UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30,~~March 31, ~~2023~~2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ______________

Commission File Number: 001-41695

CORE LABORATORIES INC.

(Exact name of registrant as specified in its charter)


Delaware		98-1164194
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6316 Windfern Road
Houston, TX		77040
(Address of principal executive offices)		(Zip Code)

(713) 328-2673

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock (par value $0.01)

CLB

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ~~☐ No~~ ☐ No ☒

The number of shares of common stock of the registrant, par value $0.01 per share, outstanding at ~~July 21, 2023~~April 19, 2024 was ~~46,680,409~~46,899,863.

CORE LABORATORIES INC.

FORM 10-Q FOR THE QUARTER ENDED ~~JUNE 30, 2023~~MARCH 31, 2024

INDEX

PART I - FINANCIAL INFORMATION


		Page

Item 1.	Financial Statements

	Consolidated Balance Sheets at ~~June 30, 2023~~March 31, 2024 (Unaudited) and December 31, ~~2022~~2023	3

	Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (Unaudited)	4

	Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (Unaudited)	65

	Consolidated Statements of Changes in Equity for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (Unaudited)	76

	Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (Unaudited)	98

	Notes to the Interim Consolidated Financial Statements (Unaudited)	109

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3429

Item 4.	Controls and Procedures	3429


PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	3530

Item 1A.	Risk Factors	3530

Item 2.	Unregistered Sales of Equity Securities and ~~Use~~Issuer Purchases of ~~Proceeds~~Equity Securities	3530

Item 5.	Other Information	3531

Item 6.	Exhibits	3632

	Signature	3733

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CORE LABORATORIES INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

June 30,
2023

December 31,
2022

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$
26,204

$
15,428

Accounts receivable, net of allowance for credit losses
      of $2,325 and $2,214 at 2023 and 2022, respectively

106,816

106,913

Inventories

71,658

60,445

Prepaid expenses

11,479

15,665

Income taxes receivable

14,557

8,190

Other current assets

5,410

5,061

TOTAL CURRENT ASSETS

236,124

211,702

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation
      of $316,429 and $314,737 at 2023 and 2022, respectively

101,662

105,028

RIGHT OF USE ASSETS

55,456

52,379

INTANGIBLES, net of accumulated amortization and impairment
      of $17,779 and $17,475 at 2023 and 2022, respectively

7,412

7,483

GOODWILL

99,445

99,445

DEFERRED TAX ASSETS, net

68,768

68,570

OTHER ASSETS

32,981

33,747

TOTAL ASSETS

$
601,848

$
578,354

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accounts payable

$
39,145

$
45,847

Accrued payroll and related costs

21,210

23,431

Taxes other than payroll and income

4,238

4,822

Unearned revenues

5,539

5,942

Operating lease liabilities

10,731

11,699

Income taxes payable

6,785

3,034

Other current liabilities

8,546

8,360

TOTAL CURRENT LIABILITIES

96,194

103,135

LONG-TERM DEBT, net

182,583

172,386

LONG-TERM OPERATING LEASE LIABILITIES

42,376

38,305

DEFERRED COMPENSATION

29,876

31,814

DEFERRED TAX LIABILITIES, net

12,126

22,877

OTHER LONG-TERM LIABILITIES

19,089

20,883

COMMITMENTS AND CONTINGENCIES

EQUITY:

Preference stock, 6,000,000 shares authorized, $0.01 par value at June 30, 2023 and EUR 0.02 par value at December 31, 2022; none issued or outstanding

—

—

Common stock, 200,000,000 shares authorized, $0.01 par value, 46,701,102 issued and 46,680,409 outstanding at June 30, 2023; EUR 0.02 par value, 46,699,102 issued and 46,631,934 outstanding at December 31, 2022

467

1,194

Additional paid-in capital

108,030

102,254

Retained earnings

110,234

85,949

Accumulated other comprehensive income (loss)

(3,539
)

(3,777
)
Treasury stock (at cost), 20,693 and 67,168 shares at 2023 and 2022, respectively

(436
)

(1,362
)
Total Core Laboratories Inc. shareholders' equity

214,756

184,258

Non-controlling interest

4,848

4,696

TOTAL EQUITY

219,604

188,954

TOTAL LIABILITIES AND EQUITY

$
601,848

$
578,354


	March 31, 2024			December 31, 2023
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	14,913		$	15,120
Accounts receivable, net of allowance for credit losses of $2,548 and $2,280 at 2024 and 2023, respectively		115,092			109,352
Inventories		70,711			71,702
Prepaid expenses		9,562			8,153
Income taxes receivable		14,443			13,716
Other current assets		4,326			5,093
TOTAL CURRENT ASSETS		229,047			223,136
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $318,151 and $315,796 at 2024 and 2023, respectively		98,521			99,626
RIGHT OF USE ASSETS		53,636			53,842
INTANGIBLES, net of accumulated amortization and impairment of $18,951 and $18,825 at 2024 and 2023, respectively		6,801			6,926
GOODWILL		99,445			99,445
DEFERRED TAX ASSETS, net		66,267			69,201
OTHER ASSETS		34,233			34,219
TOTAL ASSETS	$	587,950		$	586,395
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	32,486		$	33,506
Accrued payroll and related costs		20,178			18,791
Taxes other than payroll and income		4,148			5,939
Unearned revenues		5,126			4,755
Operating lease liabilities		10,430			10,175
Income taxes payable		3,816			7,280
Other current liabilities		9,284			7,651
TOTAL CURRENT LIABILITIES		85,468			88,097
LONG-TERM DEBT, net		160,370			163,134
LONG-TERM OPERATING LEASE LIABILITIES		41,481			42,076
DEFERRED COMPENSATION		30,445			30,544
DEFERRED TAX LIABILITIES, net		12,590			12,697
OTHER LONG-TERM LIABILITIES		20,179			20,040
COMMITMENTS AND CONTINGENCIES
EQUITY:
Preference stock, 6,000,000 shares authorized, $0.01 par value; none issued or outstanding		—			—
Common stock, 200,000,000 shares authorized, $0.01 par value, 46,938,557 issued and 46,864,366 outstanding at 2024; 46,938,557 issued and 46,856,536 outstanding at 2023		469			469
Additional paid-in capital		114,642			110,011
Retained earnings		123,508			120,756
Accumulated other comprehensive income (loss)		(5,160	)		(4,972	)
Treasury stock (at cost), 74,191 and 82,021 shares at 2024 and 2023, respectively		(1,304	)		(1,449	)
Total Core Laboratories Inc. shareholders' equity		232,155			224,815
Non-controlling interest		5,262			4,992
TOTAL EQUITY		237,417			229,807
TOTAL LIABILITIES AND EQUITY	$	587,950		$	586,395

The accompanying notes are an integral part of these interim consolidated financial statements.

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended					Three Months Ended
	June 30,					March 31,
	2023			2022		2024		2023
	(Unaudited)					(Unaudited)
REVENUE:
Services	$	93,265		$	85,422	$	96,495	$	91,076
Product sales		34,616			35,476		33,142		37,280
Total revenue		127,881			120,898		129,637		128,356
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below		71,121			68,166		73,865		70,934
Cost of product sales, exclusive of depreciation expense shown below		29,174			29,791		30,723		30,594
General and administrative expense, exclusive of depreciation expense shown below		5,811			6,847		11,789		16,331
Depreciation		3,807			4,189		3,715		3,939
Amortization		130			171		128		105
Other (income) expense, net		(1,068	)		82		846		(28	)
OPERATING INCOME		18,906			11,652		8,571		6,481
Interest expense		3,236			2,707		3,423		3,429
Income before income taxes		15,670			8,945		5,148		3,052
Income tax expense (benefit)		(7,259	)		1,789		1,658		610
Net income		22,929			7,156		3,490		2,442
Net income attributable to non-controlling interest		83			90		270		69
Net income attributable to Core Laboratories Inc.	$	22,846		$	7,066	$	3,220	$	2,373

EARNINGS PER SHARE INFORMATION:
Basic earnings per share	$	0.49		$	0.15	$	0.07	$	0.05
Basic earnings per share attributable to Core Laboratories Inc.	$	0.49		$	0.15	$	0.07	$	0.05

Diluted earnings per share	$	0.48		$	0.15	$	0.07	$	0.05
Diluted earnings per share attributable to Core Laboratories Inc.	$	0.48		$	0.15	$	0.07	$	0.05

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		46,675			46,319		46,859		46,634
Diluted		47,497			47,143		47,703		47,481

The accompanying notes are an integral part of these interim consolidated financial statements.

Return to Index

~~CORE LABORATORIES INC.~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(In thousands, except per share data)~~

Six Months Ended

June 30,

2023

2022

(Unaudited)

REVENUE:

Services

$
184,341

$
170,145

Product sales

71,896

66,053

Total revenue

256,237

236,198

OPERATING EXPENSES:

Cost of services, exclusive of depreciation expense shown below

142,055

137,023

Cost of product sales, exclusive of depreciation expense shown below

59,768

57,886

General and administrative expense, exclusive of depreciation expense shown below

22,142

19,392

Depreciation

7,746

8,573

Amortization

235

344

Other (income) expense, net

(1,096
)

1,719

OPERATING INCOME

25,387

11,261

Interest expense

6,665

5,351

Income before income taxes

18,722

5,910

Income tax expense (benefit)

(6,649
)

593

Net income

25,371

5,317

Net income attributable to non-controlling interest

152

139

Net income attributable to Core Laboratories Inc.

$
25,219

$
5,178

EARNINGS PER SHARE INFORMATION:

Basic earnings per share

$
0.54

$
0.11

Basic earnings per share attributable to Core Laboratories Inc.

$
0.54

$
0.11

Diluted earnings per share

$
0.53

$
0.11

Diluted earnings per share attributable to Core Laboratories Inc.

$
0.53

$
0.11

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

46,655

46,309

Diluted

47,476

47,133

~~The accompanying notes are an integral part of these interim consolidated financial statements.~~

~~Return to Index~~

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
	(Unaudited)												(Unaudited)
Net income	$	22,929		$	7,156		$	25,371		$	5,317		$	3,490		$	2,442
Other comprehensive income (loss):
Interest rate swaps:
Gain (loss) on fair value of interest rate swaps		—			2,058			—			6,015
Interest rate swap amount reclassified to net income (loss)		(38	)		259			228			513
Income tax expense (benefit) on interest rate swaps reclassified to net income (loss)		8			(313	)		(48	)		(1,144	)
Interest rate swap amount reclassified to net income														(297	)		266
Income tax (expense) benefit on interest rate swaps reclassified to net income														62			(56	)
Total interest rate swaps		(30	)		2,004			180			5,384			(235	)		210
Pension and other postretirement benefit plans:
Amortization of actuarial gain (loss) reclassified to net income (loss)		39			—			78			—
Income tax expense (benefit) on pension and other postretirement benefit plans reclassified to net income (loss)		(10	)		—			(20	)		—
Amortization of actuarial gain (loss) reclassified to net income														64			39
Income tax (expense) benefit on pension and other postretirement benefit plans reclassified to net income														(17	)		(10	)
Total pension and other postretirement benefit plans		29			—			58			—			47			29
Total other comprehensive income (loss)		(1	)		2,004			238			5,384			(188	)		239
Comprehensive income		22,928			9,160			25,609			10,701			3,302			2,681
Comprehensive income attributable to non-controlling interest		83			90			152			139			270			69
Comprehensive income attributable to Core Laboratories Inc.	$	22,845		$	9,070		$	25,457		$	10,562		$	3,032		$	2,612

The accompanying notes are an integral part of these interim consolidated financial statements.

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share data)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
	(Unaudited)												(Unaudited)
Common Stock
Balance at Beginning of Period	$	1,194		$	1,188		$	1,194		$	1,188		$	469		$	1,194
New share issuance		—			—			—			—			—			—
Change in par value		(727	)		—			(727	)		—
Balance at End of Period	$	467		$	1,188		$	467		$	1,188		$	469		$	1,194
Additional Paid-In Capital
Balance at Beginning of Period	$	111,235		$	107,088		$	102,254		$	101,120		$	110,011		$	102,254
New share issuance		—			—			—			—			—			—
Change in par value and equity related transaction costs		(3,435	)		—			(3,435	)		—
Stock-based compensation		230			(2,309	)		9,211			3,659			4,631			8,981
Balance at End of Period	$	108,030		$	104,779		$	108,030		$	104,779		$	114,642		$	111,235
Retained Earnings
Balance at Beginning of Period	$	87,855		$	65,998		$	85,949		$	68,349		$	120,756		$	85,949
Dividends paid		(467	)		(463	)		(934	)		(926	)		(468	)		(467	)
Net income attributable to Core Laboratories Inc.		22,846			7,066			25,219			5,178			3,220			2,373
Balance at End of Period	$	110,234		$	72,601		$	110,234		$	72,601		$	123,508		$	87,855
Accumulated Other Comprehensive Income (Loss)
Balance at Beginning of Period	$	(3,538	)	$	(6,753	)	$	(3,777	)	$	(10,133	)	$	(4,972	)	$	(3,777	)
Interest rate swaps, net of income taxes		(30	)		2,004			180			5,384			(235	)		210
Pension and other postretirement benefit plans, net of income taxes		29			—			58			—			47			29
Balance at End of Period	$	(3,539	)	$	(4,749	)	$	(3,539	)	$	(4,749	)	$	(5,160	)	$	(3,538	)
Treasury Stock
Balance at Beginning of Period	$	(1,360	)	$	(5,736	)	$	(1,362	)	$	(4,075	)	$	(1,449	)	$	(1,362	)
Stock-based compensation		1,123			1,300			1,126			1,559			189			3
Repurchase of common stock		(199	)		(246	)		(200	)		(2,166	)		(44	)		(1	)
Balance at End of Period	$	(436	)	$	(4,682	)	$	(436	)	$	(4,682	)	$	(1,304	)	$	(1,360	)
Non-Controlling Interest
Balance at Beginning of Period	$	4,765		$	4,601		$	4,696		$	4,552		$	4,992		$	4,696
Non-controlling interest dividends		—			(61	)		—			(61	)
Net income attributable to non-controlling interest		83			90			152			139			270			69
Balance at End of Period	$	4,848		$	4,630		$	4,848		$	4,630		$	5,262		$	4,765
Total Equity
Balance at Beginning of Period	$	200,151		$	166,386		$	188,954		$	161,001		$	229,807		$	188,954
New share issuance		—			—			—			—			—			—
Change in par value and equity related transaction costs		(4,162	)		—			(4,162	)		—
Stock-based compensation		1,353			(1,009	)		10,337			5,218			4,820			8,984
Dividends paid		(467	)		(463	)		(934	)		(926	)		(468	)		(467	)
Non-controlling interest dividends		—			(61	)		—			(61	)
Net income		22,929			7,156			25,371			5,317			3,490			2,442
Interest rate swaps, net of income taxes		(30	)		2,004			180			5,384			(235	)		210
Pension and other postretirement benefit plans, net of income taxes		29			—			58			—			47			29
Repurchase of common stock		(199	)		(246	)		(200	)		(2,166	)		(44	)		(1	)
Balance at End of Period	$	219,604		$	173,767		$	219,604		$	173,767		$	237,417		$	200,151

Cash Dividends per Share	$	0.01		$	0.01		$	0.02		$	0.02		$	0.01		$	0.01

The accompanying notes are an integral part of these interim consolidated financial statements.

