What changed in this filing

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Item 1A. Risk Factors

2025-03-03 compared with 2024-03-13 · 149 added, 148 removed, 525 unchanged (36% of the section changed)

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• Our international operations could subject us to additional risks and expenses that could adversely impact our business or results of operations.

• Our customer or therapeutic area concentration may have a material adverse effect on our business, financial condition, results of operations or cash flows.

• Our customer or therapeutic area concentrations may have a material adverse effect on our business, financial condition, results of operations or cash flows.

• Our customers may experience insufficient funding to complete their clinical trials.

• Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog.

• We operate in a highly competitive industry.

• An inability to attract and retain experienced and qualified personnel, including key management personnel and increased personnel costs, could adversely affect our business.

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• Our business is dependent upon access to data and an inability to access the necessary data from our data partners on commercially reasonable terms or at all could adversely affect our business.

• Our accounting, enterprise resource planning, and other management systems and resources may not be adequately prepared to meet financial reporting and other requirements.

• If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

• Our effective income tax rate may fluctuate, which could adversely affect our operations.

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• A failure to identify and successfully close strategic transactions could have a material adverse effect on our business objectives and our revenues and profitability.

• The pending divestiture of certain assets relating to our Enabling Services segment may not close on time or at all, and we may not achieve the full purchase price or benefits of the transaction.

Risks Relating to Technology and Cybersecurity

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• Contract research services create liability risk.

• We face risks arising from the restructuring of our operations.

• Failure to obtain, maintain and enforce intellectual property rights could adversely affect us.

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• Foreign currency fluctuations could have an adverse effect on our business.

• Our debt and debt covenants may limit cash flow available to invest in our business.

• Costs associated with our debt and debt covenants may limit cash flow available to invest in our business.

• We may not be able to access the capital and credit markets on terms that are favorable or at all.

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Risks Relating to Our Common Stock

• As a public company, we will incur additional expenses.

• Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control or impact the trading price of our common stock.

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• decisions to forego or terminate a particular trial;

• budgetary limits or changing priorities;

• budgetary limits, unanticipated trial costs or changing priorities;

• actions by regulatory authorities;

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• unexpected or undesired clinical results for products;

• insufficient patient enrollment in a trial;

• insufficient principal investigator recruitment;

• insufficient patient enrollment in a trial, competition for patients and/or insufficient principal investigator recruitment;

• the customer’s decision to terminate or scale back the development or commercialization of a product or to end a particular project;

• shift of business to a competitor or internal resources;

• perceptions in the marketplace or other general trends;

• shift of business to a competitor or internal resources; or

• product withdrawal following market launch.

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Our customers may also decide to shift their business to a competitor.

Each of these factors results in less visibility to future revenues and may result in high volatility in future revenues.

Each of these factors could lead to less visibility to future revenues and may result in high volatility in future revenues.

Contract terminations, delays and modifications are a regular part of our business.

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In addition, cancellation of a contract or project for the reasons noted above may result in the unwillingness or inability of our customer to satisfy its existing obligations to us, such as payments of accounts receivable, which may in turn result in a material impact to our results of operations and cash flow.

Historically, cancellations and delays have negatively

impacted our operating results, and they might impact them in the future.

Historically, cancellations and delays have negatively impacted our operating results, and they might impact them in the future.

In addition, we might not realize the full benefits of our backlog if our customers cancel, delay, or reduce their commitments to us, which may occur if, among other things, a customer decides to shift its business to a competitor or revoke our status as a preferred provider.

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Our international operations could subject us to additional risks and expenses that could adversely impact our business or results of operations.

Our international operations expose us to risks from potential failure to comply with foreign laws and regulations that differ from those under which we operate in the U.S.

Due to a strategic footprint of primary office locations in five countries with field operations worldwide, our international operations expose us to risks from potential failure to comply with foreign laws and regulations that differ from those under which we operate in the U.S.

In addition, we may be adversely affected by other risks of expanded operations in foreign countries, including, but not limited to, compliance with export controls and trade regulations;

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In some countries, our success will depend in part on our ability to form relationships with local partners.

Our inability to identify appropriate partners or reach mutually satisfactory arrangements could adversely affect the business and operations.

Our embedded and functional outsourcing services could subject us to employment liability, which may cause adverse effects on our business.

Our inability to identify appropriate partners or reach mutually satisfactory arrangements could adversely affect our business and operations.

Embedded and functional outsourcing services associated with our FSP delivery models could subject us to employment liability, which may cause adverse effects on our business.

With our embedded and functional outsourcing services, we sometimes place employees at the physical workplaces of our customers.

The risks of this activity include claims of errors and omissions, misuse or misappropriation of client proprietary information, theft of client property, and torts or other claims under employment liability, co-employment liability, or joint employment liability, as well as claims of misclassification or noncompliance with various employment and staffing laws and regulations.

We have policies and guidelines in

place to reduce our exposure to such risks, but if we fail to follow these policies and guidelines we may suffer reputational damage, loss of customer relationships and business, monetary damages, fines, and other governmental actions.

Our customer or therapeutic area concentration may have a material adverse effect on our business, financial condition, results of operations or cash flows.

If any large customer decreases or terminates its relationship with us, our business, financial condition, results of operations or cash flows could be materially adversely affected.

We have policies and guidelines in place to reduce our exposure to such risks, but if we fail to follow these policies and guidelines we may suffer reputational damage, loss of customer relationships and business, monetary damages, fines, and other governmental actions.

Our customer or therapeutic area concentrations may have a material adverse effect on our business, financial condition, results of operations or cash flows.

We experience termination, cancellation and non-renewal of contracts by our customers in the ordinary course of business, and the number and dollar value of cancellations can vary significantly from year to year.

