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Fortrea Holdings Inc.

FTRE
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Business Summary

Fortrea Holdings Inc. is a global contract research organization (CRO) that provides biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology, and medical device customers. The company offers phase I through IV clinical trial management, clinical pharmacology, and consulting services. Fortrea operates in approximately 100 countries with a team of approximately 14,300 employees . The company was formed through a spin-off of the CRO business from Labcorp Holdings Inc. on June 29, 2023 . The clinical development market is described as large, attractive, and growing, with phase I-IV clinical development spend by the pharmaceutical and biotechnology industry forecast to be approximately $145 billion in 2026 . Fortrea estimates its current addressable market to be approximately $41 billion .

Fortrea's core business model revolves around providing comprehensive clinical trial solutions through flexible engagement models: Full Service, Functional Service Provider (FSP), and Hybrid structures . Revenue is generated from these services, with a majority earned under long-term contracts ranging from a few months to many years . The company's primary customer segments are pharmaceutical, biotechnology, and medical device organizations, serving a balanced and diverse customer mix . One customer accounted for approximately 18.1% of Fortrea's revenue in 2025 , and 56% of its 2025 revenue came from leading pharmaceutical customers .

The company manages its business in one reporting segment: Clinical Services . This segment encompasses Clinical Pharmacology and Clinical Development. Clinical Pharmacology is a recognized leader in first-in-human and exploratory clinical pharmacology studies, as well as biopharma label support studies. Its solutions include clinical research units (CRUs) in Leeds, U.K. (100 bed capacity), Dallas, Texas (100 bed capacity), Daytona, Florida (88 bed capacity), and Madison, Wisconsin (88 bed capacity) . These CRUs have cGMP pharmacies for on-site drug product manufacture . Clinical Development is Fortrea's largest offering by annual revenue contribution and provides full-service phase I through IV clinical and real-world evidence (RWE) studies. Services include regulatory affairs, protocol design, project management, site monitoring, data management, biostatistics, pharmacovigilance, and medical writing . From January 2020 to December 2024, the company conducted over 5,930 phase I through IV clinical trial projects involving approximately 1,000,000 subjects . The medical device and diagnostics offering conducted over 500 studies during the same period . Consulting Services provide expertise from product development and regulatory strategy to market access and health economics and outcomes research (HEOR), including RWE services .

For the fiscal year ended December 31, 2025, Fortrea reported total revenues of $2,723.4 million , an increase of 1.0% from $2,696.4 million in 2024 . Direct costs, exclusive of depreciation and amortization, increased by 2.7% to $2,219.6 million in 2025 from $2,162.2 million in 2024 , representing 81.5% of revenues compared to 80.2% in 2024 . Selling, general and administrative expenses, exclusive of depreciation and amortization, decreased by 18.6% to $456.4 million in 2025 from $560.7 million in 2024 . The company reported an operating loss of $872.6 million in 2025, compared to an operating loss of $161.9 million in 2024. Net loss for 2025 was $986.2 million , compared to $328.5 million in 2024 . Basic and diluted loss per share from continuing operations was $10.81 in 2025, versus $3.03 in 2024. Cash and cash equivalents stood at $174.6 million as of December 31, 2025, up from $118.5 million in 2024. Total long-term debt, less current portion, was $1,048.0 million at December 31, 2025, compared to $1,049.7 million in 2024. Goodwill, net, was $960.0 million at December 31, 2025, a decrease from $1,710.4 million in 2024.

The 1.0% increase in total revenues for 2025 was driven by a 0.8% increase in organic revenues and favorable foreign currency translation of 0.2% . This organic growth was primarily due to an increase in the clinical pharmacology business, including higher pass-through costs, partially offset by lower clinical development revenues due to the mix of complex and longer-duration studies and lower functional service provider revenue . Direct costs increased as a percentage of revenues to 81.5% in 2025 from 80.2% in 2024, primarily due to increased pass-through costs, stock compensation, direct study-related expenses, reintroduction of variable compensation, and lower R&D tax credits, partially offset by lower headcount and personnel costs from restructuring actions . Selling, general and administrative expenses decreased due to lower transition service agreement and information technology costs, partially offset by increased costs to establish corporate functions and reintroduction of variable compensation . A significant operational development was the sale of the Enabling Services Segment on March 9, 2024, for a final adjusted purchase price of $340.0 million , with $295.0 million paid at closing and two milestone payments of $20.0 million and $25.0 million received in the first and third quarters of 2025, respectively. This transaction resulted in a loss on disposal of $19.6 million . The company also recorded goodwill impairment charges totaling $797.9 million in its Clinical Development reporting unit during the first and second quarters of 2025 .

