For the three months and full year ended
- Revenues of
$775.4 million for the fourth quarter,$3,109.0 million for the full year - GAAP net loss of
$(36.0) million for the fourth quarter,$(3.4) million for the full year - Adjusted EBITDA of
$67.2 million for the fourth quarter,$267.3 million for the full year - Fourth-quarter book-to-bill ratio of 1.30x
- Revenues of
“Fortrea successfully navigated the second half 2023 transforming a “division of a division” into a leader in clinical development,” said
Fourth Quarter 2023 Financial Results
Revenue for the fourth quarter was
Fourth quarter GAAP net loss was
Fortrea’s book-to-bill ratio was 1.30x for the fourth quarter of 2023, achieving the target of more than 1.2x for its first six months as an independent organization.
Full Year 2023 Financial Results
Revenue for the full year was
Full year GAAP net loss was
Backlog as of
The Company’s cash and cash equivalents were
2024 Financial Guidance
For the full year 2024, the Company targets revenues in the range of
Other Developments
On
Earnings Call and Replay
Fortrea will host a conference call at
A replay of the live conference call will be available shortly after the conclusion of the event and accessible on the events and presentations section of the Fortrea website. A supplemental slide presentation will also be available on the Fortrea Investor Relations website prior to the start of the call.
About Fortrea
Fortrea (Nasdaq: FTRE) is a leading global provider of clinical development and patient access solutions to the life sciences industry. We partner with emerging and large biopharmaceutical, biotechnology, medical device and diagnostic companies to drive healthcare innovation that accelerates life-changing therapies to patients. Fortrea provides phase I-IV clinical trial management, clinical pharmacology, consulting services, differentiated technology enabled trial solutions and post-approval services.
Fortrea’s solutions leverage three decades of experience spanning more than 20 therapeutic areas, a passion for scientific rigor, exceptional insights and a strong investigator site network. Our talented and diverse team of approximately 18,000 people working in more than 90 countries is scaled to deliver focused and agile solutions to customers globally.
Learn more about how Fortrea is becoming a transformative force from pipeline to patient at Fortrea.com and follow us on LinkedIn and X (formerly Twitter) @Fortrea.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, the Company’s 2024 financial guidance and the revenue growth and the transformation to meet industry expectations of costs. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “guidance,” “expect,” “assume,” “anticipate,” “intend,” “plan,” “forecast,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words that are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from the Company’s expectations due to a number of factors, including, but not limited to, the following: if the Company does not realize some or all of the benefits expected to result from the spin-off of the Company (the “Spin”) from Laboratory Corporation of America Holdings (“Labcorp”), or if such benefits are delayed; risks and consequences that are a result of the Spin; the impacts of becoming an independent public company; the Company’s reliance on Labcorp to provide financial reporting and other financial and accounting information for periods prior to the Spin through the end of the relevant transition agreements, as well as IT, accounting, finance, legal, human resources, and other services critical to the Company’s businesses; the Company’s dependence on third parties generally to provide services critical to the Company’s businesses throughout the transition period and beyond; the establishment of the Company’s accounting, enterprise resource planning, and other management systems post the transition period, which could cost more or take longer than anticipated; the impact of the rebranding of the Company; the Company’s ability to successfully implement the Company’s business strategies and execute the Company’s long-term value creation strategy; risks and expenses associated with the Company’s international operations and currency fluctuations; the Company’s customer or therapeutic area concentrations; any further deterioration in the macroeconomic environment, which could lead to defaults or cancellations by the Company’s customers; the risk that the Company’s backlog and net new business may not be indicative of the Company’s future revenues and that the Company might not realize all of the anticipated future revenue reflected in the Company’s backlog; the Company’s ability to generate sufficient net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract; if the Company underprices the Company’s contracts, overrun the Company’s cost estimates, or fail to receive approval for, or experience delays in documentation of change orders; the Company’s ability to complete the divestiture of Endpoint Clinical and Fortrea Patient Access businesses on time or at all; the Company’s ability to realize the full purchase price for the divestiture transaction; the Company’s ability to realize the benefits of the asset divestiture transaction; and other factors described from time to time in documents that the Company files with the
Note on Non-GAAP Financial Measures
This release includes information based on financial measures that are not recognized under generally accepted accounting principles in
The Company uses non-GAAP measures in its operational and financial decision making and believes that it is useful to exclude certain items in order to focus on what it regards to be a more meaningful indicator of the underlying operating performance of the business. For example, in calculating Adjusted EBITDA, the Company excludes all the amortization of intangible assets associated with acquired customer relationships and backlog, databases, non-compete agreements and trademarks, trade names and other from non-GAAP expense and income measures as such amounts can be significantly impacted by the timing and size of acquisitions. Although the Company excludes amortization of acquired intangible assets from the Company’s non-GAAP expenses, the Company believes that it is important for investors to understand that revenue generated from such intangibles is included within revenue in determining net income attributable to the Company. As a result, internal management reports feature non-GAAP measures which are also used to prepare strategic plans and annual budgets and review management compensation. The Company also believes that investors may find non-GAAP financial measures useful for the same reasons, although investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures.