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(In thousands, except share and per share data)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
	(Unaudited)												(Unaudited)
Common Stock - Number of shares issued
Balance at Beginning of Period		46,701,102			46,454,264			46,699,102			46,454,264			46,938,557			46,699,102
New share issuance		—			—			2,000			—			—			2,000
Balance at End of Period		46,701,102			46,454,264			46,701,102			46,454,264			46,938,557			46,701,102

Treasury Stock - Number of shares
Balance at Beginning of Period		(67,075	)		(170,587	)		(67,168	)		(104,867	)		(82,021	)		(67,168	)
Stock-based compensation		55,395			50,105			55,545			59,405			10,675			150
Repurchase of common stock		(9,013	)		(8,975	)		(9,070	)		(83,995	)		(2,845	)		(57	)
Balance at End of Period		(20,693	)		(129,457	)		(20,693	)		(129,457	)		(74,191	)		(67,075	)

Common Stock - Number of shares outstanding
Balance at Beginning of Period		46,634,027			46,283,677			46,631,934			46,349,397			46,856,536			46,631,934
New share issuance		—			—			2,000			—			—			2,000
Stock-based compensation		55,395			50,105			55,545			59,405			10,675			150
Repurchase of common stock		(9,013	)		(8,975	)		(9,070	)		(83,995	)		(2,845	)		(57	)
Balance at End of Period		46,680,409			46,324,807			46,680,409			46,324,807			46,864,366			46,634,027

The accompanying notes are an integral part of these interim consolidated financial statements.

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


		Six Months Ended							Three Months Ended
		June 30,							March 31,
		2023			2022				2024			2023
		(Unaudited)							(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	25,371		$	5,317			$	3,490		$	2,442
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:							Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation			10,337			5,218				4,820			8,984
Depreciation and amortization			7,981			8,917				3,843			4,044
Assets write-down										1,110			1,015
Changes in value of life insurance policies			(3,989	)		5,310				(946	)		(791	)
Deferred income taxes			(10,949	)		530				2,827			936
Other non-cash items			936			(485	)			269			(195	)
Changes in assets and liabilities:
Accounts receivable			(103	)		(2,202	)			(6,290	)		(4,024	)
Inventories			(11,618	)		(6,827	)			991			(6,897	)
Prepaid expenses and other current assets			(2,532	)		(2,903	)			(2,017	)		(3,399	)
Other assets			1,579			(1,019	)			160			1,746
Accounts payable			(8,685	)		5,062				(551	)		(7,078	)
Accrued expenses			1,131			(681	)			(2,469	)		587
Unearned revenues			(403	)		(1,238	)			371			10
Other liabilities			(3,484	)		(9,104	)			(78	)		(549	)
Net cash provided by (used in) operating activities			5,572			5,895				5,530			(3,169	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(4,382	)		(5,493	)			(3,052	)		(2,208	)
Patents and other intangibles			(164	)		(42	)			(3	)		90
Proceeds from sale of assets			353			281				593			80
Proceeds from insurance recovery			—			583
Net proceeds on life insurance policies			3,375			2,074				805			—
Proceeds from sale of business, net of cash sold			—			240
Net cash provided by (used in) investing activities			(818	)		(2,357	)			(1,657	)		(2,038	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt			(101,000	)		(31,000	)			(17,000	)		(16,000	)
Proceeds from long-term debt			111,000			29,000				14,000			24,000
Debt issuance costs										(19	)		(184	)
Dividends paid			(934	)		(926	)			(468	)		(466	)
Repurchase of common stock			(200	)		(2,166	)			(44	)		(1	)
Equity related transaction costs			(2,553	)		—				(549	)		(1,285	)
Other financing activities			(291	)		(1	)
Net cash provided by (used in) financing activities			6,022			(5,093	)			(4,080	)		6,064
NET CHANGE IN CASH AND CASH EQUIVALENTS			10,776			(1,555	)			(207	)		857
CASH AND CASH EQUIVALENTS, beginning of period			15,428			17,703				15,120			15,428
CASH AND CASH EQUIVALENTS, end of period		$	26,204		$	16,148			$	14,913		$	16,285

Supplemental disclosures of cash flow information:
Cash payments for interest		$	5,187		$	4,359			$	3,286		$	2,956
Cash payments for income taxes		$	4,694		$	6,966			$	2,650		$	1,541
Non-cash investing and financing activities:
Capital expenditures incurred but not paid for as of the end of the period									$	1,200		$	575
Equity related transaction costs incurred but not paid for as of the end of the period		$	1,609		$	—			$	207		$	—

The accompanying notes are an integral part of these interim consolidated financial statements.

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CORE LABORATORIES INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS

References to “Core Lab”, “Core Laboratories”, the “Company”, “we”, “our” and similar phrases are used throughout this Quarterly Report on Form 10-Q (“Quarterly Report”) and relate collectively to Core Laboratories Inc. and its consolidated subsidiaries.

On May 1, 2023, Core Laboratories N.V. completed its previously announced redomestication transaction (the “Redomestication Transaction”), which included (i) the merger (the “Merger”) of Core Laboratories N.V. with and into Core Laboratories Luxembourg S.A., a public limited liability company incorporated under the laws of Luxembourg, with Core Laboratories Luxembourg S.A. surviving, and (ii) following the completion of the Merger, the migration of Core Laboratories Luxembourg S.A. out of Luxembourg and its domestication as Core Laboratories Inc., a Delaware corporation. As a result of the Redomestication Transaction, all common shares in Core Laboratories N.V. were canceled and exchanged for common stock in Core Laboratories Luxembourg S.A. on a one-for-one basis. Former holders of Core Laboratories N.V. common shares now hold one share of common stock of Core Laboratories Inc. for each Core Laboratories N.V. common share owned immediately prior to the consummation of the Redomestication Transaction, and the business, assets, liabilities, directors and officers of Core Laboratories Inc. are now the same as the business, assets, liabilities, directors and officers of Core Laboratories N.V. immediately prior to the Redomestication Transaction. See Note 2 - ~~Significant Accounting Policies Update – Basis of Presentation and Principles of Consolidation, Note 7 -~~ ~~Long-Term Debt, net, Note 8 -~~ ~~Pension And Other Postretirement Benefit Plans, Note 10 -~~ ~~Equity~~ ~~and Note 14 -~~ ~~Income Tax Expense (Benefit)~~ ~~for additional information regarding the Redomestication Transaction.~~

We operate our business in two segments: (1) Reservoir Description and (2) Production Enhancement. These complementary operating segments provide different services and products and utilize different technologies for evaluating and improving reservoir performance and increasing oil and gas recovery from new and existing fields. For a description of the types of services and products offered by these operating segments, see Note 16 - Segment Reporting.

2. SIGNIFICANT ACCOUNTING POLICIES UPDATE

Basis of Presentation and Principles of Consolidation

On May 1, 2023, Core Laboratories N.V. completed its previously announced redomestication transaction (the “Redomestication Transaction”) which through a series of steps, resulted in the merger of Core Laboratories N.V., a holding company in the Netherlands, with and into Core Laboratories Luxembourg S.A., a public limited liability company incorporated under the laws of Luxembourg, with Core Laboratories Luxembourg S.A. surviving, and subsequently the migration of Core Laboratories Luxembourg S.A. out of Luxembourg and its domestication as Core Laboratories Inc., a Delaware corporation. The Redomestication Transaction has been accounted for as a transaction between entities under common control. Accordingly, Core Laboratories Inc. (formerly Core Laboratories Luxembourg S.A.) recorded the assets and liabilities transferred at their carrying amounts at the date of transfer. All common shares in Core Laboratories N.V., at par value EUR ~~0.02, were canceled and exchanged for common stock in Core Laboratories Inc. (formerly Core Laboratories Luxembourg S.A.), at par value $0.01, on a one-for-one basis. Core Laboratories Inc.'s common stock par value was decreased by $0.7~~ million for the difference between the total par value of common stock of Core Laboratories Inc. and the total par value of common shares of Core Laboratories N.V. at the date of transfer, with an offset to additional paid in capital. There is no difference between the combined separate entities prior to the Redomestication Transaction and the combined separate entities after the Redomestication Transaction, therefore, comparative information reported in these financial statements ~~reported as though the exchange of equity interests had occurred at the beginning of the reporting period, and comparative information~~ do not differ from amounts previously reported under Core Laboratories N.V.’s consolidated financial statements. These financial statements should be read in conjunction with Core Laboratories N.V.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and Core Laboratories N.V.’s Annual Report on Form 10-K for the year ended December 31, 2022, including Note 2 - Summary of Significant Accounting Policies.~~There have been no changes to the accounting policies of the combined entities during the six months ended June 30, 2023.~~

The accompanying unaudited interim consolidated financial statements include the accounts of Core Laboratories Inc. and its subsidiaries for which we have a controlling voting interest and/or a controlling financial interest. These financial statements

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have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Core Laboratories Inc.’s balance sheet information for the year ended December 31, ~~2022,~~2023, was derived from the ~~2022~~2023 audited consolidated financial statements. Accordingly, these financial statements do not include all of the information and footnote disclosures required by U.S. GAAP for the annual financial statements and should be read in conjunction with the audited financial ~~statements.~~statements and the summary of significant accounting policies and notes thereto included in Core Laboratories Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023, including Note 2 - Summary of Significant Accounting Policies. There have been no changes to the accounting policies of the combined entities during the three months ended March 31, 2024.

Core Laboratories Inc. uses the equity method of accounting for investments in which it has less than a majority interest and does not exercise control but does exert significant influence. Non-controlling interests have been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than 100% owned. All inter-company transactions and balances have been eliminated in consolidation.

In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods presented have been included in these financial statements. Furthermore, the operating results presented for the three ~~and six~~ months ended ~~June 30, 2023,~~March 31, 2024, may not necessarily be indicative of the results that may be expected for the year ending December 31, 2024.

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Certain reclassifications were made to prior period amounts in order to conform to the current period presentations. These reclassifications had no impact on the reported net income or cash flows for the three months ended March 31, 2023.

Property, Plant and Equipment

We review our long-lived assets (“LLA”) for impairment when events or changes in circumstances indicate that their net book value may not be recovered over their remaining service lives. Indicators of possible impairment may include significant declines in activity levels in regions where specific assets or groups of assets are located, extended periods of idle use, declining revenue or cash flow or overall changes in general market conditions.

The geopolitical conflict between Russia and Ukraine, which began in February 2022 and has continued through ~~June 30, 2023,~~March 31, 2024, has resulted in disruptions to our operations in Russia and Ukraine. ~~However, as~~As of ~~June 30, 2023,~~March 31, 2024, all laboratory facilities, offices, and locations in Russia and Ukraine continued to operate ~~and remained profitable. The Company’s operation, assets and facilities in Ukraine are immaterial.~~with no significant impact to local business operations. Therefore, we determined there was no triggering event for LLA in Russia and Ukraine, and no impairment assessments have been performed as of ~~June 30, 2023.~~March 31, 2024.

Recent Accounting Pronouncements

Issued But Not Yet Effective

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023- 07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis. The amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendment should be applied retrospectively to all prior periods presented in the financial statements. Upon adoption, our disclosures regarding segment reporting will be expanded accordingly.

In December 2023, FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures to improve transparency of income tax disclosures, primarily by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendment is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendment should be applied prospectively; however, retrospective application is permitted. Upon adoption, our disclosures regarding income taxes will be expanded accordingly.

3. ACQUISITIONS AND DIVESTURES

We had no significant business acquisitions or divestures during the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023.

4. CONTRACT ASSETS AND LIABILITIES

The balance of contract assets and liabilities consisted of the following (in thousands):


	June 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Contract assets:
Current	$	502	$	1,148	$	911	$	1,293
	$	502	$	1,148	$	911	$	1,293
Contract liabilities:
Current	$	702	$	907	$	668	$	299
Non-current		24		24
	$	726	$	931	$	668	$	299

June 30,
2023

Estimate of when contract liabilities will be recognized as revenue:

Within 12 months

$
702

Within 12 to 24 months

—

Greater than 24 months

24

1110

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	March 31, 2024
Estimate of when contract liabilities will be recognized as revenue:
Within 12 months	$	668

The current portion of contract assets are included in our accounts receivable. The current portion of contract liabilities is included in unearned ~~revenues and the non-current portion of contract liabilities is included in other long-term liabilities.~~revenues.

We did not recognize any impairment losses on our contract assets during the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023.

5. INVENTORIES

Inventories consist of the following (in thousands):


	June 30, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Finished goods	$	32,742	$	26,534	$	31,477	$	30,508
Parts and materials		35,477		31,323		35,660		37,670
Work in progress		3,439		2,588		3,574		3,524
Total inventories	$	71,658	$	60,445	$	70,711	$	71,702

We include freight costs incurred for shipping inventory to our clients in the cost of product sales caption in the accompanying consolidated statements of operations.

6. LEASES

We have operating leases primarily consisting of office and lab space, machinery and equipment and vehicles. We entered into a sublease agreement that commenced on July 1, 2023, for existing office and lab space in Calgary, Alberta, Canada.

The components of lease expense and other information are as follows (in thousands):


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
Consolidated Statements of Operations:
Operating lease expense	$	4,181		$	4,098		$	8,670		$	8,267		$	4,282		$	4,489
Short-term lease expense		462			397			891			821			552			429
Variable lease expense		437			351			1,041			764			429			604
Sublease income														(57	)		—
Total lease expense	$	5,080		$	4,846		$	10,602		$	9,852		$	5,206		$	5,522
Consolidated Statements of Cash Flows:
Operating cash flows - operating leases payments													$	3,850		$	4,165
Right of use assets obtained in exchange for operating lease obligations														1,534			8,590
Other information:
Operating cash flows - operating leases payments	$	4,218		$	4,347		$	8,750		$	8,953
Right of use assets obtained (released) in exchange for operating lease obligations	$	441		$	953		$	10,405		$	3,996
Weighted-average remaining lease term - operating leases	8.32 years			7.22 years			8.32 years			7.22 years			8.99 years			8.41 years
Weighted-average discount rate - operating leases		5.24	%		4.55	%		5.24	%		4.55	%		5.37	%		5.18	%

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Scheduled undiscounted lease payments for non-cancellable operating leases consist of the following (in thousands):


	June 30, 2023			March 31, 2024
Remainder of 2023	$	6,969
2024		11,292
				Operating Leases			Operating Sublease
Remainder of 2024				$	9,919		$	(169	)
2025		9,107			10,341			(232	)
2026		6,967			8,074			(237	)
2027		5,708			6,313			(241	)
2028					4,907			(163	)
Thereafter		26,531			26,678			—
Total undiscounted lease payments		66,574			66,232		$	(1,042	)
Less: Imputed interest		(13,467	)		(14,321	)
Total operating lease liabilities	$	53,107		$	51,911

See Note 13 -Other (income) and expense, netregarding lease abandonments during the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023.

