Good day, and thank you for standing by. Welcome to the Fortrea Second Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Hima Inguva, Head of Investor Relations and Corporate Development. Please go ahead.

Good morning, and thank you for joining the Fortrea Second Quarter 2025 Earnings Conference Call. I am Hima Inguva, Head of Investor Relations and Corporate Development at Fortrea. Before we begin, I want to share that this has been my last call leading Fortrea earnings call as I have decided to leave the company to pursue other opportunities. I'm incredibly proud of what we've built here and deeply grateful for the support of our investors, the commitment of our teams, and the opportunity to work alongside such a high-caliber team. We have a robust transition plan for Investor Relations. It's my pleasure to introduce Tracy Krumme, a new Head of IR, who will be joining the call. Welcome, Tracy. I'd also like to welcome our new CEO, Anshul Thakral, who joined Fortrea on Monday. Anshul, we're excited to have you here. With that said, I'm pleased to introduce our Chairman, Peter Neupert, who served as our interim CEO in the second quarter; and CFO, Jill McConnell, as our speakers of the call today. The call is being webcasted, and the slides accompanying today's presentations have been posted to the Investor Relations page of our website fortrea.com. During this call, we'll make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to significant risks and uncertainties that could cause actual results to differ materially from our current expectations. We strongly encourage you to review the reports we file with the SEC regarding these risks and uncertainties, in particular, those that are described in the cautionary statement concerning forward-looking statements and risk factors in our press release and presentation that we posted on the website. Please note that any forward-looking statements represent our views as of today, August 6, 2025, and that we assume no obligation to update the forward-looking statements even if estimates change. During this call, we'll also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures, but we believe these measures help investors achieve a more complete understanding of results. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and earnings call presentation slides provided in connection with today's call.

Thank you, Hima, and good morning, everyone. I'll add my welcome to Anshul and Tracy today. We're very pleased to have you both on board and hitting the ground running. Now let's turn to the second quarter, which showed another solid quarter of delivery. Fortrea revenue for the second quarter was $710.3 million, with adjusted EBITDA of $54.9 million supported by our continued progress against the company's margin optimization initiatives. The team continues to make progress with its transformation efforts, including reshaping the organization to align with its evolving pipeline mix and customer needs. Backlog as of June 30, 2025, stood at $7.5 billion, and the book-to-bill ratio for the quarter was 0.79x, resulting in a 1.1x book-to-bill for the trailing 12 months. While Fortrea did not achieve the level of net new business wins we would have wanted, there are positive signals in the quarter. The volume of RFP opportunities remains high, and cancellations continued to be in line with our historical trends. Although the company experienced some customer hesitancy in the quarter, primarily in new to Fortrea biotech customers as the team navigated the CEO leadership transition. Win rates remain consistent for existing large pharma and biotech customers, but declined for new to Fortrea biotech customers. Fortrea experienced a similar phenomenon prior to the spin, and then saw that in a reasonably brief period of time, it was able to return to solid net new business wins with new customers once they saw that the focus on delivery remains strong and Fortrea's leaders and employees were committed to their best interest. Other highlights from the second quarter include positive cash flow as expected. The company's liquidity is sound, and its capital structure is balanced. Further, Fortrea provided updated guidance for the remainder of the year, increasing the revenue range and reaffirming its EBITDA range. Fortrea's business fundamentals are steadily improving as demonstrated in this quarter's performance. This progress reflects its strengthened operational delivery and position. Fortrea's leading clinical pharmacology services reporting unit is in high demand with a combination of leading science and robust delivery. For example, the team delivered a bioequivalence trial ahead of schedule from first subject in to database lock for more than 500 participants in exactly one year, earlier than expected. The trial will enable regulatory submission for oral formulations of life-changing therapy that is currently only available in injectable form. In later phase clinical projects, second quarter delivery also was strong. The team had a flawless track record. And by that, I mean early on time in its delivery of site initiation visits as well as patient enrollment at the halfway mark of the study. Similarly, the metrics for ready to enroll sites and last patient in were all better than our benchmark targets. In an environment of global complex studies, this level of operational performance stands out and is reflected in our strong customer NPS scores. The company continues to invest in innovation and in its people. The second quarter saw the introduction of three new modules in the award-winning Accelerate software platform. One example, Risk Radar, is an AI-powered agent designed to enhance risk-based quality management in clinical trials. It uses AI and machine learning to automate risk identification and suggest mitigation strategies. Risk Radar reduces manual effort, improves operational efficiency, and strengthens patient safety protection. I'll wrap up my prepared remarks by thanking Fortrea employees for their commitment and hard work over the quarter. I've seen this organization evolve over many years now in my role on the Board. Over the past few months, I've gained a unique perspective serving as its Interim CEO. I can tell you that this team is not only dedicated to advancing research but is also remarkably resilient. They have definitely navigated a challenging journey to independence by staying focused on what matters most, motivated by a shared mission to bring new treatments to patients faster. Supported by a seasoned and collaborative leadership team of industry veterans, they are forward-facing and looking to the future with optimism. I'm very pleased to have Anshul joining the team as CEO this week. Let me just say a few words about Anshul. He brings deep experience in life sciences, knows the CRO industry from the inside out, not only as an executive but also as a customer. He has a proven record of building companies and delivering profitable growth. He is an outstanding and hands-on leader, and I know the entire Board joins me in welcoming him to Fortrea. Anshul, now that you've been here for a full 48 hours, would you like to make any comments before we hand the call over to Jill?

