Fortrea Holdings Inc. (FTRE) Earnings Call Transcript & Summary

Good evening. My name is Tejas Savant, and I'm on the life sciences team here at Morgan Stanley. Before we begin for important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And if you have any questions, do reach out to your sales rep. So it's my pleasure this evening to host Fortrea. And speaking on behalf of the company, we have Tom Pike, CEO; and Jill McConnell, CFO. So thanks, guys, for doing this. We appreciate it.

Maybe, Tom, just to kick things off, can you outline Fortrea's key accomplishments this year against a decidedly tough macro backdrop. What are you particularly proud of? And is there anything you wish you'd done differently?

I think there's always things you wish you did differently. Thank you, Tejas, for having us, by the way. And Yes, I think when you consider this company has only been public for a year, we actually have accomplished a tremendous amount. This company was a division of a division of a much larger company. It never operated independently. And then at the same time, right out of the gates, we had two very strong bookings quarters our quarter 1 bookings were actually decent. People forget that a [ 1.1x ] is a growth story. So in any other industry, [ 1.1x ] is pretty good, but [ 1.1x ] is a growth story. And so we feel pretty good about the commercial transformation. We can come back to it. There's more to do, but we're also making great progress getting out of our parent. You think about how these things work, we have more than 1,000 servers and 500 applications sitting there with our parent, and we're making great progress getting them out. We've actually transformed the way we think about customer service so that we have multilevel selling taking place. We have direct interactions with us, we brought our therapeutic leaders together. We've developed strategies by therapeutic area. We're now targeting both biotech molecules and large pharma. We had a couple of big break-ins, Tejas we announced in our last earnings call that we had three break-ins with large pharma during the second quarter, two of them, what I'd call footholds. And those footholds really give us the ability to walk around in a large pharma while we're doing a piece of the business, not a formal part, a large partnership but a good partnership and then one full-service partnership which should pay real dividends in 2025. So I think when you step back from it all from where we started, we put a great team together, yes, and one thing Jill just reminded me is we came out. We had a fair amount of debt on us, and we've actually paid down about $0.5 billion of debt which, again, kudos to Jill's team for getting that done. So that's really derisked the spin from an investor and a customer standpoint to a great degree.

Got it. So just double-clicking on the biotech side of things, we'll get to the pharma piece in a second. When you look at your clinical services offering, last quarter, you called out that the pipeline was actually quite strong, but it didn't translate into bookings and revenue recognition from your biotech customer base, was there a difference in behavior between the larger companies versus the emerging ones? And what does your backlog split look like across these two customer sets?

Yes. I'll let Jill talk about the backlog in a second. We had an interesting thing happened that we probably didn't think enough about early in the year, and that's in the first half of the year. We had a lot of exposure in our opportunity pipeline to biotech and a little bit less than normal to large pharma. So one of the things we really like about the business is we're about 50-50, large pharma and biotech. And we had a more percentage-wise biotech. I think what we learned is that it's just less predictable contracting with them. You'll be awarded something and then there may be a board decision. They may still be working with the regulatory authority. A number of things can come up and it's just less predictable. So in the first half, that really hit us. In the second half of the year, we actually are more exposed to large pharma in our opportunities as well as biotech and large pharma tends to have more predictable processes, procurements involved. They do things to deadlines. So we actually expect that the second half of the year should be more predictable than the first half was in terms of what those bookings are. And Jill, I don't know if you want to take the backlog...

Yes. I think in terms of backlog, it generally mirrors our revenue mix, too, which -- ever since been when we did our Investor Day, we talked about being about 50-50. We really like that mix because the balance of -- of the large pharma where you have more consistent pipeline relationships with the small. So the backlog generally mirrors that. It vary from quarter-to-quarter, but [ on that ].

Of course. And between the biotech book of business, specifically, Jill, what's the emerging sort of biotech exposure versus the more mature biotechs?

Yes. I think when you talk about emerging, you're meaning probably people that look like pre-commercial -- we do have a portion of that, but it's not -- the majority of it is commercial stage biotech. And we're really careful about when we do work with the pre-commercial making sure they've got appropriate funding before we put ourselves at risk with work or even bring the order into our indoor backlog.

Got it. And Tom, back to you on just the hesitancy in actual execution of bookings, is it just nervousness surrounding capital markets activity and therefore, what future cash availability could look like? Jim over Charles River called the psychology around this being as important as the reality of what's on the balance sheet and those kinds of things. What's your take on that?

