CLB - Earnings call transcript Q1 2021

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Operator

Good day, and welcome to the Core Laboratories First Quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Larry Bruno, Chairman and CEO. Please go ahead.

Lawrence Bruno

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

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

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

Gwendolyn Schreffler

Larry. you, Thank

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

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

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

Lawrence Bruno

Thanks, Gwen.

of in pandemic. geographic persistent affected thoughts rising number that our still remain even infection virus-related the been a all those by have global areas of with with First, There rates are or challenges regions. like XXXX widely become other and as for Brazil, throughout parts certainly oil the are demand India, distributed and There as more recover. of vaccines continues optimism gas to for reasons Europe and

QX. issues logistical expanded unpredictable restrictions enacted, causing shipments still complications during schedules clients' field a countries in However, our precautionary travel virus-related reenacted product and and even hurdles are for as of or travel services measures, lockdowns number activities, and

manufacturing Coast the the the with a lines production and storm disruptions into for Core of Texas this mid-continent quarter closures operations week. idle in first oilfield Northern Canada, Alberta, impacted Core at Oklahoma, Texas, Gulf facility region. substantial event facility a in from power storm, operations by Texas largest winter the adversely across even North Louisiana, During XXXX, impacted were Godley, across Lab's storm winter Lab American

longer. to a access, in the that power are advanced number although measures while Core operations helped and thank such currently employed All Because combination of business, to proper replacement damaged the fire lab laboratories, of brave facilities Core's disruptions Core ventilation still I was to service their operation. thermal dedication, are HVAC damage frozen the Calgary, Lab the extended action. complex side staff and want and of and Western awaiting and the more facility a steps downtime. require up elements operational water Large disruptions. closures technology even pipes facilities safe able systems affect these remedial by working, centers permanent forced are suppression at in operations for water reduce repairs the being On quick that Houston and the are laboratory impacted for were through as temporary stability and Hemisphere the of workplace, in the power and parts. largest mitigated

was no damage sustained, laboratory permanent and equipment Although impact or no disruptions, on there anticipate operational inevitable we facility negative were workflow performance. QX

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

remain Core on capital team the shareholders. we current long-standing, Those While maximize on we very its remain that challenges, ensuring focused sharply our excess and client focused tenants. cash beyond. client free invested will the return aligned X cost we maximize XXXX recovery return that to in Moreover, positioned Core's our remains anticipate project we financial in flow, navigate on will importantly, long-term management cash being activity of to with and client and for continue free structure meet through well levels. activity our is to all needs,

unique allowed Lab's remains for in relationship technologies. improving in Description Central for base with core needs. offerings internal particularly conditions technologically strong of international collaborative the client positive. always technologic to Core Enhancement growth XXXX, outlook our industry regions, Our solutions maintains its has to remains the and long-term sophisticated innovative throughout new Production new is and introduction pipeline strategy market Core address very continued that Reservoir both provide scientists to

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

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

Christopher Hill

by focused reducing with efforts net our and Larry. will an continued cash of structure liquidity debt debt. balance capital improving primarily to as position. reducing company's flow Excess start Thanks, on strengthening I our corporate update towards sheet be the free the continues

company. first facility. steps a little proceeds issued weighted ATM X.XX which the of proceeds off used took However, million we to netting credit pay against remaining $XX.XX, we million additional quarter, our to as fully $XX.X we the to at were over a shares executed outstanding our price These the balance of during average borrowed

which debt quarter. For in was to a $XX million, also X.X March by over XX, little reduced reduced first ratio the compared quarter, leverage the net to prior X.XX our as of

the down end is a agreements Xx debt XX, reminder, maximum quarters reduced XXXX, at of and our X.X next permitted leverage under X the this then the ratio to year. As is over June through

to $XXX there is XXXX. $XXX reducing capacity debt towards the million XX, focus net for continue million March free we our will of credit under cash available remainder facility, and As of of

months with improving the continue and of our now product XXXX. and and offerings. creating reducing XX the conditions service to liquidity, the steps company is commercialization positioned remainder we throughout earlier, anticipate As market better the new over expansion taken last Larry And debt towards additional stated with of the

calls financial for the an effective review and of past guidance performance we our any before Now on quarter, impact XX%. the we tax of and FX and excluded gains specifically the gave last rate losses call the assumed

