CLB - Earnings call transcript Q4 2020

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Operator

Good morning and welcome to the Core Laboratories Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Larry Bruno, Chairman and CEO. Please go ahead.

Larry Bruno

Ailey. Thanks, the and in good in the Africa good East Middle evening Americas, morning Europe afternoon and Good in Asia-Pacific. welcome employees fourth to most like all employees, our We'd analysts, importantly, our XXXX to quarter Laboratories' Core earnings call. of and Chris joined and Core's President I Vice Chief of Head Schreffler, Core's by morning, Financial Hill, This Investor Senior and am Officer; Gwen Relations. into The call will six segments. be divided making start by remarks will statements. regarding Gwen forward-looking XXXX opening comments including high-level performance. We'll Core's then some have review a of

and give the value. employs have strategies financial financial addition, tenets shareholder company Core’s In regarding we’ll and the three to value. that review shareholder overview comments additional Chris a long-term build will then detailed

Chris, Core's well on session. a and operations and major some projects guidance. and Lab's our now Following company's progress for some to review deployment I'll for the technologies, highlighting the turn segments, over on as outlook I'll Then successful continued phones Q&A of open statements. detailing call will Gwen discussing and as Core introduction Gwen the of Core's provide we'll comments worldwide. then two operating forward-looking the remarks

Gwen Schreffler

Thank you, Larry.

materialize These may include we projections, otherwise. forward-looking other in results projected forward-looking or of prove outcome. and conference this our morning, call these the oil gas whether undertake forward-looking Act may information, climate industry, statements of and statements, and our are actual more outlook. subject assumptions in I'll or or international estimates Before and those our any would vary or that the discussion to we international start 'XX to as Should including any any types revise affect no discussed may obligation those political statements of from business in should that of future information. forward-looking risks or uncertainties risks business during We result company's events this a relating to a number new that incorrect, This some publicly other uncertainties one filings update of respects of statements. material make factors, the markets, conditions, mention the of include the

more recent as For foregoing Item most registration on the discussion risks Form annual our Xa AFM. of us and as see the report Factors statements Risk of other reports in with XX-K, a SEC uncertainties, by well filed the and and detailed some

With Reconciliation pass Our fourth to found our included measures be comparable non-GAAP the the I'll financial directly non-GAAP website. also Those measures. quarter back GAAP comments financial said, measures the to discussion most include can press that release results. in Larry. is our on announcing

Larry Bruno

Gwen. Thanks, Okay.

First, our families, thoughts dedicated particularly well the and medical remain with professionals our their directly COVID-XX, as affected all of been serving industry colleagues employees and those frontlines. the our that and others as among on have by

still demand are is challenges some in during in widely oil XXXX. distributed lie the reduced COVID-XX improvement entire of to that international can reason hurdles oil activity clients’ those gas combination vaccines regions optimism along industry, we saw logistic the to as and activities, all the persisted services with there fourth certainly field but in throughout Unpredictable of and Headwinds that due product regions. the a see there and us, While tied COVID-XX was disruptions quarter, operational cases particularly for remain and virus-related ahead schedules become increasing oilfield shipments more operational our benefited positive for a number across our to of importantly, products activity from Core Core QX or of positioned vital as and global fourth lockdowns early even fourth provide required to countries the and improved the beginning sequentially note, to and staffs QX a services precautionary On dedicated of expanded more an so. quarter to during safely quarter. we part Labs’ efficiently from land continue U.S. middle in meet to to the do uptick the and enacted Lab the measures needs continue well in and all very client Very well base completions. of

on As unprecedented across adjustments to rapidly operational full Due is goodwill oilfield XXXX, to oilfield. posed for year our posted write-downs cost the the time posted challenges back team and in The that see effective impairments, of comfortably cash XX index. flow performance and exceeded year. Core one a outperformed OSX and price the and we select last of positive invested that resulted the Core adaptability four years a other in for return free over for adjusting leadership companies full the of Index look earnings Core’s when and a has service consecutive of year share management year group structures, non-cash that of dedicated Lab implemented that we the positive and staff quarters positive capital XXth Core’s the

XXXX performance to financial the These Core’s addition, as running end the goal global to durability company, of the disciplined Core’s net capital, In from XXXX. million $XX stated metrics business both with our approach of of to as delever aligned well debt underlying the reduced the managing end by reflect and Core model.

The which review dedicated the customer clients will technology to employees to innovation, always Core by Core has of that Core’s tenets and build strategies problems shareholder relies be year our XX as value leveraging culture, shareholders, publicly resilient traded our on used a served Now financial history interest service. solve plus and Labs’ company. over to and

cash new activity the to will in client generated levels team with continue longstanding, focus which, focused Core the financial in structural free for remain million outlined XXXX. reductions second to flow, maintaining industry. the all needs cash we cash. This our capital, safety that Core’s Core’s Moreover, in the shareholders. always XXth among long-term the Central on to light While best and address offerings long-term of positioned have cash scientists on enhancement anticipate Core year return we importantly, client its solutions beyond. current capital client maximizing annualized million ensuring of challenges, industry sophisticated strong workplace one-time with business the generating our in strategy accomplished activity in Core both and and in invested return while and positive of employees. meet our very to that will free that technological internal marking continued sharply the remains we pipeline its our new the exceeded well is the remain quarter maximize excess XXXX, management asset production through growth consecutive those continue focused navigate innovative model technologically for invested impairments for asset $XX being Core’s of remains of is maintains on tenets, we the XXXX on structure remains adjustment still on excluding to project cost maximize aligned technologies. in collaborative we and $XX description provide Core in our to reservoir client and free will was recovery relationship unique three introduction Labs’ allowed free needs. base has to return cost very the

of underway efforts collaborative some New in these to are I’ll review always technologies operational solving the of currently call. section this and develop on touch problem and

their navigate moment market want sacrifices adaptability review. personal prepare in more hard a Before the loyalty past it want many and that endured the have over employees we needs I’ll client as for and our upcoming the for now in to financial Chris the year. for turn both thank active detailed also for management all thank and to them to we on, Core’s meeting of year. the I and for over unprecedented work I challenges the move during the team dedication,