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7. LONG-TERM DEBT, NET

We have no ~~significant~~ finance lease obligations. Debt is summarized in the following table (in thousands):

Interest Rate

Maturity Date

June 30,
2023

December 31,
2022

2011 Senior Notes (1)
4.11%

September 30, 2023

$
75,000

$
75,000

2021 Senior Notes Series A (2)
4.09%

January 12, 2026

45,000

45,000

2021 Senior Notes Series B (2)
4.38%

January 12, 2028

15,000

15,000

2023 Senior Notes Series A (3)
7.25%

June 28, 2028

25,000

—

2023 Senior Notes Series B (3)
7.50%

June 28, 2030

25,000

—

Credit Facility

—

40,000

Total long-term debt

185,000

175,000

Less: Debt issuance costs

(2,417
)

(2,614
)
Long-term debt, net

$
182,583

$
172,386


	Interest Rate	Maturity Date	March 31, 2024			December 31, 2023
2021 Senior Notes Series A (1)	4.09%	January 12, 2026	$	45,000		$	45,000
2021 Senior Notes Series B (1)	4.38%	January 12, 2028		15,000			15,000
2023 Senior Notes Series A (2)	7.25%	June 28, 2028		25,000			25,000
2023 Senior Notes Series B (2)	7.50%	June 28, 2030		25,000			25,000
Credit Facility				53,000			56,000
Total long-term debt				163,000			166,000
Less: Debt issuance costs				(2,630	)		(2,866	)
Long-term debt, net			$	160,370		$	163,134

~~(1) Interest is payable semi-annually on March 30 and September 30.~~

~~(2)~~(1) Interest is payable semi-annually on June 30 and December 30.

~~(3)~~(2) Interest is payable semi-annually on March 28 and September 28.

In connection with the Redomestication Transaction, on May 1, 2023, Core Laboratories N.V. assigned to Core Laboratories Inc., and Core Laboratories Inc. assumed, all of Core Laboratories N.V.’s rights and obligations under existing agreements.

We, along with our wholly owned subsidiary Core Laboratories (U.S.) Interests Holdings, Inc. (“CLIH”) as issuer, have ~~five~~ ~~series of~~ senior notes outstanding ~~with an aggregate principal amount of $185~~ ~~million~~ that were issued through private placement transactions. ~~The 2011 Senior Notes were issued in 2011.~~ Series A and Series B of the 2021 Senior Notes were issued in 2021 (the “2021 Senior Notes”). Series A and Series B of the 2023 Senior Notes were ~~entered on May 4, 2023, and subsequently~~ issued ~~and funded on June 28,~~in 2023 (the “2023 Senior Notes”). The ~~2011 Senior Notes,~~ 2021 Senior Notes and the 2023 Senior Notes are collectively the “Senior Notes”. ~~We intend to repay the 2011 Senior Notes at maturity in September 2023 using borrowings under our existing long-term credit facility; therefore, we continue to classify them as long-term debt.~~

We, along with ~~our wholly owned subsidiary~~ CLIH, have a credit facility, the Eighth Amended and Restated Credit Agreement (as amended, the “Credit Facility”) for an aggregate borrowing commitment of $~~135~~135.0 million with a $5050.0 million “accordion” feature. ~~Proceeds from the 2023 Senior Notes were used to repay the outstanding balance under the Credit Facility at June 30, 2023.~~

The Credit Facility is secured by first priority interests in (1) substantially all of the tangible and intangible personal property, and equity interest of CLIH and certain of the Company’s U.S. and foreign subsidiary companies; and (2) instruments evidencing intercompany indebtedness owing to the Company, CLIH and certain of the Company’s U.S. and foreign subsidiary companies. Under the Credit Facility, the Secured Overnight Financing Rate (“SOFR”) plus 2.00% to SOFR plus 3.00% will be applied to outstanding borrowings. Any outstanding balance under the Credit Facility is due at maturity on July 25, 2026, subject to springing maturity on July 12, 2025, if any portion of the Company’s 2021 Senior Notes Series A due January 12, 2026, in the aggregate principal amount of $4545.0 million, remain outstanding on July 12, 2025, unless the Company’s liquidity equals or exceeds the principal amount of the 2021 Senior Notes Series A outstanding on such date. The available capacity at any point in time is reduced by outstanding borrowings and outstanding letters of credit which totaled approximately $99.8 million at ~~June 30, 2023,~~March 31, 2024, resulting in an available borrowing capacity under the Credit Facility of approximately $~~126~~72.2

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million. In addition to indebtedness under the Credit Facility, we had approximately $77.4 million of outstanding letters of credit and performance guarantees and bonds from other sources as of ~~June 30, 2023.~~March 31, 2024.

The Credit Facility and Senior Notes include a cross-default provision, whereby a default under one agreement may trigger a default in the other agreements.

The terms of the Credit Facility and Senior Notes require us to meet certain covenants, including, but not limited to, an interest coverage ratio (calculated as consolidated EBITDA divided by interest expense) and a leverage ratio (calculated as consolidated net indebtedness divided by consolidated EBITDA), where consolidated EBITDA (as defined in each agreement) and interest expense are calculated using the most recent four fiscal quarters. ~~The Credit Facility and Senior Notes include a~~

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~~cross-default provision, whereby a default under one agreement may trigger a default in the other agreements.~~ The Credit Facility has more restrictive covenants with a minimum interest coverage ratio of 3.00 to 1.00 and permits a maximum leverage ratio of 2.50 to 1.00. The Credit Facility allows non-cash charges such as impairment of assets, stock compensation and other non-cash charges to be added back in the calculation of consolidated EBITDA. The terms of our Credit Facility also allow us to negotiate in good faith to amend any ratio or requirement to preserve the original intent of the agreement if any change in accounting principles would affect the computation of any financial ratio or covenant of the Credit Facility. In accordance with the terms of the Credit Facility, our leverage ratio is ~~1.85~~1.76, and our interest coverage ratio is ~~6.66~~6.27, each for the period ended ~~June 30, 2023.~~March 31, 2024. We ~~believe that we~~ are in compliance with all covenants contained in our Credit Facility and Senior ~~Notes.~~Notes as of March 31, 2024. Certain of our material, wholly owned subsidiaries are guarantors or co-borrowers under the Credit Facility and Senior Notes.

See Note 11 - Derivative Instruments and Hedging Activities for additional information regarding interest rate swap agreements we have entered to fix the underlying risk-free rate on our Credit Facility and ~~the 2023~~ Senior ~~Notes.~~notes.

The estimated fair value of total debt at ~~June 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, approximated the book value of total debt. The fair value was estimated using Level 2 inputs by calculating the sum of the discounted future interest and principal payments through the maturity date.

8. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Prior to January 2020, one of our subsidiaries provided a noncontributory defined benefit pension plan covering substantially all of our Dutch employees (“Dutch Plan”) who were hired prior to 2000. This pension benefit was based on years of service and final pay or career average pay, depending on when the employee began participating. The Dutch Plan was curtailed prior to January 2020, and these employees have been moved into the Dutch defined contribution plan. However, the unconditional indexation for this group of participants continues for so long as they remain in active service with the Company.

The following table summarizes the components of net periodic pension cost under the Dutch Plan (in thousands):


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
Interest cost	$	372		$	145		$	739		$	299		$	354		$	367
Expected return on plan assets		(330	)		(136	)		(656	)		(281	)		(290	)		(326	)
Net periodic pension cost	$	42		$	9		$	83		$	18		$	64		$	41

~~During the three and six months ended June 30, 2023, we made additional contributions to the Dutch Plan of approximately $1.8~~ ~~million for the indexation.~~13

~~In connection with the Redomestication Transaction, Core Laboratories N.V. assigned~~Return to Core Laboratories Inc., and Core Laboratories Inc. assumed, all of Core Laboratories N.V.’s rights and obligations under compensation or benefit plans, policies and arrangements previously maintained by Core Laboratories N.V., including the Supplemental Executive Retirement Plan, Deferred Compensation Plan, Employment Agreements and Profit Sharing and Retirement Plan.Index

9. COMMITMENTS AND CONTINGENCIES

We have been and may, from time to time, be named as a defendant in legal actions that arise in the ordinary course of business. These include, but are not limited to, employment-related claims and contractual disputes or claims for personal injury or property damage which occur in connection with the provision of our services and products. A liability is accrued when a loss is both probable and can be reasonably estimated.

See Note 7 - Long-term Debt, net for amounts committed under letters of ~~credits~~credit and performance guarantees and bonds.

10. EQUITY

~~Return to Index~~

~~Common Stock~~

~~In connection with the Redomestication Transaction, all common shares in Core Laboratories N.V. at par value EUR~~ ~~0.02, were canceled and exchanged for common stock in Core Laboratories Inc. (formerly Core Laboratories Luxembourg S.A.) at par value $0.01, on a one-for-one basis. Core Laboratories Inc.’s common stock par value was decreased by $0.7~~ million for the difference between the total par value of common stock of Core Laboratories Inc. and the total par value of common shares of Core Laboratories N.V. at the date of transfer, with an offset to additional paid in capital. Equity related transaction costs associated with the Redomestication Transaction of $~~4.2~~ ~~million have been charged to additional paid in capital.~~

In addition, Core Laboratories N.V. assigned to Core Laboratories Inc., and Core Laboratories Inc. assumed, all of Core Laboratories N.V.’s rights and obligations under the 2014 Non-Employee Director Stock Incentive Plan and the 2020 Long Term Incentive Plan. Each outstanding Core Laboratories N.V. incentive award thereunder became a Core Laboratories Inc. incentive award that is subject to substantially the same terms and conditions as the former Core Laboratories N.V. incentive award, except, in the case of equity-based Core Laboratories N.V. incentive awards, the security issuable upon exercise or settlement of the incentive award, as applicable, will be a share of Core Laboratories Inc. common stock rather than a Core Laboratories N.V. common share.

~~On June 9, 2022, we entered into an Equity Distribution Agreement with certain banks for the issuance and sale of up to $60.0~~ million of our common stock allowing sales of our common stock to be made by any method deemed to be an “at-the-market offering” (“ATM Program”) as defined in Rule 415 under the Securities Act of 1933. Subsequently, on July 17, 2023, the Company terminated the Equity Distribution Agreement. As a result of the termination of the Equity Distribution Agreement, the Company suspended and terminated the 2022 ATM Program and therefore will not offer or sell any shares under the 2022 ATM Program. The Company did not sell any shares under the Equity Distribution Agreement.

~~During the six months ended June 30, 2023, we distributed~~ ~~2,000~~ ~~shares of common stock upon vesting of stock-based awards.~~

Treasury Stock

During the three ~~and six~~ months ended ~~June 30, 2023,~~March 31, 2024, we distributed ~~55,395~~ ~~and~~ ~~55,545~~10,675 shares of treasury stock ~~respectively,~~ upon vesting of stock-based awards. During the three ~~and six~~ months ended ~~June 30, 2023,~~March 31, 2024, we repurchased ~~9,013~~ ~~and~~ ~~9,070~~2,845 shares of our common stock ~~respectively,~~ for $~~199~~44 thousand ~~and $200~~ ~~thousand, respectively,~~ which were surrendered to us pursuant to the terms of a stock-based compensation plan in consideration of the participants' tax burdens resulting from the issuance of common stock under that plan. Such shares of common stock, unless canceled, may be reissued for a variety of purposes such as future acquisitions, non-employee director stock awards or employee stock awards.

Dividend Policy

In March ~~and May 2023,~~2024, we paid a quarterly cash ~~dividends~~dividend of $0.01 per share of common stock. In addition, on ~~July 26, 2023~~April 24, 2024, we declared a quarterly dividend of $0.01 per share of common stock for shareholders of record on ~~August 7, 2023,~~May 6, 2024, and payable on ~~August~~May 28, ~~2023.~~2024.

Accumulated Other Comprehensive Income (Loss)

Amounts recognized, net of income tax, in accumulated other comprehensive income (loss) consist of the following (in thousands):

~~Return to Index~~


	June 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
Pension and other post-retirement benefit plans - unrecognized prior service costs and net actuarial loss	$	(5,050	)	$	(5,108	)	$	(5,867	)	$	(5,914	)
Interest rate swaps - net gain (loss) on fair value		1,511			1,331			707			942
Total accumulated other comprehensive income (loss)	$	(3,539	)	$	(3,777	)	$	(5,160	)	$	(4,972	)

11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risks related to fluctuations in interest rates. To mitigate these risks, we may utilize derivative instruments in the form of interest rate swaps. We do not enter into derivative transactions for speculative purposes.

Under the Company’s Credit Facility, the SOFR plus 2.00% to SOFR plus 3.00% will be applied to outstanding borrowings. See Note 7 - ~~Long-Term~~Long-term Debt, net for additional information. The Company has elected to apply the optional expedient for hedging relationships affected by reference rate reform. Accordingly, no outstanding balance on the Credit Facility with a SOFR rate will preclude cash flow hedging with existing London Inter-Bank Offer Rate (“LIBOR”) hedging instruments.

In August 2014, we entered into a swap agreement with a notional amount of $25 million (“2014 Variable-to-Fixed Swap”), and the LIBOR portion of the interest rate was fixed at 2.5% through August 29, 2024. In February 2020, we entered into a second swap agreement with a notional amount of $25 million (“2020 Variable-to-Fixed Swap”), and the LIBOR portion of the interest rate was fixed at 1.3% through February 28, 2025. These interest rate swap agreements were terminated, dedesignated and settled in March 2021. The hedging relationship is highly effective; therefore, gains and losses on these swaps will be reclassified into interest expense in accordance with the forecasted transactions or the scheduled interest payments on the Credit

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Facility. ~~At June 30, 2023, the outstanding balance on our Credit Facility had been reduced to~~ ~~zero, and approximately $0.2~~ million of losses were reclassified to interest expense associated with the ineffective period of the hedging relationship, as it became probable that certain of the forecasted transactions would not occur within the originally specified time period. Remaining net losses on these swaps included in accumulated other comprehensive income (loss) as of ~~June 30, 2023,~~March 31, 2024, are $~~0.5~~0.2 million all of which $~~0.4~~ ~~million,~~ is expected to be reclassified into earnings within the next 12 months as interest payments are made on the Company’s Credit Facility.