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

Additionally, is quarter shares of also their reflected the include $XXX,XXX first instruments as from our of been $X.X vesting a of with our of associated the retirement. have results. a rate employees and million, settlement financial discussion associated restructuring financial expense results in a excluded of These the age for XXXX with X the who interest which future of as charge compensation stock for well gain hedging have interest of items for performance as expense eligible our reached reduction the

statement. approximately the the So in The $XXX.X from with is primarily decrease the look associated from down that at seasonal of prior first that $XXX.X continuing X.X% million first each was the quarter, experience with Revenue operations income in decline said, million normally quarter. year. let's in the we quarter

approximately the with and quickly although elevated as down restrictions our delays more disruptions and international we quarter. negatively travel to recovered was continued typical be primarily challenged Additionally, Service first winter service which decrease was storm, and associated $XX.X The land X% from last strengthen, impacted is The outside is COVID for logistical disruptions quarter, associated quarter. million market regions international, by restrictions exited in and U.S. declines, seasonal the million challenges. fairly nicely sequentially $XX but continue the many operations international also up U.S. to in with revenue the with and revenue,

America. damage. the and earlier, technology the largest Operations stated during not regional activity shut disrupted centers the quarter storm-related Larry our only As U.S., North some advanced experienced also were several labs and were in but down in winter temporarily X our storm minor facilities completion some of as drilling impacted the impacted and of

product backlog market we slightly orders U.S. Product work the is Product the and Our relatively and international impacted North equally U.S. both delivery and And exited international tied on deliverables. where meet sales for negatively previous and showed laboratories projects. Houston, million as to build, flagship storm, prior challenged by from operational, facilities perform up the logistical were of our the project flat implications. is network compared of the our we the to to clients' advanced although to significant Currently, of technology in center land sales continue by were global quarter. which we located activity, fully product to is quarter. although remains service $XX.X here America sales, winter the all and growth the of the International continues one quarter. needs of strengthened, impacted, international quarter,

the quarter Moving pretty and on ex-items, for the nicely. XX% last COVID held quarter, services, have considering and just of operational was below comparable storm winter to revenue to of created challenges service by the cost

utilization improve, operational activities As will also our improve. laboratory

environment. protocols continue However, additional costs with associated current the in COVID-XX

we Cost as furlough absorbed the Additional be the in year. was quarters. of to for the costs from for last factors this XX% XX% near to has begin sales, our quarter and impact incremental also will margins unwind X first and program consecutive revenue last quarter These X will ex-items, improved of our midterm.

million. $X.X initiatives expand. million to restore G&A, expect margin as improve are employee progress ex-items, fully realized, the to and our to continue the last to quarter our comparable As completed of was timing which would in extent XXXX reduction product able for we Again, sales $X.X to cost and and in $XX levels quarter million compensation could we EBIT, $XX Depreciation quarter XXXX, through we our and the from million impact compared of million, best-in-class to over quarter expense quarter. given $X.X future also quarter. circumstances, $X.X the continues the was last down EBIT margin current amortization for pretty And to million XX%. for G&A last was flat ex-items, quarters. represent are

on swap somewhat our the $X.X a settlement On interest quarter income $X.X rate effective and operating agreements quarter, at approximately was an rate higher the each which was quarter the million includes of to effective interest the the reduction tax Interest quarter. items applied The in million was from the $X.X reflecting globe million. the debt. $X.X quarter. $XX.X long-term our across the million, of quarter, expense $X.X a and GAAP million of to on GAAP of basis, million. Our $X.X for associated a with restructuring was interest for be Income interest will was basis the expense and basis million sensitive expense, a earnings was continue rate geographic during XX%, mix for tax expense the impact in and, up rate ex-items, GAAP of ex-items, blended for across quarter to discrete last a

from to the quarter $X the was project ex-items, Income continuing be sequentially operations, $X.X operations to tax continue company's quarter. last for from continuing million from effective we continuing quarter. down per approximately However, $X.X the approximately income rate XX%. GAAP XX% quarter share million million, from quarter $X.XX GAAP and operations per ex-items, of Earnings compared $XX.X earnings the operations, share XXXX quarter. first $X.XX million was from the to was for continuing for last diluted for was

move on quarter. to approximately and Now were $X sheet. the $XX.X balance we'll from million the increased Receivables million prior

to sales million primarily the in quarter below to although quarter average, $X the $XX.X days, up increase The up approximately were and million, product Our some days logistical international XX Inventory DSOs were by last of impressive caused for from last is at delays continued the quarter. our XX was first quarter. first compared historical disruptions. due achieved

consumption the winter U.S. of land used for slowed caused by the during targeted market in the Additionally, products was disruptions materials quarter storm. raw the by

We markets. we sheet. in continue the side as of And improve progress to to international anticipate through inventory for liability improved the turns activity line will with and U.S. on balance land levels now XXXX,

on long-term Our the $XXX in XXXX, balance were the first proceeds million, our issuance issuing reduced Proceeds facility received cash to from new million, March well considering down first of XX, $XXX notes debt the the the X of was in $XX.X to credit $XX at or reduce quarter senior of quarter. shares to XXXX. decrease through as outstanding and January of a from million million used at the was end of ATM net as of debt program XXXX,

of XXXX be is and X notes. will and back September $XX cash. is our were using series XXXX Our in retired these of debt due million of excess totaling now comprised facility $XXX credit notes, issued Of series X senior XXXX. million

second series January January is in series which X due and XXXX is million XXXX. XXXX, September issued new million due of $XX XXXX in January $XX of million senior $XX of totaling notes The due XXXX. The is were of

