- Earnings call transcript Q2 2022

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Operator

Good morning, and welcome to the Core Lab Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Larry Bruno, would like to to over conference the Chairman turn I and CEO. Please go ahead.

Larry Bruno

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

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

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

Gwen Gresham

estimates other forward-looking subject uncertainties any outlook. materially the that This and undertake this obligation reports statements. with actual call business any and most to the on by filed XX-K and our These result of update information, as I'll and otherwise. that events us number risks These AFM. publicly recent or projections, of uncertainties during registration future that to are this the risks Form differ company's types no from We as to statements our we as morning, conference Report the of revise Annual whether include well information. discussion make statements are cause new forward-looking of would and SEC other or a could forward-looking start results discussed statements of a mention statements in we forward-looking Before include may some the

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

Larry Bruno

second X% Thanks, quarter Lab's year-over-year Gwen. increased In the revenue of by revenue sequentially X%. by XXXX Core and increased

to post activity collateral XXXX, for both were operations prospects and of arenas expect leverage into growth nicely the business reflecting global those conflict in continued across XX% in company most impact the Ukraine as remainder year-over-year available Russian regions. we the QX operational Core and the European segments Core's and Lab international in improvement although Full to U.S., For headwinds sequential improves. in margins the

Lab half as in up started traditional our as beyond; in with unconventional growth I for carbon Reservoir Middle multiple sites. next finally, the over Core capture COX established clients quarter has addition with reservoirs in as their engaging for itself all to with prospective NOCs plans both reservoirs work major clients we there evaluation the and in of region. where is on visits sequestration During the expertise Core of Lab Description, work years; Core's with well the Lab takeaways Core pick project subsurface our and across focus those the a volume involvement growth production one, begun significant to on Middle two, visited leveraging And accelerate Core's into have three, has East, Key broad second industry-leader of of XXXX Middle move have several XXXX, to completion an expected East from across region opportunities as and initiatives Middle conventional the is second East East in include: diagnostics. products in the and completion sequestration

factor parts Description, military assay sanctions important in Another In Core liquid impacted hydrocarbon demand and and the segments. in QX Ukraine associated work has Ukraine, business with Russia, that slowed of conflict conflict of Europe. for Lab's across Reservoir both in the

for patterns continue its Over completion three, United maintaining its rest we supply projects XXXX of focus production introducing on key into one, organization; in strategic Russian and key service impact exports markets; likely slowly a a focused execute delivery two, the new to Core and of of objectives lean delevering Europe maintaining and by: resumed. still product company. geographic continues and to States, Ukraine and the these demand to will sanctions enhancement realign the as during While services XXXX. return client anticipate gradual into offerings have on

service. served be on some to of Core build and innovations to and I'll strategies the latest our in talk to review section publicly XX and solve year Core which resilient operational problems shareholders, will well leveraging employees call. as tenants value dedicated our that this history use always Now Core's traded -- review financial by relies Lab's our plus a more of innovation, The culture, company. clients Core's technology over the of Lab shareholder customer about interest

challenges returning and shareholders. remain we company long-term longstanding opportunities, capital, on navigate growth flow, being three focused will maximize invested free tenants; those to current and our pursue maximize excess to free cash the financial the cash through its return on While

dedication, commitment more thank and on, now active and over all to the that and our for employees loyalty detailed needs the have in to turn prepare I'll moment we Chris meeting of for review. the I clients' it as market. for want for the our adaptability financial moving Before shown many navigate

Chris Hill

Thanks, Larry.

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

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

adjustment of compensation reverse previously second longer include benefit financial results. quarter of compensation the a associated vest. to non-cash results for has discussion expense with from expected XXXX no the reversing are also been million the stock to Additionally, our which of recognized stock from This $X.X shares, performance financial excluded the

So now both growth X% the almost and prior income in from revenue operations increase the X% $XXX.X U.S. continuing approximately quarter, up looking year-over-year. in international and up in The the at quarter, driven in $XXX.X the second million statement, by million from sequential was revenue was markets.

expand offset international later Euro the been and conflict, result underlying devaluation partially as the British of in nice on a multiple of by However, discussion. the regions growth have which in in and Pound the Ukraine-Russia disruptions operations the I'll continued

