UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2024

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

For the transition period from __ to

Commission File Number: 001-41695

CORE LABORATORIES INC.

(Exact name of registrant as specified in its charter)

Delaware	98-1164194
(State or other jurisdiction of<br><br>incorporation or organization)	(I.R.S. Employer Identification No.)
6316 Windfern Road
Houston, TX	77040
(Address of principal executive offices)	(Zip Code)

(713) 328-2673

(Registrant's telephone number, including area code)

None

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

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

Title of each class	Trading<br><br>Symbol(s)	Name of each exchange on which registered
Common Stock (par value $0.01)	CLB	New York Stock Exchange

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

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock of the registrant, par value $0.01 per share, outstanding at July 19, 2024 was 46,912,971.

CORE LABORATORIES INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024

INDEX

PART I - FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements
	Consolidated Balance Sheets at June 30, 2024 (Unaudited) and December 31, 2023	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023(Unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	6
	Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2024 and 2023(Unaudited)	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023(Unaudited)	9
	Notes to the Interim Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signature	36

Item 1. Financial Statements

CORE LABORATORIES INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

			December 31,<br>2023

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	17,695		$	15,120
Accounts receivable, net of allowance for credit losses of 2,690 and 2,280 at 2024 and 2023, respectively	115,644			109,352
Inventories	69,898			71,702
Prepaid expenses	9,863			8,153
Income taxes receivable	15,087			13,716
Other current assets	5,341			5,093
TOTAL CURRENT ASSETS	233,528			223,136
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of 317,654 and 315,796 at 2024 and 2023, respectively	98,510			99,626
RIGHT OF USE ASSETS	55,689			53,842
INTANGIBLES, net of accumulated amortization and impairment of 19,078 and 18,825 at 2024 and 2023, respectively	6,674			6,926
GOODWILL	99,445			99,445
DEFERRED TAX ASSETS, net	70,531			69,201
OTHER ASSETS	33,422			34,219
TOTAL ASSETS	597,799		$	586,395
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	36,863		$	33,506
Accrued payroll and related costs	21,972			18,791
Taxes other than payroll and income	4,957			5,939
Unearned revenues	5,500			4,755
Operating lease liabilities	11,045			10,175
Income taxes payable	8,240			7,280
Other current liabilities	9,021			7,651
TOTAL CURRENT LIABILITIES	97,598			88,097
LONG-TERM DEBT, net	147,621			163,134
LONG-TERM OPERATING LEASE LIABILITIES	42,616			42,076
DEFERRED COMPENSATION	30,678			30,544
DEFERRED TAX LIABILITIES, net	13,250			12,697
OTHER LONG-TERM LIABILITIES	20,342			20,040
COMMITMENTS AND CONTINGENCIES
EQUITY:
Preference stock, 6,000,000 shares authorized, 0.01 par value; none issued or outstanding	—			—
Common stock, 200,000,000 shares authorized, 0.01 par value, 46,938,557 issued and 46,912,695 outstanding at 2024; 46,938,557 issued and 46,856,536 outstanding at 2023	469			469
Additional paid-in capital	113,479			110,011
Retained earnings	132,070			120,756
Accumulated other comprehensive income (loss)	(5,309	)		(4,972	)
Treasury stock (at cost), 25,862 and 82,021 shares at 2024 and 2023, respectively	(435	)		(1,449	)
Total Core Laboratories Inc. shareholders' equity	240,274			224,815
Non-controlling interest	5,420			4,992
TOTAL EQUITY	245,694			229,807
TOTAL LIABILITIES AND EQUITY	597,799		$	586,395

All values are in US Dollars.

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

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Three Months Ended
	June 30,
	2024			2023
	(Unaudited)
REVENUE:
Services	$	96,337		$	93,265
Product sales		34,240			34,616
Total revenue		130,577			127,881
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below		74,823			71,121
Cost of product sales, exclusive of depreciation expense shown below		28,107			29,174
General and administrative expense, exclusive of depreciation expense shown below		10,259			5,811
Depreciation		3,643			3,807
Amortization		127			130
Other (income) expense, net		(2,390	)		(1,068	)
OPERATING INCOME		16,008			18,906
Interest expense		3,209			3,236
Income before income taxes		12,799			15,670
Income tax expense (benefit)		3,609			(7,259	)
Net income		9,190			22,929
Net income attributable to non-controlling interest		158			83
Net income attributable to Core Laboratories Inc.	$	9,032		$	22,846
EARNINGS PER SHARE INFORMATION:
Basic earnings per share	$	0.20		$	0.49
Basic earnings per share attributable to Core Laboratories Inc.	$	0.19		$	0.49
Diluted earnings per share	$	0.19		$	0.48
Diluted earnings per share attributable to Core Laboratories Inc.	$	0.19		$	0.48
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		46,908			46,675
Diluted		47,743			47,497

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

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Six Months Ended
	June 30,
	2024			2023
	(Unaudited)
REVENUE:
Services	$	192,832		$	184,341
Product sales		67,382			71,896
Total revenue		260,214			256,237
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below		148,688			142,055
Cost of product sales, exclusive of depreciation expense shown below		58,830			59,768
General and administrative expense, exclusive of depreciation expense shown below		22,048			22,142
Depreciation		7,358			7,746
Amortization		255			235
Other (income) expense, net		(1,544	)		(1,096	)
OPERATING INCOME		24,579			25,387
Interest expense		6,632			6,665
Income before income taxes		17,947			18,722
Income tax expense (benefit)		5,267			(6,649	)
Net income		12,680			25,371
Net income attributable to non-controlling interest		428			152
Net income attributable to Core Laboratories Inc.	$	12,252		$	25,219
EARNINGS PER SHARE INFORMATION:
Basic earnings per share	$	0.27		$	0.54
Basic earnings per share attributable to Core Laboratories Inc.	$	0.26		$	0.54
Diluted earnings per share	$	0.26		$	0.53
Diluted earnings per share attributable to Core Laboratories Inc.	$	0.26		$	0.53
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		46,884			46,655
Diluted		47,662			47,476

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

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(Unaudited)
Net income	$	9,190		$	22,929		$	12,680		$	25,371
Other comprehensive income (loss):
Interest rate swaps:
Interest rate swap amount reclassified to net income		(248	)		(38	)		(545	)		228
Income tax (expense) benefit on interest rate swaps<br> reclassified to net income		52			8			114			(48	)
Total interest rate swaps		(196	)		(30	)		(431	)		180
Pension and other postretirement benefit plans:
Amortization of actuarial gain (loss) reclassified to net income		64			39			128			78
Income tax (expense) benefit on pension and other postretirement benefit plans reclassified to net income		(17	)		(10	)		(34	)		(20	)
Total pension and other postretirement benefit plans		47			29			94			58
Total other comprehensive income (loss)		(149	)		(1	)		(337	)		238
Comprehensive income		9,041			22,928			12,343			25,609
Comprehensive income attributable to non-controlling interest		158			83			428			152
Comprehensive income attributable to Core Laboratories Inc.	$	8,883		$	22,845		$	11,915		$	25,457