If any large customer materially decreases or terminates its relationship with us and we fail to add new customers or expand services to other existing customers to replace lost revenue, our business, financial condition, results of operations or cash flows could be materially adversely affected.

For the year ended December 31, 2024, our top ten customers based on revenue accounted for approximately 53% of our consolidated revenue and our top ten customers based on backlog accounted for approximately 51% of our total backlog.

For the year ended December 31, 2023, one customer accounted for approximately 10.6% of revenue.

For the year ended December 31, 2024, two customers accounted for approximately 14.3% and 10.5% of revenue.

It is possible that an even greater portion of our revenues will be attributable to a smaller number of customers in the future, including as a result of our entering into strategic provider relationships with customers.

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The rate at which our backlog converts to revenue may vary over time.

The revenue recognition on larger, more global projects could be slower than on smaller, more regional projects for a variety of reasons, including, but not limited to, an extended period of negotiation between the time the project is awarded to us and the actual execution of the contract, as well as an increased timeframe for obtaining the necessary regulatory approvals.

The revenue recognition on larger, more global projects could be slower than on smaller, more regional projects for a variety of reasons, including, but not limited to, an extended period of coordination from the time the project is awarded and the actual execution of the contract, as well as an increased timeframe for obtaining the necessary regulatory approvals.

Our backlog as of December 31, 2024 was $7.7 billion.

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In addition, we also rely on third-party CROs and other contract clinical personnel for clinical services either in regions where we have limited resources, or in cases where demand cannot be met by our internal staff.

In some circumstances, our customers require that we take on responsibility for the performance of these third parties as part of our overall service delivery.

In some circumstances, our customers require that we oversee responsibility for the performance of these third parties as part of our overall service delivery.

The failure of any of these third parties to adequately provide us timely critical support services in accordance with applicable laws and regulations and the terms of our agreements with them could have a material adverse effect on our business, results of operations and reputation.

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To manage our growth, we must continue to attract and retain top personnel and invest in our operating systems.

We believe that maintaining and enhancing both personnel and our systems at reasonable cost are instrumental to our continued growth and success.

We may not be able to enhance our current technology or obtain new technology

that will enable our systems to keep pace with industry developments and the sophisticated needs of our customers.

Failure to maintain and enhance both personnel and our systems at reasonable cost may negatively impact our ability to achieve growth and success.

We may not be able to enhance our current technology or obtain new technology that will enable our systems to keep pace with industry developments and the sophisticated needs of our customers.

The nature and pace of our growth introduces risks associated with quality control and customer dissatisfaction due to delays in performance or other problems.

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Our business is dependent upon access to data and an inability to access the necessary data from our data partners on commercially reasonable terms or at all could adversely affect our business.

Access to data is foundational to any CRO and through our unique relationship with Labcorp, as set forth in the Patient and Site Data Agreement, we have access to large datasets relevant to clinical trials.

However, the Patient and Site Data Agreement, which has an initial two-year term, may be terminated in certain situations and ultimately will expire.

Access to data is foundational to any CRO, and through our unique relationship with Labcorp we have access to large datasets relevant to clinical trials under a patient and site data agreement (the “Patient and Site Data Agreement”).

This Patient and Site Data Agreement is set to expire as of June 30, 2025, if not renewed.

In addition, we source data from a number of third parties to support our services.

An inability to purchase or access the necessary data (from Labcorp pursuant to the Patient and Site Data Agreement or from other third parties) now, or in the future, on commercially reasonable terms or at all, could have a material adverse effect on our business, financial condition and results of operations.

Our accounting, enterprise resource planning, and other management systems and resources may not be adequately prepared to meet financial reporting and other requirements.

If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

We believe that our reporting and control systems are appropriate for a public company.

However, we have only been directly subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) since July 1, 2023.

As a result, we are now directly subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls.

In addition, beginning with this Annual Report on Form 10-K, our independent registered public accounting firm is required to express an opinion as to the effectiveness of our internal controls over financial reporting.

These reporting and other obligations place significant demands on our management and administrative and operational resources, including our accounting and IT resources.

To comply with these requirements, we are dependent on Labcorp’s systems to provide financial reporting and other financial and accounting information for periods prior to the Spin through the end of the relevant transition agreements.

We are in the process of (i) replacing or otherwise upgrading our systems, including our IT and enterprise resource planning systems, (ii) implementing additional financial, IT, and management controls, (iii) implementing reporting systems and procedures, and (iv) hiring additional management, IT, accounting, finance, legal, human resources, and other administrative staff and third-party service providers.

Transitioning away from our reliance on Labcorp could cost more or take longer than anticipated, especially if we are not able to complete the transition prior to the end of the term of the transition agreements.

While we are advancing our efforts to exit from the transition agreements prior to their expiration, the transition process involves coordination between us, third parties and Labcorp, which may be subject to delays or other challenges of working collaboratively in a technology environment, including system accessibility and security.

If we are unable to do so in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired.

Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our rebranding involves substantial cost, and our brand awareness may build slowly.

It may not be favorably received by customers, sites, suppliers, employees, candidates or investors.

Prior July 1, 2023, we conducted our business under Labcorp and its associated brands, including Labcorp Drug Development and Covance.

We now conduct our business under a new name, Fortrea, and certain associated brands,

also with new names.

Building awareness of our new brand is in process and will be an ongoing initiative.

We were previously dependent on Labcorp’s systems to provide financial reporting and other financial and accounting information for periods prior to the Spin and through the period ending December 31, 2024.

To fully separate ourselves from our Former Parent, we have (i) replaced / upgraded our systems, including our IT and enterprise resource planning systems, (ii) implemented additional financial, IT, and management controls, (iii) implemented new reporting systems and procedures, and (iv) hired additional management, IT, accounting, finance, legal, human resources, and other administrative staff and third-party service providers.

