Core Laboratories Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion highlights the current operating environment and summarizes the financial position of Core Laboratories Inc. and its subsidiaries as of March 31, 2025, and should be read in conjunction with (i) the unaudited interim consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and (ii) the audited consolidated financial statements and accompanying notes thereto included in our 2024 Annual Report on Form 10-K for the year ended December 31, 2024.

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 3,400 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.

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 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.

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, 2024, filed by us with the Securities and Exchange Commission (“SEC”).

Outlook

The global demand for crude oil and natural gas is forecast to continue growing for both 2025 and the longer term. According to the latest reports from the U.S. Energy Information Administration, the International Energy Agency and the Organization of the Petroleum Exporting Countries and other oil producing nations (“OPEC+”), global demand for crude oil and natural gas is expected to continue increasing in 2025 and beyond. However, in the first week of April 2025, crude oil prices declined sharply after announcements that the United States would impose new tariffs on imported goods. The announcement of new tariffs has triggered global trade negotiations and has raised the level of uncertainty for global economies and the likelihood of a global recession. Additionally, on April 3, 2025, OPEC+ affirmed their decision to proceed with a gradual return of 2.2 million barrels of daily production by removing the voluntary production restrictions established in 2023. The gradual increase in production from OPEC+ is scheduled to begin in May 2025 with incremental increases in production through September 2026. OPEC also published an updated “compensation plan” which shows committed reductions in production for countries that produced volumes over their committed quotas since January 2024, which if complied with, should partially offset the scheduled increases to production quotas. In each announcement from OPEC+ regarding the production increases, they have also stated they will continue to hold monthly meetings to review market conditions, conformity, and compensation.

The uncertainty around the impact global trade negotiations may have on global economies combined with OPEC+’s announcement of increased production quotas has also increased the likelihood that global inventory levels of crude oil will rise, thereby contributing to weaker crude oil prices. The Company believes that activity levels associated with smaller-scale, short-cycle crude oil development projects will be more sensitive to a decrease and/or continued volatility of crude-oil prices. As such, we expect changes in crude oil prices will have a greater impact on drilling and completion activity levels in the U.S. onshore market. Outside the U.S., large-scale international oil and gas projects are expected to be more resilient to the near-term volatility of crude-oil prices, and the Company anticipates current client projects to continue as planned and additional projects scheduled this year to also be executed as planned.

The ongoing geopolitical conflicts between Russia and Ukraine and in the Middle East, along with associated sanctions, continue to cause disruptions to traditional maritime supply chains and the trading of crude oil and derived products, such as diesel fuel. The announcement of expanded sanctions on January 10, 2025 by the United States, disrupted and temporarily decreased the trading and maritime transportation of crude oil, along with demand for the Company's associated laboratory assay services. Demand for the laboratory assay analysis services recovered somewhat in March 2025, however these geopolitical conflicts and associated sanctions continue to create a higher level of uncertainty. The United States, the European Union, the United Kingdom and other countries continue to expand sanctions, export controls and other measures against Russia, Belarus, Iran and other countries, companies, 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 with many of the onshore unconventional basins and offshore projects in the Gulf of Mexico. Outside the U.S., we continue to work on many small and large-scale projects analyzing reservoir rock and fluid samples in every major producing region of the world. Notable larger projects are in locations such as offshore South America, Australia, West Africa and the Middle East. Analysis and measurement services also occur in every major producing region of the world. Additionally, some of our major clients have increased their investment in projects to capture and sequester carbon dioxide (“CO2”). The Company’s activities on these projects expanded in 2024 and are expected to continue expanding in 2025 and beyond.

Our major clients continue to focus on capital management, return on invested capital, free cash flow and returning capital to their shareholders, as opposed to a focus on production growth. The companies adopting value versus volume metrics tend to be the more technologically sophisticated operators and form the foundation of Core Lab’s worldwide client base. As oil and gas commodity prices stabilize in the mid-to-long-term, the Company expects our clients’ activities associated with increasing oil and gas reserves and production levels will continue to increase in the coming years.

Results of Operations

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

“NM” means not meaningful

*Percentage based on applicable revenue rather than total revenue

(1) Current ratio is calculated as follows: current assets divided by current liabilities.

(2) Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization and certain non-cash adjustments.

(3) Debt to Adjusted EBITDA ratio (as defined in our Credit Facility) is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization, impairments, severance and certain non-cash adjustments.

“NM” means not meaningful

*Percentage based on applicable revenue rather than total revenue

(1) Current ratio is calculated as follows: current assets divided by current liabilities.

(2) Debt to EBITDA ratio is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation and amortization and certain non-cash adjustments.