$XX by the little during We the previously common program million year-end. stated, will the ATM little additional over when more strategy for longer-term fully the as increased specifically, capital during executed and and we company. the a to X.XX compared the last million a delever million to quarter our paid-in continue as issued quarter. company And shares shares Equity, over $XX

count now As outstanding XX.XX a million. is company's result, the share

line expenditures free free quarter in of growth operating positive in after capital flow. ability million. at guidance quarter Looking will also model remain particularly remainder asset-light evaluating on we to XXXX our the flow $X.X flow XXXX the $X.X quarter moderated comparing will of free company's to And growth. Core and yield ahead for activity opportunities. second was Gwen as growth who CapEx an for to primarily period will expect and XXXX, flow be first $X of XXXX generate levels anticipate opportunities but our with free results, with continue update the and capital look discipline of in our beyond. and I important paying cash cash cash from activities at also for is CapEx to The when with company increase, strict shareholders shareholders levels continues improve and Core for would half continue cash an flow for discounted business historical expenditures the for We while valuations. million will metric to company's flow financial initiatives. a for free cash million. flow of projecting quarter, to to outlook. the to the cash continue capital activity assess utilize and This levels it targeted we for over was cash marks where now another flow Lab those and turn positive believe cash generating are generated we And models with

Gwendolyn Schreffler

Thank you, Chris.

our execute a net strategic Chris invested reducing on on For maximizing continue free have while focus cash generating and will capital. plan and Core XXXX, to Larry as return discussed, both with debt

With our of well problems technologies growth to Core's ample positioned targeted focus, to company continue opportunities. capitalize with client-driven and artificial the The oil international than strategic include company along needs digital innovations the Core invest that aim up. capabilities optimistic will proprietary Additionally, of the expanding Core's liquidity planning databases as opportunities projects the international remains its technology on both machine as Core's learning, clients. the sees These opportunities which part is of growth global the revenue remains solve and markets of new is momentum to to XXXX and underway in about crude activity, throughout international stage projects in active capabilities market, on will spooling for more in XX% already in for Core's rebound. intelligence are of foundation exposed meet company throughout growth invest stages in remainder building our the drive remainder Core with the to XXXX XXXX of which and beyond. is and the our Lab -- planning having international transformation. Core company

these South the of regions other geographic include Some Atlantic various Qatar of East. Mexico, Turkey, margin, Middle areas and

optimistic follow single near supply Reservoir to midterm, Considering with related persist activity, be into COVID-XX revenue activity, digits XXXX. quarter and remains U.S. a crude in that quarter. remainder sequentially the disruptions international winter unpredictable of mid-to-high spread to the expected and recovery will of Core the are storm, improvement second Core improvement second XXXX. Description up for gradual the following to demand the Core which in to in the land projects strong sequential the expects continued improvement continuing over frac While in oil has part on U.S.

of As for second Core compared to a Production Enhancement land first outperform XXXX. mid-to-high grow U.S. expects quarter continue the to or when to teens result, Enhancement Lab track revenue activity XXXX quarter Core level. to Production projects

reductions as midterm. may to the margins Core's clients' are the be company's reinstated structure, Additionally, activity back near in cost and softer increases certain cost incremental into

summary, Core and performance related However, levels performance remainder the near-term historical incremental once Core's of financial workflows losses and expects restrictions, fully activity challenges operations for to company's client In and second is particularly normal or well are market XXXX. to returning and margin growth costs guidance penetration, activity better. throughout in excluding on directly gains the excludes exchange. as quarter international sees improving in related are The underlying foreign these to based international restored, projections existing Core opportunities as travel long-term new regions. projects expanding

also XXXX assumes that, back to rate Second effective With of tax XX%. Larry. an quarter hand it guidance I'll

Lawrence Bruno

Thanks, Gwen.

