Core Laboratories NV Aktie

Good morning, and welcome to the Core Laboratories Third Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note this event is being recorded. I would now like to turn the conference over to Larry Bruno, Chairman and CEO. Please go ahead.

Thanks, Cindy. Good morning in the Americas, good afternoon in Europe, Africa and the Middle East, and good evening in Asia Pacific. We'd like to welcome all of our shareholders, analysts and most importantly, our employees to Core Laboratories Third Quarter 2026 Earnings Call. This morning, I'm joined by Chris Hill, Core's Chief Financial Officer; and Gwen Gresham, Core's Senior Vice President and Head of Investor Relations.

The call will be divided into 6 segments. Gwen will start by making remarks regarding forward-looking statements. We'll then have some opening comments, including a high-level review of important factors in Core's Q3 performance. In addition, we'll review Core's strategies and the 3 financial tenets that Core Lab employs to build long-term shareholder value. Chris will then give a detailed financial overview and have additional comments regarding shareholder value.

Following Chris, Gwen will provide some comments on the company's outlook and guidance. I'll then review Core's 2 operating segments, detailing our progress and discussing the continued successful introduction and deployment of Core Lab's technologies as well as highlighting some of Core's operations, recent client interactions and major projects worldwide. Then we'll open the phones for a Q&A session. I'll now turn the call over to Gwen for remarks on forward-looking statements.

Before we start the conference this morning, I'll mention that some of the statements that we make during this call may include projections, estimates and other forward-looking information. This would include any discussion of the company's business outlook. These types of forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from our forward-looking statements.

These risks and uncertainties are discussed in our most recent annual report on Form 10-K as well as other reports and registration statements filed by us with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our comments also include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing our third quarter results. Those non-GAAP measures can also be found on our website. With that said, I'll pass the discussion back to Larry.

Thanks, Gwen. Moving now to some high-level comments about our third quarter 2026 results. Compared to the second quarter, operational performance improved nicely with higher revenue, operating income, operating margins and earnings per share. Core continued to execute its strategic plan of technology investments targeted to both solve client problems and capitalize on Core's technical and geographic opportunities.

The ongoing military conflict in the Middle East, which began during the first quarter of 2026, continued to affect operations, causing project delays and logistical disruptions across several countries where the company operates. Reservoir Description experienced the greatest impacts of the Middle East conflict as crude assay work and reservoir characterization projects depend on predictable field operations, active maritime hydrocarbon trade and transportation, timely sample acquisition and access to client facilities.

The intermittent closures of the Strait of Hormuz and the widespread disruption to maritime hydrocarbon transportation routes throughout the third quarter extends beyond the Middle East region as the global movement of hydrocarbon cargoes was impacted. There was some improvement in the movement of hydrocarbon shipments in the last weeks of the quarter, but activity remained below pre-conflict levels through quarter end. In addition, escalating attacks on energy infrastructure in Russia and Ukraine, together with evolving sanctions created further headwinds.

Production Enhancement remains comparatively less impacted by the geopolitical conflicts, although some product shipments have been delayed and Middle East field operations have been suspended from time to time. Looking at Reservoir Description. Third quarter revenue was up 7% from Q2 of 2026, but down 4% compared to Q3 of last year. Third quarter operating margins in Reservoir Description ex-items were 10%, up from 5% in Q2.

Despite the multiple factors impacting Core Lab's third quarter results, Reservoir Description achieved higher sequential revenue, operating income and operating margins. Throughout the quarter, the company maintained its focus on creating new technology offerings, maximizing operating efficiency and leveraging its global network to support client operations. In Production Enhancement, third quarter revenue was up 4% compared to Q2 of 2026.

Third quarter 2026 operating margins in Production Enhancement ex-items were over 9%, down from 12% in Q2 of 2026, reflecting a greater proportion of product sales versus higher-margin diagnostic services when compared to the second quarter. Even in this challenging operating environment, product sales improved during the quarter in both U.S. land and international markets, reflecting continued operator adoption of Core Lab's advanced completion technologies.

The company maintained its long-standing commitment to shareholder returns during the quarter, returning free cash to our shareholders through our quarterly dividend and by repurchasing approximately 88,000 shares of company stock, representing a value of $1.1 million. Q3 marks the eighth consecutive quarter of share buybacks. Core intends to continue to use free cash to fund our quarterly dividend, pursue growth opportunities, reduce debt and improve shareholder value through opportunistic share repurchases.

Considering current market dynamics and looking out over the mid and longer term, Core Lab has decades of experience supporting clients through periods of geopolitical uncertainty. The company's long-standing presence in the Middle East, along with its proprietary technologies and dedicated employees will allow Core Lab to continue serving its clients across this strategically important region. Moreover, despite near-term headwinds, Core's global operations, asset-light business model and diversified technology portfolio position the company for long-term success.

For 90 years, Core Lab's resilience, technical leadership and unwavering focus on client service have enabled the company to deliver differentiated solutions that help our clients de-risk their operations and their operational decisions. As we move ahead, Core will continue to execute on its key strategic objectives by: 1, introducing new product and service offerings in key geographic markets; 2, maintaining a lean and focused organization; and 3, maintaining our commitments to returning excess free cash to our shareholders while preserving the company's strong balance sheet.

Core's strengths, together with disciplined capital deployment, continued free cash flow generation and the company's commitment to returning excess capital to its owners will drive long-term value creation for Core Lab shareholders. The interest of our shareholders, clients and employees will always be well served by the company's resilient culture, which emphasizes innovation, the application of technology to solve complex problems and dedicated customer service. I'll talk more about some of our latest accomplishments in the operational review section of this call.

Now to review the company's strategies and the financial tenets that have guided Core Lab's shareholder value creation through our 31-year history as a publicly traded company. While we continue to pursue growth opportunities, the company will remain focused on its 3 long-standing long-term financial tenets, those being to maximize free cash flow, maximize return on invested capital and returning excess free cash to our shareholders. I'll now turn it over to Chris for the detailed financial review.

Thanks, Larry. Before we review the financial performance for the quarter, the guidance we gave on our last call and past calls excluded the impact of any FX gains and losses and assumed an effective tax rate of 25%. So accordingly, our discussion today excludes any foreign exchange gain or loss for current and prior periods. The comparison periods for the second quarter of 2026 and the third quarter of 2025 also include items that were discussed on those calls and highlighted in our earnings release for those periods.

These items have also been excluded from our discussion of the financial results today. You can find a summary of those items in the tables attached to our press release for the third quarter of 2026. So now looking at the income statement, revenue was $132.1 million in the third quarter, up 6% compared to the prior quarter and down 2% year-over-year. Sequentially, we saw growth in demand for our completion products in both the U.S. land and international markets, while service revenue increased in several international regions.

The conflicts in both Russia, Ukraine and the Middle East have continued to primarily impact service revenue. Of this revenue, service revenue, which is more international, was $96 million for the quarter, up 2% sequentially and down 5% year-over-year. Our service revenue associated with crude assay services and proprietary studies continue to be impacted by the geopolitical conflicts in the Middle East and Russia, Ukraine, which are the primary reason for the year-over-year decrease. However, growth in other regions outside these affected areas offset some of the impact.

Sequentially, service revenue was up as we continue to see increased demand for our reservoir rock and fluid analytical programs in nearly all international regions, including the Middle East. However, the increase was partially offset by a lower level of well completion diagnostic services as several large projects scheduled for the third quarter were delayed due to changes in the client schedule. Product sales, which are more equally tied to North America and international activity were $36.1 million for the quarter and were up 19% sequentially and 8% year-over-year.

Sequentially, we saw improved demand for completion products and a growing adoption of our proprietary completion technologies in the U.S. International product sales were also up nicely and up 31% compared to the second quarter. As a reminder, international product sales are typically larger bulk orders and can vary from 1 quarter to another. Additionally, laboratory instrumentation sales were higher in the third quarter compared to the prior quarter. When looking at year-over-year, the growth in product sales was primarily in the U.S.

Moving on to cost of services, ex-items for the quarter was 78% of service revenue, which improved from 80% in the prior quarter but increased from 74% last year. Sequential improvement was primarily driven by higher revenue, supported by a relatively fixed cost structure.

The year-over-year increase is primarily a result of the company continuing to carry costs in the regions which have been more negatively impacted in 2026 by the escalation of the conflicts in both Middle East and Russia, Ukraine.

As discussed on prior calls, the service side of our business has been more affected by geopolitical conflicts and expanded sanctions. Volatility in crude oil prices, along with the continued conflicts in Russia, Ukraine and the Middle East have disrupted regional operations and reduced demand for our crude assay services, which are closely tied to the trading and maritime movement of crude oil and derived products. We will continue to manage our cost structure as effectively as possible as we work through these disruptions in certain regions.

Cost of sales ex-items in the third quarter was 83% of revenue, an improvement from 85% in the prior quarter and 88% compared to last year. Sequential improvement was primarily driven by absorption of fixed costs on higher revenue and continued cost control initiatives and manufacturing efficiencies.

With these initiatives in place, we anticipate the manufacturing absorption rate in future quarters to be in line with projected product sales. G&A ex-items for the quarter was $11.3 million, which was up slightly compared to the prior quarter and up $600,000 from the same quarter in the prior year.

For 2026, we expect G&A ex-items to be approximately $43 million to $45 million. It is also important to note that 100% of our corporate G&A expenses are allocated and absorbed into the financial performance of the reported segments. Depreciation and amortization for the quarter was $3.7 million, relatively flat compared to the prior quarter and the prior year. EBIT ex-items for the quarter was $12.6 million, up from $9.4 million last quarter, yielding an EBIT margin of approximately 10% and expanding 200 basis points from last quarter. Our EBIT for the quarter on a GAAP basis was $12.1 million.

Interest expense of $2.8 million for the third quarter is relatively flat compared to the prior quarter and $2.7 million in the same quarter in the prior year.

The changes in interest expense were primarily due to changes in average borrowings with variable interest rates during these periods. Income tax expense at an effective tax rate of 25% and ex-items was $2.5 million for the quarter. On a GAAP basis, we recorded tax expense of $3.8 million for the quarter. The effective tax rate will continue to be somewhat sensitive to the geographic mix of earnings across the globe and the impact of items discrete to each quarter.

We continue to project the company's effective tax rate to be approximately 25%. Net income ex-items for the quarter was $7.4 million, up sequentially from $5.1 million last quarter, but down from $10.2 million in the third quarter of last year. On a GAAP basis, we had net income of $5.4 million for the quarter. Earnings per diluted share ex-items was $0.16 for the quarter compared to $0.11 in the prior quarter and $0.22 in the third quarter of last year.

On a GAAP basis, EPS was $0.12 for the quarter.

Turning to the balance sheet. Receivables were $115.6 million, an increase from $108.8 million in the prior quarter. Our DSOs for the third quarter were at 72 days, which improved slightly from the 73 days last quarter. As discussed on prior calls, the timing of collections has been impacted by the ongoing conflicts, and we will continue to remain focused on our collection efforts in these affected regions. Inventory as of September 30, 2026, was $60.7 million, up from $58 million at last quarter end.

The increase in inventory during 2026 is primarily associated with increased cost of raw materials. Inventory turns for the quarter improved to 2.0 compared to 1.8 at the last quarter end. With continued focus, we anticipate inventory turns will gradually improve as we progress through the remainder of 2026. And now to the liability side of the balance sheet. Our long-term debt was $114.8 million as of September 30, 2026. And considering cash of $21.4 million, net debt was $93.4 million, which decreased slightly from last quarter.

Our leverage ratio is currently just under 1.5 compared to 1.3 last quarter. Our debt is currently comprised of $65 million in senior notes, a term loan of $48.8 million and $1 million outstanding under our bank credit facility. Looking at cash flow for the third quarter of 2026, cash flow from operating activities was $5 million and after paying $3.3 million of CapEx for operations, our free cash flow for the quarter was $1.7 million. As a reminder, the capital expenditures associated with rebuilding our U.K. facility, which are covered by the company's insurance have been excluded in the calculation of free cash flow.

In the third quarter of 2026, capital expenditures associated with rebuilding the U.K. facility were $500,000. Looking ahead to the rest of the year, we will continue our strict capital discipline and asset-light business model with capital expenditures primarily targeted at growth opportunities. Excluding the CapEx for rebuilding the U.K. facility, we expect capital expenditures for the full year 2026 to be in the range of $14 million to $16 million. Core Lab's operational leverage to provide the ability to grow revenue and profitability with minimal capital requirements.

Capital expenditures for operations has historically ranged from 2% to 4% of revenue even during periods of significant growth. That same level of laboratory infrastructure, intellectual property and leverage exists in the business today. We believe evaluating the company's ability to generate free cash flow and free cash flow yield is an important metric for shareholders when comparing and projecting company's financial results, particularly for those shareholders who utilize discounted cash flow models to assess valuations. I will now turn it over to Gwen for an update on our guidance and outlook.

Thank you, Chris. Turning to Core Lab's outlook for the fourth quarter 2026. Ongoing geopolitical conflicts in the Middle East and Russia, Ukraine, along with associated sanctions continue to disrupt the transportation and trading of crude oil and refined products during the third quarter of 2026. Although the cargo traffic [indiscernible] gradually improved late in the quarter, crude oil supply remains significantly disrupted, creating near-term volatility in commodity prices and uncertainty around the timing of upstream client activity.

These geopolitical events also impacted upstream operations and slowed the pace of client projects. Higher energy prices and constrained availability of certain petroleum products and have weighed on crude oil demand in the near term. Looking ahead, the IEA, the EIA and OPEC all anticipate strong global crude oil demand in 2027 as supply disruptions ease and trade flows normalize. Short-cycle U.S. onshore activity is more sensitive to crude oil price volatility, while large-scale international projects are expected to be more resilient and proceed as planned unless directly impacted by regional conflicts.

Overall, the company believes the historic disruption to the global supply of oil and gas caused by the Middle East conflict will support improved activity in 2027 and a long-term growth cycle for oilfield services. Natural production declines from existing fields, the need to rebuild depleted global inventories and clients' increasing focus on reserve replacement underscores the importance of investment in new resources of production and in maximizing recovery from existing fields.

Core Lab's reservoir description and production optimization technology support operators in evaluating new resources, reducing development risk and recovery from producing reservoirs. For the fourth quarter 2026, Core Lab expects revenue to remain relatively flat sequentially, reflecting continued disruptions in the Middle East. Early in the quarter, attacks affected client operations in the region and have resulted in some project delays. In the U.S., Core expects the customary year-end seasonal moderation in land activity, partially offset by the sequential improvement in diagnostic services.

A sequential increase in production enhancement service activity is expected to drive growth quarter-over-quarter. Although recovery in certain Middle East countries remains difficult to predict, Core Lab's international laboratory network, proprietary technologies and specialized expertise position the company to capitalize on emerging opportunities across global markets.

In summary, Reservoir Description's fourth quarter 2026 revenue is projected to range from $81 million to $85 million with operating income of $5.1 million to $8.3 million.

Production Enhancement's fourth quarter revenue is estimated to range from $47.5 million to $49.5 million with operating income of $5.5 million to $6.7 million. The company's fourth quarter 2026 revenue is projected to range from $128.5 million to $134.5 million, with operating income of $10.7 million to $15.1 million, yielding operating margins of 10%. EPS for the fourth quarter 2026 is expected to range from $0.12 to $0.20. The company's guidance is based on projections for underlying operations and excludes gains and losses in foreign exchange and assumes an effective tax rate of 25%. With that, I'll turn the call back over to Larry.

Thanks, Gwen. First, I'd like to thank our global team of employees for their continued commitment to innovation, integrity and exceptional service to our clients. I'd particularly like to thank our employees throughout our Middle East operations for dealing with a wide range of challenges that have resulted from the conflict in the region. Looking at the macro, global energy markets continue to navigate geopolitical uncertainty tied to disruptions in the production, trade and shipment of crude oil, natural gas and derived products, along with commodity price volatility.

Although crude and derived product exports from parts of the Middle East improved late in the quarter, the conflict continued to affect infrastructure, transportation routes and the timing of client activity related to the production, refining and distribution of hydrocarbons. The IEA, EIA and OPEC have revised their near-term oil demand outlooks amid the ongoing geopolitical disruptions. Their latest forecast projects global oil demand growth of approximately 2 million to 2.6 million barrels per day in 2027, reflecting an anticipated recovery from the disruption to demand that is unfolding in 2026.

This year, global inventory draws have helped offset supply disruptions with further draws occurring in the third quarter. The EIA estimates that global inventories declined by approximately 1.8 million barrels per day during the quarter and projects an additional draw of 0.7 million barrels per day in the fourth quarter. Although Middle East production and exports have improved over the past several weeks, the agency expects constraints on regional oil flows to persist through year-end.

Beyond the near-term supply and demand outlook, replacing production loss to natural field decline remains a significant factor in future activity levels. The IEA estimates that if all capital investment in existing sources of oil production were to stop, global oil production would decline by approximately 8% annually on average over the next decade. This underscores the need for continued investment in existing producing fields as well as the exploration, appraisal and development of new resources.

In the United States, the EIA's October short-term energy outlook projects crude oil production to average approximately 13.9 million barrels per day in 2026, up marginally from 2025.

While U.S. oil production growth in 2027 may slightly add to global supply, it does not remove the need for replacement production to account for the natural decline from existing fields. Taken together, the need to offset natural field decline, combined with the need to replace depleted inventories and the production growth required to support future demand, all reinforce the importance of a sustained investment cycle across geographically diverse sources of supply.

These requirements will drive both new field discoveries and developments, including international and offshore projects as well as programs to improve recovery from existing fields. Core Lab's global reach, proprietary technologies and specialized technical expertise will support operators across these investment priorities. Now let's review the third quarter performance of our 2 business segments. Turning first to Reservoir Description. For the third quarter of 2026, revenue came in at $84.3 million, up 7% compared to Q2 of 2026.

Operating income for Reservoir Description ex-items was $8.1 million, up from $3.7 million in Q2, yielding operating margins of 10% with strong sequential incremental margins of 78%. Despite the quarter-over-quarter improvement, revenue and margins continue to be impacted by a year-over-year reduction in demand for assay work resulting from disruptions to hydrocarbon cargo movements through the Strait of Hormuz, along with delayed project execution and reduced client activity across the Middle East. In addition, expanded sanctions and military action against oil and gas infrastructure continue to negatively impact the company's operations in Russia and Ukraine.