The non-GAAP financial measures are not presented in accordance with GAAP. Please refer to the schedules attached to this release for relevant definitions and reconciliations of non-GAAP financial measures contained herein to the most directly comparable GAAP measures. The Company’s full-year 2024 guidance measures (other than revenue) are provided on a non-GAAP basis without a reconciliation to the most directly comparable GAAP measure because the Company is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures without unreasonable efforts. Such items include, but are not limited to, acquisition-related expenses, restructuring and related expenses, stock-based compensation and other items not reflective of the Company's ongoing operations.
Non-GAAP measures are frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to the Company, many of which present non-GAAP measures when reporting their results. Non-GAAP measures have limitations as an analytical tool. They are not presentations made in accordance with GAAP, are not measures of financial condition or liquidity and should not be considered as an alternative to profit or loss for the period determined in accordance with GAAP or operating cash flows determined in accordance with GAAP. Non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider such performance measures in isolation from, or as a substitute analysis for, the Company’s results of operations as determined in accordance with GAAP.
Fortrea Contacts
Hima Inguva (Investors) – 877-495-0816, hima.inguva@fortrea.com
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS | |||||||||||||||
(in millions, except per share data) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenues | $ | 775.4 | $ | 761.7 | $ | 3,109.0 | $ | 3,096.1 | |||||||
Costs and expenses: | |||||||||||||||
Direct costs, exclusive of depreciation and amortization (including costs incurred from related parties of | 655.7 | 599.8 | 2,588.6 | 2,447.4 | |||||||||||
Selling, general and administrative expenses, exclusive of depreciation and amortization | 98.9 | 63.3 | 336.6 | 279.8 | |||||||||||
Depreciation and amortization | 23.9 | 23.0 | 96.4 | 92.7 | |||||||||||
— | 9.8 | — | 9.8 | ||||||||||||
Restructuring and other charges | 7.6 | 2.7 | 24.3 | 30.5 | |||||||||||
Total costs and expenses | 786.1 | 698.6 | 3,045.9 | 2,860.2 | |||||||||||
Operating income (loss) | (10.7 | ) | 63.1 | 63.1 | 235.9 | ||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (34.5 | ) | (0.2 | ) | (69.8 | ) | (0.2 | ) | |||||||
Foreign exchange gain (loss) | 1.9 | (22.0 | ) | 0.9 | (0.9 | ) | |||||||||
Other, net | 2.3 | 0.8 | 6.9 | 2.2 | |||||||||||
Net income (loss) before income taxes | (41.0 | ) | 41.7 | 1.1 | 237.0 | ||||||||||
Provision for (benefit from) income taxes | (5.0 | ) | 8.3 | 4.5 | 44.1 | ||||||||||
Net income (loss) | $ | (36.0 | ) | $ | 33.4 | $ | (3.4 | ) | $ | 192.9 | |||||
Earnings (loss) per common share | |||||||||||||||
Basic | $ | (0.41 | ) | $ | 0.38 | $ | (0.04 | ) | $ | 2.17 | |||||
Diluted | $ | (0.41 | ) | $ | 0.38 | $ | (0.04 | ) | $ | 2.17 |
CONSOLIDATED AND COMBINED BALANCE SHEETS | |||||||
(dollars and shares in millions) | |||||||
2023 | 2022 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 108.6 | $ | 112.0 | |||
Accounts receivable and unbilled services, net | 1,052.1 | 1,022.2 | |||||
Prepaid expenses and other | 92.4 | 112.7 | |||||
Total current assets | 1,253.1 | 1,246.9 | |||||
Property, plant and equipment, net | 220.9 | 164.9 | |||||
2,029.3 | 1,997.3 | ||||||
Intangible assets, net | 771.2 | 823.3 | |||||
Deferred income taxes | 3.2 | 1.2 | |||||
Other assets, net | 79.5 | 54.3 | |||||
Total assets | $ | 4,357.2 | $ | 4,287.9 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 132.8 | $ | 81.5 | |||
Accrued expenses and other current liabilities | 356.1 | 322.7 | |||||
Unearned revenue | 241.4 | 271.5 | |||||
Current portion of long-term debt | 26.1 | — | |||||
Short-term operating lease liabilities | 19.5 | 23.3 | |||||
