Jill McConnell, who many of you know, is Fortrea's CFO. We are excited to have a fireside chat today, obviously, lack of real fire given the actual temperatures outside. I'm Elizabeth Anderson, for those of you who don't know me, and I cover CROs here at Evercore. So, Jill, thank you so much for joining us today. It's really nice to see you. You know, I know you came onto the scene as sort of like a public CFO through this spin and had been known to some people given your background at Labcorp, but for some of us who may have only met you or seen you speak virtually at a thing, can you give us a little bit of background about yourself and sort of why you were excited about this Fortrea opportunity? Absolutely. Thanks, Elizabeth. And I appreciate you having me today. It's great to be talking with you. So, yes, I have been in this role. We're coming up on the one-year anniversary of our spin. So I'm really excited about being here today to talk about some of that, and I'll come back to that. But I had most of my career actually in the large pharma side, on the sponsor side. So I double majored in college in accounting and French, and I went the traditional route of public accounting and got my CPA license. And when I decided to move into industry, I went into GlaxoSmithKline, actually, at the time. And I was there for nearly two decades and had roles in finance, corporate finance, but all across that drug development continuum. So coming into Labcorp as the CFO of their Drug Development business in 2018, it was a really great experience for me to bring in, to be able to immediately bring that sponsor perspective and the changes and drive improvements and things about how we can show up for the business. But also, I did a lot of transformation there, both for my finance teams, but also the businesses I supported, including leading the ERP implementation for their U.S. market when I was the CFO there. So it's provided me with a lot of really great, relevant experience to bring to bear. I moved to Labcorp and did that role and then went from the spin and delighted to be in this role. We have a lot of work still ahead of us, as everyone knows. In the last year, we have done a lot to start to move on this journey. So those are some of the things that I'm excited to talk to you about today. Perfect. No, that sounds great. Obviously, you guys announced the close of the Patient Access and Endpoint businesses and said the proceeds will be used to pay down debt. For those of you on the webinar who didn't see, Fortrea filed an 8-K very, very recently talking about some of this. But it would be helpful to us to understand a little bit better about the debt paydown and how you were sort of thinking about that. Obviously, the numbers are in the 8-K. Yes, sure. So as we had previously announced a couple of weeks ago, we did complete that transaction on time. We were really excited. It's good for both businesses because it allows us to focus, and it allows us then to improve our capital structure, which we had committed to. So over the last week or so, we've paid down $275 million of debt, which is significant when you think about the fact that if you think about on the go forward, if you think the trailing 12 Adjusted EBITDA that we had provided in our slides, that allowed us to bring our debt down, our leverage by more than a turn. So this is really positive for us. And we remain committed to that target in the medium term of 2.5-3 times that we've been talking about publicly since we spun. Got it. So sorry, what is your leverage ratio after the net debt paydown? So there are actually two things to think about here. The other thing that was announced in that 8K, Elizabeth, is that we have now drawn on our securitization program. We announced that as part of our Q1 results as well. So we've done an initial draw on that. And by the time we get to the end of the quarter, we'll have allocated about $200 million from that program as well against debt. So in total, we'd expect, again, if you think about what we had provided in our slides for trailing 12 at the end of the first quarter, Adjusted EBITDA, we'll be somewhere in kind of the mid-fours from a net leverage report and net leverage perspective. So it's a significant improvement from where we were at year end. Got it. And just in terms of the A/R securitization program, sort of why was that the right metric and sort of vehicle to use in terms of additional debt paydown opportunity? It's very common in our industry. We did a lot of research. We have a really experienced treasurer. He had experience with that. But a lot of our peers do this as well. And that, in particular, allows you to benefit significantly from the interest arbitrage. So you're using the rates of primarily your larger pharma customers. And for us, that was a pretty significant improvement. And the two combined, I think it's important for people to understand between the debt paydown from the divestiture and then applying a good portion, the majority of these proceeds towards debt, it's going to save us on an annualized basis over $30 million a year of interest expense, which is obviously massive from our ability from a cash flow perspective, but