Eastman Kodak Firm (NYSE:KODK) Q1 2023 Outcomes Convention Name Might 9, 2023 5:00 PM ET
Firm Individuals
Anthony Redding – Chief Compliance Officer
Jim Continenza – Chairman and CEO
Dave Bullwinkle – CFO
Operator
Good afternoon, and thanks for standing by. Welcome to the Eastman Kodak First Quarter 2023 Earnings Convention Name. [Operator Instructions] Please be suggested that at the moment’s convention is being recorded.
I might now like handy the convention over to Anthony Redding. Please go forward.
Anthony Redding
Thanks, and good afternoon, everybody. I’m Anthony Redding, Eastman Kodak Firm’s Chief Compliance Officer. Welcome to Kodak’s First Quarter 2023 Earnings Name. At 04:15 p.m. this afternoon, Kodak filed its Type 10-Q and issued its launch on monetary outcomes for the primary quarter of 2023.
You might entry the presentation and webcast for at the moment’s name on our Investor Middle at investor.kodak.com. Throughout at the moment’s name, we will likely be ensuring forward-looking statements as outlined by the Personal Securities Litigation Reform Act of 1995. All forward-looking statements are based mostly upon Kodak’s expectations and varied assumptions.
Future occasions or outcomes might differ from these anticipated or expressed within the forward-looking statements. Vital components that might trigger precise occasions or outcomes to vary materially from these forward-looking statements embody, amongst others, the dangers, uncertainties and different components described in additional element in Kodak’s filings with the U.S. Securities and Trade Fee sometimes. There could also be different components which will trigger Kodak’s precise outcomes to vary materially from the forward-looking statements.
All forward-looking statements attributable to Kodak or individuals performing on its behalf apply solely as of the date of this presentation and are expressly certified of their entirety by the cautionary statements included or referenced on this presentation.
Kodak undertakes no obligation to replace or revise forward-looking statements to mirror occasions or circumstances that come up after the date made or to mirror the incidence of unanticipated occasions. As well as, the discharge simply issued and the presentation offered comprises sure measures which might be deemed non-GAAP measures.
Reconciliations to essentially the most instantly comparable GAAP measures have been supplied with the launch and throughout the presentation on our web site in our Investor Middle at investor.kodak.com. Audio system on at the moment’s name are Jim Continenza, Kodak’s Government Chairman and Chief Government Officer; and Dave Bullwinkle, Chief Monetary Officer of Eastman Kodak. We won’t be holding a proper Q&A throughout at the moment’s name. As at all times, the Investor Relations group is obtainable for follow-up.
I’ll now flip the decision over to Jim Continenza. Thanks.
Jim Continenza
Welcome, everybody. Thanks for becoming a member of the primary quarter 2023 investor name for Kodak. Turning to Slide 5. I’m happy with the advance reported within the firm’s outcomes for the primary quarter 2023. We continued to construct momentum, producing good revenues and money and enhancing our gross revenue in a particularly difficult enterprise atmosphere.
You will need to observe that the progress we’ve made did not occur in a single day. It’s the results of investing and executing on our long-term plan, staying targeted on our core competencies of superior supplies and print.
During the last 4 years, we have innovated and constructed a basis for development and profitability. We have now strengthened our monetary place and targeted on driving good income in our core companies by realizing the worth of our choices, the profitable implementation of this technique permits us to proceed investing and monetizing our new development initiatives. We proceed to put money into beforehand introduced long-term development initiatives, in our Superior Supplies and Chemical Group, together with layering and coding substrates for EV batteries and power storage and the managed introduction of our KODALUX light-blocking cloth enterprise. We’re beginning to see income for the companies. As well as, we proceed to see rising demand in our movie enterprise.
We have now invested in a big infrastructure improve together with full implementation of Salesforce and our SAP ERP system that has made us materially higher when it comes to effectivity and reporting. We should be as environment friendly as potential to get rid of at all times and improve our productiveness to fulfill our prospects’ wants and keep worthwhile in difficult environments.
We proceed to put money into our core print enterprise, particularly digital print. We have now launched 2 groundbreaking inkjet presses, the PROSPER Extremely 520 Press, which rivals offset our high quality and productiveness and the PROSPER 7000 Turbo Press, which is the world’s quickest inset press. As well as, we’ve launched our PhotoChrome Inkjet Inks, that are the gold normal for colour for a lot of many years. You’ll hear extra subsequent quarter in regards to the rollout technique of those merchandise, which is designed to maximise productiveness and worth for our prospects.