If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected.

As reported in our Form 10-Q for the quarter ended March 31, 2024, as filed with the SEC on May 24, 2024, management identified material weaknesses in our internal controls over financial reporting that existed because the company did not have sufficient resources which in turn led to an inability to effectively perform certain control activities and fulfill our internal control and accounting responsibilities.

Management has devoted substantial resources to the implementation of remediation efforts, as described most recently in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

During the fourth quarter of 2024, the Company successfully completed the testing and evaluation necessary to conclude that, as of December 31, 2024, the previously identified material weaknesses have been remediated.

Our brand, products or solutions may not be favorably received by our customers.

Building awareness of our brand is an ongoing initiative as we continue to conduct our business under the name Fortrea and certain associated brands, with the potential for new names and systems.

Maintaining and continually enhancing the value of our brands is critical to the success of our business.

Brand value is based in large part on customer perceptions.

Success in promoting and enhancing brand value depends in large part on our ability to provide high-quality products.

We may not improve upon the brand recognition associated with Labcorp and its historical or associated brands with customers, sites, suppliers, employees and candidates.

In addition, the rebranding will involve financial investment and require the dedication of significant time and effort by management and other personnel.

We cannot predict the impact of this rebranding on our business.

However, if we fail to establish, maintain and/or enhance brand recognition associated with the “Fortrea” name, it may affect our relations with investigator sites or customers, which may adversely affect our ability to generate revenues and could impede our business.

Additionally, the costs and the dedication of time and effort associated with the rebranding may negatively impact our profitability.

If we fail to maintain and/or enhance brand recognition associated with the “Fortrea” name, it may affect our relationships with investigator sites or customers, which may adversely affect our ability to generate revenues and could impede our business in a highly competitive industry.

Damage to our brand, reputation or loss of customer confidence in our brand or products could result in decreased demand for our products and have a negative impact on our business, results of operations or financial condition.

We might not be able to engage in certain transactions and equity issuances until July 1, 2025.

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These restrictions limit our ability to pursue certain transactions that we may believe to be in the best interests of our stockholders or that might increase the value of our businesses.

Pandemics, such as COVID-19, and associated economic repercussions have adversely impacted our business and results of operations, and may do so in the future.

Pandemics, including the COVID-19 pandemic, and associated economic repercussions have significantly impacted, and may impact, our business and our operations.

The possibility of pandemics, including the spread of COVID-19 variants, could continue to adversely impact our business and results of operations in a number of ways, including, but not limited to:

Epidemics, pandemics, or widespread public health crisis, such as COVID-19, and associated economic repercussions have adversely impacted our business and results of operations, and may do so in the future.

Pandemics, including the COVID-19 pandemic, and associated economic repercussions have significantly impacted our business and our operations.

Other epidemics, pandemics, or widespread public health crises may impact our business and operations in the future.

The possibility of epidemics or pandemics, including the spread of variants, could continue to adversely impact our business and results of operations in a number of ways, including, but not limited to:

• delays or difficulties in commencing new and operating ongoing clinical trials, including intermittent challenges accessing investigative sites, delays in enrolling patients, delays in obtaining approvals from regulatory authorities, and difficulty obtaining necessary pharmaceutical and other products and supplies;

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These and other impacts of a pandemic could also have the effect of heightening many of the other factors described in these “Risk Factors” and other parts of this Annual Report on Form 10-K.

The ultimate impact depends on the severity and duration of a pandemic, including the emergence and spread of COVID-19 variants, the continued availability and effectiveness of vaccines and treatments, and actions taken by governmental authorities and other third parties in response to the pandemic, each of which is uncertain, rapidly changing and difficult to predict.

The ultimate impact depends on the severity and duration of a pandemic, including the emergence and spread of variants, the continued availability and effectiveness of vaccines and treatments, and actions taken by governmental authorities and other third parties in response to the pandemic, each of which is uncertain, rapidly changing and difficult to predict.

Any of these disruptions could adversely impact our business and results of operations.

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Our effective tax rate and deferred income taxes could be impacted by changes in tax legislation globally.

Recent changes in the U.S.

include the Inflation Reduction Act of 2022 (the “IRA”), enacted August 16, 2022, which, among other items, imposes a 15% alternative minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion and introduces or extends a number of tax credits to promote clean energy development.

The Inflation Reduction Act of 2022 (the “IRA”), enacted August 16, 2022, which, among other items, imposes a 15% alternative minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion and introduces or extends a number of tax credits to promote clean energy development.

We continue to monitor the effects of the IRA and other regulatory developments on our financial condition, operating results, and income tax rate.

We have not accrued for income taxes on the undistributed earnings of most non-U.S.

subsidiaries, because those earnings are intended to be indefinitely reinvested in the operations of those subsidiaries.

Certain tax legislation within those foreign jurisdictions could potentially have a material income on our income tax expense.

We have cumulatively accrued $3.6 million for income taxes on a portion of the undistributed earnings of our non-U.S.

subsidiaries that are not considered permanently reinvested.

Certain tax legislation with those foreign jurisdictions could potentially have a material impact on our income tax expense.

Our future effective tax rates could be impacted by changes in the mix of earnings in countries with differing statutory tax rates, changes in the assessment regarding the realization of the valuation of deferred tax assets, or changes in tax laws and regulations or their interpretation.

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In December 2021, the OECD released Pillar Two Model Rules defining the global minimum tax rules, which contemplate a minimum tax rate of 15%.

An additional “top-up” tax would be incurred in instances where the 15% minimum tax rate is not achieved.

To date, various jurisdictions have enacted, or are in the process of enacting, legislation on these rules, and the OECD continues to release additional guidance.