(3) Debt to Adjusted EBITDA ratio (as defined in our Credit Facility) is calculated as follows: debt less cash divided by the sum of consolidated net income plus interest, taxes, depreciation, amortization, impairments, severance and certain non-cash adjustments.

Operating Results for the Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024 and December 31, 2024

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 March 31, 2025, service revenue was $95.1 million, a decrease of 1% year-over-year and sequentially. Year-over-year, the slight decrease was due to lower activity levels in the international market. Revenue was negatively impacted by the ongoing geopolitical conflicts and expanded sanctions previously discussed, which disrupted and impacted the trading and maritime transportation of crude oil and derived products, and the associated laboratory assay services the Company provides. However, these decreases were partially offset by a strong growth in well completion diagnostic services in the U.S. and certain international markets when compared to the same period in 2024.

Sequentially, the decrease in service revenue was primarily due to lower demand for laboratory assay services in international markets partially offset by an increase in the U.S. market. As discussed above, the expanded sanctions announced in January 2025 disrupted the trading and maritime transportation of crude oil and derived products, and as a result demand for the associated laboratory assay services provided by the Company declined. This decline was partially offset by an increase in demand for our well completion diagnostic services in the U.S. and international markets compared to the prior quarter.

Product Sales Revenue

Product sales are primarily tied to supporting the U.S. onshore drilling and completion activities and bulk product sales to international markets. Product sales to international markets are typically sold and shipped in bulk, and revenue can vary from one quarter to another. For the three months ended March 31, 2025, product sales revenue of $28.5 million decreased 14% year-over-year and 13% sequentially. The year-over-year decrease was driven by a reduction in product sales to both the U.S. and international markets. One large international order scheduled for delivery in February 2025, was suspended when the expanded sanctions were announced in January 2025. Additionally, the U.S. onshore drilling and completion activity decreased throughout 2024 and remained at these lower levels in 2025. The average U.S. land rig count for the three months ended March 31, 2025 was 5% lower when compared to the same period in 2024.

Sequentially, the decrease was due to a lower level of bulk shipments to international markets, including the international order that was suspended, described above. However, the lower international product deliveries were partially offset by a higher level of product sales in the U.S. onshore market.

Cost of Services, excluding depreciation

Cost of services was $73.0 million for the three months ended March 31, 2025, a decrease of 1% year-over-year and flat sequentially. Cost of services expressed as a percentage of service revenue was 77% for the three months ended March 31, 2025, comparable to the same period in the prior year, and compared to 76% in the prior quarter. The year-over-year changes in cost of services as a percentage of service revenue was in line with changes in service revenue.

Sequentially, the slight increase in cost of services as a percentage of services revenue was primarily due to a lower revenue base in the three months ended March 31, 2025, versus the prior quarter.

Cost of Product Sales, excluding depreciation

Cost of product sales was $26.5 million for the three months ended March 31, 2025, a decrease of 14% year-over-year and 20% sequentially. Cost of product sales expressed as a percentage of product sales revenue was 93% for the three months ended March 31, 2025, comparable to the same period in the prior year and compared to 101% in the prior quarter. The year-over-year changes in cost of product sales as a percentage of product sales was in line with changes in product sales revenue.

Sequentially, cost of product sales as a percentage of product sales decreased primarily due to approximately $3.3 million in additional costs associated with the write-down of certain inventory and other related assets in the prior quarter.

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 March 31, 2025, was $13.6 million, which increased $1.9 million compared to the same period in 2024. The year-over-year increase was primarily due to increased outside consulting fees and license fees primarily associated with implementation costs of a global human capital management system that commenced from the second quarter of 2024, and losses on our company owned life insurance policies in 2025 compared to gains in 2024.

G&A expense for the three months ended March 31, 2025, increased $4.6 million compared to the three months ended December 31, 2024 primarily due to the acceleration of stock compensation expense for retirement eligible executives of $3.5 million in 2025. In addition, adjustments to revalue performance awards based on expected performance criteria were $0.9 million higher in 2025 compared to 2024.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended March 31, 2025, was $3.7 million compared to $3.8 million for the three months ended March 31, 2024 and $3.7 million for the three months ended December 31, 2024. The slight decrease in depreciation and amortization expense compared to the prior year period is primarily due to assets which became fully depreciated.

Other (Income) Expense, Net

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

As a result of consolidating and exiting certain facilities in the U.S. and other international locations, we incurred a total of $0.7 million and $1.8 million associated with lease abandonment, other exit costs, and write-down of the associated leasehold improvements, right of use assets and other assets during the three months ended March 31, 2025 and 2024, respectively.

