What changed in this filing

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Item 1. Financial Statements

2025-08-06 compared with 2025-05-12 · 214 added, 116 removed, 446 unchanged (43% of the section changed)

3 unchanged sentences

(in millions)

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Current assets:

23 unchanged sentences

Commitments and contingent liabilities (Note 9)

Common stock, 90.5 and 89.7 shares outstanding at March 31, 2025 and December 31, 2024, respectively

Common stock, 90.8 and 89.7 shares outstanding at June 30, 2025 and December 31, 2024, respectively

Additional paid-in capital 2,079.5 2,042.2

7 unchanged sentences

(in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Revenues $ 710.3 $ 662.4 $ 1,361.6 $ 1,324.5

1 unchanged sentence

Direct costs, exclusive of depreciation and amortization

576.8 525.3 1,111.6 1,079.5

Selling, general and administrative expenses, exclusive of depreciation and amortization 124.8 156.2 246.6 276.3

1 unchanged sentence

Goodwill and other asset impairments

309.1 — 797.9 —

Restructuring and other charges 10.3 10.4 16.8 13.7

14 unchanged sentences

Basic and diluted earnings (loss) per share from discontinued operations

— ( 0.44 ) — ( 0.68 )

Basic and diluted earnings (loss) per share

4 unchanged sentences

(in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Net loss $ ( 374.9 ) $ ( 138.4 ) $ ( 937.8 ) $ ( 239.4 )

Foreign currency translation adjustments 82.8 ( 7.7 ) 128.0 ( 35.4 )

4 unchanged sentences

Comprehensive loss $ ( 292.3 ) $ ( 145.8 ) $ ( 810.5 ) $ ( 272.9 )

$ ( 518.2 ) $ ( 127.1 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

12 unchanged sentences

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

Shares Amounts Additional Paid-in Capital Accumulated Deficit Accumulated

8 unchanged sentences

Balance at March 31, 2024 89.4 0.1 2,002.9 ( 169.5 ) ( 241.6 ) 1,591.9

Net loss — — — ( 138.4 ) — ( 138.4 )

Other comprehensive loss, net of tax — — — — ( 7.4 ) ( 7.4 )

Stock compensation — — 15.0 — — 15.0

Issuance of common stock 0.1 — — — — —

Balance at June 30, 2024 89.5 $ 0.1 $ 2,017.9 $ ( 307.9 ) $ ( 249.0 ) $ 1,461.1

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions) (unaudited)

Three Months Ended March 31,

(in millions)

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 562.9 ) $ ( 101.0 )

Adjustments to reconcile net loss to net cash used for operating activities:

Net loss $ ( 937.8 ) $ ( 239.4 )

Adjustments to reconcile net loss to net cash (used for) provided by operating activities:

Depreciation and amortization 39.1 44.9

5 unchanged sentences

Deferred income taxes ( 16.8 ) ( 11.6 )

Unrealized foreign exchange movements 37.7 ( 11.3 )

Loss on sale of business — 23.2

Write-off of debt issuance costs — 12.2

Other, net 2.3 ( 7.8 )

1 unchanged sentence

(Increase) decrease in accounts receivable and unbilled services, net ( 77.5 ) 346.9

( 70.5 ) 34.7

Decrease (increase) in prepaid expenses and other

24.5 ( 11.7 )

Decrease in accounts payable

(Decrease) increase in accounts payable

( 46.8 ) 13.0

2 unchanged sentences

( 1.7 ) ( 23.0 )

Net cash used for operating activities ( 124.2 ) ( 25.6 )

Net cash (used for) provided by operating activities ( 102.4 ) 248.1

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Proceeds from sale of assets — 0.1

Net cash provided by (used for) investing activities 16.1 ( 9.2 )

Net cash provided by investing activities 8.6 256.2

CASH FLOWS FROM FINANCING ACTIVITIES:

3 unchanged sentences

Principal payments of long-term debt — ( 482.7 )

Net cash provided by financing activities 88.4 21.3

Net cash provided by (used for) financing activities 49.4 ( 482.7 )

Effect of exchange rate changes on cash and cash equivalents 7.1 ( 4.0 )

15 unchanged sentences

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 Singapore) with field operations in other jurisdictions worldwide.

The Company has established access to all key markets worldwide through a strategic footprint of primary office locations in five countries (the United States, the United Kingdom, China, India and Japan) with field operations in other jurisdictions worldwide.