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We will continue to monitor the implementation of the Framework by the countries in which we operate.

We currently do not expect the Framework to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows.

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 2024 income tax provision for the Company.

Risks Relating to Regulatory and Compliance Matters

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New laws or regulations may create a risk of liability, increase our costs or limit our service offerings.

At this time, it is unclear exactly how the new U.S.

presidential administration will impact the healthcare reform measures of the previous Biden Administration or whether the new Trump Administration could impose other reform efforts, including what, if any, impact such changes could have on our business.

The Trump Administration has recently relied on executive orders in lieu of federal legislation to implement regulatory policy and objectives.

We may be unable to anticipate changes in regulatory regimes of the U.S.

federal government administration and, therefore, be unable to make timely operational or other changes, assuming we are in a position to effectively respond to any such change, which may not be the case, or to ensure compliance with federal regulations or orders.

Executive orders or regulatory priorities issued or rescinded by the U.S.

federal government administration may require additional capital expenditures or additional costs and may cause a delay or the abandonment of projects which could adversely affect our results of operations or financial condition.

Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business.

If we do not comply with existing or new laws and regulations related to protecting the privacy and security of personal or health information, we could be subject to monetary fines, civil penalties or criminal sanctions.

the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, collectively referred to as “HIPAA”.

In the U.S., we may obtain health information from third parties (e.g., healthcare providers who sponsor trials) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, collectively referred to as “HIPAA”.

Although we are not directly subject to HIPAA, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA.

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For example, we could incur damages under state laws, including pursuant to an action brought by a private party for the wrongful use or disclosure of health information or other personal information.

We also are subject to the California Consumer Privacy Act, or the CCPA, which became effective as of January 2020, and creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

In the past few years, numerous U.S.

states—including California, Virginia, Colorado, Connecticut, Delaware, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Tennessee and Texas—have enacted or proposed comprehensive privacy laws, reflecting a trend toward more stringent privacy legislation in the U.S.

For example, the California Consumer Privacy Act (“CCPA”), which became effective as of January 2020, creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

While the majority of provision went into effect on January 1, 2023, the enforcement of the California Privacy Rights Act, or the CPRA, began as of July 1, 2023, in California.

While the majority of provision went into effect on January 1, 2023, the enforcement of the California Privacy Rights Act (the “CPRA”) began as of July 1, 2023, in California.

The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

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As such, additional compliance investment and potential business process changes may still be required.

Similar laws have passed in Delaware, Indiana, Iowa, Montana, Oregon and Tennessee, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

In the event that we are subject to or affected by the CCPA, the CPRA, or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

In the event that we are subject to or affected by the CCPA, the CPRA, or other domestic comprehensive privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

We may also be required to comply with the data privacy and security laws of other countries in which we operate or with which we transfer and receive data.

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data protection regime consisting primarily of the GDPR and the U.K.

Data Protection Act 2018, which include a range of compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue.

Data Protection Act 2018, respectively, which include a range of compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue.

We have established processes and frameworks to manage compliance with the GDPR.

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For example, the evolving landscape surrounding the use of AI and online advertising may lead to additional compliance costs and could increase our overall risk.

Our employees and personnel may use generative AI technologies to perform their work, and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations.

Governments have passed and are likely to pass additional laws regulating generative AI.

Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits.

If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.

Failure to comply with federal, state, and foreign laws and regulations, including healthcare fraud and abuse laws, anti-corruption laws and regulations, trade sanction laws and regulations, and privacy and security laws and regulations, could result in substantial penalties and our business, financial condition, results of operations, cash flows, and prospects could be adversely affected.

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Anti-corruption laws in the countries where we conduct business, including the U.S.

Foreign Corrupt Practices Act, or the FCPA, U.K.

Bribery Act 2010, or the Bribery Act, and similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly obtaining or retaining business.

Foreign Corrupt Practices Act (the “FCPA”), U.K.

Bribery Act 2010 (the “Bribery Act”), and similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly obtaining or retaining business.

We operate in some parts of the world where corruption may be common and where anti-corruption laws may conflict to some degree with local customs and practices.

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Part of our strategy involves deploying capital to investments that enhance our business, which includes pursuing strategic acquisitions to strengthen our scientific capabilities and enhance therapeutic expertise, enhance global drug development capabilities, and increase presence in key geographic areas, or to enter into and consummate other strategic transactions, such as joint ventures, collaborations or divestitures.

However, we may not be able to identify acquisition targets that are attractive to us or that will have a meaningful impact on our operating results or to conduct other strategic transactions on terms that are acceptable to Fortrea, or at all.

However, we may not be able to identify acquisition targets or other strategic arrangements that are attractive to us or that will have a meaningful impact on our operating results or to conduct other strategic transactions on terms that are acceptable to Fortrea, or at all.

Furthermore, the successful closing and integration of a strategic acquisition entails numerous risks, including, among others:

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• the potential disruption of the ongoing business and diversion of management's resources.

Current or future acquisitions, if any, or any related integration efforts may not be successful, and we cannot provide assurance that our business will not be adversely affected by any future acquisitions, including with respect to revenues and profitability.

Similarly, any potential gains from other strategic transactions, such as cost savings or other operational efficiencies may also not be realized.

Current or future acquisitions or other strategic transactions, if any, or any related integration efforts may not be successful, and we cannot provide assurance that our business will not be adversely affected by any future strategic transactions, including with respect to revenues and profitability.

Similarly, any potential gains from strategic transactions, such as cost savings or other operational efficiencies may also not be realized.

Even if we are able to successfully integrate the operations of businesses that we may acquire in the future, we may not be able to realize the benefits that we expect from such acquisitions.

