e Laboratories (US:CLB)2021-01-28 20:45Financial Data and Key Metrics Changes - Revenue from continuing operations for Q4 2020 was $113.7 million, an increase of approximately 8% from $105.4 million in the prior quarter. For the full year 2020, revenue was $487.3 million, a decrease of 27% from $668.2 million in 2019 [31][32]. - Core Laboratories generated $46 million in free cash flow in 2020, marking the 19th consecutive year of positive free cash flow [18][55]. - The company reduced net debt by approximately $49 million from the end of 2019 to the end of 2020 [15][24]. Business Line Data and Key Metrics Changes - Service revenue for Q4 2020 was $89.2 million, up over 3% sequentially from $86.3 million last quarter [32]. - Product sales for Q4 2020 were $24.6 million, an increase of over 28% from $19.1 million last quarter, with U.S. market product sales up 44% sequentially [34]. - EBIT for Q4 2020, excluding items, was $13 million, representing a best-in-class EBIT margin of over 11% [39]. Market Data and Key Metrics Changes - U.S. land activity improved sequentially from Q3 to Q4 2020, benefiting Core Laboratories from an uptick in well completions [12]. - The company anticipates lower client activity in Q1 2021 due to seasonality, projecting a decline in revenue by mid-single-digits [61]. Company Strategy and Development Direction - Core Laboratories will continue to focus on maximizing free cash flow, return on invested capital, and returning excess free cash to shareholders [17][57]. - The company is committed to introducing new technologies and maintaining a strong collaborative relationship with its clients to address industry needs [21][60]. - Core Laboratories aims to reduce its leverage ratio below 1.5, with a target to achieve this by the end of 2022 [96][98]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in client activity anticipated in 2021, particularly in the U.S. land market and international projects [20][60]. - The company noted that while COVID-19 disruptions present uncertainties, they expect activity levels to improve in the second half of 2021 [65]. - Management highlighted the importance of maintaining a disciplined cost structure aligned with client activity levels [19][114]. Other Important Information - The company issued $60 million in new senior notes in January 2021 to refinance a portion of its long-term debt [25][47]. - Core Laboratories' DSO (Days Sales Outstanding) for Q4 2020 was 62 days, a significant improvement from 68 days in the prior quarter [43]. Q&A Session Summary Question: What drove the 65% increase in energetic sales quarter-on-quarter? - Management indicated that both market share shifts and increased completions activity contributed to the strong bounce in energetic sales [85][86]. Question: Can you explain the seasonality affecting Q1 revenue? - Management noted that Q1 typically sees a decline in revenue due to clients wrapping up budgets and projects from the previous year, compounded by COVID-19 uncertainties [90][91]. Question: What is the target for deleveraging? - The company aims to reduce its leverage ratio below 1.5, with a goal to achieve this by the end of 2022, depending on market conditions [96][98]. Question: How does the company view the recovery in international markets? - Management expressed caution but acknowledged the potential for double-digit growth in the second half of 2021, particularly as OPEC increases production [100][101]. Question: What are the expectations for CapEx in 2021? - Management indicated that CapEx for the first half of 2021 would be around $6 million, with potential increases in the second half depending on market conditions [117][120].