Total current liabilities | 775.9 | 699.0 | |||||
Long-term debt, less current portion | 1,565.9 | — | |||||
Operating lease liabilities | 66.5 | 40.1 | |||||
Deferred income taxes and other tax liabilities | 148.8 | 184.5 | |||||
Other liabilities | 61.3 | 21.7 | |||||
Total liabilities | 2,618.4 | 945.3 | |||||
Commitments and contingent liabilities | |||||||
Equity | |||||||
Former parent investment | — | 3,618.6 | |||||
Common stock, 88.8 and 0.0 shares outstanding on | 0.1 | — | |||||
Additional paid-in capital | 2,006.2 | — | |||||
Accumulated deficit | (49.1 | ) | — | ||||
Accumulated other comprehensive loss | (218.4 | ) | (276.0 | ) | |||
Total equity | 1,738.8 | 3,342.6 | |||||
Total liabilities and equity | $ | 4,357.2 | $ | 4,287.9 |
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS | |||||||
(in millions) | |||||||
Years Ended | |||||||
2023 | 2022 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | (3.4 | ) | $ | 192.9 | ||
Adjustments to reconcile net earnings to net cash provided by (used for) operating activities: | |||||||
Depreciation and amortization | 96.4 | 92.7 | |||||
Stock compensation | 42.7 | 25.4 | |||||
Operating lease right-of-use asset expense | 27.4 | 24.9 | |||||
— | 9.8 | ||||||
Deferred income taxes | (40.5 | ) | (16.5 | ) | |||
Other, net | (1.0 | ) | 4.1 | ||||
Changes in assets and liabilities: | |||||||
Increase in accounts receivable and unbilled services, net | (28.8 | ) | (105.0 | ) | |||
Increase in prepaid expenses and other | (2.0 | ) | (12.2 | ) | |||
Increase in accounts payable | 51.1 | 22.4 | |||||
Decrease in unearned revenue | (3.4 | ) | (32.5 | ) | |||
Increase (decrease) in accrued expenses and other | 28.9 | (118.5 | ) | ||||
Net cash provided by operating activities | 167.4 | 87.5 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital expenditures | (40.3 | ) | (54.4 | ) | |||
Proceeds from sale of assets | 8.5 | 0.4 | |||||
Net cash used for investing activities | (31.8 | ) | (54.0 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from revolving credit facilities | 164.0 | — | |||||
Payments on revolving credit facilities | (164.0 | ) | — | ||||
Proceeds from term loans | 1,061.4 | — | |||||
Proceeds from issuance of senior notes | 570.0 | — | |||||
Debt issuance costs | (26.4 | ) | — | ||||
Principal payments of long-term debt | (15.4 | ) | — | ||||
Special payment to Former Parent | (1,595.0 | ) | — | ||||
Net transfers (to) Former Parent | (133.6 | ) | (8.7 | ) | |||
Net cash used for financing activities | (139.0 | ) | (8.7 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | — | (7.4 | ) | ||||
Net (decrease) increase change in cash and cash equivalents | (3.4 | ) | 17.4 | ||||
Cash and cash equivalents at beginning of period | 112.0 | 94.6 | |||||
Cash and cash equivalents at end of period | $ | 108.6 | $ | 112.0 |
RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||
NET INCOME TO ADJUSTED EBITDA RECONCILIATION | |||||||||||||||
(in millions) | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Adjusted EBITDA: | |||||||||||||||
Net income (loss) | $ | (36.0 | ) | $ | 33.4 | $ | (3.4 | ) | $ | 192.9 | |||||
Provision for (benefit from) income taxes | (5.0 | ) | 8.3 | 4.5 | 44.1 | ||||||||||
Interest expense, net | 34.5 | 0.2 | 69.8 | 0.2 | |||||||||||
Foreign exchange (gain) loss | (1.9 | ) | 22.0 | (0.9 | ) | 0.9 | |||||||||
Depreciation and amortization (a) | 23.9 | 23.0 | 96.4 | 92.7 | |||||||||||
— | 9.8 | — | 9.8 | ||||||||||||
Restructuring and other charges (c) | 7.6 | 2.7 | 26.9 | 30.5 | |||||||||||
Stock based compensation | 15.5 | 5.8 | 42.7 | 25.4 | |||||||||||
One-time spin related costs (d) | 25.2 | — | 31.7 | — | |||||||||||
Customer matter (e) | 5.5 | — | 5.5 | — | |||||||||||
Acquisition and disposition-related costs(f) | — | 2.3 | — | 3.9 | |||||||||||
Other | (2.1 | ) | 2.3 | (5.9 | ) | 4.7 | |||||||||
Adjusted EBITDA | $ | 67.2 | $ | 109.8 | $ | 267.3 | $ | 405.1 |
(a) Amortization represents amortization of intangible assets acquired as part of business acquisitions.