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

Turning Description. Reservoir first to

international the compared quarter, was million, impacted was travel nearly revenue negatively North downward X% complications America. in seasonality, typical by and by Revenue QX. down which $XX.X the in came For ongoing at to the winter storm compounded

operating to decremental was to margins XX%. at able manage just income, company Looking under sequential the

projects international New up. are Description for Reservoir spooling

As extensive the and coal recover core in energy away multi-well Gas Türkali-X opportunities global sees plus direction laboratory in shifts Sakarya patented under first from demand this analysis of Field strata. Core's cores from experience transition. Core Black provide In Lab is the Corporation, was and of quarter Lab, natural This the analytical Turkish Petroleum in toward technologies deepwater in program Core Core's laboratory conventional to global the on well the proprietary engaged unconsolidated XXXX, from evaluating leveraging gas, Sea. located the

quickly Lab's increase strategies. content from organic rock generated incorporating Core Middle first the the best utilized large a its properties. Core Core's East. drilling drill completion gas of continued of onshore a is In detailed characteristics, fracture for well global Tomography portfolio study leveraging properties. very Core geologic of in this variability these derive and during critical wide program scale, Core's recommendations evaluate cores parameters these The algorithms an uses physical from laboratory-measured Optimization of Core well they were gas analysis field. encounters High are questions Core with Frequency will Computed addition, unconventional resolution, provided in laboratory expansive is being integration for proprietary comprehensive underway A Petroleum modeling early high in expression a geomechanical the Caspian unconventional multi-well provided well branded Petroleum's teams. in datasets, discovery. information were the now digital petrophysical to datasets traditional stratigraphic learned Core These proprietary high-quality information target's as to experience technology Dual-Energy deliverables between conjunction to of Black method. lithologic reservoir, properties. properties, utilized used using the application, the be national experts refine technical cores information pleased measurements, integrated technologies Testing natural laboratory will consultations in as rock technologies variations branded drilling-derived as technologies, region model petrophysical Gamma Upon this of Core with this forces week potential then significant evaluate important industry sample the Lab's arrival expedite quarter to work a to innovative the intelligence surface on Also, recently reservoir deepwater that along NITRO, These with Reservoir Core learning, time as and This program machine as reservoir practices geomechanical Sea geologic assessment. to geomechanical includes of another company physical through fully that and logging be continued project oil the natural Turkish following using immediately are Turkish of scanned of bit at hydrocarbon in Spectral are a proprietary key feedback as into laboratory time-honored to of rapidly process enhance recovered discovery. parameters project the Core's studies. as development, are within measurements engineering XXXX, Non-Invasive proprietary assist adoption as This calibrate proprietary, economic is for new conventional pressure and and laboratory, Turkish proprietary range petrophysical deformation the analysis core, in the a Lab In artificial evaluating being Petroleum region the as of This as Core's intervals. assisting helping Lab's new is Core's datasets quarter. a combined progressing and Turkish on of Lab's Lab's The integrated Petroleum's include NITRO expanded pay methodology can a and comprehensive D-Code, selection receipt in the program. Lab with These types,

projects gain reservoirs During to insight physics-based highly faults, and completion The identify geologic effective identify in both the vertical on and This the Core's horizontal variability various variability, is target fractures being used is conventional properties only variations noninvasive ability into stages. U.S. Among located and of initiated the were Core's in both Middle clients make decisions rock to the between East. location data. time-sensitive deliverables, rock, wellbore and and D-Code along approach in of formation possible formation clients fluid quarter, because by and allows unconventional and completion regarding to organized, stability intervals. extensive pressure of wellbores, proprietary, Core Lab's database pressure

where manufacturing strengths the came U.S. Core largest Moving Enhancement million, systems completion and idling winter $XX.X now negative on of impact activity storm to in diagnostics Revenue Core's resultant X% the at the facility. up display. Production energetic were and in of temporary despite again sequentially both Lab's to

expand in to place casing its competitive the to product downhole sensors, to systems due ZEROXXX surface penetrate outer the set the oriented the optic These data programs. of wells for with advanced Smart Enhancement Core's in real-time in that the XX% pleased are their fiber came conjunction during at well the market which utilize the downhole segment cable, techniques. cables are fiber with incremental advantages traction as relay to response, completion attached always storm. despite Core's to artificial preferred margins continues allowing Production improve critical the by completion. decisions through make Core's perforating inefficiencies gain over continues well perforating products. sensors line. smart optic wall lift to are on wells clients fracking, and We the to completions patented system operators over spacing and caused method In the looking technologically

perforated the and frac must cables, operations Following subsequent hydrocarbon production. still for installation be the wells and to allow of sensors

will be the vital that This with the charges optic operations, the not lead would During are high in accuracy. fiber the cut sensors. that ensures degree or communication the cable loss damaged, with of perforating to a oriented guns a perforating it's of downhole which

During in to major and Core a U.S. wells and first number the a operators major of Lab worked multiple the of perforate XXXX, with provider in service Canada. basins smart quarter successfully

in was no a guns Core Mid-Continent completed region example, optic job XXX or sensors, in supplied without significantly to in incident damage North fiber smart a system well of cable America. QX, time. with nonproductive an stages operator to of consisting with designed with and perforate For and XX The the no

