Categories Analysis, Earnings, Industrials

Q4 Earnings Preview: All eyes on cryptocurrency platform updates from Eastman Kodak

Eastman Kodak (KODK) will be reporting its fourth quarter results on Monday after the bell under its new CEO Jim Continenza. Last month, Continenza replaced Jeff Clarke who stepped down from the role after a five-year stint. Shares of the company have increased 17% this year aided by the leadership change announcement.

In December, Kodak got the clearance from the Federal Trade Commission (FTC) for selling its Flexographic Packaging (FP) unit to private equity (PE) firm Montagu Private Equity. Kodak decided to sell the unit to Montagu in November for $390 million. The company plans to use the proceeds to reduce the debt burden.

At the end of the Q3 period, long-term debt for Kodak stood at $402 million. Post the packaging unit sales, Kodak’s stock price popped 10%. However, it’s worth noting that Flexographic Packaging division in the first three quarters generated revenues of $111 million and operational EBITDA of $24 million. Kodak has sold one of the profitable units. With most of its divisions not performing up to the mark, it would be interesting to see the impact of the FP segment sale in the fourth quarter.

Last quarter, Kodak reported revenues of $366 million, a modest drop from last year mainly impacted by lower sales from the Print Systems. Net income stood at $19 million recovering from the $46 million loss reported last year.

However, the company is still facing liquidity issues as it is still reporting negative cash flow. For the Q3 period, operating cash flow was a negative $79 million, which is unchanged from the prior year period. It’s going to be an uphill task for the new CEO to turnaround the firm from the current situation.

KODAKCoin: A turning point in store?

In the Consumer Electronics Show last year, Kodak surprised everyone by announcing the launch of its own cryptocurrency KODAKCoin. Post the announcement, the stock price skyrocketed more than 300% touching $13 mark with investors hoping that this would be a turning point for the imaging firm. However, with declining revenues and profits, the stock price came back to the $3 level mark.

Last year, Kodak licensed its brand to Wenn Digital to develop KODAKOne, an image rights platform developed using blockchain technology. The platform helps the owners to better manage their images and look for infringements using artificial intelligence to track images and monetize it better. In addition to the platform, KODAKCoin also has been developed by Ryde Holding (previously known as Wenn Digital) to work along with the KODAKOne platform.

In October, the platform’s post-licensing portal was unveiled for beta testing. Since the start of the private beta, KODAKOne platform has generated $1 million as licensing claims in January. Ryde plans to launch KODAKCoin in June and will be restricted to accredited investors.

With most of its divisions struggling to make profits, Kodak needs to find a solid business which would bring in stable and recurring revenues. It’s still unclear how the cryptocurrency venture is going to unfold in the near future. Investors would be expecting updates from the management on how it plans to monetize the digital platform.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

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