Core Laboratories Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion highlights the current operating environment and summarizes the financial position of Core Laboratories Inc. and its subsidiaries as of September 30, 2025, and should be read in conjunction with (i) the unaudited interim consolidated financial statements and notes thereto included elsewhere in this 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 3,300 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

According to the latest reports from the U.S. Energy Information Administration, the International Energy Agency (“IEA”) 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. New tariffs announced by the U.S. during the year have triggered global trade negotiations and have raised the level of uncertainty for global economies. Additionally, 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+ began in May 2025 with incremental increases in production expected through September 2026, which could create a surplus in supply and lead to lower commodity prices. 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. Recently, revised IEA field data showed that a steeper natural decline rate may represent a dominant long-term supply risk, where the agency projected a sustained upstream investment of approximately $540 to $570 billion per year is required to prevent disruptive declines and to avoid price volatility.

The ongoing geopolitical conflicts between Russia and Ukraine and in the Middle East, along with associated and expanded sanctions in the United States, the European Union, the United Kingdom and other countries continue to cause disruptions to traditional maritime supply chains and the trading of crude oil and derived products, such as diesel fuel. These disruptions to the trading and maritime transportation of crude oil, also impact the demand for the Company's associated laboratory assay services. Although demand for the Company’s laboratory assay analysis services continued to increase during the first nine months of 2025, these geopolitical conflicts and associated sanctions continue to create a higher level of uncertainty. 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, as well as 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 in recent years that has expanded the Company’s activities on these projects beginning in 2024 and into 2025.

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.

“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 September 30, 2025 compared to the Three Months Ended September 30, 2024 and June 30, 2025 and for the Nine Months Ended September 30, 2025 compared to the Nine Months Ended September 30, 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 September 30, 2025, service revenue was $101.1 million, an increase of 2% year-over-year and an increase of 5% sequentially. Year-over-year, revenues increased primarily due to the increase in international markets partially offset by lower activity level in the U.S. market. Despite disruptions from the ongoing geopolitical conflicts and expanded sanctions throughout the first nine months of 2025, we continue to see recovery in demand for our laboratory crude-assay services during the third quarter of 2025 and continued growth in well completion diagnostic services in certain international markets when compared to the same period in 2024. Service revenue in 2025 has been negatively impacted by certain projects that were planned and scheduled but were canceled, as the wells drilled by our clients were determined to be uneconomical or unsuccessful.

Sequentially, the increase in service revenue was primarily due to an increase in demand for laboratory crude-assay services in international markets while the U.S. market remained relatively flat. As discussed above, the expanded sanctions imposed throughout the year have caused a temporary disruption in the trading and maritime transportation of crude oil and derived products that slowed the growth of laboratory crude-assay revenue during 2025.

For the nine months ended September 30, 2025, service revenue was $292.4 million, relatively flat compared to the same period in the prior year. Year-over-year, the demand for laboratory crude-assay services and well completion diagnostic services continued to grow in the international markets. Additionally, reservoir rock and fluid analysis services have been negatively impacted due to the decline in international offshore commercial success rates for exploration and appraisal well projects, as discussed above.

Product Sales Revenue

Product sales are primarily tied to U.S. onshore drilling and completion activities and 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 September 30, 2025, product sales revenue of $33.4 million decreased 6% year-over-year and 2% sequentially. The decrease was driven by lower drilling and completion activity onshore in the U.S. for the three months ended September 30, 2025 when compared to the same period in 2024.

Sequentially, the slight decrease was due to the lower level of U.S. onshore drilling and completion activity but was substantially offset by higher levels of bulk shipments to international markets.

For the nine months ended September 30, 2025, product sales revenue was $95.8 million and decreased 7% compared to the same period in the prior year, primarily due to lower average U.S. onshore drilling and completion activity in 2025 compared to 2024, but was partially offset by an increase of laboratory instrument sales to international markets in 2025.

Cost of Services, excluding depreciation

Cost of services was $74.9 million for the three months ended September 30, 2025, a decrease of 1% year-over-year and an increase of 1% sequentially. The year-over-year decrease in cost of services was primarily due to increased efficiencies and the benefits of lower compensation costs as a result of cost reduction initiatives implemented during the first half of 2025. Sequentially, the slight increase in cost of services is primarily due to an increase in service revenue partially offset by the increased efficiencies and lower compensation cost as discussed above. Cost of services expressed as a percentage of service revenue was 74% for the three months ended September 30, 2025, compared to 77% for the prior quarter and 76% for the same period in the prior year. Cost of services as a percentage of service revenue improved primarily driven by the efficiencies and cost reduction initiatives as discussed above.