Reportable Segment

31 unchanged sentences

Substantially all of the Company’s accounts receivable and unbilled services are with companies in the pharmaceutical, biotechnology and medical device industries.

As of March 31, 2025, two pharmaceutical customers accounted for 14.3 % and 10.1 % of the Company's combined gross accounts receivable and unbilled services.

As of June 30, 2025, one pharmaceutical customer accounted for 16.5 % of the Company's combined gross accounts receivable and unbilled services.

As of December 31, 2024, two pharmaceutical companies accounted for approximately 22.2 % and 13.8 % of the Company's combined gross accounts receivable and unbilled services.

Additionally, for the three months ended March 31, 2025, one customer accounted for approximately 15.4 % of revenues.

For the three months ended March 31, 2024, two customers accounted for 14.0 % and 13.0 % of revenues.

Additionally, for the three months ended June 30, 2025, one customer accounted for approximately 19.5 % of revenues, and for the six months ended June 30, 2025, one customer accounted for approximately 17.5 % of revenues.

For the three months ended June 30, 2024, one customer accounted for 13.2 % of revenues, and for the six months ended June 30, 2024, two customers accounted for 13.6 % and 11.3 % 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.

5 unchanged sentences

however, retrospective application is also permitted.

The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.

The Company does not expect the adoption of this standard to have a material impact on its results of operations, financial position or cash flows.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses.

16 unchanged sentences

Financial Information of Discontinued Operations

The following table summarizes the significant line items included in income (loss) from discontinued operations, net of income tax in the condensed consolidated statements of operations for the three months ended March 31, 2024:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Revenues $ 40.7 $ 106.4

6 unchanged sentences

Total costs and expenses 34.8 117.9

Operating income (loss) 5.9 ( 11.5 )

Other expense:

Foreign exchange gain (loss) 0.1 0.1

Loss on sale of a business ( 23.2 ) ( 23.2 )

Other, net 0.1 0.1

Loss from discontinued operations before income taxes ( 17.1 ) ( 34.5 )

1 unchanged sentence

Loss from discontinued operations, net of tax $ ( 39.1 ) $ ( 60.3 )

Three Months Ended June 30, Six Months Ended June 30,

Loss from operations of discontinued component $ ( 15.9 ) $ ( 37.1 )

Loss on disposal of discontinued operations ( 23.2 ) ( 23.2 )

Loss on discontinued operations $ ( 39.1 ) $ ( 60.3 )

In the first quarter of 2024, as a result of the negotiated sale price of the Patient Access and Endpoint businesses, the Company evaluated the Enabling Services Segment for impairment and determined that it was more likely than not that the carrying value of the assets exceeded its fair value.

Accordingly, an impairment analysis was performed, which resulted in a goodwill impairment charge of $ 24.0 .

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

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

The following table summarizes depreciation and amortization, capital expenditures and the significant cash flow and noncash items from discontinued operations for the three months ended March 31, 2024:

Three Months Ended March 31,

The following table summarizes depreciation and amortization, capital expenditures and the significant cash flow and noncash items from discontinued operations for the six months ended June 30, 2024:

Six Months Ended June 30,

Depreciation and amortization $ 1.6

Goodwill impairment 24.0

Loss on sale of business 23.2

Capital expenditures 7.4

There were no significant operating or investing noncash items related to discontinued operations for the three months ended March 31, 2024.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The Company’s revenues by geography for the three months ended March 31, 2025 and 2024 are as follows:

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

There were no significant operating or investing noncash items related to discontinued operations for the six months ended June 30, 2024.

The Company’s revenues by geography for the three and six months ended June 30, 2025 and 2024 are as follows:

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

North America Europe Other Total North America Europe Other Total

$ 344.3 $ 218.7 $ 147.3 $ 710.3 $ 317.9 $ 195.9 $ 148.6 $ 662.4

Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

North America Europe Other Total North America Europe Other Total

$ 653.8 $ 419.0 $ 288.8 $ 1,361.6 $ 624.6 $ 403.4 $ 296.5 $ 1,324.5

Revenue from the United States comprises substantially all revenue in North America.

1 unchanged sentence

The following table provides information about contract asset balances:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Sales commission assets $ 20.6 $ 22.1

1 unchanged sentence

Total $ 21.3 $ 23.2

Amortization related to sales commission assets for the three months ended March 31, 2025 and 2024 was $ 3.1 and $ 2.6 , respectively.