Business Outlook

Fortrea's growth and margin expansion strategy is built on three pillars: commercial excellence, operational excellence, and financial excellence. The company aims to increase its brand awareness, identify new clients, expand existing relationships, and improve win-rates by leveraging data, analytics, and AI-enabled tools for prospect identification, early engagement, value proposition tailoring, and commercial team upskilling .

A major growth area for Fortrea is leading with scientific and therapeutic expertise and expanding in existing and novel therapeutic areas. The company possesses significant expertise in rapidly growing scientific areas such as oncology, CNS and neurodegenerative disease, metabolic diseases including MASH, immunology and inflammation, cardiovascular, renal, rare disease, cell and gene therapy, and ophthalmology . Oncology, which made up 40% of full-service therapeutic-based revenue in 2025 , remains a key area of unmet medical need and significant R&D investment, presenting ample opportunity for future growth .

Another key growth area is building on strengths in Clinical Pharmacology. Fortrea is a market leader in first-in-human and exploratory clinical pharmacology studies and biopharma label supporting studies . The company is focused on increasing the utilization of its four clinical research units and expanding wraparound services. It seeks to optimize delivery in complex hybrid study designs involving both healthy volunteers and patients, and to expand service offerings into phase 1B studies in patients and serve as investigator sites for phase 2 and vaccine studies .

Operationally, Fortrea is taking a focused, digital-led approach to technology, investing selectively in platforms, data assets, AI, ML, other advanced technologies, and workflow automation to accelerate trial execution and drive quality and simplification . In 2025, the company made progress in modernizing its Xcellerate platform for Risk Based Quality Management, central monitoring, and study oversight . An initial version of its CRA mobile app and digital assistant was released, with plans for scaled rollout and enhanced features . The company also leverages tools like Microsoft ML/AI Foundry and Microsoft Copilot to enhance employee productivity . Fortrea plans to continue investing in these capabilities to generate insights through data and analytics, reduce costs, and increase the speed and efficiency of clinical trial execution . The company also aims to increase its operating margin over time through disciplined pricing, managing business mix, right-sizing the organization to match resources to demand, and improving efficiencies in operations and SG&A .

Regarding capital allocation, capital expenditures were $25.2 million in 2025, representing 0.9% of revenues . These expenditures were primarily for projects supporting growth in core businesses . The company intends to continue selective investments in key therapeutic areas, business areas, and geographies to drive growth and improve operational efficiency, expecting these expenditures to be funded by cash flow from operations . Fortrea does not anticipate paying any cash dividends in the foreseeable future, intending to retain future earnings to finance operations and business expansion . The company has an aggregate principal amount of indebtedness of approximately $1,066.3 million and access to a $450.0 million senior secured revolving credit facility, with $447.7 million available for borrowing as of December 31, 2025 . The company also has a three-year $300.0 million accounts receivable securitization program, which was amended on February 24, 2026, to extend its termination date to February 23, 2029 .

Management explicitly flagged several structural headwinds and execution risks. The CRO market is expected to grow more slowly in the short term before returning to a higher growth rate in the longer term . Risks include customers' ability to access sufficient funding to run clinical trials, the company's ability to generate net new business awards, or new business awards being delayed, terminated, reduced in scope, or failing to go to contract . The company also faces challenges in contracting with suitable investigators and recruiting and enrolling patients for clinical trials . Geopolitical events, such as the current conflicts in Ukraine and the Middle East, are identified as factors that could delay or disrupt the ability to conduct clinical trials . Regulatory changes, such as the Inflation Reduction Act of 2022, which authorizes government negotiated pricing for certain drugs, may reduce pharmaceutical and biotechnology manufacturer revenue and investments in new drug development, potentially decreasing demand for Fortrea's services .