It's hard to disagree, Jim, about the importance of psychology with them. But I think just being a little more prudent and a little bit more involvement of different executives in the decision-making. So we're in the past with the biotech, you might have had the R&D portion of the organization essentially the research portion of the organization are able to make a decision. Now you may have board involvement. You may have an advisory committee involved and so it's just stretching out a little bit. So for us, our actual pipeline of biotech opportunities is strong enough for us to be able to be successful. It really is just a matter of being a little more predictable in terms of the actual timing. And so what we're trying to do is work with our teams to be more disciplined in asking questions to make sure we understand exactly what's going on in the decision-making process. So we can set expectations and prioritize better.

Got it. That's actually a perfect segue into my next question. Just this difficulty in predicting when biotechs are actually going to contract, what are some of the measures you're taking to improve your revenue forecasting for this set of customers? Is it simply a matter of using more conservative assumptions on conversion rates as it relates to your outlook? Or are there any operational measures that you can put in place to get better at that? Sort of particular...

Yes. I think it's -- we are doubling down. We're looking at some of our processes to make sure that we go deep enough in our forecasting. So for instance, before Jill and I came up here, took a second look. We have a normal process. So every Friday, we take a look at our sales pipeline. And every Friday, we look at our opportunities and we say, does this need more attention? Is this something that Jill should sent an e-mail or call the executives so Tom do it, should some other executives. So we do this -- we've added this discipline to the organization so that we're looking every Friday. However, now for forecasting, we're actually going a little bit deeper, and we're doing multiple scenarios with ins and outs and probabilities. And that helps us, again, the main thing is I don't want to predict [ 0.9 ]. I want to make a [ 1.2 ]. So the main thing that we're trying to do with that is how do we reprioritize things what can we do to intervene to actually make a difference in a sale. And so the goal is it's more than just predicting accurately. It's actually making the number that we're trying to do.

Got it. Cancellations? I mean recently, there was some chatter in the market that a smaller CRO that focus mainly on biotech customers called out an uptick in cancellations, is that a dynamic that you see in your book of business at all post the second quarter or not really?

Yes. We haven't seen it. They've been consistent for us and I think relatively, low. We haven't seen tick in cancellations.

Got it. Perfect. We were sort of more sort of positive commentary from the Fed around -- starting to cut interest rates. Any shift at all from the biotechs in terms of their confidence levels and being a bit less cautious around spend as we get closer to the rate cuts. And has that started to bubble up in terms of actual contracting and bookings at all or not yet?

Not really. I mean, I don't -- I think it's too early to tell. We've all been watching interest rates in the Fed for so long. I think we've all been hoping for some kind of reduction in interest rates. We're finally starting to see some daylight on that. I do think if you just look over time, biotech spending is somewhat correlated with lower interest rates. So there's no -- I think the general view is that, that will be a positive, but it's a little bit early to digest from our standpoint on that.

Fair enough. Let's switch to the larger cap sort of customer base. Tom, you mentioned the wins in the second quarter, your -- I guess, as you went head-to-head with a bunch of other CROs into those conversations, what really stood out about Fortrea?

Yes, a few things. We did naturally, as you'd expect, we do debrief after the fact and our culture the agility of the organization, the access to management is very meaningful to them. But also some of the ways we're trying to innovate. It's been noted that we seem to be closer to investigative sites and then really thinking about investigator satisfaction in ways that others aren't. They like our tech strategy. We are close to Veeva. We're close to Medidata we're probably the leading CRO in terms of using the entirety of the Veeva suite. And then we're doing some innovative stuff with people like [ EVAR ] and WCG as well. So they like the way we're leaning into people who are investing heavily in tech. And then finally, they do like our data strategy. The LabCorp data is still valuable, and they like the fact that we're partnering with others that have really interesting data sources, one, just for instance, we have an exclusive partnership with Verana who has got an ophthalmology database. And so that -- and we do very well in ophthalmology. And so that gives us an advantage. So we've been we're trying to make the most of the ability to develop and leverage relationships with key players as well as some of this real focus around sites.

Got it. And was what resonated with those customers different based upon the nature of the contract, sounded like a couple of them were more on the FSP side and one was more full service. So was it the same sort of criteria that you just laid out across all three? Or was there a distinction?