These collective geopolitical headwinds were partially offset by continued investment in reservoir characterization programs that are supporting international exploration, appraisal and development projects in many regions. Now for some operational highlights from Reservoir Description. Even as portions of our business remain negatively impacted by geopolitical disruptions during the third quarter of 2026, clients continue to rely on Core Lab's specialized technical expertise and global laboratory network.

During the third quarter, Core Lab secured a carbon capture and storage project in Malaysia, supporting a sequestration program for a major international operator that is evaluating long-term CO2 injection into a depleted natural gas reservoir. The project includes a comprehensive reservoir characterization and CO2 storage qualification program, incorporating advanced petrophysical, geochemical and geomechanical performance analysis. Core Lab's analytical program will generate the critical data required to evaluate CO2 storage capacity, formation damage risks and seal integrity.

Also during the third quarter, the company secured a key role in supporting a major offshore operator in the Black Sea as their development project advances toward first hydrocarbon production. With the infrastructure installed and drilling underway, Core Lab is providing a specialized offshore mobile laboratory with on-site sampling and analytical services to support start-up and initial production operations. These real-time data sets are helping the operator reduce risk during this important phase of development.

This project award highlights Core's ability to integrate advanced laboratory capabilities with on-site expertise and positions the company for additional opportunities as this project transitions into long-term production operations. Moving now to Production Enhancement, where Core Lab's technologies continue to help our clients optimize their well completions and improve production. Revenue for Production Enhancement for the third quarter of 2026 came in at $47.8 million, up 4% sequentially and 3% year-over-year.

Q3 2026 operating income for Production Enhancement ex-items was $4.4 million, yielding operating margins over 9%. Operating margins were down sequentially as revenue shifted to a proportionately higher volume of product sales versus diagnostic services. Diagnostic services in the Gulf of Mexico were down sequentially due to project timing. Several large diagnostic projects reached successful completion in the second quarter, while new projects originally scheduled for the third quarter were delayed until the fourth quarter due to a shift in client schedules.

We anticipate improved diagnostic activity in the Gulf of America in the fourth quarter as these projects get underway. Now for some operational highlights from Production Enhancement. During the third quarter, Core Lab was selected by a national oil company in Southeast Asia to develop and deploy an integrated water shutoff solution for its offshore well intervention program. To meet the operator's specific requirements, Core's team developed and commercialized a proprietary retrievable packer designed for water shutoff applications.

This new packer was combined with our proprietary X-SPAN tubing and casing patch technology to provide a comprehensive well intervention solution. Following successful product development and qualification testing, the operator deployed the integrated system in our offshore fields, achieving 100% operational success. As a result of this successful deployment, Core Lab was awarded a 5-year contract to support the operator's ongoing water shutoff program.

Also during the third quarter, Core Lab deployed its proprietary oil and water tracer technologies to support a large-scale onshore unconventional development program in the Middle East. The operator is developing closely spaced horizontal wells across multiple reservoir intervals using completion designs adapted from successful multi-bench Permian Basin operations. With reservoir modeling indicating potential hydraulic fracture communication between wells, the operator engaged Core Lab to provide direct diagnostic measurements of inter-well connectivity.

The engagement built on the client's prior experience with Core Lab's diagnostic technologies on legacy U.S. land projects. Working closely with the client, Core Lab's technology team executed a tracer diagnostic program that provided data to help the operator evaluate well interconnectivity and completion effectiveness in this new development. This work will be used to optimize well spacing and demonstrates Core Lab's ability to apply its proprietary technologies and North American experience to emerging international unconventional field developments. That concludes our operational review. We appreciate your participation, and Cindy will now open the call for questions.

[Operator Instructions]

Our first question comes from Josh Jayne of Daniel Energy Partners.

I think it was in Gwen's commentary, you noted the conflict driving higher commodity prices will drive higher spending in 2027. Maybe you could just go into a little bit. Are there regions where you see more of an uptick relative to others? Or do you see global CapEx from operators next year? Are there more relative dollars moving a certain way than what you experienced this year? Maybe you could just dive into that a little bit would be great.

Yes, Josh, good question. I mean we're still putting together our thoughts and our conversations with clients about 2027. But I think it's more of the latter. A global increase in capital spending is emerging across our conversations with our client base. And I think with many of those, they're long-cycle projects. And so I don't think they're going to be terribly influenced by short-term fluctuations in the price of crude oil. And so we just see across the globe, an increase in activity next year.

And then maybe on the production enhancement side, what are you seeing in the U.S. as you move forward? Could you speak to if you're seeing a difference in demand from the privates versus the larger publics moving forward, given most of the uptick over the course of this year has been driven by privates and smaller operators. Just what are you seeing?

Yes, that's pretty much what we've seen. It's been the smaller operators, privates. I think the -- I think if I could characterize a consensus among the larger operators, it's been they're going to execute their budgets that they had and not flex that very much. And so I'd say the uptick that we've seen on U.S. land has been more smaller operators being a little opportunistic.

[Operator Instructions]

This concludes our question-and-answer session. I would like to turn the conference back over to Larry Bruno, Chairman and CEO, for any closing remarks.

Okay. I think we'll wrap up here. In summary, Core's operational leadership continues to position the company for improving client activity levels in the coming quarters and years. For 9 decades through many cycles, Core Lab has successfully navigated changing industry dynamics, political uncertainty and global market disruptions by remaining focused on innovation, operational excellence and servicing our clients.

Core Lab is well positioned both operationally and technologically to help our global clients optimize reservoir performance and address their evolving needs. Our focus on differentiated technologies, scientific expertise and client collaboration continues to distinguish the company across the oilfield service sector. The company will remain focused on maximizing free cash and return on invested capital.

In addition to our quarterly dividend, we'll bring value to our shareholders via growth opportunities, driven by both the introduction of problem-solving technologies and new market penetration. In the near term, Core will continue to use free cash to repurchase shares while preserving its strong balance sheet. So in closing, we thank and appreciate all of our shareholders and the analysts that cover Core Lab.

The executive management team and the Board of Core Laboratories give a special thanks to our worldwide employees that have made these results possible. We're proud to be associated with their continuing achievements. So thanks for spending time with us, and we look forward to our next update. Goodbye for now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Core Labs Second Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Larry Bruno, Chairman and CEO of Core Labs. Please go ahead.

Thanks, Alan. Good morning in the Americas. Good afternoon in Europe, Africa, and the Middle East, and good evening in Asia Pacific. We'd like to welcome all of our shareholders, analysts, and most importantly, our employees to Core Laboratories second quarter 2026 earnings call. This morning, I'm joined by Chris Hill, Core's Chief Financial Officer, and Gwen Gresham, Core's Senior Vice President and Head of Investor Relations.

The call will be divided into 6 segments. Gwen will start by making remarks regarding forward-looking statements. We'll then have some opening comments, including a high-level review of important factors in Core's second quarter performance. In addition, we'll review Core strategies and the 3 financial tenets that Core employs to build long-term shareholder value. Chris will then give a detailed financial overview and have additional comments regarding shareholder value. Following Chris, Gwen will provide some comments on the company's outlook and guidance.

I'll then review Core's 2 operating segments, detailing our progress and discussing the continued successful introduction and deployment of Core Laboratories technologies, as well as highlighting some of Core's operations, recent client interactions, and major projects worldwide. Then we'll open the phones for a Q&A session. I'll now turn the call over to Gwen for remarks on forward-looking statements.

Before we start the conference this morning, I'll mention that some of the statements we make during this call may include projections, estimates, and other forward-looking information. This would include any discussion of the company's business outlook. These types of forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from our forward-looking statements. These risks and uncertainties are discussed in our most recent annual report on Form 10-K, as well as other reports and registration statements filed by us with the SEC.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our comments also include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing our second quarter results. Those non-GAAP measures can also be found on our website.

With that said, I'll pass the discussion back to Larry.

Thanks, Gwen. Moving now to some high-level comments about our second quarter 2026 results. Core continued to execute its strategic plan of technology investments targeted to both solve client problems and capitalize on Core's technical and geographic opportunities. The ongoing military conflict in the Middle East, which began during the first quarter of 2026, continued to affect operations through project delays and logistical disruptions across several countries where the company operates.

Reservoir Description bore the greatest impacts of the Middle East conflict as crude assay work and reservoir characterization projects depend on field operations, active maritime hydrocarbon trade and transportation, timely sample acquisition, and access to client facilities. The closure of the Strait of Hormuz and the widespread disruption to maritime hydrocarbon transportation routes extends beyond the Middle East region.

In addition, in both Russia and Ukraine, escalating attacks on refining, storage, and hydrocarbon transportation sites, along with evolving sanctions, resulted in additional headwinds. Production Enhancement was comparatively less affected by these geopolitical conflicts, although certain service activities and completion product shipments into the region continued to experience delays.

Even in this challenging operating environment, energetic product sales improved during the quarter, reflecting continued operator adoption of Core Labs' advanced completion technologies across both the U.S. and international markets. While the Middle East situation remains uncertain and further geopolitical developments could continue to influence Core's business, operating conditions improved in several other geographic markets during the second quarter and client engagement strengthened outside the Middle East.

Looking at Reservoir Description, second quarter revenue was down 4% from Q1 of 2026 and down 9% compared to Q2 of last year. Second quarter operating margins in Reservoir Description ex item were 5%, down sequentially by approximately 100 basis points. Despite the multiple factors impacting Core Labs' second quarter results, the company maintained its focus on creating new technology offerings, maximizing operating efficiency, and leveraging our global network to support client operations.

In Production Enhancement, second quarter revenue was up 15% compared to Q1 of 2026, and margins in Production Enhancement ex item were 12%, up nicely from 5% in Q1 of 2026, or over 700 basis points. Sequential margins benefited from higher product sales during the quarter, driven by increased operator adoption of Core Labs' proprietary completion technologies across both the U.S. and international markets. Second quarter operating margins also benefited from the resolution of previously recorded tax matters.

The company maintained its longstanding commitment to shareholder returns during the quarter, returning free cash to our shareholders through our quarterly dividend and by repurchasing more than 214,000 shares of company stock, representing a value of $2.7 million. Q2 marks the 7th consecutive quarter of share buybacks. Core intends to continue using free cash to fund our quarterly dividend, pursue growth opportunities, and improve shareholder value through opportunistic share repurchases.

Considering current market dynamics and looking ahead to the mid and longer term, Core Lab has decades of experience supporting clients through periods of geopolitical uncertainty. The company's longstanding presence in the Middle East, along with the company's proprietary technologies and dedicated employees, will allow Core Lab to continue serving its clients across this strategically important region. Moreover, despite near-term headwinds, Core's global operations, asset-light business model, and diversified technology portfolio position the company for long-term success.

For 90 years, Core Lab's resilience, technical leadership and unwavering client focus have enabled the company to deliver differentiated solutions and help our clients derisk their operational decisions. As we move ahead, Core will continue to execute on its key strategic objectives by, one, introducing new product and service offerings in key geographic markets, two, maintaining a lean and focused organization, and three, maintaining our commitments to returning excess free cash to our shareholders while preserving the company's strong balance sheet. Core's strengths, together with disciplined capital deployment, continued free cash flow generation and the company's commitment to returning excess capital to its owners will drive long-term value creation for Core Lab's shareholders.

Now to review the company's strategies and the financial tenets that have guided Core Lab's shareholder value creation through our more than 32-year history as a publicly traded company. While we continue to pursue growth opportunities, the company will remain focused on its 3 long-standing, long-term financial tenets, those being to maximize free cash flow, maximize return on invested capital, and returning excess free cash to our shareholders.

I'll now turn it over to Chris for the detailed financial review.

Thanks, Larry. Before we review the financial performance for the quarter, the guidance we gave on our last call and past calls excluded the impact of any FX gains and losses and assumed an effective tax rate of 25%. So accordingly, our discussion today excludes any foreign exchange gain or loss for current and prior periods. The comparison periods for the first quarter of 2026 and the second quarter of 2025 also included items that were discussed in those calls and highlighted in our earnings release for those periods. These items have also been excluded from our discussion of the financial results today. You can find a summary of those items in the tables attached to our press release for the second quarter of 2026.

Now looking at the income statement, revenue was $124.6 million in the second quarter, up over 2% compared to the prior quarter and down 4% year-over-year. Sequentially, we saw increased demand for our completion products in both the U.S. land and international markets, while service revenue increased in certain international regions. The conflicts in both Russia, Ukraine, and the Middle East, which have intensified, have primarily impacted our service revenue.

Of this revenue, service revenue, which is more international, was $94.3 million for the quarter, flat sequentially and down 2% year-over-year. Our service revenue associated with crude assay services and regional studies continue to be impacted by the geopolitical conflicts in the Middle East and Russia, Ukraine, which are the primary reason for the year-over-year decrease. However, growth in other regions outside these affected areas offset some of the impact.

Sequentially, although the Middle East and Russia have been significantly impacted, service revenue was flat. We continue to see demand improve for our reservoir rock and fluid analytical programs in certain international regions where exploration programs are more active. Additionally, our well completion diagnostic services continue to perform well in the U.S. market and is showing some growth internationally, excluding the Middle East.

Product sales, which are more equally tied to North America and international activity, were $30.3 million for the quarter and were up 10% sequentially, but down 11% year-over-year. Sequentially, completion activity in the U.S. improved modestly. However, we saw significant growth in our U.S. completion product sales. Switching to international product sales, which are typically larger bulk orders and can vary from one quarter to another, were also up nicely compared to the first quarter. When looking at year-over-year, we had a large laboratory instrumentation sale last year, which did not repeat in the second quarter of 2026. However, this was partially offset by improved sales of perforating products in both the U.S. and international markets.

Moving on to cost of services ex items for the quarter was 80% of service revenue, a slight improvement from 81% in the prior quarter and increased from 77% last year. Sequential improvement was primarily driven by continued cost reduction initiatives in regions impacted by the conflicts. The year-over-year increase is primarily result of the company continuing to carry costs in the regions, which have been more negatively impacted in 2026 by the escalation of conflicts in both the Middle East and Russia, Ukraine. As discussed on prior calls, the service side of our business has been more affected by geopolitical conflicts and expanded sanctions.

Volatility in crude oil prices, along with continued conflict in Russia, Ukraine, and the Middle East, have disrupted regional operations and reduced demand for our crude assay services, which are closely tied to the trading and maritime movement of crude oil and derived products. We will continue to manage our cost structure as effectively as possible as we work through these disruptions in certain regions.

Cost of sales ex items in the second quarter was 85% of revenue, which improved from 94% in the prior quarter and was relatively flat compared to last year. Sequential improvement was primarily driven by continued cost control initiatives and manufacturing efficiencies. With these initiatives in place, we anticipate the manufacturing absorption rate in future periods to be in line with projected product sales. Additionally, in the second quarter of 2026, we received a partial refund of import tariffs, which were incurred in prior periods.

G&A ex items for the quarter was $11 million, which was relatively flat compared to the prior quarter, and up slightly from the same quarter in the prior year. For 2026, we expect G&A ex items to be approximately $43 million to $45 million. It is also important to note that 100% of our corporate G&A expenses are allocated and absorbed into the financial performance of the reported segments.

Depreciation and amortization for the quarter was $3.8 million, flat compared to the prior quarter. EBIT ex items for the quarter was $9.4 million, up from $6.6 million last quarter, yielding an EBIT margin of approximately 8% and expanding 210 basis points from last quarter. Our EBIT for the quarter on a GAAP basis was $9.2 million.

Interest expense of $2.8 million for the second quarter compares to $2.9 million in the prior quarter and $2.7 million in the same quarter in the prior year. The changes in interest expense were primarily due to changes in our average borrowings with variable interest rates during the periods. Income tax expense at an effective tax rate of 25% and ex items was $1.6 million for the quarter.

On a GAAP basis, we recorded tax expense of $500,000 for the quarter. The second quarter expense includes benefits from certain discrete items recorded in the quarter. The effective tax rate will continue to be somewhat sensitive to the geographic mix of earnings across the globe and the impact of items discrete to each quarter. We continue to project the company's effective tax rate to be approximately 25%.

Net income ex items for the quarter was $5.1 million, up sequentially from $2.7 million last quarter, but down from $8.8 million in the second quarter of last year. On a GAAP basis, we had net income of $6 million for the quarter. Earnings per diluted share ex items was $0.11 for the quarter, compared to $0.06 in the prior quarter, and $0.19 in the second quarter of last year. On a GAAP basis, EPS was $0.13 for the quarter.

Turning to the balance sheet, receivables were $108.8 million and increased slightly from the prior quarter. Our DSOs for the second quarter were at 73 days, which improved slightly from 74 days last quarter. The timing of collections have been impacted by the ongoing conflicts, and we continue to remain focused on our collection efforts in the affected regions. Inventory at June 30, 2026, was $58 million, up slightly from last quarter-end. Inventory turns for the quarter were 1.8 and remained the same compared to last quarter. With continued focus, we anticipate inventory turns will gradually improve as we progress through the remainder of 2026.

And now to the liability side of the balance sheet. Our long-term debt was $116.4 million as of June 30, 2026, and considering cash of $22.7 million, net debt was $93.6 million, which decreased slightly from the last quarter. Our leverage ratio is currently at 1.3 compared to 1.2 last quarter. Our debt is currently comprised of $65 million in senior notes, a term loan of $49.4 million and $2 million outstanding under our bank credit facility.

Looking at cash flow. For the second quarter of 2026, cash flow from operating activities was $7.8 million, and after paying approximately $4.7 million of CapEx for operations, our free cash flow for the quarter was $3.1 million. Cash from operations almost doubled this quarter when you compare it to the first quarter. However, our capital expenditures were also higher. The elevated capital expenditures are primarily associated with investments to support a recently signed multi-year contract in the Asia-Pacific region and rebuilding our facilities in the Mediterranean region, which incurred weather-related damage in the first quarter.

As discussed in prior quarters, the capital expenditures associated with rebuilding our U.K. facility, which was damaged by fire are covered by the company's property and casualty insurance and have been excluded in the calculation of free cash flow. In the second quarter of 2026, capital expenditures associated with rebuilding the U.K. facility were $1.1 million.

Looking ahead to the rest of the year, we will continue our strict capital discipline and asset-light business model with capital expenditures primarily targeted at growth opportunities. Excluding the CapEx associated with rebuilding the U.K. facility, we expect capital expenditures for the full year of 2026 to be in the range of $15 million to $18 million. Core Lab's operational leverage continues to provide the ability to grow revenue and profitability with minimal capital requirements.