For the nine months ended September 30, 2025, cost of services was $221.9 million, a decrease of 1% compared to the same period in the prior year. Cost of services expressed as a percentage of service revenue improved to 76% from 77% when compared to the same period in the prior year. The year-over-year decrease in cost of services while service revenue remained relatively flat was primarily due to increased efficiencies and cost reduction initiatives as discussed above.

Cost of Product Sales, excluding depreciation

Cost of product sales was $30.0 million for the three months ended September 30, 2025, a decrease of 4% year-over-year and an increase of 1% sequentially. Cost of product sales expressed as a percentage of product sales revenue was 90% for the three months ended September 30, 2025, compared to 88% for the same period in the prior year and compared to 87% in the prior quarter. The year-over-year changes in cost of product sales as a percentage of product sales increased primarily due to higher absorption of fixed costs on a lower revenue base that is partially associated with increased tariff cost on certain imported materials, along with a write-down of certain inventory of approximately $0.6 million in the three months ended September 30, 2025.

Sequentially, cost of product sales as a percentage of product sales increased due to higher absorption of fixed costs on a lower revenue base.

For the nine months ended September 30, 2025, cost of product sales was $86.2 million, a decrease of 4% compared to the same period in the prior year. Cost of product sales expressed as a percentage of product sales revenue was 90% for the nine months ended September 30, 2025, compared to 88% from the same period in the prior year. The increase in cost of product sales as a percentage of product sales revenue was due to higher absorption of fixed costs on a lower revenue base as discussed above, along with a write-down of certain inventory totaled $1.8 million in 2025, with no such write-down in the same period in the prior year.

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 September 30, 2025, was $10.7 million, which increased $2.0 million, compared to the same period in 2024. The year-over-year increase was primarily due to higher stock compensation expense recorded in 2025. In 2024, a portion of stock compensation expense that was previously recognized was reversed to align with the expectations of vesting levels for certain performance share awards.

G&A expense for the three months ended September 30, 2025, was comparable to the prior quarter and increased $0.2 million or less than 2%.

For the nine months ended September 30, 2025, G&A expense was $34.8 million which increased $4.1 million, compared to the nine months ended September 30, 2024. The year-over-year increase was primarily due to (1) a higher total stock compensation cost of $1.8 million; (2) a lower gain from mark-to-market adjustments on Company-owned life insurance policies of $1.3 million; and (3) increased license fees and implementation costs associated with a new global human capital management system.

Depreciation and Amortization Expense

Depreciation and amortization expense for the three months ended September 30, 2025, was $3.6 million, a decrease of 2% year-over-year and sequentially. Depreciation and amortization expense for the nine months ended September 30, 2025, was $11.0 million, a decrease of 3% year-over-year. The decrease in depreciation and amortization expense compared to the prior year periods and sequentially is primarily due to assets that had become fully depreciated.

Other (Income) Expense, Net

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

During the nine months ended September 30, 2025 and 2024, as a result of consolidating and exiting certain facilities in the U.S. and other international locations, we recognized a write-down of the associated leasehold improvements, right of use assets and other assets and incurred lease abandonment and other exit costs of $0.7 million and $1.8 million, respectively.

In February 2024, we had a fire incident at our Aberdeen, U.K. facility and we have recorded insurance recovery associated with business interruptions, increase in cost of work, and loss on property and assets during the three and nine months ended September 30, 2025 and 2024. During the three months ended September 30, 2025, Core Lab reached final settlement with the insurance company and recorded a gain of approximately $5.3 million on the insurance recovery.

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

Interest Expense

Interest expense for the three months ended September 30, 2025, was $2.7 million and decreased $0.5 million or 15% year-over-year and 2% compared to the prior quarter. For the nine months ended September 30, 2025, interest expense decreased $1.8 million or 18%.

The year-over-year and sequential decreases are primarily due to lower variable interest rates and average borrowings on our bank revolving credit facility during the three and nine months ended September 30, 2025.

