Live? Okay, great. Good afternoon, everyone. My name's Eric Coldwell, and it's really a great pleasure to have Fortrea with us. Anshul, it's been a year. Yeah. It's been a lot of fun, just over a year, I guess. Yeah Formally since you joined. And Jason. Yes, sir. You gave it the college effort. It took an extra couple of months, but here we are. We'll talk a little bit about that, too. Everyone knows Anshul, and Jason, I'm guessing this is your first public event with the company. Am I- Yes, it is. Yeah. That's right. Yeah. We'll definitely get into that. Heck of a year, a lot of things going on in this industry. I want to jump. I don't think you're doing any slides, let's just confirm that. Good. Jump right into it. I'm just here to answer any questions. Answer them perfectly. That's the goal. Fact-based. Tons of info. Fact-based. Okay. Let's just kick it off. Yeah. I am going to come back to Jason here in a second, but from a corporate standpoint, you just announced a deal. There was a spin, there was some cleanup that the prior leadership team had. Started right after the spin, getting out of a couple of assets. Here you are going into the market picking something up. Talk about the clinical pharmacology, bioanalytical, et cetera, business of Worldwide Clinical Trials that you just announced an acquisition of, and give us a little bit of a flavor for that business, and then I have some specific Sure questions. Yeah. I think, Eric, you touched on a few different things. I will talk about the acquisition that we are in the middle of right now. We have not closed yet. It takes time to close a deal. But you said spin management, cleaning stuff up, me coming in for the past year. I think it's really important. It's about flipping a page in the chapter of Fortrea. Yes, there was a spin. Yes, there was a period of volatility and settling and CEO transition, and over the past year, look, about 25%-30% of senior leaders at Fortrea are now new. This acquisition in and of itself is important, but also symbolic of us flipping the page on a chapter of figuring out how we're spinning the company out and fixating the company to now running it against the strategies that we've laid out. This opportunity came along, and it fits square in the middle of a strategy that we laid on the ground, which was to continue to grow in our clinical pharmacology business, which has been a strong business for us. Let's think about a few things in clinical pharmacology that we were missing. One of the things is a reliance on third parties for bioanalytical lab services, which is critical to almost every study that we do in those units. Another one is a reliant on third parties when we have large studies that require other clinics or we have overflow, or bioequivalent studies that our big pharma partners love running with Fortrea, but we don't have enough beds to run. In line with our growth strategy for clinical pharmacology, we saw this opportunity, worked through it, worked through the process with Worldwide Clinical Trials, and here we are. Once we close the deal, we end up with a bioanalytical lab in Austin, Texas, that will be able to service the vast majority of the work we do in our U.S. clinics. We'll be able to do it ourselves versus relying on a third party. A great new 200-bed unit in San Antonio basically allows us to create a 300-bed network between Dallas and San Antonio, and it opens up the aperture to be able to do some larger scale bioequivalent studies that we've had to rely on third parties for in the past. I don't know how much more details you want me to go through on that. That's great. For those maybe who aren't as familiar, maybe a 10, 20 seconds- Sure you could just talk about your clinical pharmacology business. I will preview by saying that amongst the public companies, you are the most differentiated with higher relative mix of, let's call it Phase I clinical pharmacology. Yep. You are, I would say, more than double the concentration as a percent of revenue, probably close to triple if I'm getting this math right in my head. Somewhere between double and triple the number two player in the public market in terms of share relative to your, or mix relative to your total revenue. It is a differentiated asset. You have four really good sites. Now it will be five. You have run into capacity constraints. I'm really curious, how quickly once this deal closes, how quickly can you sell the next contract? Somebody comes to you and says, "Run six GLP-1 studies for us all at once," and you say, "Oh, we can do that now?" Is that what we are talking about? Yeah. You asked two parts of this question. Yeah. One was describe the current. We've got four great units. One in Leeds, U.K.; Madison, Wisconsin; Daytona Beach, Florida; and Dallas, Texas. All of the units are roughly-ish about 100 beds. Yeah. When you've got a 100-bed unit, you can take on studies where you've got cohorts of patients coming in at a time of 15- 20 patients. You can't take on a study with a 100-patient cohort or a 60-patient cohort. Adding a 200-bed clinic within a few hour driving distance of another 100-bed clinic, it opens up the market and changes the game for us in the kinds of studies that we can take on. I would also note that when we look at overflow units, and we have to send some work to external sites, this is one of the sites we've been using for a fair amount of time, so it's a site that we know. In fact, some of that backlog is ours. Great. That should answer the second part of your question. Yeah. I think we're all good. Jason, I got to Yep. Welcome. Thank you. Glad to be here. You are now formally reinstated. You're able to be on stage with