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Fortrea Holdings Inc. (FTRE)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $697.0M (down 1.8% YoY; up sequentially), GAAP diluted EPS from continuing operations was $(0.82), and adjusted EBITDA was $56.0M; book-to-bill was 1.35x and backlog ended at $7.699B .
  • Management issued FY2025 guidance well below FY2024 actuals: revenue $2.45–$2.55B vs $2.696B in FY2024 and adjusted EBITDA $170–$200M vs $202.5M in FY2024, citing slower burn and lower margins on pre‑spin projects; SG&A net savings of $40–$50M are targeted in 2025 .
  • The quarter’s positives were strong CPS (Phase I) momentum, disciplined pricing, and improved customer satisfaction/NPS; however, late‑stage portfolio mix, slower onboarding of new wins, and TSA transition costs weighed on profitability .
  • Investor sentiment was challenged around the print/guidance; an analyst noted the stock traded below $10 the morning of the call, with management highlighting cost actions and operational transformation as key levers going into 2026 .

What Went Well and What Went Wrong

What Went Well

  • Strong commercial momentum: book-to-bill 1.35x in Q4 and 1.29x in 2H; backlog grew to $7.7B; CPS posted its most successful quarter ever, with repeat awards and capacity investments .
  • Pricing discipline and improved customer experience: “Our positive progress is also reflected in our improving quality metrics and increasing customer satisfaction scores” — CEO Tom Pike .
  • TSA exit and systems go-live: migrated 17k devices, 8k phones, 500 applications, and built 1,600 servers; HR ERP went live Dec 16, finance ERP Jan 2, enabling process efficiencies post-spin .

What Went Wrong

  • Pre‑spin project mix: older, late‑lifecycle full-service contracts are “burning more slowly” and at lower profitability; new wins are not ramping fast enough to offset in 2025 .
  • SG&A headwinds: incremental one‑time spin/TSA costs and securitization yield costs kept SG&A elevated; Q4 included a $21.3M restructuring charge to align resources .
  • Margin pressure and guidance reset: FY2025 adjusted EBITDA margin guide implies further compression vs FY2024 (7.5% in FY2024), with margin recovery deferred into 2026 as mix improves .

Financial Results

Quarterly comparison vs prior year and prior quarters

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$709.7 $662.4 $674.9 $697.0
GAAP Diluted EPS – Continuing Ops ($)$(0.55) $(1.11) $(0.21) $(0.82)
Adjusted Diluted EPS – Continuing Ops ($)$0.14 $(0.03) $0.23 $0.18
Adjusted EBITDA ($USD Millions)$58.9 $55.2 $64.2 $56.0

KPIs and balance sheet highlights

KPI / Balance ItemQ2 2024Q3 2024Q4 2024
Book-to-Bill (x)0.96x 1.23x 1.35x
Backlog ($USD Billions)$7.366 $7.571 $7.699
Cash & Cash Equivalents ($USD Millions)$126.2 $105.3 $118.5
Gross Debt ($USD Millions)$1,142.0 $1,142.0 $1,142.0
Operating Cash Flow ($USD Millions; period-to-date)$248.1 (6M) $245.7 (9M) $262.8 (FY)
Free Cash Flow ($USD Millions)$227.6 (6M) $217.0 (9M) $237.3 (FY)
Adjusted EBITDA Margin (%)—9.5% —

Note: FY2024 adjusted EBITDA margin was 7.5% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY2024$2.700–$2.750 $2.700–$2.725 Lowered top end
Adjusted EBITDA ($USD Millions)FY2024$220–$240 $220–$240 Maintained
Revenue ($USD Billions)FY2025—$2.450–$2.550 New
Adjusted EBITDA ($USD Millions)FY2025—$170–$200 New