Chris Hill

our Thanks balance Larry. debt reducing free cash And and company and for as that the we Larry reduced working by previously approximately on sheet debt focus reducing debt XXXX, XXXX, for has company a our towards position. improving focus stated, the strengthening $XX been liquidity million. net by announced would towards Excess

million our XXth year and exclusively took refinancing facility. Additionally, a have senior and of issued notes These proceeds maturity seven a of private senior a debt outstanding credit January new on placement. portion were our to the reduce company $XX debt XXXX in the to notes through long-term steps five new in used on

credit leverage the our capacity restrictive has after $XXX the time, this on our an covenants. more to ratio the three I’ll continue December new At million reminder, the provide this of our debt At with corporate a as sized the over also the as maximum under was facility to remain compliant leverage borrowing trailing million manage available covenants is of X.X a XX, $XXX balance one tied EBITDA. outstanding at The update company to debt. little company’s currently was financial our XX month is our we from bank issuing down levels to facility. ratio over times senior limited January, As ratio in with proceeds our reducing leverage and notes debt of

fourth several forecast As to its of company first of the our leverage performance XXXX. the in quarter financial always over forecast past the XXXX we’d quarter ratio and has reach quarters, peak

We towards cash decreasing ratio the of leverage expectations financial reducing we will continue to with in as our free XXXX second the with to current debt, remain forecasting covenants excess for forecast and continue are compliant we our XXXX. applying company quarter and begin

our quarter, last effective the rate gains gave specifically XX%. or any we Before an past of excludes performance on the losses impact financial tax review the call guidance and the and of assumes we for FX calls,

prior foreign for exchange So, periods. and loss today any excludes accordingly, our discussion gain or current

non-cash including stock of Additionally, did revalued the million share for were recognized adjustment that previously awards expense to quarter fully XXXX performance $XX.X was vest of and compensation revalued. the financial that reverse associated with results fourth not

associated with of charges and These credits been results. included Additionally, costs. charge the inventory additional facility from of financial ex write-downs have our exit and items $XXX,XXX also additional discussion excluded

from Revenue see two U.S. the looking quarter. up fourth was and pronounced from years. markets we that momentum not quarter previous in Now fourth did experienced statement. continued fourth $XXX.X in land income to prior quarter, million was for million at The gain operations in through approximately decrease the continuing the $XXX.X the X% quarter the the the

had COVID-XX the did fourth quarter. growth resume which continue Although longer revenue disruptions projects persist, international also some cycle on to in activities

XXXX service of $XXX.X XXXX, quarter. was of from million which revenue, full million year the is $XX.X this the last a XX% $XXX.X million, more for X% revenue $XX.X Of For million. revenue, up of sequentially revenue international over was decrease quarter, from

analysis and some we improvement had levels in markets projects, well on diagnostic for U.S. earlier, improvement fluids activity saw but also services. an international in stated As

continue up the client were and laboratories to Product quarter. network XX% activities sales have $XX.X has some our last fourth operational XX% the we restrictions facilities. and international for to well quarter throughout and of countries, which increase sales, sites over return quarter. additional of although Product while $XX.X million in the U.S. international remained as product Our North virus, project been a there sequentially, resurgence tied was across operate of sales to were from equally an to activity the America the million over up quarter, for and is market compared prior the XX% globe

associated to is from Moving XX% ex improved with efficient on for by were when the for the to as items abate. fourth was services, COVID-XX more XX% to of revenue service reductions which of to often would in pretty additional for items XX% created during two XXXX challenges result both Cost and and of and operational operational quarter. are XXXX, just in structure. cost averaged disruptions quarters. comparable the Cost for quarters has our revenue of challenges These restrictions sales, of and COVID below clients considering quarter, with continue held the sized nicely inefficiencies have align expected XX% quarter implemented the operational in those significant until us begin consecutive compared earlier to last costs in ex and and year, are XX% the cost services to cost appropriately

announced the expand. third XXXX. was to million, million company from in quarter $X.X lower were our the down completed for $X.X levels also $X.X full of and and expect G&A items XXXX. $X.X million G&A, expenditures Our year quarter improve, revenue capital down full million fully cost this The Depreciation we $XX.X implemented in for realized for for reduction ex reflecting the million cost in cost year, by the amortization reductions last and quarter from as $XX.X last and quarter, was reflects quarter would in decrease the quarter XXXX. the the initiatives and million from margins down

the XXXX, For XX% million, levels. we expenditures $XX.X almost down year XXXX from capital were of full

over the represent XX%. from current year, year. For to was last $XX.X of and given margin the full $XX.X X.X% quarter million, for expense the items amortization continues was million, best-in-class EBIT $XX.X depreciation $XX the about up EBIT last million from circumstances quarter down ex and million

the income GAAP expense recorded was XX% for was for events skewed for margins quarter XXXX. million of continue sensitive from XXXX ex-items tax But quarter tax company’s earnings expense last of effective million of the a looking impact globe basis unusual was and Full quarter. the mix On of across operating rate tax items to items substantially of also million, XX% the which XX.X%. was discrete each quarter. using to the and we rate Our an year operations The forward items company's the now of EBIT, non-deductible for company the recorded $X.X be $XX.X approximately on up geographic to $XX.X million. $X.X was are Income generated to goodwill million. XX%. XXXX sequentially rate effective the quarter Income adjustments that the $X.X GAAP of and a have rate that $X included basis, from tax project somewhat million. The income continuing will effective effective XXXX, for tax ex to impairment be tax ex

continuing $X.XX for $X.XX $X.XX the and the was for full fourth the for per year. the from $XX.X a from quarter GAAP full and of diluted year the ex operations $XX.X loss earnings share from operations, it $XX.X items, continuing per of was and For year. for for of a operations income share the year. ex share Earnings million million million. diluted items full quarter quarter loss was XXXX XXXX, per the GAAP was for full continuing $X.XX