also in time allows us to have more opportunity to improve cash flow, but reinvest in the business. We're kind of in that 23%-25% range in terms of reduction in interest expense. It's obviously very meaningful for us between the two. That reduction in interest expense, does that start with 3Q or just sort of the start of? That's the annualized amount. Yes. Annualized amount starting with sort of the 3Q, right? Yes. Okay. Got it. That's very helpful. And then obviously, you guys filed an 8-K talking about, I guess it was two Fridays ago now, in terms of some of the changes you made. And I think we had some updated financials from 1Q. So can you talk maybe through a couple of the things there, maybe starting with some of the delayed filing of the 10-Q initially, and then we can talk about some of the updates and the numbers there? Yes, absolutely. So in terms of the delayed filing, Elizabeth, when we started really digging in and working through our discontinued operations accounting, as you can imagine, having come out of the spin and then trying to spin from a spin, there was a lot of work. And as we started digging in, we became aware of some issues primarily related to periods before the spin going back multiple years where there were just some issues that needed to be addressed. And so we had to take the extra time to go through, and we really started looking to go through and make sure we had covered all of those. So the good news is that we were, unfortunately, a few days late in terms of filing that, but we believe, and we said it would be immaterial in terms of the overall impact, and it is. People can see that now. But we believe with that work, we've gotten to the bottom of it. What ended up happening two weeks ago, we were made aware of an issue in our slides. So the 10-Q is not impacted at all by this, but there were a couple of items in the slides. We have already made internal, and we're still making internal process and some personnel enhancements to address that. I take responsibility that that happened, and it won't happen again. We know what we need to do, and we're on top of it. Got it. Okay. Maybe just to double-click on one thing there, it does seem like if you're spinning a spin and you have, there's historical data at Labcorp, and you have some of it and things like that, that sounds like it also just adds to the complicating factor in terms of just getting all the right people and the right systems and the right data. That was part of it too? That was part of it. Absolutely. Because yes, our ERP is through a TSA from Labcorp. So as you can imagine, in those pre-spin periods, and we did have to go back and work with our former parent, and they were very helpful in helping us pull things together. But it wasn't straightforward by any stretch. So taking the time to do that and make sure we had gotten through all those issues, it was important to do. Just to be 100% clear, no ongoing impact going forward? Yeah. Okay. All right. So maybe I think with that, can you just talk about sort of from a guidance perspective? I think the number one question that I get, and then probably you get and many other people as they're sort of thinking about the business is the guidance, right? Obviously, across life sciences, many companies have a ramp into the back half of the year just given the broader macro environment and the biotech funding that we saw in the first quarter and some of the nuances of pharma. But your ramp obviously has the complicating factor of the TSAs as well as the new business wins since the spin and sort of the performance since then. So if we take all of those pieces together, how confident are you in the guidance that you issued on the 1Q call? Obviously, you adjusted at that time for the divestiture, but just in terms of that base underlying guidance. Yes. So I can assure you we are committed to the guidance that we provided with our Q1 results in May. And we knew as part of the spin, we talked about the fact that in that year pre-spin, we had struggled in terms of some new awards. And a lot of that was related to what was a perception of uncertainty. And we've obviously made good progress against that post-spin. We can talk about that a little bit more going forward. But we knew that one year was going to manifest and that the first quarter was going to be the most challenging. And so that's what played out. But now we have the pipeline, right? As you get to this point in the year, your backlog includes all the revenue and that you would have for the remainder of this year. The things we're winning now are really more so for 2025. We're committed to the guidance. We understand in terms of that revenue, we are working very closely. We are meeting regularly with the teams, and everyone is very focused on that because not only is it important for us from a financial performance perspective, but it's important for our customers that we're moving through those programs at pace, hitting milestones and getting them what they need so that they can move their molecules forward. We're committed to the guidance we provided. Got it. I think you guys have talked about, and certainly the guidance implies an acceleration