Good morning and welcome to the Core Laboratories Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [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, Ailey. 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 employees, analysts, and most importantly, our employees to Core Laboratories' fourth quarter 2020 earnings call. This morning, I am joined by Chris Hill, Core's Chief Financial Officer; and Gwen Schreffler, 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 Core's 2020 performance. In addition, we’ll review Core’s strategies and the three financial tenets that the company 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 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 relating to the oil and gas industry, business conditions, international markets, international political climate and other factors, including those discussed in our '34 Act filings that may affect our outcome. Should one or more of these risks or uncertainties materialize or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1a Risk Factors in our most recent annual report on Form 10-K, as well as other reports and registration statements filed by us with the SEC and the AFM. Our comments 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 said, I'll pass the discussion back to Larry.

Okay. Thanks, Gwen. First, our thoughts remain with all of those that have been directly affected by COVID-19, particularly among our dedicated employees and their families, as well as our industry colleagues and the medical professionals and others serving on the frontlines. While we can all see the virus-related challenges that still lie ahead of us, there is certainly reason for optimism as the vaccines become more widely distributed throughout 2021. Headwinds across the entire oil and gas industry, due to a combination of reduced oil demand and oilfield operational disruptions tied to COVID-19 persisted during the fourth quarter, but there was improvement in operational activity in some regions. Unpredictable schedules and our clients’ activities, along with logistic hurdles for field services and product shipments remain particularly in those international regions that saw increasing COVID-19 cases beginning in the early to middle part of the fourth quarter as a number of countries enacted or expanded precautionary measures and even lockdowns during the fourth quarter. On a more positive note, U.S. land activity improved sequentially from Q3 to Q4 and Core Lab benefited from an uptick in well completions. Very importantly, Core Labs’ dedicated staffs continue to safely and efficiently provide all of the vital services and products required to meet the needs of our global client base and we are very well positioned to continue to do so. As we look back over 2020, we see a year that posed unprecedented challenges across the oilfield. Due to effective and rapidly implemented adjustments to our cost and operational structures, Core Lab is one of a select group of oilfield service companies that posted positive full year free cash flow and when adjusting for non-cash write-downs for goodwill and other impairments, posted four consecutive quarters of positive earnings and a positive return…

Thanks Larry. And as Larry previously stated, the company announced that for 2020, we would focus on strengthening our balance sheet by reducing debt and working towards improving our liquidity position. Excess free cash has been a focus towards reducing debt and for 2020, the company reduced net debt by approximately $49 million. Additionally, the company took steps in refinancing a portion of our long-term debt and on January 12th of 2021 issued $60 million in new senior notes through a private placement. These new senior notes have a five to seven year maturity and the proceeds were used exclusively to reduce outstanding debt on our credit facility. As a reminder, our bank credit facility is sized at $225 million and after reducing the outstanding balance with proceeds from issuing the new senior notes in January, the company has over $150 million of available borrowing capacity under the facility. At this time, I’ll also provide an update on our debt leverage ratio as this is one of the more restrictive financial covenants tied to our corporate debt. The maximum leverage ratio was currently limited to three times of our trailing 12 month EBITDA. At December 31, the company’s leverage ratio was a little over 2.8 as we continue to manage our debt levels down to remain compliant with our covenants. As the company has forecast financial performance over the past several quarters, we’d always forecast our leverage ratio to reach its peak in the fourth quarter of 2020 and first quarter of 2021. We continue to forecast the company will remain compliant with our financial covenants and with current expectations for 2021 and as we continue applying excess free cash towards reducing debt, we are forecasting our leverage ratio to begin decreasing in the second quarter of 2021. Before we…

Thank you, Chris. And as Chris mentioned, for 2021, Core will continue to focus on executing our strategic plan of generating free cash and reducing our net debt, while maximizing return on invested capital. Additionally, as part of the company’s 2021 strategic focus, we will continue to invest in targeted, client-driven technologies that aimed to solve both client problems and capitalize on Core’s growth opportunities. We are optimistic about the company’s international growth opportunities as the second half of 2021 unfolds and COVID-19 disruptions are expected to abate. With Core Lab having more than 70% of its revenue exposed to international activity, the company remains active on international projects already underway. Additionally, as Core sees early signs of growth in international markets trending higher in 2022 and beyond, combined with the international opportunities, as well as the continued momentum of U.S. land for the company in the second half of 2021 and beyond, we believe the strength of the company’s technology portfolio, dedicated and talented workforce and strong operating model is a nice backdrop to the emerging cycle. Some of the emerging international growth areas are Brazil, Mexico, Qatar, and various areas of the Middle East. For the first quarter of 2021, and consistent with historical trends, we expect lower client activity due to seasonality. This seasonal pattern typically results in a decline in first quarter revenue by mid-single-digits. We anticipate typical seasonal effects and COVID-19 restrictions to impact the first quarter of 2021 with the first quarter revenue projected to be flat to down low-single-digits sequentially. In the projected decline in first quarter revenues is slightly less pronounced compared to historical trends as expected momentum in U.S. land activity continues. With reservoir description, we expect reservoir fluid analysis with accounts for more than 65% of the segment’s revenue to…