Capital expenditures for operations has historically ranged from 2% to 4% of revenue, even during periods of significant growth. That same level of laboratory infrastructure, intellectual property, and leverage exists in the business today. We believe evaluating a company's ability to generate free cash flow and free cash flow yield is an important metric for shareholders when comparing and projecting companies' financial results, particularly for those shareholders who utilize discounted cash flow models to assess valuations.

I will now turn it over to Gwen for an update on our guidance and outlook.

Thank you, Chris. Turning to Core Lab's outlook for the third quarter of 2026. As a result of the ongoing conflicts in the Middle East and Russia, Ukraine, the IEA, the EIA, and OPEC have all revised their respective 2026 global crude oil demand forecast to reflect the impact of higher energy prices, constrained product availability, and interruptions to global hydrocarbon trade and transportation. While near-term demand has been negatively impacted by the ongoing conflict, the agencies all project demand growth will rebound in 2027.

The long-term need for investment in new resources of global crude oil production and initiatives to maximize recovery from existing producing fields remains strong. Accelerating decline rates from existing producing fields, together with geopolitical uncertainty, reinforce the importance of energy security and geographically diversified resources of hydrocarbon supply. Collectively, these factors expect to support continued client investment in hydrocarbon development and new exploration.

Despite client activity headwinds from the 2 ongoing geopolitical conflicts, Core expects third quarter revenue to increase sequentially, supported by improvement in several international regions, including the South Atlantic margin and Asia-Pacific. Recent escalations in both the Middle East and Russia, Ukraine conflict are expected to continue affecting client operations, project timing, and logistics across portions of these regions during the third quarter, with greater impact to Reservoir Description and the service component of Production Enhancement compared to the company's completion product business.

U.S. land completion activity is expected to improve modestly as the third quarter 2026 progresses. Core Lab expects growing adoption of its diagnostic services, reservoir optimization technologies, and proprietary energetic systems to outperform U.S. land completion activity. Longer-term international projects, including offshore developments and emerging exploration plays, are expected to create additional growth opportunities. While the timing of recovery in certain Middle East markets remains difficult to predict, Core believes long-term fundamentals support future growth in exploration activity levels. The company's international footprint, proprietary technologies, and expertise support Core Lab to capitalize on opportunities across global markets.

In summary, Reservoir Description's third quarter 2026 revenue is projected to range from $81 million to $84 million, with operating income of $5.5 million to $7.9 million. Production Enhancement's third quarter revenue is estimated to range from $47.5 million to $51.5 million, with operating income of $4.8 million to $6.9 million. Core's third quarter 2026 revenue is projected to range from $128.5 million to $135.5 million, with operating income of $10.5 million to $15 million, yielding operating margins of approximately 10%. EPS for the third quarter is expected to range from $0.12 to $0.20. The company's guidance is based on projections for underlying operations and excludes gains and losses in foreign exchange and assumes an effective tax rate of 25%.

With that, I'll turn the call back over to Larry.

Thanks, Gwen. First, I'd like to recognize our employees in the Middle East, whose professionalism, resilience, and unwavering support to our clients have been especially evident throughout the recent geopolitical conflict. I'd also like to thank our entire global team of employees for their continued commitment to innovation, integrity, and exceptional service to our clients. For 90 years, our employees' collective expertise and dedication has been the foundation of Core Lab's success.

Looking at the macro, while global energy markets continue to navigate geopolitical uncertainty, evolving trade policies and commodity price volatility, the IEA, EIA, and OPEC are revising their near-term forecast for oil demand. They are also projecting demand growth to rebound by approximately 1.7 million to 2 million barrels per day in 2027, supporting constructive long-term market fundamentals. The U.S. EIA's long-term reference case forecast shows crude oil demand growth continuing through 2050, approaching 120 million barrels per day.

Increases in demand will require more than incremental production growth from existing fields. New supply must also be brought online to replace the natural decline from producing fields. The IEA estimates that absent investment, global oil production would decline by approximately 8% per year due to natural field depletion. As a result, they conclude that a significant portion of global upstream capital spending is required to sustain existing production before addressing any incremental growth.

The IEA also noted that nearly 90% of upstream investment since 2019 has been directed toward maintaining existing production rather than expanding overall supply. Recent draws in global crude oil inventory in both commercial storage and strategic reserves provide another indication of the need for sustained investment. Inventory draws have helped balance recent supply disruptions resulting from the closure of the Strait of Hormuz, but those volumes will ultimately need to be replenished as the market works to restore adequate supply capacity and support long-term energy security.

The most recent EIA short-term outlook projects U.S. crude oil production to average approximately 13.8 million barrels per day in 2026, increasing only modestly from 2025, with only slight additional growth expected in 2027. Taken together, forecasted global demand growth and accelerating decline rates from existing producing fields, along with the need to replenish global inventories and moderating incremental U.S. production growth, reinforce the need for sustained investment in new discoveries.

Collectively, these trends, together with renewed concerns about energy security, reinforce the need for a geographically diverse investment cycle encompassing new hydrocarbon exploration, appraisal, and development of international conventional offshore fields. Furthermore, there will be a growing need for additional investment in existing producing fields to mitigate natural decline. Core Lab's global reach, proprietary technologies and specialized technical expertise offer clients critical advantages to optimize their assets.

Now let's review the second quarter performance of our 2 business segments. Turning first to Reservoir Description. For the first quarter of 2026, revenue came in at $79 million, down 4% compared to Q1 of 2026. Operating income for Reservoir Description, ex items, was $3.7 million, down from $4.8 million in Q1, yielding operating margins of 5%. Sequential margins were primarily impacted by reduced assay work resulting from disruptions to crude oil and derived product cargo movements through the Strait of Hormuz, along with delayed project execution and reduced client activity across the Middle East.

In addition, expanded sanctions and military action against oil and gas infrastructure also negatively impacted the company's operations in Ukraine and Russia. These geopolitical headwinds were partially offset by continued investment in reservoir characterization programs that are supporting international exploration, appraisal and development projects in other regions.

Now for some operational highlights from Reservoir Description. During the second quarter of 2026, even as portions of our business remain affected by geopolitical disruptions, clients continued to rely on Core Lab's specialized technical expertise and global laboratory network system. Core Lab saw growth in international reservoir characterization activity, securing project work on new offshore exploration and appraisal projects, as well as carbon capture and storage projects across several regions. In particular, activity across West Africa continued to grow during the second quarter, reinforcing a broad trend of increasing international offshore projects.

Core Lab was engaged by a major international operator to support reservoir characterization activities following a successful offshore Namibia exploration well. Also, during the second quarter of 2026, Core Lab initiated a reservoir characterization program supporting Murphy Oil's recently announced discovery offshore Cote d’Ivoire. Following recovery operations at the well site, core samples were transported to Core Lab's Houston Advanced Technology Center for accelerated analysis using the company's proprietary Dual Energy CT technology. Core Lab is very pleased to be assisting Murphy Oil in its Cote d'Ivoire project.

Turning to North America, the company's specialized laboratory capabilities are also helping operators improve recovery from existing producing assets. Utilizing proprietary laboratory technologies, Core Lab's Advanced Technology Center in Calgary is supporting a heavy oil operator with laboratory testing of solvent-assisted thermal recovery techniques.

Using innovative proprietary steam flood laboratory technologies, Core Lab replicated subsurface conditions and was able to show how oil production progressed while transitioning from low salinity brine injection to a steam flood, while also incrementally introducing solvents as temperatures rose. The integrated testing program continuously measured oil recovery, permeability, and potential formation damage. The results provided the operator with critical data to evaluate the effectiveness of various solvent injection systems, allowing them to maximize oil recovery.

Moving now to Production Enhancement, where Core Lab's technologies continue to help our clients optimize their well completions and improve production. Revenue for Production Enhancement for the second quarter of 2026 came in at $46 million, up 15% sequentially and 5% year-over-year. Q2 2026 operating income for Production Enhancement ex items was $5 million, yielding operating margins of 12%, with sequential incremental margins of 59%.

While U.S. completion activity improved modestly during the quarter, many operators continued to emphasize capital discipline, maintaining their original 2026 execution plans. The demand for Core Lab's advanced completion technologies remained strong, driven by both improved energetic product sales across both the U.S. and international markets, as well as increased market penetration for diagnostic services.

Now for some operational highlights from Production Enhancement. During the second quarter, operators across several U.S. unconventional basins continued to deploy Core Lab's newly commercialized InPulse perforating technology. InPulse incorporates a proprietary energetic material that generates a secondary pressure pulse immediately following the initial perforation event. This technology improves near-wellbore connectivity and reduces breakdown pressures, leading to faster stage execution and improved completion efficiency.

As commercialization continues, growing deployment among existing Core Lab clients is supporting increased product adoption and creating opportunities to expand the technology across North American unconventional plays. InPulse has applications in domestic and international markets, in both conventional and unconventional reservoirs, and for geothermal wells. Application for Core's completion diagnostic services are also expanding.

During the second quarter, an operator in West Texas utilized Core's FLOWPROFILER oil and water tracer technology to identify the highest quality landing intervals before committing to specific lateral targets. Following a successful tracer-backed appraisal program in the vertical borehole, the operator deployed tracers into selected horizontal wells, where stage-by-stage diagnostics identified the highest producing completion intervals.

Elsewhere, a major operator in Louisiana utilized the company's gas tracer technology to evaluate production performance across extended length horizontal laterals. The diagnostics confirmed that the completion design had produced sustained gas contribution from the toe of the well, increasing confidence in the development of this long lateral.

Core Lab's diagnostic technology also supported a leading independent operator in Western Canada in evaluating a complex multilateral water shutoff program. Core's diagnostic technologies confirmed that water was bypassing the isolation packer, providing definitive evidence that allowed the operator to refine the completion design. Collectively, these diagnostic projects demonstrate the expanding role of Core Lab's proprietary tracer technologies across the unconventional development cycle, from reservoir appraisal and completion optimization, as well as production surveillance and even water management programs.

That concludes our operational review. We appreciate your participation, and Alan will now open the call for questions.

[Operator Instructions]

Our first question today comes from Don Crist of Johnson Rice.

I wanted to start on the assay work. Obviously, the Middle East is a large portion of worldwide shipments of oil, and you're being influenced by both that and Ukraine/Russia. But I wanted to see how much you're seeing a pickup in movement of oil in other parts of the world. In other words, if 25% or 30% of your business was out of those 2 regions, how much has the rest of the world picked up with movements out of the U.S. or other places? Any color there?

Yes. Good I don't have in front of me the breakdown by region. But I can tell you that we look at pre-conflict cargo movements versus post-conflict cargo movements, and those are down 16% globally. And so you can imagine, one of the things I think it's important to convey here is we have revenue opportunities on both sides of a transaction. So a cargo ship that might be loading in the Middle East, we have an opportunity there. And then if that cargo makes landfall in North America or Europe, we have an opportunity there. So we kind of get it at both ends, unfortunately, with the shipments not getting out of the Strait of Hormuz.

The other thing I think is important, and we touched on it during our commentary is with the volatility in the situation, we're trying to do what we can to minimize costs without disassembling the experience and the staff that we have to do this, because things change, and we don't want to discharge all these folks and then have to try to bring them back or rebuild the organization. So we're doing the best we can, given the volatility, but we'll continue to stay focused on maximizing efficiency in the operation and making sure we're running as cost effectively as possible.

Right. The only other point I would say, too, Larry, is that when these conflicts flare up and then the oil price starts jumping all over the place, that also slows down the activity when you're talking about moving trading, primarily oil. So the trader part of that comes to a stop because they can't predict future oil prices. So it has an immediate impact on that.

And maybe just one comment. Sorry, Don, maybe just one add-on to that, the Russia, Ukraine situation. We are executing during the quarter a cost reduction plan for that business.

Okay. But you're testing SPR oil there, too, right, that's coming out of the various places around the world?

Yes, if there's stuff going into the transportation network around the globe, we get a bite at that apple.

Right. Okay. That's what I wanted to clarify.

Yes. Whether it's coming out of an SPR or whether it's coming out of a tank somewhere.

Okay. And then on the offshore side, the comments that I've heard most recently from other operators is there's more conviction today in projects moving forward than they've seen in the past, where operators may be testing pricing or other kind of factors. Are you seeing more conviction in your customer calls today that these offshore projects that we've been predicting for a couple of years now are moving forward? Are you seeing that as well?

Yes, don, I think that's very true. I think -- I'll call it the intensity of the conversations have picked up. But the comment we made before, we actually saw that starting to happen as back into 2025 and ran into a string of dry holes where we had committed work, a substantial amount of committed work ready to go and client said, hey, didn't find anything, stand down.

And so, we talked about some of the projects that we're engaged with right now on discoveries, obviously another client to be successful, when they're in their exploration efforts. But I think things are lining up for a very nice rebound in activity on offshore reservoir characterization projects late this year, but certainly into 2027.

Right. Okay. And then one final one for me. A couple of quarters back, you had talked about a project or a product that in the U.S. was boosting recoveries, but it had to be done on the initial completion. Is that this InPulse product that you talked about this quarter?

Well, I'm not quite sure. So there's 2 topics that might cover that. One is InPulse, which we just talked to again here, where that's a perforating or an energetic technology that kind of pre-stimulates the near wellbore area so that the charge goes off, penetrates the casing, and then right behind that, and I can't remember whether it's milliseconds or microseconds at the moment, a very powerful secondary charge rubblizes the area in the near wellbore.

And the feedback we got from our clients were that, that was reducing their breakdown time, their time to rate, as they refer to it, the time to get the maximum rate. The other thing that might fit into your conversation there is enhanced oil recovery, which is a laboratory process. We've got a number of tests going on for clients that look at ways to increase the recovery rate out of unconventional reservoirs.

And the commentary about having to be done early on is one of the keys in making that work is to maximize surface area in the near wellbore area. If you have a lot of penetrations and you rubblize the area around the near wellbore, that increased surface area allows for better thermodynamic interaction and the enhanced oil recovery process of either swelling the oil in place or evaporation, or vaporization and condensation, 2 different techniques takes place. But they both benefit from how you've stimulated the well.

And so we've got projects going on both. We've got growing acceptance of InPulse charges, and we've got engagement with several clients on these EOR processes where we're validating the thermodynamic processes that will work. Now, with those EOR projects, in both cases, containment is an issue that we can't help the clients with. Can they introduce a gas into the reservoir and have it go to work where they want it? Or is it gonna run down faults or extended fracs and disappear into the subsurface? That's something that we can't really help them with.

Right. Okay. Well, everybody's looking for more recovery, so I'm sure both of those products will gain traction. So I appreciate the color, guys. I'll turn it back.

Yes. Thanks, Don. We published a few things a while back on the vaporization and condensation technique, if people want to go look that up.

Our next question comes from Sean Mitchell of Daniel Energy Partners.

Any color, Larry, just additional color around the UAE regulatory approval for SpectraStim and SpectraScan? Obviously, that was notable in the press release. Any additional color there? And then any additional read-through from your peers this week, in OFS land around kind of normalization of the Middle East? Anything that's corroborating with what your own opinion it might be or different?

So on the UAE, the technology that we're talking about there involve using isotopes. And so it's a technique that we are using in some other parts of the Middle East, where we've got licensing. We've been doing work for ADNOC and other UAE folks for a while, but now we have another tool in our belt, if you will, to address other diagnostics. So that regulatory door is now open for us. We can now store on-site and we can deploy them into the field to help diagnose what's going on.

In terms of what we're seeing in the Middle East, it's not just the assay work, there's also the subsurface reservoir characterization work that's being impacted as well as completion diagnostics in at least 2 countries, I'm thinking off the top of my head, that where field operations got suspended.

What we saw happen was there was tankers -- when the ceasefire was announced, we saw the tankers start to take on more cargo, and some started to leave the region. But not as many as people might have hoped. And we can track that. We've got independent sources that track the tanker movements that we subscribe to. We monitor that.

And then on the subsurface projects, things were starting to pick up. Think of this as more of the upstream applications that we engage with. Things were starting to pick up. Clients were looking at getting back in the field with us so that we could start getting samples from the well site, and that's now pulled back some.

Got it. Maybe one other follow-on to Don's comment just on customer interest. What we've heard a lot lately is just more exploration. We actually have heard it a couple of times over the last several weeks from E&P companies. And just wondering like outside of the Middle East, is the phone starting to ring more and more on kind of exploration in general? That seems to be coming up more and more today.

Yes. No question about it. Like I said, it started ringing a while back for us, and unfortunately, a sort of failure to launch for us. We got kind of left at the dock. But Africa is clearly picking up. Brazil and the South Atlantic margin picking up and Asia Pacific also picking up for us. And there's a couple places I can't talk about yet that will raise some eyebrows if and when those projects come to fruition. And hopefully, we'll be able to talk about those in the coming quarters.

The next question comes from Sophia Vallecillo of Bank of America.

I just wanted to ask over the guide a little bit. So obviously, you're guiding sequential growth. And is any of that coming from normalization in the Middle East or Russia, Ukraine? Or is all of that growth coming from the geomarkets you mentioned, completely offsetting the geopolitical impacts?

For Reservoir Description, Sophia, we're projecting that to be up mid-single digits and driven by Africa, Brazil, Asia Pacific, and parts of Europe, like Larry mentioned. So I would say ex-Middle East, although we are seeing some marginal improvement with how projects are moving along, the subsurface projects are moving along in the Middle East.

And then for Production Enhancement, we're projecting that to be up mid-single to low-double digits and that's driven by what we think will be a modest improvement on U.S. land. We think operators will continue their capital spending plans for 2026, so not as sensitive to the volatility in the commodity prices. And then we also expect our international product business to be up slightly sequentially as well. Then that's going to be driven by the Eastern Hemisphere and Africa.

Okay. And then is there any sort of visibility into 4Q yet, or is it way too early?

I think it's a little early for that given the...

Tell us when the war's gonna end. Yes, sophia, I think Gwen covered it very well there. What I might add to that a little bit is we obviously felt like we had to dial in contingencies for what does the upside look like if things come to a conclusion sooner in the Middle East? Or what does it look like if things come to fruition later in resolving the Middle East conflict? So that's somewhat we felt sort of compelled to give a pretty wide range there to try to cover the eventualities. We try to be as transparent as we can, and what we see is upside and downside on that.

And then the other one for us, and we're -- Chris mentioned, we're working -- I think -- I'm sorry, Gwen mentioned, we're working hard on it. There's a lot of complications in navigating the situations in Russia, Ukraine. We're getting squeezed kind of from both sides there. Different governments telling us opposing things we can and can't do.