us. There was a little Fully allowed a little bit of a dust-up from- Yeah June until last week. Tell us a little bit about your background and then wrap up with, for those who aren't as familiar, wrap up with what happened and where you are now in terms of the employment. Yeah, sure. Just in terms of my background, I've been in a number of finance executive roles, CFO roles in the broader life sciences, drug development arena. I've had some good experience previously at a CRO. Did some time in the contract manufacturing realm and contract discovery work, and then most recently, was part of the business that was in digital endpoints and extracting and interpreting the data coming off of patients and trials. That business has been sold to Thermo Fisher, and is now a part of that universe. Shortly after that, I had the good fortune of getting an opportunity to join the team here. Winning personality aside- Yep what was the biggest draw? I am sure with that background and experience, PPD selling a business that was a dual track, could have been a big IPO. Thermo takes you out at a good multiple. Probably had some other options if you had maybe, I am just guessing. So what drew me here? Yeah. Yep. Absolutely. Why here? Well, I'm going to come back to the winning personality. Yeah. Just to touch on a couple of themes. I'm going to touch on some macro themes and some micro themes. From a macro theme perspective, I think it's a really interesting time in drug development, in terms of new technologies, new innovations that are coming to life at the front end of identifying new assets and molecules, identifying additional indications that can be deployed on existing molecules and so on and so forth. New innovation that can be brought to life in terms of how study conduct is done. Fortrea has been doing a lot of great things in that regard, and I think it's well positioned to be at the front end of how those enabling technologies start to manifest in trial conduct. When I look at the business from a micro perspective, it's got a lot of great customer relationships. Importantly, it's got a strong team that's committed to customer excellence and customer delivery. Because at the end of the day, everyone's trying to do right by the opportunities that we have. I think it's been at an interesting inflection point. I got to give a lot of credit to the leadership team over the last few years in terms of navigating through the spin-out, rationalizing the portfolios you touched on. Really kind of addressing the substrate, and now we're at a great inflection point of driving towards sustainable growth. That was a really compelling thing for me. In terms of winning personality, look, Anshul when he talks about AI, he likes to talk about it being a force multiplier. Well, winning personalities are a force multiplier as well. You can see that that's really just kind of continued over the last 12 months. It's cascading through the organization. It was a really compelling team to become a part of. You're coming out of a. I'm an old school guy in this space, right? Been around forever, and PPD was, you go back far enough, it was the original sort of golden child of the space. A lot of people, a lot of great culture came out of that business. A lot of people with some heritage from PPD are here now. I know it's super early. You're a week into formal joining mode, but do you have other relationships across the organization? Do you know a lot of other people here or just a few? I'm not sure where your overlap fully was with other parties who either Anshul has brought in or maybe Yeah joined the company since the spin process. Yeah. There's a few former ex-PPD colleagues. There's also some former colleagues from other businesses that I was in as well in the drug development arena. I think Anshul and the rest of the leadership team have been doing a nice job of curating some differentiated talent to be a part of the cause here. Any overhang from the TRO and now the lift? Is this done? Wash their hands. Nope. It's done. Case dismissed. I'm here, and we're moving on. It's a fun process, though. Yeah. You always need extra things to do, right? I was getting bored there. Let's talk a little bit about AI. I don't want to dwell on this. I know the rules are still being written, and as Jason said, force multiplier, and we'll see that build over time. But talk, I really want to get just high level, a minute or less, your view on this whole concept of unit-based pricing, FTE-based pricing, sort of things you can quantify unit by unit. This is what the price is, this is what the bid is, versus maybe a higher level nature. Yeah that the industry could go to where we really start talking about performance-based milestones or outcomes or overall execution Sure timeline-based contracting. I know AI's coming up in all your conversations, but where is it? Where's the rubber hitting the road and meeting the road in terms of actual contracting today? Are we anywhere close to that? Yeah. I am happy to take that one. Yeah, take it. I think it's still early innings, right? In terms of how it's cascading and manifesting. Even today, there's a number of different prevailing pricing techniques and prevailing commercial contracting techniques. In a portfolio like ours, you've got a diverse, rich set of customers that have a number of different buying preferences, right? You have different buyer types, different buying preferences. We're very much in the business of being able to navigate those different buying preferences, even with the prevailing techniques today. You add into the mix what you're talking about, and it just creates a new apparatus of optionality that