All right. 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 and it's shining through during the current challenges. Turning first to reservoir description, during the fourth quarter of 2020, Core continued to perform highly specialized Core and reservoir fluid analytical programs on samples originating from the offshore South Atlantic margin, a region that Core sees as a growth opportunity in 2021 and beyond. Several international operating companies have obtained licenses for pre-salt exploration and appraisal in Brazil signaling that this region will be a focus of near, mid and long-term capital deployment. To support current and future programs, Core is in the final stages of commissioning a new laboratory facility in Rio de Janeiro. This lab will offer a wide range of rock and fluid testing capabilities including Core’s proprietary, full visualization, pressure, volume, temperature or PVT cell instrumentation and Core’s dual energy CT rock evaluation technologies. This new lab secures Core’s position as the leading provider of advanced reservoir description services in the region and satisfies the growing demand for Core’s patented and proprietary laboratory technologies in the growing Brazilian market. Also in the fourth quarter of 2020, Core conducted analytical programs on a variety of CO2 injection projects for both carbon capture and sequestration, as well as for enhanced oil recovery efforts. Under the direction of the CarbonNet project, Core continued its laboratory analysis of conventional core from the Gular-1 appraisal well offshore Southeast Australia helping in the evaluation of this large-scale carbon capture and sequestration project. Data generated by Core is providing insight into steel capacity, storage capacity, geomechanical properties and the portions and properties of the…

[Operator Instructions] Our first question today will come from George O’Leary with TPH & Company.

Good morning, George. George O’Leary: Good morning, guys.

Good morning. George O’Leary: Good morning, guys. How are you all?

Hey, George. George O’Leary: The 65% increase in energetic sales quarter-on-quarter was particularly striking. Completions activity was clearly a peg. But was just an example of a case for your wire line customers where kind of cut short inventory and had cut both service projects plus restock that inventory? Or is this more of a market share shift type of dynamic? Just curious what you are of that – the super strong bounce there?

Yes, I think, well, it might be a better question for some of the wire line companies to give you a definitive answer on. There may be a bit of both going on there. But I think as we look over the longer period of time, what we see is our energetic sales tracking in almost every case exceeding the trends in completions. So, we see completions that were probably up – little bit fuzzy still on some of the numbers. It seems that most people are thinking that number is around 40% or so. And so, we think we nicely exceeded that. And we attribute a substantial part of that to penetration of new products and offerings. George O’Leary: Okay. Great. That’s helpful. And then, just on the Q1 seasonality that you mentioned, apologies if you hear mic getting the background. We are doing virtual learning as I am asking these questions. The Q1 seasonality that you mentioned, just went back and look at the last ten years and it kind of jumps around the Q-over-Q sequential change in revenue and I realize there is different drivers across different years. But could you frame maybe what drives the seasonality? Whether that’s something from a regional perspective on the international side or year-end sales that you might get in the fourth quarter kind of abating as we progress into that first quarter. So, any color there would be helpful.

Yes, I think, we look at, maybe even a longer view than that, 15, 20 years, go back and it’s a pattern that we see play out pretty consistently. That jumping around you see on occasion is usually attributed to a sharp upward move in the commodity price late in the year, like coming out of a steep frac holiday. And then you’ll see things – that will buff that trend. But very frequently, we’ve got clients that are trying to wrap up budgets or projects in the year. Historically, the fourth quarter of the year is our busiest year and our highest revenue year. And we see that new projects take a little time to spool up. Some companies are still refining budgets and plans. So, a little bit of a drag sort of out of the gate in the first quarter is what we’ve come to expect for Core Lab and in particular in reservoir description. And so, we see that is playing out this year and then we throw a little bit of uncertainty about COVID-19 disruptions. How those going to unfold or the pace at which those will abate. And that leads us to think that the first quarter will be flat to down slightly. Now, we normally would see that seasonal rollover in the mid-single-digits, I’d say, even when we include some of those sort of avert years. But we think that will be mitigated or lessened in the first quarter of 2021. And sort of locations and all and some are underlying reasons. So, often it’s northern hemisphere areas that we’ve seen some of the seasonality related to planning for weather conditions that might impair activity. Some clients just say, hey, no point and get no started and fighting predictably bad weather patterns. So they pushed those out a little bit and that slows things down. George O’Leary: That’s very helpful, Larry.