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

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(Unaudited)
Common Stock
Balance at Beginning of Period	$	469		$	1,194		$	469		$	1,194
New share issuance		—			—			—			—
Change in par value		—			(727	)		—			(727	)
Balance at End of Period	$	469		$	467		$	469		$	467
Additional Paid-In Capital
Balance at Beginning of Period	$	114,642		$	111,235		$	110,011		$	102,254
New share issuance		—			—			—			—
Change in par value and equity related transactions		—			(3,435	)		—			(3,435	)
Stock-based compensation		(1,163	)		230			3,468			9,211
Balance at End of Period	$	113,479		$	108,030		$	113,479		$	108,030
Retained Earnings
Balance at Beginning of Period	$	123,508		$	87,855		$	120,756		$	85,949
Dividends paid		(470	)		(467	)		(938	)		(934	)
Net income attributable to Core Laboratories Inc.		9,032			22,846			12,252			25,219
Balance at End of Period	$	132,070		$	110,234		$	132,070		$	110,234
Accumulated Other Comprehensive Income (Loss)
Balance at Beginning of Period	$	(5,160	)	$	(3,538	)	$	(4,972	)	$	(3,777	)
Interest rate swaps, net of income taxes		(196	)		(30	)		(431	)		180
Pension and other postretirement benefit plans, net of income taxes		47			29			94			58
Balance at End of Period	$	(5,309	)	$	(3,539	)	$	(5,309	)	$	(3,539	)
Treasury Stock
Balance at Beginning of Period	$	(1,304	)	$	(1,360	)	$	(1,449	)	$	(1,362	)
Stock-based compensation		1,031			1,123			1,220			1,126
Repurchase of common stock		(162	)		(199	)		(206	)		(200	)
Balance at End of Period	$	(435	)	$	(436	)	$	(435	)	$	(436	)
Non-Controlling Interest
Balance at Beginning of Period	$	5,262		$	4,765		$	4,992		$	4,696
Net income attributable to non-controlling interest		158			83			428			152
Balance at End of Period	$	5,420		$	4,848		$	5,420		$	4,848
Total Equity
Balance at Beginning of Period	$	237,417		$	200,151		$	229,807		$	188,954
New share issuance		—			—			—			—
Change in par value and equity related transactions		—			(4,162	)		—			(4,162	)
Stock-based compensation		(132	)		1,353			4,688			10,337
Dividends paid		(470	)		(467	)		(938	)		(934	)
Net income		9,190			22,929			12,680			25,371
Interest rate swaps, net of income taxes		(196	)		(30	)		(431	)		180
Pension and other postretirement benefit plans, net of income taxes		47			29			94			58
Repurchase of common stock		(162	)		(199	)		(206	)		(200	)
Balance at End of Period	$	245,694		$	219,604		$	245,694		$	219,604
Cash Dividends per Share	$	0.01		$	0.01		$	0.02		$	0.02

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

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(In thousands, except share and per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
	(Unaudited)
Common Stock - Number of shares issued
Balance at Beginning of Period		46,938,557			46,701,102			46,938,557			46,699,102
New share issuance		—			—			—			2,000
Balance at End of Period		46,938,557			46,701,102			46,938,557			46,701,102
Treasury Stock - Number of shares
Balance at Beginning of Period		(74,191	)		(67,075	)		(82,021	)		(67,168	)
Stock-based compensation		58,396			55,395			69,071			55,545
Repurchase of common stock		(10,067	)		(9,013	)		(12,912	)		(9,070	)
Balance at End of Period		(25,862	)		(20,693	)		(25,862	)		(20,693	)
Common Stock - Number of shares outstanding
Balance at Beginning of Period		46,864,366			46,634,027			46,856,536			46,631,934
New share issuance		—			—			—			2,000
Stock-based compensation		58,396			55,395			69,071			55,545
Repurchase of common stock		(10,067	)		(9,013	)		(12,912	)		(9,070	)
Balance at End of Period		46,912,695			46,680,409			46,912,695			46,680,409

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

Return to Index

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Six Months Ended
	June 30,
	2024			2023
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,680		$	25,371
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation		4,688			10,337
Depreciation and amortization		7,613			7,981
Assets write-down		1,110			1,015
Changes in value of life insurance policies		(2,185	)		(3,989	)
Deferred income taxes		(777	)		(10,949	)
Other non-cash items		445			(484	)
Changes in assets and liabilities:
Accounts receivable		(7,019	)		(103	)
Inventories		1,804			(11,213	)
Prepaid expenses and other current assets		(3,976	)		(2,532	)
Other assets		306			1,579
Accounts payable		3,116			(8,685	)
Accrued expenses		4,100			1,131
Unearned revenues		745			(403	)
Other liabilities		26			(3,484	)
Net cash provided by (used in) operating activities		22,676			5,572
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(5,918	)		(4,382	)
Patents and other intangibles		(3	)		(164	)
Proceeds from sale of assets		801			353
Net proceeds on life insurance policies		2,776			3,375
Net cash provided by (used in) investing activities		(2,344	)		(818	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt		(38,000	)		(101,000	)
Proceeds from long-term debt		22,000			111,000
Dividends paid		(938	)		(934	)
Repurchase of common stock		(206	)		(200	)
Equity related transaction costs		(594	)		(2,553	)
Other financing activities		(19	)		(291	)
Net cash provided by (used in) financing activities		(17,757	)		6,022
NET CHANGE IN CASH AND CASH EQUIVALENTS		2,575			10,776
CASH AND CASH EQUIVALENTS, beginning of period		15,120			15,428
CASH AND CASH EQUIVALENTS, end of period	$	17,695		$	26,204
Supplemental disclosures of cash flow information:
Cash payments for interest	$	5,799		$	5,187
Cash payments for income taxes	$	6,210		$	4,694
Non-cash investing and financing activities:
Capital expenditures incurred but not paid for as of the end of the period	$	1,358		$	1,479
Equity related transaction costs incurred but not paid for as of the end of the period	$	162		$	1,609

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

Return to Index

CORE LABORATORIES INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS

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

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

2. SIGNIFICANT ACCOUNTING POLICIES UPDATE

Basis of Presentation and Principles of Consolidation

On May 1, 2023, Core Laboratories N.V. completed its previously announced redomestication transaction (the “Redomestication Transaction”) which through a series of steps, resulted in the merger of Core Laboratories N.V., a holding company in the Netherlands, with and into Core Laboratories Luxembourg S.A., a public limited liability company incorporated under the laws of Luxembourg, with Core Laboratories Luxembourg S.A. surviving, and subsequently the migration of Core Laboratories Luxembourg S.A. out of Luxembourg and its domestication as Core Laboratories Inc., a Delaware corporation. The Redomestication Transaction has been accounted for as a transaction between entities under common control. There is no difference between the combined separate entities prior to the Redomestication Transaction and the combined separate entities after the Redomestication Transaction, therefore, comparative information reported in these financial statements do not differ from amounts previously reported under Core Laboratories N.V.’s consolidated financial statements. These financial statements should be read in conjunction with Core Laboratories N.V.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and Core Laboratories N.V.’s Annual Report on Form 10-K for the year ended December 31, 2022, including Note 2 - Summary of Significant Accounting Policies.

The accompanying unaudited interim consolidated financial statements include the accounts of Core Laboratories Inc. and its subsidiaries for which we have a controlling voting interest and/or a controlling financial interest. These financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Core Laboratories Inc.’s balance sheet information for the year ended December 31, 2023, was derived from the 2023 audited consolidated financial statements. Accordingly, these financial statements do not include all of the information and footnote disclosures required by U.S. GAAP for the annual financial statements and should be read in conjunction with the audited financial statements and the summary of significant accounting policies and notes thereto included in Core Laboratories Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023, including Note 2 - Summary of Significant Accounting Policies. There have been no changes to the accounting policies of the combined entities during the six months ended June 30, 2024.

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

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

Return to Index

Certain reclassifications were made to prior period amounts in order to conform to the current period presentations. These reclassifications had no impact on the reported net income or cash flows for the three and six months ended June 30, 2023.

Property, Plant and Equipment

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

The geopolitical conflict between Russia and Ukraine, which began in February 2022 and has continued through June 30, 2024, has resulted in disruptions to our operations in Russia and Ukraine. As of June 30, 2024, all laboratory facilities, offices, and locations in Russia and Ukraine continued to operate with no significant impact to local business operations. Therefore, we determined there was no triggering event for LLA in Russia and Ukraine, and no impairment assessments have been performed as of June 30, 2024.

Recent Accounting Pronouncements

Issued But Not Yet Effective

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

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

3. ACQUISITIONS AND DIVESTURES

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

4. CONTRACT ASSETS AND LIABILITIES

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

	June 30,<br>2024		December 31,<br>2023
Contract assets:
Current	$	1,079	$	1,293
	$	1,079	$	1,293
Contract liabilities:
Current	$	629	$	299
	$	629	$	299

Return to Index

	June 30,<br>2024
Estimate of when contract liabilities will be recognized as revenue:
Within 12 months	$	629

The current portion of contract assets are included in our accounts receivable. The current portion of contract liabilities is included in unearned revenues.

