Fortrea Holdings Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Fortria's second quarter 2024 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 would need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 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 second quarter 2024 earnings conference call. I am Hema Nguva, Head of Investor Relations and Corporate Development at Fortria. On the call with me today are our CEO, Tom Pike, and CFO, Jill McConnell. The call is being webcasted, and the slides accompanying today's presentation have been posted to our investor relations page for TRIA.com. During this call, we'll make certain forward-looking statements within the meaning of 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 report we filed with the SEC regarding these risks and uncertainties. In particular, those that are described in the cautionary statement regarding 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, August 12, 2024, 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 more complete understanding of results. Reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call. With that, I'd like to turn it over to our CEO, Tom Pike. Tom?

Good morning, everyone. Welcome to the call. Let me start by saying that Portria had a solid quarter of execution and progress on our strategic objectives, despite some difficulty predicting when biotech opportunities would contract that impacted our book to bill. As you know, Portria is a pure play CRO that offers end-to-end solutions for clinical trials across phases one through four. We have a strong track record of delivering high-quality services to our customers, ranging from small biotech startups to large pharma companies. We believe we have a strong value proposition in the market as we combine 30 years of experience, deep scientific expertise, operational excellence, and innovative technology to deliver faster, better, more cost-effective outcomes for our customers. We also have a diversified and balanced portfolio of projects and a healthy mix of short- and long-term contracts. as well as broad exposure to different geographies and indications. In the second quarter, we saw some positive signs of improvements in our business. Let me share with you some of the highs and lows of the quarter, and then we'll talk in more detail about what we see for our second half bookings. First, the highlights. We signed several deals and partnerships with top 20 pharma customers, including one new full-service outsourcing partnership. The other deals are solid footholds into larger customers. Our pipeline of opportunities continues to improve in both value and mix, and our win rates are solid. More on that in a couple of minutes. We've exited about 60% of the TSA agreements with our former parent and are making good progress on the most difficult part, the transition of software, servers, and other technology. We delevered the balance sheet, and finally, We have a clear line of sight to improving our margins while delivering quality work and started planning for 2025. I will give you some detail on some of these highlights and Jill will fill in on others. Our new offerings and approaches to partnering with large pharma are gaining traction. This quarter we beat out four of the big six CROs to be selected as one of only two providers in an attractive full-service partnership with a larger pharmaceutical firm. The customer noted how Fortrea showed up differently to the opportunities than others under consideration. The increased bookings and revenue from this win should be felt in 2025. As I mentioned, we had some nice wins in a couple of other large pharma firms too. In one situation would be two larger incumbents take over an important clinical services opportunity and consolidate what was three vendors into one. We also got a nice win in foothold in a third even larger pharmaceutical firm. We've begun to see additional opportunities from these customers. Our clinical pharmacology business continues to be strong with attractive book-to-bills, customers, and indications. We're also seeing increasing momentum in transferring the impressive relationships we have in clinical pharmacology into Phase 1B and 2. We have a significant number of opportunities and have increased our win rate where decisions have been made. These relationships are based on the deep scientific knowledge we've brought to the table, working in some inspiring new modalities that include metabolic, neurodegenerative, immunology, and more. We had some good wins in biotech in areas such as oncology, ophthalmology, and dermatology. Recently, I met with the CEO of an ophthalmology biotech who has a great product, and they raved about our success to date with an important and challenging trial. In the second quarter, we also announced two offerings that reflect areas of strength for Fortrea. The first was our diversity and inclusion solution, which is designed to expand patient access to clinical trials and address the US FDA requirements to increase enrollment of underrepresented populations in clinical trials. The solution incorporates our consulting expertise, real-world evidence data, comprehensive planning, implementation, and measurement methodology. We've had a very nice response to this solution and have gained significant experience in this area, working on more than 40 diversity action plans in the past year. Greater productivity in clinical trials has become critical for the industry, and Fortria is centering itself on this value proposition. We are developing changes to roles, processes, partnerships, and technology. As part of this effort, another offering that we announced in the second quarter was the launch of their AI Innovation Studio, which will develop and deploy AI and ML technologies to drive productivity, quality, and enhance site and patient experiences, as well as safety and clinical research. Vortria's Innovation Studio is a fresh take on AI for CROs, very forward-looking and collaborative, yet still cost-effective. I'm looking forward to seeing what productivity ideas emerge from the studio in collaboration with our forward-leaning customers. We're hoping to share some of this with investors and analysts later this year. In another development, our therapeutic strategy leaders, who are some of our key medical doctors, now prepare strategies for increasing our impact and share in various therapeutic areas. They identified the movers and shakers, interesting mechanisms, as well as what we need to do and offerings we need to have to increase our share of the pie with biotechs and large pharma. Overall, we're strengthening our offerings and it's getting noticed. Fortrea was recognized in the second quarter for the first time as an independent company with CRO Leadership Awards sponsored by Clinical Leader in four categories, capabilities, expertise, quality, and reliability. These awards are based on an independent survey which compiled feedback that customers provide on CROs that they have worked with on a project during the past 16 months. Now, let me address the low light of the quarter that spills into some of our other results. Our book to bill for this quarter was just under one. Since we're a new public company, we'll try to give you more color on what happened. During Q2, we said to you, if we execute, we can meet our target of 1.2 book to bill. Let me explain why we thought that. Our pipeline at the beginning of Q2 was larger than any quarter since the beginning of 2022. In fact, it was 11% higher than the average of the three prior quarters, and our win rates have been solid. Overall, about half of our work is with biotechs. We're experienced at working with biotech companies and are optimistic about our capability to deliver attractive biotech solutions that fuel growth for Pretria. At the same time, contracting in this space can be uncertain, and we're finding it is harder to predict when the final contract will be executed. In the first half, our mix was slanted toward biotech. We're making changes to address the disappointing predictions and bookings these past two quarters. Unfortunately, two quarters of sub 1.2 bookings impacts our guidance and some other key targets. Now let me turn to our pipeline for the back half of the year. As I mentioned, our pipeline at the beginning of Q2 was 11% greater than our average of the prior three quarters. Q3 and Q4 of last year, we delivered that 1.2 book to bill or better. The pipeline at the beginning of this quarter, Q3, is even greater than it was in Q2. In fact, it's 7.5% greater than it was. It also has more large pharma, which is encouraging. We're seeing our large pharma partners coming through their internal processes with RFP flow returning. We also feel good about Q4. As we sit here today, the second half overall has more qualified opportunities than any upcoming two quarters since we've been public. The pipeline is very attractive. In addition, the new and refreshed partnerships should contribute more opportunities in 2025. Now let me hand over to Jill. She'll comment on the numbers in more detail and our transformation margin improvement programs. Then I'll wrap up with some comments about the remainder of the year in 2025.