Yes, it's a mixture. We didn't really have a big FSP win per se, but we had -- we have some of the -- when you think about this business, people think about full service, they think about FSP, but there are other areas like data sciences. So we had some key wins around the data science area. We had key wins around full service. And I think in both of those, they just like the way we're trying to innovate. One of the things that we're really focused on is how do we improve productivity for the larger pharmaceutical firms and they really like our approach to that and how we quantify that and how we're thinking about it. In fact, Jill and I have a meeting after this, it's going to be focused on productivity for a couple of hours tonight. So it's something we're really trying to lean into is how do we make the clinical research process better for our customers. And naturally, they like that.

Got it. So one of the large preclinical CROs in the space, I mean, they called out a sudden and unexpected deterioration on the large pharma side of the book of business in the second quarter, continued into July and also a slower-than-anticipated recovery in biotech. Obviously, you guys are on the clinical side. It's a long-cycle business that gives you the benefit of a degree of insulation. But are you seeing any of those concerns bubble up in your conversations in July or August?

Fortrea is really focused on Phase I to Phase IV clinical research. So we're very targeted. And the place where we would look to, and we actually discussed that commentary is does it affect our Phase I operation. And what I think we're really pleased about is the fellow who runs that business has repositioned that business to work more with large pharma as well as biotech. And so he's really kind of dodged any early clinical bullet associated with biotech right now. And so we are doing some really interesting stuff, some oral GLP-1s and other interesting drugs that are coming along. And so we're -- and then we're trying to focus on how do we take things from Phase I into Phase II and really keep that relationship. In general, I think what Fortrea is exposed to, we have enough biotech for us to be successful. And then we have enough large pharma exposure to really mediate the risk of being too exposed to biotech. And then the large pharmas, we could talk about a little bit, just the large pharmas were exposed to are a nice mix. So so far, they're performing well for us as well.

Got it. Obviously, you've been around the industry for a while, Tom. As you think about PIRA or rather, you talk to your customers on the IRA, where is their head at? I mean on the one hand, you see this first round of the outcome of the first round of drug pricing negotiations. Most of the pharma companies thought it went better than the worst-case scenario and it's a manageable impact starting in 2016. But then when you hear sort of the commentary from the preclinical side, you almost wonder if there is an underlying structural reset in the way they approach innovation? Are they going to sort of significantly reprioritize pipelines you're looking at larger indications first versus going after some of the rare diseases or the smaller indications and then adding to the label over time. What are you hearing in your sort of conversation?

Yes. I think the concern that we all have is that there is a risk that will reduce innovation in pharmaceutical industry by doing these kinds of programs. And people forget that we very carefully when we're pricing drugs, we try to think about the benefits patients, and then we try to price them appropriately versus alternative therapies. And so a lot of care that goes into that. So when somebody uses a blunt instrument to reduce the price, it's something that we get concerned about whether we can support the innovation that, frankly, the burden of disease deserves. That being said, I think like whether so many things, we're talking about Medicare Part D, people thought that was going to be a disaster, and we've learned to live with it. We think we're learning to live with this as it is. And so it's starting to become a normal part of conversations. For CROs, there could be some benefits because it could bring forward larger populations of patients, larger indications earlier in the -- and the patent life of a drug, and that might mean that there are larger trials earlier, which could be good for us because pharmaceutical firms won't want to staff up for it. I do think there's a little bit of worry about if the IRA gets significantly expanded by either administration could happen in either one, that will certainly caused some pause for all of us. But I hope that the government will realize that we don't want to stifle the tremendous innovation going on. I mean, some of the therapies we have today whether it's a GLP-1 crossing different areas like kidney disease, cardiovascular or other things or some the cell and gene therapy, some of the other therapies we have are really incredible. And I think we hope that the IRA doesn't crush that innovation.

Got it. Fair enough. If you talked about your pipeline at the beginning of the third quarter being up, I think it was 7% or 8% versus 2Q. What is your threshold for adding a project to the pipeline, Tom? And have your criteria for what's in the pipeline evolved in light of some of the forecasting issues you have here in the second quarter?

Jill do you want to talk about that?

Yes. I don't think -- so we get everything before it goes in. It will be a qualified pipeline. Not every opportunity that we see goes in there. So we'll look at it to say, is it a therapeutic area or way up strength? Is this somebody that we think -- sometimes you can tell that they're just going for a price play, we'll look also, is it an organization that has some level of funding? Or is this more hypothetical type of opportunity. So we'll do that vetting and put it in there. I don't think we've -- that hasn't changed since we spun. I think we're still treating them the same, and we have been seeing quarter-on-quarter, the pipeline grows. So we're pleased with that, and we're going to continue to push to increase the size of the funnel coming into it.

