e Laboratories (US:CLB)2022-10-27 21:15Financial Data and Key Metrics Changes - For Q3 2022, Core Lab achieved a sequential improvement in revenue, operating income, operating margins, free cash flow, EPS, and EBIT margins. Year-over-year, revenue increased by 7% [9][10] - Revenue from continuing operations was $126 million, up over 4% from $120.9 million in the prior quarter and up almost 7% year-over-year [17] - EPS grew by 50% to $0.18 per share excluding items [10][26] Business Line Data and Key Metrics Changes - Reservoir Description segment revenue was $79 million, up 4% compared to Q2 2022. Operating income for this segment was $8.4 million with operating margins at 11% [40][41] - Production Enhancement segment revenue was $47 million, up 4% sequentially and up 20% year-over-year. Operating income was $4.7 million with operating margins at 10% [48] Market Data and Key Metrics Changes - Service revenue was $87.9 million, up 3% sequentially from $85.4 million last quarter, with growth coming from multiple international regions [18] - International product sales decreased approximately 4% sequentially but were up over 16% year-over-year [20] Company Strategy and Development Direction - Core Lab continues to focus on introducing new products and services in key geographic markets, maintaining a lean organization, and deleveraging the company [12] - The company anticipates continued improvement in both business segments across international arenas and in the US for the remainder of 2022 and into 2023 [11] Management's Comments on Operating Environment and Future Outlook - Management expects crude oil supply to tighten due to prolonged underinvestment, leading to increased upstream spending plans into 2023 [35] - The company projects fourth quarter revenue to range from $126 million to $131 million, with EPS expected to be between $0.17 and $0.21 [37] Other Important Information - The company recorded a net debt of $171 million, with a leverage ratio of 2.42, projected to improve through year-end [29] - Cash flow from operating activities was $5.8 million, with free cash flow of $3.1 million, up $5.7 million from the last quarter [30] Q&A Session Summary Question: What is the outlook for the Reservoir Description business in light of expected international growth? - Management agrees that Reservoir Description is entering a multiyear upcycle, with expectations for improved margins and activity levels [57][58] Question: What drove the strong product sales in North America? - The company saw a 19% sequential increase in US energetic product sales, attributed to market penetration and modest pricing improvements [60][61] Question: How does the company view the geographic leverage in different markets? - Management indicated a broad international footprint, with the Middle East showing the most significant activity pickup [72][73] Question: What is the current status of the ATM program? - The company has not sold any shares under the ATM and plans to keep options open for liquidity without utilizing the ATM unless necessary [81] Question: What are the prospects for shareholder returns? - Management indicated that raising the dividend would depend on achieving a sustainable recovery, with buybacks being a more flexible option initially [84] Question: What opportunities exist in the CCS space? - The company sees CCS potentially becoming 5% to 10% of its business over time, with ongoing projects and collaborations [88]