In March 2021, we entered into a new forward interest rate swap agreement ~~for a notional amount of $~~60 ~~million~~ and carried the fair value of the terminated 2014 and 2020 Variable-to-Fixed Swaps into the new agreement in a “blend and extend” structured transaction. The purpose of this forward interest rate swap agreement is to fix the underlying risk-free rate, that would be associated with the anticipated issuance of new long-term debt by the Company in future periods. The forward interest rate swap would hedge the risk-free rate on forecasted long-term debt for a maximum of 11 years through March 2033. Risk associated with future changes in the 10-year LIBOR interest rates have been fixed up to a notional amount of $60 million with this instrument. The interest rate swap qualifies as a cash flow hedging instrument. This forward interest rate swap agreement was terminated and settled in April 2022. The hedging relationship is highly effective, therefore, the gain on the termination of the forward interest rate swap was included in accumulated other comprehensive income (loss). On June 28, 2023, the Company issued the 2023 Senior Notes in the aggregate principal amount of $50 million at fixed interest rates of 7.25% and 7.50%. The Company has elected to apply the optional expedient for hedging relationships affected by reference rate reform. Accordingly, no outstanding balance on the 2023 Senior Notes will preclude cash flow hedging with the existing LIBOR hedging instrument. The Company recognized a gain of $0.4 million in earnings for the $10 million over hedged portion of the interest rate ~~swap.~~swap in 2023. The remaining net gain on this swap included in accumulated other comprehensive income (loss) at ~~June 30, 2023, is $2.0~~ ~~million of~~March 31, 2024, which $~~1.4~~ ~~million~~ will be ~~reclassified~~amortized into ~~earnings within the next 12 months as~~ interest expense in accordance with the forecasted transactions or the scheduled interest payments on the 2023 Senior ~~Notes.~~Notes and any future debt through March 2033, is $0.9 million, of which $0.9 million gain is expected to be reclassified into earnings within the next 12 months.

As of ~~June 30, 2023,~~March 31, 2024, the aggregated gains and losses on these interest swaps that isare included in accumulated other comprehensive income (loss) are a net gain of $~~1.5~~0.7 million.

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At ~~June 30, 2023,~~March 31, 2024, we had fixed rate long-term debt aggregating $~~185~~110 million and novariable rate long-term ~~debt.~~debt aggregating $53 million.

The effect of the interest rate swaps on the consolidated statements of operations is as follows (in thousands):


		Three Months Ended					Six Months Ended						Three Months Ended
		June 30,					June 30,						March 31,
		2023			2022		2023		2022		Income Statement Classification		2024			2023		Income Statement Classification
Derivatives designated as hedges:	Derivatives designated as hedges:											Derivatives designated as hedges:
5 year interest rate swap		$	128		$	91	$	211	$	180	Increase (decrease) to interest expense		$	39		$	83	Increase (decrease) to interest expense
10 year interest rate swap			(166	)		168		17		333	Increase (decrease) to interest expense			(336	)		183	Increase (decrease) to interest expense
		$	(38	)	$	259	$	228	$	513			$	(297	)	$	266

12. FINANCIAL INSTRUMENTS

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The Company’s only financial assets and liabilities which are measured at fair value on a recurring basis relate to certain aspects of the Company’s benefit plans. We use the market approach to determine the fair value of these assets and liabilities using significant other observable inputs (Level 2) with the assistance of third-party specialists. We do not have any assets or liabilities measured at fair value on a recurring basis using quoted prices in an active market (Level 1) or significant unobservable inputs (Level 3). Gains and losses related to the fair value changes in the ~~deferred compensation~~financial assets and liabilities are recorded in general and administrative expense in the consolidated statements of operations.

The following table summarizes the fair value balances (in thousands):


			Fair Value Measurement at								Fair Value Measurement at
			June 30, 2023								March 31, 2024
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	24,408	$	—	$	24,408	$	—	$	25,533	$	—	$	25,533	$	—
	$	24,408	$	—	$	24,408	$	—	$	25,533	$	—	$	25,533	$	—
Liabilities:
Deferred compensation liabilities	$	17,281	$	—	$	17,281	$	—	$	18,696	$	—	$	18,696	$	—
	$	17,281	$	—	$	17,281	$	—	$	18,696	$	—	$	18,696	$	—


			Fair Value Measurement at								Fair Value Measurement at
			December 31, 2022								December 31, 2023
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	23,787	$	—	$	23,787	$	—	$	25,397	$	—	$	25,397	$	—
	$	23,787	$	—	$	23,787	$	—	$	25,397	$	—	$	25,397	$	—
Liabilities:
Deferred compensation liabilities	$	16,284	$	—	$	16,284	$	—	$	17,299	$	—	$	17,299	$	—
	$	16,284	$	—	$	16,284	$	—	$	17,299	$	—	$	17,299	$	—

(1) Company owned life insurance policies have cash surrender value and are intended to assist in funding deferred compensation liabilities and other benefit plans.

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13. OTHER (INCOME) EXPENSE, NET

The components of other (income) expense, net, are as follows (in thousands):


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
(Gain) loss on sale of assets	$	(129	)	$	(111	)	$	(33	)	$	(268	)	$	(537	)	$	96
Results of non-consolidated subsidiaries		(62	)		(21	)		(199	)		(114	)		(31	)		(137	)
Foreign exchange (gain) loss, net		(386	)		1,258			(530	)		841			285			(144	)
Rents and royalties		(110	)		(126	)		(255	)		(297	)		(6	)		(145	)
Return on pension assets and other pension costs		(330	)		(136	)		(656	)		(281	)		(290	)		(326	)
Loss on lease abandonment and other exit costs		—			—			641			—			699			641
Assets write-down		—			—			1,015			—			1,110			1,015
Insurance and other settlements														(1,011	)		(604	)
Severance and other charges		—			—			—			3,332			824			—
Insurance and other settlements		—			—			(604	)		(669	)
Other, net		(51	)		(782	)		(475	)		(825	)		(197	)		(424	)
Total other (income) expense, net	$	(1,068	)	$	82		$	(1,096	)	$	1,719		$	846		$	(28	)

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and ~~relocated certain of our~~exiting these facilities, ~~in Canada and wrote down related~~the associated leasehold improvements, ~~and~~ right of use assets and other assets of $1.1 million and $1.0 million were abandoned and expensed, respectively.

~~During the six months ended June 30, 2022, we received insurance settlements of $0.7~~ ~~million associated with business interruptions and property losses to certain facilities caused by the North America mid-continent winter storm in February 2021.~~

Foreign exchange (gain) loss, net by currency is summarized in the following table (in thousands):


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
British Pound	$	70		$	28		$	(181	)	$	(8	)	$	31		$	(251	)
Canadian Dollar		(64	)		(44	)		(6	)		29			39			58
Colombian Peso		79			(187	)		132			(89	)		(7	)		53
Euro		(101	)		(357	)		(17	)		(455	)		18			84
Indonesian Rupiah														80			(71	)
Russian Ruble		(90	)		1,707			(341	)		1,105			(3	)		(251	)
Turkish Lira		(443	)		37			(448	)		124			21			(5	)
Other currencies, net		163			74			331			135			106			239
Foreign exchange (gain) loss, net	$	(386	)	$	1,258		$	(530	)	$	841		$	285		$	(144	)

14. INCOME TAX EXPENSE (BENEFIT)

The Company recorded ~~an income tax benefit of $7.3~~ ~~million and $6.6~~ ~~million for the three and six months ended June 30, 2023, respectively, compared to an~~ income tax expense of $~~1.8~~1.7 million and $0.6 million for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2024 and 2023, respectively. The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024, was (~~46.3~~32.2%~~) and (~~ recorded on income before income taxes of $~~35.5~~5.1~~%), respectively.~~ million. The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023, was 20% ~~and~~ recorded on income before income taxes of $103.1~~%, respectively.~~ million. The tax rate for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024, was largely impacted by the ~~reversal~~earnings mix of ~~net deferred~~jurisdictions subject to tax ~~liabilities attributable to Core Laboratories N.V. which will not be realized subsequent~~for the period and items discrete to the Redomestication Transaction on May 1, 2023. The tax rate for the six months ended June 30, 2022 was largely impacted by the release of withholding tax related to unrepatriated earnings of our Russian subsidiary, which are not expected to be distributed in the foreseeable future.quarter.

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15. EARNINGS PER SHARE

We compute basic earnings per share by dividing net income attributable to Core Laboratories Inc. by the number of weighted average common shares outstanding during the period. Diluted earnings per share includes the incremental effect of contingently issuable shares from performance and restricted stock awards, as determined using the treasury stock method. The Redomestication Transaction had no effect on earnings per share for the periods presented.

The following table summarizes the calculation of weighted average shares of common ~~shares~~stock outstanding used in the computation of basic and diluted earnings per share (in thousands):


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2023		2022		2023		2022		2024		2023
Weighted average common shares outstanding - basic		46,675		46,319		46,655		46,309		46,859		46,634
Effect of dilutive securities:
Restricted shares		91		124		88		123		55		105
Performance shares		731		700		733		701		789		742
Weighted average common shares outstanding - diluted		47,497		47,143		47,476		47,133		47,703		47,481

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16. SEGMENT REPORTING

We operate our business in two segments. These complementary operating segments provide different services and products and utilize different technologies for evaluating and improving reservoir performance and increasing oil and gas recovery from new and existing fields.

•

Reservoir Description: Encompasses the characterization of petroleum reservoir rock and reservoir fluids samples to increase production and improve recovery of crude oil and natural gas from our ~~clients'~~clients’ reservoirs. We provide laboratory-based analytical and field services to characterize properties of crude oil and crude oil-derived products to the oil and gas industry. Services ~~relating to~~associated with these fluids include determining the quality and measuring the quantity of the reservoir fluids and their derived products, such as gasoline, diesel and biofuels. We also provide proprietary and joint industry studies based on these types of analyses and manufacture associated laboratory equipment. In addition, we provide reservoir description capabilities that support various activities associated with energy transition projects, including services that support carbon capture, utilization and ~~storage, hydrogen~~ storage, geothermal projects, and the evaluation and appraisal of mining activities around lithium and other elements necessary for energy storage.

•

Production Enhancement: Includes services and manufactured products associated with reservoir well completions, perforations, stimulation, production and well abandonment. We provide integrated diagnostic services to evaluate and monitor the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.

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We use the same accounting policies to prepare our operating segment results as are used to prepare our consolidated financial statements. All interest and other non-operating income (expense) is attributable to Corporate & Other and is not allocated to specific operating segments. Summarized financial information ~~concerning~~of our operating segments is shown in the following table (in thousands):


	Reservoir Description		Production Enhancement		Corporate & Other (1)			Consolidated		Reservoir Description		Production Enhancement		Corporate & Other (1)			Consolidated
Three months ended June 30, 2023
Three months ended March 31, 2024
Revenue from unaffiliated clients	$	83,384	$	44,497	$	—		$	127,881	$	84,236	$	45,401	$	—		$	129,637
Inter-segment revenue		88		65		(153	)		—		14		47		(61	)		—
Segment operating income (loss)		13,316		5,498		92			18,906
Total assets (at end of period)		306,513		165,777		129,558			601,848
Segment operating income											6,892		1,576		103			8,571
Total assets											308,490		163,665		115,795			587,950
Capital expenditures		1,477		383		315			2,175		2,830		220		2			3,052
Depreciation and amortization		2,776		994		167			3,937		2,684		1,036		123			3,843
Three months ended June 30, 2022
Three months ended March 31, 2023
Revenue from unaffiliated clients	$	75,818	$	45,080	$	—		$	120,898	$	80,188	$	48,168	$	—		$	128,356
Inter-segment revenue		196		61		(257	)		—		41		54		(95	)		—
Segment operating income (loss)		5,925		4,949		778			11,652
Total assets (at end of period)		303,222		158,469		115,849			577,540
Segment operating income											2,471		3,281		729			6,481
Total assets											302,855		167,017		123,745			593,617
Capital expenditures		2,051		831		315			3,197		1,562		618		28			2,208
Depreciation and amortization		2,961		1,167		232			4,360		2,885		991		168			4,044
Six months ended June 30, 2023
Revenue from unaffiliated clients	$	163,572	$	92,665	$	—		$	256,237
Inter-segment revenue		129		119		(248	)		—
Segment operating income (loss)		15,787		8,779		821			25,387
Total assets (at end of period)		306,513		165,777		129,558			601,848
Capital expenditures		3,039		1,000		343			4,382
Depreciation and amortization		5,661		1,985		335			7,981
Six months ended June 30, 2022
Revenue from unaffiliated clients	$	150,572	$	85,626	$	—		$	236,198
Inter-segment revenue		321		94		(415	)		—
Segment operating income (loss)		6,287		4,030		944			11,261
Total assets (at end of period)		303,222		158,469		115,849			577,540
Capital expenditures		4,131		888		474			5,493
Depreciation and amortization		5,932		2,506		479			8,917

(1) "Corporate & Other" represents those items that are not directly related to a particular operating segment and eliminations.

2018

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

On May 1, 2023, Core Laboratories N.V. completed its previously announced redomestication transaction (the “Redomestication Transaction”), which, ~~included (i)~~through a series of steps, resulted in the merger ~~(the “Merger”)~~ of Core Laboratories N.V., a holding company in the Netherlands, with and into Core Laboratories Luxembourg S.A., a public limited liability company incorporated under the laws of Luxembourg, with Core Laboratories Luxembourg S.A. surviving, and ~~(ii) following the completion of the Merger,~~subsequently the migration of Core Laboratories Luxembourg S.A. out of Luxembourg and its domestication as Core Laboratories Inc., a Delaware corporation. ~~As a result of the~~The Redomestication Transaction ~~all~~has been accounted for as a transaction between entities under common shares in Core Laboratories N.V. were canceled and exchanged for common stock in Core Laboratories Luxembourg S.A. on a one-for-one basis. Former holders of Core Laboratories N.V. common shares now hold one share of common stock of Core Laboratories Inc. for each Core Laboratories N.V. common share owned immediatelycontrol. There is no difference between the combined separate entities prior to ~~the consummation of~~ the Redomestication Transaction and the ~~business, assets, liabilities, directors and officers of~~combined separate entities after the Redomestication Transaction, therefore, comparative information reported below does not differ from amounts previously reported under Core Laboratories ~~Inc. are now the same as the business, assets, liabilities, directors and officers of Core Laboratories~~ N.V. ~~immediately prior to the Redomestication Transaction. See Note 2 -~~ ~~Significant Accounting Policies Update – Basis of Presentation and Principles of Consolidation, Note 7 -~~ ~~Long-Term Debt, net, Note 8 -~~ ~~Pension And Other Postretirement Benefit Plans, Note 10 -~~ ~~Equity~~ ~~and Note 14 -~~ ~~Income Tax Expense (Benefit)~~ ~~of the Notes to the Interim Consolidated Financial Statements for additional information regarding the Redomestication Transaction.~~’s consolidated financial statements. The following discussion should be read in conjunction with Core Laboratories Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023, Core Laboratories N.V.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and Core Laboratories N.V.’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2022, including Note 2 - Summary of Significant Accounting Policies.