Peter, thank you for that introduction. I'm very appreciative of the warm welcome from the Board and from the Fortrea team. While I've only served as CEO for a couple of days, I've already had some opportunities to speak with executives in the pharma and biotech industries whom I have worked with for many years. In the near term, I will be focusing my time on engaging both our customers and colleagues around the world. For the past few years, I have been on the customer side of our industry and a consumer of CRO services. That, coupled with my time as an executive at PPD, I hope to bring a fresh perspective and energy to help drive our ambitions at Fortrea. The fundamental value proposition for CROs remains solid even as market conditions have been a headwind for the industry in the recent past. For me, it's exciting to see how scientific and technological innovation is shaping the future of clinical development. Having delivered growth in this environment in my past career, I know what it takes for us to be successful. Having spoken with current Fortrea customers, both large pharma and biotech, I know they are pleased with how we deliver for them. My role will be to add fuel to our growth engine, bringing energy and discipline in a way that will yield value for our customers, our people, our investors, and ultimately, and most importantly, for patients. I'm ready for this opportunity. I too want to thank Hima for all her efforts at Fortrea over the past few years. Additionally, I'd like to welcome Tracy to the team. Tracy, I look forward to working with you once again. But for now, let's return to the second quarter results and hand it over to Jill for a deeper dive. Jill, back over to you.