Management also targets net SG&A savings of $40–$50M in FY2025 and another ~100bp reduction in SG&A as % of revenue in FY2026 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
AI/Technology initiativesShowcased internal oversight tool; adding AI/ML; exploring AI for protocols, SOPs, CRA copilot, data cleaning Expanded AI focus with 185 use cases; democratizing AI; enabling Accelerate platform Increasing emphasis on AI-enabled productivity
TSA exit / Enterprise systems~60% TSA exit; divestitures completed; debt paydown $504M Largely exited TSA; migrated 17k devices, 8k phones, 500 apps; HR ERP live (Dec 16), Finance ERP live (Jan 2) Transition largely completed; sets stage for SG&A reduction
Book-to-bill / PipelineQ2: 0.96x; Q3: 1.23x; pipeline solid into Q4/Q1 Q4: 1.35x; average since spin 1.2x; pipeline solid; backlog $7.7B Sustained bookings momentum; backlog growth
Macros/cancellationsPeers noted cancellations; FTRE saw no uptick; CPS “churn” rather than cancels Cancellation rates not elevated; biotech decision cycles still variable but managed Stable cancellations, better large pharma mix
SG&A / Cost actionsSG&A elevated by TSA and securitization yield; restructuring ongoing $40–$50M net SG&A savings in 2025; 80bp reduction in 2025, 100bp in 2026; restructuring charge $21.3M Cost-out accelerating post-TSA
Biotech vs Large Pharma mixAbout 50/50; CPS strengthened with large pharma; biotech pipeline solid Still ~50/50; slower biotech start-ups; oncology mix burns slower Mixed; pace depends on biotech ramp
Backlog burn dynamicsStep-up from Q2→Q3; CPS burns faster; cautious on FY2025 burn commentary Older pre‑spin projects extend 40–50% longer, burn slower, lower margins; new work ramps slower Near-term headwind; expected improvement by 2H26

Management Commentary

  • CEO Tom Pike: “Our intense focus on our customers’ success and creating a better customer experience has resulted in the stronger demand that is reflected in this quarter’s book-to-bill… We are ready for the next phase in our journey, moving from transition to transformation” .
  • CFO Jill McConnell: “We target year‑on‑year net savings of $40–$50 million in 2025… benefits increasing over the course of the year… you should see a year‑over‑year reduction in total underlying SG&A spend” .
  • On pre‑spin mix: “Pre‑spin projects, many late in their life cycle, have less revenue and less profitability than expected for 2025… This older versus newer mix issue will continue to negatively impact our financial performance during 2025” .
  • On leverage covenant: “We renegotiated our net debt leverage ratio… increased from 5.3x to 6.0x for the four quarters beginning with Q3 2025… reverts to 5.3x afterwards” .

Q&A Highlights

  • Pre‑spin vs post‑spin economics: Management performed project‑by‑project analysis discovering older projects extend 40–50% longer and burn slower, limiting margin improvement under %‑complete accounting; new wins will accrete margins as they become a larger mix by 2H26 .
  • SG&A and cost savings cadence: Expect ~80bp SG&A reduction (as % revenue) in 2025 and ~100bp in 2026, with little benefit in Q1 2025 due to systems transition; margins to improve through the year .
  • Cancellations and pipeline: Cancellation rates are not elevated; pipeline remains solid across large pharma and biotech; bookings strength expected to continue into Q1 .
  • Capital structure and liquidity: More than $0.5B liquidity; interest and securitization costs down ~22% YoY in Q4; covenant flexibility secured through 4Q26 .
  • Investor sentiment: Analyst noted shares broke below $10; management emphasized bookings leadership, SG&A programs, and operational optimization .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 revenue/EPS/EBITDA was not retrievable at this time due to provider request limits. As a result, explicit beat/miss vs S&P Global consensus cannot be shown in this report. We will update comparisons when S&P Global data access is restored.

Key Takeaways for Investors

  • Near-term headwinds: FY2025 guide implies revenue down YoY ($2.45–$2.55B vs $2.696B) and lower adjusted EBITDA ($170–$200M vs $202.5M), driven by slower-burning, lower‑margin pre‑spin projects and slower ramp of new wins; watch mix shift execution and quarterly margin cadence .
  • Bookings resilience: Sustained book-to-bill (1.35x in Q4; 1.2x average since spin) and $7.7B backlog provide visibility; CPS and select FSP engagements remain growth levers .
  • Cost actions unlock FY2026: SG&A net savings ($40–$50M in 2025) and further ~100bp SG&A reduction targeted in 2026, plus new‑work mix accretion, should support margin recovery from 2026 onward .
  • Transformation completion: TSA exits and ERP go‑lives completed, enabling process and resource optimization; expect improved forecasting, utilization, and delivery discipline .
  • Liquidity and flexibility: ~$0.5B liquidity and amended leverage covenant reduce downside risk while cost and portfolio optimization efforts proceed .
  • Trading lens: Without current consensus comparisons, market reaction hinged on guidance reset and narrative around pre‑spin mix; catalysts include quarterly progress on SG&A savings, post‑spin project ramp, and booking momentum translating to revenue/margins .

Additional Documents Searched

  • Q4 2024 press release and full 8‑K 2.02 contents .
  • Q4 2024 earnings call transcripts – –.
  • Prior quarters: Q3 2024 8‑K and transcript – –; Q2 2024 8‑K –.
  • Other press releases in Q4 2024 window were third‑party “investor alerts” and not company operating updates; no additional relevant company press releases beyond the 8‑K exhibit were identified .