in the backlog burn rate as we think about sort of the front half of the year to the back half of the year. I think you've sort of at a high level talked about sort of a little bit of some additional management focus on that. But can you give us a little bit more detail in terms of where's the focus? Is it things that obviously you won last year that are faster burning? Is it just sort of mixed? Can you talk about all those different elements that give you confidence in that backlog burn acceleration? Sure. So you talked about the ramp. And I do think we understand people have asked a lot of questions about that. And when we provide our Q2 results, we'll provide a much more detailed bridge to help people understand how you get from where we were first quarter through second quarter and beyond. But we had talked about that guidance in terms of a third in the first half from an Adjusted EBITDA perspective and two-thirds in the second half. And that's still how we absolutely see this playing out. That revenue ramp, which is obviously the most important thing for us achieving that. It is impacted. Now, we've had a few good quarters, right? Our trailing 12 was over 1.2. Our trailing nine, sorry, trailing nine months will be at trailing 12 finally at the end of this quarter. The trailing nine was over 1.2. That's really critical in terms of fueling the growth that we're expecting. We've talked about the second half, expecting around, on average, across the half, about 3% revenue growth. That's a combination of the awards that we've won since spin, but also this management focus. Now, like many of our peers, we've had some revelations that came to us in the first quarter. The oncology, which is more than 40% of our portfolio, we talked about that at the time of the Investor Day, does burn a bit more slowly as you're getting into these more and more specialized treatments. It is a bit more challenging to find patients sometimes. And so you've heard some of our peers talk about that as well, but we're very focused on it. One of the things we like about our data strategy is that we are not trying to bring only our data to the table. We're working with a number of partners to try to help us be able to recruit and find those patients faster. And we think that helps us to be successful. So there's a lot of focus there. The other area is around the small and mid-sized customers. We were starting to realize when you dig in, we do the work, we find the sites, we get the sites ready, and then they might not be completely ready with the paperwork or all the details in terms of actually starting to enroll patients. So now that we know that, as we're actually going through that bid process with them, we're getting in front of it. So that focus plus just turning management's attention, we're meeting every week with the team. We're going through all of the new projects that have launched since the spin. And people realize, again, it's not just important for our financials. It's important for our customers and for the patients. And so everyone has got a lot of renewed energy around this, and we know that that's going to help us improve our burn rate going into the second half. Got it. That sort of in some ways must give you almost more of an opportunity with that SMID biotech pharma customers, right, to say, hey, look, we have this additional expertise and focus and sort of can help you move along on your process faster, right? Because they may also have some limitations from their internal capabilities, right? Sure. Yes. Absolutely. Can we bring things to the table to help them do those? Absolutely. I mean, that's got to be part of the equation, not just, "Here, we found what you're not doing, here's what you're not doing," right? I think we're talking internally about how we can show up and bring things for them, either on a consulting basis or through the staffing solutions we have to help them with those things. Absolutely. Yeah. No, that makes sense. Can you just maybe say a couple more words on that partnership with sort of multiple data partners, right? Is that kind of for one trial? Does it sort of depend on what the sponsor wants? How do you kind of think about that mix and sort of optimizing that for helping to accelerate trials? Sure. So we had a lot of great learnings. I mean, part of being in that legacy Labcorp Drug Development business, we had access, and we still do to the data from that. But what we got really good at during that period was being able to synthesize that data, think about how we use it. But we also stepped out. When we came to the spin, we realized for us to try to recreate all of that, it's very valuable. But if you think about some of that data, it might be concentrated on certain types of trials or certain geographic locations depending on what was happening. And global trials, they're global for a reason. They're conducted around the world. And you have different data providers who specialize. And you can spend a huge amount of money just keeping data current. It becomes latent very quickly. If you think about, "Hey, if somebody needs to be treatment- naive and they're a cancer patient, they're not going to. They get diagnosed, their