Thank you, Anshul, and thank you to everyone for joining us today. As a reminder, all my remarks relate to continuing operations of Fortrea following the divestiture of our Enabling Services businesses last year, unless I note otherwise. I will start by saying that I warmly welcome Anshul and Tracy to Fortrea and look forward to working with them to demonstrate the excellence I know this organization can achieve. I also want to thank Hima for her many contributions as we launch Fortrea as a stand-alone company. As we put the two-year spin transition firmly behind us, we welcome this next period as a time to take the grit and resilience we built from the separation efforts and apply it fully towards enabling our customers to develop their life-changing treatments and make them a reality for patients around the globe. It is time. In my prepared remarks, I'll cover the primary factors that influenced our second quarter performance and share an update on the steps we're taking toward achieving our 2025 guidance. I'll highlight our progress against our previously shared cost optimization initiatives. Additionally, I'll spend a few minutes highlighting improvements in our cash flow this quarter and our expectations regarding liquidity going forward. By the end of this call, I wanted to be clear that we are continuing to take appropriate actions to improve our financial performance and capital profile. As Peter highlighted, we delivered a solid second quarter as demonstrated in our financial results. For the quarter, we delivered revenue growth along with sequentially higher adjusted EBITDA following continued execution of our margin optimization initiatives, including delivering one-third of our $150 million in gross savings targets in the first half. As expected, we generated positive operating and free cash flow, and we delivered a five-day improvement in DSO versus the first quarter as we began to unwind the temporary impact of the invoicing pause related to the implementation of our new ERP system during the first quarter. These results reflect focused execution across the organization and continued momentum towards our financial goals. This quarter marked the two-year anniversary of our spin along with successful exit from our former parent, TSA. This milestone is reflected in the year-over-year decline in one-time spin-related costs as we move towards a more efficient cost structure for Fortrea. Now I'll cover the financial results in more detail. Second quarter revenue was $710.3 million, growing 7.2% versus the prior year quarter, driven primarily by an increase in revenue in our clinical pharmacology reporting unit, along with a small benefit from foreign exchange rates. Clinical development revenue was relatively flat as increases driven by recent net-new business awards, including higher pass-through costs were offset by lower FSP revenue. On a GAAP basis, direct costs in the quarter increased 9.8% year-over-year, primarily due to increases in pass-through and stock compensation costs, along with a reduction in R&D tax credits, partially offset by lower personnel costs from our ongoing restructuring actions. The reductions in direct personnel costs in the quarter continued to more than offset the investments in merit and variable compensation that we've highlighted previously. Permanent headcount across all of Fortrea is down more than 8% over the last 12 months as we carefully balance the need to reduce our cost base while continuing to deliver high-quality services to our customers. SG&A in the quarter was lower year-over-year by 20.1%, primarily due to lower TSA and IT-related costs, partially offset by the yield costs related to the receivable securitization program, along with an increase in personnel costs related to the reinstatement of merit and variable compensation. If you look at SG&A sequentially, excluding the impact of one-time costs and the securitization yield costs, SG&A in the second quarter is 4% lower than in the first quarter of 2025 and 15% lower than our fourth quarter 2024 run rate. This includes the absorption of merit and variable compensation noted above. I'll discuss more about our ongoing transformation efforts across the organization later in my remarks. Net interest expense in the quarter was $23.3 million, a decrease of $21.9 million versus the prior year quarter, primarily due to the $475 million debt paydown across our term loans made in June 2024. Because of that large paydown, our interest expense in Q2 of last year included a $12.2 million write-down of debt issuance costs. To better compare the year-on-year reduction, taking the combination of cash interest expense plus recurring securitization costs, it provides a spend that is approximately 18% lower in the second quarter of this year. Turning to our tax rate. The effective tax rate for continuing operations for the quarter was negative 1.1%. The rate was adversely impacted by an impairment of goodwill that has no tax benefit, an increase in our valuation allowance, the impact of BEAT, nondeductible compensation expenses and withholding taxes for 2025 non-U.S. earnings that are not permanently reinvested. Adjusted EBITDA for the quarter was relatively flat at $54.9 million compared to adjusted EBITDA of $55.2 million in the prior year period. Sequentially, adjusted EBITDA margin in the quarter was positively impacted by higher service fee revenue, along with lower personnel costs and operations as we continue to execute against our margin expansion initiatives. Moving to net income and adjusted net income. In the second quarter of 2025, net loss was $374.9 million, compared to a net loss of $99.3 million in the prior year period, primarily due to a noncash pre-tax goodwill impairment charge of $309.1 million related to our clinical development reporting unit. The charge was primarily a result of the decline in our share price since March 31, 2025, and to a lesser extent, a market-based increase in the discount rate used for the valuation. There is no indicator of impairment in our clinical pharmacology reporting unit. Excluding the impact of the impairment charge, the quarterly net loss decreased year-on-year, driven by the targeted reductions in our cost base. In the second quarter of 2025, adjusted net income was $17.6 million compared to adjusted net loss of $2.3 million in the prior year period. For the current quarter, adjusted basic and diluted earnings per share were $0.19. Turning to customer concentration. Our top 10 customers represented 59% of second quarter 2025 revenues. Our largest customer accounted for 13.2% of revenues during the quarter ending June 30, 2025. As I comment on cash flows, note that all references to prior year cash flows are for the entirety of Fortrea as we had not segregated cash flows from discontinued operations for the businesses sold in June 2024. To more clearly see year-to-date and second quarter cash flow metrics, please refer to Slide 6 in the investor presentation we released this morning. For the six months ended June 30, 2025, we reported negative operating cash flow of $102.4 million, compared to positive operating cash flow of $248.1 million in the prior year period. The $350.5 million reduction in year-over-year cash flow can largely be attributed to a few key factors related to our receivables. The year-to-date figure for 2024 included $298 