Now move $X the million balance over a to sheet. were Receivables little million from and $XX.X prior on we'll quarter. decreased

quarter we the have the improvement were quarter XX for DSOs in last a in and quarter six from achieved last fourth days, Our exceptional at years. XX substantial a lowest the the days

XXXX. always one of our For were in and with managing the the oilfield service great were land comparable to primarily currently market, do DSOs year, focus anticipate will as maintaining X.X at client not finished The decrease tradition work well quarter. times in from working XX in an lowest improved maintained the capital our continue at due turns last million, practices any activity as is Lab this $XX.X Inventory $X.X DSOs our year we in completion XXXX efforts has days from our full international for to U.S. on team’s Core changes with the significant company. suppliers. line approximately million we Inventory in improve We on payment levels and down anticipate now in will U.S. the for side turns land. continue activity the balance the year of to liability to And XXXX, inventory for throughout sheet. base. with improved the

$XX million debt, end cash, long-term million decrease reduced $XXX million considering was to with quarter. net $XXX fourth XXXX the the or $X million of of Our at a in in a debt

million Over the reduced our course from of XXXX, net $XX debt year we by end. last

at notes senior of credit well our facility Our XXst. under December at as outstanding comprised revolving $XXX million bank debt $XXX as our is million,

million As a of will were of in maturing of term notes XXXX. purpose million debt stated January and Lab’s notes earlier, company a XXXX. longer reducing notes issued strategy new the of The September with ratio. Core towards $XX with leverage in continue portion debt company These new refinancing in issued our senior $XX

looking flow. Now at cash

year, the $XX million, $XX year marking the $XX.X deferred of XXXX, million million in for the to operating consecutive free the year In from has was of the million from employment payment unique that from cash positive of flow that which distribution in and company million CapEx included the operating employee payments $XX cash fourth For our cash activities and $XX.X a was was quarter, after post-retirement with XXth flow. million generated plan in is cash quarter. for XXXX paying the this full of one-time flow the company’s a compensation associated cash employee flow activities Included $XX agreement. are employee’s free

which corporate the is Additionally, XXXX a insurance the annual lower annual program premium $X includes fourth million payment our for cost. prepaid to quarter

Lab practice in policies COLI. uncommon compensation an fund years, invested This deferred to an as Core these plan. company-owned not and our insurance many has often investment referred vehicle are life employees as is For to policies

value As towards the cash policies of in was accessed cash, to million cash payments to value the converted the these these funding surrender these fourth $XX.X of used COLI and was quarter, the intended, fund which surrender company payments. help

free However, policies the cash investing received cash from COLI the as activity in is is operations from an and or therefore treated included cash our not flow.

used CapEx, in activities cash million $X.X flow couple fourth points A a negative million for quarter, was topic. $X.X in $X.X As flow cash and the free million. in more paying QX a after this important our operating for was on result,

XX, funded insurance in company-owned employee deferred December to our life our policies. fully of XXXX, is compensation As plan investments

our for year be immaterial future Additionally, forecast or of plan from this expected to any are one distributions quarter. calendar employee

to CapEx. on Now

For XXXX, of for will quarters the be at levels to the company CapEx similar anticipates quarters. that recent its next couple

believe outlook. and comparing utilize models over companies’ to discipline assess However, flow Lab metric XXXX ability generating free shareholders important we projecting our update with continue cash for the for company’s increase, targeted to guidance This free is as expected marks flow, to it continue are we turn a consecutive expenditures and XXXX an when to period. and free with business and levels discounted generate generated to we capital valuations. cash flow will growth cash and model our would now will stay also initiatives. positive positive cash asset-light look is and shareholders a capital growth historical We the Gwen in flow cash half, to expenditures but our in second I for expect also capital strict beyond. evaluating those financial primarily results, to opportunities on Core has in year ahead particularly improve free XXth as Core yield line at an while

Gwen Schreffler

as executing you, plan strategic mentioned, our invested net to Thank generating And on for of free continue our Chris. debt, Core will on maximizing focus and return capital. reducing while Chris XXXX, cash

in client-driven problems opportunities. of we as XXXX technologies solve the continue growth invest strategic targeted, company’s capitalize aimed Core’s Additionally, to client focus, part on and will that to both

the active growth disruptions of the Lab the and international than to XXXX of already international exposed expected are underway. With Core abate. activity, We second as more revenue having about company XX% optimistic projects remains unfolds COVID-XX opportunities are to company’s its on international half

the Core in the trending of as combined in higher opportunities, beyond, for as growth international the XXXX sees as signs U.S. Additionally, momentum company and well markets land the early with international of continued and in cycle. dedicated XXXX strength emerging is second a operating company’s half the beyond, of talented we strong of backdrop and the workforce to and portfolio, technology the believe model nice

of areas Qatar, emerging of areas the Middle international and Brazil, are growth Some Mexico, East. the various