Amortization related to deferred contract costs for the three months ended March 31, 2025 and 2024 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.

Amortization related to sales commission assets for the three months ended June 30, 2025 and 2024 was $ 2.8 and $ 2.9 , respectively, and for the six months ended June 30, 2025 and 2024 was $ 5.9 and $ 5.5 , respectively.

Amortization related to deferred contract costs for the three months ended June 30, 2025 and 2024 was $ 0.2 and $ 0.5 , respectively, and for the six months ended June 30, 2025 and 2024 was $ 0.4 and $ 0.9 , respectively.

The Company applies the practical expedient to n ot recognize the effect of financing in its contracts with customers when the difference in timing of payment and performance is one year or less.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Accounts Receivable, Unbilled Services and Unearned Revenue

The following table provides information about accounts receivable, unbilled services and unearned revenue from contracts with customers:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Accounts receivable $ 244.5 $ 156.5

3 unchanged sentences

Unearned revenue $ 381.7 $ 353.3

Revenue recognized during the period that was included in the unearned revenue balance at the beginning of the period was $ 88.7 and $ 92.4 for the three months ended March 31, 2025 and 2024, respectively.

Additionally, as of the quarter ended March 31, 2025, the Company had sold $ 300.0 of receivables as described in the Receivables Securitization Program section below.

Revenue recognized during the period that was included in the unearned revenue balance at the beginning of the period was $ 157.5 and $ 125.5 for the six months ended June 30, 2025 and 2024, respectively.

Additionally, as of the quarter ended June 30, 2025, the Company had sold $ 300.0 of receivables as described in the Receivables Securitization Program section below.

Credit Loss Rollforward

The Company estimates future expected losses on accounts receivable and unbilled services over the remaining collection period of the instrument.

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 three months ended March 31, 2025 is as follows:

The rollforward for the allowance for credit losses for the six months ended June 30, 2025 is as follows:

Allowance for credit losses as of December 31, 2024 $ 39.3

1 unchanged sentence

Write-offs ( 0.9 )

Allowance for credit losses as of March 31, 2025 $ 42.8

Allowance for credit losses as of June 30, 2025 $ 47.4

Performance Obligations Under Long-Term Contracts

As of March 31, 2025, approximately $ 4,492.5 of revenues are expected to be recognized from remaining performance obligations.

The Company expects to recognize approximately 28 % of the existing performance obligations as of March 31, 2025 as revenue over the next 12 months and the remaining balance thereafter.

As of June 30, 2025, approximately $ 4,474.7 of revenues are expected to be recognized from remaining performance obligations.

The Company expects to recognize approximately 29 % of the existing performance obligations as of June 30, 2025 as revenue over the next 12 months and the remaining balance thereafter.

The Company’s long-term contracts generally range from one to eight years .

During the three months ended March 31, 2025, there were reductions of approximately $ 16 in revenue related to performance obligations partially satisfied in previous periods.

Of this reduction, the majority of the change was associated with changes in scope or price and a smaller portion related to changes in estimated effort to complete customer contract obligations.

The change in estimate resulted in an estimated reduction to revenue of $ 3 , and an increase in loss from continuing operations of $ 2 and in loss per share of $ 0.03 .

During the three months ended March 31, 2024, there were reductions of approximately $ 34 in revenue related to performance obligations partially satisfied in previous periods.

Of this reduction, approximately half was associated with changes in scope or price, and approximately half was related to changes in estimated effort to complete customer contract obligations.

The change in estimate resulted in an estimated reduction to revenue of $ 17 , and an increase in loss from continuing operations of $ 16 and in loss per share of $ 0.18 .

During the three and six months ended June 30, 2025, there were reductions of approximately $ 1 and $ 16 , respectively, 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, partially offset by changes in scope or price.

For the six months ended June 30, 2025, the majority of the change was associated with changes in scope or price and a smaller portion related to changes in estimated effort to complete customer contract obligations.

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

During the three and six months ended June 30, 2024, there were reductions of approximately $ 18 and $ 52 , respectively, in revenue related to performance obligations partially satisfied in previous periods.

For the reduction, for the three months ended June 30, 2024, the majority of the change was associated with changes in scope or price, and a smaller portion related to changes in estimated effort to complete customer contract obligations.