Got it. And just about the conversion, the last [indiscernible], I mean, has that started to get a little bit better?

So burn rate will look better in the second half. Some of that is because some of the growth that we are projecting for the second half on the service fee side is from the Phase I clinics. Tom talked about some of the repositioning there. We've got some really great projects with one of our partners, in particular, that have really increased the occupancy in our clinics. So that's part of it. And some of it is -- we did have very strong book-to-bills in the back half of last year, and those are really kind of coming through as we get to the end of the year. So -- and we're also really focused on the productivity operations organization. We have a lot of projects going on there to increase that. So all those things coming together should drive some improvement in the second half.

Got it. What is your book-to-bill look like in the back half of the year, Jill? I mean are you still confident of getting to that 1 point -- the magical 1.2?

Well, we're never going to guarantee and we won't guarantee anything that confident world always -- I think that trips us up before. Where we have a strong pipeline, there's a lot of opportunities. We're really focused, as Tom said, we've made some additional changes since Q2. We've talked about believing that we have line of sight to achieving a 1.2 over the course of the second half with Q4 being stronger than Q3, and that's still how we feel. The end of every quarter, the last month of every quarter really the maker break for the quarter by nature of how the industry works. And so we'll be working hard in September and all through the fourth quarter, but that is still is a 1.2 overall for the half, yes. That's our target.

Got it. Fair enough. I think your largest customer, Tom, is about 13%, 14% of sales. And obviously, there's some variation in terms of budget pressure across pharma companies, right, in terms of their GLP-1 exposure, some people dealing with COVID runoffs. Clinical trial failures and then obviously, patent cliffs. So are there any customer-specific dynamics to be thinking about either in terms of upside or downside to that backlog conversion rate?

We are pretty well exposed across different types of large pharma. And the way we start to think about it is that there's really three groups of pharmaceutical firms. There's one group who are being very successful right now, and they're actually increasing their spending on R&D in some cases, because of patent cliffs where they're going to need to fill in revenue several years from now. And so that group is doing great. And then we have another group who is restructuring, a number of them are in the news and they're clearly restructuring their business because they haven't been as successful. And then a group in the middle that we kind of call optimizers. And the optimizers are doing okay, but they're trying to optimize their spend associated with clinical research. We have pretty good exposure to all three. So our we're lucky that our customers are spread across all three, I'll love it if we weren't in the restructuring class, but we have a relationship there that's in the restructuring group, but it's a good relationship. And so we're -- again, we feel pretty good about who we're exposed to. I mean to be perfectly honest with you, what I love more vaccine exposure, what I love more GLP-1 exposure, absolutely. But as it sits, we're pretty well spread. Again, there's this Fortrea has this dynamic of diversification that's kind of nice, where we're diversified globally. We're diversified across TAs and diversified across these customer types. And so we may not have the explosive growth that smaller companies have that are less diversified, but you can kind of count on our customers being there.

Fair enough. Any thoughts on the pricing environment? I mean that's been a point of focus off late, some of the larger CROs have called out pricing competition as well?

I think it depends a little bit what we -- who you're exposed to, again, at our size, it's a couple of things in the clinical pharmacology business Phase I. I would say it's just very normal. There's pricing discipline -- we often -- we don't compete purely on price in there. In full service, which is our largest business, it's relatively disciplined. And basically, if you think about what happens, so somebody gives you a molecule and they basically outsource it to you. So they outsource the project management plus the clinical research associates, we help them pick sites around the world. We manage the project. And in those cases, our strategy for what sites we choose, what countries we choose, our relationships with those sites to how we use data and technology, those actually are as important as the price. So we find, in general, customers would prefer a good strategy to the best price. And so we try to compete there. There is a third piece of these businesses, FSP, it's called functional service provision. It's kind of like a staffing business. And in the staffing business, that has become price competitive. I think we always knew if you watch what happened with the sales rep business and CROs, if you watch what happened in the staffing business with people like Randstad and others over time, there's just less value added to it. So it's something that is prone to price competition. And I do think you hear from our competitors that there's a fair amount of that. Now for us, Tejas, we're actually just trying to maintain in that because we want to improve the margins of the business. We don't want to go for low-margin business that would tank our future. And we feel like we have enough opportunity in full-service Phase I and very selective FSP that we can grow the way at attractive above-market growth rates over time. by not having to win the biggest, hairiest lowest-priced FSP work. So for us, clinical pharmacology good, global clinical development, full service, good FSP, price competition, but we're selective in how we think about that.