million in proceeds from our initial sale of receivables under our securitization program in June of 2024. While 2025 includes the remaining negative impact of the temporary pause in invoicing in the first quarter of 2025 to support our ERP transition. For the second quarter of 2025, we generated positive operating cash flow of $21.8 million and free cash flow of $14.3 million, in line with our expectations. Days sales outstanding from continuing operations was 46 days as of June 30, 2025, five days lower than March 31, 2025, and eight days lower than the same period last year. The reduction versus the first quarter demonstrates our progress towards catching up on the delayed invoicing from our ERP transition. Net accounts receivable and unbilled services for continuing operations were $739 million as of June 30, 2025, compared to $660 million as of December 31, 2024, with the increase versus year-end primarily driven by the increase in DSO and to a lesser extent, higher revenue. We ended the quarter with $50 million outstanding on the revolver. This balance improved sequentially compared to the $89 million of borrowing outstanding as of March 31, 2025. We are targeting operating cash flow to be positive across the remaining quarters of 2025, driven by lower cash outlays for restructuring and spin-related costs as well as incremental cash generation from working capital. I want to be clear about this point. We believe that Fortrea has ample liquidity with $400 million available on our revolver as of June 30, 2025, plus more than $80 million of cash on hand. We generated positive operating cash flow in the quarter and currently project to do so for the remaining quarters of 2025. Everything we have done and are doing from our operational execution, our progress against our cost savings initiatives and reaffirmation of our 2025 guidance underscores the continued improvement in our underlying financial performance. With our projected EBITDA and significant add-backs available under the credit agreement, we expect that we will continue to have ample liquidity for the foreseeable future. As an important reminder, our credit agreement includes add-backs well beyond what we include in our definition of adjusted EBITDA, such as pro forma benefits from in-flight cost savings initiatives, Fortrea's public company costs and costs necessitated by the spin. The maximum net leverage ratio under the amended credit agreement ranges from 5.5x to 6x over the years 2025 and 2026 and reverts to 5.3x as of the first quarter of 2027. While we do not disclose our covenant calculations, we have considerable headroom and our covenant leverage ratio under our credit agreement is significantly better than our reported leverage ratio, generally at least one turn better than our reported leverage. We are currently and anticipate that we will remain fully compliant with the financial maintenance ratios of the credit agreement for the foreseeable future. With our TSA exit behind us, we plan to focus our capital allocation priorities on driving organic growth and improving productivity along with debt repayment. Backlog burn this quarter was higher than the first quarter, supported by growth in our faster burning clinical pharmacology reporting unit, along with our progress to move clinical development awards into more intensive phases of their life cycle. We anticipate the continuation of these first half trends in the second half. Although we are still seeing some delays in the start-up of biotech projects, our analysis shows that once underway, these projects tend to burn more quickly than large pharma studies. As previously noted, FSP revenue is anticipated to be a headwind in 2025, but we are rekindling our efforts in FSP, including the launch of a dedicated sales team at the start of the third quarter because we believe we can win attractive FSP work that can benefit both our margins and our customer base. We continue to target driving our commercial team towards achieving book-to-bill ratios in line with our peer set. But given the ongoing uncertainty in the macroeconomic environment and the recent leadership transition, it is not prudent to give guidance on book-to-bill. The pricing environment remains competitive, and we are monitoring pricing feedback closely as we attempt to balance winning new business with achieving attractive margins. As previously shared, we are making targeted investments this year to expand our commercial coverage of biotech, recognizing that over time, biotech organizations are expected to remain a compelling source of innovation and growth. Now I'll give an update on how we're executing against our transformation plans for 2025. As previously shared, we continue to execute against our target of gross cost reductions of $150 million in 2025 with the expected net benefit of $90 million to $100 million this year as some of the cost reductions are being offset by the reintroduction of merit and variable compensation. This $90 million to $100 million will be split, with roughly $50 million improving gross margin and $40 million to $50 million leading to lower SG&A. Year-to-date, we have captured more than $50 million in gross savings with roughly $30 million in net savings contributing to improvements in EBITDA. These savings have largely benefited gross margin as we are targeting the SG&A savings to be more heavily weighted to the second half. Building on what we discussed back in May, through the second quarter, we have increased our reduction in office square footage by a further 10% and rationalized a further 5% of the applications we inherited with the spin. We expect these optimization programs will extend into 2026 as we continue our efforts to bring our SG&A spend more in line with peers. For the full year 2025, we are raising our revenue guidance and reaffirming our adjusted EBITDA outlook. Based on exchange rates as of December 31, 2024, we are increasing our revenue target to a range of $2.6 billion to $2.7 billion. At the same time, we are reaffirming our adjusted EBITDA target in the range of $170 million to $200 million reflecting continued operational discipline. In terms of cash flow, for full year 2025, we are targeting operating cash flow to be marginally negative with positive cash flow generated in the remaining quarters of 2025. In terms of modeling the second half of 2025, we are targeting revenues in the third and fourth quarter to be more in line with the first quarter. The team at Fortrea has shown phenomenal resilience. We've come through a complex spin, exited the TSA on time, and laid the operational and financial groundwork for the future. The level of commitment and focus I've seen from our employees is extraordinary. We've endured uncertainty, worked through significant change and emerged with clarity and stability. And now we are exclusively focused on what is most important: delighting our customers and executing against our plans to improve our overall financial results. As we enter the next phase of our journey as a global leader in clinical development, we are closing the door to our transition phase and embracing our transformation phase. Through it all, we have maintained strong engagement scores from our employees, delivered improved Net Promoter Scores, and built the discipline we need to steadily improve. We are excited about the future of Fortrea.