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

5. INVENTORIES

Inventories consist of the following (in thousands):

	June 30,<br>2024		December 31,<br>2023
Finished goods	$	31,209	$	30,508
Parts and materials		35,307		37,670
Work in progress		3,382		3,524
Total inventories	$	69,898	$	71,702

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

6. LEASES

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

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Consolidated Statements of Operations:
Operating lease expense	$	4,364		$	4,181		$	8,646		$	8,670
Short-term lease expense		285			462			837			891
Variable lease expense		391			437			820			1,041
Sublease income		(56	)		—			(113	)		—
Total lease expense	$	4,984		$	5,080		$	10,190		$	10,602
Consolidated Statements of Cash Flows:
Operating cash flows - operating leases payments	$	4,631		$	4,218		$	8,909		$	8,750
Right of use assets obtained (released) in exchange for operating lease obligations	$	2,182		$	441		$	6,959		$	10,405
Other information:
Weighted-average remaining lease term - operating leases	8.62 years			8.32 years			8.62 years			8.32 years
Weighted-average discount rate - operating leases		5.33	%		5.24	%		5.33	%		5.24	%

Return to Index

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

	June 30, 2024
	Operating Leases			Operating Subleases
Remainder of 2024	$	7,046		$	(115	)
2025		11,731			(231	)
2026		9,264			(236	)
2027		7,309			(241	)
2028		5,809			(163	)
Thereafter		26,888			—
Total undiscounted lease payments		68,047		$	(986	)
Less: Imputed interest		(14,386	)
Total operating lease liabilities	$	53,661

See Note 13 - Other (income) and expense, net regarding lease abandonments during the six months ended June 30, 2024 and 2023.

7. LONG-TERM DEBT, NET

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

	Interest Rate	Maturity Date	June 30,<br>2024			December 31,<br>2023
2021 Senior Notes Series A (1)	4.09%	January 12, 2026	$	45,000		$	45,000
2021 Senior Notes Series B (1)	4.38%	January 12, 2028		15,000			15,000
2023 Senior Notes Series A (2)	7.25%	June 28, 2028		25,000			25,000
2023 Senior Notes Series B (2)	7.50%	June 28, 2030		25,000			25,000
Credit Facility				40,000			56,000
Total long-term debt				150,000			166,000
Less: Debt issuance costs				(2,379	)		(2,866	)
Long-term debt, net			$	147,621		$	163,134

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

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

We, along with our wholly owned subsidiary Core Laboratories (U.S.) Interests Holdings, Inc. (“CLIH”) as issuer, have senior notes outstanding that were issued through private placement transactions. Series A and Series B of the 2021 Senior Notes were issued in 2021 (the “2021 Senior Notes”). Series A and Series B of the 2023 Senior Notes were issued in 2023 (the “2023 Senior Notes”). The 2021 Senior Notes and the 2023 Senior Notes are collectively the “Senior Notes”.

We, along with CLIH, have a credit facility, the Eighth Amended and Restated Credit Agreement (as amended, the “Credit Facility”) for an aggregate borrowing commitment of $135.0 million with a $50.0 million “accordion” feature.

The Credit Facility is secured by first priority interests in (1) substantially all of the tangible and intangible personal property, and equity interest of CLIH and certain of the Company’s U.S. and foreign subsidiary companies; and (2) instruments evidencing intercompany indebtedness owing to the Company, CLIH and certain of the Company’s U.S. and foreign subsidiary companies. Under the Credit Facility, the Secured Overnight Financing Rate (“SOFR”) plus 2.00% to SOFR plus 3.00% will be applied to outstanding borrowings. Any outstanding balance under the Credit Facility is due at maturity on July 25, 2026, subject to springing maturity on July 12, 2025, if any portion of the Company’s 2021 Senior Notes Series A due January 12, 2026, in the aggregate principal amount of $45.0 million, remain outstanding on July 12, 2025, unless the Company’s liquidity equals or exceeds the principal amount of the 2021 Senior Notes Series A outstanding on such date. The available capacity at any point in time is reduced by outstanding borrowings and outstanding letters of credit which totaled approximately $9.7 million at June 30, 2024, resulting in an available borrowing capacity under the Credit Facility of approximately $85.3 million.

Return to Index

In addition to indebtedness under the Credit Facility, we had approximately $7.8 million of outstanding letters of credit and performance guarantees and bonds from other sources as of June 30, 2024.

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

The terms of the Credit Facility and Senior Notes require us to meet certain covenants, including, but not limited to, an interest coverage ratio (calculated as consolidated EBITDA divided by interest expense) and a leverage ratio (calculated as consolidated net indebtedness divided by consolidated EBITDA), where consolidated EBITDA (as defined in each agreement) and interest expense are calculated using the most recent four fiscal quarters. The Credit Facility has more restrictive covenants with a minimum interest coverage ratio of 3.00 to 1.00 and permits a maximum leverage ratio of 2.50 to 1.00. The Credit Facility allows non-cash charges such as impairment of assets, stock compensation and other non-cash charges to be added back in the calculation of consolidated EBITDA. The terms of our Credit Facility also allow us to negotiate in good faith to amend any ratio or requirement to preserve the original intent of the agreement if any change in accounting principles would affect the computation of any financial ratio or covenant of the Credit Facility. In accordance with the terms of the Credit Facility, our leverage ratio is 1.66, and our interest coverage ratio is 5.94, each for the period ended June 30, 2024. We are in compliance with all covenants contained in our Credit Facility and Senior Notes as of June 30, 2024. Certain of our material, wholly owned subsidiaries are guarantors or co-borrowers under the Credit Facility and Senior Notes.

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

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

8. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

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

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Interest cost	$	348		$	372		$	702		$	739
Expected return on plan assets		(287	)		(330	)		(577	)		(656	)
Net periodic pension cost	$	61		$	42		$	125		$	83

9. COMMITMENTS AND CONTINGENCIES

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

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

Return to Index

10. EQUITY

Treasury Stock

During the three and six months ended June 30, 2024, we distributed 58,396 and 69,071 shares of treasury stock, respectively, upon vesting of stock-based awards. During the three and six months ended June 30, 2024, we repurchased 10,067 and 12,912 shares of our common stock, respectively, for $162 thousand and $206 thousand, respectively, which were surrendered to us pursuant to the terms of a stock-based compensation plan in consideration of the participants’ tax burdens resulting from the issuance of common stock under that plan. Such shares of common stock, unless canceled, may be reissued for a variety of purposes such as future acquisitions, non-employee director stock awards or employee stock awards.

Dividend Policy

In March and May 2024, we paid a quarterly cash dividend of $0.01 per share of common stock. In addition, on July 24, 2024, we declared a quarterly dividend of $0.01 per share of common stock for shareholders of record on August 5, 2024, and payable on August 26, 2024.

Accumulated Other Comprehensive Income (Loss)

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

	June 30,<br>2024			December 31,<br>2023
Pension and other post-retirement benefit plans - unrecognized prior service costs and net actuarial loss	$	(5,820	)	$	(5,914	)
Interest rate swaps - net gain (loss) on fair value		511			942
Total accumulated other comprehensive income (loss)	$	(5,309	)	$	(4,972	)

11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

Under the Company’s Credit Facility, the

SOFR

plus 2.00% to

SOFR

plus 3.00% will be applied to outstanding borrowings. See Note 7 - Long-term Debt, net for additional information. The Company has elected to apply the optional expedient for hedging relationships affected by reference rate reform. Accordingly, no outstanding balance on the Credit Facility with a SOFR rate will preclude cash flow hedging with existing London Inter-Bank Offer Rate (“LIBOR”) hedging instruments. In August 2014, we entered into a swap agreement with a notional amount of $25 million (“2014 Variable-to-Fixed Swap”), and the LIBOR portion of the interest rate was fixed at 2.5% through August 29, 2024. In February 2020, we entered into a second swap agreement with a notional amount of $25 million (“2020 Variable-to-Fixed Swap”), and the LIBOR portion of the interest rate was fixed at 1.3% through February 28, 2025. These interest rate swap agreements were terminated, dedesignated and settled in March 2021. The hedging relationship is highly effective; therefore, gains and losses on these swaps will be reclassified into interest expense in accordance with the forecasted transactions or the scheduled interest payments on the Credit Facility. At June 30, 2023, the outstanding balance on our Credit Facility had been reduced to zero, and approximately $0.2 million of losses were reclassified to interest expense associated with the ineffective period of the hedging relationship, as it became probable that certain of the forecasted transactions would not occur within the originally specified time period. Remaining net losses on these swaps included in accumulated other comprehensive income (loss) as of June 30, 2024, are $50 thousand all of which is expected to be reclassified into earnings within the next 12 months as interest payments are made on the Company’s Credit Facility.