Income Tax Expense (Benefit)

The Company recorded an income tax expense of $3.8 million and $7.4 million for the three and nine months ended September 30, 2025, respectively compared to income tax expense of $4.7 million and $10.0 million for the three and nine months ended September 30, 2024, respectively. The effective tax rate for the three and nine months ended September 30, 2025, was 20.5% and 22.7%, respectively. The effective tax rate for the three and nine months ended September 30, 2024, was 28.1% and 28.8%, respectively. The effective tax rate for the three and nine months ended September 30, 2025, was primarily impacted by the earnings mix of jurisdictions subject to tax for the period and changes in uncertain tax position in certain jurisdictions which is discrete to the quarter. The tax rate for the three and nine months ended September 30, 2024 was impacted by the earnings mix of jurisdictions subject to tax for the period and items discrete to the quarter.

On July 4, 2025, the Act was enacted into law. The Act includes significant provisions, including tax cut extensions and modifications to the U.S. and international tax frameworks. We are evaluating the impact of these legislative changes as additional guidance becomes available, and uncertainty remains regarding the timing and interpretation by tax authorities in affected jurisdictions. These legislative changes could have an adverse impact on our future effective tax rate, tax assets and liabilities, including our deferred tax assets and liabilities, and cash payments for tax.

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):

30

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 $88.2 million for the three months ended September 30, 2025 decreased 1% year-over-year and increased 2% sequentially. Revenue in 2025 has been negatively impacted by the decrease in the success rate for international offshore exploration and appraisal wells, which reached a 20-year low for the six-month period ending March 31, 2025. The decrease in international offshore commercial success rates has resulted in the cancellation of several reservoir rock and fluid analysis projects that were originally planned for late 2024 and 2025. The slight decrease in year-over-year revenue was primarily due to lower revenue in reservoir rock and fluid analysis projects in the U.S. but was substantially offset by higher revenue from international projects and crude-assay services. Sequentially, the increase in revenue was primarily due to higher revenue in laboratory crude-assay services.

Revenue from the Reservoir Description operating segment of $255.4 million for the nine months ended September 30, 2025 decreased 2% from the same period in the prior year. The decreased revenue in 2025 is primarily due to lower revenue in reservoir rock and fluid analysis in the U.S., as discussed above. The decrease is partially offset by higher revenue in international laboratory crude-assay services and higher laboratory instrument sales in 2025.

Operating income of $16.6 million for the three months ended September 30, 2025, was relatively flat year-over-year and increased $4.4 million sequentially. Operating margins were 19% for the three months ended September 30, 2025, comparable for the same period in the prior year, and 14% sequentially. Year-over-year, the changes in operating income and operating margins was primarily attributable to gains on insurance recovery associated with the fire at the Aberdeen, U.K. facility of $5.3 million recorded in the three months ended September 30, 2025, compared to a $3.2 million gain in the same period in prior year. The additional gain on insurance recovery was substantially offset by a different mix of revenue with a higher level of laboratory instrument sales in 2025, which yield a lower margin.

Sequentially, the increase in operating income and operating margins was primarily due to 1) incremental revenue of $2.0 million in the three months ended September 30, 2025; and 2) insurance recovery associated with the fire at the Aberdeen, U.K. facility of $5.3 million recorded in the three months ended September 30, 2025, compared to a $2.6 million recorded in the prior quarter.

Operating income of $31.1 million for the nine months ended September 30, 2025, decreased $3.7 million from the same period in the prior year. Operating margins were 12% for the nine months ended September 30, 2025, compared to 13% for the same period in the prior year. The decrease in operating income and operating margins was primarily attributable to 1) a lower level of revenue in 2025; 2) a different mix of revenue with a higher level of laboratory instrument sales that yield lower margin compared to service revenue; and 3) a total charge of $2.7 million associated with employee severance, facility consolidation and asset write-down recorded in 2025 compared to $1.5 million recorded in the same period in prior year. The decrease in operating income and operating margins was partially offset by a higher insurance recovery associated with the fire at the Aberdeen, U.K. facility in the nine months ended September 30, 2025, compared to the same period in prior 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 September 30, 2025, was down by 7% year-over-year and 6% sequentially. International rig count was down 6% year-over-year and relatively flat sequentially.

Revenue from the Production Enhancement operating segment of $46.3 million for the three months ended September 30, 2025, increased 2% year-over-year and 6% sequentially. Year-over-year, the increase was primarily driven by a strong growth in well completion diagnostic services in the U.S. and international markets. Sequentially, the increase was primarily driven by increased product sales in bulk shipment in the international markets, and continued growth in well completion diagnostic services for projects in the Gulf of Mexico.