For the three months ended June 30, 2024, the reduction of revenue attributed to changes in estimated effort was approximately $ 4 , and resulted in an increase in loss from continuing operations of $ 3 and in loss per share of $ 0.03 .

For the six months ended June 30, 2024, the reduction of revenue attributed to changes in estimated effort was approximately $ 21 , and resulted in an increase in loss from continuing operations of $ 19 and in loss per share of $ 0.21 .

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

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

5 unchanged sentences

The Receivables Facility is scheduled to terminate on May 6, 2027, unless terminated earlier pursuant to its terms.

As of March 31, 2025, the Company had sold $ 300.0 of receivables, which were derecognized from the Company’s consolidated balance sheet as described in the Accounts Receivable, Unbilled Services and Unearned Revenue section above.

Total costs associated with the sale were $ 4.4 for the three months ended March 31, 2025 and are included within selling, general and administrative costs in the condensed consolidated statement of operations for the three months ended March 31, 2025.

As of June 30, 2025, the Company had sold $ 300.0 of receivables, which were derecognized from the Company’s consolidated balance sheet as described in the Accounts Receivable, Unbilled Services and Unearned Revenue section above.

Total costs associated with the sale were $ 4.5 and $ 8.9 for the three and six months ended June 30, 2025, and $ 2.1 for the three and six months ended June 30, 2024.

These costs are included within selling, general and administrative costs in the condensed consolidated statements of operations.

RESTRUCTURING AND OTHER CHARGES

3 unchanged sentences

The following represents the Company’s restructuring accrual activities for the periods indicated:

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Severance and Other Employee Costs Facility Costs Total

2 unchanged sentences

Cash payments and other adjustments ( 17.9 ) ( 1.4 ) ( 19.3 )

Balance as of March 31, 2025 $ 14.1 $ 0.6 $ 14.7

Balance as of June 30, 2025 $ 14.0 $ 0.6 $ 14.6

Severance and Other Employee Costs Facility Costs Total

3 unchanged sentences

Cash payments and other adjustments ( 8.7 ) ( 0.6 ) ( 9.3 )

Balance as of March 31, 2024 $ 2.9 $ 0.3 $ 3.2

The restructuring liabilities are current as of March 31, 2025 and December 31, 2024 and are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

Balance as of June 30, 2024 $ 5.2 $ 0.1 $ 5.3

The restructuring liabilities are current as of June 30, 2025 and December 31, 2024 and are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

EARNINGS (LOSS) PER SHARE

1 unchanged sentence

Diluted earnings per share is computed by dividing net earnings including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the earlier of the date of issuance or the beginning of the period presented.

Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units (“RSUs”), and performance share awards.

Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units (“RSUs”), and performance share units (“PSUs”).

The following represents the computation of basic and diluted earnings (loss) per share from continuing operations per share.

Three Months Ended March 31,

Three Months Ended June 30,

Per Share Amount

3 unchanged sentences

$ ( 374.9 ) 90.6 $ ( 4.14 ) $ ( 99.3 ) 89.4 $ ( 1.11 )

Six Months Ended June 30,

Earnings Shares Per Share Amount Earnings Shares Per Share Amount

Basic and diluted earnings (loss) from continuing operations per share:

Net earnings (loss)

$ ( 937.8 ) 90.4 $ ( 10.37 ) $ ( 179.1 ) 89.3 $ ( 2.01 )

The following represents the computation of basic and diluted earnings (loss) per share from discontinued operations per share.

Three Months Ended March 31,

Three Months Ended June 30,

Per Share Amount

3 unchanged sentences

$ — — $ — $ ( 39.1 ) 89.4 $ ( 0.44 )

Six Months Ended June 30,

Per Share Amount

Basic and diluted earnings (loss) from discontinued operations per share:

Net earnings (loss)

$ — — $ — $ ( 60.3 ) 89.3 $ ( 0.68 )

FORTREA HOLDINGS INC.

6 unchanged sentences

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Employee stock options and awards 8.2 1.9 5.4 1.6

3 unchanged sentences

For the Clinical Development reporting unit, the fair value of the business exceeded the book value by approximately 10 % as of October 1, 2024.

During the three months ended March 31, 2025, due to a sustained decline in the Company’s share price and uncertainties in global macroeconomic conditions, the Company determined that an indicator of impairment existed.

As a result, the Company performed an interim impairment test.