Most significantly, we proceed to execute on our go-to-market technique staying targeted on our prospects and growing options that tackle their challenges and create new alternatives. We put our prospects first as a result of we win solely once they win.
Turning to Slide 6. efficiency highlights for the primary quarter embody: revenues have been $278 million, a decline of $12 million or 4% in comparison with the prior yr adjusting for unfavorable impression of international alternate of $10 million, revenues decreased by $2 million or roughly flat.
Income was barely impacted additionally by our choice to droop manufacturing and gross sales of our EPS line on account of elevated value and provide chain points. This choice doesn’t in any manner have an effect on our potential or dedication to proceed to service all current EPS presses within the discipline.
There was a trade-off right here. We elevated our gross revenue by $17 million or 52% as we improve the effectivity in our provide chain and our operations. We proceed to deal with good income over development objective.
What does that imply? We deal with issues that fall inside our core competencies and issues that we will execute higher than others. And we all know that we may do an excellent job for our prospects and assist them obtain larger profitability.
Our gross revenue share was 18% in quarter 1, 2023, in comparison with 11% within the prior yr quarter, which is partially attributable to the funding we have made in infrastructure and streamlining our operations. I am proud to say, on account of our execution and loads of laborious work by the group, Kodak has generated $8 million of money within the first quarter 2023, in comparison with a lower of $53 million within the first quarter of 2022.
These enhancements are encouraging, however we perceive that we’re not out of the woods, we’ve loads of work nonetheless to do in these very tough occasions.
We intend to proceed to execute our strategic plan with the objective of driving good income within the close to time period and sustainable worthwhile development sooner or later.
I’ll now flip it over to Dave to debate the primary quarter 2023 monetary outcomes.
Dave Bullwinkle
Thanks, Jim, and good afternoon. This afternoon, the corporate filed its Type 10-Q for the quarter ending March 31, 2023, with the SEC. As at all times, I like to recommend you learn this submitting in its entirety. Earlier than I get into the small print for the quarter, I wish to touch upon a financing transaction that occurred within the first quarter of 2023. As beforehand mentioned, from February 26, 2024 to June 12, 2024. At a requirement to take care of every day minimal liquidity of $50 million along with preserve the prevailing quarterly minimal liquidity of $80 million and supply that upon the unique maturity date of the amended ABL credit score settlement on February 26, 2024, decreased the mixture quantity of commitments from $90 million to $81 million.
This extension supplies us with extra flexibility and extra time to implement a longer-term answer to our capital construction, given the macroeconomic situations. Moreover, as disclosed in our Type 10-Q, Kodak modified its organizational construction in the course of the first quarter of 2023 to mix the Conventional Printing phase and the Digital Printing phase into one phase named the Print phase.
No adjustments have been made to Kodak’s different segments. On account of this alteration, Kodak now has 3 reportable segments: Print, Superior Supplies and Chemical substances and Model. The Print phase is comprised of 5 strains of enterprise: Prepress Options enterprise, the Prosper enterprise, the software program enterprise, the Electrophotographic Printing Options enterprise and the VERSAMARK enterprise.
The Superior Supplies & Chemical substances phase is comprised of three strains of enterprise: industrial movie and chemical compounds, movement image and Superior Supplies & Purposeful printing. The model phase comprises the model licensing enterprise. All different is comprised of the operations of Eastman Enterprise Park. I’ll now share particulars on the complete firm outcomes, operational EBITDA and money movement outcomes for the primary quarter.
Turning to Slide 7. As we reported in our earnings launch for the primary quarter of 2023, we reported revenues of $278 million in comparison with $290 million within the prior yr quarter for a decline of $12 million or 4%. On a continuing foreign money foundation, income declined by $2 million or 1% in comparison with the prior yr quarter, principally flat in income year-over-year.
As Jim talked about, pricing, value reductions and customer-focused initiatives proceed to be a precedence for the corporate, and we proceed to acknowledge the numerous enhancements in profitability on account of the end result of those initiatives. We proceed to acknowledge enhancements in gross revenue with a rise of $17 million or 52% when in comparison with the prior yr quarter. Excluding the unfavorable impression of international alternate, gross revenue improved $19 million or 58% when in comparison with the prior yr quarter.
