Eastman Kodak Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 11, 2025

Key Takeaways

  • Negative Sentiment: Kodak reported Q2 revenue of $263 M, roughly flat year-over-year, but gross profit margin fell to 19% (vs 22% prior) and posted a $26 M net loss (adjusted net loss of $9 M).
  • Positive Sentiment: Revenue growth in the Advanced Materials and Chemicals segment continues, with the new US-based cGMP pharmaceutical facility now FDA-registered to produce phosphate buffered saline and laying groundwork for injectables.
  • Positive Sentiment: Kodak expects roughly $500 M of pension assets to revert after the CRIP termination by December 2025, using about $300 M in cash to pay down term debt, lowering interest costs and deleveraging the balance sheet.
  • Negative Sentiment: Kodak disclosed substantial doubt about its ability to continue as a going concern due to upcoming May 2026 maturities of its Series B preferred stock and term loan, which remain unextended.
  • Neutral Sentiment: Kodak entered an ATM equity offering agreement to sell up to $100 M of common stock to bolster liquidity but has not yet issued any shares under the program.
AI Generated. May Contain Errors.
Earnings Conference Call
Eastman Kodak Q2 2025
00:00 / 00:00

There are 4 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Eastman Kodak Q2 twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anthony Redding, Chief Compliance Officer.

Operator

Please go ahead.

Speaker 1

Thank you, and good afternoon, everyone. I am Anthony Redding, Eastman Kodak Company's Chief Compliance Officer. Welcome to Kodak's Second Quarter twenty twenty five Earnings Call. At 04:15 p. M.

Speaker 1

This afternoon, Kodak filed its Form 10 Q and issued its release on financial results for the second quarter and 2025. You may access the presentation and webcast for today's call on our Investor Center at investor.codec.com. During today's call, we will be making certain forward looking statements as defined by the Private Securities Litigation Reform Act of 1995. We intend for these forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All forward looking statements are based upon Kodak's expectations and various assumptions.

Speaker 1

Future events or results may differ from those anticipated or those expressed in the forward looking statements. Important factors that could cause actual events or results to differ materially from these forward looking statements include, among others, the risks, uncertainties, and other factors described in more detail in Kodak's filings with the US Securities and Exchange Commission from time to time. There may be other factors that may cause Kodak's actual results to differ materially from the forward looking statements. All forward looking statements attributable to Kodak or persons acting on its behalf only apply as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements included or referenced in this presentation. Kodak undertakes no obligation to update or revise forward looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

Speaker 1

In addition, the release just issued and the presentation provided contains certain measures that are deemed non GAAP measures. Reconciliations to the most directly comparable GAAP measures have been provided with the release and within the presentation on our website in our Investor Center at investor.kodak.com. Speakers on today's call are Jim Continenza, Kodak's Executive Chairman and Chief Executive Officer and David Bullwinkle, Kodak's Chief Financial Officer and Senior Vice President. We will not be holding a formal Q and A during today's call. As always, the Investor Relations team is available for follow-up.

Speaker 1

I will now turn the call over to Jim. Thank you, and good afternoon.

Speaker 2

Welcome, everyone, and thank you for joining the second quarter twenty twenty five investor call. As we remind everyone, we continue to execute on our long term plan despite all the uncertainty happening in the business environment around the world, from tariffs to logistics to wars. De levering the business and strengthening our balance sheet has been a key initiative from day one. We continue to do that and see improvements. Investing in growth businesses, and you'll see many of them come to fruition.

Speaker 2

We invested heavy back in cell, paying off EV batteries or battery substrate coating, and then our medical group that we just recently launched and more to come as we go through the presentation. One of the key items in delivering and investing in business growth is by increasing your operational efficiencies. We continue to do that through technology and automation and standardized practices throughout the business. Our core business continued to perform as expected. Highlights from the second quarter include revenue of $263,000,000 compared with $267,000,000 for second quarter twenty twenty four, roughly flat year over year.

Speaker 2

I'm proud to say we continue to see revenue growth in our Advanced Materials and Chemicals business, known as AMC. Those investments are paying off, and we're excited with the progress we've made. Gross profit percentage of 19% compared with 22% for the second quarter twenty twenty four is in line with our expectations with all the changes happening quickly in the business environment. I think it's important for me to remind our investors and our customers our commitment to US manufacturing, and I'll discuss the impact of the tariffs. But to be clear, several years ago, we brought back our heritage as a US manufacturer.

Speaker 2

From our manufacturing facilities up in Rochester, all motion picture film made in The US, most of them made in The US, a lot of other types of films made in The US, all of the Rochester plant. Our digital printers made in The US. Our ink made in The US. Our chemicals made in The US. We continue to be a US manufacturer, and we're the only manufacturer of lithographic plates in The United States.