For the goodwill impairment test as of March 31, 2025, the fair values of the Clinical Development and Clinical Pharmacology reporting units were computed using both income-based and market-based valuation methods.

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 income-based fair value methodology requires management's assumptions and judgments regarding economic conditions in the markets in which the Company operates and conditions in the capital markets, many of which are outside of management's control.

At the reporting unit level, fair value estimation requires management's assumptions and judgments regarding the effects of overall economic conditions on the specific reporting unit, along with assessment of the reporting unit's strategies and forecasts of future cash flows.

Forecasts of individual reporting unit cash flows involve management's estimates and assumptions regarding:

• Annual cash flows, on a debt-free basis, arising from future revenues and profitability, changes in working capital, capital spending and income taxes for at least a five-year forecast period.

• A terminal growth rate for years beyond the forecast period.

The terminal growth rate is selected based on consideration of growth rates used in the forecast period, historical performance of the reporting unit and economic conditions.

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.

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

• A discount rate that reflects the risks inherent in realizing the forecasted cash flows.

A discount rate 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.

In addition, the discount rate may consider any Company-specific risk in achieving the prospective financial information.

Under the market-based fair value methodology, judgment is required in evaluating market multiples and recent transactions.

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

Based upon the results of the qualitative and quantitative assessments 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 .

The changes in the carrying amount of goodwill for the three months ended March 31, 2025 and 2024 are as follows:

March 31, 2025 March 31, 2024

The changes in the carrying amount of goodwill for the six months ended June 30, 2025 and 2024 are as follows:

Balance as of December 31 $ 1,710.4 $ 1,739.4

1 unchanged sentence

Foreign currency impact and other adjustments to goodwill 52.7 ( 13.7 )

Balance as of March 31 $ 1,242.5 $ 1,727.6

Balance as of June 30 $ 965.2 $ 1,725.7

The current portion of long-term debt consisted of the following:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Current portion of 7.5 % senior notes due 2030

$ 76.0 $ 76.0

Senior secured revolving credit facility

Debt issuance discount and fees ( 1.2 ) ( 1.2 )

1 unchanged sentence

Long-term debt consisted of the following:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

7.5 % senior notes due 2030

2 unchanged sentences

Senior secured term loan B due 2030 154.7 154.7

Senior secured revolving credit facility

Debt issuance discount and fees ( 15.1 ) ( 16.3 )

Total long-term debt $ 1,100.9 $ 1,049.7

During the three and six months ended June 30, 2024, the Company paid down $ 64.0 and $ 70.2 , respectively, on term loan A and $ 411.0 and $ 412.5 , respectively, on term loan B.

Additionally, the Company wrote off $ 12.2 of unamortized debt issuance costs associated with the pay down of debt, which were recorded in interest expense in the condensed consolidated statements of operations, during the three and six months ended June 30, 2024.

On June 27, 2023, the Company issued $ 570.0 aggregate principal amount of 7.50 % senior notes due 2030 (the “Notes”).

4 unchanged sentences

(dollars and shares in millions, except per share data)

The bond indenture for the Notes contains an asset sale covenant that effectively requires the Company to utilize a prorated portion of the Net Cash Proceeds from an Asset Sale, each as defined in the indenture, to retire Notes.

Absent an amendment to the indenture or other transaction related to these Notes, Fortrea currently expects that the sale of net assets relating to its Enabling Services Segment will require the Company to offer to repurchase, purchase on the open market or redeem approximately $ 76.0 of the Notes by the fourth quarter of 2025, which has been classified as current portion of long-term debt in the consolidated balance sheet as of March 31, 2025.

Absent an amendment to the indenture or other transaction related to these Notes, Fortrea currently expects that the sale of net assets relating to its Enabling Services Segment will require the Company to offer to repurchase, purchase on the open market or redeem approximately $ 76.0 of the Notes in accordance with the terms of the indenture and no later than the fourth quarter of 2025, which amount has been classified as current portion of long-term debt in the consolidated balance sheet as of June 30, 2025.

Credit Facilities

7 unchanged sentences

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 March 31, 2025, the effective interest rate on the term loan A and term loan B was 6.57 % and 8.07 %, respectively.

As of June 30, 2025, the effective interest rate on the term loan A and term loan B was 6.33 % and 8.08 %, respectively.