resilient drilling reliant diversified on and activity with quarter is slightly we to to accounts than For to COVID-XX the across is the we projected of results more first reservoir expect description, pattern and first of revenue This historical down In work completion of historical to expected seasonality. by to decline XX% restrictions quarter of sequentially. anticipate seasonal and U.S. life the in land typical with with trends, fluid the as trends quarter XXXX as first reservoir lower seasonal decline client impact pronounced and the be of revenue due low-single-digits new first continues. in the first analysis quarter expect revenues projected XXXX, reservoir segment’s We this remain the activity typically in a momentum revenue less quarter wells. effects consistent mid-single-digits. for in compared With flat less to

client company COVID-XX land to present due to reservoir U.S. near travel However, levels restrictions sequential international into mid virus given disruptions time uncertainties XXXX. as The activity activity sees in for trends. description’s improvement fluctuate exposure, strong

revenue As sequentially. a XXXX result, enhancements project production to we quarter first increase

challenges of Additionally, XXXX in to in levels near-term summary, we incremental outperform see to completions. margins second year. we half in related continue production In restrictions, activity the the activity the expect land as track COVID-XX higher enhancement despite XXXX to levels unfolds improving U.S. international or with in emerging

in activity are the guidance rate new that on we based Within to XXXX excludes and Our initial client-driven an continued assumes growth The focused context, XXXX projections well company’s development particularly first of the and penetration, as quarter and expanding guidance throughout This operations turn also directly underlying exchange. opportunities new as will quarter penetration, tax market related foreign with effective digitization that, Core’s first on of back for the client market and on is I internationally. business. automation gains XX%. losses And focus ongoing Larry. remain to it technologies and

Larry Bruno

Gwen. Thanks, right. All

is shining challenges. like for clients. I’d our employees to success through team thank our dedication The our of to the Core collective providing innovative superior Lab’s First, integrity servicing clients to and of and global solutions, foundation team's during service it's the current

dual a cell properties of is as direction of rock evaluate in energy its CarbonNet recovery its Gular-X large-scale new leading region nuclear its fourth XXXX, COX during enhanced the continued well high capture sequestration obtained of licenses Turning reservoir for and and facility as proprietary and as both samples interactions helping evaluation in reservoir of fluid rock that combined beyond. will fluid process. with offshore this the and Core and of the sequestration, of representative carbon is perform injection have focus conducted new of this operator pre-salt the and flooding exists commissioning exploration signaling on from market. of including Core capture mid oil on support carbon oil recovery Core Southeast efforts. and Under in of a Janeiro. to opportunities Australia experiments of by programs is deployment. part the project. variety injection two national specialized Core displacement a of into properties be COX analytical patented originating injection. international capacity, This secures to Core Core’s or XXXX, opportunities, fourth some sub-surface wide and injection in the projects a tight in offer laboratory Data portions program programs in injection in enhanced a core providing and throughout This near, geomechanical after rocks physical sees I’ve and the the steel capacity, will dataset final described an the Atlantic was a Core and growing of region understanding clients. volume, as Core To that and continued stages provider the of insight core detailed generated the services magnetic growth description Rio well with region quarter of full company here and to during zone. project, first Several in fluid in-situ conventional current for storage reservoirs. laboratory Core’s South are CT growing opportunity determine XXXX instrumentation engaged a capital in for that long-term the oil Core for various appraisal appraisal pressure, Brazil quarter region advanced providing frequency, projects the to programs, Asia-Pacific the technology the lab laboratory Core visualization, future position operating hydrocarbon companies reservoir for XXXX, oil offshore the saturations The the description, and COX analysis proprietary, and in laboratory, of the Also COX and targeted Lab the by a quarter highly of Also flooding resonance Core fluid capabilities margin, proprietary, COX evaluation analytical demand de in from the Core’s fourth technologies Brazilian in satisfies range technologies. PVT Core’s testing This lab temperature as

completion very advanced strength Core’s display. completion clients enhancement response, where their production penetrate systems improve again and several Moving stress. in sophisticated techniques. to and North always completions on segment perforation developed maximum were Core’s To market technologically direction continues both Recently, now to Core’s meet of principal precisely manner Oriented efficiency, maximizes the expand focused to engineering need Lab’s are Oriented a looking enhancement The with innovative the in the team the is a opportunities the the pursued for of time in frac design required allow providing while GoGun recapture as site well technological high the both that redress and this as by GoGun be subs. also energy connections advantage advancement orientation frac, number accuracy of patent and side to in have well pending designed the This a Core energetic the diagnostics alignment minimizing minimizes to does tortuosity. enhancement the production channels operating of sub-assemblies. and clients the In objective, product is it at eliminates big not its to line. America production operator have region align this saves technologically to Core’s

GoGun pre-assembled one their During the of deployed perforation-to-perforation has downhole for a various and superior of perforating highest technology, and level Lab’s their the accuracy, stage-to-stage as result offerings of field cameras be to have compare trials, the operators Oriented adopted both Oriented operator the preferred as to Core’s gun proved the assess performance ability to preferentially Core from alignment the system. of GoGun oriented.

a were used of of bore completion a for placed gas and most the screen. the top-off completion in packed control the within critical its functionality life for enhancement, services used Lab oil revealed in wells. withdrawing the and producing that gas natural of untraditional gas XXXX, and both its part annular over agreed engaged top-off sequestration completions diagnostic treatment It to engineers are Coast. service recommended at developed were for and the coverage frac on was week as this Annular is to treatment the long-term proprietary by these services gas operator In new Core log completions U.S. projects technology a field. often production both stability This for proppant be assured is an now storage pack the PACKSCAN these deploy be proppant The Core open and your wells points project these fourth Ailey coverage Core field. storage top applications wells application, Core the gas participation. large these technology proprietary failure In well above a in appreciate to ensure of one must these PACKSCAN as insufficient of remediation concern. density along That to evaluate optimum in frac completely our potential applications a the of and order questions. services side for storage costly Lab’s number operator effectiveness utilized of will of technology avoided to the wells. a logging of many natural is storage its performed areas program. and Packs determine a for of operational natural resulting quarter Core’s And the carbon screen. this these performed moving assess the of Now call in effectively market both sand completion diagnostic years. Core’s storage interval remediate competency was the the resulting Gulf the control indentified uncovered for the treatment We completely wells, well gas Lab density injecting Core’s a PACKSCAN top-off maintained and successful to both sand and and review. perforated concludes and being that