Another stages operator well. ZEROXXX perforate guns Rockies where XX smart to the XXX system utilized a in in were used

Here or of whether a during position client's Core's to XXXX, zone drilling the producing of completion performance the accuracy Core's and trace smart completed cut had program. and sophisticated orientation zones the the in water been ZEROXXX in minus drilling deviated to oriented was of Also, of wells. has perforating best-in-class had multiple Core coverage isolation, in when to utilized sorted able quarter Andres Basin isolation the offers a were Core's Core's change diagnostic for That Formation as interest. poorly used identify date, with X X request, first on and ZEROXXX open particularly hours Spraberry operation, in utilized design of time. job perforating of help stages experiencing for zone appreciate shot To assess Core cement diagnostic completion patented internally itself expertise will system successfully correctly distinguished clearly without less of resulted nonproductive production superjacent systems decreased and now again, in in water bars. incident when evaluate spacer used Those a systems engineers holes. SpectraStim incident mud or has questions. ZEROXXX and reduced and diagnostic oriented can across the the was Lab's their system We the the system same Permian to technology perforating require location San At cementing findings time. plus thief the along was of for also completions. San The system versatility use multiple client of when production. externally completion the patented was interval West Texas. Core's the zones water-bearing to by target incomplete compared well more producers, the goal with thief its water are Tom completing leader were multiple operational wells muds perforate been our to proven In the effective on perforating without traditional in participation, along that rely concludes the cement with planes X wells zones to the on proprietary SpectraStim to these costs. positioned degrees. water-bearing to X and confirm Spraberry properly the with brought ZEROXXX densities operator provides operator X-stage disposal well eccentric interval. The many hundreds the nonproductive the weight your job. review. by call higher-than-expected cement The losses This led been completing both isolated Andres cement the and

Operator

comes from Wolfe [Operator Blake with Research. Instructions]. And the Gendron first question

Blake Gendron

I vastly. are gas opportunities. Description? of then lot pretty run start thoughts changed Reservoir sure target sounds up Encouraging rate, in thinking to just maybe I'm now revenue for that done has it's if it quarterly a for about your level. here. like know past. Description, the maybe market something the international opportunities longer-term And I'm not revenue we've for natural it's wondering the to a Reservoir Obviously, But a are spooling medium- what appropriate for

for where the it maybe forward? structural fluid What mix cycle this means has been margins if incremental or opportunity past. heavier the large margins So moving isn't as gas, in either as cycles is just that

Lawrence Bruno

questions. good Blake, Yes,

quarterly, think I going the to that. projects board. out got There's how it's uncertainty premature our progress for First, still just on are in too clients on much R&D on they've that the too drawing

talked couple question about on a for foundation, gas In fluid in many to So out In behavior to then going a you're beyond these. over having We a that you'll near you still this fluid There the gave look whether natural phase. don't over example, Australia outlook is property at some out in want pressure morning third others. our quarters liquids natural for of and to to have questions the our and of less we which opportunities, I'll a are into some what addressed. -- bit skis of the or fluid dew on potentially of testing. terms last important. other creates gas number we fluids several if drop QX. get have projects, the that exposure And critical yet have to gas point your very your you question get always words, cases, of be outlook in phase dropping start across projects critical

have So phase, now phase, and liquid you pour gas in hydrocarbon space. water, the a

maximize to field always effectively performance is So the to fluids evaluation production. model necessary be going of the to and reservoir

we that still opportunity we for So gas there, there's look more us and forward as projects move to forward.

Blake Gendron

Absolutely. Helpful there. color

opportunities portfolio, the Or you capital as a should the it to deleveraging. that be additional tunnel maybe at there's us question maybe CapEx? some And remind just R&D consider expect allocation, like end M&A balance just the so target And leverage bit? Can here in offering. here heavier forward is? sheet, of expanding you it the light we of really on finally well-executed we a spend ATM what noted for you here Second maybe move going step would up terms is seems the you here? Or pursuing commercial the

Christopher Hill

Yes.

we've is and X.Xx off mean EBITDA, our we're here historically But earnings part talked and So that I'll off add recover target. start I But start to then you us about to question. necessarily your probably doesn't of would as moment. would to and going at things for Larry debt. a be, the grow goal second say, it hand That your

once we could be go are towards that it so. to So deeper Want it, call we let's that. the a XX next, X, say, get X.X below over working working towards definitely below into, But or let's months recovery.