Please open the line for Q&A.

I have a two-part question, both related. First, I'm curious about the smaller, newer biotech clients hesitant to engage with Fortrea. Did they choose a different path or simply postpone their decisions? Is there any commentary on what was lost versus what was delayed coming out of Q2 due to this hesitancy? More importantly, welcome to Anshul and Tracy. Anshul, I would like you to share your commercial style, the skills and relationships you bring to the company, your approach to building a successful commercial operation, and any initial insights you may have on how your strategy for developing the sales force and commercial marketing team might differ from Fortrea's current approach.

Thanks, Eric. I'll take the first part of that question, then I'll turn it over to Anshul for the second part. So with regard to the new to Fortrea biotech, I think candidly, those are biotechs that made a decision to go in a different direction. It's not uncommon. As we had mentioned and Peter mentioned in his remarks, we saw the same thing if you recall prior to the spin when there was some uncertainty about leadership. And we saw that very quickly dissipate once the leadership was in place and we removed. So while unfortunate, we're not expecting to have those same uncertainty concerns with customers going forward. So we're hopeful that, that is a relatively short period in transition. Anshul, I'll turn it over to you.

Sure. Eric, thanks for the question. It's day three. So I'll answer what I can. In terms of commercial style, a couple of important things to point out. To me, this is a professional services business, and I approach the CRO industry like a professional services business. It's to figure out what our customers' needs are, figure out what tools and capabilities we have to meet those needs. And more often than not, it's about delivering high-quality results and trying to bend the time cost curve, everything we did in my prior career. To me, achieving the commercial excellence here is about commercial excellence, financial excellence, and operational excellence. And that's what it will take to win the hearts and minds of our customers. But Eric, it's day three. Ask me again in Q3, and I'll have spent a lot more time with our customers by then, and I'll have a deeper answer for you.

Welcome, Anshul. So also a two-parter for me. Number one, can you discuss the overall demand environment in pharma and biotech and how that's evolved throughout the year? And then part two is just an update on the Phase I business. That's been fairly robust for you guys. Are you still leaning on third-party for capacity support? And if so, when do you expect that to normalize?

Justin, thanks for the question. Let me take the first part about sort of our demand environment, and I'll hand it over to Jill to talk about specifics in our Phase I business. Look, I'm cautiously optimistic. We are seeing our fair share of RFPs. I agree with the broader market sentiment that's been expressed by others in the industry as well. We too are seeing our pipelines trending upwards, both across biotech and large pharma. Now our lack of exposure to vaccines or government-funded programs is a positive in this macro environment for us. In addition, as Jill has indicated and as Peter has indicated, our strong biotech pipeline is another positive for us, and not being over-indexed to any one customer segment is something I'm excited about here at Fortrea. So with that, I'll turn it over to Jill to talk a little bit more about how our CPS business is performing.

Thanks, Anshul. Justin, our clinical pharmacology business continues to be an industry leader and perform incredibly well. In fact, as we have shared previously, our biggest challenge at the moment is capacity constraints. And so that has caused us to have to shift some of that work to third parties, and we're continuing to refine scheduling to try to improve that. And we're hopeful in the future, we'll be able to bring more of those awards in-house. But we continue to have great success there, both operationally and scientifically, and we're very excited about the continued building of that business.

Maybe just a follow-up on the bookings environment. Can you just talk a bit about what you're seeing on the cancellation side? It sounds like, again, the visibility, you don't want to talk too much about the go-forward book-to-bill. But just trying to feel out, again, what you saw in the quarter, what the right way to just think about that cancel pieces just competitively, again, how you guys are doing on the win rates would be helpful just to talk through that a bit.