oncologist isn't going to sit there for months waiting to put them on something in case a trial comes." So you need to be able to work with multiple partners. And sometimes our customers come and they bring sources too. So we've found that what's better for us is to be able to be almost the ability to amalgamate all that data and synthesize it and pull the insights so we can be agnostic to the sources. And we're not spending the money trying to enhance the sources. We're working with our partners who are doing that. They're spending 100s of millions of dollars every year. We can be the engine that pulls it together and pulls from the different places for the insights. So we've seen that be received very positively in the market, and we're continuing to develop our capabilities there. That makes sense. And this increased management sort of focus through all these different metrics that you were just talking about, is that something that takes multiple quarters to start paying off? How do we think about the timeline? Because sometimes we think of, "Oh, the investment happens now. We start to see it next quarter, the quarter after next year." How do we think about some of these changes that you guys have put through? Well, you'll see it as we deliver against the guidance that we provided. Because clearly from the margin where we were in the first quarter to the 13% at around 13% that we're talking about being exiting for this year, that only will happen if we get the burn rate improving, if we start to improve the revenue flow through, if we start to deliver on the SG&A enhancements that we've been talking about. Some of them, as we've talked very openly before, are predicated on the TSA exits. So there are some things, that's why we talk about that exit run rate versus the fourth quarter. But again, the progress against the TSAs, we said at the end of the first quarter, we had exited around 50%. We're continuing to track in line with our expectations for those. The most complex ones are in the second half, really in the last few months of the year, but we are in good shape for those. We're working really hard. We've been working with our former parent. They've been very collaborative. So those pieces, you'll see it because the ramp and the Adjusted EBITDA that we were talking about earlier in this conversation only happens if these measures that we're putting in place actually come to fruition. We feel confident that people will be seeing that as we come into the second half of the year. Got it. So specifically on the revenue side, sorry, I should have asked the question a little bit more clearly. Those types of payoffs start and they ramp in Q2 and continue to ramp throughout the course of the year, right? Q2, we said the growth is really in the revenue growth will be in the second half. So we've talked about the first half being negative, and then the second half is that 3% on average positive across the two quarters. Okay. That makes sense. And then certainly, as we think about sort of the broader story, and as you said, the bookings now really start to impact 2025, but sort of seeing that on a full year sort of run rate what the core growth of the company is, how do we think about how book-to-bill is shaping up so far in the second quarter? Yes, that is the million-dollar or more question. So as you know, because you follow. Many millions, probably. Many millions, yes. As you follow this space, a lot of things come down to the last few weeks of the quarter. So I can't give obviously, I wouldn't give any clarity there, but the pipeline is continuing to grow. We're really excited about that. It's continuing to grow as we go through in this period coming out of the spin. And for the size of our business, we're seeing enough both in the large pharma space as well as the small to mid-sized space to enable us to hit that 1.2 trailing 12-month target that we've been talking about from the beginning. So that is the measure. If we are able to keep to that 1.2 consistently going forward, that's going to lead to that mid-single-digit revenue growth that we've been talking about for 2025 and going forward. So we like what we're seeing. We are at the table in a number of really interesting partnership conversations. We feel good about where we are in those. We obviously have to bring all those through to fruition, but we're in some really good conversations with customers where either we were only doing smaller amounts of work with them before or maybe some that we hadn't worked with previously, and we're feeling very positive about those opportunities. And so we've been really well received. We're excited about that. We've made great progress in our commercial transformation. We've talked about that, changing the incentives at the time of the spin, getting we've got this everyone's in sales focus here. We give spot awards in the business when people bring in RFPs. We were talking earlier today about conference attendance and some of the benefits we've seen from our focus there. So I think we're firing on all cylinders in terms of trying to make sure that we get that pipeline in, and it's all about execution for us. Got it. I think you guys previously