Lawrence Bruno

Yes.

we've that of offerings terms be on out a focused for new In working it while, into technology, been on the R&D regions. will new things service spend, expanding rolling

last that and Brazil, on bit Qatar. got I will Mexico, several into correct, say over You've the see R&D a be quarters expect about side. a it in would into year-over-year, we standards to year-over-year, few drawing we'll unusual that on But to our historical don't us you're heard talk expect the We've particularly into boards. others spending, discipline CapEx XXXX. capital higher I'd CapEx up line stay expect compared performance in of anything the to with terms

Operator

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

Michael Sabella

just And about Or we in So to to margin you expectations us thinking what have out Are should there before able as the really back of normal. of XQ? back means some we still that XQ? set to -- towards getting XQ, then kind be normal? for it it just pressure you kind gets to just is all for near back should pointed incremental term alluded XQ look incrementals to modest help in half here and

Lawrence Bruno

Yes.

in I right asked last calls there. that is lot over we've And make and to several Mike, to think back organization the a we quarters' roll we all personal the do earnings looking got staff you're as along to of compensation here benefit can. I quickly sacrifices want we've path our those directionally, terms thing across the of in. think stressed the as that reductions. We've

so a back next and further start as that's that's And in, get for the us we you'll or margins we then to. when little incremental a going X. think And along weight see get to take back on get I be to to those quarter steps

better. for respected, But XX% that going or historically, near lower Core well margins than it's be incremental Labs, think, and the at I lumpy to is very term.

Michael Sabella

be sort get then to in there. to what Are And us thinking kind XX% back Got kind walk able of recovery to it. about you through able Reservoir Got you Description that margins this to think XX% to of back segment? first you'll it. of and need revenue path

Christopher Hill

Yes.

the a I past bit think we've that about in talked little as well.

So to we'll level, expect quarter but what if be higher, you too could able kinds we little bit of to that be would little will in it to project that where level we exactly levels. those we're but revenue It's to XX% that be a back Could like, we were look going be be approach. go say mix think to range. the on when it early a we start at reaching million when $XXX a

Lawrence Bruno

And say, done -- important let's and side, into thing fair I We've lower in leverage and our levels amount in system forget, in now we margins make the R&D of point holding than is right with control have changes those think terms lab help at reorganizations historically. we'll of efficiencies the we've been advancing costs. achieve the we're to our, to increasing built of got the we labor the that on be the a infrastructure anticipation operational don't that we've laboratories automation structural on revenue able to activity.

I R&D So XX% than would look it. And -- in I achieved bogey to we've call the there revenue then incrementals. lower for, satisfying that a we'll margins historically at think level get on it, on very from

Operator

The next Company. question with George comes & from TPH O'Leary

George O'Leary

work Just oil you touched of facets do the you patch. guys on always and macro many front good so the

Or we efficient the that about And production case trenching? point today how And translates we a just just bit? increase, Core argument them. what levels with I'm the to I thing is, respect that exit-to-exit a the think on are And see with end crude are hold folks production of to at flat, for you base you into are can grow fade? all of Lab wrestling house oil respect kind we are somewhere we in North it and is to activity macro a I curious flat the they ballpark. and going we so level were oil with production? And how to crude think how or from the do is up front I'm an America, activity where view think little make curious

Lawrence Bruno

Yes.

the our in or of -- through the think clients. kind putting viewing of our lens I heads

many they've I our think plan investment sort a they've of to and us, of their the they're the going going to for expressed in -- what larger of companies, the to -- they're of publicly for discipline for well-established executing lot have XXXX. to community sort expressed is,

And going have and will So on think growth going budgets, I I think budgets. their those to that production. they're stick they're to in with weigh

be to their to with look seize commodity I sheet, their X unrealistic main in, might could strengthen that of production stay in think debt and some and that think probably see that the balance moment of Added stick where advantage kind particularly if for larger to plan. smaller think push that the there idea range going -- the we're is take prices together, I the production things the the operators prices things flattish up. driver, pay operators, not are. and of is do I down going they're

George O'Leary

color. Great

been growing, would realize small hot late. be still for it's fracs which seems curious mix Labs? has a a and portion velocity I imagine guys. of I'm you Your just impact Core does to trend, frac the simul simul topic they today. But I revenue this accelerate of how how

end a but mix, think of it's zipper -- your early less Just you thoughts. I multi-parter, just U.S., to given estimates fracs sorry, XX% from mix. are realize And point? this the the they'll at up think think of much but do are as how think I anywhere the Or do your fracs then like percentage broad simul you in grow of did? up pervasive X% I presence a you days, they'll to pervasive? curious ask

Lawrence Bruno

Yes.

create sort revenue then for think picks slacks again. us, Production it words, and get in and I intense other of you there's activity it periods In up Enhancement. lumpier might where it

do that's So there's -- be a, call to early going on phase, all a technology with an with forward adoption bit a be it, going there's it's I tell going think that. new to that introduction, going for a And seeing to where see efficiency terms washing terms question problems that, of then gains. better they're what goes. it the in in I complications. phase and And of our probably clients we'll out of think