Speaker 2

Kodak is proud to be a global company in our key manufacturing taking place right here at home. These advantages help us greatly with logistics and servicing and supplying our customers. In addition, our AMC growth initiatives include a new CGMP pharmaceutical manufacturing facility located in The United States in Rochester, New York. Our plan to continue to delever allows us to execute our long term growth initiatives. Let's talk about tariffs.

Speaker 2

Year to date, tariffs did not have a material impact in our business. We're supportive of tariffs as long as they benefit the US manufacturer. We would hope the impact of the tariffs would not negatively impact the last US manufacturer of lithographic plates. Moving on to highlights of our commercial print business, which is still our largest business. We continue to see improvements in efficiency and products and acceptance of our products.

Speaker 2

Again, right, there's a lot going on in the world that impacts print. We continue to provide our customers with reliable supply and a full range of solutions from offset to digital print. We've completed initial sale of several PROSPER five twenty, which are currently being installed at customer sites as we speak. An update on our US based Advanced Materials and Chemicals pharmaceutical initiative. As we continue to invest in our US print business, we continue to also see acceleration of growth in our AM and C business.

Speaker 2

Our CGMP pharmaceutical manufacturing facility is now registered with the FDA and certified to manufacture and sell certain regulated pharmaceutical products. This initiative is an extension of our current business in unregulated pharmaceutical key starting material known as KSM. The facility will begin operation manufacturing phosphate buffered saline, known as PBF, for laboratory use and create a bridge to manufacturing more sophisticated products and ultimately injectables such as IV saline. Let me give you an update on Kodak's US pension plan. A lot's been written about it.

Speaker 2

The CRIP termination and reversion process is proceeding as planned. We expect a significant portion of any reverted asset to be used to reduce our long term debt, and therefore, the annual cost of servicing that debt. Dave Boellwinkle will be providing much more detail, and you can find additional information in our Form 10 Q filing. Now I will turn it over to Dave to discuss the second quarter financial results.

Speaker 3

Thanks, Jim, and good afternoon. Today, the company filed its Form 10 Q for the quarter ending 06/30/2025 with the SEC. As I always do, I recommend you read this filing in its entirety. Before I get into the details for the second quarter and 2025, I would like to provide a brief status update on the termination and settlement process for The US Kodak Retirement Income Plan or CRIP on the status of our Series C preferred stock, and on a disclosure we made in our Form 10 Q filing. First and foremost, the CRIP termination and settlement process is proceeding as planned.

Speaker 3

By the close of the participant settlement election period, which ends on 08/15/2025, we expect to have a clear understanding of how we will satisfy our obligations to all plan participants. This window allows certain participants to elect whether their benefit will be settled via an annuity or a variety of lump sum options. Once that process is complete, the company intends to finalize the purchase of an annuity contract in October 2025 for participants who elect to receive regular annuity payments, and payouts are expected to be distributed in November 2025 to those who choose to receive lump sums. We expect CRIP to distribute excess assets to the company and the Kodak cash balance replacement plan in December 2025. At this time, our best estimate of pension assets that will revert to the company from the settlement of CRIP is approximately $500,000,000 with approximately $300,000,000 of this in cash and the remaining amount in illiquid assets, primarily hedge funds, which are in the process of redemption.

Speaker 3

A large portion of the reverted cash will be used to reduce term debt as required by the company's credit agreements. Please note, as previously disclosed, this time frame is subject to factors beyond Kodak's control, but not limited to, the regulatory review and approval of various aspects of the terms of CRIP, CRIP's activities, and the termination and liquidation process. Additionally, we are pleased to report on 08/08/2025, the Series C preferred stock held by Grand Oaks Capital was exchanged for shares of common stock of the company at an exchange price of $8.25 per common share. On the date of exchange, the shares issued represented approximately 15.7% of the outstanding shares of common stock of the company post exchange. This exchange eliminates the entire outstanding amount of the original $100,000,000 in Series C preferred stock, which had a mandatory redemption date of 05/28/2026, and over $24,000,000 of outstanding accrued paid in kind dividends.

Speaker 3

Finally, included in our Form 10 Q filing is disclosure regarding the company's determination that there is substantial doubt about its ability to continue as a going concern. This disclosure is driven by the existing Series B preferred stock not being extended or refinanced past the current mandatory redemption date of 05/28/2026, and the spring maturity of the company's term loan, which is 05/22/2026, or five days before the mandatory redemption date of the company's Series B preferred stock. As a result, both the Series B preferred stock and term loan contractual maturity is within twelve months. The company chose not to extend the maturity of or replace the Series B preferred stock based on unacceptable terms in light of the 4% dividend rate for the remainder of the term. As we have discussed and disclosed, the company's plan to address these maturing obligations is to complete the termination of CRIP and revert excess cash and assets of approximately $500,000,000 to the company by December 2025 prior to the maturity dates in May 2026.