disclosed the deal that slipped from the first quarter has now closed. It has closed and signed, yes. Okay. Got it. And are you seeing it sounds like this is just to double-click slightly on it, the opportunity pipeline, it sounds like is that like a broader industry comment, or you think that that's specific to you guys because of sort of the ramp and the increase in execution since the spin? Is that sort of is there like an industry I guess I'm just trying to sort of balance between how to think about the industry component versus sort of what's new for Fortrea. Sure. I mean, I do believe that coming out of the spin, because we had that period pre-spin of the softness in sales and the mix that we got, we've continued to see that improve as we've come out, getting the right team in place, again, the commercial transformation, the selective investments in augmenting some of our capabilities and things that matter to our customers. We've seen those pay off. In terms of the broader industry, I know that some of our peers have been out talking. It does appear this year, and maybe into next year, everyone's kind of talking about more mid-single-digit type growth for the industry compared to the kind of mid to highs that you've seen in the past. I think we all believe it will get back there, but that's probably consistent. It's hard. I obviously don't know what our peers are seeing. For our business and for our size, we're seeing that pipeline grow, and we feel good about those opportunities. We talked previously that during the spin year in that back half of 2022, a lot of folks, there was a fairly significant slowdown in biotech, which has started to respond. We're not back to kind of the years of COVID when money was at zero cost and everything was gangbusters, but we're seeing solid movements there in that small to mid, and we're continuing to see a lot of really great large pharma opportunities as well. Great. Okay. That makes a lot of sense. And how would you think about in terms of the implication for the guide, the back half guidance and sort of the acceleration continue, that sort of assumes that the current environment just continues for the rest of the year or gets better, gets worse? Sort of how do we think about sort of just those two factors versus each other? Sure. So for 2024, the backlog we have is pretty much set, right? When you get to end of Q1, maybe through the middle of the second quarter, you can still win some things that might impact this year. But beyond that, just from the time it takes to actually contract something and start to move forward, with the exception of maybe the odd rescue study, you're not going to really have any meaningful impact on your revenue in that year. So we've got the pipeline. We've got the backlog. It's all about execution, and we're hyper-focused on that. Obviously, the things that we're winning now are more for 2025, and that's where continuing to be at that 1.2 on a trailing basis is going to be important for us. Because that mid-single-digit growth, we talked at our Q1 call, exiting 2024 at around 13%, but then we're committed to being at 13% for the full year, which will be a significant step up. Sometimes people say, "Well, why wouldn't you be higher?" But if you think about where we'll be this year, which we've kind of been guiding in the low to mid-nines, getting to 13% on a full year basis is significant. We're committed to that, but it is important to have that 1.2 book-to-bill consistently so that we can get the mid-single-digit revenue growth. We're continuing to make progress against our SG&A cost reduction initiatives. We did change the way that we presented our SG&A and our kind of gross margin so people could understand where we are versus peers. People can see the opportunity. We talked about that. We're making great progress in terms of how we're going to improve that. We'll continue to make progress going through 2025 and 2026. The most important thing for us there is really getting through those TSAs, the majority of those TSAs this year from an SG&A perspective. Then revenue-wise, as I said, the pipeline is strong and it's growing, and we have to execute on it. No change to your timeline in terms of those TSA expectations, right? No. The vast majority will be exited by the end of this year. Okay. On a dollar basis or on a numerical basis? The dollar basis as well. I mean, when we count about the 50%, we're talking numerical, but the most significant ones, I mean, anything there may be a few that we have to do early next year just for business continuity through year-end. One example I had provided previously, we'll have our own HCM, but we still have to issue W-2s based on the system we've been TSAing. So there'll be things like that that are very small, but dollar-wise, they should not be impactful. Got it. Okay. That certainly makes sense. And then I think you talked about before we started, we were talking about sort of helping people understand all the ins and outs because obviously there's so many things going on. There's the revenue accelerating. There's the in terms of just sort of clarity on that EBITDA bridge, how do we think about that, and how do we think about