Operator

ISI. next from West James The Evercore with comes question

James West

deepwater. seeing I'm on you're curious what

jobs. on heads up as the that you good there have those going of but outsized bump be to kind seems go some in when of you year, an insight given deepwater, half you this some I Curious get we what guess, you're when gives mixed, back deepwater kind you outline seeing guys into on You could it a to There's of of bit get momentum. views especially the receive you're if on given planes, samples. core

Lawrence Bruno

Yes, question. good James,

lingering of right. some to the I would think, COVID, effects have say, it I pushed are, would I call things the

them that us it's come hey, not us clients they bit any just and be for to seen and say, projects. an a haven't frame, We to they'll things We time those roll out. going cancel uncommon then know to -- give it's any before long expected

keep in the that I eyes for I think geographically, deepwater in, that example, in. talked Turkey discovery but our this we about involvement we've is would where mix open, throw we've got

us. flare-up a project. what steeper subscription we have right Mexico a still do today. just that of there. new point South Mexico That's, say, offering would may ramp we I for things We an that. from can of deepwater phase Gulf membership deepwater would It's I COVID some Gulf not extension X It's Brazil Atlantic of out we'll see Yes, margin challenges maybe project. had also into uncertainty see We've some forward. creating going looks the in be coming. given real say strong as our

our is planning so after clients right bit a little And now. are unclear on projects. getting Timing these

James West

Okay.

shifts the towards it. -- kind a oil. global just remind kind there's And have then, little on gas revenue activity versus any of it more bit real does of us mix Larry, you impact Got But margin Okay. could Could or just your if gas or a you and bit oil? your and change? in margins, can sure mix Or change doesn't. little it that doesn't about revenue how it outlook? change whether pretty it's talk I'm that of

Lawrence Bruno

Yes.

would So little you've and water. us. tend bit relative for projects, around gas a permeability, to like X where oil phase and liquid I the Things edges, it -- oil higher got say, more value be

a condensates, And liquids -- looking reservoir. drop simpler. some gas at phases you X similar little be gases, you've cases, to the liquids in an where wet a testing drop done. dry water. extra When dealing can be where oil got got out, You've we're you're got got requirements gas and can lab would that That's very and it's is That in gases Often can as with that requires -- in rock. project, moving you've those testing can what you've protocols out.

bit a depends it the be on think quality I project, to in. gas little as gas the going So what that's to nature of

properties side, on the determined in are the are rock in holes is, the thing variability by The the rock. second the rock fluids that in not the

so of on for if that I good clients, That are drive and our to for studies Lab. of core And done. say this tough our to will hate the amount very geologic depth but the and rocks really the variable, clients, analysis Core core have get

Operator

Gruber The from Scott with Citigroup. question next comes

Scott Gruber

internationally to you the of be growth Or core. just you retain guys kind about see for to could just of given double-digit up, growth optimistic of international were in just ramp terms exit could that view? wanted change. bit rate in I there a we of that gave? James' Do thinking follow going and year slower still we a second question and color the the is of little of Last half call, where you kind guys

Christopher Hill

think Yes, of I the we've don't was the way time as up on year-over-year. was that that. I last was really sort And framed our it this perspective think changed

low XXXX. year. digits, currently, half look the to projections this higher to half So could growth, at of not But would for of of double compared second half that when second double-digit would half suggest you be disagree with it compared second second we last 'XX of year

Scott Gruber

are projects a sluggishness little I'm maybe of point, moving Got appears beyond faster hair there's onshore little you. this some bit a so just pulling of it And at much offshore? -- if the as bit the maybe

Lawrence Bruno

on depends client, things region, COVID, there. depends a the depends on the lot on on of Depends

trend of client in onshore seen I tilt don't behavior a there. versus offshore we've that So know

Scott Gruber

just an can based for of the into call acceleration 'XX coming rate we you. XX%, together? change on it, project XX% get eclipse, can mid-teens 'XX, prospects into the Got And that's queue the to

Lawrence Bruno

Yes.

too ourselves Let's of not get here. ahead

the in talk and we for black I'm we some we encouraging to the a in here. hit the see -- third think encountered the QX U.S. if swan year I there's signs that bit a a for little of said about storm hesitant rest

of with our improving, fourth throughout And client the think the think of year-over-year, giving about there. remainder Chris in amount we Let's see now out I numbers get us that. we stick a to far I what see XXXX there threw terms now, for right that's of terms swan we'll fair think are into if out as I there's in But a Right guidance. XXXX. black improvement contacts said. optimism of We that as want

Operator

with next The question Meakim comes JPMorgan. from Sean

Sean Meakim

on Maybe last just to clarify that point.

