Fortrea Holdings Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Fortria third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press R11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Hema Nguva, Head of Investor Relations and Corporate Development. Please go ahead.

Good morning, and thank you for joining Fortria's third quarter 2023 earnings conference call. I am Bhima Inguba, Head of Investor Relations and Corporate Development at Fortria. On the call with me today are our CEO, Tom Pike, and our CFO, Jill McConnell. The call is being webcasted, and the slides accompanying today's presentation have been posted to the Investor Relations page of our website, fortria.com. During this call, we'll make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to significant risks and uncertainties that could cause actual results to differ materially from our current expectations. We strongly encourage you to review the reports we filed with the SEC regarding these results and uncertainties. In particular, those that are described in the cautionary statement concerning forward-looking statements and risk factors in our press release and presentation that we posted on the website. Please note that any forward-looking statements represent our views as of today, November 13th, 2023, and that we assume no obligation to update the forward-looking statements even if estimates change. During this call, we'll also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or replacement for the comparable GAAP measures, but we believe these measures help investors gain a complete understanding of results. A reconciliation of such non-GAAP financial measures to the most directly comparable gap measures available in the earnings press release and earnings call presentation slide provided in connection with today's call. With that, I'd like to turn the call over to our CEO, Tom Pike. Tom?

Thank you, Hema. Hi, everyone. This is the second earnings call we have done as a public company and the first full quarter where the new management team has been running the newly spun out company. On our last call, we discussed how the year after the spin was announced, been a challenge for Fortrea from a new business quantity and mix standpoint. I also said that based on that sales mix and the cost structure we inherited, that we needed to get our financial health in order. In the third quarter, we adjusted our cost structure for the near-term revenue situation. Every leader of every organization took part. During our last earnings call, we told you that we would benchmark our cost structure to understand more deeply how we compare to peers. We have done that too. We have a lot of work to do to change this company from a division of a division with strong clinical skills and capabilities into a competitive, independent CRO that is the top choice for our customers and delivers results for our public investors. We need to invest in our future while exiting arduous TSAs and delivering a cost structure that is appropriate for a clinical services CRO. This fall, while delivering for customers, we have been planning our course of action for 2024 and 2025. For the next few minutes, I'm going to cover new business, our discussions with customers, and some of our commercial transformation. Then Jill will discuss the numbers, as well as our efforts around investments and operational and SG&A improvements. Finally, I will close with a few thoughts. As we've previously stated, We started the quarter strong in July, and I'm happy to announce that we ended the quarter with a 1.24 book to bill, and importantly, an attractive mix of work. As my leadership team and I visited with large and small customers during the quarter, they're excited to hear the Fortrea story and open to our ideas about how to do clinical research more effectively. We are discussing our investments and focus areas and receiving positive reactions. I spent two weeks in Europe this quarter meeting with customers and our people. In the past two weeks, I've met with three CEOs of top pharmaceutical firms, all of whom want to hear more about what we're doing and how we can work better together. We are at the table. Our strategy is to serve all of biotech and selective larger pharma. Given our size, that is a lot of opportunity. We've been doing work to transform our commercial and customer relationship capabilities to be more effective. This means developing relationships, filling the opportunity funnel, and winning business. It requires select investments in people and systems. I believe the changes we are making will take fully a year to implement to bring the consistency and business impact that we want. In clinical research, sponsors do not change partners overnight, but we are seeing immediate progress. Our pipeline for Q4 is adequate to deliver a solid book to build for the quarter with a healthy mix of work assuming we execute. Building on our past strengths along with the beginnings of our investments to create more distinctive differentiation, we have some interesting wins in the third quarter. Of course, these are just a small sample of the over 3,000 clinical projects that this organization currently touches in some way. Our clinical pharmacology business continues to solidify its leadership standing. We recently announced how a series of investments over the past few years has made a difference for customers as well as volunteers in phase one studies. Our clinical pharmacology expansions, which also included GMP pharmacy capabilities and investments in technology, are complete. These include, for instance, 100% digital bedside capture systems. The clinical pharmacology group secured some meaningful wins in cutting edge early clinical development studies and has a solid pipeline for the fourth quarter. A few examples include an orally administered IL-17 antagonist for treatment of inflammatory and autoimmune diseases, as well as an IL-4 antibody drug conjugate for the treatment of immune inflammatory disease. We were awarded several studies of novel next-generation molecules, including one that modulates a growth factor for the treatment of ALS and another that is a tyrosine kinase inhibitor for cancer. Turning to a few clinical services examples, we saw a large oncology award with one of our full-service large pharma partners. Let me also highlight an award with a mid-sized European firm for one of their newly acquired assets. Based on our level of executive engagement there, we are now entering into a partnership discussion with them to help accomplish their development goals for the next seven to 10 years. Outside of oncology, I would also like to call out two large Phase III fibrosis awards, which contributed over $100 million with another one of our large pharma partner accounts. The most important part of what we do is to delight our customers with delivery. Several oncology programs are achieving milestones faster than planned. For instance, we're meeting enrollment targets ahead of schedule in a complex solid tumor study. We delivered an early database lock in a rare cancer study. Bortrea teams also celebrated with customers when a promising oncology drug received an FDA approval letter and co-presented data with a customer at ESMO, a major conference that recently took place in Europe. This quarter, we closed enrollment on a challenging rare disease study five months ahead of schedule. We delivered a last patient in seven months ahead of schedule in a phase three pediatric metabolic study. Winning in successful delivery and programs are the keys to growth for Fortrea, and we're prioritizing both. Winning takes a great team, and we continue to foster and build our magnet talent. Dr. Jim Bush, who leads our clinical pharmacology physician team, was awarded an honorary fellowship from the prestigious St. George's University of London. Our recently hired chief information security officer, Jim Comelli, was just named a top 100 global CISO. We are adding a top CNS physician to our ranks soon. We've hired Dr. John Doyle, a consulting expert and alumnus advisor, to lead our consulting efforts and help differentiate us. We just hired a recognized expert, artificial intelligence, to lead our important efforts in this space. Now, Jill, please tell us about the numbers, our investments, and our plan to improve margins.