So last revenue, from service quarter. sequentially this X% $XX.X more of is international, which was revenue, up million quarter, million $XX.X the for

and about multiple second secondly, international our million XXXX. our activity from When to quarter operation in and underlying operation of the the in during primary conflict $X.X revenue year-over-year. half between devaluation the at Euro impeding Russia improved has has in looking two there regions, from factors service and first, Ukraine; overall Russia decreased $X.X declined While the approximately British $XXX,XXX Russia when XXXX first million are the compared sequentially Revenue of and growth; revenue the Pound.

when XXXX when million devaluation Additionally, is both in British of Pound the XXXX, million currencies by built into about first compared $X revenue these the second has about second U.S. lower during and Euro and $X.X translated compared to dollars in quarter lowered year. of the the the quarter of sharp by when quarter last to

experienced U.S. XX% in is improving U.S. growth more year. sales continue tied up grow steady XX% consecutive equally and a services activity and X% with for line in Our million quarters. revenue to $XX.X for sequentially and to market, have international which associated the quarter, the three however, product XX% last up levels International strong rebound of shown year-over-year. Product the the last were sequentially over from activity and sales with

quarter the bulk Product our international the second from and another. which by approximately sales We increased the increased sequentially. led in are was quarter. can typically over energetic sales products, delivered sales orders sequentially product international larger large and vary during Our X% XX% orders several one U.S. to of

tax services million cost of incremental of revenue, our quarter non-cash about expenses G&A for margins down in X% outside million approximately from quarter million $XX.X is $X.X second for $X.X basis to quarter ex-items The expense adjustment items company on sales includes margin held have yielding quarter. million of for compensation employee improvement market quarter a previously expense are G&A for basis, improved reversal from quarter below also G&A earlier. the be was tied more XX% down sales. for Depreciation fully international in increased just stock to EBIT improvement GAAP compensation effective basis impact retirement at rate million, was mix and quarter in an XX% to in be recognized ex-items insurances the $X.X with as quarter, of Interest of expect from loss manufacturing manufacturing product policies compared nice would service The through XXXX for last company-owned the and last tax the last a for due GAAP Cost was -- by ex-items last for up amortization geographic projected quarter. anticipated growth our mix rate efficiencies sales. resources. full-year remainder travel, year, slightly XXX to in across the million providers service of the quarter gains in $XX.X of was to value Income million last investments $XXX,XXX the includes the a we primarily this increase was quarter. quarters an globe and a to $X.X that which $X.X million ex-items with plans. of points to up XX% the the ex-items to each and XX% rate to was the the revenue tax future G&A quarter. was levels. a EBIT and a the of restored, XX% employee growth driven quarter to fair toward EBIT million $X.X the for was or associated the fund sensitive and higher life discrete anticipate $X.X an certain quarter. relatively in historical cybersecurity from progress of effective of and quarter. $X.X will from flat the by quarter We On and increase was absorption in $XX line continue a XXXX. million of ex-items little we little million improvement and somewhat was on quarter. expense Moving improve the sequentially. a second million earnings trend last forecasted $X.X the mentioned of from With

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

$XX.X Receivables million flat quarter. the Turning sheet. from remained balance prior to was the and

was at couple Inventory million Our were for at from quarter quarter DSOs last last improved turns end. million, at XX comparable up X.X, $XX.X which quarter. to last approximately XX $X.X quarter from for which Inventory quarters. the is of the consistent the days, remain second XX days June the

raw inventory. experience are of As packaging, cost previously an cost highlighted, increase continues to and the costs, the materials, of transportation company in which labor, increasing

to supply carrying disruptions. challenges to a will inventory amount help Additionally, of in persist, the continue which chain larger mitigate require

liability anticipate to we with sheet. will at levels some turns improvement of inventory And continue progress now current remain to through XXXX. side as We the balance the

from increase XXXX, at net of of considering $XXX of last second or was the long-term end the was Our $XX quarter $XXX debt million, the million cash quarter. debt slight million

expand on July revolving extended to facility company's announced previously credit The aggregate additional an facility facility. renewed commitment of credit XX, $XXX an feature has $XX with the borrowing million million. As an we and the renewed accordion

end. ratio return and Additionally, compared thereafter. the X.XX to at XX, ratio September quarter permitted maximum -- X.XX increased leverage X.X through our to XX, June will leverage XXXX, X.XX X.X At was was last

through our projecting quarter slightly are next improving We leverage decrease year-end. to continue ratio and