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On March 9, 2024, we, together with our wholly-owned subsidiary, Fortrea Inc.

(“Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer, LLC (“Buyer”), an affiliate of Arsenal Capital Partners, with respect to the sale of certain assets relating to our Enabling Services segment, including the sale of equity interests of Fortrea Patient Access Inc.

(“Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer, LLC (“Buyer”), an affiliate of Arsenal Capital Partners, with respect to the sale of certain assets relating to a segment of our business we referred to as our Enabling Services segment, including the sale of equity interests of Fortrea Patient Access Inc.

and its subsidiaries and Endpoint Clinical, Inc.

and its subsidiaries.

The transaction closed during the second quarter of 2024.

We are subject to a number of risks associated with this transaction, including risks associated with:

• the failure to satisfy, on a timely basis or at all, the closing conditions set forth in the Purchase Agreement;

• the separation of these businesses from the businesses we are retaining and the operation of our retained business without these businesses and transitioned employees;

• the need to commit substantial resources to or wind down these businesses if the transaction isn’t completed;

• the separation of the Enabling Service businesses from the businesses we retained and the operation of our retained business without the Enabling Service businesses and transitioned employees;

• issues, delays or complications in agreeing upon and completing required transition activities to allow the divested businesses to operate under Buyer after the closing, including incurring unanticipated costs or delays to complete such activities, which could delay or prevent payment of the transition payment called for under the Purchase Agreement;

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• potential disruption to and uncertainty in our business and our relationships with our customers;

• difficulties in hiring, retaining and motivating key personnel during this process or as a result of uncertainties generated by this process or any developments or actions relating to it;

• the diversion of our management’s attention away from the operation of the business we are retaining;

• the incurrence of significant transaction costs in connection with the transaction, regardless of whether it is completed;

• the need to provide transition services in connection with the transaction, which may result in the diversion of resources and focus from our retained businesses and exiting from the transition service agreements with Former Parent;

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We send, receive and store certain personal and financial information about our customers, suppliers, investigators and employees.

Our processes for the protection of this information include the utilization of third-

party service providers and vendors as well as secure data transmission and storage.

Our processes for the protection of this information include the utilization of third-party service providers and vendors as well as secure data transmission and storage.

A compromise in our processes or systems, or those processes and systems provided to us by third-party service providers and vendors, could adversely affect our reputation with our customers and others, as well as our results of operations, financial condition and liquidity.

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Despite measures we have taken to ensure the availability of our IT systems, the potential threat of physical or electronic break-ins, computer viruses or similar disruptions still exists.

In addition, we may experience system failures or interruptions as part of integrating the IT systems of any recent acquisitions.

In addition, we have established and are continuing to deploy standalone financial, IT and other systems in connection with our exit from the Transition Services Agreement with our Former Parent, which is nearly complete, and may experience system failures or interruptions from part of this process, as well as in connection with transitioning systems and data in connection with the divestiture of the Enabling Services segment or in integrating any IT systems if we complete any future acquisitions.

Sustained system failures or interruption of our systems in one or more of our operations could disrupt our ability to perform operations.

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Such a transfer could result in delays in the ability to deliver products and services to customers.

Additionally, significant delays in the planned delivery of system enhancements or improvements, and inadequate performance of the systems once they are completed could damage our reputation.

Additionally, significant delays in the planned delivery of system deployments, enhancements or improvements, and inadequate performance of the systems once they are completed could damage our reputation.

Failure of our IT systems could adversely affect our business, profitability and financial condition.

Security breaches and unauthorized access to our or our customers’ data could harm our reputation and adversely affect our business.

We have experienced and expect to continue experiencing attempts by threat actors to attack our environment.

We have also been informed of and expect to continue to experience similar attempts to attack and penetrate the systems of third-party suppliers and vendors to whom we have provided data.

While these attempts have not resulted in any material breaches, such attempts, if successful, could result in the misappropriation or compromise of personal information or proprietary or confidential information stored within our systems or within the systems of third parties, create system disruptions or cause shutdowns.

Our information systems are integral to the efficient operation of our business and handle sensitive customer and clinical data, as well as employee records and key financial and operational results and statistics.

It is critical that the data processed by these systems remains secure.

To that end, we have information security procedures and other safeguards in place which we update in response to threat information from public and private sector sources and public announcements of attempted or successful breaches at other companies.

While, like most companies, we have experienced and expect to continue experiencing attempts by threat actors to attack our environment, and we have also been informed of and expect to continue to experience similar attempts to attack and penetrate the systems of third-party suppliers and vendors to whom we have provided data, these attempts have not yet resulted in any material losses of data or materially affected our business results.

Nonetheless, such attempts, if successful, could result in the misappropriation or compromise of personal information or proprietary or confidential information stored within our systems or within the systems of third parties, create system disruptions or cause shutdowns.

Outside parties may also attempt to fraudulently induce our staff to take actions, including the release of confidential or sensitive information or to make fraudulent payments through illegal electronic spamming, phishing, spear phishing, or other tactics.

We have information security procedures and other safeguards in place, which we update in response to threat information from public and private sector sources and public announcements of attempted or successful breaches at other companies.

However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate all of these techniques or to implement adequate preventive measures.

It is difficult to fully protect against the possibility of power loss, telecommunications failures, cyber-attacks, ransomware and other cyber incidents in every potential circumstance that may arise.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate all of these techniques or to implement adequate preventive measures.

In addition, as cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures or to investigate and remediate any information security vulnerabilities.

Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service.

This could also impact the cost and availability of cyber insurance to us.

This could also impact the cost and availability of cyber insurance to us, or such cyber insurance may not sufficiently cover all types of losses or claims that may arise.

