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The call balanced clear operational and commercial progress (book-to-bill >1.1x, adjusted EBITDA growth, large backlog, strong cost savings, FIT launch, China momentum and improved cash flow metrics) against near-term revenue pressure driven by lower pass-throughs and FSP pricing concessions, customer concentration and continued negative (though improved) Q1 cash flow. Management reiterated full-year guidance and a multi-year plan to reach mid-teens adjusted EBITDA margins. Overall, the positive operational, financial and commercial momentum and materially improved profitability and cash metrics outweigh the listed headwinds.
Fortrea reiterated full‑year 2026 guidance of $2.55–2.65 billion in revenue and $190–220 million in adjusted EBITDA while targeting mid‑teens adjusted EBITDA margins over the next 3–5 years; management expects a modest sequential revenue increase in Q2 and a slight step‑up in adjusted EBITDA (partly offset by higher variable compensation). Q1 underpinned the outlook with revenue of $636.5M, adjusted EBITDA $47M, book‑to‑bill 1.15x (TTM 1.05x), backlog $7.8B and backlog burn 8.2%; Q1 results also included net loss $23.6M, adjusted net income $15.2M (adj. EPS $0.16), operating cash flow −$17M and free cash flow −$25M, DSO 20 days and net A/R & unbilled $619.6M. Management reported nearly $16M of gross and >$9M of net quarterly cost savings toward full‑year targets of $70–80M gross / $40–50M net, reiterated plans to be operating cash‑flow positive in the remainder of 2026, noted available liquidity in excess of $0.5B, and highlighted ~35% of original debt repaid since the spin.
Q1 book-to-bill of 1.15x and trailing 12-month book-to-bill of 1.05x, marking the third consecutive quarter with book-to-bill >= 1.1x and indicating improving sales execution and pipeline momentum (notably new-to-Fortrea biotech wins).
First quarter revenue of $636.5 million and backlog of $7.8 billion, with management reiterating full-year 2026 revenue guidance of $2.55 billion to $2.65 billion.
Adjusted EBITDA of $47.0 million in Q1, up from $30.3 million in prior year (+~55% YoY), driven primarily by cost savings and improved project mix; adjusted net income of $15.2 million (vs $1.9 million prior year) and adjusted EPS of $0.16.
Operating cash flow improved to negative $17 million (vs negative $124.2 million prior year) and free cash flow improved to negative $25 million (vs negative $127.1 million prior year); available liquidity in excess of $0.5 billion and reduced interest expense ($19.1M, down $3.2M YoY) following prior debt repurchases.
Q1 delivered nearly $16 million of gross cost savings and over $9 million net savings, against full-year targets of $70-$80 million gross and $40-$50 million net, helping drive margin expansion.
Launched Fortrea Intelligent Technology (FIT), an AI-enabled integrated platform strategy embedded into Xcellerate; initial market reception positive and expected to support win rates, efficiency and long-term differentiation.
Reported double-digit growth in China pipeline opportunities and notable wins; Leeds clinical research unit performed first-in-human dosing in patients for an immune thrombocytopenia program, and clinical pharmacology authorizations had strongest Q1 since founding.
Improvements in site activation/start-up timelines, expanded global site navigator program (including China and Japan), steady improvement in Net Promoter Score, and industry leadership (Chief Quality Officer voted ACRO Chair).
Management reiterated pathway to mid-teens adjusted EBITDA margin over the next 3-5 years, driven by revenue diversification, growth and continued cost/efficiency actions.
Welcome to the Fortrea First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Tracy Krumme. Senior Vice President of Investor Relations. Please go ahead.
Thank you. Good morning, everyone, and welcome to Fortrea's First Quarter 2026 Earnings Conference Call. With me today on the call is Anshul Thakral, Chief Executive Officer; and Jill McConnell, Chief Financial Officer. Before we begin, please note this call is being webcast. There is an accompanying slide presentation which can be found on the Investor Relations section of our website, fortrea.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 filed with the SEC regarding these risks 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 are posted on our website.
Please note that any forward-looking statements represent our views as of today, May 5, 2026, and that we assume no obligation to update the forward-looking statements even if estimates change. During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures a...