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

flow. cash at Looking

$X.X following paying the elevated company after also profitability operations XXXX, our primarily a negative was the quarter second $X.X January the restored quarter for down for level from first Cash in the of cases the $XXX,XXX exited the while from X. to was free second was we The activities the the flow cash company's and factors. the a quarter operating of For experienced very was second Ukraine-Russia significantly million and cash million. revenue XXXX, of quarter, due impacted for of as the employee began, and impacted The COVID began during the conflict on negatively quarter. quarter Ukraine-Russia as compensation quarter company first our CapEx conflict

on receivable second level lower a accounts quarter. collections at cash result, during were a the As

inventory. product with lastly, capital And paid challenged plans Additionally, cash chain been reduction have and fund to from plans operations second sales to cash factors associated levels severance first And to contributing during in of from cost operations remain requirements in quarter inflationary were certain working liabilities partially are as unfunded continue supply was the also increase, also used and quarter. the obligations quarter. employee from executed retirement accrued higher

and growth the expect working quarters. in We free company to positive the to capital to from cash strengthen, levels for future of with moderate, flow inventory higher associated cash operations generate in

will the managing aligned expenditures be to with for levels capital of continue XXXX. We activity remainder

laboratory For we its $XX million infrastructure, Capital business an million. cash with historically property, exists $XX level is growth. company's to model free generate comparing turn initiatives. from and expenditures assess of valuations. outlook. at I results, cash the asset-light expenditures, to capital be and ranged particularly to We when free to believe capital evaluating capital company's who now in primarily periods guidance had of of in expect intellectual continue with targeted the leverage yield revenue, opportunities ability That the important cash full-year to of profitability X% ability and will discounted to flow strict Core for same and expenditures Lab discipline on shareholders financial metric capital business flow a range for and growth X% update shareholders have will utilize significant historically revenue those our requirements. and even over during minimum Gwen XXXX, an for models to Core flow has the it grow today.

Gwen Gresham

Thank you, Chris.

in anticipate will may by that projected on as XXXX, executed oil in fields these indicators leading plans the growth as slowing the second moderately supply be elevated, but bought year-over-year XXXX, are look crude offshore both in supply, are uncertainties activity, oil more international we growth. increase stimulated related international global economic fundamentals of counts the to been due to multi-year see to exposed will reflected fluid completed, to As forward oil oil and half revenue crude commodity a company wells oil business limitations price globe. international impacted rock XXXX, international with once having prolong cycle. being more Crude spending volatile basis is our opportunities production segments crude into have onshore programs for and The around regions of demand or revenue drilling and underinvestment expanding XXXX, have to remain rig reservoir collected. samples we of be when tighten With and XX% projects. beyond. These capital to than many market and as remain growing We active as and

improvement regions, to We including margin, across client the the see Middle East. international America continue activity modest Atlantic in and South Latin many

laboratory conflict sanctions Russia-Ukraine However, Western expands. geopolitical presents our continues as and and Russia, on some uncertainty networks Ukraine Europe Russia the

international count Year-to-date single-digits reservoirs, expected sample of expect industry our Description to third clients' been Description XXXX. low-to-mid improvement activity has in When revenue outperform rig Reservoir rig changes flat. Reservoir the international and sustains their and We drill count the quarter the by in the is to improve levels.

which Enhancement, onshore Now stimulation completion Production typically turning with to exposed U.S. correlate well activity more to and is programs. and

sequentially. the expect third count rig to U.S. We increase quarter XXXX

moderate may in continued third-party potentially and growth we of and In single-digits. increase equipment is rate quarter international having availability lines project limited Reservoir the continue activity a of into revenue oil deep markets. Description's improvement offshore of to the sequentially testing improvement in XXXX the U.S. in assay positive sequential Consequently, laboratory The realignment and is third projected Production affected on by Enhancement summary, projected impact crews. by completion However, supply mid-to-high water for crude frac the region. be of to

income margins $X.XX. million, As be approximately $XX.XX is a expected result, yielding revenue to $XX.X project from company million we to $XXX million, EPS million operating operating $X.XX the for to range of X%. to to $XXX quarter

gains exchange. underlying Our and for third foreign losses operations excludes XXXX projections based is and on quarter guidance in

Third effective to Larry. pass XX%. of rate the With tax discussion assumes quarter an that I'll XXXX said, guidance also back

Larry Bruno

Thanks, Gwen.