Operator

Our today Company. from George will & with TPH Instructions] first [Operator question O’Leary come

Gwen Schreffler

George. morning, Good

George O’Leary

guys. morning, Good

Chris Hill

morning. Good

George O’Leary

morning, Good all? guys. are you How

Larry Bruno

Hey, George.

George O’Leary

kind that was bounce Just a had Or is clearly customers the a plus service line XX% example restock a quarter-on-quarter more for cut share – cut market of The peg. case this there? shift particularly curious type was inventory? of both of your dynamic? just an of that of activity what strong super are you and Completions But increase where short was energetic sales inventory wire in striking. projects

Larry Bruno

it case be might on. there. completions. There in almost of a longer I going what both the period you a sales to for a look trends exceeding may some we Yes, in wire our every better on answer give think tracking time, line definitive I companies we well, as the be energetic over of is see of bit think, question But the

so. around that is of see we numbers. some on up little are or probably It So, number still seems that completions bit that people – fuzzy the thinking most were XX%

exceeded and nicely attribute penetration of new we offerings. we think part substantial And we that. a that so, to products of And

George O’Leary

you on getting background. just Great. That’s then, if you mentioned, And Okay. seasonality mic hear the apologies QX helpful. that the

we and doing in I and jumps at The the that seasonality just ten Q-over-Q I you frame back across years or We perspective progress these you in that’s that side different of realize sales fourth drives is am learning what into maybe the international Whether get year-end questions. kind drivers that last something abating virtual years. it the asking as look from there first on you the around regional sequential But and different a QX the change quarter of quarter. went as are kind might could mentioned, revenue seasonality?

color any there So, helpful. be would

Larry Bruno

up coming then frac – will that of year even is we And pattern that, see got projects the out take time year. it’s revenue XX quarter to that play you’ll wrap clients see or year. that year, go view we And our price attributed see fourth the that up. a our consistently. sharp at, in upward late holiday. like around than things of maybe busiest a commodity we very highest in But budgets projects in longer steep trend. that a I and Yes, out is pretty the new buff year trying the a to usually XX, think, are a look Historically, jumping you and we’ve the little back years, frequently, to see spool on move That occasion

still companies refining plans. Some are budgets and

gate drag of of particular a come in sort of is description. for bit Lab the and in Core reservoir little expect we’ve what quarter in a out first to So, the

little unfold see is those COVID-XX quarter we And this disruptions. to or uncertainty going down the How slightly. at those be throw that which of and out that first bit then a will to so, that pace playing leads about year think us flat we to the And will abate.

that we that Now, will rollover we seasonal in we first think or mitigated mid-single-digits, of say, when I’d normally some in avert lessened the of those would the sort be quarter years. see XXXX. include even But of

underlying And reasons. some all and locations sort of are and

often seasonality of related impair activity. that some areas it’s conditions seen for we’ve that So, hemisphere weather to northern might the planning

fighting bad get hey, weather point started patterns. say, clients just Some no no predictably and and

bit a slows things those So down. and that out they pushed little

George O’Leary

That’s very Larry. helpful,

Larry Bruno

in be Parts first the influenced of Canada, Europe, the can North those all quarter. Sea,

George O’Leary

Got sense. if could. sneak That makes one more it. And in then, I I’d

deleveraging. deleveraging heels free year forward. guys free about in prepared a move come bit maybe remarks do then, XXXX? a you these yearend the frame for primary XXXX flow you powerful on pretty the or to talked cash the free pieces and cash XXXX for How and in we a there target flow of cash could flow goals generation You on you Clearly, And is generation as moving think Or XXXX about, target? it’s front?

Larry Bruno

I’ll get on that. started Yes.

that’s are a try debt. And helped well, comfortable But that applying market we that ratio. think as XXXX in EBITDA than and that’ll we a XXXX, to maybe on and as we throughout will But that we grows, into have get a ratio more depending below time that picks activity be I position, sheet. directionally, a for and cycle lower reducing to, down certainly and up will are our as I – committed to So, balance what aiming the obviously, continue to, sorry, – work are would leverage our cooler were call it we conditions. committed on virtual X.X. am continued be as we being net free that’ll leverage get cash We XXXX we as go to it, to

with Chris, so, those. forecast And and the to on timing relation

Chris Hill

Yes.

year unfolds really depend moving kind the it were to how in year to the it of where end seems to job this great get XXXX. the I But towards time target. get Whether the we of get achievable a on economy end of think term, or COVID will kind of back global Larry year, kind next summarizing by those pre-COVID. of Longer and how much to this be very that. did by takes we the toward it this and levels rearview really that’s the there mirror

George O’Leary

color, for guys. the Thanks very much

Gwen Schreffler

George. Thanks,

Larry Bruno

Sure George. Thanks.

Operator

from comes Mike question next Our Sabella with Bank of America.

Gwen Schreffler

Good morning, Mike

Mike Sabella

morning, morning, Good Gwen. Hey, good everyone.

Larry Bruno

Morning.

