Fortrea NASDAQ: FTRE reported first-quarter 2026 results that management said reflect improving commercial traction, operational execution, and ongoing cost discipline, while the contract research organization reiterated its full-year guidance.
Management cites stabilizing demand and sustained booking momentum
Chief Executive Officer Anshul Thakral said the market backdrop is “gradually becoming more favorable,” pointing to more constructive dialogue with large pharmaceutical companies and an inflection in biotech funding versus last year. Thakral added that clinical trial starts “rebounded” during the quarter.
Fortrea posted a first-quarter book-to-bill of 1.15x and a trailing twelve-month book-to-bill of 1.05x. Thakral said the company has delivered “three quarters in a row of book-to-bills of 1.1x or higher,” attributing the performance to improved commercial execution and better engagement quality.
Biotech was a focal point in management’s commentary. Thakral said first-quarter authorizations “skewed toward biotech,” with “significant year-over-year improvement,” including wins across therapeutic areas such as oncology, cardiovascular, and RNA-based therapeutics. He also noted an increase in biotech RFPs both sequentially and year-over-year, including an increase in “new to Fortrea” biotech opportunities, which he characterized as evidence that the company’s reach and visibility are improving.
In response to a question about the booking environment, Thakral said biotech appears to be recovering faster than large pharma. “We are seeing a little bit speedier recovery in the biotech space,” he said, while also noting that large pharma pipeline prioritizations have “largely passed in 2025.”
China pipeline growth and clinical pharmacology milestone highlighted
Thakral pointed to China as another area of commercial momentum, saying Fortrea saw “strong double-digit growth” in its pipeline of opportunities in the country, along with “some significant wins” in the quarter. He emphasized that the comments were “less about an incremental investment” and more about leveraging existing scale, citing more than 1,000 employees in China and “around 10 strategic clients headquartered in China.” He said the company is focused on “China go global,” supporting Chinese assets intended for global markets.
The CEO also highlighted performance in clinical pharmacology, saying the company delivered its “best first quarter since our founding for authorizations” in that segment, supported by both new and repeat customers. Thakral additionally noted that the Leeds clinic completed its first in-human dosing in patients with immune thrombocytopenia, which he described as a rare blood disorder.
On cancellations, management said enterprise cancellations remained within an expected historical range.
Operational initiatives center on AI-enabled technology and delivery improvements
Fortrea’s operational messaging centered on the April launch of Fortrea Intelligent Technology (FIT), which Thakral described as “our technology suite that integrates persona-driven, AI-powered solutions to automate workflows and streamline oversight.” He stressed that FIT “is not a single product” but “an AI-enabled integrated platform strategy combining trial execution, oversight, and intelligence,” with goals including improved predictability, reduced cost to serve, and stronger quality.
Thakral said the FIT launch generated “immediate positive feedback” from sponsors and technology partners. He also noted that FIT is built on an “open source architecture,” which he said is intended to help Fortrea collaborate with sponsors and technology partners rather than operate as a standalone technology vendor.
Beyond technology, Thakral described steps to improve clinical trial delivery, including revamping the company’s approach to site activation to “compress the time from site selection to site initiation,” with both year-over-year and sequential improvements. He said Fortrea expanded its Site Navigator program globally during the quarter, including in China and Japan. He also noted leadership changes such as the appointment of Erin Koch to lead the Functional Service Provider (FSP) organization.
Thakral said the company’s customer net promoter score has “improved steadily,” reflecting progress in delivery and client experience.
Revenue declines on pass-through and FSP headwinds, while profitability improves
Chief Financial Officer Jill McConnell reported first-quarter revenue of $636.5 million, down 2.3% year-over-year, including a 3.2% constant-currency decline partially offset by a 0.9% currency benefit. McConnell said the decline was driven primarily by lower pass-through costs in both clinical pharmacology and clinical development due to study mix, along with “continued FSP headwinds,” while noting that “underlying full-service clinical revenue grew year-over-year.”
On costs, McConnell said direct costs decreased 4.1% year-over-year, primarily due to lower pass-through costs and headcount-related personnel costs, despite higher variable compensation expense and currency headwinds. SG&A fell 17.5% year-over-year, driven by lower IT and headcount-related personnel costs, partially offset by higher variable compensation.
Adjusted EBITDA rose to $47 million from $30.3 million a year earlier, which McConnell attributed primarily to cost savings initiatives. She said Fortrea delivered quarterly cost savings of “nearly $16 million gross and over $9 million net” as part of its rightsizing initiative.
Net loss narrowed to $23.6 million compared with a net loss of $562.9 million in the prior-year period, which McConnell noted was impacted by a non-cash pre-tax goodwill impairment charge. Adjusted net income was $15.2 million versus $1.9 million a year earlier, and adjusted EPS was $0.16.
McConnell also disclosed that Fortrea’s top 10 customers represented 54.8% of revenue for the quarter, with the largest customer accounting for 17.2%.
Cash flow improves, guidance reaffirmed, and margin path reiterated
Operating cash flow was negative $17 million versus negative $124.2 million in the prior-year period, and free cash flow was negative $25 million compared to negative $127.1 million a year ago. McConnell said first-quarter cash generation was negative primarily due to variable compensation payments, but improvements in order-to-cash processes offset a large portion of the impact. She also said Fortrea went a second consecutive quarter without using its revolver and ended the period with “available liquidity in excess of a half billion dollars.”
McConnell reiterated full-year 2026 guidance for revenue of $2.55 billion to $2.65 billion and adjusted EBITDA of $190 million to $220 million. She said the expected year-over-year revenue decline reflects softer bookings in the first half of 2025, continued FSP headwinds, and anticipated lower pass-through costs.
For the second quarter, McConnell projected a modest sequential revenue increase driven by higher underlying service fee revenue and pass-through costs, alongside a “slight step-up” in adjusted EBITDA, partially offset by increased variable compensation costs. She added that margins should “trend up slowly over the course of the year.”
Management also discussed longer-term profitability goals. Thakral said Fortrea is progressing toward “mid-teens” adjusted EBITDA margin over the next three to five years, while McConnell said the path depends on continued cost optimization and, “most importantly,” returning to top-line growth and more consistent commercial execution. McConnell said the company is planning an investor day in the second half of the year to provide more detail on margin progression.
During Q&A, management addressed the impact of pricing concessions on a large pharma FSP contract. Thakral said a client renewed a multi-year FSP contract early, resulting in a “rate card impact” that took effect in the first quarter and is “a go-forward rate.” McConnell said the impact is already reflected in results and embedded in guidance.
On compensation, McConnell said 2026 is expected to return to “more normal levels” of variable compensation, estimating a full-year figure of “around about” $60 million, and noted it was built into guidance.
About Fortrea NASDAQ: FTRE
Fortrea, Inc is a global contract development and manufacturing organization (CDMO) that provides integrated solutions for pharmaceutical and biotechnology companies. Established as a spin-off from Thermo Fisher Scientific's Pharma Services business in October 2023, Fortrea leverages a legacy of scientific expertise and manufacturing scale to support drug development from early-stage research through commercial production. The company's comprehensive offerings address the complex needs of both small-molecule and biologics programs, making it a single source for clients seeking to accelerate timelines and manage costs.
Fortrea's core services encompass analytical and formulation development, process optimization, clinical and commercial manufacturing, and packaging services.
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