we're happy to have those discussions as they work their way through. There's no concrete changes in contracting or pricing related to AI, Eric. If I had to guess, we're at least a year away from seeing that. The only conversations are, "Hey, tell me about what you're doing. What's your roadmap? Can we pilot things together? Can we commit on piloting things together?" But we are still very early, so if you want to talk about unit pricing, well, I don't know how to price things in a unit if I don't know what the unit is going to look like. Right. I'm a year away from having visibility in what it looks like. I'm probably 2 years away from it actually getting implemented. What Jason is pointing to, if you think about the last decade, not just Fortrea, but this industry, this isn't just one pricing model. We've got an entire machine that is capable of continuously adapting. Am I worried about this? Not at all. Yeah. I think that's the biggest takeaway at this point, is there's a lot of unknowns, but we've seen the evolution of the changes in technology, the changes in how the industry's operated over time. Even through this 4-plus year protracted downturn, obviously Fortrea being a unique case, but the average company in the space, at least on the public side, was at or near all-time high margin, especially when you account for ASC 605 versus ASC 606 accounting. Mm-hmm. Mm-hmm. In the depths of a downturn years in, we had companies at or near record highs. They would have been on a 605 basis in many cases. Correct. I think the industry has learned how to deal with these and contract through these times. I agree. Fingers crossed, I guess, at the end of them. Where are you on investment? It is a year away, 2 years away, but where are you on investment? Talk about FIT, where you are with the AI. Sure investment, the dollars, incremental, decremental returns. I assume you are not getting much leverage on what you have rolled out to date. We are actually starting to see leverage within internal workflow and things we have rolled out. In internal, right. The way we think about AI is. Look, if I had to go back to my roots of having a Sharpie in my hand and a sketchbook to draw it out on a board, think about a data layer. We're investing a lot of time in getting this data lake and data layer right. If you're going to develop hundreds and hundreds upon agentic solutions, if they're accessing a Swiss cheese data lake, they're not going to be very effective. We're putting a lot of dollars in getting this right and all of the various sources, new endpoints, new data, new sources coming in. We've got our Accelerate platform for the last 8 years that we've been investing in. Now we have it at a point where all of our personas, whether it's a CRA, it's a project manager, it's a data manager, it's a biostatistician, has a unique way of accessing a uniform data lake through an Accelerate platform. What is FIT? FIT is simply adding an intelligence layer so that every time you access our internal systems to get to the clinical data, you're doing it through an intelligence layer. That's what all FIT is, and we're developing that module by module, workflow by workflow, persona by persona, and we've already started launching pilots with our CRAs where they've got now mobile apps when they're out in the field. The mobile apps are not interacting with clinical data, but the mobile apps have agentic solutions that are working with the CRAs and setting up, "Hey, have you looked at this in a protocol? Hey, have you looked at this? Have you looked at that?" Those pilots are starting to yield some success. But we're going person by person, adding in an agentic solution or a layer of agentic solution in how they access the rest of the system and how they access the data. That's what FIT is. It's a philosophical change versus AI being a standalone project that we're doing on the side. Does that It does. Crossover, though? Investment versus return? I think right now it's hard to measure ROI on any investments that you're making in AI. You're still in piloting phases. You're still in phases of trying to understand how you're going to price these things, trying to understand what you can or can't deploy. I think it's hard to measure ROI now. Any investments we make, whether it's in technology or in purchasing a clinic, it's got an ROI return attached to it. But in this particular case, I think it's hard to measure. What I can tell you, what I can measure is that when I talk to customers, the question is: Is Fortrea keeping up with the pack, or is Fortrea negatively differentiated? And the answer almost always is it's keeping up with the pack. What they're seeing us do with FIT is in line with what they're seeing with competition. I don't think anyone has truly differentiated themselves, but I do get concerned that from some of the smaller players in our industry, there's starting to be some negative differentiation because of not being able to keep up with the pack. I think that's what I can measure today. Let's talk about your margin goals- Sure your targets, and maybe you state them to the audience for those who aren't familiar, and then we'll dive in. So over the long haul. Sure. For the long haul, look, Fortrea has got a margin growth margin and profitable growth journey that we're on. What I've said publicly is we'd like to be at mid-teens margins in the next 3-5 years. We think mid-teens margin is the right measure for a pure-play CROs like us. The other pure-play CROs, Parexel, Syneos Health, and Worldwide Clinical Trials are all private, so we don't really have the great comparator in the public markets right now. Yeah. Last quarter, you had