Return to Index

In March 2021, we entered into a new forward interest rate swap agreement and carried the fair value of the terminated 2014 and 2020 Variable-to-Fixed Swaps into the new agreement in a “blend and extend” structured transaction. The purpose of this forward interest rate swap agreement is to fix the underlying risk-free rate, that would be associated with the anticipated issuance of new long-term debt by the Company in future periods. The forward interest rate swap would hedge the risk-free rate on forecasted long-term debt for a maximum of 11 years through March 2033. Risk associated with future changes in the 10-year LIBOR interest rates have been fixed up to a notional amount of $60 million with this instrument. The interest rate swap qualifies as a cash flow hedging instrument. This forward interest rate swap agreement was terminated and settled in April 2022. The hedging relationship is highly effective, therefore, the gain on the termination of the forward interest rate swap was included in accumulated other comprehensive income (loss). On June 28, 2023, the Company issued the 2023 Senior Notes in the aggregate principal amount of $50 million at fixed interest rates of 7.25% and 7.50%. The Company has elected to apply the optional expedient for hedging relationships affected by reference rate reform. Accordingly, no outstanding balance on the 2023 Senior Notes will preclude cash flow hedging with the existing LIBOR hedging instrument. The Company recognized a gain of $0.4 million in earnings for the $10 million over hedged portion of the interest rate swap in 2023. The remaining net gain on this swap included in accumulated other comprehensive income (loss) at June 30, 2024, which will be amortized into interest expense in accordance with the forecasted transactions or the scheduled interest payments on the 2023 Senior Notes and any future debt through March 2033, is $0.6 million, of which $0.7 million gain is expected to be reclassified into earnings within the next 12 months.

As of June 30, 2024, the aggregated gains and losses on these interest swaps that are included in accumulated other comprehensive income (loss) are a net gain of $0.5 million.

At June 30, 2024, we had fixed rate long-term debt aggregating $110 million and variable rate long-term debt aggregating $40 million.

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023		Income Statement <br>Classification
Derivatives designated as hedges:
5 year interest rate swap	$	22		$	128		$	61		$	211	Increase (decrease) to interest expense
10 year interest rate swap		(270	)		(166	)		(606	)		17	Increase (decrease) to interest expense
	$	(248	)	$	(38	)	$	(545	)	$	228

12. FINANCIAL INSTRUMENTS

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

Return to Index

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

			Fair Value Measurement at
			June 30, 2024
	Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	24,801	$	—	$	24,801	$	—
	$	24,801	$	—	$	24,801	$	—
Liabilities:
Deferred compensation liabilities	$	19,222	$	—	$	19,222	$	—
	$	19,222	$	—	$	19,222	$	—
			Fair Value Measurement at
---	---	---	---	---	---	---	---	---
			December 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Company owned life insurance policies (1)	$	25,397	$	—	$	25,397	$	—
	$	25,397	$	—	$	25,397	$	—
Liabilities:
Deferred compensation liabilities	$	17,299	$	—	$	17,299	$	—
	$	17,299	$	—	$	17,299	$	—

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

13. OTHER (INCOME) EXPENSE, NET

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
(Gain) loss on sale of assets	$	(217	)	$	(129	)	$	(754	)	$	(33	)
Results of non-consolidated subsidiaries		(68	)		(62	)		(99	)		(199	)
Foreign exchange (gain) loss, net		388			(386	)		674			(530	)
Rents and royalties		(795	)		(110	)		(801	)		(255	)
Return on pension assets and other pension costs		(287	)		(330	)		(577	)		(656	)
Loss on lease abandonment and other exit costs		—			—			699			641
Assets write-down		—			—			1,110			1,015
Insurance and other settlements		(1,319	)		—			(2,330	)		(604	)
Severance and other charges		—			—			824			—
Other, net		(92	)		(51	)		(290	)		(475	)
Total other (income) expense, net	$	(2,390	)	$	(1,068	)	$	(1,544	)	$	(1,096	)

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

During the six months ended June 30, 2024, we had a fire incident at one of our U.K. facilities and have recorded partial insurance settlements of $2.3 million, including $1.3 million recorded in the three months ended June 30, 2024, associated with costs incurred and loss of income from business interruption. During the six months ended June 30, 2023, the State of Louisiana expropriated the access road to one of our facilities and paid us a settlement of $0.6 million.

Return to Index

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
British Pound	$	39		$	70		$	70		$	(181	)
Canadian Dollar		34			(64	)		73			(6	)
Colombian Peso		(23	)		79			(30	)		132
Euro		47			(101	)		65			(17	)
Indonesian Rupiah		145			37			225			(33	)
Russian Ruble		18			(90	)		14			(341	)
Turkish Lira		4			(443	)		25			(448	)
Other currencies, net		124			126			232			364
Foreign exchange (gain) loss, net	$	388		$	(386	)	$	674		$	(530	)

14. INCOME TAX EXPENSE (BENEFIT)

The Company recorded an income tax expense of $3.6 million and $5.3 million for the three and six months ended June 30, 2024, respectively, compared to an income tax benefit of $7.3 million and $6.6 million for the three months and six months ended June 30, 2023, respectively. The effective tax rate for the three and six months ended June 30, 2024, was 28.2% and 29.3%, respectively. The effective tax rate for the three and six months ended June 30, 2023 was (46.3%) and (35.5%), respectively. The tax rate for the three and six months ended June 30, 2024 was impacted by the earnings mix of jurisdictions subject to tax for the period and items discrete to the quarter. The tax rate for the three and six months ended June 30, 2023 was largely impacted by the reversal of net deferred tax liabilities attributable to Core Laboratories N.V., which were not realized following the Redomestication Transaction on May 1, 2023.

15. EARNINGS PER SHARE

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

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Weighted average common shares outstanding - basic		46,908		46,675		46,884		46,655
Effect of dilutive securities:
Restricted shares		66		91		48		88
Performance shares		769		731		730		733
Weighted average common shares outstanding - diluted		47,743		47,497		47,662		47,476

16. SEGMENT REPORTING

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

Reservoir Description: Encompasses the characterization of petroleum reservoir rock and reservoir fluids samples to increase production and improve recovery of crude oil and natural gas from our clients’ reservoirs. We provide laboratory-based analytical and field services to characterize properties of crude oil and crude oil-derived products to

Return to Index

the oil and gas industry. Services associated with these fluids include determining the quality and measuring the quantity of the reservoir fluids and their derived products, such as gasoline, diesel and biofuels. We also provide proprietary and joint industry studies based on these types of analyses and manufacture associated laboratory equipment. In addition, we provide reservoir description capabilities that support various activities associated with energy transition projects, including services that support carbon capture, utilization and storage, geothermal projects, and the evaluation and appraisal of mining activities around lithium and other elements necessary for energy storage.
Production Enhancement: Includes services and manufactured products associated with reservoir well completions, perforations, stimulation, production and well abandonment. We provide integrated diagnostic services to evaluate and monitor the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.

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

	Reservoir<br>Description		Production<br>Enhancement		Corporate &<br>Other (1)			Consolidated
Three months ended June 30, 2024
Revenue from unaffiliated clients	$	86,276	$	44,301	$	—		$	130,577
Inter-segment revenue		23		15		(38	)		—
Segment operating income		11,443		4,401		164			16,008
Total assets		313,128		161,396		123,275			597,799
Capital expenditures		2,377		267		223			2,867
Depreciation and amortization		2,633		1,022		115			3,770
Three months ended June 30, 2023
Revenue from unaffiliated clients	$	83,384	$	44,497	$	—		$	127,881
Inter-segment revenue		88		65		(153	)		—
Segment operating income		13,316		5,498		92			18,906
Total assets		306,513		165,777		129,558			601,848
Capital expenditures		1,477		383		315			2,175
Depreciation and amortization		2,776		994		167			3,937
Six months ended June 30, 2024
Revenue from unaffiliated clients	$	170,513	$	89,701	$	—		$	260,214
Inter-segment revenue		37		62		(99	)		—
Segment operating income		18,336		5,977		266			24,579
Total assets		313,128		161,396		123,275			597,799
Capital expenditures		5,208		487		223			5,918
Depreciation and amortization		5,317		2,058		238			7,613
Six months ended June 30, 2023
Revenue from unaffiliated clients	$	163,572	$	92,665	$	—		$	256,237
Inter-segment revenue		129		119		(248	)		—
Segment operating income		15,787		8,779		821			25,387
Total assets		306,513		165,777		129,558			601,848
Capital expenditures		3,039		1,000		343			4,382
Depreciation and amortization		5,661		1,985		335			7,981

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

Return to Index

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

On May 1, 2023, Core Laboratories N.V. completed its previously announced redomestication transaction (the “Redomestication Transaction”), which, through a series of steps, resulted in the merger of Core Laboratories N.V., a holding company in the Netherlands, with and into Core Laboratories Luxembourg S.A., a public limited liability company incorporated under the laws of Luxembourg, with Core Laboratories Luxembourg S.A. surviving, and subsequently the migration of Core Laboratories Luxembourg S.A. out of Luxembourg and its domestication as Core Laboratories Inc., a Delaware corporation. The Redomestication Transaction has been accounted for as a transaction between entities under common control. There is no difference between the combined separate entities prior to the Redomestication Transaction and the combined separate entities after the Redomestication Transaction, therefore, comparative information reported below does not differ from amounts previously reported under Core Laboratories N.V.’s consolidated financial statements. The following discussion should be read in conjunction with Core Laboratories Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023, Core Laboratories N.V.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023 and Core Laboratories N.V.’s Annual Report on Form 10-K for the year ended December 31, 2022, including Note 2 - Summary of Significant Accounting Policies.