Speaker 3

The company expects to use cash received to repay the term loans and subsequently refinance or extend our remaining preferred stock and debt obligations. As these plans are not solely within the company's control and therefore are not deemed probable as defined under US GAAP accounting rules, we are required to provide this disclosure. Please refer to the Form 10 Q filed with the SEC today for further information and disclosure. In order to provide flexibility to generate additional liquidity for the company, we entered into an ATM equity offering sales agreement with BofA Securities, Inc. On 05/21/2025.

Speaker 3

Under this agreement, the company may offer and sell up to $100,000,000 of shares of Kodak's common stock from time to time in at the market offerings through BofA as sales agent or as principal. If executed, we intend to use the net proceeds from the sale of the shares for general corporate purposes. To date, the company has not sold any shares under this arrangement. The company also has the ability under the term loan credit agreement amendment entered into in May 2025 to pay the cash interest payment entirely in PIC for the next six quarterly interest payments. The company elected to pay the cash interest payment for the 2025 entirely in PIC.

Speaker 3

We are also exploring various opportunities to reduce or eliminate restricted cash on our balance sheet. As of 06/30/2025, the total amount of restricted cash was $98,000,000 I will now share details on the full company results, operational EBITDA, and cash flow for the second quarter and 2025. Kodak continued to build on its strong foundation during the 2025. In the face of an extremely difficult global environment with economic uncertainties around global trade and inflation, Kodak delivered results that were within our expectations. These results reflect the continued focus on executing against our priorities and long term plan, including driving SMART revenue, implementing pricing rationalization and cost reductions, launching new products, and investing in innovation and information technology systems to increase our operational efficiency.

Speaker 3

On slide seven, we reported revenues of $263,000,000 for the 2025 compared to $267,000,000 in the prior year quarter or a decline of $4,000,000 or 1%. On a constant currency basis, revenue decreased by $9,000,000 or 3% when compared to the prior year quarter. The lower decline in revenue reflects our ongoing focus on driving SMART revenue and strong profitability. The continued revenue growth in our Advanced Materials and Chemicals business manifests the results of our efforts. Gross profit decreased by $7,000,000 or 12% when compared to the prior year quarter.

Speaker 3

Excluding the impact of foreign exchange, gross profit declined by $8,000,000 or 14% when compared to the prior year quarter. Our gross profit percentage was 19% in the 2025 compared to 22% in the prior year quarter. Gross profit for the 2025 was unfavorably impacted by lower volumes and higher aluminum and manufacturing costs, partially offset by price increases. On a U. S.

Speaker 3

GAAP basis, we reported a net loss of $26,000,000 for the 2025 compared to net income of $26,000,000 in the prior year quarter, a decrease of $52,000,000 $17,000,000 of this decrease was for a non cash asset impairment charge in the current year quarter related to an equity investment held by the company. After adjusting for the non cash asset impairment charge, net loss was $9,000,000 for the 2025 compared to net income of $26,000,000 in the prior year quarter, a decrease of $35,000,000 This decrease was largely driven by a $25,000,000 decline in pension income excluding service cost component, given our change in strategy for the Crip, which resulted in a lower expected return on assets. Operational EBITDA for the 2025 was $9,000,000 compared to $12,000,000 in the prior year quarter, for a decline of $3,000,000 Excluding the impact of foreign exchange in the current year quarter, operational EBITDA declined by $4,000,000 when compared to the prior year quarter. Operational EBITDA for the 2025 was unfavorably impacted by lower volumes and higher aluminum and manufacturing costs, partially offset by price increases and lower spend on investments in IT systems, organizational structure, and costs associated with trade shows. Turning to slide eight.

Speaker 3

For the 2025, we reported revenues of $510,000,000 compared to $516,000,000 in the prior year period, or a decrease of $6,000,000 or 1%. Adjusting for the impact of foreign exchange of $2,000,000 in the current year period, revenue decreased by $8,000,000 or 2% when compared to the prior year period. Gross profit decreased by $10,000,000 or 9% when compared to the prior year period. Foreign exchange had no impact on gross profit in the current year period. Our gross profit percentage was 19% for the 2025 compared to 21% in the prior year period.

Speaker 3

Gross profit for the 2025 was unfavorably impacted by lower volumes and higher aluminum and manufacturing costs, partially offset by price increases. On a U. S. GAAP basis, we reported a net loss of $33,000,000 for the 2025 compared to net income of $58,000,000 in the prior year period, a decrease of $91,000,000 $17,000,000 of this decrease was for a non cash asset impairment charge in the current year period related to an equity investment as previously indicated. After adjusting for the non cash asset impairment charge of $17,000,000 in the current year period, a net gain on the sale of assets of $17,000,000 in the prior year period, and non cash changes in workers' compensation and employee benefit reserves, net loss for the first half of twenty twenty five was $15,000,000 compared to net income of $40,000,000 in the prior year period or a decrease of $55,000,000 This decrease was largely driven by a $44,000,000 decline in pension income excluding service cost component related to the CRIP, as stated earlier.