And so that's also challenging to navigate. There were some dramatic images over the second quarter of explosions at Russian storage facilities, for example, and in the Ukraine as well. And we have operations in both countries and that's presenting some uncertainty and challenges for us, too. On top of that, the sanctions got reinforced. I think the U.S. did it in the fourth quarter and then Europe came in the first -- late first quarter and also enhanced sanctions. So that's also tying our hands on who we can and can't work for.

All right. I think we'll wrap up there. In summary, Core's operational leadership continues to position the company for improving client activity levels in the incoming -- in the coming quarters and years. For 9 decades, through many cycles, Core Lab has successfully navigated changing industry dynamics, geopolitical uncertainty and global market disruptions by remaining focused on innovation, operational excellence and serving our clients.

Core Lab is well-positioned, both operationally and technologically to help our global client base optimize reservoir performance and address their evolving needs. Our focus on differentiated technologies, scientific expertise, and client collaboration continues to distinguish the company across the oil field service sector. The company will remain focused on maximizing free cash and returns on invested capital. In addition to our quarterly dividend, we'll bring value to our shareholders via growth opportunities, driven by both the introduction of problem-solving technologies and new market penetration. In the near term, Core will continue to use free cash to repurchase shares while preserving its strong balance sheet.

In closing, we thank and appreciate all of our shareholders and the analysts that cover Core Lab. The executive management team and the board of Core Laboratories give a special thanks to our worldwide employees that have made these results possible. We're proud to be associated with their continuing achievements. So thanks for spending time with us and we look forward to our next update. Goodbye for now.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Core Laboratories First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Larry Bruno, Chairman and CEO. Please go ahead.

Thanks, Valentina. Good morning in the Americas, good afternoon in Europe, Africa and the Middle East, and good evening in Asia Pacific. We'd like to welcome all of our shareholders, analysts and most importantly, our employees to Core Laboratories First Quarter 2026 Earnings Call.

This morning, I'm joined by Chris Hill, Core's Chief Financial Officer; and Gwen Gresham, Core's Senior Vice President and Head of Investor Relations. The call will be divided into 6 segments. Gwen will start by making remarks regarding forward-looking statements. We'll then have some opening comments, including a high-level review of important factors in Core's Q1 performance. In addition, we'll review Core's strategies and the 3 financial tenets that Core Lab employs to build long-term shareholder value.

Chris will then give a detailed financial overview and have additional comments regarding shareholder value. Following Chris, Gwen will provide some comments on the company's outlook and guidance. I'll then review Core's two operating segments, detailing our progress and discussing the continued successful introduction and deployment of Core Lab technologies as well as highlighting some of Core's operations, recent client interactions and major projects worldwide. Then we'll open the phones for a Q&A session.

I'll now turn the call over to Gwen for remarks on forward-looking statements.

Before we start the conference this morning, I'll mention that some of the statements that we make during this call may include projections, estimates and other forward-looking information. This would include any discussion of the company's business outlook. These types of forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from our forward-looking statements.

These risks and uncertainties are discussed in our most recent annual report on Form 10-K as well as other reports and registration statements filed by us with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our comments also include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing our first quarter results. Those non-GAAP measures can also be found on our website.

With that, I'll turn it back to Larry.

Thanks, Gwen. Moving now to some high-level comments about our first quarter. The military conflict in the Middle East introduced geopolitical uncertainties that created meaningful disruptions across the Middle East countries in which we operate. As the company announced on March 23, the conflict closed many client offices and resulted in project delays. In addition, the suspension of maritime hydrocarbon transportation from the Middle East region forced operators to halt hydrocarbon production.

For Core Lab, the disruption to hydrocarbon transportation routes extends beyond the Middle East region and into the company's global assay laboratory network that services the market for the maritime transportation and trading of crude oil, natural gas and refined products. The biggest impact of the conflict have been on Reservoir Description and the service side of Production Enhancement due to their roles in actively supporting reservoir rock and fluid characterization studies, completion diagnostic programs and hydrocarbon assay work, all of which require predictable client activity levels and field access for sample acquisition.

To date, Production Enhancement's completion products have been comparatively less affected by the Middle East conflict although shipments of energetic products into the region were delayed or temporarily suspended. As a result of these factors, Core lowered its forecast for the first quarter of 2026 revenue and earnings compared to the guidance we provided in our earnings call on February 4. The situation remains volatile and unpredictable shifts in the conflict will affect our operations.

Other factors also impacted the first quarter. Demand for assay services was also negatively impacted by the ongoing geopolitical conflict in Russia, Ukraine. Attacks on hydrocarbon transportation and refining infrastructure, along with evolving western sanctions continue to create demand uncertainties and operational inefficiencies.

Early in 2026, severe cold weather in North America affected onshore client completion activities and resulted in the temporary closure of Core Lab's manufacturing facilities. Additionally, adverse weather in the Mediterranean Sea related to Storm Harry temporarily suspended the demand for lab services across several countries and caused significant damage to one of the company's facilities creating further revenue and margin headwinds for the quarter. We are still in the progress of restoring service at the damage location.

Looking at Reservoir Description, first quarter revenue was down 11% from Q4 of 2025 and flat compared to Q1 of last year. First quarter operating margins in Reservoir Description ex items were 6%, down sequentially by nearly 800 basis points and margins also down year-over-year. Despite the multiple factors impacting Core Lab's first quarter results, the company maintained its focus on creating new technology offerings, maximizing operating efficiency and on leveraging its global network to continue to support Core's clients.

In Production Enhancement, first quarter revenue was down 13% compared to Q4 of 2025. Ex items, first quarter 2026 operating margins and production enhancement were 5%, down from 7% in Q4 of 2025. Sequential margins were impacted by the Middle East conflict, which delayed certain energetic shipments to the region and halted completion diagnostic field programs.

Soft sequential U.S. land activity amplified by severe cold weather in North America also reduced U.S. completion activity and resulted in the temporary closure of Core's manufacturing facilities. These headwinds were partially offset by strong demand for Core's proprietary completion diagnostic services across both onshore and offshore markets outside of the Middle East.

The company continued its longstanding commitment to shareholder returns during the quarter, returning free cash to our shareholders through our quarterly dividend and by repurchasing more than 51,000 shares of company stock, representing a value of $900,000. Q1 marked the sixth consecutive quarter of share buybacks. Core intends to continue to use free cash to fund our quarterly dividend, pursue growth opportunities and improve shareholder value through opportunistic share repurchases.

Looking ahead now to the mid and longer term, Core Lab has persevered through previous conflicts in the Middle East. The company and its dedicated employees remain committed to serving our longstanding clients throughout this vital region. Despite near-term headwinds, Core Lab's global operations, asset-light business model and diversified technology portfolio continue to position the company for long-term success.

For 90 years, Core Lab's resilience, technical leadership and unwavering client focus has enabled the company to deliver differentiated, scientific and technological solutions that help its clients derisk their operational decisions. Core's strengths, together with disciplined capital deployment, continued free cash flow generation and the company's commitment to returning excess capital to its owners, will drive long-term value creation for the company's shareholders.

As we move ahead, Core will continue to execute on its key strategic objectives by: one, introducing new product and service offerings in key geographic markets; two, maintaining a lean and focused organization; and three, maintaining our commitments to returning excess free cash to our shareholders and strengthening the company's balance sheet.

The interest of our shareholders, clients and employees will always be well served by Core Lab's resilient culture, which emphasizes innovation and the application of technology to derisk client decisions along with dedicated customer service. I'll talk more about some of our latest innovations in the operational review section of this call.

Now to review Core Lab's financial tenets that have guided the company's shareholder value creation through our more than 31-year history as a publicly traded company. We will continue to pursue growth opportunities. The company will remain focused on its 3 longstanding financial tenets, those being to maximize free cash flow, maximize return on invested capital and returning excess free cash to our shareholders.

I'll now turn it over to Chris for the detailed financial review.

Thanks, Larry. Before we review the financial performance for the quarter, the guidance we gave on our last call and past calls excluded the impact of any FX gains or losses and assumed an effective tax rate of 25%. So accordingly, our discussion today excludes any foreign exchange gain or loss for current and prior periods.

Additionally, the financial results for the first quarter of 2026 includes a charge of $3.7 million for noncash stock compensation expense associated with the future vesting of performance shares for certain employees who have reached eligible retirement age. We also recorded $600,000 of additional costs associated with exiting certain facilities as we continue to optimize our global footprint.

The comparison periods for the first and fourth quarter of 2025 also include items that were discussed in those calls and highlighted in our earnings release for those periods. These items have also been excluded from the discussion of the financial results today. You can find a summary of those items in the tables attached to our press release for the first quarter of 2026.

Now looking at the income statement. Revenue was $121.8 million in the first quarter, down 12% compared to the prior quarter and down 1% year-over-year. Core Lab will typically experience a seasonal decline in revenue from the fourth quarter to the first quarter of each year. However, as Larry mentioned, the first quarter of 2026 was also negatively impacted by the escalation of the conflict in the Middle East along with severe weather events in North America and Europe.

Of this revenue, service revenue, which is more international, was $94.3 million for the quarter, down 12% sequentially and 1% year-over-year. Our service revenue associated with crude assay services and regional studies continue to be impacted by the geopolitical conflicts in Russia, Ukraine, but particularly in the Middle East this quarter. Additionally, severe weather across North America, Europe and the Mediterranean region negatively impacted certain laboratory operations and disrupted client activity this quarter.

Offsetting some of the decline this quarter, we continue to see increased demand for our well completion diagnostic services, particularly in the Gulf of Mexico. Product sales, which are more equally tied to North America and international activity, were $27.5 million for the quarter and were down 12% from last quarter and down 3% year-over-year. Our international product sales are typically larger bulk orders and can vary from one quarter to another and were down sequentially in the first quarter of 2026. The decrease in product sales this quarter when compared to the fourth quarter of 2025 was partially offset by a higher level of product sales in the U.S.

Moving on to cost of services, ex items for the quarter was 81% of service revenue, which increased from 75% in the prior quarter and 77% last year. The sequential increase was primarily caused by the conflict in the Middle East, which resulted in a sharp decrease in revenue as the -- and our clients were forced to suspend operations.

As discussed in our previous calls, the service side of our business has been more impacted by the geopolitical conflicts and expanded sanctions, the volatility in crude oil prices and more recently, the geopolitical conflict in the Middle East caused disruptions to both our operations in the region and demand for crude assay services tied to the trading and maritime movement of crude oil and derived products. The company will continue to manage its cost structure as effectively as we can through these temporary disruptions in certain regions.

Cost of sales ex items in the first quarter was 94% of revenue, which is relatively flat compared to last quarter and was 91% last year. The company continues to face challenges with increased costs for raw materials and logistics, some of which we've had to absorb. Despite these challenges, we remain focused on improving cost efficiencies and anticipate the manufacturing absorption rate in future quarters will be in line with projected product sales.

G&A ex items for the quarter was $11 million, up a little from $10.6 million in the prior quarter. For 2026, we expect G&A ex items to be approximately $42 million to $45 million. It is also important to note that 100% of our corporate G&A expenses are allocated and absorbed into the financial performance of the reported segments.

Depreciation and amortization for the quarter was $3.8 million and increased slightly compared to $3.7 million in the last quarter and the first quarter of last year. EBIT ex items for the quarter was $6.6 million, down from $15.7 million last quarter, yielding an EBIT margin of over 5%. Our EBIT for the quarter on a GAAP basis was $1.9 million.

Interest expense of $2.9 million for the first quarter increased from $2.6 million in the prior quarter and the same quarter in the prior year. As mentioned last quarter, the increase in the interest expense is associated with the higher interest rate on the new term loan under our credit facility, which was used to retire $45 million of senior notes in January 2026.

Income tax expense and an effective tax rate of 25% and ex items was $900,000 for the quarter. On a GAAP basis, we recorded a tax benefit of $300,000 for the quarter. Net income ex items for the quarter was $2.7 million, down 72% sequentially and down 59% from first quarter of last year. On a GAAP basis, we had a net loss of $800,000 for the quarter. Earnings per diluted share ex items was $0.06 for the quarter compared to $0.21 in the prior quarter and $0.14 in the first quarter of last year. On a GAAP basis, we had a loss per diluted share of $0.02 for the quarter.

Turning to the balance sheet. Receivables were $108.3 million and decreased approximately $5.3 million from the prior quarter. Our DSOs for the first quarter were at 74 days, up from 69 days last quarter. The increase in DSOs was primarily driven by the escalation of the conflict in the Middle East, which impacted revenue for the quarter and also slowed collections. We will continue to focus our collection efforts in the affected region and anticipate that our DSO will improve in future quarters.

Inventory at March 31, 2026, was $57.8 million, up $3.3 million from last quarter end. Inventory turns for the quarter were 1.8% and down from 2.1% last quarter, which is primarily associated with the decrease in international bulk sales this quarter.

And now to the liability side of the balance sheet. Our long-term debt was $117 million as of March 31, 2026, and considering cash of $22.8 million, net debt was $94.2 million, which increased $3.9 million from last quarter. Our leverage ratio is currently at 1.2 compared to 1.1 last quarter. Our debt is currently comprised of our senior notes at $65 million, a term loan of $50 million and $2 million outstanding under our bank credit facility. As stated earlier, in the first quarter, we made a single draw of $50 million on a term loan under our credit facility and retired $45 million of senior notes in January of '26.

Looking at cash flow, for the first quarter of 2026, Cash flow from operating activities was $4 million and after paying approximately $3.5 million of CapEx for operations, our free cash flow for the quarter was $500,000. As discussed in prior quarters, the capital expenditures associated with rebuilding our U.K. facility, which was damaged by fire are covered by the company's property and casualty insurance and have been excluded in the calculation of free cash flow. The capital expenditures associated with rebuilding the U.K. facility in the first quarter were $1.4 million.

Looking ahead to the rest of the year, we will continue our strict capital discipline and asset-light business model with capital expenditures primarily targeted at growth opportunities. Excluding the CapEx associated with rebuilding the U.K. facility, we expect capital expenditures to remain aligned with activity levels and for the full year 2026 to be in the range of $15 million to $18 million.

Core Lab's operational leverage continues to provide the ability to grow revenue and profitability with minimal capital requirements. Capital expenditures for the operations has historically ranged from 2% to 4% of revenue even during periods of significant growth. That same level of laboratory infrastructure, intellectual property and leverage exists in the business today.

We believe evaluating a company's ability to generate free cash flow and free cash flow yield is an important metric for shareholders when comparing and projecting company's financial results, particularly for those shareholders who utilize discounted cash flow models to assess valuations.

I will now turn it over to Gwen for an update on our guidance and outlook.

Thank you, Chris. Turning to Core Lab's outlook for the second quarter of 2026, the IEA, the EIA and OPEC are projecting crude oil demand growth in 2026 of approximately 600,000 barrels per day to 1.4 million barrels per day, supporting constructive long-term market fundamentals despite near-term volatility. The IEA also continues to highlight that accelerating natural decline rates in existing producing fields remain a significant long-term supply risk, reinforcing the need for sustained investment.

Recent disruptions, including the closure of the Strait of Hormuz and damage to regional refining infrastructure have reduced global crude oil supply by approximately 20%. These geopolitical events are likely to support the need for new oil and gas development to address energy security risk. In the U.S., year-over-year production is expected to remain measured, as capital discipline and maturing shale plays offset efficiency gains. Combined, these trends suggest that new hydrocarbon exploration will come from international offshore conventional reservoir targets.

In the near term, geopolitical instability in the Middle East, sanctions and evolving trade policies, along with OPEC+ production decisions will continue to contribute to market volatility. However, a multiyear cycle of international offshore exploration and development activity will be required to support future demand. Core Lab maintains a constructive multiyear outlook and is positioned to support ongoing client investment needs.

Recent changes in client activity levels across the Middle East are directly impacting Core's operations. Client-driven project disruptions have led to delays in project execution and logistical constraints. For Core Lab, the disruption of hydrocarbon trading routes extends beyond the Middle East region and into the company's global lab network, which services the maritime transportation and trading of crude oil, natural gas and refined products.

The impact has been more pronounced in Reservoir Description and the service side of Production Enhancement due to Core Lab's unique role supporting regional client studies, reservoir rock and fluid characterization, completion diagnostics and hydrocarbon assay testing. These services rely on predictable fuel access, sample movement and laboratory operations.

Production Enhancement products has been comparatively less affected. However, shipments of energetic systems into certain countries have experienced delays. U.S. land completion activity is expected to remain below prior year levels with modest improvement likely driven by small to midsize operators. Growth in demand for Core's diagnostic services production optimization technologies and proprietary energetic systems are expected to partially offset softer year-over-year U.S. onshore activity. However, costs for certain imported raw materials used in production enhancement continue to increase and remain subject to tariffs and supply chain volatility.

Client discussions indicate that international projects outside the Middle East are proceeding. However, circumstances in the Middle East create difficulty in forecasting the pace and timing of activity recovery for the effective region. Collectively, these factors support expectations for modest sequential operational improvement for Core Lab.

In summary, Reservoir Description's second quarter 2026 revenue is projected to range from $77.5 million to $82.5 million, with operating income of $3.5 million to $5.4 million. Production Enhancement second quarter revenue is estimated to range from $45.5 million to $48.5 million with operating income of $2.8 million to $4.7 million.

So in summary, Core Lab's second quarter 2026 revenue is projected to range from $123 million to $131 million, with operating income of $6.4 million to $10.2 million, yielding operating margins of 7%. EPS for the second quarter 2026 is expected to range from $0.06 to $0.12. The company's guidance is based on projections for underlying operations and excludes gains and losses in foreign exchange and assumes an effective tax rate of 25%.

With that, I'll turn the call back over to Larry.

Thanks, Gwen. First, I'd like to thank our global team of employees for providing innovative solutions, integrity and exceptional service to our clients. I'd particularly like to thank our dedicated staff in the Middle East for the uncertainties and stresses they've recently had to endure during the conflict. As we celebrate our 90th year, our staff's collective expertise and their dedication to servicing our clients has been the foundation of the company's success.

Looking at the macro, even as global energy markets work through near-term economic headwinds and volatile commodity prices, the IEA, EIA and OPEC are forecasting year-over-year growth in global crude oil demand to range between 0.6 million barrels per day and 1.4 million barrels per day for 2026. In addition to the forecasted growth in demand, new production will be needed to be brought online to offset the natural decline from existing producing fields. Combined, these trends will require continued investment in the long-term development of new onshore and offshore crude oil fields.

