Shares in Kodak (NYSE: KODK) fell over 4% on Tuesday after the company reported full-year results for 2018 that included a 4% drop in revenue. For the year to December, revenue fell to $1.325 billion from $1.386 billion, while the overall loss from continuing operations was $13 million, up from a $26 million loss in 2017.

Earnings were negatively impacted by currency effects, unfavourable aluminum costs, and workers compensation reserves, without which the company would have been close to breakeven on an operational basis.

4th quarter sales were $366 million, down marginally from 12 months earlier. Apart from brief comments, very little detail was given on the company’s quarterly performance, and no forward-looking guidance was given.

In January last year, Kodak’s stock price jumped over 150% after KODAKCoin, a cryptocurrency and blockchain based joint venture was announced. In the latest earnings call, the venture wasn’t mentioned once – something likely to disappoint those who thought Kodak’s future was on the blockchain.


New Leadership to Deleverage the Business

Jim Continenza recently took over as Executive Chairman, with the task of restoring the company to financial health. His appointment earlier this year saw the stock price trade sharply higher, though it has since given up most of those gains.

Continenza’s immediate priority is finalizing the sale of Kodak’s Flexographic business, which is expected to be completed in the next few weeks. This will bring in nearly $400 million which will be used to PAY DOWN DEBT.


Falling Revenue Across the Board

Revenue fell in all, but the smallest two business units and EBITDA were lower in 3 of the 6 units. The Print Systems Division which accounts for 71% of total revenue, saw revenue fall 5% from the previous year but saw operational EBITDA fall 44%.

The company announced that the volume of Sonora Process Free Plates grew 19% during 2018 but didn’t mention revenue changes for the product. The Inkjet unit did see annuity revenue for its Prosper inkjet products grow 8%.


What Does Kodak’s Future Look Like?

If Kodak can’t generate a profit soon, it will be on shaky ground. It is heavily indebted and burning cash.

If revenue stabilizes, and the company can earn a 5% profit margin, it would have an annual income of around $65 million. If it can do that and also grow revenue, there may be some upside ahead.

But the earnings call didn’t inspire a lot of confidence, with no real growth plan beyond “focusing on core competencies and improving operational efficiencies.” Kodak’s leadership see its key growth areas being in the Process-Free Plates produced by its Print Systems Division, enterprise inkjet, and brand licensing. For now, it seems nearly all these divisions are on the back foot.

If Kodak can’t generate a profit soon, it will be on shaky ground. It is heavily indebted and burning cash. After the cash injection from the Flexographic sale is used to pay down debt, it will still need to refinance the remaining debt. How easily it will be able to do so is unclear.

Kodak is a heavily shorted stock and would be ripe for a short squeeze if there was any good news. Unfortunately, for now, there doesn’t seem to be an inspiring vision for Kodak’s future, and the results are even less exciting.

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