Revenue from the Production Enhancement operating segment of $132.9 million for the nine months ended September 30, 2025, decreased 2% from the same period in the prior year. The decrease in revenue is primarily due to lower product sales in the U.S. land market in 2025, partially offset by higher revenue in well completion diagnostic services in the U.S. and international markets.

Operating income of $4.4 million for the three months ended September 30, 2025, increased $1.1 million year-over-year, and increased $1.2 million sequentially. Operating margins for the three months ended September 30, 2025, were 9%, compared to operating margins of 7% year-over-year and sequentially. Year-over-year, the increase in operating income and margins was primarily driven by a different mix of revenue with higher well completion diagnostic service revenue that yields a higher margin. Sequentially, the increase in operating income and margins was primarily driven by incremental revenue of $2.4 million in the three months ended September 30, 2025.

Operating income of $9.0 million for the nine months ended September 30, 2025, decreased $0.2 million compared to the same period in the prior year. Operating margins for the nine months ended September 30, 2025 of 7% were comparable to the same period of the prior year. The slight decrease in operating income and margins was primarily due to a higher absorption of fixed costs on lower product sales that is partially associated with increased tariff cost on certain imported materials, substantially offset by higher margin yield from well completion diagnostic service revenue 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 capital in the 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 September 30, 2025, $22.2 million of our $25.6 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 nine months ended September 30, 2025 to the same period in the prior year, cash flows provided by operating activities decreased to $29.1 million in 2025 compared to $35.8 million in 2024. Net income for the nine months ended September 30, 2025 includes gain on insurance proceeds associated with assets of $6.8 million compared to $2.1 million in the same period in the prior year. Additionally, cash from operating activities was impacted by a decrease in working capital in 2025 compared to the same period in the prior year.

Cash flows provided by investing activities for the nine months ended September 30, 2025 of $1.5 million include proceeds on the sale of assets of $2.4 million, proceeds from insurance recovery associated with the fire incident at the Aberdeen, U.K. facility of $10.0 million, and proceeds on company owned life insurance policies of $0.8 million, offset by total capital expenditures of $10.9 million and a business acquisition, net of cash acquired of $0.6 million. Cash flows used in investing activities for the nine months ended September 30, 2024 of $2.8 million include the funding of $8.6 million for capital expenditures, partially offset by $2.1 million of proceeds from insurance recovery associated with the 2024 fire incident, $0.9 million of proceeds from the sale of assets and $2.8 million of net proceeds received from company owned life insurance policies.

Cash flows used in financing activities for the nine months ended September 30, 2025 of $24.1 million include an $11.0 million net reduction in long-term debt, $1.7 million of debt issuance costs associated with the renewal of our credit facility, $1.4 million for quarterly dividends, and $9.8 million used to repurchase the Company’s common stock. Cash flows used in financing activities for the nine months ended September 30, 2024 of $26.6 million include a $24.0 million net reduction in long-term debt, $1.4 million for quarterly dividends, $0.4 million used to repurchase the Company’s common stock and $0.8 million in costs associated with equity transactions.

During the nine months ended September 30, 2025, we repurchased 831,478 shares of our common stock for $9.8 million, including rights to 16,915 shares of our common stock to satisfy personal tax liabilities of participants in our stock-based compensation plan for an aggregate purchase price of $211 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 nine months ended September 30, 2025, decreased $6.3 million from $27.1 million for the same period in 2024. The net cash provided by operating activities of $29.1 million during the nine months ended September 30, 2025, decreased $6.7 million primarily due to the factors as discussed in the cash flow from operating activities above. Capital expenditures-operations, which exclude capital expenditures of $2.7 million associated with the Aberdeen, U.K. fire incident and are covered by insurance, decreased slightly by $0.4 million during the nine months ended September 30, 2025 compared to the same period in the prior year.

Credit Facility, Senior Notes and Available Future Liquidity

We, along with CLIH, have a secured the Credit Facility for an aggregate borrowing commitment of $150.0 million with a $50.0 million “accordion” feature. As of September 30, 2025, the Credit Facility has an available borrowing capacity of approximately $131.9 million.

See Note 7 – Long-term debt, net of the Notes to the Interim Consolidated Financial Statements, for additional information regarding the Credit Facility.

Additionally, we along with CLIH as issuer, have senior notes outstanding that were issued through private placement transactions.

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 1.10, and our interest coverage ratio is 7.86, each for the period ended September 30, 2025. We are in compliance with all covenants contained in our Credit Facility and Senior Notes as of September 30, 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 Credit Facility and the Senior Notes.

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 September 30, 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 September 30, 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.