Parts of the North Sea, Europe, Canada, those can all be influenced in the first quarter. George O’Leary: Got it. That makes sense. And then, I’d sneak in one more if I could. You talked to these a bit in prepared remarks about free cash flow generation and deleveraging. Clearly, primary goals for you guys as we move forward. How do you think about, is there a yearend target? Or it’s 2022 or 2023 target on the deleveraging front? And then, could you maybe frame the moving pieces for free cash flow and 2021 come on the heels of a pretty powerful free cash flow generation year in 2020?

Yes. I’ll get started on that. So, directionally, we are aiming to try to get that leverage ratio below 1.5. We think that’s a more comfortable position, maybe go lower than that depending on market conditions. But certainly get it down to, what I would call it, a cooler balance sheet. And that will be helped as well, obviously, as activity picks up and our EBITDA grows, that’ll have a – that’ll be a virtual cycle on that leverage ratio. But we will and we are committed to as we work throughout 2019 and continued – I am sorry, as we continue into 2021 and as we were in 2020, we are committed to, for the time being applying free cash to reducing our net debt. And so, Chris, with relation to the forecast and timing on those.

Yes. I think Larry did a great job summarizing that. Longer term, that’s the kind of the target. Whether we get there by the end of this year or next year seems to be very achievable to get to those levels by the end of 2022. But this year, it will really depend on how it unfolds and kind of how much time it takes to get toward this COVID in the rearview mirror and really the global economy kind of moving back towards where we were pre-COVID. George O’Leary: Thanks very much for the color, guys.

Thanks, George.

Sure George. Thanks.

Our next question comes from Mike Sabella with Bank of America.

Good morning, Mike

Hey, good morning, Gwen. Good morning, everyone.

Morning.

Good morning.

I was wondering if you could comment and try to help frame the magnitude of how you are thinking about the second half recovery in international, some of the larger guys have been pointing to kind of up double-digits second half 2021 over second half 2020. How do you see your all opportunity set kind of playing out in the second half?

Yes. I mean, I think, there is maybe a little bit of built-in caution as we look and some of the unpredictability where we wouldn’t necessarily disagree with some of the forecast that have put out there. We see that trend developing, and particularly as you look at it on a year-over-year basis.

All right. Thanks. And then, if we are kind of thinking about reservoir description and thinking about the segment in the context of how it performs as OPEC starts to kind of bring in production back online. Can you talk about what the opportunities for the fluids business are sort of earlier in that process kind of versus maybe later once kind of losing fluids mandate?

Yes. I think there is a little bit of a potential bump upward there, particularly where there has been wells shut in and people want to assess what current gas oil ratios are. What the pressures are doing? How it’s affecting the fluids in the borehole. So it could be a little bit of a flurry unfold on that. I don’t think it’s going to be a big needle mover. But we are well positioned to handle that. We are also expanding our fluids laboratory capability right now in the Middle East, as well as the Brazil market that I talked about earlier. So, I think the fluid side of the business, let’s maybe frame this in a bigger context here. We are in a fluids heavy phase of Core Laboratories. Go back and contrast, say Core Laboratories 2010 to 2015, when there was a lot of new rock having to be evaluated in unconventional. That was the rock heavy cycle. We are in now more of a harvesting mode and so, we are more of a fluid heavy cycle. And I’d say historically, if you look back over Core Lab, as we look back over it, it kind of swings between about a one-third, two-third blend of one or the other the services over time. So, we are kind of tilted heavily toward the fluid side of the business at the moment. That blue cycle is inevitably wind down and as new fields have to be developed and appraisal has to go on, it swings back toward the rock side of the business. So, I think fluids are a real anchor for our business through what’s a down cycle like we’ve been through and are experiencing right now. And I think it will stay that way, although what we see as we look out longer over several years is, a new cycle of appraisal to bring new fields on and new zones and fields on will have to unfold and that will swing the tangible back a bit toward the rock side of the business.