Chris Hill

morning. Good

Mike Sabella

guys I was larger opportunity help in kind over second out second how to pointing half you are recovery half try to up playing some the in XXXX. the second of about half? XXXX thinking of double-digits of How have you do you frame half could all kind second of the been the international, set if and see wondering comment your magnitude

Larry Bruno

I developing, think, unpredictability there. see I have Yes. some at look it particularly we that some We of caution of put the wouldn’t disagree and the as there out you look that where mean, is as we maybe bit a a and trend basis. little with forecast necessarily year-over-year on of built-in

Mike Sabella

opportunities All the of how you segment And in that fluids thinking kind once are of kind OPEC in to versus production description of later right. it are Thanks. reservoir then, talk if of performs about in of as losing bring kind starts context about about kind we thinking what and online. fluids Can maybe sort earlier the business back the mandate? of for process the

Larry Bruno

Yes.

are. doing? fluids gas think ratios a the a borehole. assess what current shut is How What pressures been there there in in want wells has where to affecting there, I potential little the oil of people upward bit bump particularly and it’s are the

well it’s But big flurry be of that. don’t So little think needle on a positioned it handle unfold could I to mover. are a to bit we going be a that.

also the well are in about the now capability market earlier. our that right East, fluids laboratory We as as talked Middle Brazil expanding I

this business, here. fluid think frame the the a side let’s in bigger So, context I of maybe

a say phase contrast, was new to cycle. Core lot heavy That XXXX in XXXX, unconventional. rock a when of Core We back fluids Laboratories. are Go Laboratories heavy having of rock there to and be evaluated the was in

say back harvesting now it, Lab, more as it Core And the look other a we swings one over between kind in are more we cycle. of about fluid a look I’d historically, the time. mode over one-third, or over are services blend so, We heavy two-third of and of back of a if you

as the of kind down and have the of That inevitably side the fluid moment. appraisal has business side of it are toward developed we business. to go rock So, at is tilted on, and blue be toward swings cycle to fields wind back heavily the the new

side fields like what’s we’ve that the to swing think I through real toward longer zones although cycle will through we of a over of So, on what a the cycle will years now. to and rock will right think is, a business. and and bring on new it new a down that are have and as several tangible see I for new fields look out appraisal stay are back been fluids our way, bit unfold the we experiencing anchor business And

Mike Sabella

Perfect. Thanks everyone.

Larry Bruno

are You welcome.

Gwen Schreffler

Thanks, Mike.

Operator

from Scott Citigroup. comes question next with Our Gruber

Gwen Schreffler

morning, Good Scott.

Scott Gruber

everybody. morning, Good Yes.

Larry Bruno

Scott. Hey,

Scott Gruber

Morning, morning.

or thinking up on potentially So just split XQ. trajectory, revenue guys down different? little When the a and bit XX%. Is fair more color bit think XX%, segment about about of PE we little that kind you mid-singles RD a on

Larry Bruno

I think that’s broadly framed it.

seasonality That’s substantial with upside for that might on I then And restriction what country is quarter, a is think a continuation conditions business. of we lack reservoir just in that going production business clarity improving certainly U.S. for to is of everybody will lean on description there. first part the the short-term that enhancement. on that got, is our dealing activities the us in to side, a I pattern regular what And anticipate a toward then, going and we’ve play guess, or putting land in the that posing lockdown us. next a of impact be to

And quite so, reservoir broadly, are the expect. think, there. know you extend the But of I’d I in I don’t what correct realm on downside that it’s we much. not that might description

Scott Gruber

to the corner just Gotcha. start both And back things for the for as everybody color incremental into system turn then are some here. coming on costs

system half? incrementals do about coming on right now in that the into XQ XQ incrementals relevant. costs of clarity we growth think there obviously, have incrementals still the But half. you Core or think then, as sounds like back So in the any in color incrementals maybe How you in XQ, just we in get about to in It we second guys And those or just stronger XQ, Labs half. is aren’t back incremental for to before on the normal both and XQ second mentioned XQ. do healthy getting better a the lack second

Chris Hill

is Chris. This Sure.

a So, even bit bit QX at that maybe I to QX come little QX. in back we – I incrementals. kind the so so projecting think of more a maybe soften segment-by-segment a and it it’s to going have more look it little into cost is you to in and mean, are in so, But

whole, a into get as segment. company mix the start this you of different a For also to

So, production enhancement is carrying is in that of And kind a mode. of margins. in - lower growth more

to you going how incremental the company kind sort out. to it impact want Anything So, of play segments add is two and of that? overall the to

Larry Bruno

the people shipment just virus clients It’s going Those or if or to activities, We’ve where go. is job it’s be those unpredictable will go. was costs refer we a I quarters, to this. the when over go, are got the in of it’s happen we going still right and delivery to and remain calls choppy stop is just be stop now we just not site product Yes. in a effect. says if letting back you a well remind back go But why shutdown bit incrementals going our to to go ready that say still to it’s get that, few this go because are are seeing last system.

is it’s downward how trend activity what we’ve here. we projects choppy and we’ve I’ll take going to, over out structure got had in strict to little execute it’s steep how the so, it’s think inefficient broadly aligned And the the in But program. it that still activity. carrying that in a we But somewhat to we chaotic of of roll. phase cost going a work so still are bit roll terms to need with terms

dollar structural that, the to As come well revenue very go to from out, you you XX% into are EBIT. if to further we’ve Lab incrementals positioned at we achievable all say the I’ll out G&A expect traditional a a at of $X.XX are in look on better the XX%, up company and think of very cost terms of that set convert way to we much Core look that I operations, or taken be the through

Scott Gruber

now. and all there to be the Got the tunnel silver the that at that seems of it. is appreciate light lining I end

Larry Bruno

Yes.