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

General

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

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

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

Return to Index

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

Cautionary Statement Regarding Forward-Looking Statements

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

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

Outlook

Currently, global oil inventories are low relative to historical levels, and with continued supply restrictions from the Organization of the Petroleum Exporting Countries (“OPEC+”), global supply is expected to remain tight relative to forecasted growth in oil demand for the next few years. During the last couple of years, OPEC+ and its key member, Saudi Arabia, announced several mandatory and voluntary reductions in production that continue to remain in place and are aimed at supporting the stability of the oil market.

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

The ongoing geopolitical conflicts between Russia and Ukraine and in the Middle East continue to cause disruptions to traditional maritime supply chains and the trading of crude oil and derived products, such as diesel fuel. The maritime supply chains associated with the movement of crude oil have continued to realign and stabilize throughout 2023 and in 2024, which has reduced some of the volatility in crude-oil prices and disruptions to our operations. Core Lab expects crude-oil supply lines to remain more stable, and the Company's volume of associated laboratory services to be commensurate with the trading and

Return to Index

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

We continue to focus on large-scale core analyses and reservoir fluids characterization studies in most oil-producing regions across the globe, which include both newly developed fields and brownfield extensions in many offshore developments in both the U.S. and internationally. In the U.S. we are involved in projects in many of the onshore unconventional basins and offshore projects in the Gulf of Mexico. Outside the U.S. we continue to work on many smaller and large-scale projects analyzing crude oil and derived products in every major producing region of the world. Notable larger projects are in locations such as Guyana and Suriname located offshore South America, Australia, Southern Namibia and the Middle East. Analysis and measurement of crude oil derived products also occurs in every major producing region of the world. Additionally, some of our major clients have increased their investment in projects to capture and sequester CO2. The Company’s activities on these projects have expanded and are expected to continue expanding in 2024 and beyond.

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

Return to Index

Results of Operations

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

	Three Months Ended June 30,
	2024				2023				Change		% Change
REVENUE:
Services	$	96,337		74%	$	93,265		73%			3%
Product sales		34,240		26%		34,616		27%		)	(1)%
Total revenue		130,577		100%		127,881		100%			2%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		74,823		78%		71,121		76%			5%
Cost of product sales, exclusive of depreciation expense shown below*		28,107		82%		29,174		84%		)	(4)%
Total cost of services and product sales		102,930		79%		100,295		78%			3%
General and administrative expense, exclusive of depreciation expense shown below		10,259		8%		5,811		5%			77%
Depreciation and amortization		3,770		3%		3,937		3%		)	(4)%
Other (income) expense, net		(2,390	)	(2)%		(1,068	)	(1)%		)	124%
OPERATING INCOME		16,008		12%		18,906		15%		)	(15)%
Interest expense		3,209		2%		3,236		3%		)	(1)%
Income before income taxes		12,799		10%		15,670		12%		)	(18)%
Income tax expense (benefit)		3,609		3%		(7,259	)	(6)%			NM
Net income		9,190		7%		22,929		18%		)	(60)%
Net income attributable to non-controlling interest		158		—%		83		—%			NM
Net income attributable to Core Laboratories Inc.	$	9,032		7%	$	22,846		18%		)	(60)%
Other Data:
Current ratio (1)	2.39:1				2.45:1
Debt to EBITDA ratio (2)	1.86:1				2.18:1
Debt to Adjusted EBITDA ratio (3)	1.66:1				1.85:1

All values are in US Dollars.

“NM” means not meaningful

*Percentage based on applicable revenue rather than total revenue

Return to Index

	Three Months Ended
	June 30, 2024				March 31, 2024			Change		% Change
REVENUE:
Services	$	96,337		74%	$	96,495	74%		)	(0)%
Product sales		34,240		26%		33,142	26%			3%
Total revenue		130,577		100%		129,637	100%			1%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		74,823		78%		73,865	77%			1%
Cost of product sales, exclusive of depreciation expense shown below*		28,107		82%		30,723	93%		)	(9)%
Total cost of services and product sales		102,930		79%		104,588	81%		)	(2)%
General and administrative expense, exclusive of depreciation expense shown below		10,259		8%		11,789	9%		)	(13)%
Depreciation and amortization		3,770		3%		3,843	3%		)	(2)%
Other (income) expense, net		(2,390	)	(2)%		846	1%		)	NM
OPERATING INCOME		16,008		12%		8,571	7%			87%
Interest expense		3,209		2%		3,423	3%		)	(6)%
Income before income taxes		12,799		10%		5,148	4%			149%
Income tax expense (benefit)		3,609		3%		1,658	1%			118%
Net income		9,190		7%		3,490	3%			163%
Net income attributable to non-controlling interest		158		—%		270	—%		)	NM
Net income attributable to Core Laboratories Inc.	$	9,032		7%	$	3,220	2%			180%
Other Data:
Current ratio (1)	2.39:1				2.68:1
Debt to EBITDA ratio (2)	1.86:1				1.99:1
Debt to Adjusted EBITDA ratio (3)	1.66:1				1.76:1

All values are in US Dollars.

“NM” means not meaningful

*Percentage based on applicable revenue rather than total revenue

Return to Index

	Six Months Ended June 30,
	2024				2023				Change		% Change
REVENUE:
Services	$	192,832		74%	$	184,341		72%			5%
Product sales		67,382		26%		71,896		28%		)	(6)%
Total revenue		260,214		100%		256,237		100%			2%
OPERATING EXPENSES:
Cost of services, exclusive of depreciation expense shown below*		148,688		77%		142,055		77%			5%
Cost of product sales, exclusive of depreciation expense shown below*		58,830		87%		59,768		83%		)	(2)%
Total cost of services and product sales		207,518		80%		201,823		79%			3%
General and administrative expense, exclusive of depreciation expense shown below		22,048		8%		22,142		9%		)	(0)%
Depreciation and amortization		7,613		3%		7,981		3%		)	(5)%
Other (income) expense, net		(1,544	)	(1)%		(1,096	)	—%		)	41%
OPERATING INCOME		24,579		9%		25,387		10%		)	(3)%
Interest expense		6,632		3%		6,665		3%		)	(0)%
Income before income taxes		17,947		7%		18,722		7%		)	(4)%
Income tax expense (benefit)		5,267		2%		(6,649	)	(3)%			NM
Net income		12,680		5%		25,371		10%		)	(50)%
Net income attributable to non-controlling interest		428		—%		152		—%			NM
Net income attributable to Core Laboratories Inc.	$	12,252		5%	$	25,219		10%		)	(51)%
Other Data:
Current ratio (1)	2.39:1				2.45:1
Debt to EBITDA ratio (2)	1.86:1				2.18:1
Debt to Adjusted EBITDA ratio (3)	1.66:1				1.85:1

All values are in US Dollars.

“NM” means not meaningful

*Percentage based on applicable revenue rather than total revenue

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

Service Revenue

Service revenue is primarily tied to activities associated with the exploration, appraisal, development, and production of oil, gas and derived products outside the U.S. For the three months ended June 30, 2024, service revenue was $96.3 million, an increase of 3% year-over-year and relatively flat sequentially. Year-over-year, the increase was due to growth in activity levels in both international and U.S. markets. Activity on reservoir rock and fluid projects continues to expand and reservoir fluid analysis services in the European region showed improvement when compared to the prior year. Additionally, well completion diagnostic services in the U.S. market show a strong growth in 2024 when compared to the same period in 2023.

