Ended June 30, Statement of Operations Classification 2026 2025 2026 2025 Foreign currency forward contracts Foreign exchange gain (loss) $ ( 1.3 ) $ 0.6 $ ( 0.7 ) $ 1.0 15 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 8. 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 six months ended June 30, 2025, the Company recorded legal expenses of $ — and $ 1.9 related to the settlement of legal matters initiated prior to the Spin. Legal settlement expenses for the three and six months ended June 30, 2026 we re not significant. 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 July 6, 2026, Thermo Fisher Scientific Inc., Clario Holdings, Inc., and eResearch Technology, Inc. d/b/a Clario (collectively, the “Plaintiffs”) filed an action in the Court of Chancery of the State of Delaware against Jason Knoblauch and the Company challenging the Company’s appointment of Mr. Knoblauch as Chief Financial Officer. Plaintiffs allege that Mr. Knoblauch’s employment by the Company violates restrictive covenants and that he retained confidential information belonging to Plaintiffs. Plaintiffs sought expedited proceedings and temporary and preliminary injunctive relief. On July 25, 2026, the Court entered a temporary restraining order temporarily prohibiting Mr. Knoblauch from performing services for the Company pending further order of the Court. The Company disagrees with Plaintiffs’ allegations but is complying with the Court’s order and intends to defend the action. In light of the order, the Company’s Board of Directors appointed board member David R. Smith, to serve as interim Chief Financial Officer and principal financial officer, effective July 27, 2026. A hearing on Plaintiffs’ motion for a preliminary injunction is expected to be scheduled for early September. On June 2, 2025, a purported shareholder class action complaint captioned Lucas Deslande v. Fortrea Holdings Inc., et al., No 1:25-cv-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 filed an amended complaint on November 10, 2025. The Company filed a motion to dismiss the amended complaint on January 28, 2026. Lead plaintiffs filed their opposition to the Company’s motion to dismiss on March 19, 2026. The Company filed its reply to the lead plaintiffs’ opposition to the Company’s motion to dismiss on April 9, 2026. 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. 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. 16 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 9. 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 June 30, 2026 and December 31, 2025. 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. The Rights Agreement expired in accordance with its terms at the close of business on June 10, 2026. 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, 2025 $ ( 163.8 ) $ ( 5.3 ) $ ( 0.9 ) $ ( 170.0 ) Current quarter foreign exchange adjustments ( 25.9 ) — — ( 25.9 ) Unrealized gain on derivative instruments — — 0.4 0.4 Amounts reclassified from accumulated other comprehensive loss — — 0.2 0.2 Tax effect of adjustments — — ( 0.1 ) ( 0.1 ) Balance at March 31, 2026 ( 189.7 ) ( 5.3 ) ( 0.4 ) ( 195.4 ) Current quarter foreign exchange adjustments ( 1.3 ) — — ( 1.3 ) Unrealized gain on derivative instruments — — 0.1 0.1 Amounts reclassified from accumulated other comprehensive loss — — 0.2 0.2 Tax effect of adjustments — — ( 0.1 ) ( 0.1 ) Balance at June 30, 2026 $ ( 191.0 ) $ ( 5.3 ) $ ( 0.2 ) $ ( 196.5 ) 17 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, 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 ) 10. INCOME TAXES For the three months ended June 30, 2026 and 2025, the Company recognized income tax expenses of $ 12.0 and $ 4.2 , respectively, which resulted in effective tax rates of ( 1000.0 )% and ( 1.1 )%, respectively. The effective tax rate for the three months ended June 30, 2026 was lower than the Company’s statutory tax rate primarily due to an increase in valuation allowance, non-deductible compensation expenses, earnings taxed in jurisdictions with higher tax rates and withholding taxes for 2026 non-U.S. earnings that are not permanently reinvested. For the three months ended June 30, 2025, the Company’s effective tax rate was lower than the Company’s statutory tax rate primarily due to impairment of goodwill that has no tax benefit, an increase in valuation allowance of deferred tax assets, BEAT, non-deductible compensation expenses and withholding taxes for 2025 non-U.S. earnings that are not permanently reinvested. For the six months ended June 30, 2026 and 2025, the Company recognized income tax expense of $ 23.3 and $ 19.1 , respectively, which resulted in effective tax rates of ( 172.6 )% and ( 2.1 )%, respectively. The effective tax rate for the six months ended June 30, 2026 was lower than the Company’s statutory tax rate primarily due to an increase in valuation allowance, non-deductible compensation expenses, earnings taxed in jurisdictions with higher tax rates and withholding taxes for 2026 non-U.S. earnings that are not permanently reinvested. For the six months ended June 30, 2025, the Company’s effective tax rate was lower than the Company’s statutory tax rate primarily due to impairment of goodwill that has no tax benefit, an increase in valuation allowance of deferred tax assets, BEAT, non-deductible compensation expenses and withholding taxes for 2025 non-U.S. earnings that are not permanently reinvested. 11. STOCK COMPENSATION PLANS The Company granted 0.4 and 2.3 restricted stock units, respectively, during the three and six months ended June 30, 2026 with weighted average grant date fair values of $ 15.45 and $ 10.54 per share. The Company granted — and 0.9 performance stock units, respectively, during the three and six months ended June 30, 2026 with weighted average grant date fair values of $ — and $ 11.66 per share. 18 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Direct costs $ 8.2 $ 17.2 $ 16.3 $ 28.8 Selling, general and administrative expenses 4.4 5.5 7.7 8.5 Total stock compensation expense $ 12.6 $ 22.7 $ 24.0 $ 37.3 Income tax benefits $ 2.0 $ 3.1 $ 3.9 $ 5.4 12. SUPPLEMENTAL CASH FLOW INFORMATION Six Months Ended June 30, 2026 2025 Supplemental schedule of cash flow information: Cash paid during period for: Interest $ 32.7 $ 46.2 Income taxes, net of refunds 6.6 11.8 Disclosure of non-cash investing activities: Change in accrued property, plant and equipment 0.6 — 13. BUSINESS SEGMENT INFORMATION The following table is a summary of segment information for the three and six months ended June 30, 2026 and 2025. 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. 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. 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 evaluate 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. 19 INDEX FORTREA HOLDINGS INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars and shares in millions, except per share data) Segment operating income for the three and six months ended June 30, 2026 and 2025 is reconciled to loss before income taxes as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenues $ 678.2 $ 710.3 $ 1,314.7 $ 1,361.6 Less: Pass through costs 250.8 276.3 480.7 516.2 Direct costs 288.2 298.7 571.1 592.8 Selling, general and administrative expenses 94.3 104.9 183.4 209.7 Depreciation 5.0 5.0 10.2 10.0 Segment operating income 39.9 25.4 69.3 32.9 Corporate costs not included in segment operating income 7.8 21.7 19.3 39.5 Amortization 14.6 14.6 29.2 29.1 Goodwill and other asset impairments — 309.1 — 797.9 Restructuring and other charges 2.7 10.3 9.4 16.8 Operating income (loss) 14.8 ( 330.3 ) 11.4 ( 850.4 ) Interest expense ( 19.3 ) ( 23.3 ) ( 38.4 ) ( 45.6 ) Foreign exchange gain (loss) 3.5 ( 19.9 ) 13.2 ( 25.5 ) Other, net ( 0.2 ) 2.8 0.3 2.8 Loss before income taxes $ ( 1.2 ) $ ( 370.7 ) $ ( 13.5 ) $ ( 918.7 )