Scott Gruber

million should think could more maybe I if the you made second haven’t on maybe decision one in, the sneak And Chris, half, but in guys about we first about CapEx, half a relative and on think $X million the $XX provide some half to second CapEx and clarity starting or guys maybe at how second revenues? you in the to can you on maybe point the

Chris Hill

Yes.

numbers that you of You those out are is range some definitely flexibility that kind know there, we the threw at. are looking There in the there.

that. have So we need to we flex do accelerate some some things, the ability things, to we’ll if

looks that that. if pull anything to can going there needed, that. to forward like So, And and with move returns, are a investment do good ahead are with some good go we levers we

are higher have then are to if those back could dial of as to are what we So, bit. kind the projecting, but quickly as It a that take a things thinking. little ability close little half we in we be second don’t off the

Larry Bruno

know capital-disciplined and like in we client how are very business. evaluate to talking up, that But close that asset-light is, to capital. pretty thing will to things got only that down disciplined – It’s that needs. cycles sort but traditional think, tick It or run normal we after well. revenue I’d around of outs and the add ratios. capital to here. deploy build very stay to and are of get opportunities And X% to that, we’ve percentage a we covered we some think face Lab its stay are cycles. percentage hey, X%, within about expect X.X% It be how to fractions I lab we How phased well might our very it going during of, during Core normally Chris below to We I

Scott Gruber

Yes.

So it spend? think, I half? wouldn’t going go restart second it’s above the to X%, in say,

Larry Bruno

might Back cycle we growth were that’s a a have in sort over in rare But time, hyper case a range. that it’d it be of up good. when where gotten

Scott Gruber

Thank you. color. Got it. the Appreciate all

Gwen Schreffler

Thanks, Scott.

Operator

comes Our with from Connor Morgan question next Stanley. Lynagh

Gwen Schreffler

Hi, Connor.

Connor Lynagh

morning. Good Thanks. Yes.

Larry Bruno

Good morning.

Connor Lynagh

think you equity light market your bit guys I just cash at with chosen that to about the more we not? option a the do an sheet flexibility, we should flows. utilizing use have will whether how on, not comments Chris, organically, delevering or balance currently and just pretty guess, of, anything a on having and the how not there, little guys I to notice think some talk guess, wanted about you program this program. about be In should out as that for or confidence guys I good how you

Chris Hill

Yes.

talked is think, little bit out It I we’ve a there. about that.

always are looking at both internally We externally. opportunities and

that. are we evaluating constantly So,

that projecting some covenants, I progressing externally on across make sure And think of is case have although stay we flexibility want something wanted flexibility. our we internal we want are within to initiatives. these growth we execute to the the we would in we to be. because it something have But want it to comes a that doing to on, are also we good is to tighter from company, financial don’t the or be the long-term tighter decision for got to next we little to that manage just think And for a quarter to than ratio we like debt restricted leverage two.

really the we it is is how and There uncertainty through it’s quarters going if the respect like are of therefore. are we what we behind plough there it, access over to next of to So is with feel couple kind we to virus that have and still lot that of going when to need a us.

Connor Lynagh

it talking discussing leverage where some think if to like target get world about you sort were of external earlier, Understood. growth we guess, you of Understood. sort internal seems the about and are you I and capital also those on And just growth around discuss right see, you opportunities, your within your now? interesting return. do Can the There you the avenues where potential opportunities. is more that? the incremental of specifically framework sort for ratios portfolio

Larry Bruno

because I We is between in. regularly with look look a to global somewhere Yes. very things take and there. Lab – landscape of the position might a our are opportunities. We approached calculated fit across external Core bombarded say, and our footprint, we how would

to and internal us that – great we those, interested some the pipeline individual be it that about with clients the And of together, opportunities. will Core own about working that’s this? growth IP some us. extraordinarily those what own Lab more hey, and service, as relationships concepts them are and that we the in think we’ll opportunity are with come have We year, of the We will said, get our have good talking through are say, on more for we

sure company ability or have as it opportunities I to don’t type the what leverage growth to good would framed transient miss because that to Chris it and and ratio. a and we opportunities. the the want we we be have handcuffed just call So, delay think, trying are or make navigate I point to fund in for we to nicely, like delay manage that said, long-term those want the miss not to It’s very

Connor Lynagh

Right. back. Thank Makes turn I’ll it you. sense.

Larry Bruno

Connor. Thanks,

Gwen Schreffler

Thanks, Connor.

Operator

comes with JP question Sean Meakim next Our Morgan. from

Gwen Schreffler

morning, Sean. Good

Chris Hill

Sean. Hey,

Sean Meakim

Morning.

Larry Bruno

Hey, Sean.

Sean Meakim

incrementals of I on headwind indicated reasonable. first time Let help back me the savings progression in like, it just the will – to you there margin basis, discussion, It sounds continue think a sounds cost sequentially every a year-over-year half. all is bit

I the average, RD think as versus XXXX for high margin maybe talk about perhaps we peak teens, would going if are potential in like peak and average more you potential? or dispersion possible about about think XXXX you As that to then a even mid-teens,

Larry Bruno

teens idea mid that. quarters of and the way is beyond, I it XX into consecutive think, think the if to, the high an second be things abates expect quarter that, exit I with think before in improving virus we rate just mean, kind unfold the achievable. did Yes. with We’ve and for last RD I I things hey, that the of quarter an two to in quarter will

Chris Hill

Yes.

