Fortrea NASDAQ: FTRE reported third-quarter 2026 revenue of $691.5 million, down 1.4% from a year earlier but up 2.0% sequentially, as the contract research organization cited improving demand, stronger operational execution and continued cost discipline.
Adjusted EBITDA totaled $58.0 million, rising 14.4% from $50.7 million in the prior-year quarter. Adjusted EBITDA margin expanded 120 basis points year over year to 8.4%, though it declined 30 basis points sequentially from approximately 8.7% in the second quarter.
CEO Anshul Thakral said the company’s return-to-growth strategy is centered on commercial, operational and financial execution. “The market is becoming more supportive, but our progress is not simply a function of market recovery,” Thakral said, pointing to changes in the company’s go-to-market model and greater coordination across teams.
Bookings and backlog adjustment
Fortrea recorded net new business awards of $773 million during the quarter, producing a book-to-bill ratio of 1.12 times, compared with 1.06 times in the second quarter. Its trailing 12-month book-to-bill ratio also stood at 1.12 times.
Backlog was $7.3 billion at quarter-end, down from $7.8 billion at the end of the second quarter and $7.6 billion a year earlier. CFO Jason Knoblauch said the company recorded a cumulative $558 million adjustment to backlog to better reflect its estimate of remaining revenue expected from contracts in its portfolio.
The adjustment included inactive-study dynamics and what the company internally calls “not to deliver” dynamics, Knoblauch said. He described it as an accumulation of ordinary-course changes in contract scope, including trials that can become inactive over time. The adjustment was not included in reported net book-to-bill and did not affect reported financial results or near- and medium-term revenue planning, according to the company.
Cancellations were within normal ranges but were “slightly elevated” during the quarter, Knoblauch said. He added that cancellations and negative contract amendments that closed in the quarter were within one standard deviation of normal levels.
Margins, cash flow and balance sheet
Fortrea’s year-over-year margin expansion reflected a more favorable portfolio mix and cost-management and efficiency initiatives, which together contributed more than 300 basis points of benefit, Knoblauch said. Those gains were partly offset by increased investments in employee compensation, including incentive compensation.
Net income was $0.6 million, compared with a net loss of $15.9 million in the third quarter of 2025 and a $13.2 million loss in the preceding quarter. Adjusted net income was $27.9 million, versus $11.7 million a year earlier. Adjusted diluted earnings per share were $0.28, compared with $0.12 in the prior-year quarter.
Operating cash flow was $60.8 million and free cash flow was $52.5 million, improving from $28.9 million and $19.9 million, respectively, in the second quarter. Net days sales outstanding improved to 15 days at Sept. 30, from 20 days at the end of June and 33 days a year earlier.
The company ended the quarter with approximately $668 million of available liquidity, no revolver borrowings, gross debt of $1.066 billion and net debt of $845.7 million. Net leverage was 3.9 times, representing an improvement of 1.4 turns over the preceding 12 months, driven by EBITDA growth, debt repayment and cash accumulation.
Early-phase acquisition expands capabilities
Fortrea completed its acquisition of the Early Phase Services business from Worldwide Clinical Trials on Oct. 19. The transaction expands the company’s clinical pharmacology network to more than 570 beds across the U.S. and U.K. and adds bioanalytical and safety laboratory capabilities.
Thakral said the acquired business includes a 200-bed facility in San Antonio, Texas, and a bioanalytical laboratory in Austin. Together with Fortrea’s existing Dallas unit, the facilities create a 300-bed Texas network. The Austin laboratory allows Fortrea to perform certain testing internally rather than through third parties, which Thakral said can give the company more control over execution and convert certain pass-through activity into service-fee revenue.
The company said the acquired business is expected to be EBITDA-profitable in 2027. Knoblauch said initial integration efforts are focused on commercial activity and incorporating the acquired capabilities into Fortrea’s clinical pharmacology services pipeline.
Guidance raised and narrowed
Fortrea raised the midpoint and narrowed its full-year outlook. The company now expects 2026 revenue of $2.665 billion to $2.690 billion and adjusted EBITDA of $210 million to $218 million.
For the fourth quarter, Knoblauch said the company expects a modest sequential revenue slowdown because the period has fewer working days than the third quarter. He also cited a sequential increase in information-technology operating expense investments as a secondary factor affecting the quarterly outlook.
Management did not provide 2027 guidance. Thakral said the company is seeing a recovery in both biotech and biopharma demand, with biotech bookings showing nearly double-digit growth in 2026 and biopharma request-for-proposal activity increasing. He said Fortrea continues to target mid-teens adjusted EBITDA margins over time through revenue growth, portfolio mix, utilization improvements, technology-enabled efficiencies and operating leverage.
About Fortrea (NASDAQ:FTRE)
Fortrea Holdings Inc is a global contract research organization (CRO) that provides services to pharmaceutical, biotechnology and medical device companies. The company helps clients plan, manage and execute clinical development programs, supporting the testing of new medicines and therapies from early-stage research through regulatory approval and post-approval activities.
Its services include Phase I through Phase IV clinical trials, clinical operations, patient recruitment and access, data management, biostatistics, medical monitoring, pharmacovigilance and regulatory support.
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