rate back R&D something year, half we're to run R&D, results. $XX million build going in that half-on-half, or trying of continued half just growth a get of to something a progress the back versus get confident like of You're maybe within a to back of sense it's the half range per to 'XX 'XX. the back off in expectations? close quarter. double-digit Is for that XQ kind Implies to I'm see the -- quite

sure make I what to good a sense of Just like? look that range have can

Lawrence Bruno

Yes.

think shows I I mean, that accelerates gave we that's right. I for we a improvement half and the -- that quarter-over-quarter think the back in bit year. Gwen the see think guidance lining of up QX, we

Christopher Hill

half the assumptions year. about and some was lockdowns to infections these there's say, is there, that assumptions some -- dissipate second start into built I our that in there's of the assumptions. those That And to in COVID though,

Sean Meakim

completely fair. Yes, Right. that's

focus than rather to on coming investors incremental preferred back sequential. margins just clarity a Historically, then little to in maybe to year-over-year dial So there. more you incrementals

messy, a a bit given versus P look fairly just quarter. So bit XQ were RD at still -- went elevated it's negative math we where are a for if the margins they today, is 'XX,

to, on couple quarters. incrementals So next lower. say, guiding of the that's sequential XX% medium-term, for Presumably, near-term a basis you're something

margins are you how around investors guiding mathematically, progress? Just the how

Lawrence Bruno

Yes.

the on I got that's view you've -- right think it there.

going pretty summarized to the toward side X. grow. system, those back there. And Then as would of or get think the I to choppy. get say, dialed continues sort -- into I low we you've quarter It's for costs revenue it incrementals well the next on be to back

two. cost look don't will And but and us start the from savings into, happen be to the convey loyalty it care by care to going -- restructured have we dialed been I us navigated of network, toward our think want tell being see that function know call the sacrifices we've displayed see And we've see the is we efficiencies and lab to incremental to of made. them cost at those high. can't will this. want fulfilling leverage take path arrangement that's going that what employee there. I'll next are and very soon or how employees that We it I it's as step quarter fashion, is back historic everybody to that in to as automation that wait message You'll is opportunities and take a it margins. I the build as our got the to what we've we the as But for that a I possible, it, of that's some to think our to be been

Christopher Hill

to tend we'll when only big swings year, I to where would in And add we've is had sort we've gravitate last of been a Right. there's the Sean, the that thing comparison. periods of to more that sequential like

As get year-over-year environments kind a shift we bit into sort we little steady, of back then of more probably where it's to comparisons.

Operator

The Lynagh Morgan Stanley. with next from is Connor question

Connor Lynagh

more had impression, of I caught think ATM so play I can left the know guys if I you as the me here, was not the was the to that I you this could sure with play I'm but last defense. opposed this misconstrue but offense answer, full asked, let the extent call and

or I other types investments. think strategic M&A optionality for mentioned some of freeing some you had up

And frame strategic fast you talked I anything relatively Or M&A why or this are think organic seeing the you program? how that you about front? investments. opportunity on the But interesting you that? is would on went

Lawrence Bruno

Yes.

well whether growth, terms navigate where investments to were aggressive we on to I there. or leverage mean, having summarized ratio how pretty the would it you've say, in think wanted internal I it external. our were, in we be of a I period we for -- get

And like We're evaluating. looking. of of those constraints off the so we always always idea us. getting We're

presents I historically an acquisition. is project opportunities, Some to came to that to XX ago how Lab whenever advantage want of, that. it Core right you when through of though, -- in look than know I the that I to or can take service we're understand I to this, the on years itself, not as Core that opportunity say and technologically at investment. high Internally, has looking, the priority. more Lab return wheelhouse same interested historically, whether we would complementary our applied acquisitions of discipline you opportunities product going level we make that's has returns. to and to internal we always offered get add technologies. our always is development would -- proper say look very guide us But for us our

Okay.

right think wrap XXXX. company the XXXX I up continues we're activity leadership operational ready In to to and position levels now. Core's improving for into summary, throughout client

there still there While are to uncertainties operational the are midterm, ahead. in opportunities many near

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

introduction to In and driven through will addition its the term, our value new to use opportunities to cash growth strengthen we'll problem-solving technologies market penetration. to both continue free sheet. dividends, balance by shareholders near quarterly our In of the bring Core

team Board to and Core have results the these analysts employees continuing in that possible. The our closing, we Core executive cover their be a made thanks proud all of shareholders associated management give So that our Laboratories Lab. the and We're with thank to and of special achievements. appreciate worldwide

Goodbye and spending our for for with thanks time forward to we update. look next now. us, So

Operator

presentation. The conference attending today's now for has concluded. Thank you

disconnect. You now may

Core Laboratories (CLB) 22 Apr 212021 Q1 Earnings call transcript