Risk Factors

Fortrea faces several material risks, including the potential for its business, financial condition, results of operations, or cash flows to be materially adversely affected if it does not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract . The company's customer contracts typically allow for termination without cause with 30 to 90 days' notice . An inability to attract and retain experienced and qualified personnel, including key management, and increased personnel costs, could adversely affect the business . International operations expose the company to risks from potential failure to comply with foreign laws and regulations, changes in tax policies, restrictions on currency repatriation, and geopolitical tensions . Customer or therapeutic area concentrations, with one customer accounting for approximately 18.1% of 2025 revenue and the top ten customers representing approximately 57% of consolidated revenue , pose a risk if any large customer materially decreases or terminates its relationship . The company also bears financial risk for fixed-price or fee-for-service contracts that may be underpriced or subject to cost overruns . Failure to comply with privacy and security laws and regulations, such as GDPR, could result in fines up to the greater of €20 million or 4% of worldwide revenue , or £17.5 million or 4% of global annual turnover under the U.K. Data (Use and Access) Act . Issues in the development, deployment, and/or use of AI, including flawed algorithms or biased data, could result in reputational harm, liability, or regulatory action . The company's debt level, approximately $1,066.3 million , requires a substantial portion of cash flow for debt service, reducing funds for working capital and investments .