Sequentially, service revenue was relatively flat, which reflects a slightly lower level of well diagnostic services in the U.S., offset by growth in international reservoir rocks and fluids projects.

Return to Index

For the six months ended June 30, 2024, service revenue was $192.8 million, an increase of 5% compared to the same period in the prior year, driven by increases in both international and U.S. activity discussed above.

Product Sales Revenue

Product sales are primarily tied to supporting the U.S. onshore drilling and completion operations and bulk product sales to international markets. Product sales to international markets are typically shipped and delivered in bulk and the timing of delivery can vary from one quarter to another. For the three months ended June 30, 2024, product sales revenue of $34.2 million remained relatively flat year-over-year and increased 3% sequentially. The average U.S. land rig count for the three months ended June 30, 2024 is 17% lower when compared to the same period in 2023, however product sales in the U.S. increased year-over-year. The year-over-year growth in product sales in the U.S. onshore market was offset by a lower level of international product sales during the three months ended June 30, 2024.

Sequentially, additional market penetration of our completion products into the U.S. onshore market provided strong growth, however this growth was partially offset by lower levels of product sales into the Canadian market as a result of typical seasonal declines in activity caused by the spring break-up.

For the six months ended June 30, 2024, product sales revenue was $67.4 million, and decreased 6% compared to the same period in the prior year, primarily due to decreased sales in both the U.S. and international markets. Additionally, we had lower sales of laboratory equipment when compared to the same quarter in the prior year.

Cost of Services, excluding depreciation

Cost of services was $74.8 million for the three months ended June 30, 2024, an increase of 5% year-over-year and 1% sequentially. Cost of services expressed as a percentage of service revenue was 78% for the three months ended June 30, 2024, compared to 76% for the same period in the prior year, and 77% compared to the prior quarter. Year-over-year, the increase in cost of services as a percentage of service revenue was primarily associated with higher employee compensation and operating costs.

Sequentially, the increase in cost of services as a percentage of services revenue was primarily due to a slightly different mix of services provided in the three months ended June 30, 2024, versus the prior quarter.

For the six months ended June 30, 2024, cost of services was $148.7 million, an increase of 5% compared to the same period in the prior year. Cost of services expressed as a percentage of service revenue remained flat compared to the same period in the prior year. Although utilization of our global laboratory network has improved with higher revenue, these efficiency gains have been offset by the impact of inflation on our employee compensation and operating costs.

Cost of Product Sales, excluding depreciation

Cost of product sales was $28.1 million for the three months ended June 30, 2024, a decrease of 4% year-over-year and 9% sequentially. Cost of product sales expressed as a percentage of product sales revenue was 82% for the three months ended June 30, 2024, compared to 84% year-over-year and 93% sequentially. The year-over-year improvement in cost of product sales as a percentage of product sales was primarily driven by cost reduction initiatives and manufacturing efficiencies initially implemented in March 2024.

Sequentially, the improvement in cost of product sales as a percentage of product sales was primarily due to cost reduction initiatives and manufacturing efficiencies initially implemented in March 2024.

For the six months ended June 30, 2024, cost of product sales was $58.8 million, a decrease of 2% compared to the same period in the prior year. Cost of product sales expressed as a percentage of product sales revenue was 87% for the six months ended June 30, 2024, compared to 83% from the same period in the prior year. The increase in cost of product sales as a

Return to Index

percentage of product sales revenue was primarily due to lower levels of product sales in the U.S., which resulted in higher absorption of fixed costs on a lower revenue base.

General and Administrative Expense, excluding depreciation

General and administrative (“G&A”) expense includes corporate management and centralized administrative services that benefit our operations.

G&A expense for the three months ended June 30, 2024, was $10.3 million, which increased $4.4 million when compared to $5.8 million for the three months ended June 30, 2023. The year-over-year increase of $4.4 million in G&A expense was primarily associated with:

The G&A expense for the three months ended June 30, 2023, includes a $2.0 million net benefit on proceeds received from a death benefit under company owned life insurance policies. Additionally, there was a benefit of $0.9 million associated with the reversal of previously recognized stock compensation expense as performance targets associated with performance share awards were determined to be unachievable.
The G&A expense for the three months ended June 30, 2024, increased by $0.9 million associated with implementation costs of a global human capital management system and a third-party assessment of the Company’s IT cybersecurity environment.

G&A expense for the three months ended June 30, 2024, of $10.3 million decreased $1.5 million when compared to the $11.8 million for the three months ended March 31, 2023. The sequential decrease of $1.5 million in G&A expense was primarily associated with:

The G&A expense for the three months ended March 31, 2024, includes a charge of $3.5 million associated with stock compensation expense that was accelerated for employees who are eligible for retirement.
The G&A expense for the three months ended June 30, 2024, includes additional expenses of approximately $0.9 million associated with the implementation of a new global human capital management system and a third-party assessment of the Company’s IT cybersecurity environment. The G&A expense in this quarter was also $1.0 million higher due to changes in the value of company owned life insurance instruments, which was a loss in the three months ended June 30, 2024, compared to a gain in the three months ended March 31, 2024

G&A expense for the six months ended June 30, 2024, was $22.0 million compared to $22.1 million for the six months ended June 30, 2023. The six months ended June 30, 2024, included $3.5 million of stock compensation accelerated for employees that have reached their eligible retirement age, compared to $6.5 million included in the six months ended June 30, 2023. The decrease in stock compensation expense was substantially offset by higher levels of expense for system implementation costs, IT cybersecurity assessment, net changes in the value of insurance investment instruments and employee compensation costs as discussed above.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended June 30, 2024, was $3.8 million, a decrease of 4% year-over-year and 5% sequentially. Depreciation and amortization expense for the six months ended June 30, 2023, was $7.6 million, a decrease of 2% year-over-year. The decrease in depreciation and amortization expense compared to the prior year periods and sequentially is primarily due to assets which became fully depreciated and lower levels of capital expenditures.

Return to Index

Other (Income) Expense, Net

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
(Gain) loss on sale of assets	$	(217	)	$	(129	)	$	(754	)	$	(33	)
Results of non-consolidated subsidiaries		(68	)		(62	)		(99	)		(199	)
Foreign exchange (gain) loss, net		388			(386	)		674			(530	)
Rents and royalties		(795	)		(110	)		(801	)		(255	)
Return on pension assets and other pension costs		(287	)		(330	)		(577	)		(656	)
Loss on lease abandonment and other exit costs		—			—			699			641
Assets write-down		—			—			1,110			1,015
Insurance and other settlements		(1,319	)		—			(2,330	)		(604	)
Severance and other charges		—			—			824			—
Other, net		(92	)		(51	)		(290	)		(475	)
Total other (income) expense, net	$	(2,390	)	$	(1,068	)	$	(1,544	)	$	(1,096	)

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
British Pound	$	39		$	70		$	70		$	(181	)
Canadian Dollar		34			(64	)		73			(6	)
Colombian Peso		(23	)		79			(30	)		132
Euro		47			(101	)		65			(17	)
Indonesian Rupiah		145			37			225			(33	)
Russian Ruble		18			(90	)		14			(341	)
Turkish Lira		4			(443	)		25			(448	)
Other currencies, net		124			126			232			364
Foreign exchange (gain) loss, net	$	388		$	(386	)	$	674		$	(530	)

Interest Expense

Interest expense for the three months ended June 30, 2024 was $3.2 million relatively flat year-over-year and down slightly compared to $3.4 million in the prior quarter. The Company retired $75.0 million of senior notes on September 30, 2023, which carried a fixed interest rate of 4.11%. These senior notes were partially refinanced with $60 million of new senior notes which carry fixed interest rates of 7.25% and 7.50%. Although the total debt of the Company has been reduced, the current debt carries a higher blended interest rate. Sequentially, the decrease was primarily due to lower average borrowings on our bank revolving credit facility during the three months ended June 30, 2024. Interest expense for the six months ended June 30, 2024 was $6.6 million compared to $6.7 million for the six months ended June 30, 2023, primarily due to the changes in borrowings and the associated interest rates, as discussed above.