Speaker 3

Operational EBITDA for the 2025 was $11,000,000 compared to $16,000,000 in the prior year period, or a decline of $5,000,000 Excluding the impact of non cash changes in workers' compensation and employee benefit reserves in the current and prior year periods, operational EBITDA decreased by $3,000,000 when compared to the prior year period. Foreign exchange had no impact on operational EBITDA in the current year period. Operational EBITDA for the 2025 was unfavorably impacted by lower volumes and higher aluminum and manufacturing costs, partially offset by price increases and lower spend on investments and organizational structure changes. Moving on to the company's cash performance presented on slide nine, the company ended the second quarter with an unrestricted cash balance of $155,000,000 a decrease of $46,000,000 from 12/31/2024, of which $43,000,000 occurred in the 2025. This reflects significant improvement in our use of cash during the 2025.

Speaker 3

Our use of cash was primarily driven by our continued investments in Advanced Materials and Chemicals growth initiatives and increased commodity and manufacturing costs. Foreign exchange had a favorable impact on cash of $5,000,000 in the current year period. Cash used in operating activities was $30,000,000 for the 2025, primarily driven by the use of cash from net earnings of $4,000,000 and a use of cash from balance sheet changes of $26,000,000 including a change in working capital of $24,000,000 a decrease in miscellaneous receivables of 3,000,000 and a decrease in other liabilities of $21,000,000 Within working capital, accounts payable decreased by $8,000,000 inventory increased by $13,000,000 and accounts receivable increased by $3,000,000 The change in working capital for the prior year period included the impact of $40,000,000 of cash proceeds from brand licensing. The team continues to focus on improving profitability and performance in working capital, which enhances the company's ability to generate cash. Cash used in investing activities was $19,000,000 for the current year period compared to $2,000,000 in the prior year period, primarily due to a decrease in proceeds received of $12,000,000 related to the sale of assets and an increase in capital expenditures of $5,000,000 primarily driven by our investments in Advanced Materials and Chemicals business.

Speaker 3

Cash used in financing activities for the 2025 improved by $16,000,000 when compared to the prior year period, primarily driven by the $17,000,000 prepayment of the amended and restated term loan agreement made in the prior year period. Restricted cash decreased by $2,000,000 when compared to the balance as of 12/31/2024, primarily driven by strategic efforts to reduce cash collateral and escrow requirements for certain company obligations and business arrangements. Restricted cash primarily represents cash collateral supporting the company's undiscounted actuarial workers' compensation obligations with the New York State Workers' Compensation Board and cash collateral required under the letter of credit facility, in addition to escrows to secure various ongoing obligations. As I stated earlier, we continue to focus on opportunities to reduce restrictions on cash. As presented on the bottom portion of the slide, excluding the change in restricted cash and the effects of foreign exchange, the company recognized a $52,000,000 decrease in cash and cash equivalents in the 2025 when compared to the prior year period.

Speaker 3

We remain committed to maintaining the strength of the foundation we have worked diligently to create. This foundation provides us the opportunity to fund our ongoing operations, invest in our growth initiatives, and convert our historical investments into returns for the long term. Finally, as disclosed in our Form 10 Q, we remain in compliance with all applicable financial covenants. I will now turn the discussion back to Jim. Thank you.

Speaker 2

Thank you, Dave. In summary, some key messages to walk away from this call is we continue to fix our balance sheet by delevering the business and investing in growth areas. As an American manufacturer for over one hundred years, we remain committed to manufacturing in The U. S. And expect U.

Speaker 2

S. Tariffs to protect U. S. Businesses like ours. Our CGMP pharmaceutical manufacturing facility is now registered with the FDA and certified to manufacture and sell regulated pharmaceutical products, starting with PDF, again, phosphate buffered savings.

Speaker 2

Again, just as a reminder, our US pension plan termination and reversion process is right on track with expectations, And we plan to use excess assets to pay down debt and reduce our interest costs, allowing Kodak to continue to invest in profitable growth businesses. I wanna make sure I thank all of our employees around the world for all their hard work and all of our customers around the world for their loyalty. I'd like to thank our shareholders for continuing to believe in us and invest in us. We are committed to working through the uncertain business environment and executing our long term plan and delivering shareholder value for all of our investors. Thank you, and have a good day.

Operator

And this concludes today's conference call. Thank you for participating. You may now disconnect. Have a good day.

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