Our gross revenue share was 18% in Q1 2023, in comparison with 11% within the prior yr quarter. This enchancment is a results of the numerous actions our group has taken to mitigate the results of the worldwide economic system to make our operations extra environment friendly in addition to implementing pricing actions.
On a U.S. GAAP foundation, we reported internet earnings of $33 million for the primary quarter in comparison with a internet lack of $3 million within the prior yr quarter, a rise of $36 million. Contributing to this improve is $10 million of earnings from insurance coverage reimbursement of authorized bills incurred in prior intervals.
The 2023 and 2022 first quarter outcomes embody expense of $1 million and $3 million, respectively, associated to adjustments within the honest worth of embedded spinoff liabilities and expense of $1 million and earnings of $4 million, respectively, associated to noncash adjustments in employees’ compensation and worker profit reserves. The primary quarter of 2023, additionally contains earnings of $9 million associated to a refund from a non-U.S. governmental authority. Excluding these present and prior yr gadgets, earnings for 2023 was $26 million in comparison with a lack of $4 million within the prior yr quarter, reflecting a rise of $30 million. Operational EBITDA for the quarter was a optimistic $9 million in comparison with a detrimental $7 million within the prior yr quarter, a rise of $16 million or 229%. Excluding the impression of noncash adjustments in employees’ compensation and worker profit reserves in each the present and prior yr and the unfavorable impression of international alternate within the present yr, operational EBITDA elevated $22 million or 200% from the prior yr quarter.
Operational EBITDA for the primary quarter of 2023 was favorably impacted by improved profitability associated to pricing actions and improved operational effectivity, partially offset by increased continued ongoing international value will increase.
Throughout the first quarter, volumes for SONORA Course of Free Plates declined by 14% or 12% when together with quantity pursuant to a licensing settlement underneath which Kodak receives royalties and the annuity income for PROSPER declined by 6%. On a continuing foreign money foundation, Prosper annuity income declined by 1%.
As Jim talked about, we’ve targeted on key improvements in our Print enterprise to ship new merchandise that our prospects have to drive their companies ahead.
Shifting on to the corporate money efficiency offered on Slide 8. The corporate ended the primary quarter with $225 million in money and money equivalents, a rise of $8 million within the first quarter of 2023, in comparison with the lower of $53 million within the first quarter of 2022. That is the second consecutive quarter that the corporate has elevated its money stability. Money offered by working actions was $14 million, pushed primarily by money movement from internet earnings of $11 million and money movement from stability sheet adjustments of $3 million, together with a change in working capital of $2 million, a lower in miscellaneous receivables of $7 million and a lower in different liabilities of $13 million.
Inside working capital, accounts payable elevated by $3 million, stock elevated by $13 million, and accounts receivable decreased by $12 million as in comparison with December 31, 2022. Money utilized in investing actions was $5 million within the first quarter, flat when in comparison with the prior yr interval. Money utilized in financing actions was $1 million for the quarter, additionally flat when in comparison with the prior yr interval.
Restricted money on the finish of the quarter was $69 million, flat when in comparison with December 31, 2022. Restricted money primarily represents money collateral required underneath the brand new letter of credit score facility and sure aluminum provide contracts along with escrows to safe varied ongoing obligations.
As offered on the underside portion of the slide, excluding the present yr impression of a refund from a non-U.S. governmental authority, the corporate delivered a $52 million print in money movement within the first quarter of 2023, in comparison with the prior yr.
Lastly, we stay compliance with all relevant monetary covenants. I’ll now flip the dialogue again to Jim.
Jim Continenza
In abstract, delivering robust efficiency within the first quarter, producing money, growing profitability whereas persevering with to put money into our future regardless of the challenges of a particularly tough enterprise atmosphere with loads of uncertainty, our efficiency mirrored the success of actions we’ve taken during the last 4 years, that are creating a robust basis that permit us to proceed to innovate, make investments and develop.
We’ll proceed to put money into our Print companies and our AMC development initiatives. We’ll proceed to place our prospects first delivering the options they should thrive on this evolving print market, driving the effectivity enhancements they anticipate.
Our objective is to construct on our optimistic momentum we’ve created, associate with our prospects, ship innovation and execute on our plan. Thanks for attending the decision and your continued curiosity in Eastman Kodak. Have an important day.
Operator
This concludes at the moment’s convention name. Thanks for taking part. You might now disconnect.
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