Eastman Kodak Company (KODK) is a global manufacturer focused on commercial print and advanced materials and chemicals. With a rich history spanning over 130 years, Kodak has built a strong foundation of research and development, earning over 79,000 patents. The company's innovative products, combined with its customer-centric approach, make it a trusted partner for commercial printers worldwide.
In the face of a challenging global environment, Kodak has remained committed to executing its long-term strategy. The company has strengthened its balance sheet, refinanced its long-term debt, and is now generating cash, which allows it to continue investing in its core businesses and drive innovation.
Business Overview
Kodak's Print segment, which accounted for 73% of its total revenues in the first quarter of 2024, has faced headwinds from higher prices and availability of raw materials, digital substitution, and competitive pricing pressures. To mitigate these challenges, the company has implemented a combination of surcharges, price increases, improved production efficiency, and cost reduction initiatives. Kodak's focus on innovation, such as its SONORA Process Free Plates and the PROSPER Inkjet Systems, has helped offset the impact of market dynamics.
The Advanced Materials and Chemicals (AMC) segment has also experienced its share of challenges, including labor shortages in certain manufacturing areas and increased demand for consumer film products. Kodak has responded by increasing headcount, improving infrastructure, and streamlining processes to increase capacity in the film business. Additionally, the company is leveraging its expertise in chemistry, deposition, and coating processes to explore new initiatives in areas like electric vehicle battery material manufacturing, light-blocking technology, and transparent antennas.
Financials
In the first quarter of 2024, Kodak reported revenues of $249 million, a decrease of $29 million (10%) compared to the same period in 2023. This decline was in line with the company's estimate of the overall market decline. Despite the revenue decrease, Kodak's gross profit only declined by $1 million (2%), and its gross profit percentage increased from 18% to 20%. This performance reflects the company's commitment to improving operational efficiency and investing in automation.
On a GAAP basis, Kodak reported net income of $32 million in the first quarter of 2024, compared to $33 million in the prior year quarter, a decrease of $1 million. Excluding one-time items, net income for the first quarter of 2024 was $14 million, compared to $26 million in the prior year quarter, a decline of $12 million. Operational EBITDA for the quarter was $4 million, compared to $9 million in the prior year quarter, a decline of $5 million. This decline was primarily due to significant investments in automation and simplification of back-office functions.
Liquidity
Kodak's cash performance in the first quarter of 2024 was strong, with the company ending the quarter with a cash balance of $262 million, an increase of $7 million from December 31, 2023. Cash provided by operating activities was $17 million for the current quarter, compared to $14 million in the prior year quarter, reflecting an improvement of $3 million. This was primarily driven by changes in working capital, including a $53 million decrease in accounts receivable due to $40 million of cash proceeds from brand licensing.
For the full year 2023, Kodak reported annual net income of $75 million, annual revenue of $1,117 million, annual operating cash flow of $38 million, and annual free cash flow of $6 million. The company remains in compliance with all applicable financial covenants.
Outlook
Looking ahead, Kodak is focused on maintaining the strength of its foundation, which provides the opportunity to fund ongoing operations and invest in growth opportunities. The company plans to concentrate on the fundamentals of its strategic plan, investing for growth, increasing operational efficiency, and helping its customers succeed.
Kodak's strategy includes a focus on its core competency areas of print and advanced materials, leveraging its proprietary technologies to deliver technologically advanced products in the product goods packaging, graphic communications, and functional printing markets. The company also aims to grow revenues through a focus on customers in its print division, increase overall market share, promote the use of film, and expand the applications of its film and chemicals.
In the Print segment, Kodak is investing in digital plate products, including its SONORA Process Free Plates, which offer customers time and cost savings, as well as environmental benefits. The company is also focused on its digital printing businesses, such as the PROSPER Inkjet Systems, which are expected to continue building profitability.
In the AMC segment, Kodak is exploring new initiatives that leverage its expertise in chemistry, deposition, and coating processes. These include efforts in electric vehicle battery material manufacturing, light-blocking technology, and transparent antennas. The company is also capitalizing on its existing chemical manufacturing expertise to expand into the production of diagnostic test reagent solutions.
Conclusion
Kodak's success is largely attributed to the competitive spirit and winning attitude of its employees. The company remains committed to putting its customers first, offering a complete range of solutions, a reliable supply, and ongoing innovation in both offset and digital print, as well as advanced materials and chemicals.
Despite the challenges posed by the global economic environment, Kodak has demonstrated its ability to adapt and maintain profitability. The company's focus on operational efficiency, cost reduction, and strategic investments positions it well to navigate the current landscape and capitalize on future growth opportunities. As Kodak continues to execute its long-term plan, investors will be closely watching the company's ability to deliver on its promises and drive sustainable growth.