U.S. tight oil production has been by far the largest component of non-OPEC oil production growth since 2010. The most recent EIA short-term energy outlook for U.S. oil production projects approximately 13.5 million barrels per day for 2026, essentially flat to 2025 and with modest growth expected in 2027 in response to projected stronger commodity prices.

Growing global oil demand, combined with moderating incremental U.S. production growth, continue to support the thesis that future supply will need to come from new discoveries and field developments, largely driven from long-cycle offshore investments outside the Continental U.S.

The most recent IEA long-term outlook under its current policy scenario shows global oil demand continuing to rise through 2050 to approximately 113 million barrels per day. As highlighted in the IEA September 2025 analysis, global field-by-field data show that the natural decline in existing producing oil fields is accelerating and has become a dominant long-term supply risk. The IEA estimates that absent reinvestment, global oil production would decline by approximately 8% per year due to natural field depletion. As a result, the majority of upstream capital spending globally is now required to simply offset decline rather than to meet incremental demand growth.

The IEA also noted that nearly 90% of upstream investment since 2019 has gone towards sustaining existing production rather than expanding supply. The IEA states that significant annual investment in oil and gas resource development will be required for many years to come to ensure energy security and market stability. The U.S. EIA's long-term reference case forecast shows even higher crude oil demand through 2050, approaching 120 million barrels per day, reinforcing the conclusion that continued investment in new crude oil production will remain necessary.

In summary, current demand forecasts support a multiyear investment cycle in which U.S. onshore production growth slows and in which future global supply growth will increasingly be driven by capital investment in long cycle international conventional offshore opportunities as well as with unconventional plays in the Middle East, trends that continue to support the demand for Core Lab services.

Current supply disruptions and renewed concerns about energy security only strengthen the case for a geographically broad-based cycle of new hydrocarbon exploration appraisal and development. Core's Reservoir Description and Production Enhancement technologies are directly aligned with the investment imperatives required to find and develop new oil and gas fields and to improve recovery from existing fields.

Now let's review the first quarter performance of our 2 business segments. Turning first to Reservoir Description. For the first quarter of 2026, revenue came in at $82 million, down 11% compared to Q4 of 2025. Operating income for Reservoir Description ex items was $5 million, down from $13 million in Q4, yielding operating margins of 6%.

Incremental margins were negatively impacted by 2 factors: the conflict in the Middle East and severe weather in North America and in the Mediterranean. While demand for Reservoir Description's lab services remained strong in several regions across our global network, ongoing international geopolitical conflicts along with sanctions that were enacted in 2025 further expanded throughout the year and yet again in Q1 of 2026, continue to produce headwinds that negatively impacted the demand for laboratory services tied to the trade and transportation of crude oil and derived products.

Now for some operational highlights from Reservoir Description. In the first quarter of 2026, Core Lab continued to advance its integrated digital data strategy through the delivery of key reservoir data sets via our proprietary rapid platform. These data sets include a wide array of laboratory data and mark an important milestone in the company's ongoing effort to standardize and digitize reservoir data across our global portfolio.

By making these data streams more accessible and easier to integrate into Core's clients' existing workflows, Core Lab is improving turnaround times, reducing friction in data transfer and helping clients make faster and more informed decisions. This digital offering continues to reinforce Core Lab's differentiated position as a technology-led provider of high-value reservoir solutions.

Core Lab's proprietary rapid database delivers the highly structured, well organized, geological, petrophysical and engineering data that will form a critical foundation for developing artificial intelligence initiatives by both Core Lab and its clients.

Moving now to Production Enhancement, where Core Lab technologies continue to help our clients optimize well completions and improve production. Revenue for production enhancement for the first quarter of 2026 came in at $40 million, down 7% year-over-year. Q1 2026 operating income for Production Enhancement ex items was $2 million, yielding operating margins of 5%. Margins were negatively impacted by soft sequential U.S. land activity and severe cold weather that both reduced U.S. completions and temporarily closed Core Lab's completion product manufacturing facilities.

In addition, the Middle East conflict reduced client activity in the region and delayed certain energetic product shipments. Diagnostic Services benefited from strong demand in complex U.S. land completion designs and on offshore projects in both domestic and international markets.

Now for some operational highlights from Production Enhancement. Early in the first quarter of 2026, Core Lab was engaged by a national oil company in the Middle East to address a significant excess water production issue affecting multiple wells, which had led to shut-ins. The client deployed Core's GTX X-SPAN Extreme High temperature casing patch solution to address the issue.

Core Lab's GTX X-SPAN proprietary technology is specifically engineered for harsh cyclic steam injection environments where temperatures can reach up to 600 degrees Fahrenheit. The GTX X-SPAN installation significantly reduced water cut from the well from 99% down to 40% and thus materially lowered water disposal and environmental remediation costs. Based on this success, the client initiated an additional 10-well campaign using Core's proprietary GTX X-SPAN technology.

Also in the first quarter, an independent operator in the Permian Basin deployed Core Lab's FLOWPROFILER solid oil tracers across a 30-stage horizontal well to evaluate stage-by-stage oil contribution within an upper bench test in an existing reservoir. Core's FLOWPROFILER engineered delivery system is designed to stay within the proppant pack of each individual frac stage and then slowly release the oil tracer as the produced oil moves past the engineered particles and into the production strength.

Flowback analysis of the produced oil provided clear insight into the production performance along the lateral length, showing that the strongest oil contribution came from the heel and toe sections of the well, with materially lower contribution from the mid-lateral. Core Lab's FLOWPROFILER diagnostic results are allowing the operator to optimize future drilling targets and completion design. Importantly, based on the success of this program, the client plans to deploy FLOWPROFILER in 5 additional wells, highlighting the value of Core's differentiated technology.

That concludes our operational review. We appreciate your participation, and Valentina will now open the call for questions.

[Operator Instructions] The first question comes from Don Crist from Johnson Rice.

I wanted to touch on the Middle East. Obviously, it's unfortunate what's going on with the conflict there. But I just wanted to ensure that your facilities are undamaged and once this conflict is resolved, everything should bounce back to pretty much normal. I mean, is that the correct read on the situation?

Yes. Absolutely, Don. And so first of all, thanks for the question. And first of all, yes, no damage to any of our infrastructure. Our staff has been beyond admirable in their ability to cope with a very challenging situation here. I do think it's important to understand that the flow of oil and refined products that normally underpins our -- some of our revenue in Reservoir Description in the region has essentially come to a halt. And when that happens, we have all the costs and none of the revenue.

And so we're doing what we can to mitigate those costs. What we think will happen is as the situation gets resolved, there's going to be a strong rebound. I hesitate to use the word surge because that's going to depend on things out of our control, but a strong rebound in oil movement out of the region and into the rest of the global network. What we tried to illustrate in our comments was we have a revenue opportunity on that assay work in the region. And then once it leaves the region and makes port in some other part of the world, we have another revenue opportunity.

So it extends beyond the region for us, but we think there's a very quick rebound in the flow of our work on -- tied to the maritime transportation of crude oil and refined products, natural gas as well out of the region. And then I think beyond that, the office closures that -- and I'll call it the slow down of field access that impaired acquisition of more upstream crude oil and rock samples, that will start picking up.

We've seen some early indications of that during the cease fire, and we've kind of dialed that into our thinking already. But we think that things are poised for a nice rebound for us across Reservoir Description and then products will start moving in there as well.

Yes, that's exactly as I thought that everything should get back to pretty quick. I wanted to touch on a topic that we've heard across many conference calls this earnings cycle, and it's the fact that worldwide supplies or storage has fallen significantly. And a lot of investors are now thinking that there's a significant disconnect between the physical market and the paper market. You're in that physical market much more than a lot of other companies.

I don't know if you have an opinion on that. And is it influencing any NOCs and IOCs around the world to get more urgent in developing resources closer to home from an energy security standpoint. Any comments around that? Because we're hearing that from a lot more investors now whether they believe it or not.

Yes. I do think that the worldwide supply, we've been burning through, there was apparently around 400 million barrels of oil committed out of strategic reserves that are flowing into the system. If you roughly balance that off at 20 million barrels a day disrupted from the Middle East, and I think it might be a little less than that, some stuff is coming out of Yanbu in Western Saudi Arabia. But call it, 20 million barrels a day. And then also refined products and all. I think inventory levels on both crude oil and on refined products are being consumed pretty quickly here.

And so I think that is inevitably going to drive people to think about the longer term, hey, I don't want to be in this position whenever -- if I can avoid it. And so I would say, Don, long before the war started, we saw reinvestment and directional changes in places like Malaysia and Indonesia and in other parts of the world to say, hey, we've got to get some things going closer to home than we have in the past to avoid disruptions that might be shipping related, conflict-related, canal related depending on the 2 big canal systems in the world that move oil around.

And so I think there is a growing awareness that you need to derisk your energy supply, and that's going to mean a very -- as I said in my comments there, a broad geographically based investment in new studies, new appraisals and get -- make sure that oil can get to market. Whether it comes from -- to get into the Western Hemisphere, that could come from West Africa as well, but it could also mean more stuff in the Gulf of Mexico, more stuff in South Atlantic margin having to be developed.

Yes, that supports what we're hearing there as well. I wanted to touch on one...

I think the European situation maybe amplifies that they're pretty concerned about flow of oil from the Middle East right now.

Understandably. And my last question, I'll turn back to queue. We saw a press release at Olivia this week where a major is going to start assessing the reservoirs in Libya. I don't know if you can talk specifically about that, but I think that kind of supports what has been talked about for the past couple of quarters that North Africa region is going to be developed sooner rather than later. I don't know if you have any comments broadly on that.

Don, I think several quarters ago on our earnings call, we talked about having conducted a client Technology Day focused on 2 things, improving recovery from existing fields and an unconventional development. And we held that in Tunisia to address opportunities in Libya and in Algeria and into Egypt as well. Very well attended, 50 client companies represented here.

And so we've had a number of discussions with operators and with government agencies about Core Lab's involvement and our availability and readiness to participate in getting those Libyan and other regional assets up to speed for the older fields that need a lot of remediation and for unconventional plays. There is a nice unconventional opportunity in North Africa, very close to the European market. I think it plays out very nicely. And Core Lab has been on top of that, and we've got some of our top hands engaged in those conversations.

The next question comes from Sean Mitchell from Daniel Energy Partners.

Congrats on 90 years. That's great. I have a follow up...

Sean, I have to look it up. Silver anniversary is 25, 50 is gold, 90th anniversary is the Granite anniversary. So I think it's quite appropriate that it's a rock of some type.

There we go. Thanks for all the color on the macro. Maybe following on to what Don was asking about. Just when we think about recovery time lines in the Middle East, reopening the Strait is really just the first step. There's obviously storage that can move quickly, but restarting production requires tanker repositioning, infrastructure coordination and really damage assessment across the value chain. From what you're seeing on the ground, do you think the market is underestimating how complex and potentially prolong this recovery could be? Any color on that front?

I mean I think there are some prior -- and Core Lab has been through these. I talked about our confidence that we'll navigate through this. There are prior disruptions, whether it was the wars in Kuwait and Iraq where there was considerable field damage. It doesn't appear that some of the, I'll call it, the metal -- there's not as much bent metal at this point as there was during some of those conflicts. So I think that won't take as long as get going. But I do think there'll be, I'll call it, a strong push and a rebound in trying to move as much crude oil and refined product as possible.

And then longer term, I think there's going to be maybe infrastructure opportunities, not all of which will affect Core Lab. I think there'll be more pipelines built to try to avoid choke points in the future. I think we saw some comments coming out of the UAE about that. And I think it's going to be a costly process to get oil back into the system, get strategic reserves refilled. And I think the refining infrastructure hits that have occurred in the Middle East are going to compromise for a while natural gas and some crude oil exports.

Got it. And then maybe just as that process plays out where you're bringing production back on, I'm assuming this might create some incremental demand for reservoir diagnostics and optimization?

Yes. I mean I think the clients are going to want to make up for lost time, so to speak. And so we have seen -- by the way, and it relates to this a little bit, we have seen a few operators outside of the Middle East come to us and say, for example, hey, we want to increase production, take advantage of the higher price here. We want to run some PVT fluids testing to make sure that we understand exactly the phase behavior if we start depleting the reservoir a little faster here, are we going to some type of physical change in the properties of the oil, viscosity change or bubble point potentially being impacted. So we are seeing that.

And I think that can ripple through the Middle East. If people try to put more oil back on the market in the short term. There'll be some opportunities there for us to help them assess what ratcheting up production might mean for their reservoir models for the long term.

Got it. Well, as always, guys, appreciate the color, especially the macro commentary and the current environment. It's super helpful.

This concludes our question-and-answer session. I would like to turn the conference back over to Larry Bruno for any closing remarks.

Okay. We'll wrap up here. In summary, Core's operational leadership continues to position the company for improving client activity levels in the coming quarters and years.

For 90 years, Core Lab has navigated geopolitical conflicts and uncertainties, and we will do so again. We have never been better operationally or technologically positioned to help our global client base, optimize their reservoirs and to address their evolving needs. We remain uniquely focused and are the most technologically advanced, client-focused reservoir optimization company in the oilfield service sector.

The company will remain focused on maximizing free cash and returns on invested capital. In addition to our quarterly dividend, we'll bring value to our shareholders via growth opportunities, driven by both the introduction of problem-solving technologies and new market penetration. In the near term, Core will continue to use free cash to repurchase shares and strengthen its balance sheet, while always investing in growth opportunities and evaluating various methods to increase shareholder value.

So in closing, we thank and appreciate all of our shareholders and the analysts that cover Core Lab. The executive management team and the Board of Core Laboratories give a special thanks to our worldwide employees that have made these results possible. We're proud to be associated with our continuing achievements. So thanks for spending time with us, and we look forward to our next update. Goodbye for now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Core Laboratories Fourth Quarter and Fiscal Year 2025 Earnings Webcast and Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Larry Bruno, Chairman and CEO. Please go ahead.

Thanks, Dave. Good morning in the Americas, good afternoon in Europe, Africa and the Middle East, and good evening in Asia Pacific. We'd like to welcome all of our shareholders, analysts and, most importantly, our employees to Core Laboratories' Fourth Quarter 2025 Earnings Call. This morning, I'm joined by Chris Hill, Core's Chief Financial Officer; and Gwen Gresham Core's Senior Vice President and Head of Investor Relations.

The call will be divided into six segments. Gwen will start by making remarks regarding forward-looking statements. We'll then have some opening comments, including a high-level review of important factors in Core's Q4 performance. In addition, we'll review Core's strategies and the three financial tenets that Core Lab employs to build long-term shareholder value.

Chris will then give a detailed financial overview and have additional comments regarding shareholder value. Following Chris, Gwen will provide some comments on the company's outlook and guidance. I'll then review Core's two operating segments, detailing our progress and discussing the continued successful introduction and deployment of Core Lab's technologies as well as highlighting some of Core's operations and major projects worldwide. Then we'll open the phones for a Q&A session.

I'll now turn the call over to Gwen for remarks on forward-looking statements.

Thank you, Larry. Before we start the conference this morning, I'll mention that some of our statements that we make during the call may include projections, estimates and other forward-looking information. This would include any discussion of the company's business outlook. These types of forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from our forward-looking statements.

These risks and uncertainties are discussed in our most recent annual report on Form 10-K as well as other reports and registration statements filed by us with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Our comments also include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing our fourth quarter results. Those non-GAAP measures can also be found on our website.

With that, I'll pass the discussion back to Larry.

Thanks, Gwen. Moving now to some high-level comments about our fourth quarter and full year 2025 results. Core continued to execute its strategic plan of technology investments, targeted to both solve client problems and capitalize on Core's technical and geographic opportunities. Fourth quarter 2025 revenue was up 3% compared to Q3 of 2025. Full year revenue for the company increased slightly compared to 2024. Fourth quarter performance was driven by strong international demand for Core's proprietary technologies, which helped offset a seasonally soft U.S. land market.

Looking at Reservoir Description, fourth quarter revenue was up 5% compared to Q3 of 2025 and up 6% from Q4 of last year, reflecting the continued demand for rock and fluid analysis across the company's global laboratory network. Demand for laboratory services, tied to the assay of crude oil and derived products, was negatively impacted by ongoing geopolitical conflicts and evolving sanctions, which were further expanded during Q4. These geopolitical tensions, along with supply-demand balance concerns, contributed to commodity price volatility during the quarter.

Despite these headwinds, fourth quarter operating margins in Reservoir Description ex items remained strong at 14%, expanding sequentially by 60 basis points. The company's 2025 performance reflects Core's continued focus on operational efficiency and strong utilization across Core Lab's international laboratory network.

In Production Enhancement, fourth quarter revenue was relatively flat compared to Q3 but meaningfully higher year-over-year, up over 8%. Ex items, fourth quarter 2025 operating margins in Production Enhancement were 7%, down from 11% in Q3 but up from 4% in Q4 of 2024. Sequential results were negatively impacted by a provision for a potentially uncollectible receivable in Asia Pacific. This was partially offset by continued strong demand for Core Laboratories' proprietary completion diagnostic services across both onshore and offshore markets.

Turning now to some fourth quarter highlights regarding capital allocation. The company continued its long-standing commitment to shareholder returns during the quarter, returning free cash to our shareholders through our quarterly dividend and by repurchasing more than 363,000 shares of company stock representing a value of $5.7 million.

For the full year, core repurchased 1.2 million shares at a value of $15.5 million. Q4 marked the fifth consecutive quarter of share buybacks. Core intends to continue to use free cash to fund our quarterly dividend, pursue growth opportunities and improve shareholder value through opportunistic share repurchases.

As Core Lab celebrates its 90th anniversary, the company's long-term success continues to reflect the strength of its asset-light business model, its global technology leadership and Core's unmatched client focus. These strengths, combined with disciplined capital deployment, continued to drive long-term value creation for our shareholders.

Looking ahead, Core will continue to execute on its key strategic objectives by: one, introducing new product and service offerings in key geographic markets; two, running a lean and focused organization; and three, holding to our commitments to return excess free cash to our shareholders while maintaining a strong balance sheet.

The interest of our shareholders, clients and employees will always be well served by Core Lab's resilient culture, which emphasizes innovation, the application of technology to derisk our clients' decisions and solve their complex problems along with dedicated client service. I'll talk more about some of our latest innovations in the operational review section of this call.

Now to review Core Lab's strategies and the financial tenets that have guided the company shareholder value creation through our more than 30-year history as a publicly traded company. While we continue to pursue growth opportunities, the company will remain focused on its three long-standing, long-term financial tenets, those being to maximize free cash flow, maximize return on invested capital and returning excess free cash to our shareholders.