Got it. Fair enough. What is the mix, Tom, across your backlog in terms of full service hybrid FSP?

We don't disclose it. But what we do disclose is our largest business is full service. And then FSP is behind that and then clinical pharmacologies behind that.

Fair enough. Switching to guide, Jill, back to you. How are you thinking about the cadence of the improvement here? I know you mentioned, obviously, 4Q being a little bit better than 3Q. But any sort of further trends that you can highlight in terms of how that improvement plays out?

For the remainder of this year? Yes. So it will continue to increase over the course of the year. There'll be some probably muted improvement in Q3 and then more of an improvement in at a point where you'll see a little bit in Q4 of benefit as we do start to formally exit some of the remaining technology TSAs, There'll be a little bit of improvement in late the year in our SG&A line. There's still a lot more to do there next year, but you'll see some improvement there. And then the growth quarter-on-quarter from a service fee perspective will be a little bit in Q3 but more so in Q4 as we start to really see the projects we won in the second half of last year, plus the productivity work that we've been doing come to play in the fourth quarter.

Got it. And at this point, I mean, do you have good visibility in terms of how the rest of the year plays out? Just given the cut -- I mean, is it fair to call the guide as relatively de-risked?

We believe at this point that the EBITDA guide, I mean there's always sometimes a little bit of volatility in press through from a revenue perspective, but the EBITDA guide we've given, we feel good about. And right now, it's all about execution in terms of delivering those numbers. I mean, there's nothing that we would win at this point that would really change this year from a revenue perspective.

Fair enough. And in terms of that pass-through moderation, when does it reach steady state?

Well, I know I've talked to some of my peers about this over time, and everybody struggles to really predict pass-throughs on a consistent basis. We were impacted in particular by some biomarker studies with a customer that are thousands of participants and over several years, and we had some particularly bumpy quarters associated with that, that -- that study is still ongoing. So there's possibility some still movements in that, but probably not to the extent that we've seen it previously. We saw what was kind of a low double-digit number in Q2 of 2023, increased multiple times over the three quarters ensuing and then kind of reverted to that again in Q2 of this year. So we think we're probably getting into a little bit more of a steady state with that, but and we're also seeing less, I think the pricing of the site and what you need to pay for the services is kind of like balancing out now following the initial post-COVID area where they were struggling for staff and prices were going up. So I think over -- on time, we're seeing it moderate a bit more, but there will still be volatility from quarter-to-quarter.

Got it. And I think you talked about EBITDA margin in that 11% to 12% range for next year, Jill. I think it's about 300 bps better than your midpoint versus 2024. I guess, if the exit velocity this year in terms of backlog conversion, book of business, et cetera, isn't where you hope it would be. How should we think of the EBITDA margin range for next year?

Yes. So you're right, it's about 300 basis points midpoint-to-midpoint. If you think about it year-on-year. And we've said roughly half of that improvement will come from SG&A. So that's TSA exits and then the additional transformation that we'll do in SG&A over the course of the year, which will grow over the course of the year. Then the other half will come from improvements on the top line and the drop-through of that as we continue to optimize our cost line, in particular, it will be important to achieve that, that we do get to 1.2 on average over the second half of this year. So that is one of the variables that we would need to see. But at this point, we believe that, that is possible, so that's what we're planning for. When you think about the revenue piece, it implies a flattish 2025, but that is low single-digit service fee growth being offset by pass-throughs declining. And obviously, this pass-throughs are dilutive to margin and the service fee growth, especially when you don't have to increase but your cost of sales line, in particular, it allows them to drop through strongly, which we saw that in the move from Q1 to Q2 as well this year.

Got it. On the TSAs, I think you've now exited something like 60% of them, right? Realizing that the most difficult part is still ahead in terms of software, servers, other tech pieces. Do you think you'll still be in good shape to exit the majority of them by year-end? And what could, I guess, bleed over to 2025?