Perfect. Thanks everyone.

You are welcome.

Thanks, Mike.

Our next question comes from Scott Gruber with Citigroup.

Good morning, Scott.

Yes. Good morning, everybody.

Hey, Scott.

Morning, morning. So just a little bit more color on 1Q. When we think about the split on segment revenue trajectory, you guys thinking about RD potentially down kind of mid-singles and PE up 10%, 15%. Is that fair or a little bit different?

I think that’s broadly framed it. I think the short-term upside for us is a continuation of improving conditions in U.S. land and that will certainly lean toward production enhancement. That’s a substantial part of that business. And then on the reservoir description side, for the first quarter, that seasonality is going to play in to a regular pattern that we anticipate there. And then, we’ve got, just I guess, what everybody is dealing with the lack of clarity on what country is going to be next in putting a lockdown or posing a restriction on our business activities that might impact us. And so, I think, broadly, you are correct there. I don’t know that I’d extend the downside in reservoir description quite that much. But it’s not on the realm of what we might expect.

Gotcha. And then just some color on incremental for both costs are coming back into the system for everybody as things start to turn the corner here. So any color on incrementals in 1Q. And then, as we think about 2Q, obviously, you guys mentioned stronger incrementals in the second half. It sounds like getting back to those normal healthy incremental for Core Labs in the second half. But in 2Q, do you still have costs coming back into the system or is there just a lack of clarity on growth in 3Q right now or maybe the incrementals just aren’t that relevant. How do we think about both 1Q and 2Q before we get to better incrementals in the second half?

Sure. This is Chris. So, it’s a – I think you have to look at it segment-by-segment that we are projecting cost to kind of come back in a little bit in Q2 and maybe even more so, I mean, in Q1 and a little bit maybe more so into Q2. But so it is going to soften the incrementals. For the company as a whole, you start to get into also a different mix of this segment. So, production enhancement is kind of in - more of in a growth mode. And that is carrying lower margins. So, company overall it is going to impact the incremental and kind of how the two segments sort of play out. Anything you want to add to that?

Yes. I will just say that, it’s a bit choppy right now and it’s going to be remind that why was incrementals is we are still in this. But if you go back and refer back to our calls over the last few quarters, we are still seeing this stop go, stop go effect. It’s just unpredictable where it’s going to happen or if a product delivery shipment or a well site job is just going to get shutdown because of virus activities, we are not letting those people go. Those costs remain in the system. We’ve got to be ready to go when the clients says go. And so, it’s somewhat inefficient phase here. I’ll take it over the strict steep downward trend that we’ve had in activity. But it’s still a bit chaotic in terms of how activity is going to roll out and so we are carrying a cost structure that we think we’ve got broadly aligned with what we need to, to execute the program. But it’s still little choppy in terms of how the work projects going to roll. As we look further out, I think the traditional incrementals that you come to expect at a Core Lab 50%, 60% are very achievable and I’ll go on to say that, if you look at the structural cost that we’ve taken out of the company from G&A all the way through operations, we are set up to be very well positioned to convert a dollar of revenue into $0.50 or much better in terms of EBIT.

Got it. I appreciate all that and the silver lining is that there seems to be light at the end of the tunnel now.

Yes.

And if I could sneak one more in, Chris, on CapEx, and maybe you guys haven’t made the decision on the second half, but should we think about maybe $6 million in the first half and at a starting point maybe $10 million in the second or can you provide some clarity on how you guys to think about second half CapEx maybe relative to the revenues?

Yes. You know the numbers that you threw out there, those are definitely in the range that we are kind of looking at. There is some flexibility there. So we have the ability to flex some things, if we need to accelerate some things, we’ll do that. So, anything that looks like a good investment with good returns, we are going to go ahead and move forward with that. And if needed, there are some levers we can pull to do that. So, but those are kind of close to what we are thinking. It could be a little higher if things don’t take off in the second half as quickly as we are projecting, then we have the ability to dial that back a little bit.

And I think – the only thing I’d add to that, I think, Chris covered it very well is, expect Core Lab to stay within its traditional percentage of capital to revenue ratios. It’s normally around 3%, 3.5% during down cycles. It will be below 3% during normal cycles and sort of, hey, we’ve got to get after some phased lab build outs or things like that to face client needs. It might tick up, but we are talking about fractions of a percentage here. But we are going to stay very close to our asset-light capital-disciplined business. We know that very well. How to run that and we are pretty disciplined in how we evaluate opportunities and how we deploy that capital.