(b) During 2022, impairment of identifiable intangible assets of
(c) Restructuring and other charges represent amounts incurred in connection with the elimination of redundant positions to reduce overcapacity, align resources, and restructure certain operations.
(d) Represents one-time or incremental costs required to implement capabilities to exit transition services agreements.
(e) As part of working with the customer, the Company has agreed to make concessions and provide discounts and other consideration to the customer as part of a multi-party solution. The Company’s contribution to the customer is approximately
(f) Acquisition and disposition-related costs include due-diligence legal and advisory fees, retention bonuses and other integration or disposition-related activities.
NET INCOME TO ADJUSTED NET INCOME RECONCILIATION | ||||||||||||||||
(dollars and shares in millions, except per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Adjusted net income (loss): | ||||||||||||||||
Net income (loss) | $ | (36.0 | ) | $ | 33.4 | $ | (3.4 | ) | $ | 192.9 | ||||||
Foreign exchange (gain)/loss | (1.9 | ) | 22.0 | (0.9 | ) | 0.9 | ||||||||||
Amortization (a) | 15.9 | 16.0 | 63.8 | 65.7 | ||||||||||||
Restructuring and other charges (b) | 7.6 | 2.7 | 26.9 | 30.5 | ||||||||||||
Stock based compensation | 15.5 | 5.8 | 42.7 | 25.4 | ||||||||||||
— | 9.8 | — | 9.8 | |||||||||||||
Acquisition and disposition-related costs (d) | — | 2.3 | — | 3.9 | ||||||||||||
One-time spin related costs (e) | 25.2 | — | 31.7 | — | ||||||||||||
Customer matter (f) | 5.5 | — | 5.5 | — | ||||||||||||
Other | (2.1 | ) | 2.3 | (5.9 | ) | 4.7 | ||||||||||
Income tax impact of adjustments (g) | (13.1 | ) | (12.7 | ) | (35.9 | ) | (31.6 | ) | ||||||||
Adjusted net income (loss) | $ | 16.6 | $ | 81.6 | $ | 124.5 | $ | 302.2 | ||||||||
Basic shares | 88.8 | 88.8 | 88.8 | 88.8 | ||||||||||||
Diluted shares | 89.7 | 88.8 | 89.0 | 88.8 | ||||||||||||
Adjusted basic EPS | $ | 0.19 | $ | 0.92 | $ | 1.40 | $ | 3.40 | ||||||||
Adjusted diluted EPS | $ | 0.19 | $ | 0.92 | $ | 1.40 | $ | 3.40 |
(a) Represents amortization of intangible assets acquired as part of business acquisitions.
(b) Restructuring and other charges represent amounts incurred in connection with the elimination of redundant positions to reduce overcapacity, align resources, and restructure certain operations.
(c) During 2022, impairment of identifiable intangible assets of
(d) Acquisition and disposition-related costs include due-diligence legal and advisory fees, retention bonuses and other integration or disposition-related activities.
(e) Represents one-time or incremental costs required to implement capabilities to exit transition services agreements.
(f) As part of working with the customer, the Company has agreed to make concessions and provide discounts and other consideration to the customer as part of a multi-party solution. The Company’s contribution to the customer is approximately
(g) Income tax impact of adjustments calculated based on the tax rate applicable to each item.
NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW RECONCILIATION | ||||
(in millions) | ||||
(unaudited) | ||||
Year Ended | ||||
Net cash provided by operating activities | $ | 167.4 | ||
Capital expenditures | (40.3 | ) | ||
Free cash flow | $ | 127.1 |
Source:
2024 GlobeNewswire, Inc., source