Yes. So we are -- we've actually -- I'd say, over the last 6 to 8 weeks, we've made significant progress in terms of those server and application migrations. We expect by the time we're announcing our Q3 results, we're going to have the majority of those pieces moved across, and we'll be down to some of the less systems like our HCM and ERP. So we do expect to have exited the majority of TSAs by the end of the year. There's a couple of small, I guess, subsets of some of these, for example, if you think about we're using our former parent HCM to do payroll and people management you can't just cut that off on December 31 because you have to issue W-2s and everything. As you go into the first quarter next year, also same thing with the ERP. We don't -- it to close and to your reporting and everything. So it will be subsets of those, but the vast majority of them, and I think based on the momentum we've seen over the last couple of months, we feel really good about our ability to exit these, which -- it's a significant amount of work, and the team has done a phenomenal job just really laying out the plan and driving against it. So we feel good about that.

Got it. In terms of capital deployment, obviously, debt paydown is your top priority. How are you thinking about the rate cuts? And how should we think about interest expense on a year-over-year basis for you next year?

Yes. So we did use the initial proceeds from the first tranche from the divestiture that we closed in the second quarter towards debt pay down. There are -- two other payments that are due for that pretty much in '25, which will also the majority be used for that debt paydown. I think beyond that, we are -- so that is significantly improving or reducing our interest expense. And we obviously are -- we're talking with my team regularly about how we look at the forward curves and try to decide do we hedge or not hedge, I think there is some additional benefit for us. But we feel good about that we have plenty of room under our covenants. So at this point, with that $0.5 billion paydown that Tom talked about and taking out about 1/3 of it, we will. But I think now it's going to be about how we use that EBITDA expansion, right, to really help drive leverage down further. But we're still committed to that 2.5 to 3x over the medium term. And really have line of sight to by the end of next year being significantly kind of in and around maybe the 4s by the end of next year.

Got it. Got it. Tom, back to you. I mean, Fortrea has a strong dealer lake. You talked about using tech partnerships. You've highlighted a couple of them as well. To help improve and differentiate your product suite? And I think also helped with targeting and RFP development you've called out. Can you talk a little bit about the progress you're making here? And what makes your data capabilities differentiated from other players in the market? And -- as you think about your exclusive agreement with LabCorp running out, what comes next on the other side of that?

Yes. I mean I think the whole data market has changed tremendously the last 8 years. It went from just a couple of providers where you had somebody like Optum and IMS is your only choice is to just tens of providers. So our strategy and our competitive advantage is really how do you take those tens of providers and really optimize whether it's in a vertical like ophthalmology as I discussed or whether it's a horizontal where some global trial in a more traditional like cardiovascular indication. How do you optimize? And so we start with some of the things we learned with LabCorp using LabCorp data plus some other data sources where we created a tool to be able to come through that. And now what we're trying to do, we have this AI innovation center that we've opened. We have an excellent artificial intelligence leader. So we're trying to figure out how can machine learning complement that. And how can something like a large language model actually give us more context and really a more specific tighter answer that a human wouldn't necessarily come up with because they couldn't process that much knowledge. So we're trying to home in on the areas of whether it's patient recruiting or site identification and even some other areas like how do you work a project when you have something like a Microsoft Copilot, what do you do differently with the project because you have the ability to have essentially some kind of automated aid who can always retrieve things for you. Over time, I think we have good relationships with LabCorp, we're excited about that partnership. I was just on the phone with them last week talking about how we might be able to do more I think we expect those relationships will remain long term. And we may no longer be the only racer, but we should be in the pole position at least and turn to that as we go forward.

Fair enough. Just in closing, Tom, in your quest to reinvigorate the top line and improve your margin profile, bring it more in line with your peers. How do you ensure that portrays culture stays intact and you don't lose that sort of special customer touch, that sort of the benefit of working with the Goldilocks CRO, as you've called it in the past, walk us through your thought process?

Yes. Well, culture is really important for us. So we just held an all-hands call last week, and a good portion of it was discussing the company and its situation with our people and trying to be candid about how our employees are key stakeholders in Fortrea's future, and we're really reinventing this company together. I've been around this industry for a while, as you say, Tejas, in -- and I think it can still use an organization -- a services organization with an exceptional culture can make a big difference in this industry. And so whether it's improving how we promote, making sure the right people and the right performance takes place, improving career opportunities, giving them excellent work to do, doing innovation like the artificial intelligence work that we're just talking about. Interestingly, our artificial intelligence leader has said, he'll take all comers. Anyone who has ideas he'll take on and try to put them to work and help. And I think if we can keep giving people opportunities, we will create that culture that will create the winning organization that will outgrow the rest of the industry.

Fair enough. That's a great place to leave with that. So thanks so much for joining us.

Thanks for having us.

Thank you.