Fortrea Holdings (FTRE) risk factors, FY2024 10-K

Risks Relating to Our Business

1. 01If we do not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected
2. 02If we are unable to contract with suitable investigators and recruit and enroll patients for clinical trials, our business might suffer
3. 03Our international operations could subject us to additional risks and expenses that could adversely impact our business or results of operations
4. 04Embedded and functional outsourcing services associated with our FSP delivery models could subject us to employment liability, which may cause adverse effects on our business
5. 05Our customer or therapeutic area concentrations may have a material adverse effect on our business, financial condition, results of operations or cash flows
6. 06Our customers may experience insufficient funding to complete their clinical trials
7. 07Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog
8. 08Increased competition, including price competition, could have a material adverse effect on our revenues and profitability
9. 09An inability to attract and retain experienced and qualified personnel, including key management personnel, and increased personnel costs, could adversely affect our business
10. 10We depend on third parties to provide services critical to our business and depend on them to comply with applicable laws and regulations
11. 11If we are unable to effectively manage our growth, our business could be adversely affected
12. 12Our relationships with existing or potential customers who are in competition with each other may adversely impact the extent to which those customers use our services
13. 13Our business is dependent upon access to data and an inability to access the necessary data from our data partners on commercially reasonable terms or at all could adversely affect our business
14. 14If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected
15. 15Our brand, products or solutions may not be favorably received by our customers
16. 16We might not be able to engage in certain transactions and equity issuances until July 1, 2025
17. 17Epidemics, pandemics, or widespread public health crisis, such as COVID-19, and associated economic repercussions have adversely impacted our business and results of operations, and may do so in the future
18. 18Our effective income tax rate may fluctuate, which may adversely affect our operations, earnings and earnings per share
19. 19Our future effective tax rates could be impacted by changes in the mix of earnings in countries with differing statutory tax rates, changes in the assessment regarding the realization of the valuation of deferred tax assets, or changes in tax laws and regulations or their interpretation

Risks Relating to Regulatory and Compliance Matters

1. 20Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies, such as the FDA, the MHRA in the U.K., the EMA in the European Union, the NMPA in China, and the PMDA in Japan, could result in sanctions and/or remedies against us and have a material adverse effect on us
2. 21Failure to comply with national, state, local or international environmental, health and safety laws and regulations, could result in fines and penalties and loss of licensure, and have a material adverse effect upon our business
3. 22Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that we provide
4. 23Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business
5. 24International operations may increase our exposure to liabilities under the anti-corruption laws

Risks Relating to Strategic Transactions

1. 25A failure to identify and successfully close and integrate strategic acquisition targets or close other strategic transactions could have a material adverse effect on our business objectives and our revenues and profitability
2. 26We are subject to a number of risks associated with the sale of certain assets relating to our Enabling Services segment, and these risks could adversely impact our operations, financial condition and business

Risks Relating to Technology and Cybersecurity

1. 27Failure to maintain the security of customer-related information or compliance with security requirements could damage our reputation with customers, cause us to incur substantial additional costs and become subject to litigation and enforcement actions
2. 28Failure in our IT systems, including hardware and software failures, delays in the operation of computer and communications systems, and the failure to implement new systems or system enhancements may harm us
3. 29Security breaches and unauthorized access to our or our customers’ data could harm our reputation and adversely affect our business
4. 30We use internally developed and licensed technology systems to manage various aspects of clinical trials and failures of these systems, including errors in design, programming or validation, could adversely affect our business
5. 31Failure to keep pace with rapid technological changes could make our services less competitive or obsolete
6. 32Issues in the development and/or use of AI may result in reputational harm, liability or adversely affect our business, financial condition or results of operations

Risks Relating to Legal Matters

1. 33Failure to comply with the contractual requirements of our agreements with customers or third-party service providers could result in claims and/or remedies against us and have a material adverse effect on us and our reputation could be harmed
2. 34Contract research services in the drug development industry create liability risks
3. 35Adverse results in material litigation matters could have a material adverse effect upon our business
4. 36We face risks arising from the restructuring of our operations
5. 37The failure to successfully obtain, maintain and enforce intellectual property rights and defend against challenges to our intellectual property rights could adversely affect us
6. 38Changes in our tax rates, the adoption of new U.S. or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results
7. 39We are subject to continuing contingent liabilities as a result of the Spin, including potential indemnification liabilities to Labcorp, and these liabilities could materially and adversely affect our business, financial condition, results of operations, and cash flows
8. 40Labcorp has indemnified us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Labcorp's ability to satisfy its indemnification obligations will not be impaired in the future

Risks Relating to Financial Matters

1. 41We bear financial risk for contracts that, including for reasons beyond our control, may be underpriced, subject to cost overruns, delayed, or terminated or reduced in scope
2. 42Our revenues depend on the pharmaceutical, biotechnology and medical device industries
3. 43Foreign currency fluctuations could have an adverse effect on our business and our planned use of financial instruments to limit our exposure to currency fluctuations could expose us to risks and financial losses that may adversely affect our financial condition, liquidity and results of operations
4. 44Our debt and debt covenant requirements may limit cash flow available to invest in the ongoing needs of our business
5. 45As a result of the debt we have incurred, it may be difficult for the Company to incur additional debt should the business require it. This will increase the riskiness of our business and of an investment in our common stock
6. 46We may not be able to access the capital and credit markets on terms that are favorable to us, or at all
7. 47Our historical combined financial information is not necessarily indicative of our future financial condition, results of operations, or cash flows nor does it reflect what our financial condition, results of operations, or cash flows would have been as an independent public company during the periods presented

Risks Relating to General Matters

1. 48General or macro-economic factors in the U.S. and globally may have a material adverse effect upon us, and a significant deterioration in the economy could negatively impact our services, cash collections, profitability and the availability and cost of credit
2. 49Unfavorable labor environments, work stoppages, works council negotiations, or failure to comply with labor or employment laws could adversely affect our operations and have a material adverse effect on our business
3. 50Failure to establish and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect us
4. 51Operations may be disrupted and adversely impacted by the effects of adverse weather, other natural disasters, geopolitical events, public health crises, and other events outside of our control
5. 52Our increasing focus on environmental, social, governance, and other sustainability matters could increase our costs, and inaction could harm our reputation and adversely impact our financial results

Risks Relating to Ownership of Our Common Stock

1. 53The market price and trading volume of our common stock may be volatile and investors may lose all or part of their investments in Fortrea common stock
2. 54Anti-takeover provisions in our charter documents and Delaware law could discourage, delay, or prevent a change in control over us and may affect the trading price of our common stock
3. 55Investors’ percentage of ownership of us may be diluted in the future
4. 56We have not paid any dividends on our common stock and we do not have any current plans to pay dividends, consequently, investors’ ability to achieve a return on an investment in Fortrea common stock will depend on appreciation in the price of our common stock
5. 57Securities or industry analysts may not publish favorable research about our business and our stock price and trading volume could decline
6. 58Actions of activist stockholders could impact the pursuit of our business strategies, cause us to incur substantial costs, divert our management’s attention and resources, and adversely affect our business, results of operations, liquidity, financial condition, and the trading price of our common stock