Sure, Patrick. I'll take that one. So in terms of cancellations, we have fortunately continued to see cancellations in line with our historic trends, which are relatively low. Our cancellations are actually even slightly lower than they were in the first quarter. So from a cancellation perspective, we've been pleased to see that trend continue. In terms of win rates, they were relatively consistent with our existing large pharma and biotech customers. But as we called out, we did see a drop in the new to Fortrea biotech customers. And again, hopefully, we'll see that start to turn around as we go through the second half. Yes, I'll start with pricing. The pricing environment is very competitive, but we believe we are competing effectively. Our aim has never been to have the lowest price; we want to be aligned with the market. We are closely monitoring trends and making adjustments as necessary. Currently, we feel we are managing this situation well. While the environment remains competitive, we don't see anything exceptionally aggressive. Regarding margins, it's too early to discuss 2026, but we expect to continue the annualization of our initiatives, particularly those related to SG&A that are more focused on the second half of the year. You will see the benefits fully realized by 2026. We have also mentioned plans to drive further savings in SG&A next year while working to improve gross margins. I plan to provide more details about that in the future, but at this stage, it’s a bit premature to discuss margins for 2026.

Welcome, Anshul. It's nice to catch up with you. I had a question just in terms of the outlook for the back half of the year. I think you called out that the guidance raise in terms of revenue is largely driven by FX. And I just wanted to make sure I understood all the moving pieces on the EBITDA line. Could you just talk about sort of your FX exposure on sort of like a revenue versus EBITDA basis? And I know, obviously, you have the cost-cutting benefits, but some planned investments. So could you just walk us through that to make sure we have all of our ducks in a row on that point?

Sure, Elizabeth. I'm happy to clarify. The increase is not related to foreign exchange. We noted that it had a very minor impact, around 60 basis points this quarter, and we expect it to remain similar as we move forward. While it's impossible to predict rate fluctuations, they are not the main factor influencing the revenue guidance range. We're focused on advancing our projects into more intensive phases, particularly with the new awards we've secured. Additionally, there's also some impact from pass-throughs involved.

Just kind of drilling into the second half guidance here. So it sounds like you guys expect a step down in revenue from the second quarter, but maybe more in line with the first quarter. So I guess I'm just trying to put the pieces together of why is kind of burn rate maybe dropping back down in the second half? And how do pass-throughs play a role into that?

Sure, Tucker. So I think we are expecting a little bit, especially towards the end of the year and moderation in pass-throughs. They're still going to be elevated in the second half, but we actually have a very large, very heavy pass-through-driven study that was successfully ended early. And so one of the things that's been driving some of the higher one as that winds down will impact revenues in the back end of the year. I think what you'll see is revenues more in line with the first quarter, but with better margins on them, as you can see relative to the maintaining of the adjusted EBITDA guidance as the cost savings initiatives continue to deliver. Sure. I'll take that. I think in terms of cancellations, you're right, it is about who you're exposed to. We don't do government work generally. We don't have really a book of business in the government-related or government-funded work, and we have very limited exposure on the vaccine side, which I think is some of the issue that our peers have faced. We also have a relatively conservative bookings policy. So I think that also has helped us to keep our cancellation rates in check. But we monitor it constantly, and we've been pleased to see that it's really remained in line.

Sure. I'm happy to share. I went through a thoughtful decision-making process regarding this industry and its fundamentals before joining the team at Fortrea, and I am very excited about my choice to be part of this team. Yes, there are some challenges present due to various macroeconomic factors, which have been acknowledged by all competitors. However, I remain confident in the fundamental aspects of the market. As Jill mentioned a moment ago, good science continues to receive funding, and this is true for both large pharmaceutical companies and biotech firms. Good science and effective drugs are still being developed, and the CRO industry plays a crucial role in that process. I am committed to the industry's long-term fundamentals, and that's a key reason for my enthusiasm about being here. In the coming months, I plan to travel to meet with our colleagues and customers to understand how we can utilize Fortrea's strengths in light of the market conditions I just described.

I would like to ask about cancellations a bit further. It's encouraging to hear that your cancellations improved from the first quarter to the second quarter, especially compared to what we've seen from others. Can you explain why you're experiencing these better trends? Is it related to having a more concentrated exposure with certain large pharmaceutical sponsors, or are you executing differently with the types of programs you're involved in? Any additional insights on your resilience in this area and your thoughts on its sustainability would be appreciated.

Sure. I'll take that. I think in terms of cancellations, you're right, it is about who you're exposed to. We don't do government work generally. We don't have really a book of business in the government-related or government-funded work, and we have very limited exposure on the vaccine side, which I think is some of the issue that our peers have faced. We also have a relatively conservative bookings policy. So I think that also has helped us to keep our cancellation rates in check. But we monitor it constantly, and we've been pleased to see that it's really remained in line.

We look forward to sustaining our relationship with you.

Thank you.

Thanks everyone.

This concludes today's conference call. Thank you for participating, and you may now disconnect.