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 was $ 89.0 outstanding on the Company’s current revolving credit facility and $ 361.0 was available for borrowing as of March 31, 2025.

There was $ 50.0 outstanding on the Company’s revolving credit facility and $ 400.0 was available for borrowing as of June 30, 2025.

No balances were outstanding as of December 31, 2024.

As of March 31, 2025, the effective interest rate on the revolving credit facility was 7.28 %.

There is a commitment fee associated with the revolving credit facility of 0.35 % (per annum and paid quarterly) and an annual $ 0.1 agency fee (paid in quarterly installments).

As of June 30, 2025, the effective interest rate on the revolving credit facility was 6.32 %.

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, 2025, the commitment fee was 0.30 % (per annum and paid quarterly).

The credit facility matures on June 30, 2028.

There were no outstanding letters of credit under the Credit Agreement as of March 31, 2025.

There were no outstanding letters of credit under the Credit Agreement as of June 30, 2025.

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.

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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 March 31, 2025 and believes it will be in compliance with all covenants for a period of at least 12 months from the date these financial statements are issued.

The Company was in compliance with all covenants in the Credit Agreement at June 30, 2025 and believes it will be in compliance with all covenants for a period of at least 12 months from the date these financial statements are issued.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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The table below presents the fair value of the Company’s derivatives on a gross basis and the balance sheet classification of those instruments:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Balance Sheet Classification Asset Liability Asset Liability

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Foreign currency forward contracts Prepaid expenses and other $ 0.3 $ — $ — $ —

Other current liabilities — ( 0.9 ) — ( 1.2 )

The notional amounts of the Company’s interest rate swaps and foreign currency forward contracts were $ 150.0 and $ 256.5 as of March 31, 2025 and $ 150.0 and $ 468.6 as of December 31, 2024, respectively.

Accrued expenses and other — ( 0.5 ) — ( 1.2 )

The notional amounts of the Company’s interest rate swaps and foreign currency forward contracts were $ 150.0 and $ 256.8 as of June 30, 2025 and $ 150.0 and $ 468.6 as of December 31, 2024, respectively.

The following table presents the pre-tax effects of cash flow hedges included in the Company’s condensed consolidated statements of comprehensive loss:

Pre-Tax Gain (Loss) Included in Other Comprehensive Income

Three Months Ended March 31,

Pre-Tax Gain (Loss) Included in Other Comprehensive Income (Loss)

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Interest rate swaps $ ( 0.1 ) $ 0.8 $ ( 0.8 ) $ 3.3

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 March 31,

Amounts Reclassified from Other Comprehensive Income (Loss) into Earnings

Three Months Ended June 30, Six Months Ended June 30,

Statement of Operations Classification 2025 2024 2025 2024

Interest rate swaps Interest expense $ ( 0.1 ) $ ( 0.4 ) $ ( 0.1 ) $ ( 0.8 )

The estimated amount of pre-tax net losses included in other comprehensive loss that is expected to be reclassified into earnings over the twelve months following March 31, 2025, is $ 0.4 .

The estimated amount of pre-tax net losses included in other comprehensive income (loss) that is expected to be reclassified into earnings over the twelve months following June 30, 2025, is $ 0.6 .

Refer to Note 10, “Preferred Stock and Common Shareholders' Equity” for the impact of the Company’s derivative instruments included in accumulated other comprehensive loss.

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Gain (Loss) on Derivatives Recognized in Earnings

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Statement of Operations Classification 2025 2024 2025 2024

Foreign currency forward contracts Foreign exchange gain (loss) $ 0.4 $ ( 0.8 )

Foreign currency forward contracts Foreign exchange loss $ 0.6 $ 0.4 $ 1.0 $ ( 0.4 )

FORTREA HOLDINGS INC.

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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 months ended March 31, 2025, the Company recorded legal expenses of $ 1.9 related to legal matters initiated prior to the spin.

For the three and six months ended June 30, 2025, the Company recorded legal expenses of $ — and $ 1.9 , respectively, related to the settlement of legal matters initiated prior to the spin.

The Company does not believe that any liabilities resulting from claims and legal actions will have a material effect on its financial condition, results of operations or cash flows.

On June 2, 2025, a purported shareholder class action complaint captioned Lucas Deslande v.

Fortrea Holdings Inc., et al.

, No 1:25-sv-04630 was filed in the U.S.