Breaches of our or third parties' security measures and the unauthorized dissemination of personal, proprietary or confidential information about us or our customers or other third parties could expose customers’ private information.

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Issues in the development and/or use of AI may result in reputational harm, liability or adversely affect our business, financial condition or results of operations.

AI is an emerging technology that is expected to fundamentally impact the support of clinical research.

We have made investments in various AI initiatives and will continue to incorporate AI into our offerings when appropriate and beneficial.

This AI may be developed by the Company or others.

We expect these elements of our business to grow.

AI is an emerging technology that is fundamentally impacting and expected to further impact the clinical research industry.

In 2024, we continued to develop and deploy AI and machine learning (“ML”) technologies that are intended to drive speed, agility, quality and enhanced patient safety in clinical research, and we are exploring ways to incorporate AI into our offerings when appropriate and beneficial.

This AI may be developed by us or others.

We expect these elements of our business to increase over time.

AI presents risks and challenges that could affect its adoption, and therefore our business.

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Content generated by AI systems may be offensive, illegal, or otherwise harmful.

Ineffective or inadequate AI development or deployment practices by the Company or others could result in incidents that impair the acceptance of AI solutions or cause harm to individuals or society.

Ineffective or inadequate AI development or deployment practices by us or others could result in incidents that impair the acceptance of AI solutions or cause harm to individuals or society.

These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm.

Some AI scenarios present ethical issues or may have broad impacts on society.

New laws regulating AI may reduce the ability to use AI within our business or reduce the value of our investments in technology.

We have developed policies governing the use of AI to help protect against such harm, but such policies may not be adequate to address all of the foregoing risks.

Additionally, new laws regulating AI may reduce the ability to use AI within our business or reduce the value of our investments in technology.

If we enable or offer AI solutions that have unintended consequences or are controversial because of their impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm that could adversely affect our business, financial condition or results or operations.

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Due to the overall cost of clinical trials, our noncompliance with contractual obligations could result in substantial monetary claims.

In addition, our failure to perform, or failure of our third party-service providers to perform, could raise concerns

among customers about the quality of services provided and our ability to deliver services, which could harm our reputation and impact our ability to acquire new business or result in termination of existing contracts.

In addition, our failure to perform, or failure of our third party-service providers to perform, could raise concerns among customers about the quality of services provided and our ability to deliver services, which could harm our reputation and impact our ability to acquire new business or result in termination of existing contracts.

Any of these actions could have a material adverse effect on our business, regulatory compliance, financial condition and results of operations, and future prospects.

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Adverse results in material litigation matters could have a material adverse effect upon our business.

We may become subject in the ordinary course of business to material legal actions related to, among other things, commercial and contract disputes, data and privacy issues, professional liability, employee-related matters,

and intellectual property disputes.

Legal actions could result in substantial monetary damages as well as damage to our reputation with customers, which could have a material adverse effect upon our business.

We face risks arising from the restructuring of our operations.

From time to time, we have adopted restructuring plans to improve our operating efficiency through various means such as reduction of overcapacity, elimination of non-billable support roles or other realignment of resources.

Restructuring presents significant potential risks of events occurring that could adversely affect us, including:

• actual or perceived disruption of service or reduction in service standards to clients;

• the failure to preserve important relationships and to resolve conflicts that may arise;

• loss of sales as we reduce or eliminate staffing on non-core services;

• diversion of management attention from ongoing business activities;

• the failure to maintain employee morale and retain key employees.

Further, any such restructuring would result in charges that, if material, could have a material adverse effect on our financial condition and our results of operations.

In addition, we may incur certain unforeseen costs once any restructuring activities are implemented.

Further, if we determine to effect any other restructuring, we can give no assurance that any projected cost reductions resulting from such restructuring activities will be achieved within the expected timeframe, or at all.

Because of these and other factors, we cannot predict whether we will realize the purpose and anticipated benefits of these measures and, if we do not, our business and results of operations may be adversely affected.

Additionally, there may be delays in implementing the restructuring activities or a failure to achieve the anticipated levels of cost savings and efficiencies as a result of the restructuring activities, each of which could materially and adversely impact our business and results of operations.

Further restructuring or reorganization activities may also be required in the future beyond what has been implemented, which could further enhance the risks associated with these activities.

The failure to successfully obtain, maintain and enforce intellectual property rights and defend against challenges to our intellectual property rights could adversely affect us.

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federal income tax liability for a pre-Spin period, we could be required to pay the amount of such tax, which could be substantial and in excess of the amount allocated to us under the tax matters agreement.

Similar rules may apply for state, local, and

Similar rules may apply for state, local, and non-U.S.

tax purposes.

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Although our contracts often entitle us to receive the costs of winding down the terminated projects, as well as all fees earned up to the time of termination, the loss, reduction in scope or delay of a large contract or the loss, delay or conclusion of multiple contracts could materially adversely affect us.

A significant increase in our days sales outstanding could have an adverse effect on our business, including our cash flow, by increasing our bad debt or decreasing our cash flow.

A significant increase in our days sales outstanding level from delays in billing or collection could have an adverse effect on our business, including potentially increasing our bad debt rate and decreasing our cash flows.

Our revenues depend on the pharmaceutical, biotechnology and medical device industries.

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Accordingly, economic factors and industry trends affecting our customers in these industries may also affect us.

If these companies were to reduce the number of R&D projects they conduct or

outsource, whether through the inability to raise capital, reductions in reimbursement from governmental programs or commercial payers, industry trends, economic conditions or otherwise, we could be materially adversely affected.

If these companies were to reduce the number of R&D projects they conduct or outsource, whether through the inability to raise capital, reductions in reimbursement from governmental programs or commercial payers, industry trends, economic conditions or otherwise, we could be materially adversely affected.

