e Laboratories (CLB) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The financial statements present the company's financial position as of June 30, 2025, and its performance for the recent three and six-month periods Consolidated Balance Sheets As of June 30, 2025, total assets increased slightly to $602.1 million from $590.4 million at year-end 2024, driven by a rise in cash Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $237,677 | $226,606 | | Total Assets | $602,111 | $590,406 | | Total Current Liabilities | $104,772 | $97,586 | | Long-Term Debt, net | $124,613 | $126,111 | | Total Liabilities | $334,808 | $332,670 | | Total Equity | $267,303 | $257,736 | Consolidated Statements of Operations For Q2 2025, revenue was flat year-over-year at $130.2 million while net income rose, whereas six-month revenue and net income both declined Q2 2025 vs Q2 2024 Statement of Operations (in thousands, except per share data) | Metric | Q2 2025 (Unaudited) | Q2 2024 | | :--- | :--- | :--- | | Total Revenue | $130,159 | $130,577 | | Operating Income | $15,291 | $16,008 | | Net Income Attributable to Core Laboratories Inc. | $10,636 | $9,032 | | Diluted EPS Attributable to Core Laboratories Inc. | $0.22 | $0.19 | Six Months 2025 vs 2024 Statement of Operations (in thousands, except per share data) | Metric | Six Months 2025 (Unaudited) | Six Months 2024 | | :--- | :--- | :--- | | Total Revenue | $253,744 | $260,214 | | Operating Income | $19,708 | $24,579 | | Net Income Attributable to Core Laboratories Inc. | $10,482 | $12,252 | | Diluted EPS Attributable to Core Laboratories Inc. | $0.22 | $0.26 | Consolidated Statements of Cash Flows For the first six months of 2025, operating cash flow decreased to $20.6 million, while a net increase in cash was driven by lower financing and investing outflows Six Months Ended June 30 Cash Flow Summary (in thousands) | Activity | 2025 (Unaudited) | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,583 | $22,676 | | Net cash used in investing activities | $(872) | $(2,344) | | Net cash used in financing activities | $(7,680) | $(17,757) | | Net Change in Cash | $12,031 | $2,575 | | Cash at End of Period | $31,188 | $17,695 | - Key investing activities included $7.9 million in capital expenditures (including $1.6 million for rebuilding the Aberdeen facility) offset by $4.7 million in insurance proceeds[27][149] - Financing activities included a net debt repayment of $2.0 million, $4.8 million in common stock repurchases, and $0.9 million in dividends paid[27][151] Notes to the Interim Consolidated Financial Statements The notes detail the company's two business segments, a renewed $150 million credit facility, debt covenant compliance, and a $2.6 million insurance recovery - The company operates in two complementary segments: Reservoir Description and Production Enhancement[29] - On July 22, 2025, the company entered into a Ninth Amended and Restated Credit Agreement for an aggregate borrowing commitment of $150.0 million with a $50.0 million "accordion" feature[46] - The company is in compliance with all debt covenants as of June 30, 2025, with a leverage ratio of 1.27 and an interest coverage ratio of 7.22[51] - A quarterly cash dividend of $0.01 per share was paid in March and May 2025, and another was declared for August 2025[59] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a mixed market outlook, flat Q2 2025 revenue, segment performance, and the company's strong liquidity and capital resources Outlook Management anticipates continued demand growth but notes increased uncertainty from trade policies and OPEC+ decisions, impacting project outlooks - Global demand for crude oil and natural gas is expected to increase in 2025, but new U.S. tariffs and OPEC+ production increases have raised uncertainty[92] - Management believes changes in crude oil prices will have a greater impact on U.S. onshore drilling and completion activity, while large-scale international projects are expected to be more resilient[93] - The company is focused on large-scale international projects and has seen expanded activity in carbon capture and sequestration projects[95][96] Results of Operations Q2 2025 revenue was flat year-over-year at $130.2 million, while net income rose 18% due to a significantly lower effective tax rate Q2 2025 vs Q2 2024 and Q1 2025 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Q1 2025 | | :--- | :--- | :--- | :--- | | Total Revenue | $130,159 | $130,577 | $123,585 | | Operating Income | $15,291 | $16,008 | $4,417 | | Net Income Attributable to Core Labs | $10,636 | $9,032 | $(154) | - Service revenue in Q2 2025 was flat year-over-year as increased international demand was offset by a reduction in the U.S. market[106] - Product sales revenue decreased 1% year-over-year in Q2 2025 due to lower U.S. onshore drilling and completion activity[110] - Income tax expense for Q2 2025 was $1.9 million (15.2% ETR), a significant decrease from $3.6 million (28.2% ETR) in Q2 2024, primarily due to the earnings mix of jurisdictions and other discrete items[128] Segment Analysis Reservoir Description revenue was flat with improved margins, while Production Enhancement revenue declined slightly with lower margins in Q2 2025 Q2 2025 Segment Performance (in thousands) | Segment | Revenue | % of Total | Operating Income | Operating Margin | | :--- | :--- | :--- | :--- | :--- | | Reservoir Description | $86,280 | 66% | $12,203 | 14% | | Production Enhancement | $43,879 | 34% | $3,148 | 7% | | Consolidated | $130,159 | 100% | $15,291 | 12% | - Reservoir Description's sequential revenue growth was driven by higher crude-assay services and manufactured laboratory instrumentation sales[134] - Production Enhancement's YoY revenue decrease was due to lower product sales in the U.S. land market, partially offset by growth in international bulk shipments and diagnostic services[140] Liquidity and Capital Resources The company maintains solid liquidity with $14.3 million in free cash flow for H1 2025 and $108.0 million available under its credit facility Free Cash Flow Calculation (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,583 | $22,676 | | Less: Cash paid for capital expenditures - operations | $(6,259) | $(5,918) | | Free cash flow | $14,324 | $16,758 | - As of June 30, 2025, the company had an available borrowing capacity of approximately $108.0 million under its Credit Facility[154] - The company is in compliance with all covenants, with a leverage ratio of 1.27 and an interest coverage ratio of 7.22 for the period ended June 30, 2025[159] - The company maintains a quarterly dividend of $0.01 per share[147] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposures since its 2024 year-end annual report - There have been no material changes in market risk from the information provided in the Annual Report on Form 10-K for the year ended December 31, 2024[161] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[163] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the internal controls[166] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to the financial statement notes for details regarding the company's legal proceedings - Information on legal proceedings is available in Note 9 - Commitments and Contingencies of the financial statements[168] Item 1A. Risk Factors The company updated its risk factors to include potential adverse effects from tariffs and other trade measures on its business and supply chain - An updated risk factor highlights that tariffs and other trade measures could adversely affect the business by increasing input costs, disrupting the supply chain, and facing retaliatory measures[171] - Potential impacts include increased costs for raw materials like steel and electronic components, which may not be fully passed on to customers, thereby affecting results of operations[171] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 237,632 shares in Q2 2025 at an average price of $11.52 per share without a formal buyback program Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1-30, 2025 | 139,435 | $11.70 | | May 1-31, 2025 | 83,197 | $11.13 | | June 1-30, 2025 | 15,000 | $12.14 | | Total | 237,632 | $11.52 | - The company does not have a formal share repurchase program; repurchases are made at the discretion of management with Board authorization[178] Item 5. Other Information No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[177] Item 6. Exhibits This section lists filed exhibits, including the amended credit agreement and required CEO/CFO certifications - Key exhibits filed include the Ninth Amended and Restated Credit Agreement and certifications by the CEO and CFO[179]