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    CLB
    Earnings call· Jun 2026(Q2 FY26)

    Core Laboratories Inc. /DE/ Q2 FY26 earnings call CLB

    Jul 30, 2026 Source

    Executive summary

    Core Laboratories Q2 FY26 — Geopolitical Headwinds Offset by International Growth and Shareholder Returns

    Core Laboratories navigated a challenging Q2 FY26 marked by significant geopolitical conflicts impacting its Reservoir Description segment and service revenue. Despite these headwinds, the company demonstrated resilience with sequential growth in Production Enhancement, driven by technology adoption and international activity. Management remains focused on strategic technology investments, operational efficiency, and consistent shareholder returns through dividends and share repurchases, while anticipating a rebound in global oil demand in 2027.

    Highlights

    5

    • Production Enhancement revenue up 15% sequentially to $46 million, with operating margins expanding to 12%.

    • Energetic product sales improved, driven by increased operator adoption of advanced completion technologies in the U.S. and international markets.

    • Cash flow from operating activities almost doubled sequentially to $7.8 million.

    • Repurchased over 214,000 shares of company stock, valued at $2.7 million, marking the 7th consecutive quarter of buybacks.

    • DSOs improved slightly to 73 days from 74 days in the prior quarter.

    Concerns

    5

    • Reservoir Description revenue down 4% sequentially to $79 million and 9% year-over-year, with operating margins at 5%.

    • Ongoing military conflict in the Middle East and escalating attacks in Russia/Ukraine continued to affect operations, causing project delays and logistical disruptions.

    • Global crude assay work and reservoir characterization projects impacted by closure of the Strait of Hormuz and disruptions to maritime hydrocarbon transportation routes.

    • Product sales down 11% year-over-year, primarily due to a large laboratory instrumentation sale in Q2 2025 not repeating.

    • Net income ex-items down to $5.1 million from $8.8 million in Q2 FY25.

    Guidance & targets

    12
    CategoryTargetConfidence
    Q3 FY26 Revenue
    $128.5 million to $135.5 million
    high materiality
    Medium
    Q3 FY26 Operating Income
    $10.5 million to $15 million
    high materiality
    Medium
    Q3 FY26 EPS
    $0.12 to $0.20
    high materiality
    Medium
    Q3 FY26 Reservoir Description Revenue
    $81 million to $84 million
    medium materiality
    Medium
    Q3 FY26 Reservoir Description Operating Income
    $5.5 million to $7.9 million
    medium materiality
    Medium
    Q3 FY26 Production Enhancement Revenue
    $47.5 million to $51.5 million
    medium materiality
    Medium
    Q3 FY26 Production Enhancement Operating Income
    $4.8 million to $6.9 million
    medium materiality
    Medium
    Full-year FY26 Capital Expenditures (excluding UK facility rebuild)
    $15 million to $18 million
    medium materiality
    High
    Full-year FY26 G&A ex-items
    approximately $43 million to $45 million
    low materiality
    High
    Global Crude Oil Demand Growth
    rebound by approximately 1.7 million to 2 million barrels per day
    high materiality
    Medium
    U.S. Crude Oil Production
    approximately 13.8 million barrels per day
    medium materiality
    Medium
    Effective Tax Rate
    approximately 25%
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Reservoir Description
    Revenue was down sequentially and year-over-year, primarily impacted by reduced crude assay work due to disruptions in the Strait of Hormuz and delayed project execution/reduced client activity across the Middle East. Expanded sanctions and military action in Ukraine and Russia also negatively impacted operations. Partially offset by continued investment in reservoir characterization programs in other international regions.
    		$79 million-9%-4%5% operating margin
    Production Enhancement
    Revenue increased sequentially and year-over-year, driven by improved energetic product sales across both U.S. and international markets, as well as increased market penetration for diagnostic services. Operating margins benefited from higher product sales and the resolution of previously recorded tax matters.
    Sequential incremental margins: 59%
    		$46 million5%15%12% operating margin

    Operational metrics

    24
    Revenue
    $124.6 millionup over 2% compared to prior quarter, down 4% year-over-year
    Q2 FY26

    Total company revenue.