Foreign currency fluctuations could have an adverse effect on our business and our planned use of financial instruments to limit our exposure to currency fluctuations could expose us to risks and financial losses that may adversely affect our financial condition, liquidity and results of operations.

We have business and operations outside the U.S., and derive a significant portion of our revenues from international operations.

We have business and operations outside the U.S.

and derive a significant portion of our revenues from international operations.

Since our consolidated and combined financial statements are denominated in U.S.

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As a result, factors associated with international operations, including changes in foreign currency exchange rates and our hedging activities, could significantly affect our results of operations, financial condition and cash flows.

Our quarterly operating results may vary.

Our operating results may vary significantly from quarter to quarter and are influenced by a variety of factors, such as:

• changes in the general global economy;

• exchange rate fluctuations;

• the commencement, completion, delay or cancellation of large projects or contracts or groups of projects;

• the progress of ongoing projects;

• timing of contract amendments for changes in scope that could affect the value of a contract and potentially impact the amount of net new business and revenue from quarter to quarter;

• the timing of and charges associated with completed acquisitions or other events;

• changes in the utilization mix of our services.

We believe that operating results for any particular quarter are not necessarily a meaningful indication of future results.

While fluctuations in our quarterly operating results could negatively or positively affect the market price of our common stock, these fluctuations may not be related to our future overall operating performance.

Our debt and debt covenant requirements may limit cash flow available to invest in the ongoing needs of our business.

We have an aggregate principal amount of indebtedness of approximately $1,142.0 million, which consists of borrowings under senior secured term loan facilities and senior secured notes.

We also have borrowing capacity in the form of a $450 million senior secured revolving credit facility, from which we have borrowed and repaid $164.0 million during the year ended December 31, 2023 and an accounts receivable purchase program, or ARPP, from which $17.5 million of receivables were sold with net proceeds of $17.3 million during the year ended December 31, 2023.

The ARPP establishes a receivables purchase facility that provides for up to approximately $80 million in funding based on the availability of certain eligible receivables and the satisfaction of certain conditions.

We also have borrowing capacity in the form of a $450.0 million senior secured revolving credit facility, from which we have borrowed and repaid $826.5 million during the year ended December 31, 2024, and an accounts receivable securitization program from which $300.0 million of receivables were sold for net proceeds of $297.9 million during the year ended December 31, 2024.

Under this program, Fortrea Inc.

conveys receivable balances to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”), who in turn may sell receivables to a third-party financial institution in exchange for cash.

The Company entered into this three-year, $300.0 million program on May 6, 2024.

Our level of debt could have important consequences.

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Any of these risks could have a material adverse effect on our business, results of operations, financial condition and cash flows.

As a result of our failure to timely file a periodic report with the SEC in 2024, we are not eligible to use a Form S-3 registration statement.

Our eligibility to use a Form S-3 registration statement may not be restored until June 1, 2025, and then only if we have not had any other filing delinquency that would preclude Form S-3 eligibility and satisfy all other requirements for Form S-3 eligibility.

During any period when we are not eligible to use Form S-3, our capital raising ability may be impaired.

Under these circumstances, we will be required to use a registration statement on Form S-1 to register securities with the SEC, which could hinder our ability to act quickly in raising capital to take advantage of market conditions and may increase our cost of raising capital.

Further, the expenses associated with raising capital using Form S-1 are generally greater than those associated with using Form S-3.

We depend on a variety of U.S.

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In addition, uncertainty in the credit markets could reduce the availability of credit and impact our ability to meet our financing needs in the future.

Any further deterioration in the macro-economic economy or financial services industry could lead to losses or defaults by our partners or vendors, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition.

Any deterioration in the macro-economic economy or financial services industry could lead to losses or defaults by our partners or vendors, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition.

For example, a partner may fail to make payments when due, default under their agreements with us, become insolvent or declare bankruptcy, or a vendor may determine that it will no longer deal with us as a customer.

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In addition, the Sarbanes-Oxley Act requires that, among other things, we establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes.

Beginning with our second required Annual Report on Form 10-K, which will be filed in 2025,

we intend to comply with the applicable sections of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm on the effectiveness of internal control over financial reporting.

Beginning with this Annual Report on Form 10-K, the applicable sections of Section 404 of the Sarbanes-Oxley Act require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm on the effectiveness of internal control over financial reporting.

Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules.

If we are not able to maintain or document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting.

Matters affecting our internal controls may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules.

There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in our internal control over financial reporting.

This could have a material and adverse effect on us by, for example, leading to a decline in our share price and impairing our ability to raise additional capital.

We cannot provide assurance that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective, and in the past (as discussed in Item 9A to this Annual Report on Form 10-K), we have identified material weaknesses in our internal controls, which have since been remediated.

We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses and the existence of future material weaknesses in our internal control over financial reporting could have a material adverse effect on our business or our reputation.

Operations may be disrupted and adversely impacted by the effects of adverse weather, other natural disasters, geopolitical events, public health crises, and other events outside of our control.

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public health crises;

and other disruptions or events outside of our control or the escalation or expansion of any of the same, could delay or disrupt our ability to conduct clinical trials or other business, endanger our personnel, or cause other project delays or loss of clinical trial materials or results.

Long-term disruptions in the infrastructure and operations caused by such events (particularly involving locations in which we have operations), could harm our operating results.

Damage or disruption to our facilities could adversely affect our business.

Many of our facilities could be difficult to replace in a short period of time.

Any event that causes a disruption of the operation of these facilities might impact our ability to provide services to customers and, therefore, could have a material adverse effect on our financial condition, results of operations, and cash flows.

and other disruptions or events outside of our control or the escalation or expansion of any of the same, could delay or disrupt our ability to conduct clinical trials or other business, endanger our personnel, damage our facilities or cause other project delays or loss of clinical trial materials or results.