I'll now turn it over to Chris for the detailed financial review.

Thanks, Larry. Before we review the financial performance for the quarter, the guidance we gave on our last call and past calls specifically excluded the impact of any FX gains or losses and assumed an effective tax rate of 25%. So accordingly, our discussion today excludes any foreign exchange gain or loss for current and prior periods.

The comparison periods for the third quarter of 2025 and fourth quarter of 2024 also include items that were discussed in those calls and highlighted in our earnings release for those periods. These items have also been excluded from our discussion of the financial results today. You can find a summary of those items in the tables attached to our press release for the fourth quarter and full year of 2025.

So now looking at the income statement. Revenue was $138.3 million in the fourth quarter, up 3% compared to the prior quarter. Year-over-year revenue also increased 7%. The sequential improvement was primarily associated with increased demand for our reservoir rock and fluid analysis as well as completion diagnostic services in the U.S. and several international regions. For the full year 2025, revenue was $526.5 million, up slightly year-over-year, again, driven by growth in our service revenue, however, substantially offset by a decline in U.S. onshore completion activity and associated product sales.

Of this revenue, service revenue, which is more international, was $107 million for the quarter, up 6% sequentially and 11% year-over-year. Sequentially, we continue to see growth for our reservoir rock and fluid analysis services in the U.S. and several international regions as well as demand for our completion diagnostic services in the U.S. Year-over-year, the increase was driven by growth in our reservoir rock and fluid analysis as well as our completion diagnostic services. For the full year of 2025, service revenue was $399.4 million and was up 3% compared to $388.2 million in 2024.

Product sales, which is more equally tied to North America and international activity, were $31.3 million for the quarter, which is down 6% from last quarter and down 4% year-over-year. Our international product sales are typically larger bulk orders and can vary from one quarter to another and were down in the fourth quarter when compared to the third quarter. Additionally, U.S. onshore completion activity continued to decline sequentially.

Looking at year-over-year, the decrease in product sales was primarily driven by lower completion activity in the U.S. onshore market. For the full year of 2025, product sales of $127.1 million were down 6% from $135.6 million in 2024, which again is primarily associated with lower levels of completion activity in the U.S.

Moving on to cost of services ex items for the quarter was 75% of service revenue, which increased slightly from 74% in the prior quarter but improved from 76% in the same quarter in the prior year. The sequential increase was primarily due to increased labor costs and pass-through revenue during the quarter. The year-over-year improvement in cost of services was due to improved absorption of costs on a higher level of revenue in 2025.

As discussed in our previous calls, the service side of our business has been more impacted by the geopolitical conflicts and associated sanctions. The volatility in crude oil prices and more recently expanded sanctions continue to cause disruptions to the trading and maritime movement of crude oil and derived products and the associated crude assay laboratory services we provide. The company will continue to manage its cost structure as effectively as we can through these temporary disruptions in certain regions.

Full year 2025 cost of services ex items was 76% of service revenue compared to 77% in 2024. Cost of sales ex items in the fourth quarter was 94% of revenue compared to 88% last quarter and 90% in the fourth quarter of last year. The sequential increase was due to higher absorption of fixed costs on a slightly lower revenue base in the quarter and a higher level of bad debt expense.

As we continue to focus on cost efficiencies, we anticipate the manufacturing absorption rate in future quarters to be in line with projected product sales. For full year 2025, cost of sales ex items was approximately 89% of sales revenue compared to 88% in 2024.

G&A ex items for the quarter was $10.6 million, down slightly from $10.7 million in the prior quarter. Full year 2025 G&A ex items was $41.9 million compared to $38.4 million in 2024. For 2026, we expect G&A ex-items to be approximately $42 million to $45 million. It is also important to note that 100% of our corporate G&A expenses are allocated and absorbed into the financial performance of the reported segments.

Depreciation for the quarter was $3.7 million and increased slightly compared to $3.6 million in the last quarter but remained relatively flat compared to the same quarter last year.

EBIT ex items for the quarter was $15.7 million, down from $16.6 million last quarter and yielding an EBIT margin of over 11%. Year-over-year, EBIT ex items for the fourth quarter was flat compared to the fourth quarter of last year. Our EBIT for the quarter on a GAAP basis was $15.8 million. Full year 2025 EBIT ex items was $58.7 million, down 10% from $65.3 million in 2024. On a GAAP basis, EBIT was $56.5 million for 2025 compared to $58.6 million in 2024.

Interest expense of $2.6 million for the fourth quarter decreased slightly when compared to the prior quarter and comparable to the fourth quarter of last year. For the full year, interest expense was $10.6 million in 2025 and was down from $12.4 million in 2024. The decrease in interest expense for 2025 is primarily attributable to lower average borrowings on the credit facility.

In January 2026, we funded the retirement of our 2021 $45 million senior notes by drawing $50 million against a term loan under our credit facility. The interest rate on our term loan is variable and tied to the SOFR, which will be approximately 200 basis points higher than the fixed rate on the retired notes, which was a little over 4%. As such, we expect a slight increase in our interest expense starting with the first quarter of 2026.

Income tax expense at an effective tax rate of 25% and ex items was $3.3 million for the quarter. On a GAAP basis, we recorded a tax expense of $6 million for the quarter. For the full year 2025, income tax expense on a GAAP basis was $13.4 million with an effective tax rate of 29%. While the effective tax rate will continue to be somewhat sensitive to the geographic mix of earnings across the globe and the impact of items discrete to each quarter, we project the company's effective tax rate will be approximately 25% for 2026.

Net income ex items for the quarter was $9.7 million, down 5% sequentially and down 7% from the same quarter last year. On a GAAP basis, we had net income of $7.1 million for the quarter. For the full year 2025 net income ex items was $35.4 million, down 15% from $41.6 million in 2024. GAAP net income for the full year 2025 was $31.8 million.

Earnings per diluted share ex items was $0.21 for the quarter compared to $0.22 in both the prior quarter and the fourth quarter of last year. On a GAAP basis, EPS was $0.15 for the fourth quarter of 2025. Full year 2025 earnings per diluted share ex items was $0.75 and down 14% from 2024. And on a GAAP basis, EPS for the full year 2025 was $0.68.

Turning to the balance sheet. Receivables was $113.5 million and increased approximately $3.3 million from the prior quarter. Our DSOs improved in the fourth quarter to 69 days from 71 days last quarter. Inventory at December 31, 2025 was $54.5 million, down $3.7 million from last quarter end. Inventory turns for the quarter improved to 2.1 from 2.0 in the prior quarter. Our team will continue to focus on managing our inventory with anticipation inventory turns will improve over time.

And now to the liability side of the balance sheet. Our long-term debt was $113 million as of December 31, 2025. Considering cash of $22.8 million, net debt was $90.2 million. During 2025, net debt was reduced by $18.7 million from the end of last year. Additionally, our leverage ratio continued to improve throughout 2025 and ended the year at 1.09.

Since announcing the company's commitment and focus on reducing debt in the fourth quarter of 2019, we have reduced net debt by $205.8 million or 70%. At December 31, 2025, our debt was comprised of $110 million in senior notes and $3 million outstanding under our bank credit facility. However, as I stated earlier, on January 12, 2026, we made a single draw of $50 million on a term loan under our credit facility and repaid the 2021 senior notes which had a principal amount of $45 million.

Looking at cash flow. For the fourth quarter of 2025, cash flow from operating activities was approximately $8.1 million. And after paying $2.9 million of CapEx for operations, our free cash flow for the quarter was $5.1 million. As discussed in prior quarters, the capital expenditures associated with rebuilding our U.K. facility, which was damaged by fire in February 2024, are covered by the company's property and casualty insurance and have been excluded from the calculation of free cash flow.

For the full year, capital expenditures for operations excluding the CapEx associated with rebuilding the U.K. facility was $11.2 million. Looking ahead to 2026, we will continue to manage investment in working capital and continue our strict capital discipline and asset-light business model with capital expenditures primarily targeted at growth opportunities. Excluding the CapEx associated with rebuilding the U.K. facility, we expect capital expenditures in 2026 to be in the range of $15 million to $18 million.

Core Lab's operational leverage continues to provide the ability to grow revenue and profitability with minimal capital requirements. Capital expenditures for operations had historically ranged from 2% to 4% of revenue even during periods of significant growth. That same level of laboratory infrastructure, intellectual property and leverage exists in the business today. We believe evaluating a company's ability to generate free cash flow and free cash flow yield is an important metric for shareholders when comparing and projecting company's financial results, particularly for those shareholders who utilize discounted cash flow models to assess valuations.

I'll now turn it over to Gwen for an update on our guidance and outlook.

Thank you, Chris. Turning to Core Lab's outlook for the first quarter of 2026. The IEA, the EIA and OPEC+ forecast global crude oil demand growth of approximately 900,000 to 1.4 million barrels per day in 2026, a slight increase from their previous forecast. As discussed in our third quarter 2025 release, the IEA published a report in September 2025, which noted accelerating natural decline rates in existing producing fields, which pose a significant risk to long-term supply. This analysis underpins the need for sustained investment in oil and gas development to maintain energy security and market stability.

In the U.S., oil production growth is moderating as capital discipline, maturing shale plays and natural decline rates increasingly offset efficiency gains. As efficiency gains become less impactful, activity levels must increase to maintain or expand U.S. land production. These factors support the ongoing demand for oilfield services, and Core Lab is seeing operators prioritize production sustainment, well optimization and recovery enhancement.

International markets continue to exhibit resilient activity levels of a multiyear offshore development and long cycle investments across key global basins. The company's Reservoir Description and Production Enhancement technologies are well positioned to support these ongoing investments. In the near term, tariff pressures and OPEC+ production policy decisions continue to contribute to market volatility and softer commodity prices.

Despite these headwinds, longer-term crude oil demand fundamentals remain strong. Core Lab maintains a constructive multiyear outlook and continues to see steady activity across committed long-cycle projects, including deepwater development in the South Atlantic Margin, North and West Africa, Norway, the Middle East and select Asia Pacific markets. Revenue realization from these projects remains partially dependent on the geologic success rate achieved by Core's clients.

Short-cycle activities particularly in the U.S. onshore environment will remain sensitive to changes in commodity prices. Geopolitical conflicts and associated sanctions, evolving trade and tariff dynamics and commodity price volatility continue to create uncertainty in demand for Core Labs' products and services.

We also expect seasonal patterns to result in the typical sequential decline in activity during the first quarter of 2026. Severe weather events in North America caused freezing conditions in early January that disrupted both Reservoir Description and Production Enhancement client activities and Core Lab operation. In addition, adverse weather in Europe and the Mediterranean Sea also suspended client crude assay work and damaged one of Core Lab's facilities. While client operations have begun to recover, these weather-related disruptions have created additional revenue and margin headwinds for the first quarter.

Turning to the U.S. For the first half of 2026, Core Lab anticipates U.S. land completion activity will be down compared to the first half of 2025. However, the company projects completion activity to improve from current levels. Growth in demand for Core's diagnostic services and technological innovations in the company's energetic systems may partially offset softer U.S. onshore activity during the year.

To date, tariffs have not had a significant impact to Core's Reservoir Description segment. However, for Production Enhancement operations, certain imported raw materials are subject to tariffs. While tariffs are increasing supply costs and affecting margins, the company continues to take steps to mitigate their impact.

In summary, Reservoir Description's first quarter 2026 revenue is projected to range from $82 million to $86 million with operating income of $6.8 million to $8.2 million. Production Enhancement's first quarter 2026 revenue is estimated to range from $42 million to $44 million with operating income of $2.8 million to $3.8 million. Full company first quarter 2026 revenue is projected to range from $124 million to $130 million with operating income of $9.7 million to $12.2 million, yielding operating margins of approximately 9%.

EPS for the first quarter of 2026 is expected to be $0.11 to $0.15. The company's first quarter 2026 guidance is based on projections for underlying operations and excludes gains and losses in foreign exchange.

The first quarter guidance also reflects a higher interest rate related to a term loan drawn upon on January 12, 2026 in the amount of $50 million. The term loan was used to repay the 2021 Senior Notes Series A in the amount of $45 million. This term loan is subject to a variable interest rate in line with our revolving credit facility, which is approximately 200 basis points higher than the fixed rate debt that was retired.

Our first quarter guidance assumes an effective tax rate of 25%.

With that said, I'll turn the call back over to Larry.

Thanks, Gwen. First, I'd like to thank our global team of employees for providing innovative solutions, integrity and exceptional service to our clients. As we celebrate our 90th year, the company's Granite Anniversary, our staff's collective expertise and their dedication to servicing our clients continues to be the foundation of the company's success.

Looking at the macro, even as global energy markets work through near-term economic headwinds and volatile commodity prices, the IEA, EIA and OPEC all continue to forecast growth in global crude oil demand. These agencies are now projecting demand growth to range between 0.9 million and 1.4 million barrels per day for 2026 compared to 2025, a slight increase from their prior guidance. In addition to the forecasted growth in demand, new production will need to be brought online to offset the natural decline from existing producing fields. Combined, these trends will require continued investment in the long-term development of new onshore and offshore crude oil fields.

U.S. tight oil production has been by far the largest component of non-OPEC oil production growth since 2010. However, the most recent EIA short-term energy outlook for U.S. oil production projects approximately 13.6 million barrels of crude oil production per day in 2026, essentially flat to 2025 with little or no year-over-year growth. This forecast reinforces the view that incremental U.S. production growth is flattening. Continued growth in global oil demand, combined with constrained incremental U.S. oil production growth, supports the thesis that the balance of future supply growth must increasingly rely on discoveries and field developments outside the Continental U.S.

Of particular note, during the fourth quarter, the IEA continued to pivot from earlier projections on the need for investment in new oil and gas production. The most recent IEA forecast shows oil demand rising to 113 million barrels per day by 2050 using its current policy scenario. As highlighted in the IEA September 2025 analysis, global field-by-field data show that the natural decline in existing producing fields is accelerating and has become a dominant long-term supply risk. The IEA estimates that absent reinvestment, global oil production would decline by approximately 8% per year due to natural field depletion.

As a result, the majority of upstream capital spending globally is now required to just offset decline, not to meet incremental demand growth. The IEA also noted that nearly 90% of upstream investment since 2019 has gone towards sustaining existing production rather than expanding supply. The IEA now states that significant annual investment in oil and gas resource development will be required for many years to come and to ensure energy security and market stability.

The U.S. Energy Information Agency's reference case forecast shows even higher crude oil demand by 2050, rising to approximately 120 million barrels per day, suggesting even more investment in new oil production will be required.

In summary, the current forecast suggests a multiyear cycle in which U.S. onshore production growth slows and future growth in global supply will be driven by capital investment in international, conventional fields and unconventional opportunities in the Middle East, all trends that support increasing demand for Core Lab services across the globe, particularly for Reservoir Description. Core's Reservoir Description and Production Enhancement technologies are directly aligned with the investment imperatives required to find and develop new oil and gas fields and to improve recovery from existing fields.

Now let's review the fourth quarter performance of our two business segments. Turning first to Reservoir Description. For the fourth quarter of 2025, revenue came in at $92.3 million, up over 5% compared to Q3. Operating income for Reservoir Description ex items was $12.7 million, up from $11.6 million in Q3, yielding operating margins of 14% with incremental margins of 27%. Incremental margins were negatively impacted by three factors: enhanced geopolitical sanctions enacted during Q4, pass-through revenue on a collaborative analytical program that was conducted with another oilfield service company and increased labor costs.

While demand for Reservoir Description lab services remained strong in several regions across our global network, ongoing international geopolitical conflicts along with sanctions that were enacted in early Q1 of 2025 and which were further expanded in Q4 of last year continue to produce headwinds that negatively impact the demand for laboratory services tied to the trade and transportation of crude oil and derived products.

Now for some operational highlights from Reservoir Description. In the fourth quarter of 2025, Core Lab advanced multiple high-value projects across South America, reflecting the company's expanding regional footprint and the growing demand for integrated reservoir characterization services.

In Colombia, Core was engaged by a client to conduct an advanced geo-mechanics and reservoir characterization study within the Palagua field in the middle Magdalena Valley. The project focused on improving reservoir performance across multiple vertical wells and a complex low-resistivity contrast reservoir. The study addressed critical subsurface challenges, including mitigating sand production risks associated with planned water flooding operations for enhanced oil recovery.

By integrating existing core and petrophysical data with well logs, along with the newly acquired geo-mechanical laboratory measurements, Core Lab's multidisciplinary team delivered Core-calibrated models that provided actionable insights to optimize completions and enable a more efficient waterflood program.

Also in South America, and leveraging Core's expanding in-country capabilities in Brazil following the recent acquisition of Solintec, Core conducted laboratory services in support of a major carbon capture and storage initiative in the region. For this project, an ethanol producer is working to reduce CO2 emissions. Approximately 100 meters of core from an injector well were evaluated with Core's NITRO digital rock tomography technology, which quickly delivered interactive three-dimensional visualizations of the strata along with petrophysical insights into the rock properties.

The program also evaluated seal rock capacity and geo-mechanical attributes of the rocks and determined how CO2 would react with both the rocks and the poor fluids. This work is ongoing and the company's full array of analytical services are being employed, reinforcing Core Lab's role in enabling energy transition projects.

Moving now to Production Enhancement, where Core Lab technologies continue to help our clients optimize their well completions and improve production. Revenue for Production Enhancement for Q4 came in at $46 million, up over 8% year-over-year. Fourth quarter operating income for Production Enhancement ex items was $3 million, yielding operating margins of 7%, down from 11% in Q3 but up from 4% in Q4 of 2024.

Margins were negatively impacted by our provision for a potentially uncollectible receivable in Asia Pacific. There are no further receivables at risk with this contract. Margins were also impacted by raw material costs that have risen due to tariffs. In the U.S., diagnostic services benefited from strong demand as complex U.S. land completion designs like trimul-fracs and extended lateral length horizontal wells become more and more common.

Now for some operational highlights from Production Enhancement. In the fourth quarter of 2025, Core Lab supported a plug and abandonment operation for a national oil company in the Middle East through the deployment of its proprietary Pulverizor system. The operation to use the tubing-conveyed configuration to support a multi-zone well abandonment program. During the operation, approximately 100 feet of Core Lab's Pulverizor technology were deployed to rubblize the annular cement as a prelude to a perf wash job and the placement of a permanent cement barrier.