In February 2024, we had a fire incident at our Aberdeen, U.K. facility and have recorded a partial insurance settlement of $1.0 million during the three months ended March 31, 2024, associated with costs incurred and loss of income from business interruption.

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

25

Interest Expense

Interest expense for the three months ended March 31, 2025, was $2.6 million and decreased $0.8 million or 24% year-over-year and was relatively flat compared to the prior quarter. The year-over-year decrease is due to lower interest rates and lower average borrowings on our bank revolving credit facility during the three months ended March 31, 2025.

Income Tax Expense (Benefit)

The Company recorded an income tax expense of $1.7 million for the three months ended March 31, 2025 and 2024. The effective tax rate for the three months ended March 31, 2025, was 96.2% recorded on income before income taxes of $1.8 million. The effective tax rate for the three months ended March 31, 2024, was 32.2%, recorded on income before income taxes of $5.1 million. The effective tax rate for the three months ended March 31, 2025, was impacted by approximately $1.4 million of additional tax expense recorded for items discrete to the quarter. These discrete items are primarily associated with the finalization of certain tax jurisdictions’ return to provision assessments due to changes in estimates. The effective tax rate for the three months ended March 31, 2024, was impacted by the earnings mix of jurisdictions subject to tax for the period and items discrete to the quarter.

Segment Analysis

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. The following tables summarize our results by operating segment (in thousands):

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.

Revenue from the Reservoir Description operating segment of $80.9 million for the three months ended March 31, 2025 decreased 4% year-over-year and 7% sequentially. The year-over-year decrease was primarily due to disruptions in the trading and maritime transportation of crude oil and derived products as a result of the expanded sanctions announced in January 2025. The decrease in these activities resulted in a decrease in demand for the Company’s laboratory assay services. Additionally, offshore commercial success rates for well exploration and appraisal projects continued to decline in 2024, which resulted in the cancellation of some reservoir rock and fluid analysis projects that were originally planned for what turned out to be unsuccessful wells. Demand for fluid analysis services continues to be negatively impacted by the on-going geopolitical conflicts and expanded sanctions previously discussed. Sequentially, the decrease in revenue was primarily associated with the same factors described above.

Operating income of $2.3 million for the three months ended March 31, 2025, decreased $4.6 million, year-over-year and $14.3 million sequentially. Operating margins were 3% for the three months ended March 31, 2025, compared to 8% year-over-year, and 19% sequentially. Year-over-year, the decrease in operating income and operating margins was primarily attributable to 1) decremental revenue of $3.3 million in the three months ended March 31, 2025; 2) a total charge of $2.7 million associated with severance, facility exit cost and certain asset write-downs recorded during the three months ended March 31, 2025, compared to $1.5 million in the same period of the prior year; and 3) a gain on insurance proceeds associated with the fire at the Aberdeen, U.K. facility of $1.0 million recorded in the three months ended March 31, 2024, and no such gain in the current quarter.

Sequentially, the decrease in operating income and operating margins was primarily due to 1) decremental revenue of $5.9 million in the three months ended March 31, 2025; 2) a gain on insurance proceeds associated with the fire at the Aberdeen, U.K. facility of $3.1 million recorded in the three months ended December 31, 2024, and no such gain in the current quarter; 3) a gain of $1.4 million on the sale of assets during the three months ended December 31, 2024, and no such sale in the current quarter; and 4) a higher level of Corporate G&A expenses absorbed in the segment. See discussion of General and Administrative Expense, above.

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 March 31, 2025, was down by 5% year-over-year and relatively flat sequentially. International rig count was down over 6% year-over-year and down 2% sequentially.

Revenue from the Production Enhancement operating segment of $42.7 million for the three months ended March 31, 2025, decreased 6% year-over-year and increased 1% sequentially. Year-over-year, the decrease was primarily due to lower product sales in the U.S. land market and decline in bulk shipments in the international market. These decreases were partially offset by a growth in well completion diagnostic services in the U.S. and international markets. Sequentially, the increase was primarily driven by continued expansion of well completion diagnostic service in the U.S and certain international markets, substantially offset by lower product sales to the international market.

Operating income of $1.5 million for the three months ended March 31, 2025, decreased slightly year-over-year, and increased $4.1 million sequentially. Operating margins for the three months ended March 31, 2025, were 4%, compared to operating margins of 3% year-over-year and (6)% sequentially. Year-over-year, the increase in operating income and margins was primarily driven by a different mix of revenue, with a higher level of service revenue that contributed to higher margins in 2025 compared to 2024, mostly offset by a higher level of corporate G&A expenses absorbed by the segment. Sequentially, the increase in operating income and margins was primarily due to 1) a strong growth in well diagnostic projects with high incremental margins; 2) certain severance costs, inventory and other related asset write-downs of approximately $4.1 million recorded in the prior quarter, compared to $0.5 million recorded in the current quarter; offset by 3) a higher level of corporate G&A expenses absorbed by the segment in the current quarter. See discussion of General and Administrative Expense, 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 March 31, 2025, $21.2 million of our $22.1 million of cash was held by our foreign subsidiaries.