The following discussion highlights the current operating environment and summarizes the financial position of Core Laboratories Inc. and its subsidiaries as of ~~June 30, 2023,~~March 31, 2024, and should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”).

General

Core Laboratories Inc. is a Delaware ~~corporation and successor to Core Laboratories N.V. subsequent to the Redomestication Transaction.~~corporation. It was established in 1936 and is one of the world's leading providers of proprietary and patented reservoir description and production enhancement services and products to the oil and gas industry. These services and products can enable our clients to evaluate and improve reservoir performance and increase oil and gas recovery from new and existing fields. We make measurements on reservoir rocks, reservoir fluids (crude oil, natural gas and water) and their derived products. In addition, we assist clients in evaluating subsurface targets associated with carbon capture and sequestration projects or initiatives. Core Laboratories Inc. has over 70 offices in more than 50 countries and employs approximately ~~3,600~~3,500 people worldwide.

References to “Core Lab”, “Core Laboratories”, the “Company”, “we”, “our” and similar phrases are used throughout this Quarterly Report and relate collectively to Core Laboratories Inc. and its consolidated affiliates.

We operate our business in two ~~segments: Reservoir Description and Production Enhancement.~~segments. These complementary operating segments provide different services and products and utilize different technologies for evaluating and improving reservoir performance and increasing oil and gas recovery from new and existing fields.

•

Reservoir Description: Encompasses the characterization of petroleum reservoir rock and reservoir fluids samples to increase production and improve recovery of crude oil and natural gas from our clients' reservoirs. We provide laboratory-based analytical and field services to characterize properties of crude oil and crude oil-derived products to the oil and gas industry. Services ~~relating to~~associated with these fluids include determining the quality and measuring the quantity of the reservoir fluids and their derived products, such as gasoline, diesel and biofuels. We also provide proprietary and joint industry studies based on these types of analyses and manufacture associated laboratory equipment. In addition, we provide reservoir description capabilities that support various activities associated with energy transition projects, including services that support carbon capture, utilization and storage, ~~hydrogen storage,~~ geothermal projects, and the evaluation and appraisal of mining activities around lithium and other elements necessary for energy storage.

2119

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•

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations section, including those under the headings “Outlook” and “Liquidity and Capital Resources”, and in other parts of this Quarterly Report, are forward-looking. In addition, from time to time, we may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. Forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “believe”, “expect”, “anticipate”, “estimate”, “continue”, or other similar words, including statements as to the intent, belief, or current expectations of our directors, officers, and management with respect to our future operations, performance, or positions or which contain other forward-looking information. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, no assurances can be given that the future results indicated, whether expressed or implied, will be achieved. While we believe that these statements are and will be accurate, our actual results and experience may differ materially from the anticipated results or other expectations expressed in our statements due to a variety of risks and uncertainties.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see Part II, “Item 1A - Risk Factors” of this Quarterly Report and “Item 1A - Risk Factors” of ~~Core Laboratories N.V.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023, and Core Laboratories N.V.’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023, filed by us with the SEC.

Outlook

Currently, global oil inventories are low relative to historical levels, and with continued supply restrictions from the Organization of the Petroleum Exporting Countries ~~and other oil producing nations~~ (“OPEC+”), global supply is ~~not~~ expected to ~~be sufficient~~remain tight relative to ~~meet~~ forecasted growth in oil demand ~~growth~~ for the next few years. ~~On April 2, 2023,~~During the last couple of years, OPEC+ and its key member, Saudi Arabia, announced ~~further~~several mandatory and voluntary reductions in production of around 1.66 million barrels (“bbls”) per day. In July 2023, Saudi Arabia, a key member of OPEC+, started an additional reduction of 1.0 million bbls over the two earlier reductions as a precautionary measurethat continue to remain in place and are aimed at supporting the stability of the oil market.

The geopolitical conflict between Russia and Ukraine that erupted in February 2022, caused disruptions to traditional maritime supply chains associated with the movement of crude oil, primarily reducing the level of crude oil sourced from Russia and being imported into various European ports. The disruptions to traditional maritime supply chains of crude oil and derived products, such as diesel fuel, and associated sanctions imposed on maritime exports of these products out of Russia caused significant volatility in both the prices and trading patterns of these products during 2022 and into 2023. As a result, average crude-oil prices were elevated during 2022, but have since decreased and moderated for the six months ended June 30, 2023.

The current global demand for crude oil and natural gas remains at a high level and according to the latest International Energy Agency’s report, global demand is expected to increase ~~throughout 2023.~~in 2024 and 2025. As a result, it is anticipated that crude-oil commodity prices for the near-term will remain at current levels or increase if projections for demand remain accurate. In 2022 and 2023, capital spending towards the exploration of crude oil and natural gas reached their highest level in over a decade with modest growth expected in 2024 and 2025. Therefore, our clients' activities associated with the appraisal, development and production of crude oil and natural gas are also expected to remain at current levels or increase for the remainder of ~~2023.~~2024. Outside the U.S., international oil and gas projects continue to build and are expected to grow and accelerate into the next several years. U.S. onshore drilling and completion activities are expected to remain at current levels with some typical seasonal decrease towards the end of the year.

~~Return~~The ongoing geopolitical conflicts between Russia and Ukraine and in the Middle East continue to ~~Index~~

cause disruptions to traditional maritime supply chains and the trading of crude oil and derived products, such as diesel fuel. The maritime supply chains associated with the movement of crude oil ~~continue~~have continued to realign and ~~establish new logistical~~stabilize throughout 2023 and ~~trading patterns, as Europe finds new suppliers~~in 2024, which has reduced some of ~~crude oil~~the volatility in crude-oil prices and disruptions to ~~import into the region, and maritime exports from Russia find new destinations. Thus,~~our operations. Core Lab expects crude-oil supply lines to ~~continue to realign and stabilize,~~remain more stable, and the Company's volume of associated laboratory services to be commensurate with the trading and

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movement of crude-oil into Europe, the Middle East, Asia and across the ~~globe, such as the Middle East and Asia.~~globe. The ~~situation continues to evolve and the~~ United States, the European Union, the United Kingdom and other countries ~~may implement additional~~continue to expand sanctions, export controls orand other measures against Russia, Belarus and other countries, regions, officials, individuals or industries in the respective ~~territories.~~territories, which may have further impact on the trading and movement of crude oil and derived products. We have no way to predict the progress or outcome of these events, and any resulting government responses are fluid and beyond our control.

We continue to focus on large-scale core analyses and reservoir fluids characterization studies in most oil-producing regions across the ~~Eagle Ford Shale,~~globe, which include both newly developed fields and brownfield extensions in many offshore developments in both the ~~Permian Basin~~U.S. and internationally. In the U.S. we are involved in projects in many of the onshore unconventional basins and offshore projects in the Gulf of ~~Mexico, along with Guyana, Suriname, Malaysia~~Mexico. Outside the U.S. we continue to work on many smaller and ~~other international~~large-scale projects analyzing crude oil and derived products in every major producing region of the world. Notable larger projects are in locations such as Guyana and Suriname located offshore South America, Australia, Southern Namibia and the Middle ~~East, including Qatar, Saudi Arabia, Kuwait~~East. Analysis and ~~the United Arab Emirates. Analysis~~measurement of crude oil derived products also occurs in every major producing region of the world.

Our major clients continue to focus on capital management, return on invested capital, free cash flow, and returning capital to their shareholders, as opposed to a focus on production growth. The companies adopting value versus volume metrics tend to be the more technologically sophisticated operators and form the foundation of Core Lab’s worldwide client base. As oil and gas commodity prices have stabilized or are expected to increase in the near to mid-term, the Company expects our clients’ activities associated with increasing oil and gas reserves and production levels will continue to increase in the coming years. Additionally, some of our major clients have ~~begun investing~~increased their investment in projects to ~~reduce the levels of CO~~2 ~~in the atmosphere, including carbon~~ capture and ~~sequestration projects.~~sequester CO2. The Company’s activities on these projects have expanded and are expected to continue expanding in ~~2023~~2024 and beyond.

Additionally, on March 6, 2024, the SEC finalized rules to require certain climate-related disclosures in filings for public companies, beginning for fiscal year 2025 for large accelerated filers. However, the rule has been subject to consolidated legal challenges in the U.S. Court of Appeals for the Eighth Circuit and the SEC has announced that it will not implement the rule while litigation is pending. While we are still assessing the rule’s potential impact on us, if the rule takes effect, we will be required to comply.

2321

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Results of Operations

Our results of operations as a percentage of applicable revenue are as follows (in thousands):


	Three Months Ended June 30,							2023/2022				Three Months Ended March 31,
	2023				2022			$ Change			% Change	2024			2023				$ Change			% Change
REVENUE:
Services	$	93,265		73%	$	85,422	71%	$	7,843		9%	$	96,495	74%	$	91,076		71%	$	5,419		6%
Product sales		34,616		27%		35,476	29%		(860	)	(2)%		33,142	26%		37,280		29%		(4,138	)	(11)%
Total revenue		127,881		100%		120,898	100%		6,983		6%		129,637	100%		128,356		100%		1,281		1%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		71,121		76%		68,166	80%		2,955		4%		73,865	77%		70,934		78%		2,931		4%
Cost of product sales, exclusive of depreciation expense shown below*		29,174		84%		29,791	84%		(617	)	(2)%		30,723	93%		30,594		82%		129		0%
Total cost of services and product sales		100,295		78%		97,957	81%		2,338		2%		104,588	81%		101,528		79%		3,060		3%
General and administrative expense, exclusive of depreciation expense shown below		5,811		5%		6,847	6%		(1,036	)	(15)%		11,789	9%		16,331		13%		(4,542	)	(28)%
Depreciation and amortization		3,937		3%		4,360	4%		(423	)	(10)%		3,843	3%		4,044		3%		(201	)	(5)%
Other (income) expense, net		(1,068	)	(1)%		82	—%		(1,150	)	NM		846	1%		(28	)	—%		874		NM
OPERATING INCOME		18,906		15%		11,652	10%		7,254		62%		8,571	7%		6,481		5%		2,090		32%
Interest expense		3,236		3%		2,707	2%		529		20%		3,423	3%		3,429		3%		(6	)	(0)%
Income before income taxes		15,670		12%		8,945	7%		6,725		75%		5,148	4%		3,052		2%		2,096		69%
Income tax expense (benefit)		(7,259	)	(6)%		1,789	1%		(9,048	)	NM		1,658	1%		610		—%		1,048		172%
Net income		22,929		18%		7,156	6%		15,773		220%		3,490	3%		2,442		2%		1,048		43%
Net income attributable to non-controlling interest		83		—%		90	—%		(7	)	NM		270	—%		69		—%		201		NM
Net income attributable to Core Laboratories Inc.	$	22,846		18%	$	7,066	6%	$	15,780		223%	$	3,220	2%	$	2,373		2%	$	847		36%

Other Data:
Current ratio (1)	2.45:1				2.08:1							2.68:1			2.38:1
Debt to EBITDA ratio (2)	2.18:1				3.23:1							1.99:1			2.52:1
Debt to Adjusted EBITDA ratio (3)	1.85:1				2.47:1							1.76:1			2.18:1

“NM” means not meaningful

*Percentage based on applicable revenue rather than total revenue

(1)

Current ratio is calculated as follows: current assets divided by current liabilities.

(2)

Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization and certain non-cash adjustments.

(3)

Debt to Adjusted EBITDA ratio (as defined in our Credit Facility) is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization, impairments, severance and certain non-cash adjustments.

2422

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Three Months Ended

Q2/Q1

June 30, 2023

March 31, 2023

$ Change

% Change
REVENUE:

Services

$
93,265

73%

$
91,076

71%

$
2,189

2%
Product sales

34,616

27%

37,280

29%

(2,664
)

(7)%
Total revenue

127,881

100%

128,356

100%

(475
)

(0)%
OPERATING EXPENSES:

Cost of services, exclusive of depreciation expense shown below*

71,121

76%

70,934

78%

187

0%
Cost of product sales, exclusive of depreciation expense shown below*

29,174

84%

30,594

82%

(1,420
)

(5)%
Total cost of services and product sales

100,295

78%

101,528

79%

(1,233
)

(1)%
General and administrative expense, exclusive of depreciation expense shown below

5,811

5%

16,331

13%

(10,520
)

(64)%
Depreciation and amortization

3,937

3%

4,044

3%

(107
)

(3)%
Other (income) expense, net

(1,068
)

(1)%

(28
)

—%

(1,040
)

3714%
OPERATING INCOME

18,906

15%

6,481

5%

12,425

192%
Interest expense

3,236

3%

3,429

3%

(193
)

(6)%
Income before income taxes

15,670

12%

3,052

2%

12,618

413%
Income tax expense (benefit)

(7,259
)

(6)%

610

—%

(7,869
)

NM
Net income

22,929

18%

2,442

2%

20,487

839%
Net income attributable to non-controlling interest

83

—%

69

—%

14

NM
Net income attributable to Core Laboratories Inc.

$
22,846

18%

$
2,373

2%

$
20,473

863%

Other Data:

Current ratio (1)

2.45:1

2.38:1

Debt to EBITDA ratio (2)

2.18:1

2.52:1

Debt to Adjusted EBITDA ratio (3)

1.85:1

2.18:1

~~“NM” means not meaningful~~

*Percentage based on applicable revenue rather than total revenue

~~(1)~~

~~Current ratio is calculated as follows: current assets divided by current liabilities.~~

~~(2)~~

~~Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation and amortization and certain non-cash adjustments.~~

~~(3)~~

~~Return to Index~~


	Six Months Ended June 30,							2023/2022				Three Months Ended
	2023				2022			$ Change			% Change	March 31, 2024			December 31, 2023				$ Change			% Change
REVENUE:
Services	$	184,341		72%	$	170,145	72%	$	14,196		8%	$	96,495	74%	$	94,690		74%	$	1,805		2%
Product sales		71,896		28%		66,053	28%		5,843		9%		33,142	26%		33,520		26%		(378	)	(1)%
Total revenue		256,237		100%		236,198	100%		20,039		8%		129,637	100%		128,210		100%		1,427		1%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		142,055		77%		137,023	81%		5,032		4%		73,865	77%		71,104		75%		2,761		4%
Cost of product sales, exclusive of depreciation expense shown below*		59,768		83%		57,886	88%		1,882		3%		30,723	93%		30,413		91%		310		1%
Total cost of services and product sales		201,823		79%		194,909	83%		6,914		4%		104,588	81%		101,517		79%		3,071		3%
General and administrative expense, exclusive of depreciation expense shown below		22,142		9%		19,392	8%		2,750		14%		11,789	9%		8,665		7%		3,124		36%
Depreciation and amortization		7,981		3%		8,917	4%		(936	)	(10)%		3,843	3%		3,874		3%		(31	)	(1)%
Other (income) expense, net		(1,096	)	—%		1,719	1%		(2,815	)	NM		846	1%		(427	)	—%		1,273		NM
OPERATING INCOME (LOSS)		25,387		10%		11,261	5%		14,126		125%
OPERATING INCOME													8,571	7%		14,581		11%		(6,010	)	(41)%
Interest expense		6,665		3%		5,351	2%		1,314		25%		3,423	3%		3,618		3%		(195	)	(5)%
Income before income taxes		18,722		7%		5,910	3%		12,812		217%		5,148	4%		10,963		9%		(5,815	)	(53)%
Income tax expense (benefit)		(6,649	)	(3)%		593	—%		(7,242	)	NM		1,658	1%		8,529		7%		(6,871	)	(81)%
Net income		25,371		10%		5,317	2%		20,054		377%		3,490	3%		2,434		2%		1,056		43%
Net income attributable to non-controlling interest		152		—%		139	—%		13		NM		270	—%		235		—%		35		NM
Net income attributable to Core Laboratories Inc.	$	25,219		10%	$	5,178	2%	$	20,041		387%	$	3,220	2%	$	2,199		2%	$	1,021		46%

Other Data:
Current ratio (1)	2.45:1				2.08:1							2.68:1			2.53:1
Debt to EBITDA ratio (2)	2.18:1				3.23:1							1.99:1			2.11:1
Debt to Adjusted EBITDA ratio (3)	1.85:1				2.47:1							1.76:1			1.76:1

“NM” means not meaningful

*Percentage based on applicable revenue rather than total revenue

(1)

Current ratio is calculated as follows: current assets divided by current liabilities.