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

Reservoir to Description. first Turning

up For $XX.X came QX. slightly compared to the quarter revenue million, second in

As Chris reduced. to of income mentioned, Comparing lowered margins growth the as ex-items devaluations CLB translated These devaluation discussed, and impact revenue XXX% the sequential by the $X.X currency were segment currency revenue first consider million in sequential sequential with the devaluation when Euro looking of million first accounting is sharp Russia-Ukraine conflict, Reservoir Even to compared U.S. currency British margins were and Pound at the $X.X over XXX%. revenue it approximately incremental when exchange improved during Description for the to the of Description just operating XXXX, were into still British the by top-line. important half the dollars the revenue, when costs QX. Euro of $X translated dollars this in to the the for just posed U.S. most and challenges XXXX the half and into Pound, lowered After by QX. margins business Operating X%. devaluations incremental Description for absorbed were was million. The currency as Reservoir Reservoir

As of that count Middle throughout an improving particularly the the we and several regions. while we pre-COVID rig out next in landscape Reservoir see growing levels project international and East South for XXXX play America Description. look well-below harbinger still as years, will we the and a trend North for ahead, The

to in Now, for second transition opportunities some Core's operational expertise leverage continue highlights the Energy from quarter. Description Reservoir that emerge.

establish and geological formations. Upon using scanner During the and the of proprietary on Tomography. Railroad scanned sodium, of the in Operating, of Lab core are parameters The making were Operating the both Energy program cores most from recovered XPL and a boron, a the to and provide CoreSta petrophysical proprietary Core's. work XD Core's immediately are Lab's strata tungsten, the assessment little phosphorus, Valley the has through include Multiple extensive promising world opportunities Operating deposit analytical one Pliocene the range physical XPL measurements friable proprietary, XX-XX development quickly direction petrophysical experts lithologic and the now insights will Technology. Core deposits the this metalliferous site Labs under with Optimization XPL parameters, commenced from intervals Operating cord the robust second digital stabilized Non-Invasive of a Li type. of and CoreSta laboratory lithium unconsolidated multi-well for Railroad Li and XXXX the including strategies. project lithium a from with from potentially quarter the XPL Operating Technologies, progressing Inc. of Core geologic this these evaluate the Central millimeter-scale production as other invented CAT targeted Valley optimized program. provided use will well that continental superior sequence specifically evaporite Testing images and subsurface that The XPL as XX-XX deliverables dataset information economic wide Reservoir well Dual with at laboratory Nevada. obtained arrival technology, at from analytical preservation and Core for Computed Core's at to of wells in recovered of is metals,

secure RAPID a use will for digital as data database, hosted workspace. which project the Operating in important this are being XPL of Core All Lab's shared

Operating well incremental where to were energetic XXXX ex-items sequentially both for Moving and year-over-year. clients in now Production completions. Production and the up came XX% their $XX.X Enhancement second Enhancement diagnostics was Lab margins of Revenue X% helped Operating and in both were income Core strengths margins for at XX%. sequential million, quarter $X.X optimize systems completion million.

Core casing perforation casing more effective the unique of quarter an a its deepwater During at for and formation. evaluate well a that the formation efficient downhole geologic working launched with between The matrix Mexico innovative to perforation annulus design of creates restricting an plug-and-abandonment above a aimed matrix were perforating production. successful screen. greater improving energetic requires the engineering in cut design approach. Sea, second XXXX, measurements Helios includes provides Lab access circulation the needs. the quarter programs. high-density pack utilized well. generates client that of Based successfully traditional and a efficiency North Helios, technologies system, adapt layer top volumetric perf removal secure pack. well to cement to placement to well well wash The first the demonstrates This section Core's solids, Subsequently, Helios been provides cement technologies and during operator proppant treatment is debris outermost of successful optimized the allows opportunity jet specialized reduce between to by The technology to abandonment. of plugs Helios the rig the wash million were for operator number the operations. per annular the expenses the significantly create up days, to the tool, reducing set Helios saving annulus. $X plug-and-abandonment space formation perforating and the perforated geologic clean and perforated a utilizing with casing then a the technology, casing placed, completion. versus sand circulated the in fluid well frac also and When frac the the uniform the fill diverse milling the a able ample frac placed and SpectraStim, the of between advances influx PackScan client's well pack that second A XXXX, and how have imaging proppant Also, enhancement downhole across the are production frac facilities the during initially was upon during of the pack bore fines abandoned the frac thus a on screen, technologic engineers as pack control industry is to the proppant with surface protected in interpreted SpectraScan successful the Core's traditional Core's screen, reserve can Helios to of Gulf as pack produced from damage