The Company maintains the quarterly dividend of $0.01 per share.

Cash Flows

The following table summarizes cash flows (in thousands):

Comparing the three months ended March 31, 2025 to the same period in the prior year, cash flows provided by operating activities improved to $6.7 million in 2025 compared to $5.5 million in the same period 2024. The Company’s working capital improved primarily due to effectiveness in leveraging credit terms on accounts payable.

Cash flows provided by investing activities for the three months ended March 31, 2025 of $0.8 million were primarily driven by proceeds on the sale of assets of $1.2 million and proceeds from insurance recovery associated with the fire incident at the Aberdeen, U.K. facility of $3.1 million, offset by capital expenditures of $3.6 million, which includes $0.8 million related to the replacement of assets damaged in the fire incident. Cash flows used in investing activities for the three months ended March 31, 2024 of $1.7 million were driven primarily by funding capital expenditures of $3.1 million offset by proceeds on the sale of assets of $0.6 million and net proceeds on company owned life insurance policies of $0.8 million.

Cash flows used in financing activities for the three months ended March 31, 2025 of $4.5 million include a $2.0 million net reduction in long-term debt, $0.5 million for quarterly dividends and $2.0 million for the repurchase of common stock. Cash flows provided by financing activities for the three months ended March 31, 2024 of $4.1 million were primarily driven by a $3.0 million net reduction in long-term debt, $0.5 million for quarterly dividends and $0.5 million in costs associated with equity transactions.

During the three months ended March 31, 2025, we repurchased 131,598 shares of our common stock for $2.0 million, including rights to 2,123 shares of our common stock to satisfy personal tax liabilities of participants in our stock-based compensation plan for an aggregate purchase price of $32 thousand.

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 income, 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):

Free cash flow for the three months ended March 31, 2025, increased $1.4 million from $2.5 million for the same period in 2024. The net cash provided by operating activities of $6.7 million during the three months ended March 31, 2025, was primarily driven by effectiveness in leveraging credit terms on accounts payable. Capital expenditures, excluding capital expenditures of $0.8 million associated with the Aberdeen, U.K. fire incident that were recovered from insurance proceeds, were $0.3 million lower during the three months ended March 31, 2025 compared to the same period in the prior year.

Senior Notes, Credit Facility and Available Future Liquidity

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.

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 March 31, 2025, the Credit Facility has an available borrowing capacity of approximately $108.0 million.

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

(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 1.31, and our interest coverage ratio is 6.86, each for the period ended March 31, 2025. We are in compliance with all covenants contained in our Credit Facility and Senior Notes as of March 31, 2025. 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.

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, 2024.

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, 2024.

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 March 31, 2025, 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 March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

CORE LABORATORIES INC.

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, 2024. In addition to the risk factors identified in our 2024 Annual Report, we updated the following risk factor:

Tariffs and other trade measures could adversely affect our business, results of operations, financial position and cash flows.

Our business and results of operations may be adversely affected by uncertainty and changes in U.S. trade policies, including tariffs, trade agreements or other trade restrictions imposed by the U.S. or other governments. Our input costs for raw materials and other goods, such as steel, electronic components, chemical reagents and laboratory equipment, are adversely affected by tariffs imposed by the U.S. government on products imported into the United States. Additionally, we sell our products internationally and our product sales may be subject to any retaliatory measures by other countries. Any imposition of or increase in tariffs on the goods we purchase or the products we sell could increase our costs and the price of our products and services. To the extent we are unable to pass all or a portion of these cost increases on to our customers, such cost increases could adversely affect our results of operations.

Additional tariffs, further trade restrictions and retaliatory trade measures could disrupt our supply chain and logistics, restrict or limit the availability of goods or supplies, cause adverse financial impacts due to volatility in foreign exchange rates and interest rates, and inflationary pressures on raw materials. It may be time-consuming and expensive for us to alter our business operations to adapt to or comply with any changes in international trade policies and agreements and any failure to do so could have a material adverse effect on our business. Any potential impact will depend on future developments with respect to trade policy and the results of trade negotiations, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our business, results of operations and financial condition.

Tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. and global financial and economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced demand for our products and services and the demand for crude oil and gas. Such conditions could have a material adverse impact on our business, results of operations and cash flows.