(2)

Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation and amortization and certain non-cash adjustments.

(3)

Operating Results for the Three Months Ended ~~June 30, 2023~~March 31, 2024 compared to the Three Months Ended ~~June 30, 2022 and~~ March 31, 2023 and ~~for the Six Months Ended June 30,~~December 31, 2023 ~~compared to the Six Months Ended June 30, 2022~~

Service Revenue

Service revenue is primarily tied to activities associated with the exploration, appraisal, development, and production of oil, gas and derived products outside the U.S. For the three months ended ~~June 30, 2023,~~March 31, 2024, service revenue was ~~$93.3~~$96.5 million, an increase of 9%6% year-over-year and 2% sequentially. Year-over-year, the increase was due to growth in activity levels in both international and U.S. markets. Activity on reservoir rock and ~~international markets. Growth~~fluid projects in ~~international markets~~the Middle East has continued to expand and reservoir fluid analysis services in the European and Asian regions showed improvement from the disruptions last year caused by the on-going conflict between Russia-Ukraine. This growth was partially offset by typical seasonal decline, lower revenue in Russia and delayed project revenue of approximately $0.7 million due to a fire incident that occurred at one of our facilities in the United Kingdom. Sequentially, the growth was primarily driven by ~~growing client activity for our core and reservoir fluids analysis services in the Middle East region, and~~ increased services in the European region as supply chains and logistic patterns of maritime transportation of crude oil and derived products continue to stabilize. The increase in the U.S. operations benefited from increased use of our diagnostic services on the U.S. land completions. Sequentially, international projects moderately improved as activity on projects outside the U.S. continues to build. For the six months ended June 30, 2023, service revenue was $184.3 million, an increase of 8% compared to the same period in the prior year, driven by increases in both internationalreservoir rock and ~~U.S. activity discussed above.~~fluids projects

2623

Return to Index

in the Middle East and well completion diagnostic services in the U.S., partially offset by a loss of revenue due to the fire incident in the United Kingdom and lower revenue in Russia, as discussed above.

Product Sales Revenue

~~For the three months ended June 30, 2023, product~~Product sales ~~revenue of $34.6 million decreased 2% year-over-year and 7% sequentially. Year-over-year our product sales revenue~~are primarily tied to supporting the U.S. onshore ~~market increased 4%, outperforming the average U.S. land rig count over the same period. However, this improvement in the U.S. land market was offset by lower~~drilling and completion operations and bulk product sales to international ~~bulk sales for the quarter ended June 30, 2023.~~markets. Product sales to international markets are typically shipped and delivered in bulk and the timing of delivery can vary from one quarter to another. Sequentially, the decrease was associated with both a decrease of drilling and well completion activity onshore in the U.S. and fewer bulk sales to international markets. The average rig count for U.S. land decreased 6% sequentially, and associated well completions have also decreased sequentially. Our product sales to the U.S. onshore markets decreased 3% sequentially, and product sales to international markets were down 9%. For the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, product sales revenue ~~was $71.9~~of $33.1 million decreased 11% year-over-year and ~~increased 9% compared~~remained relatively flat sequentially. Year-over-year the decline in our product sales revenue is primarily due to lower U.S. onshore activity, where the average U.S. land rig count decreased 19% over the same period in the prior ~~year, and is attributable~~year. Additionally, we had lower sales of manufactured laboratory equipment when compared to the same quarter in the prior year. Sequentially, product sales increased in North America but were offset by fewer international bulk sales ~~in both~~during the ~~U.S. and international markets.~~three months ended March 31, 2024.

Cost of Services, excluding depreciation

Cost of services was ~~$71.1~~$73.9 million for the three months ended ~~June 30, 2023,~~March 31, 2024, an increase of 4% year-over-year and ~~flat~~ sequentially. Cost of services expressed as a percentage of service revenue ~~improved to 76%~~was 77% for the three months ended ~~June 30, 2023,~~March 31, 2024, compared to ~~80%~~78% for the same period in the prior year, and ~~78%~~75% compared to the prior quarter. ~~The year-over-year and sequential~~Year-over-year, improvement in cost of services as a percentage of service revenue ~~for the three months ended June 30, 2023,~~primarily was ~~primarily~~ associated with improved utilization of our global laboratory network on higher ~~revenue. For~~revenue, although it was partially offset by higher employee compensation costs and continuing inflation. Sequentially, the ~~six months ended June 30, 2023,~~increase in cost of services ~~was $142.1 million, an increase of 4% compared to the same period in the prior year. Cost of services expressed~~ as a percentage of ~~service~~services revenue ~~improved~~was primarily due to ~~77% compared to 81% in the same period in the prior year. The improvement was also primarily associated with improved utilization of our global laboratory network on~~ higher ~~revenue.~~employee compensation and inflation as discussed above.

Cost of Product Sales, excluding depreciation

Cost of product sales was ~~$29.2~~$30.7 million for the three months ended ~~June 30, 2023, a decrease of 2%~~March 31, 2024, relatively flat year-over-year and 5% sequentially. Cost of product sales expressed as a percentage of product sales revenue was ~~84%~~93% for the three months ended ~~June 30, 2023, remained flat year-over-year, and~~March 31, 2024, compared to 82% for the prior quarter. Year-over-year, the change in cost of product sales were commensurate with the changes in product sales revenue. Sequentially, the higher cost of product sales as a percentage of product sales revenue was primarily due to inflation on material costs in 2023. For the six months ended June 30, 2023, cost of product sales was $59.8 million, anyear-over-year and 91% sequentially. The year-over-year increase of 3% compared to the same period in the prior year. Cost of product sales expressed as a percentage of product sales revenue was 83% for the six months ended June 30, 2023, and improved from 88% compared to the same period in the prior year. The improvement in cost of product sales as a percentage of product sales ~~revenue~~ was primarily due to ~~improved manufacturing productivity and~~higher absorption of fixed costs on a ~~higher~~lower revenue base ~~though this improvement~~and inflation in material, personnel, and logistical costs. Sequentially, the increase in cost of product sales as a percentage of product sales was ~~partially offset by inflation as discussed above.~~primarily due to a lower level of international bulk product sales, which have a higher gross margin.

General and Administrative Expense, excluding depreciation

General and administrative ~~( “G~~(“G&A”) expense includes corporate management and centralized administrative services that benefit our operations. G&A expense for the three months ended ~~June 30, 2023~~March 31, 2024, was ~~$5.8~~$11.8 million, a decrease of ~~$1.0~~$4.5 million year-over-year and ~~$10.5~~an increase of $3.1 million sequentially. Year-over-year, the decrease was primarily due to 1) a reversal of $0.9 million in stock compensation expense previously recognized as the performance conditions associated with the performance share awards were determined to be unachievable; and 2) a net gain of $2.0 million from the company owned life insurance policies associated with death benefit proceeds. The quarter ending June 30, 2022 included 1) a reversal of $3.3 million in stock compensation expense previously recognized as the performance conditions associated with the performance share awards were determined to be unachievable; partially offset by 2) a net loss on company owned life insurance policies of $1.0 million associated with mark-to-market valuation. Sequentially, the decrease was primarily due to the recognition of additional stock compensation expense of $6.5 million increasing G&A expense for the three months ended March 31, ~~2023, which~~2024, included the acceleration of stock compensation expense for retirement eligible executives of $3.5 million, compared to $6.5 million included in the three months ended March 31, 2023. The remainder of the decrease was primarily associated with changes in market value of company owned life insurance investment instruments which fund certain employee retirement plans. Sequentially, the three months ended December 31, 2023, did not include any accelerated stock compensation expense for retirement eligible ~~employees. G&A expense was decreased~~

~~Return to Index~~

during the three months June 30, 2023 by adjustments to reverse previously recognized stock compensation expense, and net gain associated with cash proceeds received from company owned life insurance policies, as discussed above.

G&A expense for the six months ended June 30, 2023, was $22.1 million compared to $19.4 million for the six months ended June 30, 2022. The increase of $2.8 million was primarily due to changes in stock compensation expense and the changes in company owned life insurance policies, as discussed above.executives.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended ~~June 30, 2023,~~March 31, 2024, was ~~$3.9~~$3.8 million, a decrease of ~~10%~~5% year-over-year and 3%relatively flat sequentially. ~~Depreciation and amortization expense for the six months ended June 30, 2023, was $8.0 million a~~The decrease ~~of 10% year-over-year. Decreasing~~in depreciation and amortization expense compared to the prior year is primarily due to ~~more~~ assets ~~becoming~~which became fully ~~depreciated and reduced capital expenditures.~~depreciated.

Other (Income) Expense, Net

Return to Index

The components of other (income) expense, net, are as follows (in thousands):


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
(Gain) loss on sale of assets	$	(129	)	$	(111	)	$	(33	)	$	(268	)	$	(537	)	$	96
Results of non-consolidated subsidiaries		(62	)		(21	)		(199	)		(114	)		(31	)		(137	)
Foreign exchange (gain) loss, net		(386	)		1,258			(530	)		841			285			(144	)
Rents and royalties		(110	)		(126	)		(255	)		(297	)		(6	)		(145	)
Return on pension assets and other pension costs		(330	)		(136	)		(656	)		(281	)		(290	)		(326	)
Loss on lease abandonment and other exit costs		—			—			641			—			699			641
Assets write-down		—			—			1,015			—			1,110			1,015
Insurance and other settlements														(1,011	)		(604	)
Severance and other charges		—			—			—			3,332			824			—
Insurance and other settlements		—			—			(604	)		(669	)
Other, net		(51	)		(782	)		(475	)		(825	)		(197	)		(424	)
Total other (income) expense, net	$	(1,068	)	$	82		$	(1,096	)	$	1,719		$	846		$	(28	)

During the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, we abandoned certain leases in the U.S. and Canada, respectively, and incurred lease abandonment and other exit costs of $0.7 million and $0.6 ~~million. We integrated~~million, respectively. As a result of consolidating and ~~relocated certain of our~~exiting these facilities, ~~in Canada and wrote down related~~the associated leasehold improvements, ~~and~~ right of use assets and other assets of $1.1 million and $1.0 million were abandoned and expensed, respectively.

During the three months ended March 31, 2024, we had a fire incident at one of our U.K. facilities and have recorded partial insurance settlements of $1.0 ~~million. Additionally,~~million associated with costs incurred and loss of income from business interruption. During the three months ended March 31, 2023, the State of Louisiana expropriated the access road to one of our facilities and paid us a settlement of $0.6 million. During the six months ended June 30, 2022, we received insurance settlements of $0.7 million associated with business interruptions and property losses to certain facilities caused by the North America mid-continent winter storm in February 2021.

Foreign exchange (gain) loss, net by currency is summarized in the following table (in thousands):

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

British Pound

$
70

$
28

$
(181
)

$
(8
)
Canadian Dollar

(64
)

(44
)

(6
)

29

Colombian Peso

79

(187
)

132

(89
)
Euro

(101
)

(357
)

(17
)

(455
)
Russian Ruble

(90
)

1,707

(341
)

1,105

Turkish Lira

(443
)

37

(448
)

124

Other currencies, net

163

74

331

135

Foreign exchange (gain) loss, net

$
(386
)

$
1,258

$
(530
)

$
841

~~Return to Index~~


	Three Months Ended
	March 31,
	2024			2023
British Pound	$	31		$	(251	)
Canadian Dollar		39			58
Colombian Peso		(7	)		53
Euro		18			84
Indonesian Rupiah		80			(71	)
Russian Ruble		(3	)		(251	)
Turkish Lira		21			(5	)
Other currencies, net		106			239
Foreign exchange (gain) loss, net	$	285		$	(144	)

Interest Expense

Interest expense for the three months ended ~~June 30, 2023~~March 31, 2024 was ~~$3.2~~$3.4 million, relatively flat year-over-year. The Company’s average outstanding debt for the three-month period ending March 31, 2024, is lower when compared to ~~$2.7 million and $3.4 million for~~ the ~~three months ended June 30, 2022 and March 31, 2023, respectively. Interest expense for~~same period in the ~~six months ended June 30, 2023 was $6.7 million compared to $5.4 million for~~prior year; however, the ~~six months ended June 30, 2022. Year-over-year, for the three and six months ended June 30, 2023,~~Company’s blended average interest rate has increased. Sequentially, interest expense was ~~higher primarily due to rising interest rates on our aggregated variable rate debt during these periods. Sequentially,~~$3.6 million in the prior quarter, and the decrease was primarily due to lower average borrowings during the three months ended ~~June 30, 2023, and the net effect of our interest rate swap hedging transactions during these periods. See Note 11 -~~ ~~Derivative Instruments and Hedging Activities~~ ~~of the Notes to the Interim Consolidated Financial Statements, for additional information.~~March 31, 2024.

Income Tax Expense (Benefit)

The Company recorded ~~an income tax benefit of $7.3 million and $6.6 million for the three and six months ended June 30, 2023, respectively, compared to an~~ income tax expense of ~~$1.8~~$1.7 million and $0.6 million for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2024 and 2023, respectively. The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024, was ~~(46.3%) and (35.5%), respectively.~~32.2% recorded on income before income tax of $5.1 million. The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023, was 20% ~~and 10%, respectively.~~recorded on income

Return to Index

before income taxes of $3.1 million. The tax rate for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024, was largely impacted by the ~~reversal~~earnings mix of ~~net deferred~~jurisdictions subject to tax ~~liabilities attributable to Core Laboratories N.V. which will not be realized subsequent~~for that period and items discrete to the Redomestication Transaction on May 1, 2023. The tax rate for the six months ended June 30, 2022 was largely impacted by the release of withholding tax related to unrepatriated earnings of our Russian subsidiary, which are not expected to be distributed in the foreseeable future.quarter.