District Court for the Southern District of New York, naming the Company and certain of its current and former officers as defendants.

The complaint alleges that defendants made omissions and misrepresentations to investors that they claim violated certain securities laws.

A motion for lead plaintiff is expected in August, and it is anticipated that an amended complaint will be filed thereafter, to which the Company will respond.

The Company believes it has valid defenses to the claims alleged and intends to vigorously defend itself, but there is no guarantee that the Company will prevail.

The case is at a very early stage and the Company is unable to estimate the possible loss or range of loss, if any, associated with this action.

It was previously disclosed that there was an issue in a customer’s trial caused by a third-party vendor not affiliated with the Company.

As part of working with this customer, the Company made concessions and provide discounts and other consideration to the customer in the amount of $ 12.5 as part of a multi-party solution to facilitate the ongoing trials, of which $ 1.7 was recorded as a reduction of revenue for the three months ended March 31, 2024.

There were no related reductions of revenue during the three months ended March 31, 2025, as the agreed-upon amount had been satisfied.

As part of working with this customer, the Company made concessions and provided discounts and other consideration to the customer in the amount of $ 12.5 as part of a multi-party solution to facilitate the ongoing trials, of which $ 0.4 and $ 2.1 were recorded as a reduction of revenue for the three and six months ended June 30, 2024.

There were no related reductions of revenue during the three and six months ended June 30, 2025, as the agreed-upon amount had been satisfied.

The Company believes that it is in compliance in all material respects with all statutes, regulations, and other requirements applicable to its drug development support services.

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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 March 31, 2025 and December 31, 2024.

There were no preferred shares outstanding as of June 30, 2025 and December 31, 2024.

Stockholder Rights Plan

On June 11, 2025, the Company’s Board of Directors adopted a limited duration stockholder rights plan (the “Rights Agreement”).

Pursuant to the Rights Agreement, on June 11, 2025, the Company’s Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $ 0.001 per share, of the Company (the “Common Shares”) outstanding on June 23, 2025 to the stockholders of record on that date.

Each Right entitles the registered holder to purchase from the Company one one thousandth of a share of Series A Preferred Stock, par value $ 0.001 per share, of the Company (the “Preferred Shares”) at a price of $ 50.00 per one one thousandth of a Preferred Share represented by a Right, subject to adjustment.

Initially, the Rights will be attached to all Common Share certificates and no separate certificates evidencing the Rights will be issued.

Until the Distribution Date (as defined per the Rights Agreement), the Rights will be transferred with and only with the Common Shares.

As long as the Rights are attached to the Common Shares, the Company will issue one Right with each new Common Share so that all such Common Shares will have Rights attached.

The Rights are generally exercisable only in the event that a person or group of affiliated or associated persons (such person or group being an “Acquiring Person”), acquires (or commences a tender offer or exchange offer the consummation of which would result in) beneficial ownership of 10 % or more of the outstanding Common Shares.

In such case (with certain limited exceptions), each holder of a Right (other than the Acquiring Person, whose Rights shall become void) will have the right to receive, upon exercise at the then current exercise price of the Right, Common Shares (or, if the Board so elects, cash, securities, or other property) having a value equal to two times the exercise price of the Right.

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

The Rights will expire at the close of business on June 10, 2026.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Accumulated Other Comprehensive Loss

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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 )

Foreign Currency Translation Adjustments Net Benefit Plan Adjustments Unrealized Gain (Loss) on Derivative Instruments Accumulated Other Comprehensive Loss

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Balance at March 31, 2024 ( 234.4 ) ( 7.4 ) 0.2 ( 241.6 )

For the three months ended March 31, 2025 and 2024, the Company recognized income tax expenses of $ 14.9 and $ 4.1 , respectively, which resulted in effective tax rates of ( 2.7 )% and ( 5.4 )%, respectively.

The effective tax rate for the three months ended March 31, 2025 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, BEAT, non-deductible compensation expenses and withholding taxes for 2025 non-U.S.

earnings that are not permanently reinvested.

The effective tax rate for the three months ended March 31, 2024 was lower than the Company’s statutory tax rate primarily due to a change in valuation allowance, the geographic mix of earnings, and non-deductible compensation expenses.

STOCK COMPENSATION PLANS

The Company granted 5.6 and 0.5 of restricted stock units and performance share awards, respectively, during the three months ended March 31, 2025 with weighted average grant date fair values of $ 10.65 and $ 8.13 per share.