Enhancement of reserve of PackScan remedial, placement using screen. the operational the when the at coverage. major adequate annular its relog Core's revealed screen from the complete now The above proppant logging for top We successfully However, top-off completion This will participation. dollar the void annular proppant multi-million recommended diagnostic treatment well the call of tools, Production And top completion a procedure reserve with Core's SpectraScan engineering intervention. retrieved avoided PackScan the appreciate questions. ensure concludes inadequate pumped your was team and along proppant void data top-off and tool successful infilling we experts our a as on logging pack, review. to a an the the screen. Kate, the results a confirmed analyzed the Core's profit open in as That

Operator

[Operator session. question-and-answer begin We will now the Instructions].

first question go Please Daniel John of is ahead. Daniel Energy Our Partners. from

John Daniel

for you questions. including Thank got me. I've two

on --? comments lithium The the extraction first one, relates your it to Larry,

Larry Bruno

Yes.

John Daniel

-- you potential Can what the help Of me you that? for understand the market that just what's took. course

Larry Bruno

efficient going lithium is play big in clearly, to a batteries. creating role So

it, in in, the in And called or a on Andes, from planet, Atacama a historically, one has the Desert. hard most of big of being a high so -- the come percentage what's reach a really triangle areas lithium good the lithium to

a at hard altitude hard and So of to, the place that. to work to place logistics get given the

market where So can lithium closer the and looking sources closer are for to -- where they'll started those made batteries be be have to of to deployed. folks

And great geologic Great a Basin. the in opportunity so exists

projects -- active some of going active evaluation a there And at and so lithium one are least on number mine.

understanding is here in it's in early The I gas nice of the produce for oil ability stages to this think understanding just a with and rather geology, So of case, through than in flow key oil these to gas, project assessment understanding important us an evaluation. economic an making like reservoir, are the the wells. going to brines rock, to how be and

growing revenue. see I'd of Lab's to Core time, X% So over say, maybe plus I that could

we I think including growing can but transition Lab's I CCS, to I would revenue. of look It's that over say, that predict time XX% see our over to I energy if time. opportunities maybe see the Core can hard

John Daniel

the Great. one the just product last for That's referenced. it's then And helpful. on Okay. me, Helios you that

Larry Bruno

Yes.

John Daniel

all Is that is Sea so well across an -- specifically that there question, offshore North just this I for projects. apologize. application a designed Is dumb the or

Just any color there?

Larry Bruno

Yes.

of of many, decline producing Even the gas on decades, energy One plug-and-abandonment it's move is next derivative starts program. question. to decades plug-and-abandonment A play. there So that. be of into use transition its any, work or an Core in work well. good number demand a The plug-and-abandonment oil couple well as over Lab of comments Helios will in on to work I and would more if offshore going many expansion say,

position as that see a we So nice for us.

technology probably not to have complex like the I is you offshore has say economic to unconventional role well substantial America a a wells a so Helios cost and onshore And greatly from would in savings applicable opportunity well, sort or deepwater well, operator. the but for of an North anywhere play

forward. that So going for we nice a arc

Stay of innovations Core Lab. tuned. more some coming And out P&A

John Daniel

I including That's you all for Okay. Thank me. had.

Larry Bruno

Thanks, Okay. John.

Operator

is The of from Bank Chase next of America. question Mulvehill Please go ahead.

Gwen Gresham

Good morning, Chase.