    Service Revenue
    $94.3 millionflat sequentially, down 2% year-over-year
    Q2 FY26

    Service revenue, which is more international, was primarily impacted by geopolitical conflicts in the Middle East and Russia/Ukraine.

    Product Sales
    $30.3 millionup 10% sequentially, down 11% year-over-year
    Q2 FY26

    Product sales are more equally tied to North America and international activity. Year-over-year decline due to a large laboratory instrumentation sale in Q2 2025 not repeating, partially offset by improved perforating product sales.

    Cost of Services ex-items
    80%slight improvement from 81% in prior quarter, increased from 77% last year
    Q2 FY26

    Sequential improvement driven by continued cost reduction initiatives in regions impacted by conflicts. Year-over-year increase due to carrying costs in negatively impacted regions.

    Cost of Sales ex-items
    85%improved from 94% in prior quarter, relatively flat compared to last year
    Q2 FY26

    Sequential improvement driven by continued cost control initiatives and manufacturing efficiencies. Includes partial refund of import tariffs incurred in prior periods.

    G&A ex-items
    $11 millionrelatively flat compared to prior quarter, up slightly from same quarter in prior year
    Q2 FY26

    100% of corporate G&A expenses are allocated and absorbed into the financial performance of reported segments.

    Depreciation and Amortization
    $3.8 millionflat compared to prior quarter
    Q2 FY26

    Company-wide depreciation and amortization.

    EBIT ex-items
    $9.4 millionup from $6.6 million last quarter
    Q2 FY26

    Company-wide EBIT, excluding certain items.

    Interest Expense
    $2.8 millioncompares to $2.9 million in prior quarter and $2.7 million in same quarter prior year
    Q2 FY26

    Changes primarily due to changes in average borrowings with variable interest rates.

    Net Income ex-items
    $5.1 millionup sequentially from $2.7 million last quarter, down from $8.8 million in Q2 FY25
    Q2 FY26

    Company-wide net income, excluding certain items.

    Earnings Per Diluted Share ex-items
    $0.11compared to $0.06 in prior quarter and $0.19 in Q2 FY25
    Q2 FY26

    Company-wide diluted EPS, excluding certain items.

    Receivables
    $108.8 millionincreased slightly from prior quarter
    Q2 FY26

    Timing of collections impacted by ongoing conflicts.

    Days Sales Outstanding (DSOs)
    73 daysimproved slightly from 74 days last quarter
    Q2 FY26

    Reflects collection efforts in affected regions.

    Inventory
    $58 millionup slightly from last quarter end
    Q2 FY26

    Company-wide inventory balance.

    Inventory Turns
    1.8%remained the same compared to last quarter
    Q2 FY26

    Anticipated to gradually improve through the remainder of 2026.

    Long-term Debt
    $116.4 million
    Q2 FY26

    Balance as of June 30, 2026.

    Cash
    $22.7 million
    Q2 FY26

    Cash balance as of June 30, 2026.

    Net Debt
    $93.6 milliondecreased slightly from last quarter
    Q2 FY26

    Net debt calculated as long-term debt minus cash.

    Leverage Ratio
    1.3xcompared to 1.2x last quarter
    Q2 FY26

    Company's leverage ratio.

    Capital Expenditures for Operations
    $4.7 millionhigher than Q1
    Q2 FY26

    Elevated CapEx primarily associated with investments for Asia Pacific contract and Mediterranean facility rebuilding.

    Share Buybacks
    $2.7 million
    Q2 FY26

    Value of shares repurchased during the quarter.

    Global Crude Oil Cargo Movements
    -16%vs. pre-conflict
    Post-conflict

    Decline in global cargo movements observed by independent sources tracking tanker movements.

    Global Oil Production Decline Rate
    8%absent investment
    Ongoing

    IEA estimate of natural field depletion rate.

    Upstream Investment Allocation
    90%
    Since 2019

    IEA noted that a significant portion of upstream investments has been directed towards sustaining existing production rather than expanding overall supply.