Segment Analysis

Three Months Ended June 30,

2023/2022

Three Months Ended March 31,

Q2/Q1

2023

2022

$ Change

% Change

2023

$ Change

% Change
Revenue:

Reservoir Description

$
83,384

$
75,818

$
7,566

10%

$
80,188

$
3,196

4%
Production Enhancement

44,497

45,080

(583
)

(1)%

48,168

(3,671
)

(8)%
Consolidated

$
127,881

$
120,898

$
6,983

6%

$
128,356

$
(475
)

(0)%
Operating income (loss):

Reservoir Description

$
13,316

$
5,925

$
7,391

125%

$
2,471

$
10,845

439%
Production Enhancement

5,498

4,949

549

11%

3,281

2,217

68%
Corporate and Other (1)

92

778

(686
)

NM

729

(637
)

NM
Consolidated

$
18,906

$
11,652

$
7,254

62%

$
6,481

$
12,425

192%
"NM" means not meaningful
(1) "Corporate and Other" represents those items that are not directly related to a particular operating segment.

~~Return to Index~~


	Six Months Ended June 30,				2023/2022					Three Months Ended
	2023		2022		$ Change			% Change		March 31, 2024			March 31, 2023			December 31, 2023			Year-over-year	Sequential
Revenue:
																			% Change	% Change
REVENUE:
Reservoir Description	$	163,572	$	150,572	$	13,000		9%		$	84,236	65%	$	80,188	62%	$	84,628	66%	5%	—%
Production Enhancement		92,665		85,626		7,039		8%			45,401	35%		48,168	38%		43,582	34%	(6)%	4%
Consolidated	$	256,237	$	236,198	$	20,039		8%
Operating income (loss):
Reservoir Description	$	15,787	$	6,287	$	9,500		151%
Production Enhancement		8,779		4,030		4,749		118%
Total revenue										$	129,637	100%	$	128,356	100%	$	128,210	100%	1%	1%
OPERATING INCOME:
Reservoir Description *										$	6,892	8%	$	2,471	3%	$	12,259	14%	179%	(44)%
Production Enhancement *											1,576	3%		3,281	7%		2,195	5%	(52)%	(28)%
Corporate and Other (1)		821		944		(123	)	NM			103	—%		729	1%		127	—%	NM	NM
Consolidated	$	25,387	$	11,261	$	14,126		125%
"NM" means not meaningful (1) "Corporate and Other" represents those items that are not directly related to a particular operating segment.
Total operating income										$	8,571	7%	$	6,481	5%	$	14,581	11%	32%	(41)%
* Percentage, which represents operating margins, is based on operating income divided by applicable revenue rather than total revenue. "NM" means not meaningful (1) "Corporate and Other" represents those items that are not directly related to a particular operating segment.									* Percentage, which represents operating margins, is based on operating income divided by applicable revenue rather than total revenue. "NM" means not meaningful (1) "Corporate and Other" represents those items that are not directly related to a particular operating segment.

Reservoir Description

Reservoir Description operations ~~rely heavily on~~are closely correlated with trends in international and offshore activity levels, with approximately 80% of its revenue sourced from existing producing fields, development projects and movement of crude oil products outside the U.S. The Company continues to see improvement in international projects across several international regions; however, increases in project activity have been offset by disruptions caused by the Russia-Ukraine geopolitical conflict. The Russia-Ukraine geopolitical conflict that erupted in February 2022 caused disruptions and changes in the maritime movement and logistical trading patterns for crude oil and derived products, primarily exports from Russia being transported into Europe.

Revenue from the Reservoir Description operating segment of ~~$83.4~~$84.2 million for the three months ended ~~June 30, 2023~~March 31, 2024 increased ~~10%~~5% year-over-year and 4%was flat sequentially. The year-over-year increase was primarily due to ~~increased~~growth in activity levels in both international and U.S. markets. Growth in reservoir rock and fluid analysis in both international and U.S. markets offset typical seasonal decline and delayed project revenue caused by the fire in our United Kingdom facility. The Company holds insurance policies for both property damage and business interruption, which has minimized the loss to the Company associated with the fire. Sequentially, the increase in demand for our reservoir ~~core~~rock and ~~reservoir fluids~~fluid analysis services on international projects ~~along with moderate growth on projects in~~was offset by disruptions caused by the ~~U.S. during the three months ended June 30, 2023 compared to the same period in 2022. The sequential increase in~~on-going geopolitical conflicts and lower revenue is primarily due to growing client activity for our reservoir core and reservoir fluids analysis services in the Middle East region, and the recovery of activity levels in the European region as the supply chains associated with the ~~maritime movement~~sale of crude oil realign to new trading patterns. Revenue from the Reservoir Description segment of $163.6 million for the six months ended June 30, 2023 increased 9% from the same period in 2022. The increased revenue in 2023 is primarily due to growth in activity levels on international projects, particularly the Middle East, and a recovery of some services associated with the maritime movement of crude oil and derived products which was impacted by the Russia-Ukraine conflict, as discussed above.manufactured laboratory equipment.

Operating income of ~~$13.3~~$6.9 million for the three months ended ~~June 30, 2023~~March 31, 2024, increased ~~$7.4~~$4.4 million, year-over-year and ~~$10.8~~decreased $5.4 million sequentially. Year-over-year, the operating income increased due to 1) improved utilization of our global laboratory network as a result of higher activity levels and revenue; 2) a net gain of $1.3 million cash proceeds received from company owned life insurance policies; and 3) a reversal of previously recognized stock compensation expense of $0.6 million, as the performance conditions associated with the performance share awardsOperating margins were determined to be unachievable. A similar reversal of $2.1 million was recorded in the same period in 2022. Sequentially, the increase in the operating income is due to the items as discussed above. Additionally, certain charges included in8% for the three months ended March 31, ~~2023 were: 1)~~2024, compared to 3% year-over-year, and 14% sequentially. Year-over-year, the increase in operating income and margins was primarily attributable to incremental revenue and a ~~charge~~lower amount of ~~$4.2 million associated with~~ accelerated stock compensation expense for retirement eligible ~~employees; and 2)~~employees of $2.3 million in 2024 compared to a charge of ~~$1.3~~$4.2 million ~~associated with facility exit and consolidation expenses~~ in the United States and Canada in 2023. No similar expenses were recorded in the three months ended June 30, 2023. Operating income of $15.8 million for the six months ended June 30, 2023, increased $9.5 million year-over-year compared to the same period ~~in 2022. The increase~~of 2023. Sequentially, the decrease in operating ~~income~~margins is primarily due to the ~~items~~$2.3 million accelerated stock compensation expense discussed ~~above.~~

~~Operating margins~~above and $1.6 million charge associated with the consolidation and exit of certain facilities during the three-month period ending March 31, 2024. There were ~~16% for~~no similar charges during the three months ended June 30, 2023, compared to 8% for the three months ended June 30, 2022, and 3% for the three months ended March 31, 2023. Operating margins were 10% for the six months ended June 30, 2023, which increased from 4% for the six months ended June 30, 2022. The increases in operating margin primarily driven by

~~Return to Index~~

~~higher revenue, improved utilization, gain from company owned life insurance policies and changes in stock compensation expense, as discussed above.~~

We continue to focus on large-scale core analysis and reservoir fluids characterization studies in most oil-producing regions across the globe, which include both newly developed fields and brownfield extensions in many offshore developments. Analysis and measurement of crude oil derived products also occurs in every major producing region of the world. Additionally, client interest and activity continues to increase on projects for the purpose of carbon capture and sequestration.December 31,2023.

Production Enhancement

Production Enhancement operations are largely focused on complex completions in unconventional ~~tight-oil~~oil and gas reservoirs in the U.S. as well as conventional projects across the globe. ~~During the year 2022,~~ U.S. ~~land~~onshore drilling and completion activities ~~continued~~typically experience a

Return to ~~increase throughout~~Index

seasonal decline at end of the year ~~until a normal seasonal drop starting~~with activity levels increasing at the beginning of the year. Average rig count in ~~mid-November 2022. Although~~the U.S. land ~~drilling and completion activities that began to increase again peaked in April of 2023, activity declined during~~market for the three months ended ~~June 30, 2023, primarily due to the weakening of natural gas commodity prices.~~March 31, 2024, was down by 19% year-over-year and remained flat sequentially. International drilling and completion activities continued to ~~show an improvement during the three months ended June 30, 2023.~~improve year-over-year, which increased by 5%, however remained flat sequentially.

Revenue from the Production Enhancement operating segment of ~~$44.5~~$45.4 million for the three months ended ~~June 30, 2023, remained flat~~March 31, 2024, decreased 6% year-over-year and ~~decreased 8%~~increased 4% sequentially. ~~Although international markets continue to strengthen year-over-year, this has been offset by a weaker market for U.S. onshore. Sequentially, the decrease was~~Year-over-year, revenue decreased primarily due to ~~decreased activity~~lower product sales in the U.S. market ~~and some delayed product sales due to instability caused~~as a result of lower U.S. onshore activity, however this was partially offset by ~~political unrest~~strong growth in ~~South America. Revenue from~~well completion diagnostic services. Sequentially, the ~~Production Enhancement segment of $92.7 million for the six months ended June 30, 2023, increased 8% from the same period in 2022. The~~ increase ~~in revenue in 2023 is~~was primarily driven by ~~the increased drilling~~strong growth in well completion diagnostic services and ~~completion activity in both~~product sales to the U.S. ~~land and international~~ markets, ~~however, growth~~partially offset by fewer bulk sales in the ~~U.S. onshore market was softened by weaker natural gas commodity prices, as discussed above.~~international market.

Operating income of ~~$5.5~~$1.6 million for the three months ended ~~June 30, 2023, increased $0.5~~March 31, 2024, decreased $1.7 million year-over-year, and ~~$2.2~~$0.6 million sequentially. ~~The~~Operating margins for the three months ended March 31, 2024, was 3%, compared to operating margins of 7% year-over-year ~~increase~~and 5% sequentially. Year-over-year, the decrease in operating income and margins was primarily due to ~~improved manufacturing efficiencies. These improved operating efficiencies have been~~decremental revenue and inflation on material, personnel and logistical costs. This was partially offset by ~~continued increase in cost~~a lower charge of ~~materials and shipping as a result of inflation. Sequentially, the increase in operating income was primarily driven by~~$1.2 million associated with accelerated stock compensation expense for retirement eligible employees ~~recorded~~ in ~~the three months ended March 31, 2023~~2024 compared to a charge of $2.3 million in the same period of 2023. Sequentially, the decrease in operating income and operating margins primarily was related to the charge of $1.2 million associated with accelerated stock compensation expense as discussed above. There was no similar accelerated stock compensation ~~expense was recorded in~~charge during the three months ended June 30, 2023. Operating income of $8.8 million for the six months ended June 30, 2023, increased $4.7 million compared to the same period in the prior year. The increase in operating income was primarily driven by improved manufacturing efficiencies due to absorption of fixed cost on a higher revenue base, partially offset by increased cost of materials and shipping due to inflation in 2023.

Operating margins for the three months ended June 30, 2023, were 12%, compared to operating margins of 11% for the same period in the prior year and 7% in the three months ended March 31, 2023. Operating margins were 9% for the six months ended June 30, 2023, which increased from 5% for the six months ended June 30, 2022. The increases in operating margin were primarily driven by improved manufacturing efficiencies due to absorption of fixed cost on a higher revenue base, partially offset by increased cost of materials and shipping caused by inflation in 2023, as discussed above.December 31,2023.

Liquidity and Capital Resources

General

We have historically financed our activities through cash on hand, cash flows from operations, bank credit facilities, equity financing and the issuance of debt. Cash flows from operating activities provide the primary source of funds to finance operating needs, capital expenditures, dividends and our share repurchase program. Our ability to maintain and grow our operating income and cash flow depends, to a large extent, on continued investing activities. We believe our future cash flows from operations, supplemented by our borrowing capacity and the ability to issue additional equity and debt, should be

~~Return to Index~~

sufficient to fund our debt requirements, capital expenditures, working capital, dividends, share repurchase program and future acquisitions. The Company will continue to monitor and evaluate the availability of debt and equity markets.

We ~~were a holding company incorporated in the Netherlands, and after the Redomestication Transaction, we~~ are a holding company incorporated in Delaware. Therefore, we conduct substantially all of our operations through our subsidiaries. Our cash availability is largely dependent upon the ability of our subsidiaries to pay cash dividends or otherwise distribute or advance funds to us and on the terms and conditions of our existing and future credit arrangements. There are no restrictions preventing any of our subsidiaries from repatriating earnings, except for the unrepatriated earnings of our Russian subsidiary which are not expected to be distributed in the foreseeable future, and there are no restrictions or income taxes associated with distributing cash to the parent company through loans or advances. As of ~~June 30, 2023, $17.9~~March 31, 2024, $13.6 million of our ~~$26.2~~$14.9 million of cash was held by our foreign subsidiaries.

The Company continues to maintain the quarterly dividend of $0.01 per share.

Cash Flows

The following table summarizes cash flows (in thousands):

Six Months Ended June 30,

2023/2022

2023

2022

% Change
Cash flows provided by (used in):

Operating activities

$
5,572

$
5,895

(5)%
Investing activities

(818
)

(2,357
)

(65)%
Financing activities

6,022

(5,093
)

NM
Net change in cash and cash equivalents

$
10,776

$
(1,555
)

NM

~~Cash flows provided by operating activities for~~27

Return to Index


	Three Months Ended March 31,
	2024			2023			% Change
Cash flows provided by (used in):
Operating activities	$	5,530		$	(3,169	)	NM
Investing activities		(1,657	)		(2,038	)	(19)%
Financing activities		(4,080	)		6,064		NM
Net change in cash and cash equivalents	$	(207	)	$	857		NM

Comparing the ~~six~~three months ended ~~June 30, 2023 of $5.6 million were slightly lower than~~March 31, 2024 to the same period in the prior year, cash flows provided by operating activities ~~for the six months ended June 30, 2022 of $5.9 million. Although net income is $20.1~~improved to $5.5 million ~~higher for the six months ended June 30, 2023, cash from operations was slightly down~~in 2024 compared to the prior year. The six months ended June 30, 2023 includes a non-cash tax benefit of approximately $11.6 million associated with the Company’s Redomestication Transaction and secondly non-cash stock-based compensation expense was also $5.1 million higher during this same period. Additionally, there was an increase of approximately $14.6 million of cash used in ~~operational~~operating activities of $3.2 million in the same period 2023. Net income was $1.0 million higher in 2024, and the Company improved its levels of working capital primarily inventory. The Company continues to carry higher levels of inventory to mitigate longer lead times required to source raw materials used in the manufacturing of the products we sell. Supply chains associated with ~~many raw materials used in manufacturing our products were disrupted during the COVID-19 global pandemic, and lead times continue to be much longer than average lead times prior to the pandemic.~~inventory.