Return to Index

Income Tax Expense (Benefit)

The Company recorded an income tax expense of $3.6 million and $5.3 million for the three and six months ended June 30, 2024, respectively, compared to an income tax benefit of $7.3 million and $6.6 million for the three and six months ended June 30, 2023, respectively. The effective tax rate for the three and six months ended June 30, 2024 was 28.2% and 29.3%, respectively. The effective tax rate for the three and six months ended June 30, 2023 was (46.3%) and (35.5%), respectively. The tax rate for the six months ended June 30, 2024 was largely impacted by the earnings mix of jurisdictions subject to tax for the period and items discrete to the quarter. The tax rate for the three and six months ended June 30, 2023 was largely impacted by the reversal of net deferred tax liabilities attributable to Core Laboratories N.V., which were not realized following the Redomestication Transaction on May 1, 2023.

Segment Analysis

	Three Months Ended									Year-over-year	Sequential
	June 30, 2024			June 30, 2023			March 31, 2024			% Change	% Change
REVENUE:
Reservoir Description	$	86,277	66%	$	83,384	65%	$	84,236	65%	3%	2%
Production Enhancement		44,300	34%		44,497	35%		45,401	35%	0%	(2)%
Consolidated	$	130,577	100%	$	127,881	100%	$	129,637	100%	2%	1%
OPERATING INCOME:
Reservoir Description *	$	11,443	13%	$	13,316	16%	$	6,892	8%	(14)%	66%
Production Enhancement *		4,401	10%		5,498	12%		1,576	3%	(20)%	179%
Corporate and Other (1)		164	0%		92	0%		103	0%	NM	NM
Consolidated	$	16,008	12%	$	18,906	15%	$	8,571	7%	(15)%	87%
* Percentage, which represents operating margins, is based on operating income divided by applicable revenue rather than total revenue.<br>"NM" means not meaningful<br>(1) "Corporate and Other" represents those items that are not directly related to a particular operating segment.
	Six Months Ended June 30,						Year-over-year
---	---	---	---	---	---	---	---
	2024			2023			% Change
REVENUE:
Reservoir Description	$	170,513	66%	$	163,572	64%	4%
Production Enhancement		89,701	34%		92,665	36%	(3)%
Consolidated	$	260,214	100%	$	256,237	100%	2%
OPERATING INCOME:
Reservoir Description *	$	18,336	11%	$	15,787	10%	16%
Production Enhancement *		5,977	7%		8,779	9%	(32)%
Corporate and Other (1)		266	0%		821	0%	NM
Consolidated	$	24,579	9%	$	25,387	10%	(3)%
* Percentage, which represents operating margin, is based on operating income divided by applicable revenue rather than total revenue.<br>"NM" means not meaningful<br>(1) "Corporate and Other" represents those items that are not directly related to a particular operating segment.

Reservoir Description

Reservoir Description operations are closely correlated with trends in international and offshore activity levels, with approximately 80% of its revenue sourced from existing producing fields, development projects and movement of crude oil products outside the U.S.

Return to Index

Revenue from the Reservoir Description operating segment of $86.3 million for the three months ended June 30, 2024 increased 3% year-over-year and 2% sequentially. The year-over-year increase was primarily due to growth in reservoir rock and fluid analysis in both international and U.S. markets. The growth was partially offset by a decline in crude-assay analysis services in certain regions impacted by the on-going geopolitical conflicts and delayed reservoir rock and fluids analysis projects caused by the fire in our Aberdeen, United Kingdom facility in February 2024. The Company holds insurance policies for both property damage and business interruption, which has minimized the loss to the Company associated with the fire.

Sequentially, the increase in revenue is associated with a slightly elevated level of activity in reservoir rock and fluid analysis for international projects, as well as increased revenue associated with the sale of laboratory equipment. The increase in revenue was partially offset by disruptions caused by the on-going geopolitical conflicts as discussed above.

Revenue from the Reservoir Description segment of $170.5 million for the six months ended June 30, 2024 increased 4% from the same period in 2023. The increase in revenue during 2024 is primarily due to growth in activity levels on international projects for reservoir rock and fluid analysis services, particularly the South America and Middle East, and improvement in the level of some crude-assay services in Europe. The growth in revenue was partially offset by delayed project revenue caused by the fire in our Aberdeen facility as discussed above.

Operating income of $11.4 million for the three months ended June 30, 2024, decreased $1.9 million, year-over-year and increased $4.6 million sequentially. Operating margins were 13% for the three months ended June 30, 2024, compared to 16% year-over-year, and 8% sequentially. Year-over-year, the decrease in operating income and operating margins was primarily attributable to higher employee compensation and operating expenses. Sequentially, the increase in operating income and operating margins was primarily due to 1) incremental revenue in the three months ended June 30, 2024; and 2) a lower level of Corporate G&A expenses absorbed in the segment. See discussion of General and Administrative Expenses, above. Operating income of $18.3 million for the six months ended June 30, 2024, increased $2.5 million year-over-year compared to the same period in 2023. The increase in operating income is primarily driven by incremental revenue of $6.9 million year-over-year.

Production Enhancement

Production Enhancement operations are largely focused on complex completions in unconventional oil and gas reservoirs in the U.S. as well as conventional projects across the globe. U.S. onshore drilling and completion activities typically experience a seasonal decline at end of the year with activity levels increasing at the beginning of the year. Average rig count in the U.S. land market for the three months ended June 30, 2024, was down by 17% year-over-year and 3% sequentially. International drilling and completion activities remained flat year-over-year and sequentially.

Revenue from the Production Enhancement operating segment of $44.3 million for the three months ended June 30, 2024, remained flat year-over-year and decreased 2% sequentially. Year-over-year, growth in well completion diagnostic services was substantially offset by a lower level of bulk sales in the international markets. Bulk sales to international markets may vary from one quarter to another quarter. Sequentially, product sales to the U.S onshore markets increased, however this was offset by lower product sales in Canada and bulk sales to international markets. Additionally, well diagnostic services to the U.S. onshore market decreased slightly during the three months ended June 30, 2024.

Revenue from the Production Enhancement segment of $89.7 million for the six months ended June 30, 2024, decreased 3% from the same period in 2023. The decrease in revenue in 2024 is primarily due to a decline of drilling and completion activity in the U.S. land market, partially offset by growth in well completion diagnostic services in the U.S. markets.

Operating income of $4.4 million for the three months ended June 30, 2024, decreased $1.1 million year-over-year, and increased $2.8 million sequentially. Operating margins for the three months ended June 30, 2024, was 10%, compared to operating margins of 12% year-over-year and 3% sequentially. Year-over-year, the decrease in operating income and margins was primarily due to lower product sales to the U.S. onshore market, resulting in lost manufacturing efficiencies increasing the cost of manufacturing products. Sequentially, the increase in operating income and margins was primarily driven by benefits

Return to Index

from cost optimization initiatives on manufacturing efficiencies initially implemented in March 2024, and a lower level of corporate G&A expenses absorbed by the segment.

Operating income of $6.0 million for the six months ended June 30, 2024, decreased $2.8 million compared to the same period in the prior year. The decrease in operating income was primarily due to a lower level of revenue which resulted in a higher absorption of fixed cost and reduced manufacturing efficiencies as discussed above.

Liquidity and Capital Resources

General

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

We are a holding company incorporated in Delaware. Therefore, we conduct substantially all of our operations through our subsidiaries. Our cash availability is largely dependent upon the ability of our subsidiaries to pay cash dividends or otherwise distribute or advance funds to us and on the terms and conditions of our existing and future credit arrangements. There are no restrictions preventing any of our subsidiaries from repatriating earnings, except for the unrepatriated earnings of our Russian subsidiary which are not expected to be distributed in the foreseeable future, and there are no restrictions or income taxes associated with distributing cash to the parent company through loans or advances. As of June 30, 2024, $15.7 million of our $17.7 million of cash was held by our foreign subsidiaries.

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

Cash Flows

The following table summarizes cash flows (in thousands):

	Six Months Ended June 30,
	2024			2023			% Change
Cash flows provided by (used in):
Operating activities	$	22,676		$	5,572		307%
Investing activities		(2,344	)		(818	)	187%
Financing activities		(17,757	)		6,022		NM
Net change in cash and cash equivalents	$	2,575		$	10,776		(76)%

Comparing the six months ended June 30, 2024 to the same period in the prior year, cash flows provided by operating activities improved to $22.7 million in 2024 compared to $5.6 million in the same period 2023. The Company improved its working capital by lowering its level of inventory and accounts payable during the six months ended June 30, 2024.