Larry Bruno

sort past issues up. the – of And get so, maybe seasonality go first should we in I quarter, a of bit think to from the there, little

Sean Meakim

Okay. That reasonable. sounds

line is just that then So continuing shrinking…

Larry Bruno

taken would up that revenue will the we at look I increase in cost all that dollar one of that that what way an that the said structural that do will the with I on earlier Sean, thing that, – and come we when extra we’ve with reinforce down that is, can reinforce system, out just activity. organization of the

Sean Meakim

enough. Fair

line, on that PD, the have for think, in on nice I you margins just, XQ. back bounce So now then continuing

see volume XQ, in in margins growth. read do And to middle then of cadence exhaustion How onshore? of at would the think potential good anticipate you budget XQ? peak the think, end. U.S. you had level a year, Risk a about year through do of the we’ll So, of volumes interesting. Do activity more we be You load?

could margin? a XXXX? at peak best we Or double-digit we can high-single maybe – in the would double-digit for you So, the characterize, hope as

Chris Hill

Hey, Sean. This is Chris.

commodity we starts get prices more are kind to we going year if maybe kind And throughout in our a efficiencies are we to back the to But levels of be, strengthen where our stay So, towards or out still assumptions make and you we at that throughout as current have you projecting where of kind year, sort not be move half. that gradual around the they facilities. of expectation. would really manufacturing levels build the are as of flatten of unless whole

bit side. continue the expand to product a margins there be little on a expect lower Incrementals little would we to So, can bit. for

then can there side, XX% is too higher. a get XX% be wouldn’t the us. services then little historically the aggressive may And I range be in on achievable they So, to for

to that to blend the out, expect out be to kind rest high-single-digits that project for would we So, and of year. you as continued if growth achievable forecast of you double-digits the low

Sean Meakim

sounds you budget of year? off a of it more much so, a a of not at time roll mid-year expecting perhaps of the the plateau kind are peak like towards and some And middle

Chris Hill

prices. Not commodity current Yes. the at

Sean Meakim

Okay, the great. appreciate I feedback.

Larry Bruno

that call something incrementals are on And we’ll has are – going our more normalized into here. still back to system. get some do to that’s to furlough. said employees sort have have just a the we near-term back Chris of earlier got reinforce come until going to world. Sean, costs the impact We it that We’ve to

where slowly us, priority cuts for the winding were. that as to possible to in back whole, in We’ve people those to navigate have they got them are great taken either It’s employees return time. or difficult loyalty a us as get to We pay demonstrated back soon steps in.

And so, moment. the we don’t do want to help made make to sure that that difficult neglect and sacrifices we navigate that this they’ve

Sean Meakim

Okay.

Larry Bruno

time call. more got for one We’ve

Operator

from Gengaro Stifel. question next with Stephen will Your come

Gwen Schreffler

Good morning, Stephen.

Chris Hill

Stephen. Hey,

Larry Bruno

Good morning.

Stephen Gengaro

you any lot Thanks I component I everybody. inventory really was there there. currently in on that Perforating the where the on inventories of me slipping about, because morning, Perforating within pricing the in more thing you especially, dynamic dynamics Good over the quarters and there with thoughts XQ commodity pricing business? in is of massive impacted the one the think channel that heard especially left. here. of to of have of has sort ask component Do Really, for the and sits stand, side a wanted kind And these how we probably last that? some couple only a drop-off manufacturers

Larry Bruno

run line question companies they there. Kind a George’s question imagined might be there. to better It pretty I circle Yes. ask where to back they stand earlier lean the of some to, think, are on inventories. of the I’ve wire inventories are holding they trying

tied inventory. in up to work just have want And opportunity. time they capital are on think in a don’t sitting trying so, They to I

us, and that for coming combination having new so, And the system we sales are too. are and it’s sales a that market nice the offerings of reception the been with on component through

complicated And that there. think out is the so, I am world and I components Core selling of it’s glad a Lab systems. in both business

Stephen Gengaro

kind you Thanks. I of GoGun you of or And of in example, phenomenon because sort any some that components? Have for integrated systems heard re-acceleration slowed are earlier that that the then, had year. the context, in traction. seeing within of down versus regained that seen, Because acceleration adoption

Larry Bruno

I’ve mean, about one the talked GoGun. in here expression I with of that Oriented Yes.

market to coming that’s now. so, And

said, that the that our alignment on precise perforating part of sure system so, is And our desire go moment this objective thing. to the of make that was and client get tunnels was we for a the we preassembled before using the that frac hey,

And you tuned. we so, do. Oriented came and thanks stay here are GoGun to trying and to that said, come relationship. what help the Can More They that. on is to us get us led to there? And that to

Stephen Gengaro

you. Very good. Thank

Larry Bruno

Stephen. Okay,

Chris Hill

Stephen. Thanks,

Larry Bruno

Okay.

In continues activity the company in leadership XXXX. for I to operational wrap there. client levels Core’s we’ll think, improving up position from summary,

still opportunities operational uncertainties to the many mid-term, ahead. are in is there While near there

their sector. We remain base remain cash company oilfield returns technologically in have uniquely service address and evolving help never invested to expand or been capital. better will company their maintain needs. free the positioned most on optimization client-focused, and We technologically the advanced, operationally production our clients focused reservoir The on on and focused conversion and

dividends, solving In introduction free continue bring debt. driven In our will addition and both penetration. to problem new market via opportunities, our value of growth Core near-term, the use shareholders by cash we’ll reduce to to the quarterly to technologies,

analysts Core. cover that management appreciate that worldwide and give special So, our in our executive have and of possible. closing, these the to employees team thank Core of the we results The all Laboratories and thanks shareholders made a Board

be to their We achievements. are proud with continuing associated

thanks with for look And update. for we our time us. spending bye \ now. forward So to Good next

Core Laboratories (CLB) 28 Jan 212020 Q4 Earnings call transcript