    Industry KPIs

    1
    MetricValueDetails
    FCF CAPEX leverage$3.1 million FCF; $4.7 million CapEx; 1.3x Net Debt/EBITDAUSD

    Deals & partnerships

    6
    Major international operatorReservoir characterization activities

    Core Lab was engaged to support reservoir characterization activities following a successful offshore Namibia exploration well.

    Murphy OilReservoir characterization program

    Core Lab initiated a reservoir characterization program supporting Murphy Oil's recently announced discovery offshore Cote d'Ivoire, utilizing dual-energy CT technology.

    Major international operatorLaboratory testing of solvent-assisted thermal recovery techniques

    Core Lab's Advanced Technology Center in Calgary is supporting a heavy oil operator with laboratory testing to improve recovery from existing producing assets.

    Operator in West TexasCompletion diagnostic services (FlowProfiler)

    Utilized Core's FlowProfiler oil and water tracer technology to identify highest quality landing intervals and highest producing completion intervals in horizontal wells.

    Major operator in LouisianaCompletion diagnostic services (gas tracer technology)

    Utilized the company's gas tracer technology to evaluate production performance across extended length horizontal laterals, confirming sustained gas contribution from the toe of the well.

    Leading independent operator in Western CanadaCompletion diagnostic services (water shutter program evaluation)

    Core's diagnostic technologies confirmed water bypassing the isolation packer, allowing the operator to refine completion design for a complex multilateral water shutter program.

    Capital programs

    3
    Asia Pacific Multiyear Contract Investmentunderway

    Investments to support a recently signed multiyear contract in the Asia Pacific region, contributing to elevated capital expenditures in Q2 FY26.

    Mediterranean Facility Rebuildingunderway
    Start: Q1 FY26

    Rebuilding facilities in the Mediterranean region that incurred weather-related damage in Q1 FY26, contributing to elevated capital expenditures in Q2 FY26.

    U.K. Facility Rebuildingunderway
    Period spend: $1.1 million
    Funding: company's property and casualty insurance

    Capital expenditure associated with rebuilding the U.K. facility, which was damaged by fire. These costs are covered by insurance and excluded from free cash flow calculation.

    Risks & headwinds

    5
    Geopolitical conflicts in Middle East and Russia/UkraineOngoing (Q2 FY26 and expected Q3 FY26)

    Reservoir Description revenue down 4% sequentially and 9% YoY; global cargo movements down 16% post-conflict; service revenue flat sequentially but down 2% YoY.

    Mitigation: Focus on cost reduction initiatives in affected regions; maintaining experienced staff for future rebound; leveraging global network and diversified technology portfolio; growth in other international regions.

    Disruption to crude assay work and reservoir characterization projectsOngoing (Q2 FY26 and expected Q3 FY26)

    Impacted by closure of Strait of Hormuz and widespread disruption to maritime hydrocarbon transportation routes.

    Mitigation: Growth in other regions (Africa, Brazil, Asia Pacific) partially offsetting impacts; continued investment in reservoir characterization programs in unaffected international areas.

    Evolving sanctions and military actionOngoing (Q2 FY26 and expected Q3 FY26)

    Negatively impacted company's operations in Ukraine and Russia; tying hands on who can and cannot be worked for.

    Mitigation: Executing a cost reduction plan for the Russia/Ukraine business; managing cost structure effectively.

    Volatility in crude oil pricesOngoing

    Disrupted regional operations and reduced demand for crude assay services.

    Mitigation: Asset-light business model; diversified technology portfolio; focus on maximizing operating efficiency.

    Lumpy product salesQ2 FY26

    Product sales down 11% YoY due to a large laboratory instrumentation sale in Q2 2025 not repeating.

    Mitigation: Improved sales of perforating products in both U.S. and international markets partially offset the decline; focus on manufacturing efficiencies and cost control initiatives.

    What to watch in Q3 FY26

    5

    Middle East Market Recovery

    Next quarter
    CurrentTiming difficult to predict; some marginal improvement in subsurface projects.
    TargetClear signs of recovery in client activity and project timing.