Management Priorities

Management's message to shareholders emphasizes a commitment to delivering solutions that bring life-changing medicines to patients faster and creating lasting value for all stakeholders, underpinned by four cultural beliefs: Forward Together, Own It, Uphold Integrity, and Respect People . The company's strategic priorities for the period ahead center on three pillars: commercial excellence, operational excellence, and financial excellence . Specific forward-looking statements include the expectation that R&D spend of large biopharmaceutical companies is forecast to grow at approximately 4-5% CAGR over the period 2025-2030 , and that the CRO market is expected to grow more slowly in the short term, and return to a higher growth rate in the longer term . Management believes existing cash and cash flows from operations, plus existing credit facilities, will be sufficient to cover the needs of current and planned operations for at least the next 12 months . They also anticipate that with revenue growth, they can drive operating leverage across both operations and SG&A .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Overview
  2. [2] Item 1, Business — Overview
  3. [3] Item 1, Business — Overview
  4. [4] Item 1, Business — Overview
  5. [5] Item 1, Business — Overview
  6. [6] Item 1, Business — Market Opportunity
  7. [7] Item 1, Business — Market Opportunity
  8. [8] Item 1, Business — Overview
  9. [9] Item 7, MD&A — Critical Accounting Policies and Estimates
  10. [10] Item 1, Business — Competitive Strengths
  11. [11] Item 1, Business — Competitive Strengths
  12. [12] Item 1, Business — Competitive Strengths
  13. [13] Item 1, Business — Overview
  14. [14] Item 1, Business — Our Business
  15. [15] Item 1, Business — Our Business
  16. [16] Item 1, Business — Our Business
  17. [17] Item 1, Business — Our Business
  18. [18] Item 1, Business — Our Business
  19. [19] Item 1, Business — Our Business
  20. [20] Item 7, MD&A — Revenues
  21. [21] Item 7, MD&A — Revenues
  22. [22] Item 7, MD&A — Direct Costs, Exclusive of Depreciation and Amortization
  23. [23] Item 7, MD&A — Direct Costs, Exclusive of Depreciation and Amortization
  24. [24] Item 7, MD&A — Direct Costs, Exclusive of Depreciation and Amortization
  25. [25] Item 7, MD&A — Direct Costs, Exclusive of Depreciation and Amortization
  26. [26] Item 7, MD&A — Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
  27. [27] Item 7, MD&A — Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
  28. [28] Item 7, MD&A — Results of Continuing Operations for the years ended December 31, 2025 and 2024
  29. [29] Item 7, MD&A — Results of Continuing Operations for the years ended December 31, 2025 and 2024
  30. [30] Item 8, Consolidated and Combined Statements of Operations
  31. [31] Item 8, Consolidated and Combined Statements of Operations
  32. [32] Item 8, Consolidated and Combined Statements of Operations
  33. [33] Item 8, Consolidated and Combined Statements of Operations
  34. [34] Item 7, MD&A — Cash and Cash Equivalents
  35. [35] Item 7, MD&A — Cash and Cash Equivalents
  36. [36] Item 11, Debt — Long-term debt consisted of the following
  37. [37] Item 11, Debt — Long-term debt consisted of the following
  38. [38] Item 10, Goodwill and Intangible Assets — The changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024 are as follows
  39. [39] Item 10, Goodwill and Intangible Assets — The changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024 are as follows
  40. [40] Item 7, MD&A — Revenues
  41. [41] Item 7, MD&A — Revenues
  42. [42] Item 7, MD&A — Revenues
  43. [43] Item 7, MD&A — Direct Costs, Exclusive of Depreciation and Amortization
  44. [44] Item 7, MD&A — Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
  45. [45] Item 7, MD&A — Sale of Assets Relating to the Enabling Services Segment
  46. [46] Item 7, MD&A — Sale of Assets Relating to the Enabling Services Segment
  47. [47] Item 7, MD&A — Sale of Assets Relating to the Enabling Services Segment
  48. [48] Item 7, MD&A — Sale of Assets Relating to the Enabling Services Segment
  49. [49] Item 7, MD&A — Sale of Assets Relating to the Enabling Services Segment
  50. [50] Item 7, MD&A — Goodwill and Other Asset Impairments
  51. [51] Item 7, MD&A — Goodwill and Other Asset Impairments
  52. [52] Item 1, Business — Growth and Margin Expansion Strategy
  53. [53] Item 1, Business — Growth and Margin Expansion Strategy
  54. [54] Item 1, Business — Competitive Strengths
  55. [55] Item 1, Business — Growth and Margin Expansion Strategy
  56. [56] Item 1, Business — Growth and Margin Expansion Strategy
  57. [57] Item 1, Business — Growth and Margin Expansion Strategy
  58. [58] Item 1, Business — Growth and Margin Expansion Strategy
  59. [59] Item 1, Business — Growth and Margin Expansion Strategy
  60. [60] Item 1, Business — Growth and Margin Expansion Strategy
  61. [61] Item 1, Business — Growth and Margin Expansion Strategy
  62. [62] Item 1, Business — Growth and Margin Expansion Strategy
  63. [63] Item 1, Business — Margin Expansion
  64. [64] Item 7, MD&A — Cash Flows from Investing Activities
  65. [65] Item 7, MD&A — Cash Flows from Investing Activities
  66. [66] Item 7, MD&A — Cash Flows from Investing Activities
  67. [67] Item 7, MD&A — Cash Flows from Investing Activities
  68. [68] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  69. [69] Item 7A, Quantitative and Qualitative Disclosures About Market Risk
  70. [70] Item 7, MD&A — Liquidity, Capital Resources and Financial Position
  71. [71] Item 7, MD&A — Receivables Securitization Program
  72. [72] Item 1, Business — Market Opportunity
  73. [73] Item 1, Business — Market Opportunity
  74. [74] Item 1, Business — Market Opportunity
  75. [75] Item 1A, Risk Factors — 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
  76. [76] Item 1A, Risk Factors — Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that we provide
  77. [77] Item 1A, Risk Factors — If we do not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected
  78. [78] Item 1A, Risk Factors — If we do not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected
  79. [79] Item 1A, Risk Factors — An inability to attract and retain experienced and qualified personnel, including key management personnel, and increased personnel costs, could adversely affect our business
  80. [80] Item 1A, Risk Factors — Our international operations could subject us to additional risks and expenses that could adversely impact our business or results of operations
  81. [81] Item 1A, Risk Factors — Our customer or therapeutic area concentrations may have a material adverse effect on our business, financial condition, results of operations or cash flows
  82. [82] Item 1A, Risk Factors — Our customer or therapeutic area concentrations may have a material adverse effect on our business, financial condition, results of operations or cash flows
  83. [83] Item 1A, Risk Factors — Our customer or therapeutic area concentrations may have a material adverse effect on our business, financial condition, results of operations or cash flows
  84. [84] Item 1A, Risk Factors — We bear financial risk for contracts that, including for reasons beyond our control, may be underpriced, subject to cost overruns, delayed, or terminated or reduced in scope
  85. [85] Item 1A, Risk Factors — 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
  86. [86] Item 1A, Risk Factors — 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
  87. [87] Item 1A, Risk Factors — Issues in the development, deployment and/or use of AI may result in reputational harm, liability, regulatory action or adversely affect our business, financial condition or results of operations
  88. [88] Item 1A, Risk Factors — Costs associated with our debt and our debt covenant requirements may limit cash flow available to invest in the ongoing needs of our business
  89. [89] Item 1A, Risk Factors — Costs associated with our debt and our debt covenant requirements may limit cash flow available to invest in the ongoing needs of our business
  90. [90] Item 1, Business — Create an Inclusive Culture for Careers with Meaning as a Competitive Advantage
  91. [91] Item 1, Business — Growth and Margin Expansion Strategy
  92. [92] Item 1, Business — Market Opportunity
  93. [93] Item 1, Business — Market Opportunity
  94. [94] Item 7, MD&A — Liquidity, Capital Resources and Financial Position
  95. [95] Item 1, Business — Margin Expansion

Analysis on 5/21/2026