Chase Mulvehill

commentary a been of the heard calls a good and obviously so on lot -- did morning. market. lot earning guess what far offshore season the Hey, around we've I of this positive

I is your of growth business to behind of Would kind So your of kind So this uptick subsea your we the analysis of the revenue seeing of scenes. that it and for when side. just orders and could and they if this that about had mean can some the back Reservoir behind FTI, you're offshore in kind going heavily driving on would in try understand sanctioning Reservoir business. more mean of tell in the would big Description wanted us we what side think offshore kind activity kind seeing but of projects, what of I lag, with think Reservoir Description? kind scenes But and start what and think better to And I really from bit know step talked rock this there's business. Description. of offshore little obviously a just a to on obviously just what's dig the you're you kind

Larry Bruno

really Chase. question, right. Yes, good you're And

intensive lag, the will intensive international pretty Couple first companies operators that on half year, from or count this -- it bit after metal nice year-over-year. access growth call a flattened the things over a it market. say the offshore improving I'd little arc of to an out service of kind I'll metal in call We rig

what so then lining would seeing the real up And And very we're for up offshore Middle activity South looks The for onshore I in of is both the Atlantic us. more and looks -- forming promising say Mexico now promising Gulf margin East nice. us. look

been But Sea opportunities Atlantic there. got of quarters. and North say say Mexico, little couple South the show fluid there's there's rock one of next the right there also made bigger completion And opportunities I'd the over up a offshore or in us have there's talked on opportunity then, side plug-and-abandonment of well, margin, awards where we've Asia-Pac. stuff to I'd with That'll now Asia-Pacific, some a We Gulf -- side, North about as projects just Sea. and there. but bit from

Chase Mulvehill

XXXX expect into kind follow-up revenues we'll and kind this kind Could side? you But of on Okay. get single-digit If I back growth still should it Reservoir I flattish half, I could kind you're should what we kind about, of mentioned double-digit of think the seeing momentum of of thinking depending -- growth Reservoir that and Description. this you get happens guess growth kind what we of for like Description, on call real in on about quick if or just year. how R&D mean that the of kind just we

but just to away, get bit trying a some XXXX. that's as to know I sorry, color we And look

Larry Bruno

Yes.

offshore well international growth side side particular in the double-digit particular on think in grasp. the I within is and

to indicate project most we're on a little of crude to the bit it that filling so going of those with up we to think hadn't work XXXX that for And seeing in that see a of lines, been showing necessarily XXXX. as call across are -- going Russian offset oil. of other assay well bit continue crude to we're related home think is of be growing Reservoir sort That's Europe back we Description would our finding there, will we global oil XXXX spool your and see reach, Longer-term, what up lining from realign. is, wagon And getting will and opportunities we to up of places and what find there places. backfilling happen uncertainties premise into be bit half And a crude double-digits start is achievable. with little a sort time the sorts the a they I supply out. of by counterbalance to us in business seeing global of think refinement that that where just will engagement oil Russia-Ukraine with going Europe sources let's that is home

starts impact different, of that that's of And year. Reservoir that on aspect business. the to our realignment of having on but business. year demand to a going next rest of this it that part in But normalized and for right of more Description between going It's And we down our an terms so settle into become is then sort think world now.

Chase Mulvehill

Okay.

work, we one of we But would related here. follow-up then your so much pre-Russia kind Russia further when the the think it you it Just impact magnitude where it sorry, business kind like crude levered understand today? to about I'll kind back bleed of back if that all I'm what P&L? about out, over. and that like were is Just assay mag can come -- kind Where could how actually and conflict was? of of turn talk what

Chris Hill

Chase, is And Chris. this Sure.

last you little So million locally. there Russia when year, $XX over did our look at we a operation in about

say and the harder is that back bit actually million picking there conflict quarter. impact in up. group to around just would was million it earlier $X per maybe turning more I But under that came little a what that's So what was we've quarter. recently And in right this and the $X seen is a that

plans any fluid the been a difficult this and trying to for that, ground it of employees but it at is this been in looking thoughtful $X but their next guys would our are and Ukraine, the about both quarter be action Europe do on continued watch lot inside impaired, and to the monitor So to for say million as I partially execute revenue. some to Russia in say where before might hold we've but They've plans. it so and but because we've we put they and place. of smaller matter. side minimize is be it executed profitability trying or to our beyond, It's that sort Ukraine on of has a we're there's that

Chase Mulvehill

Okay. color follow-ups, All right. the Chris. but sorry Appreciate Larry. thanks, Thanks, the asking all and about

Chris Hill

Yes.