Long-term disruptions in the infrastructure and operations caused by such events (particularly involving locations in which we have operations, which would be difficult to replace in a short period of time), could have a material adverse effect on our financial condition, results of operations, and cash flows.

Our increasing focus on environmental, social, governance, and other sustainability matters could increase our costs, and inaction could harm our reputation and adversely impact our financial results.

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Risks Relating to Ownership of Our Common Stock

We have limited history operating as an independent public company.

We will incur additional expenses to create or supplement the corporate infrastructure necessary to operate as an independent public company and we have and will experience increased ongoing costs in connection with being an independent public company.

Our business has historically used Labcorp’s corporate infrastructure and services to support our business functions.

A portion of the expenses related to establishing and maintaining this infrastructure has been charged to us on a cost-allocation basis in connection with the Spin.

Except for certain services under the transition services agreement, since the distribution date we no longer have access to Labcorp’s infrastructure or services and we have had to and are continuing to establish or supplement our own.

We may experience increased pricing in our supplier relationships for similar services due to lower volume requirements because we are separate from Labcorp.

The operational, financial, information system, and logistical separation from Labcorp is complex and involves numerous systems and jurisdictions.

Following the Spin, Labcorp continues to provide some services to us on a transitional basis pursuant to a transition services agreement.

We have expended and will need to expend significant efforts and costs to (i) replace or otherwise upgrade our systems, including our IT and enterprise resource planning systems, (ii) implement additional financial, IT, and management controls, (iii) implement reporting systems and procedures, (iv) hire additional management, IT, accounting, finance, legal, human resources, and other administrative staff and third-party service providers, (v) establish employee benefit programs, (vi) support our board of directors and corporate governance programs, (vii) carry out audit, tax and legal functions, and (vii) establish banking and credit facility arrangements.

Any interruption in these services could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, at the end of this transition period, to the extent we are unable to perform particular functions ourselves, we will need to hire third parties to perform these functions on our behalf.

The market price and trading volume of our common stock may be volatile and investors may not be able to resell their shares of Fortrea common stock at or above the initial market price of our common stock following the spin.

The market price and trading volume of our common stock may be volatile and investors may lose all or part of their investments in Fortrea common stock.

We cannot predict the prices at which shares of our common stock may trade.

The market price of Fortrea common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including:

• fluctuations in our quarterly or annual earnings results or those of other companies in our industry;

• the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections;

• failures of our results of operations to meet the estimates of securities analysts or the expectations of our stockholders, or changes by securities analysts in their estimates of our future earnings;

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Investors’ percentage of ownership of us may be diluted in the future.

An investor’s percentage ownership of Fortrea common stock may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we will grant to our directors, officers and employees.

An investor’s percentage ownership of Fortrea common stock may be diluted because of future equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we will grant to our directors, officers and employees.

Our employees have stock-based awards that correspond to shares of Fortrea common stock.

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From time to time, we will issue additional stock-based awards to our employees under our employee benefits plans.

We may determine to not pay dividends on our common stock and, consequently, investors’ ability to achieve a return on an investment in Fortrea common stock will depend on appreciation in the price of our common stock.

We do not currently expect to declare or pay dividends on our common stock for the foreseeable future.

In the absence of a dividend, the success of an investment in shares of our common stock would depend upon any future appreciation in their value.

We have not paid any dividends on our common stock and we do not have any current plans to pay dividends, consequently, investors’ ability to achieve a return on an investment in Fortrea common stock will depend on appreciation in the price of our common stock.

We do not currently pay dividends on our common stock and we do not plan to pay any dividends in the foreseeable future.

In the absence of a dividend, the success of an investment in shares of our common stock depends upon any future appreciation in their value.

There is no guarantee that shares of our common stock will appreciate in value.

Securities or industry analysts may not publish favorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business.

Securities or industry analysts may not publish favorable research about our business and our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business.

If one or more of these securities analysts downgrades our stock or publishes unfavorable research about our business, our stock price would likely decline.

If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.

Actions of activist stockholders could impact the pursuit of our business strategies, cause us to incur substantial costs, divert our management’s attention and resources, and adversely affect our business, results of operations, liquidity, financial condition, and the trading price of our common stock.

While we value constructive input from investors and regularly engage in dialogue with our stockholders, and we welcome their views and opinions regarding strategy and performance, we may be subject to actions or proposals from activist stockholders that may not align with our business strategies or the interests of our other stockholders, and our board and our management are committed to acting in the best interests of all of our stockholders.

Accordingly, there is no assurance that the actions taken by our Board of Directors and our management in seeking to maintain constructive engagement with certain stockholders will be successful in preventing the occurrence of stockholder activist campaigns.

We have been subject to stockholder activism and may be subject to such activism in the future, which could result in substantial costs and divert management’s and our board’s attention and resources from our business.

For example, we entered into a Cooperation Agreement, dated February 21, 2025 (the “Cooperation Agreement”), with Starboard Value LP (“Starboard”), an activist investor, and certain of its affiliates, regarding certain changes to the composition of our board, including the appointment of an independent director, Erin Russell, and an option for Starboard to appoint an additional Starboard employee to our board, subject to the terms and conditions set out in the Cooperation Agreement.

Responding to actions by activist stockholders, such as potential nominations of candidates for election to our board of directors or other special requests may disrupt our business and divert the attention of management and employees.

In addition, any perceived uncertainties as to our future direction resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern to our current or potential customers and make it more difficult to attract and retain qualified personnel and business partners, any of which could negatively impact our business.

Stockholder activism could result in substantial costs.

In addition, actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals of our business.

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 1A. Risk Factors