a solid update, 8.7%, making nice progress ahead of Street. You raised targets, top and middle, revenue and EBITDA targets, you raised for the year. Margin in the back half was guided back down to something closer to 8%. You listed a number of reasons behind that. There were some mixed reasons. There were some merit increases. Maybe go through that list for us and ultimately what I am trying to extract is. Well, first off, having a company that in general is beating and raising the annual targets is a lot more fun than the alternative. Thank you for getting us in that position. But if we are going to be at this mid-teens range in 3-5 years, and that clock started a few quarters ago, if we are going to be there, we need to see some improvement in 2027 and 2028. We cannot just have it all happen in the third year or the fifth year. What of the second half margin optics, let us call it. I will not call it a headwind. Some of it is optics, but some of it is transitory. What part of that is truly transitory? What part trails into 2027? Then let us go through the items that get that margin trajectory moving more favorably, more quickly. Sure, I can take that. Look, if you look at the first half in aggregate, we had an 8% EBITDA margin. To your point, the guide implies a second half of about 8% as well. The team is making great progress on just operational execution, efficiency in how we are conducting our business, how we are managing our infrastructure, optimizing our infrastructure, so on and so forth. To your point, the headwinds that we do have, and these are planned headwinds that have been a part of the plan coming into the year. are some investments in people and investments in compensation. We have some variable compensation associated with the objectives that we're driving. That's a big part of what you're seeing play out. We also have our annual merit cycle kicking in in Q3 here, so when you're doing that sequential H1, H2 dynamic, that's going to be a part of it. But underneath that, very much making good progress on the efficiency. Then if you pivot from this year into the future years, and that other part of your question. We think that 2026 will now have the run rate of these people and compensation investments in it. Right. So part of the base, and so do expect that we're going to continue to drive across a number of different themes. One is ongoing excellence in our delivery and our efficiency in it. The other is continued evolution of the mix of business, the mix of contracts in our portfolio. And then the third is, as we start to crest into more of a top-line growth outcome, the infrastructure in our organization is well positioned to see some nice drop-through benefits associated with that. When I think about service revenue because unfortunately, the ASC 606 thing Sure is with us, so we have to talk about pass-through reimbursable out-of-pockets, et cetera. But when I think about service revenue and getting leverage on service revenue, partly that could come through better mix within the service buckets. It could come through better pricing over time, better execution against that, cost reductions against the base. But I ultimately would think that the biggest driver, the most sustainable driver, is getting to service revenue growth leverage. That's it. It feels like we're getting really close. But you could still have mix differential between clinical pharmacology, full service, functional. Sure. We don't have, as an audience, we don't have the insights into that pricing. How much is overhang from what was going on in the industry 2 years ago, 4 years ago, that's still trickling through that backlog to revenue. Talk to us a little bit about these topics. Why don't I add a couple of tidbits here. You covered a lot of points. Mix is really important. There's three fundamental products. There's clinical pharmacology, Yep which you can see that we're investing in. Clinical pharmacology tends to be higher margin business and burns quickly. There's FSP. FSP tends to be very sticky but fairly low margin, and I've been pretty vocal about making sure we're making the right margin trade-offs and not going for large revenue. We saw some irrational behavior in the marketplace, especially by some larger players, who needed to fill revenue gaps due to BARDA and vaccine cancellations and things like that. The less of that type of revenue you have going forward, the better your margins are going to be. Right? FSO, within FSO, it's about execution, and that's what Jason is pointing to. Yeah. It's about what level of overburns do you have? It's like having a general contractor come in and do your kitchen, right? You have a general contractor come and do your kitchen, all of a sudden, you change the tiles. If they tell you on Tuesday that you change the tiles and it'll cost you $10,000 more, and it's going to take a week longer, you're going to give them $10,000 more. But if they come and tell you 6 months from now and I still don't know if it's $10,000 more, you're not going to give them that money, right? That's execution. So within the FSO business, it's about continuing to diversify our client base, continuing to get further out in the biotech sphere, which tends to be higher margin business. It's about executing better, and we're seeing that on a day-to-day basis. In terms of portfolio diversification, it is more clinical pharmacology, more FSO, less low margin FSP. You put all of these things together, and how the backlog burns off in future years looks very different than what it is burning off right now. Does that- Yeah. No, it makes a ton of sense, and it is hard to ask a question of what an incremental