Conflicting Signals: Navigating International Market Expectations and Revenue Mix in 2025 Earnings Call

Revenue and Profitability Improvement:
- Core Labs reported second quarter 2025 revenue of $130.2 million, up 5% compared to Q1, with sequential improvement in operating income, operating margins, free cash flow, and earnings per share.
- The increase was primarily driven by a rebound in maritime trading of crude oil and laboratory assay services, as well as elevated levels of international product sales.

Segment Performance:
- Reservoir Description revenue was up 7% compared to Q1, with operating margins at 13%. Ex-items operating margins improved to 13%, up from 10% in Q1.
- The growth was attributed to strong demand for rock and fluid analysis and laboratory instrumentation sales, partially offset by geopolitical conflicts and sanctions impacting crude oil trading patterns.

International and Product Sales:
- International product sales increased by 25% sequentially, driven by increased laboratory instrumentation sales and bulk shipments.
- However, product sales in the U.S. onshore market decreased, indicating regional variations in demand due to economic conditions and geopolitical influences.

Shareholder Value and Balance Sheet Strengthening:
- Core Labs returned excess free cash to shareholders by repurchasing over 237,000 shares of company stock, and reduced net debt by $9 million, lowering the leverage ratio to 1.27.
- This strategy aims to strengthen the balance sheet, improve shareholder value through opportunistic share repurchases, and continue funding the quarterly dividend.

Outlook and Market Dynamics:
- Core Labs anticipates Reservoir Description's third quarter revenue to be flat sequentially, with geopolitical conflicts and volatile commodity prices creating uncertainty in crude oil trading and assay services.
- The company remains optimistic about international upstream activity, driven by demand from non-OECD countries, and expects stable activity across large-scale projects in key regions.