as we're putting together that sort of back half to sort of year-end bridge? Yeah. So if you think about, again, the 1/3 and the 2/3, and we still believe that's the appropriate measure. If you just do the math, we talked about the 1/3 and 2/3 for the half, but we also talked about the 1/3 and 2/3 for Q1 and Q2. So if you think about moving from Q1 and then what that means for Q2, you've already started to again, assuming that we're down there, you're going to start to show already significant progress in terms of closing that gap and getting on the right path for that ramp. And we talked about with Q1 results that to get to that 13% exit trajectory, about 25% would come from SG&A, and the other 75% will come from revenue growth as well as optimization of our contribution margin. We talked on the call there. We had done a restructuring program last fall. We had started another smaller one, but we kicked off another one that began in April, and we'll run through this quarter into next. So we're continuing to think about our footprint and making sure we're being efficient and with the work that we've won where we need the resource. We have held on to that. So that obviously is part of the margin story, but in anticipation of the growth coming. So the important thing for people to understand is that as that revenue growth comes, we don't have to add heads. We can absorb that growth because we've retained a base, which you need to be competitive, but we can absorb that growth for the near term for the remainder of this year and probably into 2025. Any revenue growth that you get from a service fee perspective will drop through incredibly strongly, which is a big driver of that ramp in the second half from a margin perspective. Got it. And then maybe I know we only have a couple more minutes, so we'll try our best to squeeze a couple more in. But can you talk about I think you've sort of talked about this in bits and pieces over the time, but sort of if we in a space of clinical development, what actually makes Fortrea differentiated versus some of your larger and smaller peers? Yeah. I think that I talked a little bit about the data strategy that we have because there are—I think there was a period in time where having data in and of itself was a really important differentiator. But at this point, it's ubiquitous. And as I said, the latency of data is something to be mindful of. So we believe that this strategy of having this ecosystem that we can leverage for insights is a differentiator. Our scale, we've talked about that, the fact that we are large enough to handle any global clinical trial, but we're also small enough that you can have personalized executive engagement. And that's happening all the time, constantly having leaders out with customers talking to them. I'm talking to them, Tom, obviously everyone on the leadership team as well. And we're super focused on their experience. We're checking in with them regularly. We have people who are not involved in the project, for example, checking in to make sure that the key stakeholders at our customers are happy with what's there. And what we're finding from that is that it sometimes allows us to see new opportunities that maybe the teams down in the project wouldn't have been aware of. So we're doing things like that. We have been open about our site experience and trying to simplify that site opportunity. And some of the partners that we're working with on data also have offerings there to try to simplify. They talk about how many tools they all have to work with. We think that's an opportunity to site counsel. And we think just generally the combination has been well received. We get great feedback from our customers that people feel like we are showing up differently from what they experienced perhaps pre-spin. And so we're excited about that and continuing to build on it. Okay. Just one more rapid-fire one. Even with the 1Q EBITDA restatement, does that have any impact on the full-year EBITDA guidance? No, it does not. It does not. Tom and I remain committed to that full-year guidance. And again, when we come out with our Q2 results, we'll help people understand with a lot more clarity. That bridge will show something that helps people understand how we believe we're going to get there, but to help you understand because I understand, I mean, it is a big ramp. But again. Yeah. People would love that, I think. Absolutely. And you think about that, again, I just want to come back to the one-third and two-thirds just in the first half. I mean, people will start to see how you get on that pathway, but we'll make it more clear for folks. I understand that's important. Got it. Looking forward to it. Well, thank you, Jill. Thanks for the time. I know we only had 30 minutes, but it was a great 30 minutes to chat and to kind of get a better perspective on these points. So thank you so much for the time today, and thanks everyone for joining us. Thanks for having me. I'm excited about Fortrea. It's a phenomenal business. We're doing some great things, and we really appreciate all of you on the journey with us. Thanks, Elizabeth. Good to see you. Awesome. Thank you so much. Take care. Bye, everyone.