Following the successful deployment of Pulverizor and the installation of the cement barrier, a second deployment of an additional 100 feet of Pulverizor was executed up hole. In both of these intervals, the Pulverizor system provided a reliable alternative to conventional section milling in plug and abandonment applications that would have been much more time-consuming and expensive.

Core Lab is proud to announce that the company's Pulverizor system received a 2025 Offshore Well Intervention Global Award for plug and abandonment innovation presented by the Offshore Network, an independent and globally respected industry forum. The award highlights Pulverizor's technical merit, successful field application and its role in advancing plug and abandonment operations. Commercial adoption continues to expand with multiple international Pulverizor deployments scheduled for early 2026.

Also in the fourth quarter, multiple U.S. unconventional operators engaged Core Lab to employ diagnostic technologies to evaluate emerging plugless completion designs on their land wells. Plugless completion designs are aimed at reducing cost and improving operational efficiency. Core deployed its proprietary SpectraStim proppant tracer diagnostics to assess diverter-based stage isolation and to verify stimulation effectiveness across the multiple stage laterals.

Core Lab's diagnostic technology delivered clear insight into the proppant placement and confirmed that these test cases, plugless system successfully stimulated the stages. Moreover, these results demonstrate that Core's SpectraStim technology provides operators with a reliable cost-efficient method to evaluate new completion designs. Additional diagnostically evaluated wells will be needed to determine the range of applications that are suitable for plugless completions.

That concludes our operational review. We appreciate your participation. And Dave will now open the phone for questions.

[Operator Instructions] Our first question comes from Don Crist with Johnson Rice.

Larry, the first question for me, and I know it's gotten a lot of headlines recently, but maybe it's calmed down in the last week or 2, is on Venezuela. I know it's going to take a lot to go back in there for these operators. But from Core's perspective, I would assume that you all have a long history there and could benefit if operators are looking to expand presence there. Any comments around Venezuela?

Yes. Don, good question. And it is a common question that is coming up in meetings. So Yes, so it turns out Venezuela was the first international company that Core Lab ventured into, and we've been there for nearly 60 years. And so a lot of experience dealing with very challenging reservoirs in the Orinoco Belt, the heavy oil belt, and also our headquarters and at the time were in Maracaibo.

Our predecessors, I think, made a good call a number of years back when the red shirt showed up and looked like a challenging environment, and we left Venezuela and moved into Colombia. So what we do have is a fair amount of legacy data that we could monetize if there was interest in it from people wanting to get back in and get up to speed on rock and fluid properties.

I think for the near term, the bigger advantages are going to be for metal heavy companies, not Core Lab. And so if you're a wellhead company, if you're into patching pipe, if you're into fixing leaks and environmental remediation, that's probably going to be where the first dollars are made down there. We would probably follow operators into the country. And we have mobile lab capabilities that we can deploy, and we can be present in a yard with some power that we can set up to do rock and fluid analysis, or the basics at least, in country. And we can do that quickly when the need arises.

And then over time, we'll look at the landscape and see if it makes sense to have a presence back in Venezuela. But I think that's a question that's several quarters at least away from having to be addressed.

Yes, I would agree with that comment. It's probably more of a '27 story than a '26 story, but just wanted to get your kind of expectation on it.

So moving over to the Middle East. We're hearing a lot of commentary about rigs going back to work in Saudi and then good conversations in Algeria and Turkey and other places on the unconventional side. I know it's been a couple of quarters since you put out a broader update on your Middle East facility that was built during COVID and kind of had a slow start.

But do you have capabilities there to expand rapidly? Or would you have to put more CapEx into that facility if Algeria kicked off in a big way in later '26, '27 or Turkey or any of these other kind of areas picked up?

Yes. So let's bifurcate a little bit the Middle East and North Africa. So in the second quarter of 2025, we announced that we expanded our lab capabilities in Saudi Arabia to bring the full suite of analytical technologies that had been developed in our U.S. operation for unconventionals. And we put that into the Middle East. And if you read our earnings release there, we were quickly rewarded for that investment, a large expedited project with some very nice returns on that.

I think how I would describe, and we only have one really great client in Saudi Arabia, we did not see the pullback in activity that some of the more drilling focused companies did. We have ongoing great engagement with Aramco. Saudi Aramco, they're a great client for us and have been for decades. And so throughout the Middle East, we've got opportunities. Lab in Qatar, a nice flow of work from there, Oman, Abu Dhabi and Kuwait. And we're in position with permanent facilities in all those locations.

In North Africa, we recently held a technology conference to address opportunities across North Africa, from Algeria, Libya, Tunisia and into Egypt. And we see opportunities developing there. There's a great need for people to assess damaged and underdeveloped fields that have been, I'll call it, wilting under years of neglect. And so there's opportunities for us there. There's unconventional opportunities emerging in that region that we'll have a lot to say about.

We currently operate or would service that out of our Aberdeen facility for rock and fluid analysis on reservoir valuation. And again, if we have to put in some mobile lab operations to facilitate that, we're ready to roll.

I appreciate all that color. And I guess one for Chris. Obviously, you shifted around some of the debt as you paid off the notes and put it on the revolver. Can you just kind of frame how you're thinking about future cash flows, free cash flow and paying off that revolver debt that has a higher interest rate versus share buybacks? And just kind of your thoughts around that.

Sure. It did -- moving it into this term loan under the credit facility out of the private placement notes does give us more flexibility with that. There's no penalty to pay down that early. There is some required paydowns. I think it's $2.5 million a year, if my memory serves me right. So we will be paying it down.

But as far as our use of free cash flow, we still think the stock is undervalued. You've seen a shift over the last 5 quarters on using some of that towards share repurchases versus paying down the debt. And so I don't see that changing. We're going to be opportunistic with the share buyback. So we see a dip in the market, we might get more aggressive. But I see it as a mix between continuing to make sure the leverage ratio kind of stays where we're comfortable but also using it to buy back shares.

And Don, I might add to that. Don, there's 0.25 point click in our favor if we get the leverage ratio below 1. And you it's within close proximity to where we are. That looks like a smart place to try to get to as we can. But in the meantime, I think if you look at how we've been allocating capital between debt reduction and share buybacks, that's probably a good optics on where we're going for the near term.

And the next question comes from Josh Jayne with Daniel Energy Partners.

I wanted to start with something you mentioned in the release and then also on the call. You talked about an increase in regional study sales on Africa and Brazil, highlighting the renewed industry interest and exploration activity. And I feel like there were numerous large operators over the last couple of quarters have highlighted the need for exploration activity international and offshore moving forward.

So do you see this sort of as the beginning of demand accelerating as we move through this year and in the next year? Or do you think it was just a little small uptick in Q4? Or just how do you see this all playing out?

No, Josh, it's clearly a trend. And I've talked about this a little bit. We think the trend has already started. And last year, we would have seen, I would say, markedly better performance in Reservoir Description if we hadn't had so many operators come up with dry holes. So in other words, committed work to Core Lab, nice stack of work coming up for us and a series of geologic failures, if you will, by the operators that resulted in no cores, no fluids.

And so we see that trend continuing. We've got a nice portfolio of project commitments in front of us. And I think people are getting further along in their commitment to these larger projects and larger evaluations. We do have core coming in. We have folks on location in a number of places over the last quarter or 2 and today. And we do see an increase in FIDs around the world that are all, I would say, they're not indications, they are facts that are showing that an international wave is coming.

People recognize that the growth in U.S. production is flattening. And look, there's opportunities in that. We're engaged with, I'll call it, mechanical improvements in the production enhancement that might help improve U.S. production and also thermodynamic lab testing for ways to get those extra molecules out of the ground. We've got experiments going on in the lab for clients. So we're going to work on trying to improve recovery in the U.S.

But for the longer term, the trend is clearly in the direction of more international exploration. And the bigger structures that can move the needle in terms of reserve replacement, which is a term we've been waiting to come back into the vernacular in the industry, is going to be offshore opportunities. And so the sale of off-the-shelf and ongoing studies that we are able to provide allow people to quickly get up to speed on the geologic variables they're going to encounter as they drill in these offshore environments, whether it's the South Atlantic Margin or offshore Africa or Asia Pacific.

And maybe we could just move to the -- go ahead.

No, we didn't have anything.

Sorry about that. Maybe just to move to the U.S. You highlighted the onshore environment and how it's obviously a little bit more sensitive to changes in commodity prices. Could you talk to what those are? So if we sort of break out of this flat to down commodity price range that we've seen over the last couple of months, what it ultimately would take from a commodity price standpoint to sort of materially change the activity outlook in the U.S.

Yes. I think, Josh, that's probably a better question for some of our operators. I think if I was in their shoes, I'd be looking for some stability in the commodity price. And you see 8%, 10% swings, $5, $6, bouncing around here. And look, a lot of the companies have different hedging strategies and all that impact their plans. I think it's best to defer to them on that.

But if you look at actions as an indication of their thinking, rig counts down, frac spreads down. And so I would say it's still an environment that they're -- and also there's been consolidation in the industry. That's also impacting activity levels as those kind of sort themselves through. I'd hate to put a price on it because I think it varies by company.

Our objective is to use our product to help them get more oil and gas out of the ground as cheaply as possible and then where there are opportunities like enhanced oil recovery in unconventionals to do the lab testing, they give them techniques that they can try to increase the recoverables on these unconventional wells from high single digits, 8%, 9%, 10%. If we can help them get that to 12%, 13% by some laboratory-proven techniques, then that will be good for us and good for our clients.

And then if I could just squeeze one more. I'm not sure if you explicitly called out the tariff impact in 2025. I know you highlighted it in Q4 as sort of a headwind. So if you did call it out, I apologize for missing it. But maybe you could talk about the impact in 2025 so that we could think about what the potential tailwind is moving forward in the event that things settle down a bit.

Sure. Josh, this is Chris. So I think in 2025, it started to become more impactful as we got into, I would say, the latter part of the third quarter.and then the fourth quarter because we had previously purchased supplies. Think of raw materials for the products but then also the chemical tracers for the service side. We had supplies that kind of lasted partway through the third quarter.

So those are all imported products. They all attract tariffs, some are higher than others. So I think the impact in Q4 is you're going to see that repeat going forward unless there's a change in the tariffs that are being applied right now. So it's probably somewhere in the range of $0.02 to $0.03 each quarter. And it's primarily the Production Enhancement group but also some things in Reservoir Description, but not as impactful for that group.

And then Josh, yes, I'd add to that, that we're always trying to mitigate this. And so for example, on the chemicals used for diagnostics, we traditionally had brought those into the U.S. mixed-up cocktails of proprietary blends of these chemicals to be used as tracers and then ship them out as we needed to, to various other regions in the world.

Well, if we can ship those directly to the other regions and our expanding footprint like the lab we put into Abu Dhabi, for example, for tracer diagnostics, if we can shift those right to Abu Dhabi going forward, we'll bypass some of the tariff, call it, complications that are presented to us in making up our proprietary tracer.

So it is an impact for us. I would say it's -- hard part is planning. But steel costs have gone up, Energetic powders have gone up. Chemical tracers and lab supplies have gone up. But we're working hard to mitigate that through our procurement process and how we, let's call it, draw the arrows on where things come from and where they go.

This concludes our question-and-answer session. I would like to turn the conference back over to Larry Bruno for any closing remarks.

Okay. We'll wrap up here. In summary, Core's operational leadership continues to position the company for improving client activity levels in the coming quarters and years. We have never been better operationally or technologically positioned to help our global client base optimize their reservoirs and to address their evolving needs. We remain uniquely focused and are the most technologically advanced, client-focused reservoir optimization company in the oilfield service sector.

The company will remain focused on maximizing free cash and returns on invested capital. In addition to our quarterly dividend, we'll bring value to our shareholders via growth opportunities, driven by both the introduction of problem-solving technologies and new market penetration. In the near term, Core will continue to use free cash to repurchase shares and maintain a strong balance sheet while always investing in growth opportunities and evaluating various methods to increase shareholder value.

So in closing, we thank and appreciate all of our shareholders and the analysts that cover Core Lab. The executive management team and the Board of Core Laboratories give a special thanks to our worldwide employees that have made these results possible. We're proud to be associated with their continuing achievements.

So thanks for spending time with us, and we look forward to our next update. Goodbye for now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Core Laboratories Q3 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Larry Bruno, Chairman and CEO. Please go ahead.

Thanks, Danielle. Good morning in the Americas, good afternoon in Europe, Africa and the Middle East, and good evening in Asia Pacific. We'd like to welcome all of our shareholders, analysts and most importantly, our employees to Core Laboratories Third Quarter 2025 Earnings Call. This morning, I'm joined by Chris Hill, Core's Chief Financial Officer; and Gwen Gresham, Core's Senior Vice President and Head of Investor Relations.

The call will be divided into 6 segments. Gwen will start by making remarks regarding forward-looking statements. We'll then have some opening comments, including a high-level review of important factors in Core's Q3 performance. In addition, we'll review Core's strategies and the 3 financial tenets that Core employs to build long-term shareholder value.

Chris will then give a detailed financial overview and have additional comments regarding shareholder value. Following Chris, Gwen will provide some comments on the company's outlook and guidance. I'll then review Core's 2 operating segments, detailing our progress and discussing the continued successful introduction and deployment of Core Lab's technologies as well as highlighting some of Core's operations, recent client interactions and major projects worldwide. Then we'll open the phones for a Q&A session.

I'll now turn the call over to Gwen for remarks on forward-looking statements.

Before we start the conference this morning, I'll mention that some of the statements that we make during this call may include projections, estimates and other forward-looking information. This would include any discussion of the company's business outlook. These types of forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to materially differ from our forward-looking statements. These risks and uncertainties are discussed in our most recent annual report on Form 10-K as well as other reports and registration statements filed by us with the SEC.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our comments also include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing our third quarter results. Those non-GAAP measures can also be found on our website. With that said, I'll pass the discussion back to Larry.

Thanks, Gwen. Moving now to some high-level comments about our third quarter 2025 results. Core continued to execute its strategic plan of technology investments targeted to both solve client problems and capitalize on Core's technical and geographic opportunities. Third quarter 2025 revenue was up over 3% compared to Q2 and Core achieved nice sequential improvement in operating income, operating margins and earnings per share.

Looking at Reservoir Description in more detail, revenue in the third quarter was up over 2% compared to Q2. For the third quarter, ex items, operating margins in Reservoir Description were 13%. The segment's financial performance in the third quarter reflects continued demand for rock and fluid analysis across the company's global laboratory network. Demand for laboratory services tied to the assay of crude oil and derived products remained steady as trading patterns somewhat improved following disruptions caused by sanctions. There is still uncertainty in the demand for these assay services due to ongoing international geopolitical conflicts and evolving sanctions.

In addition, pending tariffs and supply-demand balance concerns continue to generate volatility in commodity prices. In Production Enhancement, third quarter revenue was up 6% compared to Q2. Ex items, third quarter 2025 operating margins were 11%, up from 9% in Q2. This sequential improvement in margins reflects continued demand for completion diagnostic services, both onshore and offshore, along with improved international product sales.

In addition to our quarterly dividend, Core Lab returned excess free cash to our shareholders by repurchasing more than 462,000 shares of company stock during the third quarter, equating to approximately 1% of Core's outstanding share count and representing a value of $5 million. Looking forward, Core intends to use free cash to fund our quarterly dividend, pursue growth opportunities and improve shareholder value through opportunistic share repurchases. As we look ahead, Core will continue to execute on its key strategic objectives by: one, introducing new product and service offerings in key geographic markets; two, maintaining a lean and focused organization; and three, maintaining our commitments to returning excess free cash to our shareholders and strengthening the company's balance sheet.

Now to review Core Lab's strategies and the financial tenets that the company has used to build shareholder value over our nearly 30-year history as a publicly traded company. The interest of our shareholders, clients and employees will always be well served by Core Lab's resilient culture, which relies on innovation, leveraging technology to solve problems and dedicated customer service.

I'll talk more about some of our latest innovations in the operational review section of this call. While we continue to pursue growth opportunities, the company will remain focused on its 3 long-standing, long-term financial tenets, those being to maximize free cash flow, maximize return on invested capital and returning excess free cash to our shareholders. I'll now turn it over to Chris for the detailed financial review.

Thanks, Larry. Before we review the financial performance for the quarter, the guidance we gave on our last call and past calls specifically excluded the impact of any FX gains or losses and assumed an effective tax rate of 25%. So accordingly, our discussion today excludes any foreign exchange gain or loss for current and prior periods. Additionally, adjustments, which net to a gain of $4.6 million have been excluded from today's discussion of the third quarter 2025 financial results. You can find a summary of those items in the tables attached to our press release for the third quarter of 2025.

Now looking at the income statement. Revenue was $134.5 million in the third quarter, up $4.4 million or over 3% compared to the prior quarter and flat year-over-year. The sequential improvement is primarily associated with increased demand for our laboratory analytical services and completion diagnostic services in international regions. Of this revenue, service revenue, which is more international, was $101.1 million for the quarter, up 5% sequentially and up over 2% year-over-year.

As mentioned earlier, sequentially, we saw an increase in international service revenue for both our laboratory analytical services and our completion diagnostic services when compared to the second quarter. For the U.S., service revenue remained flat sequentially and was down almost 4% from last year. Product sales, which is more equally tied to North America and international activity, were $33.4 million for the quarter, down slightly from last quarter and down 6% year-over-year.

Our international product sales are typically larger bulk orders and can vary from one quarter to another and were up nicely in the third quarter when compared to the second quarter. However, laboratory instrumentation sales decreased in the third quarter, but coming off a very strong second quarter. Looking at year-over-year, the decrease in product sales was primarily due to the lower levels of completion activity in the U.S. onshore market.

Moving on to cost of services, ex items for the quarter was 74% of service revenue, improving from 77% in the prior quarter and from 76% in the same quarter last year. The year-over-year and sequential improvements in cost of services was primarily due to cost efficiencies and reductions in overall compensation costs associated with actions taken earlier this year. Cost of sales ex items in the third quarter was 88% of revenue compared to 85% last quarter and flat compared to last year. The sequential increase was due to higher absorption of fixed costs on a slightly lower revenue base in the quarter as well as an increase in the cost of imported steel due to tariffs.

As we continue to focus on cost efficiencies, we anticipate the manufacturing absorption rate in future quarters will be in line with projected product sales. G&A ex items for the quarter was $10.7 million, a slight increase from $10.5 million in the prior quarter and $10 million in the same quarter of the prior year. For 2025, we expect G&A ex items to be approximately $42 million to $44 million. Depreciation and amortization for the quarter was $3.6 million, decreased slightly compared to $3.7 million in the last quarter and the same quarter in the prior year.