Yes. So it wouldn’t go above 4%, say, in the second half? I think, it’s going to restart spend?

Back over time, it’d be a rare case when we were in a sort of a hyper growth cycle where it might have gotten up in that range. But that’s good.

Got it. Appreciate all the color. Thank you.

Thanks, Scott.

Our next question comes from Connor Lynagh with Morgan Stanley.

Hi, Connor.

Yes. Thanks. Good morning.

Good morning.

I just wanted to talk a little bit more about the balance sheet and cash flows. I guess, notice that you guys have not chosen to do anything with the at the market equity program. In light of, Chris, your comments on, having some pretty good confidence on delevering organically, how should we think about how you guys currently use this as a just an option out there, and for flexibility, I guess, how should we think about whether or not you guys will be utilizing that program or not?

Yes. I think, we’ve talked a little bit about that. It is out there. We are always looking at opportunities both internally and externally. So, we are constantly evaluating that. I think we wanted to have the flexibility to make sure we are progressing on some of these internal growth initiatives. But also in case something externally comes across that we want to execute on, we want to have that flexibility. And although we are projecting to stay within our financial covenants, it is tighter than we would like it to be. And we just don’t want to be restricted from doing something that we think is a good long-term decision for the company, because we got to manage a little tighter to the debt leverage ratio for the next quarter or two. So it is there and if we feel like we need to access it, that is what it’s therefore. There is still a lot of uncertainty over the next couple of quarters with respect to how we are going to plough through the virus and when we are really going to kind of have that behind us.

Understood. Understood. I guess, if we sort of think about the world and where you sort of get to those target leverage ratios you were discussing earlier, it seems like you are talking about some internal and external growth opportunities. There is also the potential for incremental capital return. Can you just discuss your sort of framework around that? And specifically on the growth opportunities, where do you see, within your portfolio the more interesting avenues right now?

Yes. We look across the landscape there. I would say, Core Lab is a – because of our position and our global footprint, we are somewhere between regularly approached and bombarded with external opportunities. We take a very calculated look to how things might fit in. We are more interested in our internal pipeline growth opportunities. We think that that’s extraordinarily good and some of those, as we get through the year, we’ll be talking about the more – some of those are concepts that individual clients that we have great relationships with have come to us and said, hey, what about this? And we are working on it with them together, Core Lab will own the IP and will own the service, say, opportunity for us. So, we want to make sure that we have the ability to fund those and as Chris said, I think, framed it very nicely, we don’t want to have to manage the company and miss or delay growth opportunities because we are trying to navigate what I would call it a transient type point in the leverage ratio. It’s just not good for the long-term to be handcuffed like that and miss or delay opportunities.

Right. Makes sense. I’ll turn it back. Thank you.

Thanks, Connor.

Thanks, Connor.

Our next question comes from Sean Meakim with JP Morgan.

Good morning, Sean.

Hey, Sean.

Morning.

Hey, Sean.

Let me just – to continue back on the margin progression discussion, I think you indicated cost savings will help incrementals every time year-over-year basis, it sounds like, there is a bit of a headwind sequentially in the first half. It all sounds reasonable. As you think about potential peak margin for 2021 versus the average, as I think about RD or high teens, a possible peak in 2021 even if perhaps maybe we are going to average and then more like mid-teens, would you talk about that dispersion potential?

Yes. I mean, I think, if things unfold the way we expect it to, and the virus abates kind of with an idea that, hey, things will be improving into the second quarter beyond, I think an exit rate for RD in the mid to high teens is achievable. We’ve just did 15 last quarter and I think in the quarter before that with two consecutive quarters of that.

Yes.

And so, I think from there, get past to sort of the – maybe a little bit of seasonality issues in the first quarter, we should go up.

Okay. That sounds reasonable. So then just continuing that line is shrinking…

Sean, I would just reinforce one thing on that is, that I said earlier that, when we look at the structural cost that we’ve taken out of the system, all the way up and down the organization that will reinforce that – what we can do with that extra dollar of revenue that will come with an increase in activity.

