Core Laboratories Inc. /DE/ Q1 FY2025 earnings call

Strategic Objectives - Introducing new product or service offerings in key geographic markets. - Maintaining a lean and focused organization. - Maintaining commitments to deleveraging and returning excess free cash to shareholders. ### Operational Highlights - Reservoir Description: Emerging opportunities across Africa for reservoir description lab services, including work on new exploration targets and mature field workovers. Reinforced role in Libya's upstream sector, hosting technical workshops. - Production Enhancement: Increased demand for completion diagnostic services in U.S. land with complex designs, and Gulf of Mexico completion diagnostics on delayed offshore projects. Successfully completed a well abandonment program using proprietary technology. - Financial Tenets: Maximize free cash flow, maximize return on invested capital, and return excess free cash to shareholders. Also, focus on reducing debt and strengthening the balance sheet.

Reservoir Description: In the first quarter of 2025, revenue was $80.9 million, down 7% compared to Q4 of 2024. Excluding items, operating income was $7.8 million, yielding an operating margin of 10%. Production Enhancement: Revenue for the first quarter was $42.7 million, flat compared to Q4 of 2024. Excluding items, operating income was $3.4 million, with an operating margin of 8%.

Second Quarter 2025 Guidance - Reservoir Description: Revenue projected to range from $85 million to $89 million, with operating income of $11 million to $13 million. - Production Enhancement: Revenue estimated to range from $43 million to $45 million, with operating income of $2 million to $2.6 million. - Overall: Second quarter 2025 revenue projected to range from $128 million to $134 million, with operating income of $13.1 million to $15.7 million, yielding operating margins of approximately 11%. EPS expected to range from $0.17 to $0.21. The guidance is based on projections for underlying operations and excludes foreign exchange gains/losses, with an expected effective tax rate of 25%.

• Geopolitical conflicts in Russia, Ukraine, and the Middle East, along with expanded sanctions in January, impacted revenue and created operational inefficiencies. - Uncertainty in commodity prices due to geopolitical events affected demand for laboratory assay services tied to crude oil and derived products trade. - Political decisions in certain regions (e.g., Colombia) affecting client plans and behaviors, potentially leading to slowdown in activity.

Q: Stephen Gengaro asked about margin progression in production enhancement and relative performance to peers.

A: Chris Hill mentioned diagnostic services were up in Q1 but may come down in Q2, and product sales are increasing. Larry Bruno noted Q1 was affected by sanctions but things are opening up, and there are cost reduction plans with more effect in later quarters. On peer expectations, Larry Bruno said Core is more optimistic about U.S. land penetration than some peers.

Q: Sean Mitchell asked about international market areas and Brazil.

A: Larry Bruno discussed various international regions, noting Middle East looks strong, Africa is a multi-year growth cycle, Colombia has challenges, Ecuador may rebound, and Brazil is seen as gradual improvement in market penetration.