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CL

Core Laboratories Inc. /DE/ (CLB)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue rose 5% sequentially to $130.2M and was roughly flat year-over-year; GAAP EPS was $0.22 and ex-items EPS $0.19, with operating income of $15.3M and ex-items operating income of $14.5M .
  • Segment performance improved: Reservoir Description revenue up 7% q/q with ex-items operating margin of 13% and incremental margins of 57%; Production Enhancement revenue up 3% q/q with ex-items operating margin of 9% .
  • Free cash flow strengthened to $10.4M; Core repurchased 237,632 shares for $2.7M, reduced net debt by $9.1M to $94.8M, and improved leverage ratio to 1.27, the lowest in eight years .
  • Q3 2025 guidance: revenue $127.5–$134.5M, operating income $13.6–$16.2M (~11% margin), EPS $0.18–$0.22; segment guidance expects flat RD revenue and softness in U.S. onshore offset by international/offshore demand .
  • Notable catalysts: stabilization of crude assay services post-January sanctions, opening of the Unconventional Core Analysis Lab in Dammam, Saudi Arabia, and renewal/expansion of the credit agreement (RCF $100M + $50M DDTL; maturity extended to July 2029) .

What Went Well and What Went Wrong

What Went Well

  • Sequential topline/margin improvement: revenue +5% q/q, ex-items operating margin expanded 160 bps to ~11%, with strong incremental margins (41%) on revenue growth .
  • Reservoir Description strength: ex-items margin expanded to 13% with 57% incremental margins; demand strengthened globally, and crude assay work began stabilizing after expanded sanctions .
  • Liquidity and capital returns: FCF of $10.4M, share repurchases of 237,632 shares ($2.7M), net debt down $9.1M, leverage ratio improved to 1.27 .
  • Management quote: “Core Lab delivered sequential revenue growth in the second quarter, leading to solid improvements in operating income, operating margins, free cash flow, and earnings per share” — Larry Bruno .

What Went Wrong

  • Year-over-year softness: operating income ex-items down 11% y/y; ex-items EPS down 14% y/y, reflecting lingering geopolitical/tariff headwinds and U.S. onshore softness .
  • EBITDA below consensus: Q2 2025 EBITDA came in below the S&P Global consensus, despite revenue/EPS beats* (see Estimates Context) .
  • U.S. land and tariffs: continued softness in U.S. frac spread counts and elevated tariffs pressured product cost absorption; management expects a soft U.S. market through year-end .
  • Analyst concern: Q&A highlighted diagnostic services moderation post-Q1 peak and mix affecting Production Enhancement margins quarter to quarter .

Financial Results

Consolidated Metrics (GAAP unless noted; columns oldest → newest)

MetricQ2 2024Q1 2025Q2 2025
Revenue ($M)$130.6 $123.6 $130.2
Operating Income ($M)$16.0 $4.4 $15.3
Operating Income ex-items ($M)$16.4 $11.8 $14.5
EBIT ex-items Margin (%)~12 ~10 ~11 (up 160 bps q/q)
GAAP Diluted EPS ($)$0.19 $0.00 $0.22
Diluted EPS ex-items ($)$0.22 $0.14 $0.19

Segment Breakdown

SegmentQ2 2024 Revenue ($M)Q1 2025 Revenue ($M)Q2 2025 Revenue ($M)Q2 2024 Op Inc ($M)Q1 2025 Op Inc ($M)Q2 2025 Op Inc ($M)
Reservoir Description$86.3 $80.9 $86.3 $11.4 $2.3 $12.2
Production Enhancement$44.3 $42.7 $43.9 $4.4 $1.5 $3.1
Corporate & Other———$0.2 $0.6 $(0.1)

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
Free Cash Flow ($M)$16.2 $3.9 $10.4
Cash from Operations ($M)$20.6 $6.7 $13.9
Capex - Operations ($M)$4.4 $2.8 $3.5
Net Debt ($M)$108.8 $103.9 $94.8
Leverage Ratio1.31 1.31 1.27
DSOs (days)76 79 75
Inventory Turns2.1 1.8 1.9
Share Repurchases265,000 shares in Q4 131,598 shares ($2.0M) 237,632 shares ($2.7M)
Dividend per Share ($)$0.01 (paid Mar 3) $0.01 (paid May 27) $0.01 (pay Aug 25)