Total stock-based compensation expense and the associated income tax benefits recognized by the Company in the condensed consolidated statements of operations were as follows:

Current quarter foreign exchange adjustments ( 7.7 ) — — ( 7.7 )

Unrealized gain on derivative instruments — — 0.8 0.8

Amounts reclassified from accumulated other comprehensive loss — — ( 0.4 ) ( 0.4 )

Tax effect of adjustments — — ( 0.1 ) ( 0.1 )

Balance at June 30, 2024 $ ( 242.1 ) $ ( 7.4 ) $ 0.5 $ ( 249.0 )

FORTREA HOLDINGS INC.

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(dollars and shares in millions, except per share data)

Three Months Ended March 31,

For the three months ended June 30, 2025 and 2024, the Company recognized income tax expenses of $ 4.2 and $ 10.7 , respectively, which resulted in effective tax rates of ( 1.1 )% and ( 12.1 )%, respectively.

The effective tax rate for the three months ended June 30, 2025 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, BEAT, non-deductible compensation expenses and withholding taxes for 2025 non-U.S.

earnings that are not permanently reinvested.

The effective tax rate for the three months ended June 30, 2024 was lower than the Company’s statutory tax rate primarily due to a change in valuation allowance, earnings mix, and non-deductible compensation expenses.

More specifically, for the quarter ended June 30, 2024, the Company included income tax expense of approximately $ 10.7 primarily due to a forecasted valuation allowance on the deferred tax asset for the carryforward of disallowed interest expense.

This deferred tax asset exists due to limitations imposed under the Internal Revenue Code on the annual deductibility of business interest expense.

This amount resulted in a significant impact to the effective tax rate.

For the six months ended June 30, 2025 and 2024, the Company recognized income tax expense of $ 19.1 and $ 14.8 , respectively, which resulted in effective tax rates of ( 2.1 )% and ( 9.0 )%, respectively.

The effective tax rate for the six months ended June 30, 2025 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, BEAT, non-deductible compensation expenses and withholding taxes for 2025 non-U.S.

earnings that are not permanently reinvested.

The effective tax rate for the six months ended June 30, 2024 was lower than the Company’s statutory tax rate primarily due to a change in the valuation allowance, earnings mix, and non-deductible compensation expenses.

On July 4, 2025, the One Big Beautiful Bill Act of 2025 (the “Tax Act”) was signed into law.

The Tax Act includes substantial changes to the U.S.

federal tax code and broader fiscal policy.

There are several provisions of the Tax Act that will impact the Company’s calculation of its tax position in the future.

The Company is currently assessing the impact of the Tax Act on its condensed consolidated financial statements.

STOCK COMPENSATION PLANS

The Company granted 0.3 and 5.9 of restricted stock units, respectively, during the three and six months ended June 30, 2025 with weighted average grant date fair values of $ 5.14 and $ 10.33 per share.

The Company granted 0.5 of performance share units during the six months ended June 30, 2025 with weighted average grant date fair values of $ 8.13 per share.

Total stock-based compensation expense and the associated income tax benefits recognized by the Company in the condensed consolidated statements of operations were as follows:

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Direct costs $ 17.2 $ 12.4 $ 28.8 $ 21.3

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Income tax benefits $ 3.1 $ 2.3 $ 5.4 $ 4.3

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

SUPPLEMENTAL CASH FLOW INFORMATION

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental schedule of cash flow information:

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Change in accrued property, plant and equipment — ( 0.5 )

Fair value of contingent consideration related to the sale of assets — 39.6

BUSINESS SEGMENT INFORMATION

The following table is a summary of segment information for the three months ended March 31, 2025 and 2024.

The following table is a summary of segment information for the three and six months ended June 30, 2025 and 2024.

The segment information is based upon the way the management of the Company organizes segments within an enterprise for making operating decisions and assessing performance.

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(dollars and shares in millions, except per share data)

Segment operating income for the three months ended March 31, 2025 and 2024 is reconciled to income (loss) from continuing operations before income taxes as follows:

Three Months Ended March 31,

Segment operating income for the three and six months ended June 30, 2025 and 2024 is reconciled to loss from continuing operations before income taxes as follows:

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Revenues $ 710.3 $ 662.4 $ 1,361.6 $ 1,324.5

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

What changed 10-Q

Item 1. Financial Statements