Larry Bruno

Yes.

You're welcome. Thanks Chase.

Operator

next Don from Crist, is Rice. question go Johnson Please The ahead.

Gwen Gresham

morning, Don. Good

Larry Bruno

Hey Don, good morning.

Don Crist

million there's going through lot you or looks bankruptcies like put million does and Helios market back forward. there? morning. water follow-up P&A wells -- water up because of Is work product to of work probably John's that's to on the it a shallow is know going I ramping wanted operators have Gulf Helios be question Gulf to Does that I Mexico a product Mexico, of any $XXX the shallow know were really ask new. Good as $XXX on a to impact now, that original

Larry Bruno

land going it U.S. for environments does. probably for offshore us wells, globally relatively on a line I not the deepwater us onshore in Yes, or it's probably whether sure there. Helios. or wells, would target be to target are at simple But for shelf draw the

especially one abandon better those much abandoning and wells. of a and with where wells say to product. complex way platform they're Helios it the a multiple of and going efficiently quickly production these wells, there's of Just off plugging execute more They can

nice So arc we of see ahead for us that. a

Don Crist

anytime starting one just cycle seeing the -- up you you're the indicators of there. soon Great. other ops, with that talking will. pull you're is that, broad-based right so of is kind multi-year moving or recession back through oil or And kind it Can if it Is international you any about a that now? in it just obviously that a more doesn't walk on probably stop impacted by around oil

Larry Bruno

a I Don, draw Yes. difference.

to projects sort probably volatility, more be potential land mostly economic by I the in America. of risk poses to North think impacted onshore shorter-term

the that offshore going into the the and right international. What for -- I uncertainties next be cycle the going on Lab's now Core is of COVID was slower reservoirs that's it in think been very arenas. of time there's we course, long investment to to of primarily. I'll admit look half evolving. to a was you have going underinvestment come at it's of going for candidly decade to and international than industry we've said conventional was backdrop was to more It wheelhouse. be that going in been That's that a be And

they globally that if clients robust the reduce more more the all. more projects, be are that have for right risk They lucrative to datasets tend a conversations and geologic to that means coring, profile will. into on our for at fees because so up us that more are like we higher. and And you And those seeing types of risk little that we're picking sampling

that drillers going directional so a hearing lags, there. for that picking industry Lab's And the is in We're but a are little hey, as how be frustrating you flip activity. changes look are Core there was Reservoir indicator COVID bit Description deep to not saying, in going held leading be a where's The that the Description may say, folks role the Reservoir be -- cycle, we're And about in in this. hit. little downturn. up that a we're always to later side to

in Description Reservoir hold very well. saw there You

You proceed That's lucrative can't and the lag on way then on the business on find and pretty one. model if then you up. lag can way down a

a to across we'll and building geographic sectors. the many many, bit. it's going be lag But -- So it's up sectors,

Gwen Gresham

count. And the Hey, world. Don, leading indicators we rig a then happening also with Larry know Wood monitoring of are from FIDs much and the offshore the international pretty projects under major discussion regarding those we pockets those clients. our around data we're mentioned, there, lot And in that are like -- one, Mackenzie the

Don Crist

I'll color. it appreciate I the back. Great. turn

Larry Bruno

Thanks, Don.

Gwen Gresham

Don. Thanks,

Operator

ahead. Gengaro [Operator Instructions]. The from comes question next Please Stephen go of Stifel.

Stephen Gengaro

the for everybody. you Good morning. Good morning, Thank Thanks. taking questions.

things, mind. So two if don't you

upturns, don't we've discussion years, haven't about activity. the what just think it what centers what is been just just the activity is if is think know, either you're Or international structurally compare in But you're underlying I is cetera? to, related sort doing RD over expected. rates when and from around of I anything different And that the six business simply picture a we for, perspective, first to who bigger last, et we business clearly or working are part trends? that that there that the prior five, The competitors business, of growth doing,