Cash flows used in investing activities for the six months ended June 30, 2024 of $2.3 million were driven primarily by funding capital expenditures of $5.9 million offset by proceeds on the sale of assets of $0.8 million and proceeds on company owned life insurance policies of $2.8 million. Cash flows used in investing activities for the six months ended June 30, 2023 of $0.8 million were driven primarily by funding capital expenditures of $4.4 million offset by proceeds on company owned life insurance policies of $3.4 million.

Cash flows used in financing activities for the six months ended June 30, 2024 of $17.8 million includes a $16.0 million net reduction in long-term debt, quarterly dividends of $0.9 million and $0.6 million associated with the Redomestication

Return to Index

Transaction. Cash flows provided by financing activities for the six months ended June 30, 2023 of $6.0 million includes borrowings on our Credit Facility of $10.0 million, offset by quarterly dividend payments of $0.9 million and $2.6 million associated with the Redomestication Transaction.

During the six months ended June 30, 2024, we repurchased 12,912 shares of our common stock to satisfy personal tax liabilities of participants in our stock-based compensation plan for an aggregate purchase price of $0.2 million.

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

	Six Months Ended June 30,
	2024			2023			% Change
Free cash flow calculation:
Net cash provided by (used in) operating activities	$	22,676		$	5,572		307%
Less: Cash paid for capital expenditures		(5,918	)		(4,382	)	35%
Free cash flow	$	16,758		$	1,190		1308%

Free cash flow for the six months ended June 30, 2024 was $16.8 million, compared to $1.2 million for the same period in 2023. The cash flows of $5.6 million provided by operating activities during the six months ended June 30, 2023, was largely impacted by an $11.2 million increase in inventory during this six-month period. Capital expenditures were $1.6 million higher during the six months ended June 30, 2024 compared to the same period in the prior year.

Senior Notes, Credit Facility and Available Future Liquidity

Additionally, we, along with CLIH, have a secured credit facility, the Eighth Amended and Restated Credit Agreement (as amended, the “Credit Facility”) for an aggregate borrowing commitment of $135.0 million with a $50.0 million “accordion” feature. As of June 30, 2024, the Credit Facility has an available borrowing capacity of approximately $85.3 million.

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

	Interest Rate	Maturity Date	June 30,<br>2024			December 31,<br>2023
2021 Senior Notes Series A (1)	4.09%	January 12, 2026	$	45,000		$	45,000
2021 Senior Notes Series B (1)	4.38%	January 12, 2028		15,000			15,000
2023 Senior Notes Series A (2)	7.25%	June 28, 2028		25,000			25,000
2023 Senior Notes Series B (2)	7.50%	June 28, 2030		25,000			25,000
Credit Facility				40,000			56,000
Total long-term debt				150,000			166,000
Less: Debt issuance costs				(2,379	)		(2,866	)
Long-term debt, net			$	147,621		$	163,134

Return to Index

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

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

In accordance with the terms of the Credit Facility, our leverage ratio is 1.66, and our interest coverage ratio is 5.94, each for the period ended June 30, 2024. We are in compliance with all covenants contained in our Credit Facility and Senior Notes as of June 30, 2024. Certain of our material, wholly owned subsidiaries are guarantors or co-borrowers under the Credit Facility and Senior Notes. See Note 7 - Long-term Debt, net of the Notes to the Interim Consolidated Financial Statements for additional information regarding the terms and financial covenants of the Senior Notes and the Credit Facility.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

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

Disclosure Controls and Procedures

Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2024, at the reasonable assurance level.

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

Changes in Internal Control Over Financial Reporting

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

Return to Index

CORE LABORATORIES INC.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

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

Item 2. Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

The following table provides information about our purchases of shares of our common stock, par value $0.01, that are registered by us pursuant to Section 12 of the Exchange Act during the three months ended June 30, 2024:

Period		Average Price<br>Paid Per<br>Share
April 1 - 30, 2024 (1)	3,017	$	17.13	—	4,655,162
May 1 - 31, 2024 (1)	7,050	$	15.71	—	4,667,994
June 1 - 30, 2024	—	$	—	—	4,667,994
Total	10,067	$	16.14	—

Repurchased shares were surrendered to us by participants in a stock-based compensation plan to settle any personal tax liabilities which may result from the award.
During the three months ended June 30, 2024, we distributed 58,396 shares of our treasury stock upon vesting of stock-based awards.

Item 5. Other Information

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

Return to Index

Item 6. Exhibits

Exhibit<br><br>No.		Exhibit Title	Incorporated by<br><br>reference from the<br><br>following documents
31.1	-	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	-	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	-	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	-	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101.INS	-	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	Filed herewith
101.SCH	-	Inline XBRL Schema Document	Filed herewith
101.CAL	-	Inline XBRL Calculation Linkbase Document	Filed herewith
101.LAB	-	Inline XBRL Label Linkbase Document	Filed herewith
101.PRE	-	Inline XBRL Presentation Linkbase Document	Filed herewith
101.DEF	-	Inline XBRL Definition Linkbase Document	Filed herewith
104	-	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Filed herewith

Return to Index

SIGNATURE

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

		CORE LABORATORIES INC.
Date:	July 25, 2024	By:	/s/ Christopher S. Hill
			Christopher S. Hill
			Chief Financial Officer
			(Duly Authorized Officer and
			Principal Financial Officer)

Return to Index

EX-31.1

Exhibit 31.1

Certification

I, Lawrence V. Bruno, certify that:

I have reviewed this quarterly report on Form 10-Q of Core Laboratories Inc. (the “Registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date:	July 25, 2024	By:	/s/ Lawrence V. Bruno
			Lawrence V. Bruno
			Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Christopher S. Hill, certify that:

I have reviewed this quarterly report on Form 10-Q of Core Laboratories Inc. (the “Registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date:	July 25, 2024	By:	/s/ Christopher S. Hill
			Christopher S. Hill
			Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of

Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Lawrence V. Bruno, Chief Executive Officer of Core Laboratories Inc. (the “Company”), hereby certify that the accompanying report on Form 10-Q for the quarter ended June 30, 2024, filed by the Company with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, (the “Report”).

I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	July 25, 2024	/s/ Lawrence V. Bruno
		Name:	Lawrence V. Bruno
		Title:	Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of

Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Christopher S. Hill, Chief Financial Officer of Core Laboratories Inc. (the “Company”), hereby certify that the accompanying report on Form 10-Q for the quarter ended June 30, 2024, filed by the Company with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, (the “Report”).

I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	July 25, 2024	/s/ Christopher S. Hill
		Name:	Christopher S. Hill
		Title:	Chief Financial Officer

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2024

For the transition period from ________________ to ______________

Commission File Number: 001-41695

CORE LABORATORIES INC.

(713) 328-2673

None

CORE LABORATORIES INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024

INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CORE LABORATORIES INC.

CONSOLIDATED BALANCE SHEETS

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

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

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

CORE LABORATORIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

CORE LABORATORIES INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS

2. SIGNIFICANT ACCOUNTING POLICIES UPDATE

Basis of Presentation and Principles of Consolidation

Property, Plant and Equipment

Recent Accounting Pronouncements

Issued But Not Yet Effective

3. ACQUISITIONS AND DIVESTURES

4. CONTRACT ASSETS AND LIABILITIES

5. INVENTORIES

6. LEASES

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

7. LONG-TERM DEBT, NET

8. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

9. COMMITMENTS AND CONTINGENCIES

10. EQUITY

Treasury Stock

Dividend Policy

Accumulated Other Comprehensive Income (Loss)

11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

SOFR

SOFR

12. FINANCIAL INSTRUMENTS

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

13. OTHER (INCOME) EXPENSE, NET

14. INCOME TAX EXPENSE (BENEFIT)

15. EARNINGS PER SHARE

16. SEGMENT REPORTING

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

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

General

Cautionary Statement Regarding Forward-Looking Statements

Outlook

Results of Operations

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

Service Revenue

Product Sales Revenue

Cost of Services, excluding depreciation

Cost of Product Sales, excluding depreciation

General and Administrative Expense, excluding depreciation

Depreciation and Amortization Expense

Other (Income) Expense, Net

For the transition period from __ to