Cash flows used in investing activities for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 of ~~$0.8~~$1.7 million were driven primarily by funding capital expenditures of ~~$4.4~~$3.1 million offset by ~~net~~ proceeds ~~received~~on the sale of assets of $0.6 million and proceeds on company owned life insurance policies of ~~$3.4~~$0.8 million. Cash flows used in investing activities for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 of ~~$2.4~~$2.0 million were driven primarily by funding capital expenditures of ~~$5.5~~$2.2 million.

Cash flows used in financing activities for the three months ended March 31, 2024 of $4.1 million ~~offset by~~includes a $3.0 million net ~~proceeds received on company owned life insurance policies and proceeds from insurance settlements~~reduction in long-term debt, quarterly dividends of ~~$2.1~~$0.5 million and $0.6 million ~~respectively.~~

~~Return to Index~~

associated with the Redomestication Transaction. Cash flows provided by financing activities for the ~~six~~three months ended ~~June 30,~~March 31, 2023 of ~~$6.0~~$6.1 million were driven primarily by a $10.0 million net increase in long-term debt related to the issuance of $50.0 million of new senior notes offset by repayment of the outstanding balance on our Credit Facility. This increase in cash flows was offset by payments of quarterly dividends of $0.9 million and Redomestication Transaction costs of $2.6 million. Cash flows used in financing activities for the six months ended June 30, 2022 of $5.1 million were driven primarily by net repaymentincludes drawdowns on our Credit Facility of ~~$2.0~~$8.0 million, offset by quarterly dividend payments of ~~$0.9~~$0.5 million and ~~repurchase of common stock of $2.2 million.~~$1.3 million associated with the Redomestication Transaction.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, we repurchased ~~9,070~~2,845 shares of our common stock to satisfy personal tax liabilities of participants in our stock-based compensation plan for an aggregate purchase price of ~~$0.2 million.~~$44 thousand.

We utilize the non-GAAP financial measure of free cash flow to evaluate our cash flows and results of operations. Free cash flow is defined as net cash provided by operating activities (which is the most directly comparable GAAP measure) less cash paid for capital expenditures. Management believes that free cash flow provides useful information to investors regarding the cash available in the period that was in excess of our needs to fund our capital expenditures and operating activities. Free cash flow is not a measure of operating performance under GAAP and should not be considered in isolation nor construed as an alternative to operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. Free cash flow does not represent residual cash available for distribution because we may have other non-discretionary expenditures that are not deducted from the measure. Moreover, since free cash flow is not a measure determined in accordance with GAAP and thus is susceptible to varying interpretations and calculations, free cash flow as presented, may not be comparable to similarly titled measures presented by other companies. The following table reconciles this non-GAAP financial measure to the most directly comparable measure calculated and presented in accordance with GAAP (in thousands):


	Six Months Ended June 30,						2023/2022	Three Months Ended March 31,
	2023			2022			% Change	2024			2023			% Change
Free cash flow calculation:
Net cash provided by (used in) operating activities	$	5,572		$	5,895		(5)%	$	5,530		$	(3,169	)	NM
Less: Cash paid for capital expenditures		(4,382	)		(5,493	)	(20)%		(3,052	)		(2,208	)	38%
Free cash flow	$	1,190		$	402		196%	$	2,478		$	(5,377	)	NM

Free cash flow ~~increased~~ for the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024 was $2.5 million, compared to negative $5.4 million for the same period in ~~2022~~2023. The cash used in operating activities during the three months ended March 31, 2023 was primarily ~~as a result of~~associated with an increase in inventory and lower net income. Additionally, capital expenditures ~~in 2023. Changes in cash provided by operating activities for~~were $0.8 million higher during the ~~six~~three months ended ~~June 30, 2023 and 2022 are discussed above.~~March 31, 2024.

Return to Index

Senior Notes, Credit Facility and Available Future Liquidity

We, along with our wholly owned subsidiary Core Laboratories (U.S.) Interests Holdings, Inc. (“CLIH”) as issuer, have ~~five series of~~ senior notes outstanding ~~with an aggregate principal amount of $185 million~~ that were issued through ~~the following~~ private placement transactions: 1) the 2011 Senior Notes issued in 2011 consist of $75 million in aggregate principal amount and bears interest at a fixed rate of 4.11% and are due in full on September 30, 2023; 2) Series A and Series B of the 2021 Senior Notes were issued and funded in 2021. Series A of the 2021 Senior Notes consists of $45 million in aggregate principal amount that bears interest at a fixed rate of 4.09% and is due in full on January 12, 2026. Series B of the 2021 Senior Notes consists of $15 million in aggregate principal amount that bears interest at a fixed rate of 4.38% and is due in full on January 12, 2028; and 3) Series A and Series B of the 2023 Senior Notes were issued and funded in June 2023. Series A of the 2023 Senior Notes consists of $25 million in aggregate principal amount that bears interest at a fixed rate of 7.25% and is due in full on June 28, 2028. Series B of the 2023 Senior Notes consists of $25 million in aggregate principal amount that bears interest at a fixed rate of 7.50% and is due in full on June 28, 2030. The 2011 Senior Notes, 2021 Senior Notes and the 2023 Senior Notes are collectively the “Senior Notes”.transactions.

Additionally, we, along with ~~our wholly owned subsidiary~~ CLIH, have a secured credit facility, the Eighth Amended and Restated Credit Agreement (as amended, the “Credit Facility”) for an aggregate borrowing commitment of ~~$135~~$135.0 million with a

~~Return to Index~~

~~$50~~ $50.0 million “accordion” feature. ~~Proceeds from the 2023 Senior Notes were used to repay all amounts outstanding under~~As of March 31, 2024, the Credit Facility athas an available borrowing capacity of approximately $72.2 million.

These debt instruments are summarized in the following table (in thousands):


	Interest Rate	Maturity Date	March 31, 2024			December 31, 2023
2021 Senior Notes Series A (1)	4.09%	January 12, 2026	$	45,000		$	45,000
2021 Senior Notes Series B (1)	4.38%	January 12, 2028		15,000			15,000
2023 Senior Notes Series A (2)	7.25%	June 28, 2028		25,000			25,000
2023 Senior Notes Series B (2)	7.50%	June 28, 2030		25,000			25,000
Credit Facility				53,000			56,000
Total long-term debt				163,000			166,000
Less: Debt issuance costs				(2,630	)		(2,866	)
Long-term debt, net			$	160,370		$	163,134

(1) Interest is payable semi-annually on June 30 ~~2023.~~ and December 30.

(2) Interest is payable semi-annually on March 28 and September 28.

In accordance with the terms of the Credit Facility, our leverage ratio is ~~1.85,~~1.76, and our interest coverage ratio is ~~6.66,~~6.27, each for the period ended ~~June 30, 2023.~~March 31, 2024. We ~~believe that we~~ are in compliance with all covenants contained in our Credit Facility and Senior ~~Notes.~~Notes as of March 31, 2024. Certain of our material, wholly owned subsidiaries are guarantors or co-borrowers under the Credit Facility and Senior Notes. See Note 7 - ~~Long-Term~~Long-term Debt, net of the Notes to the Interim Consolidated Financial Statements for additional information regarding the terms and financial covenants of the Senior Notes and the Credit Facility.

See Note 11 - Derivative Instruments and Hedging Activities of the Notes to the Interim Consolidated Financial Statements, for additional information regarding interest rate swap agreements we have entered to fix the underlying risk-free rate on our Credit Facility and the 2023 Senior Notes.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from the information provided in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” of Core Laboratories ~~N.V.~~Inc.'s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Item 4. Controls and Procedures

A complete discussion of our controls and procedures is included in Core Laboratories ~~N.V.~~Inc.'s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Disclosure Controls and Procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on such evaluation, our

Return to Index

Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~June 30, 2023,~~March 31, 2024, at the reasonable assurance level.

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. Further, the design of disclosure controls and internal control over financial reporting must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting

There have been no changes in our system of internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the fiscal quarter ended ~~June 30, 2023~~March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Return to Index~~

CORE LABORATORIES INC.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

See Note 9 - Commitments and Contingencies of the Notes to the Interim Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report.

Item 1A. Risk Factors

Our business faces many risks. Any of the risks discussed in this Quarterly Report or our other SEC filings could have a material impact on our business, financial position or results of operations.

Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. For a detailed discussion of the risk factors that should be understood by any investor contemplating investment in our securities, please refer to “Item 1A - Risk Factors” in Core Laboratories ~~N.V.~~Inc.’s Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Item 2. Unregistered Sales of Equity Securities and ~~Use~~Issuer Purchases of ~~Proceeds~~Equity Securities

Unregistered Sales of Equity Securities

None.

Issuer ~~Repurchases~~Purchases of Equity Securities

The following table provides information about our purchases of ~~equity securities~~shares of our common stock, par value $0.01, that are registered by us pursuant to Section 12 of the Exchange ~~Act:~~Act during the three months ended March 31, 2024:

Period

Total Number
of Shares
Purchased

Average Price
Paid Per
Share

Total Number of Shares
Purchased as Part of a
Publicly Announced
Program

Maximum Number of
Shares That May Yet be
Purchased Under the
Program (2)

April 1 - 30, 2023 (1)

2,524

$
22.05

—

4,633,421

May 1 - 31, 2023 (1)

6,489

$
22.03

—

4,649,417

June 1 - 30, 2023

—

$
—

—

4,649,417

Total

9,013

$
22.04

—


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program		Maximum Number of Shares That May Yet be Purchased Under the Program (2)
January 1-31, 2024		—	$	—		—		4,611,835
February 1-29, 2024 (1)		398	$	15.03		—		4,612,737
March 1-31, 2024 (1)		2,447	$	15.46		—		4,619,665
Total		2,845	$	15.40		—

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(1)

Repurchased shares were surrendered to us by participants in a stock-based compensation plan to settle any personal tax liabilities which may result from the award.

(2)

During the three months ended ~~June 30, 2023,~~March 31, 2024, we distributed ~~55,395~~10,675 shares of our treasury stock upon vesting of stock-based awards.

Item 5. Other Information

During the three months ended ~~June 30, 2023,~~March 31, 2024, no director or officer of the Company adopted, modified or terminated any “Rule 10b5-1 trading arrangement” or ~~non-Rule~~“non-Rule 10b5-1 trading arrangement” within the meaning of Item408(a) of Item 408 of Regulation S-K.

3531

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Item 6. Exhibits


Exhibit No.		Exhibit Title	Incorporated by reference from the following documents
10.1	-	~~Assumption~~Amended and ~~Reaffirmation~~Restated Employment Agreement, ~~dated May 1, 2023,~~ by and between Core Laboratories Inc. and ~~Bank of America, N.A.~~Lawrence V. Bruno, dated February 1, 2024 (1)	Form ~~8-K, May 1, 2023~~10-K, February 14, 2024 (File No. ~~333-269259)~~001-41695)
10.2	-	~~Amendment No. 1 to Eighth~~ Amended and Restated ~~Credit~~Employment Agreement, ~~dated as of April 28, 2023, among~~by and between Core Laboratories ~~N.V., and Core Laboratories (U.S.) Interests Holdings,~~ Inc. and ~~the lenders party thereto and Bank of America, N.A., as administrative agent~~Christopher S. Hill, dated February 1, 2024 (1)	Form ~~8-K, May 1, 2023~~10-K, February 14, 2024 (File No. ~~333-269259)~~001-41695)
10.3	-	~~Amendment No. 2 to Master Note Purchase~~Amended and Restated Employment Agreement, by and ~~Assumption Agreement,~~between Core Laboratories Inc. and Gwendolyn Y. Gresham, dated ~~as of May~~February 1, ~~2023~~2024 (1)	Form ~~8-K, May 1, 2023~~10-K, February 14, 2024 (File No. ~~333-269259)~~001-41695)
10.4	-	~~Amendment No. 2 to Note Purchase~~Amended and Restated Employment Agreement, by and ~~Assumption Agreement,~~between Core Laboratories Inc. and Mark D. Tattoli, dated ~~as of May~~February 1, ~~2023~~2024 (1)	Form ~~8-K, May 1, 2023 (File No. 333-269259)~~
~~10.5~~	-	~~Note Purchase Agreement, dated as of May 4, 2023.~~	~~Form 8-K, May 4, 2023~~10-K, February 14, 2024 (File No. 001-41695)
31.1	-	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	-	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	-	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	-	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101.INS	-	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	Filed herewith
101.SCH	-	Inline XBRL Schema Document	Filed herewith
101.CAL	-	Inline XBRL Calculation Linkbase Document	Filed herewith
101.LAB	-	Inline XBRL Label Linkbase Document	Filed herewith
101.PRE	-	Inline XBRL Presentation Linkbase Document	Filed herewith
101.DEF	-	Inline XBRL Definition Linkbase Document	Filed herewith
104	-	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Filed herewith
(1) Management contracts or compensatory plans or arrangements.

3632

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Core Laboratories Inc., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CORE LABORATORIES INC.

Date:	~~July 27, 2023~~April 25, 2024	By:	/s/ Christopher S. Hill
			Christopher S. Hill
			Chief Financial Officer
			(Duly Authorized Officer and
			Principal Financial Officer)

3733

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	Three Months Ended								Q2/Q1
	June 30, 2023				March 31, 2023				$ Change			% Change
REVENUE:
Services	$	93,265		73%	$	91,076		71%	$	2,189		2%
Product sales		34,616		27%		37,280		29%		(2,664	)	(7)%
Total revenue		127,881		100%		128,356		100%		(475	)	(0)%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		71,121		76%		70,934		78%		187		0%
Cost of product sales, exclusive of depreciation expense shown below*		29,174		84%		30,594		82%		(1,420	)	(5)%
Total cost of services and product sales		100,295		78%		101,528		79%		(1,233	)	(1)%
General and administrative expense, exclusive of depreciation expense shown below		5,811		5%		16,331		13%		(10,520	)	(64)%
Depreciation and amortization		3,937		3%		4,044		3%		(107	)	(3)%
Other (income) expense, net		(1,068	)	(1)%		(28	)	—%		(1,040	)	3714%
OPERATING INCOME		18,906		15%		6,481		5%		12,425		192%
Interest expense		3,236		3%		3,429		3%		(193	)	(6)%
Income before income taxes		15,670		12%		3,052		2%		12,618		413%
Income tax expense (benefit)		(7,259	)	(6)%		610		—%		(7,869	)	NM
Net income		22,929		18%		2,442		2%		20,487		839%
Net income attributable to non-controlling interest		83		—%		69		—%		14		NM
Net income attributable to Core Laboratories Inc.	$	22,846		18%	$	2,373		2%	$	20,473		863%

Other Data:
Current ratio (1)	2.45:1				2.38:1
Debt to EBITDA ratio (2)	2.18:1				2.52:1
Debt to Adjusted EBITDA ratio (3)	1.85:1				2.18:1