margin could be when we do not know what that incremental revenue mix is. Yeah. It is going to be different if it is a dollar of clinical pharmacology versus a dollar of FSP. But to that end, if we just assume, let us say, some form of steady mix, going to 1%, 2%, 3% service revenue growth, what kind of incremental margin drops through on that in year one, in year two? Eventually you would have to hire and invest, but you could probably get at least a few years, two or three years of some incremental leverage, I would like to think. I think what we have said in the past, and I will say again, is when you have low single digit service revenue growth, we are going to see some of that drop straight down because, for example, non-billable head count. We do not need to hire non-billable head count. No. What Jason is saying is that the infrastructure is there to absorb a lot of that growth. It is when you start getting to mid-single digits service fee revenue growth, that is when you start really seeing operating leverage. It is not about a hockey stick, it is about that is the moment where the operating leverage becomes very apparent. I would add that the improvements that you have seen in some of the historical SG&A, in the sort of rationalization of investment in certain areas, those have all been done in a fashion of sustainability, right? To be able to get to. It is not just for some point in time lower revenue number. They have been done in a fashion of sustainability so that it can scale appropriately going forward. I will be left out of the room if I do not ask a bookings question. Sure. Go for it. Yeah, go for it. Or 10. Or 10. I wouldn't be surprised. Bookings were up, what, almost 20% in the first half. You did have easier comps. Sure. Now the comps get a little tougher in the back half. But it's still apparently a good environment. I guess I'm hoping for you to fill in the blank on how good the environment is. Yep. Does it look as good as what we've been hearing and seeing over the last 3, 4 quarters for the broader sector? Here's what I don't know and here's what I do know. What I don't know is what our bookings for Q3 are going to be, because on September 15th- Yep still got 15 days where most of the deal making gets done. Yeah. Right? Not a clue there. What I do know is three very important things. The first is the demand environment is getting better. It's not wishful thinking, it's palatable. Demand environment is continuing to get better, but within the demand environment there's a nuance. Let's talk about two pieces here. One, our pipeline. Our pipeline sequentially quarter-over-quarter for the last four quarters, every quarter has gone up, and I'm looking at a Q4 pipeline that's more interesting than the Q3 pipeline. Part of that is the demand environment, part of that is what I've been trying to put into place for the past 13 months is a new go-to market model and being able to increase the aperture of the kind of deals we're looking at, and that's really coming to fruition right now. What I do know is decisions are getting made in a timely manner. What I do know is pricing is rational in the marketplace. What I do know, the demand environment is getting better and there's market growth. The strategies that we put in with our commercial team are taking hold, and we're starting to see more RFPs than we have at any point that I've been here. What I don't know is how that's all going to translate in the next 15 days. Yeah. Fair enough. New to Fortrea clients? That's where we're seeing the most significant progress, is continuing to increase that aperture to clients who've never worked with us in the past. What do these clients look like? These are Series A, Series B emerging biotechs? Are these European mid pharmas? It's across the spectrum. I'll give you examples. We don't talk much about this in biopharma space, but right now we are competing in somewhere between a half a dozen to a dozen various partnership refreshes in top 30 pharma that we've never been invited to in the past. This is all new. Whether we win one of them, it's actually a great outcome for us. But we are seeing our name and showing up to the table in places we have not showed up as a company in the last decade. Wow. Yes, within the U.S., we're increasing our spectrum to the biotech companies. These are $100 million and up in funding type of biotech companies. The other piece is in China, where we've got such strength in country. If you're a Chinese biotech that's going out of China to develop an asset in Europe and in the U.S., chances are greater than 50/50 that Fortrea is one of the CROs that you're looking at. So these are the three areas in which new to Fortrea companies, not just biotech, new to Fortrea companies, are helping us increase the aperture of our pipeline. We've gone past our time. Any final comment we could squeeze in, or do you want to call it a day and No. Look, I think We'll wait for earnings and when you tell us those good bookings figures for us. Well, hopefully I know by then. I'll know October 1st. Look, I think first of all, I really appreciate the time, Eric. You and the team have always been very thoughtful in how you look at the space and how you look at the company. I think one of the messages I'm trying to make sure get out there is new management team, new strategy, flipping the chapter. It's not about spend, it's not about rightsizing, it's about growth. Yep. If it is not evident in our numbers in the last two quarters, it certainly will be going forward. Great. Thank you again. Yeah. Everyone, please join me in welcoming and thanking the company for the presentation. Appreciate the time. Thank you.