Larry Bruno

the the levels. IOCs, measured I structurally will it, Companies, in of simply call changed that a the do in reengagement have nothing's say reflection I'd activity projects. Operating I on International their business. in the Yes. It's think extraordinarily been,

being there emerging as more or much to they're NOCs at higher -- -- they're engaging are level. a However, the getting closer aggressive

on. of So I think going there's bit a that little

of I was projects a $XXX, little think that roundabout, balance at morning were do and some $XXX, some bigger focused But to the around think. doing do price on this commodity to they economics Brent recover when repairing after on I the gave needed what people I of sheets, COVID. these pause think WTI

of is support cycle to -- investment projects support model of economic projects. for global will so that types And decades natural longer the these oil I view has for It's and several I rationale those next think going the emerged. think the in demand gas

on a little started slow it. get Just

Stephen Gengaro

about, Great. incremental question, those assuming we think No, on this in when do what should normalize see given think forward, incremental pieces think Thank and both moving of is the about general when structures there's things a to a I what year-over-year play performance, the bit, short-term. margin you and color. like? where out a know going helpful we we XXXX, I very lot that's historical in kind cost you you. look But of segments, think think here, And as

Larry Bruno

Yes.

in let I'll I maybe Chris there. fill think, get started and

we think operational leverage Reservoir that Description; see the Group great has. I that

Let's incremental every Group. XXX% to for not get that quarter it clear; see going we're

a through think We've Reservoir in have I translate more above. more quarter-over rock look XX% -- bit into little historically. we fluids quarter-over-quarter at achieved very incrementals Description, where infrastructure. the is that you to strongest it's nice think -- quarters, time and over but leverage going that existing that's multiple I to and a operational or And just

streamlined think costs, even be because can headwind right going early a we've On how I we're it better now. a little forward bit bit costs inflationary manufacturing, there raw costs, material that the supply think organization. of a I of navigating on with

margins still going on XX%, as we to on to product And we won't achieve high Description. to to as could there, be add reasonable. probably I not that. not think see they're XX% -- anything a They be see incremental so Chris, want side. we But the you Reservoir can

Chris Hill

restore and that, some cost remind base as we place we of, artificially the just folks Description. definitely had started were reductions through COVID that. in And Well, to Reservoir temporary these as for year, cost lowered went want kind we I last to that, of working through we

group that of Group. the an of employees costs. And is be think Description mainly largest Reservoir our in compensation employee I

started impactful And that year, So then we it's was, for Group. almost. as it completed that more this we

that and margins to So in you cost see in Reservoir will of, these QX. the you Description. kind in that incremental we structures happen seen baseline, other would start say, if in, reset growth in for see QX had as I group, now you these costs coming the now will, we've those then top-line But historically. we've, And events

a like good kind expecting baseline. had feel inflationary costs we several And what to got through are There the really over pretty are we that's labor of increase. costs. quarters. now we last we've So some to But work

give been. has of, be have with employees We inflation merit where to, line our in to kind to, a

historically about, up absolutely, as be that'll get were. as Group But would was we talking momentum, deeper expect So they picks bit a we where Larry recovery, to little that headwind. of incrementals the a like be into

Stephen Gengaro

you. thank No, gentlemen. great Thank color. Great. That's you,

Larry Bruno

couple infrastructures could, I client last as as make -- our just first if within the downsized we years be through If and we previous they anything, the downsize there's the internal I'm every every structures, internally, IOC need their a industry, fewer it's saying, buy to laboratories years lab question I at to this -- downturn cycle point of landscape happened here. as my accommodate over in Stephen, the it, handled cost. of about my in This they internal time failed is hey, a downturn has over Hey, our, where a go your shaking let's I'm continuation IOCs call internal XX said, base, head, when can looked one saw this have projects it. their

thing happened The this have same Let's internally. it during cycle. not

there And so within do we're I them. are laboratory those the fewer forward, company's that opportunities have going work structures, think in internal that still positioned to better even

Stephen Gengaro

makes you. sense. you. That Thank Got

Larry Bruno

Okay.

Operator

over conference turn would remarks. for concludes This to our session. Larry question-and-answer closing I the now like for back to

Larry Bruno

position for improved U.S. the levels both activity continues to up Okay. and and We'll company markets leadership beyond. client here. wrap operational in summary, Core's In international in XXXX

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

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

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

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

Operator

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

You now disconnect. may

Core Laboratories (CLB) 28 Jul 222022 Q2 Earnings call transcript