Fair enough. So then just, continuing on that line, I think, now for PD, you have the nice bounce back on margins in 4Q. You had good volume growth. How do you think about the potential cadence of activity in U.S. onshore? So, do we think, we’ll see a peak in volumes middle of the year, 2Q, 3Q? Risk of budget exhaustion at year end. Do you anticipate more of a level load? And then the read through to margins would be interesting. So, can we peak at a double-digit – the double-digit margin? Or would you characterize, maybe high-single as the best we could hope for in 2021?

Hey, Sean. This is Chris. So, we are kind of projecting more of a gradual kind of build as we move throughout the year and maybe that starts to kind of flatten out as you get towards the back half. But if you make assumptions around where commodity prices are going to be, unless they stay at current levels or strengthen throughout the year, that would be our expectation. And we are still not to sort of levels where we really have whole efficiencies in our manufacturing facilities. So, we would expect margins to continue to expand there a little bit. Incrementals can be a little bit lower for on the product side. So, I wouldn’t get too aggressive there may be in the historically 25% to 30% range is then achievable for us. And then on the services side, they can be a little higher. So, as you kind of blend that out and forecast that out, we would expect high-single-digits to low double-digits to be achievable if you project to continued growth for the rest of the year.

And so, it sounds like you are not expecting much of a kind of mid-year peak and a budget roll off more of a plateau perhaps at some time towards the middle of the year?

Yes. Not at the current commodity prices.

Okay, great. I appreciate the feedback.

Sean, just to reinforce something Chris has said earlier here. We do have some costs that are going to have to come back into the system. And that’s going to impact our incrementals – we’ll call it the near-term until we get back to a sort of more normalized world. We’ve still got employees that are on furlough. We are slowly winding those back in. We’ve got employees that have demonstrated great loyalty to us, taken pay cuts to navigate the difficult time. It’s a priority for us to as soon as possible return people either in steps or in whole, get them back to where they were. And so, we want to make sure that we do that and don’t neglect the sacrifices that they’ve made to help navigate this difficult moment.

Okay.

We’ve got time for one more call.

Your next question will come from Stephen Gengaro with Stifel.

Good morning, Stephen.

Hey, Stephen.

Good morning.

Good morning, everybody. Thanks for slipping me in here. Really, I think there is only one thing left. I really wanted to ask you about, we heard that there was a lot of sort of component inventory in the channel on the Perforating side over the last couple quarters especially, because of a massive drop-off in 2Q and that has kind of impacted the pricing dynamics there. Do you have any thoughts on that? And where the inventories stand, especially with some of these more probably commodity component manufacturers and how the pricing dynamic currently sits within the Perforating business?

Yes. Kind of circle back to, I think, George’s question earlier there. It might be a better question to ask some of the wire line companies where they stand on the inventories they are holding there. I’ve imagined they are trying to run pretty lean inventories. And so, I think they are trying to work on a just in time opportunity. They don’t want to have capital tied up sitting in inventory. And so, for us, it’s been a combination of system sales and component sales and with the new offerings that are coming on through the market that we are having the nice reception too. And so, I think it’s a complicated world out there. I am glad that Core Lab is in the business of selling both components and systems.

Thanks. And then, within that context, are you seeing any re-acceleration or acceleration in the adoption of integrated systems versus components? Because I heard that that had kind of slowed down because of that phenomenon earlier in the year. Have you seen, sort of for example, GoGun regained some traction.

Yes. I mean, I’ve talked about in one expression of that here with the Oriented GoGun. And so, that’s coming to market now. And so, that was a desire on the part of the client that was using our preassembled system that said, hey, our objective for the moment is to make sure that we get precise alignment of the perforating tunnels before we go and frac this thing. And so, thanks to that relationship. They came to us and said, here is what we are trying to do. Can you help us get there? And that led to the Oriented GoGun and stay tuned. More to come on that.

Very good. Thank you.

Okay, Stephen.

Thanks, Stephen.

Okay. I think, we’ll wrap up from there. In summary, Core’s operational leadership continues to position the company for improving client activity levels in 2021. While there is still operational uncertainties in the near to mid-term, there are many opportunities ahead. We have never been better operationally or technologically positioned to help our clients maintain and expand their production base and address their evolving needs. We remain uniquely focused and on the most technologically advanced, client-focused, reservoir optimization company in the oilfield service sector. The company will remain focused on free cash conversion and returns on invested capital. In addition to our quarterly dividends, 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 reduce debt. So, in closing, we thank and appreciate all of our shareholders and the analysts that cover Core. 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 are proud to be associated with their continuing achievements. So thanks for spending time with us. And we look forward to our next update. Good bye for now. \