e Laboratories (US:CLB)2024-10-24 21:30markdown [PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Interim financials report total assets at $600.5 million, Q3 revenue at $134.4 million, and nine-month operating cash flow at $35.8 million [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $600.5 million, driven by cash and receivables, with total equity rising to $256.4 million Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | **Total Current Assets** | **$235,227** | **$223,136** | | **Total Assets** | **$600,466** | **$586,395** | | Total Current Liabilities | $94,938 | $88,097 | | Long-Term Debt, net | $139,872 | $163,134 | | **Total Liabilities** | **$344,045** | **$356,588** | | **Total Equity** | **$256,421** | **$229,807** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q3 2024 revenue increased 7.2% to $134.4 million, with net income at $12.0 million, while nine-month net income decreased due to a prior-year tax benefit Q3 2024 vs. Q3 2023 Performance (in thousands, except EPS) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $134,397 | $125,343 | +7.2% | | Operating Income | $19,803 | $14,672 | +35.0% | | Net Income | $12,004 | $9,220 | +30.2% | | Diluted EPS | $0.25 | $0.19 | +31.6% | Nine Months 2024 vs. 2023 Performance (in thousands, except EPS) | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $394,611 | $381,580 | +3.4% | | Operating Income | $44,382 | $40,059 | +10.8% | | Net Income | $24,684 | $34,591 | -28.6% | | Diluted EPS | $0.50 | $0.73 | -31.5% | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Nine-month operating cash flow significantly increased to $35.8 million, driven by working capital, with cash position rising by $6.4 million Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,773 | $5,360 | | Net cash used in investing activities | ($2,835) | ($4,206) | | Net cash provided by (used in) financing activities | ($26,584) | $34 | | **Net Change in Cash** | **$6,354** | **$1,188** | [Notes to the Interim Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Interim%20Consolidated%20Financial%20Statements) Notes detail business segments, accounting policies, reduced long-term debt to $139.9 million, a $5.6 million insurance settlement, and a 28.8% effective tax rate - The company operates in two complementary segments: **Reservoir Description** and **Production Enhancement**[15](index=15&type=chunk) - **Long-term debt**, net of issuance costs, decreased from **$163.1 million** at year-end 2023 to **$139.9 million** as of **September 30, 2024**. The company was in compliance with all debt covenants[29](index=29&type=chunk)[33](index=33&type=chunk) - The company paid a quarterly cash dividend of **$0.01 per share** in March, May, and August 2024[37](index=37&type=chunk) - A fire at a U.K. facility in February 2024 led to partial insurance settlements of **$5.6 million** recorded during the first nine months of the year, which is included in 'Other (income) expense, net'[45](index=45&type=chunk)[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a positive outlook, citing 7% Q3 revenue growth, 35% operating income increase, and a significant improvement in free cash flow [Outlook](index=25&type=section&id=Outlook) Management anticipates continued global oil demand growth, accelerating international projects, stable U.S. onshore activity, and expanded energy transition projects - Global oil demand is expected to continue increasing in **2024 and 2025**, with OPEC+ supply cuts expected to remain in place through **November 2024**[61](index=61&type=chunk)[62](index=62&type=chunk) - International oil and gas projects are expected to grow and accelerate, while U.S. onshore drilling and completion activities are expected to remain at current levels for the remainder of **2024**[62](index=62&type=chunk) - The company's activities on carbon capture and sequestration (CO2) projects have expanded and are expected to continue growing in **2024 and beyond**[64](index=64&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q3 2024 total revenue increased 7% to $134.4 million, with operating income surging 35% to $19.8 million, driven by revenue growth and a $3.2 million insurance settlement Q3 2024 vs. Q3 2023 Revenue Breakdown (in thousands) | Revenue Type | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Services | $98,842 | $92,883 | 6% | | Product sales | $35,555 | $32,460 | 10% | | **Total revenue** | **$134,397** | **$125,343** | **7%** | - G&A expense decreased in **Q3 2024** primarily due to a **$1.9 million** reversal of previously recognized stock compensation expense[76](index=76&type=chunk) - Other income for **Q3 2024** was **$4.5 million**, largely due to a **$3.2 million** partial insurance settlement from a fire incident at a U.K. facility[78](index=78&type=chunk)[79](index=79&type=chunk) [Segment Analysis](index=33&type=section&id=Segment%20Analysis) Q3 2024 Reservoir Description revenue grew 4% to $88.8 million with 19% operating margin, while Production Enhancement revenue rose 13% to $45.6 million with 7% margin Q3 2024 Segment Performance (in thousands) | Segment | Revenue | Operating Income | Operating Margin | | :--- | :--- | :--- | :--- | | Reservoir Description | $88,840 | $16,487 | 19% | | Production Enhancement | $45,557 | $3,232 | 7% | - **Reservoir Description's Q3 operating income** increased **27%** year-over-year, primarily due to improved utilization of its global laboratory network and insurance proceeds related to the Aberdeen facility fire[83](index=83&type=chunk)[88](index=88&type=chunk) - **Production Enhancement's Q3 revenue** grew **13%** year-over-year, driven by strong growth in well completion diagnostic services and a higher level of bulk sales in international markets[83](index=83&type=chunk)[91](index=91&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity remains strong with nine-month operating cash flow at $35.8 million and free cash flow at $27.1 million, alongside reduced debt and covenant compliance Free Cash Flow - Nine Months Ended Sep 30 (in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,773 | $5,360 | | Less: Cash paid for capital expenditures | ($8,647) | ($7,843) | | **Free cash flow** | **$27,126** | **($2,483)** | - As of **September 30, 2024**, the company had an available borrowing capacity of approximately **$92.1 million** under its Credit Facility[101](index=101&type=chunk) - The company is in compliance with all debt covenants, with a **leverage ratio of 1.47** and an **interest coverage ratio of 6.13** for the period ended **September 30, 2024**[103](index=103&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposures have occurred since the 2023 Annual Report on Form 10-K - There have been no **material** changes in market risk since the company's **2023 Annual Report on Form 10-K**[104](index=104&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of September 30, 2024, with no material changes in internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of **September 30, 2024**[105](index=105&type=chunk) - No changes occurred in the company's internal control over financial reporting during the **third quarter of 2024** that have **materially** affected, or are reasonably likely to **materially** affect, internal controls[107](index=107&type=chunk) [PART II - OTHER INFORMATION](index=38&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal actions outside the ordinary course of business - The company is not currently named as a defendant in any legal actions that would be considered **material** and outside the ordinary course of business[36](index=36&type=chunk)[108](index=108&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the 2023 Annual Report on Form 10-K - For a detailed discussion of risk factors, the company refers investors to its **Annual Report on Form 10-K for the year ended December 31, 2023**[109](index=109&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 8,546 shares in Q3 2024 at an average of $22.86 per share, primarily for employee tax liabilities Issuer Purchases of Equity Securities (Q3 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2024 | 224 | $19.98 | | August 2024 | 7,638 | $23.24 | | September 2024 | 684 | $19.56 | | **Total** | **8,546** | **$22.86** | - The repurchased shares were surrendered by participants in a stock-based compensation plan to settle personal tax liabilities and were not part of a publicly announced program[110](index=110&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL data - The report includes standard exhibits such as **Sarbanes-Oxley certifications (Sections 302 and 906)** and **Inline XBRL documents**[111](index=111&type=chunk)