EBIT ex items for the quarter was $16.6 million, up $2.1 million from $14.5 million last quarter, yielding an EBIT margin over 12% and expanding 120 basis points sequentially. Our EBIT for the quarter on a GAAP basis was $20.9 million, which includes a gain of approximately $5.2 million associated with the final settlement of insurance claim for our U.K. facility that was damaged by fire. Interest expense of $2.7 million remained flat compared to the prior quarter and decreased from $3.1 million last year. The decrease in interest expense from last year is due to a lower average borrowings on the credit facility in 2025.

Income tax expense at an effective rate of 25% and ex items was $3.5 million for the quarter. On a GAAP basis, we recorded tax expense of $3.8 million for the quarter at an effective rate of 21%. The effective tax rate will continue to be somewhat sensitive to the geographic mix of earnings across the globe and the impact of items discrete to each quarter. We continue to project the company's effective tax rate to be approximately 25% for 2025.

Net income ex items for the quarter was $10.2 million, an increase of over 15% sequentially, but down almost 14% from the same quarter last year. On a GAAP basis, we had net income of $14.2 million for the quarter. Earnings per diluted share ex items was $0.22 for the quarter, an increase from $0.19 in the prior quarter and a decrease from $0.25 last year. On a GAAP basis, EPS was $0.30 for the third quarter of 2025.

Turning to the balance sheet. Receivables were $110.3 million and decreased approximately $3.6 million from the prior quarter. Our DSOs for the third quarter improved to 71 days from 75 days last quarter. Inventory at September 30, 2025, was $58.2 million, down $1.5 million from last quarter end. Inventory turns for the quarter improved to 2.0, up from 1.9 in the prior quarter. We continue to focus on managing our inventory to lower levels with improved returns and anticipate inventory turns will gradually improve over time.

And now to the liability side of the balance sheet. Our long-term debt was $117 million as of September 30, 2025, and considering cash of $25.6 million, net debt was $91.4 million, which decreased $3.4 million from last quarter. Our leverage ratio was reduced to 1.1 at September 30, down from 1.27 last quarter end. As of September 30, 2025, our debt was comprised of $110 million in senior notes and $7 million outstanding under our bank credit facility. As Larry stated earlier, the company will remain focused on executing its strategic business initiatives while maintaining a healthy balance sheet.

Looking at cash flow. For the third quarter of 2025, cash flow from operating activities was approximately $8.5 million. And after paying $2 million of CapEx for operations, our free cash flow for the quarter was $6.5 million. As discussed in prior quarters, the capital expenditures associated with rebuilding our U.K. facility, which was damaged by fire in February 2024, are covered by the company's property and casualty insurance and have been excluded in the calculation of free cash flow.

Additionally, we expect CapEx to remain aligned with activity levels. And for the full year 2025, we expect capital expenditures for operations to be in the range of $11 million to $13 million. The forecast for capital expenditures excludes CapEx associated with rebuilding the U.K. facility. Core Lab will continue its strict capital discipline and asset-light business model with capital expenditures primarily targeted at growth opportunities.

Core Lab's operational leverage continues to provide the ability to grow revenue and profitability with minimal capital requirements. Capital expenditures have historically ranged from 2.5% to 4% of revenue even during periods of significant growth. That same level of laboratory infrastructure, intellectual property and leverage exists in the business today. We believe evaluating a company's ability to generate free cash flow and free cash flow yield is an important metric for shareholders when comparing and projecting company's financial results, particularly for those shareholders who utilize discounted cash flow models to assess valuations.

I will now turn it over to Gwen for an update on our guidance and outlook.

Thank you, Chris. Turning to Core Lab's outlook for the fourth quarter. The IEA, the EIA and OPEC+ continue to forecast growth in crude oil demand between 700,000 and 1.3 million barrels per day in 2025 with a similar level of incremental growth projected for 2026. This growth continues to drive primarily by demand from non-OECD countries, including Asia, India and emerging markets across the Middle East and Africa.

As noted in the IEA's report published September 16, 2025, crude oil field data shows the natural decline in existing producing fields is accelerating globally and now represents a major long-term supply risk. Addressing steeper decline rates and bringing new fields online will be central to ensuring energy security and maintaining market stability. As such, according to the IEA, significant annual investment in oil and gas resource development will be required for many years to come. Core Lab's Reservoir Description and Production Enhancement technologies are directly aligned with these investment imperatives.

In the near term, potential tariff headwinds, combined with OPEC+ decisions to increase production levels are contributing to market volatility and lower commodity prices. Despite the current softness and long-term crude oil demand fundamentals remain intact. Core Lab maintains its constructive outlook and continues to see steady activity across committed long-cycle projects, including deepwater along the South Atlantic margin, North and West Africa, Norway, the Middle East and certain areas of Asia Pacific. These projects by nature of their scale and planning cycles tend to be less reactive to near-term commodity price fluctuations. Core Lab's revenue opportunity on awarded projects will remain somewhat dependent on our clients' geological success rates.

Activity tied to smaller scale short-cycle crude oil development projects are expected to remain more sensitive to changes in commodity prices. As a result, changes in crude oil prices are anticipated to have a more immediate impact on drilling and completion activity in the U.S. onshore market. Geopolitical conflicts, evolving trade and tariff dynamics and volatile commodity prices continue to create uncertainty in demand for laboratory services tied to the maritime transportation and trade of crude oil and derived products.

Despite these headwinds, Core Lab projects Reservoir Description's fourth quarter revenue to be up sequentially. The U.S. frac spread count continues to trend lower, and the company anticipates the typical year-end seasonal decline in U.S. onshore completion activity. However, growth in demand for Core's diagnostic services and energetic system product sales in both international and offshore markets may somewhat offset the decline in U.S. onshore activity. As such, Core projects Production Enhancement to be down slightly sequentially.

Core believes that the tariff measures under consideration will not apply to the vast majority of service revenue and product sales provided by the company. Core services account for over 75% of the company's total revenue and are currently not subject to tariffs. Core's product sales have been less than 25% of total revenue and are primarily manufactured in the U.S. Tariffs on exported products would not apply to approximately 50% of these product sales as they are consumed in the U.S. drilling and completion market. Certain raw materials imported and consumed in production enhancements, U.S. product manufacturing and service businesses are attracting import tariffs. We continue to take steps to mitigate the impact of tariffs.

In summary, Reservoir Description’s production -- Reservoir Description's fourth quarter revenue is projected to range from $88 million to $90 million with operating income of $11 million to $12.3 million. Production Enhancement's fourth quarter revenue is estimated to range from $44 million to $46 million, with operating income of $2.9 million to $3.7 million.

Core's fourth quarter 2025 revenue is projected to range from $132 million to $136 million with operating income of $14 million to $16.1 million, yielding operating margins of approximately 11%. EPS for the fourth quarter is expected to range from $0.18 to $0.22. The company's fourth quarter 2025 guidance is based on projections for underlying operations and excludes gains and losses in foreign exchange. Our fourth quarter guidance assumes an effective tax rate of 25%.

With that, I'll turn it back over to Larry.

Thanks, Gwen. First, I'd like to thank our global team of employees for providing innovative solutions, integrity and superior service to our clients. The team's collective dedication to servicing our clients is the foundation of Core Lab's success. Looking at the macro, as Gwen mentioned, even after assessing current and near-term economic headwinds, the IEA, EIA and OPEC projections continue to point to growth in global crude oil demand in 2025 and beyond. The various estimates show growth in demand of between 0.7 million barrels per day and 1.3 million barrels per day for 2025 with similar additional demand growth projected for 2026.

In addition to the forecasted growth in demand, new production will need to be brought online to offset the natural decline from existing producing fields. Combined, these trends will require continued investment in the development of onshore and offshore crude oil fields. U.S. tight oil production has been by far the largest component of non-OPEC oil production growth since 2010. Continued growth in global oil demand, combined with constrained incremental U.S. oil production growth supports the thesis that the balance of future supply growth must increasingly rely on discoveries and field developments outside the U.S.

In summary, the current forecast suggests a multiyear cycle in which U.S. onshore production growth slows and future growth in global supply will be driven by capital investment in international conventional offshore fields and unconventional opportunities in the Middle East. These trends support increased demand for Core Lab services across the globe, particularly for Reservoir Description.

The most recent EIA short-term energy outlook for U.S. oil production is 13.5 million barrels per day in 2025, and the agency currently projects production to remain essentially flat in 2026 with only nominal growth in U.S. production over this time frame. Of particular note, during the third quarter, the IEA pivoted from earlier projections on the need for investment in new oil and gas production, stating that in addition to continued investment in existing fields, more than 45 million barrels of oil production from new conventional oil fields must be added by 2050 just to maintain current production levels. Any growth in demand would add to that number.

The IEA now states that significant annual investment in oil and gas resource development will be required for many years to come as the natural decline in existing producing fields is accelerating globally. The new IEA analysis published in September, the agency's global field-by-field data show that steeper natural declines now dominate supply risk. The IEA quantified this risk, stating that oil output would fall approximately 8% per year from natural decline. Nearly 90% of upstream CapEx since 2019 has gone just to offset declines, not to meet continuing demand growth.

Additionally, the IEA sees 20-year average project lead times, and they conclude that delayed or inefficient development of new production will further compound the supply risk. Directionally, these IEA revisions and the need for increased investment in oil and gas projects align with Core Lab's long-standing view that the decline curve never sleeps and always wins.

Along with new exploration, appraisal and development programs, disciplined data-driven optimization of existing reservoirs is the fastest, lowest risk path to supply reliability and operator returns, a scenario that Core Lab is uniquely positioned to deliver through its Reservoir Description and Production Enhancement Technologies. With Core Lab's expanding opportunities across international markets, such as with unconventional plays in the Middle East and emerging onshore and offshore deepwater conventional plays in a number of regions, including along the South Atlantic margin, the company continues to enhance its portfolio of innovative offerings for our growing global client base.

Now let's review the third quarter performance of our 2 business segments, turning first to Reservoir Description. For the third quarter of 2025, revenue came in at $88.2 million, up over 2% compared to Q2. For Q3, operating income for Reservoir Description ex items was $11.6 million, up from $10.8 million in Q2, yielding operating margins of 13% with incremental margins of 41%. While demand for Reservoir Description lab services remained strong in several regions across our global network, ongoing international geopolitical conflicts, along with sanctions, continue to produce headwinds that impact the demand for laboratory services tied to the trade and transportation of crude oil and derived products. The demand for these services did rebound some in the third quarter as trading patterns continue to realign.

Now for some operational highlights from Reservoir Description. In the third quarter of 2025, Core Lab completed phase 1 of a major reservoir fluid study in the Middle East. This analytical program addressed the critical challenge of crude oil stability by determining how natural pressure depletion impacts asphaltene behavior. As pressure drops across producing reservoirs, asphaltene can precipitate from some crude oils. These solid particles can then plug pore-throats, impair permeability and even obstruct production tubulars. Consequently, asphaltene precipitation has significant implications for both production efficiency and infrastructure integrity.

As reservoirs mature, a decline in pressure will destabilize the delicate balance of pressure, volume and temperature, or PVT, that governs the thermodynamic behavior of the crude oil. This disruption can cause costly formation damage in the subsurface, leading to reduced production rates and other operational issues. The operator engaged Core Lab to deploy its proprietary full visualization PVT laboratory technologies alongside Core's advanced near infrared and high-pressure microscopy detection techniques.

Combined, these technologies enabled precise measurement of asphaltene onset pressures and depositional behaviors under a range of reservoir and production conditions. Concurrently, Core Lab designed and executed advanced laboratory Core flood experiments to quantify permeability impairment as the laboratory system pressure was reduced to below critical asphaltene precipitation thresholds. These laboratory results form the essential hard data inputs into dynamic reservoir models that will allow the client to mitigate risk as they develop pressure maintenance strategies for the field.

This project is now progressing into phase 2, which will assess the feasibility of pressure maintenance and solvent injection programs aimed at permeability restoration and reducing formation damage. Throughout the life cycle of oilfields, Core Laboratories measurements and interpretations help our clients maximize hydrocarbon production from their assets.

Moving now to Production Enhancement, where Core Lab's technologies continue to help our clients maximize their well completions and improve production. Revenue for Production Enhancement for Q3 came in at $46.3 million, up 6% compared to Q2. Third quarter operating income for Production Enhancement, ex items was $4.9 million, yielding operating margins of 11%, up from 9% in Q2. In the U.S., Diagnostic services benefited from increasing demand as complex U.S. land completion designs like trimulfrac and extended lateral length horizontal wells become more and more common. Core's expansive portfolio of completion products also saw increased demand in international markets.

Now for some operational highlights from Production Enhancement. In the third quarter of 2025, a national oil company engaged Core Lab's production enhancement team after experiencing nearly 2 months of costly downtime due to a stuck, heavyweight drill pipe in a well from offshore West Africa. The operator deployed Core's proprietary dual-end severing tool, which is engineered for high-efficiency pipe recovery operations, particularly in scenarios where conventional drill pipe and casing cutters are not up to the task.

Core Lab provided the operator with extensive assembly and field application procedures and training and real-time guidance to determine the optimal deployment position within the wellbore for maximum effectiveness. Core's proprietary tool works by using precisely timed energetic events that are sequenced to generate two equal and opposing shock fronts. This technology focuses the energy outward towards the drill string and severs the drill collar. As a result of Core Lab's proprietary technologies and unmatched client service, the drill pipe was successfully recovered and well operations were restored.

Also in the third quarter, one of Canada's most active heavy oil operators needed to identify which bore holes in the multilateral wells were contributing the most oil to overall production. This is a key challenge in optimizing completions in low-temperature heavy oil reservoirs. Having successfully used Core Lab's SPECTRACHEM Water Tracers in previous multistage fracturing operations, the operator again turned to Core's engineering team for a solution using chemical tracers to assess oil production from these challenging complex wells.

The operator deployed Core's unique FLOWPROFILER Engineered Delivery System, or EDS. These oil tracers were placed into each lateral leg, allowing the operator to monitor produced oil concentrations and generate a precise production contribution profile. The operator found the diagnostic results to be of high value and is now including Core's FLOWPROFILER EDS oil tracers as a standard evaluation technology for future projects.

That concludes our operational review. We appreciate your participation, and Danielle will now open the call for questions.

[Operator Instructions] The first question comes from John Daniel from Daniel Energy Partners.

Hopefully, you can hear me okay. Well, first question is on the transaction you all just did. If you could elaborate on maybe what some of the opportunities might be for similar sized transactions globally? And this is a sidebar, I thought it was an interesting way you structured the purchase price where a lot of it's on the back end in terms of earnout, it's pretty new way to do that. So just any color on those opportunities.

I'll let Chris fill in a lot of the sort of the details on that, but just a little background there, John. So I think you know, I came to Core Lab now 26 or so years ago through a similar sort of tuck-in technology acquisition. And so have a pretty good model for that. Core Lab did a series of those private company acquisitions. They offer technological advantages. They offer geographic advantages.

And as you and some of the other folks have heard us say before, everybody has got hockey stick projections on how their business is going to play out over the next few years. Well, we think it's a good approach to have them participate, in that the need to deliver that hockey stick if they're going to be rewarded for that hockey stick. So yes, so I think that approach make sense. And I think we'll look at -- we're always looking at similar acquisitions.

And Chris, any color you might want to add on the Solintec acquisition?

No. I think the way we did structure that may be a little unique from what you normally see. We would love to structure most transactions like that, but it takes two parties to agree on what those terms look like. So we are very happy with the acquisition and then it's kind of a win-win if we end up paying that earn-out, for both the seller and us.

And I think I would add to that, that Solintec has a long multi-decade history in Brazil, and we are really glad to have them part of the Core Lab family.

Okay. I guess just my follow-up question, a bit unrelated to the M&A market, but you guys do a really good job of kind of traveling the globe and seeing your customers, and I think you alluded to going to Asia Pac in the third quarter.

I'm curious when you sit down and talk with those folks, obviously, don't name me names, but like when they look into their crystal ball, 2 to 3 to 4 years from now, are they suggesting to you higher activity, lower activity? Any color would be appreciated.

Yes, higher activity, and it's across the board. I'd say it's Middle East still leading the pack, South Atlantic margin and West Africa, I would say, are in the second position. And then recently here in Asia Pac, we're seeing some sort of, I'll call it, they've been on the drawing board for a while, but finally getting -- closer to getting kinetic, if you will, on some exploration programs.

And with those, for us, there's some work tied to exploration, but we really hope our clients are geologically successful because it's when they get into appraisal and development, that's really kind of the wheelhouse, particularly for Reservoir Description. And then eventually, it's production, and that plays out into our Production Enhancement Group.

But it's clearly rising in our perspective here, that activity levels over the next few years should be going up. And I think there's -- we have even more confidence into the trends that we've been describing over the last year or so saying that, "Hey, there is a wave coming of more international investment."

And I think it's tied to a realization that the production from U.S. land has largely absorbed the rest of the world from having to bring new production on and that, that phase at 15-year cycle from 2010 to 2025, look, there's still going to be a lot of oil and gas produced in the U.S., but the growth that has covered a lot of the decline around the rest of the world, that's starting to come to an end.

Okay. That's very helpful. Thank you for including me.

Yes. Thanks, John. I appreciate the call.

[Operator Instructions] Seeing that there are no further questions, I would like to turn the conference back over to Larry Bruno for closing remarks.

Okay. Thanks, Danielle. We'll wrap up here. I think we've got a pretty busy earnings release morning going on here, so probably a little bit of people juggling phones.

In summary, Core's operational leadership continues to position the company for improving client activity levels in the coming quarters and years. We have never been better operationally or technologically positioned to help our global client base optimize their reservoirs and to address their evolving needs. We remain uniquely focused and are the most technologically advanced, client-focused reservoir optimization company in the oilfield service sector.

The company will remain focused on maximizing free cash and returns on invested capital. In addition to our quarterly dividend, we'll bring value to our shareholders via growth opportunities, driven by both the introduction of problem-solving technologies and new market penetration. In the near term, Core will continue to use free cash to repurchase shares and strengthen its balance sheet while always investing in growth opportunities and evaluating various methods to increase shareholder value.

So in closing, we thank and appreciate all of our shareholders and the analysts that cover Core Lab. The executive management team and the Board of Core Laboratories give a special thanks to our worldwide employees that have made these results possible. We're proud to be associated with their continuing achievements. So thanks for spending time with us, and we look forward to our next update. Goodbye for now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.