    Why it matters

    The Middle East conflict significantly impacts Reservoir Description and service revenue; recovery is key to overall performance improvement.

    While the timing of📎 recovery in certain Middle East markets remains difficult to predict📌, core believes, long-term fundamental support, future growth and exploration activity levels.

    Q&A highlights

    7

    How much has the pickup in oil movement in other parts of the world offset the decline in assay work from the Middle East and Russia/Ukraine?

    Global cargo movements are down 16% post-conflict. Core Lab has revenue opportunities on both ends of a transaction (loading and landfall). Management is focused on cost minimization without dismantling experienced staff, acknowledging volatility. Volatility in crude oil prices also slows down trading activity. A cost reduction plan is being executed for the Russia/Ukraine business.

    “I can tell you that we look at pre-conflict cargo movements versus post-conflict cargo movements and those are down 16% globally.”

    asked by Donald Crist · answered by Lawrence Bruno

    2 min read6 chapters

    Detailed Narrative

    01

    Geopolitical Impact and Operational Resilience

    Core Laboratories experienced continued operational challenges in Q2 FY26 due to the ongoing military conflict in the Middle East and escalating attacks in Russia/Ukraine. These conflicts led to project delays, logistical disruptions, and reduced demand for crude assay services, particularly impacting the Reservoir Description segment. Despite these headwinds, the company maintained focus on technology development and operating efficiency, leveraging its global network to support clients and partially offsetting impacts with growth in other regions.

    02

    Strategic Focus and Financial Tenets

    The company reiterated its long-standing strategic objectives: introducing new product and service offerings, maintaining a lean organization, and returning excess free cash to shareholders while preserving a strong balance sheet. Core Lab emphasized its three core financial tenets: maximizing free cash flow, maximizing return on invested capital, and returning excess free cash to shareholders, which have guided its value creation for over 32 years as a public company.

    03

    Reservoir Description Performance and Highlights

    The Reservoir Description segment reported Q2 FY26 revenue of $79 million, down 4% sequentially, with operating income of $3.7 million and a 5% operating margin. The decline was primarily attributed to disruptions in crude oil cargo movements through the Strait of Hormuz and reduced client activity in the Middle East, along with impacts from sanctions in Ukraine and Russia. Growth in international reservoir characterization activity, particularly in West Africa, Namibia, and Cote d'Ivoire, partially offset these challenges, with new projects secured for offshore exploration, appraisal, and carbon capture and storage.

    04

    Production Enhancement Performance and Highlights

    Production Enhancement revenue increased 15% sequentially to $46 million in Q2 FY26, up 5% year-over-year, with operating income of $5 million and a 12% operating margin. This improvement was driven by increased energetic product sales and market penetration for diagnostic services, despite only modest improvement in U.S. completion activity. The newly commercialized Impulse perforating technology saw growing deployment in North American unconventional plays, and FlowProfiler and gas tracer technologies expanded applications in reservoir appraisal, completion optimization, and water management programs.

    05

    Macro Outlook and Energy Demand

    Core Lab highlighted revised 2026 global crude oil demand forecasts from IEA, EIA, and OPEC, reflecting near-term negative impacts from geopolitical conflicts. However, these agencies project a demand growth rebound of 1.7 million to 2 million barrels per day in 2027. The company emphasized the long-term need for investment in new resources and maximizing recovery from existing fields due to accelerating decline rates and energy security concerns, noting that 90% of upstream investments since 2019 have been for maintaining existing production.

    06

    Shareholder Returns and Capital Discipline

    Core Lab maintained its commitment to shareholder returns, funding its quarterly dividend and repurchasing over 214,000 shares for $2.7 million in Q2 FY26, marking the seventh consecutive quarter of buybacks. The company plans to continue using free cash for dividends, growth opportunities, and opportunistic share repurchases. Capital expenditures for operations were $4.7 million, with full-year FY26 CapEx (excluding UK facility rebuild) projected at $15 million to $18 million, reflecting a disciplined, asset-light business model.

    AI-generated summary of the company’s earnings call. Not investment advice.