Versus Estimates (S&P Global consensus)*

MetricQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 Actual
Revenue ($M)$124.8*$123.6 $128.7*$130.2
Primary EPS ($)$0.15*$0.14 $0.18*$0.19
EBITDA ($M)$15.3*$11.5 $17.7*$16.4
# of Estimates (Rev/EPS)4/4*—4/3*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (Consolidated)Q3 2025—$127.5–$134.5M New
Operating IncomeQ3 2025—$13.6–$16.2M; ~11% margin New
EPSQ3 2025—$0.18–$0.22 New
Effective Tax RateQ3 2025~25% (full-year) 25% assumption Maintained
Reservoir Description RevenueQ3 2025—$84–$88M; Op Inc $10.6–$12.4M New
Production Enhancement RevenueQ3 2025—$43.5–$46.5M; Op Inc $2.9–$3.7M New
G&A ex-itemsFY 2025$40–$44M (Q4 call) $41–$43M (updated) Narrowed
DividendQ2 2025$0.01/share paid May 27 $0.01/share payable Aug 25 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Sanctions/Crude AssayJanuary 10 sanctions disrupted assay; decremental margin impact; trading activity halted temporarily Demand stabilized in Q2; assay services rebounded Improving
Tariffs/Macro VolatilityTariff risk flagged; crude price uncertainty; operators cautious Pending tariffs still elevating costs; limited applicability to most services/products Ongoing headwind
International Long-Cycle ProjectsStrong outlook across Middle East, Africa, South Atlantic, Asia-Pac Steady activity; RD revenue projected flat q/q; continued global demand Stable/constructive
U.S. Onshore ActivitySoftness; Q1 weather disruptions; frac spreads down U.S. frac spread continues to trend lower; PE softness expected through year Softer
Technology/DiagnosticsSpectraStim, ReFRAC; diagnostic growth in Gulf of Mexico 3AB™ tracer evaluation; HERO PerFRAC wins; geothermal tracer deployments Expanding
Middle East ExpansionNew diagnostics lab (prior); regional opportunities Opened Unconventional Core Analysis Lab in Dammam, Saudi Arabia Scaling
Balance Sheet/LeverageLeverage ratio at 1.31; net debt reduced Leverage ratio 1.27; renewed credit facility to 2029; DDTL to retire Jan 2026 notes Strengthening

Management Commentary

  • Strategic focus: “Core remains focused on expanding our global business in strategically important regions such as the Middle East, Africa, and South America… positioning the Company to deliver long-term value” — Larry Bruno .
  • Margin execution: “EBIT, ex-items for the quarter was $14.5 million… yielding an EBIT margin a little over 11% and expanding 160 basis points from last quarter” — Chris Hill .
  • Liquidity actions: “On July 22, 2025, the company renewed and extended its credit agreement… $100 million revolving credit facility and a $50 million delayed draw term loan… plan to use these funds to retire $45 million of private placement notes due January 2026” — Chris Hill .
  • Outlook tone: “Despite near-term volatility, Core Lab maintains a constructive long-term outlook for international upstream activity” — Gwen Gresham .

Q&A Highlights

  • Diagnostic innovation and proppant trials: Management detailed 3AB™ tracer analyses enabling rapid stage-level performance assessment; Middle East investments in formation damage testing and opening of the Dammam unconventional lab to serve emerging regional unconventional plays .
  • Mix and margins: Earlier Q1 Q&A clarified PE margin sensitivity to mix between diagnostic services and product sales; Gulf of Mexico diagnostics timing drove Q1 strength, with normalization expected thereafter .
  • Geographies: Mexico remains challenging; opportunities cited in Australia, Indonesia, Norway, Middle East, Africa; Colombia noted as politically inhospitable in near term .

Estimates Context

  • Q2 2025 actuals versus S&P Global consensus: Revenue beat ($130.2M vs $128.7M*), EPS beat ($0.19 ex-items vs $0.18*), EBITDA miss ($16.4M actual vs $17.7M*) .
  • Sequential pattern: Q1 2025 revenue/EPS modestly below consensus amid sanctions/weather impacts; Q2 recovery supports revenue/EPS upside, but manufacturing absorption and tariffs constrained EBITDA* .
  • Coverage depth: # of estimates remained limited (Rev: 4; EPS: 3 in Q2)*, implying potential for estimate volatility with new disclosures.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue/EPS momentum returned in Q2 with ex-items EBIT margin expanding to ~11%; sequential margin leverage (41% incremental) underscores operating discipline .
  • Reservoir Description is the core driver near term as assay services normalize and global rock/fluid analysis demand remains resilient; RD margin expansion (13% ex-items) reflects positive mix .
  • U.S. onshore softness persists; expect PE results to hinge on diagnostic demand and international product orders; tariffs elevate input costs but apply to a minority of revenue streams .
  • Balance sheet risk reduced: net debt down to $94.8M, leverage 1.27; extended/expanded credit facility provides optionality to retire 2026 notes and maintain liquidity through 2029 .
  • Q3 guide implies stable topline with EPS $0.18–$0.22 and ~11% margin; near-term stock drivers include confirmation of international project activity, tariff developments, and diagnostic/product order cadence .
  • Capital returns remain measured (dividend $0.01/share; opportunistic buybacks); continued free cash redeployment to debt reduction supports equity value accretion .
  • Watch estimate revisions: consensus may lift revenue/EPS but temper EBITDA given cost absorption/tariff commentary and PE mix dynamics* .

Appendix: Additional Relevant Q2 Materials

  • Dividend declaration (payable Aug 25, 2025) reaffirmed alongside results ; 8-K Reg FD disclosure notes the dividend details .
  • Credit Agreement details: amended facility to $150M aggregate commitments with $100M revolver and $50M DDTL; maturity extended to July 22, 2029, subject to springing maturities if certain notes remain outstanding .