KODK — Eastman Kodak Company · 2026-09-06 · Verdict: PASS · Conviction 3
Price $9.29 (screen row, universe_under2b.csv refreshed 2026-09-05; no live quote available) · Mkt cap $909.5M · EV ~$822M fully diluted (screen basis $727M) · EV/LTM Operational EBITDA ~8.0x · FCF yield: screen says 49.0%, corrected LTM is negative · Net cash $180M plus $90M restricted · ADV $8.6M Sources: 10-K 2026-03-12 (Items 1, 1A, 7), 10-Q 2026-08-04, DEF 14A 2026-04-09, 8-Ks 2026-03-12, 2026-05-07 and 2026-08-04 with exhibits, Form 4s (12 filings, 50 rows). No transcript in the bundle.
1. What the business actually does
Print, 67% of 2025 revenue, is mostly Prepress Solutions: aluminum digital offset plates and the laser platesetters that image them, sold on two-year contracts, with a new plate consumed on every print run so the revenue recurs. Prepress alone was 52% of company revenue in 2025 (10-K 2025, Item 1); the rest of Print is PROSPER inkjet, PRINERGY software and a service tail on discontinued equipment. Advanced Materials and Chemicals, 30% of revenue, is industrial and consumer film, motion picture film, specialty chemicals and IP licensing, with Kodak Alaris at roughly 33% of segment revenue. Brand is royalty: $23M at an 87% margin.
2. Why it is mispriced — the edge case
There is no mispricing, only a screen artifact. The screen's $446M of free cash flow and 49.0% yield is the Kodak Retirement Income Plan termination. Kodak settled roughly $2 billion of pension obligations in Q4 2025 and $1.023 billion of excess assets reverted; $256M went to the replacement Cash Balance Plan, $312M to the term loan lenders and $153M to the IRS as excise tax, leaving $144M of net cash (10-K 2025, Item 7). The gross $618M ran through operating cash flow, which is why 2025 CFO printed $480M against negative $7M in 2024.
Strip the reversion and the excise tax and 2025 operating cash flow was roughly $15M against $34M of capex: free cash flow of about negative $19M. H1 2026 confirms it, with operating cash flow negative $25M and $11M of capex (10-Q 2026-08-04). Item 1A concedes it: Kodak "has not consistently generated positive operating cash flows without supplementing such cash flow from operations with financing and monetization transactions, such as the KRIP reversion," and warns an extended repeat would impair its ability to continue as a going concern. The stock is also up 63% over twelve months and 36% off its high, so there is no forced seller.
3. Unit economics and growth
The operating improvement is real: Q2 2026 revenue $311M, up 18%, gross margin from 19% to 26%, Operational EBITDA $36M against $9M, and about $103M over the trailing four quarters against $64M for full-year 2025 (8-K 2026-08-04). But look at what drives it. Print's H1 2026 Operational EBITDA improved $24M, of which $21M is Prepress pricing, while Prepress volume fell another $7M on top of a $40M decline in 2025 (10-Q 2026-08-04; 10-K 2025, Item 7). That pricing exists because Commerce and the ITC imposed anti-dumping duties of 115.84% to 317.43% on Chinese plates and 91.83% on Japanese plates. Fuji appealed, and on February 18, 2026 the Court of International Trade remanded the ITC's injury determination. Duties still collect during the appeal, but the Print turnaround rests on a legal ruling. AM&C is the better story: Q2 revenue $105M against $75M and Operational EBITDA $22M at a 21% margin, on $14M of Industrial Film pricing and $14M of volume, though silver cost $9M in H1.
Conversion is the problem. Operational EBITDA excludes $14M of H1 stock compensation (up $11M), $3M of idle costs and $6M of other operating expense; below it sit $40-45M of guided 2026 capex, $12-13M of cash interest, a $7M H1 tax provision and $6M of preferred dividends. On $105M of Operational EBITDA that lands near zero free cash to equity.
4. Balance sheet and capital allocation
Genuinely better. Term loans went from $450M to $200M with the reversion, then $50M in March and $50M in June 2026, leaving $110M of debt against $290M of cash; quarterly interest expense fell from $15M to $6M. The $90M of restricted cash is pledged against letters of credit, surety bonds and workers' compensation deposits, and about $65M of reversion hedge fund assets are still to be monetized through 2028.
Capital allocation goes to lenders and dilution. From January 2025 through March 2026 Kodak paid Kennedy Lewis affiliates $358.7M of principal, interest and prepayment premiums (DEF 14A 2026-04-09); Kennedy Lewis is also the Series B holder with a board nominee. Shares rose 20.9%, almost entirely the 15.1M issued to Golisano's GO EK Ventures in the August 2025 Series C exchange, and one million Series B preferred remain, 6.0% cash pay, convertible at $10.00 and mandatorily redeemable June 11, 2029, about 9% further dilution per the 10-K. A $100M ATM is live. Insider buying is one purchase of 2,000 shares for $20,600 by director Philippe Katz (Form 4, 2026-05-13), against a CEO paid $6.8M in 2025 including a $2M bonus for refinancing the term loan.
5. Management: what they said vs what they did
Kodak gives no numeric guidance, so there is nothing to score against. Continenza's Q2 framing was "stability and growth" and "the operational and financial leverage to focus on growth" (8-K 2026-08-04). They delivered on deleveraging. They have not delivered what the risk factor says they must: funding the business from operations.
6. Valuation
Fully diluted for the Series B, EV is about $822M. Base: 2027 Operational EBITDA of $110M, Print flat and AM&C up high single digits, at 6.5x, about $8.10-8.50 a share. Bear: the appeal removes the plate duties, Prepress gives back $20-25M of price, EBITDA falls to $70M at 5.5x, about $4.75. Bull: AM&C reaches $400M at 20% margins by 2028 for $132M of EBITDA at 8x, about $11.50. Weighted 25/50/25, roughly $8.20 against $9.29.
Reverse DCF: at $9.29 the price implies about $103M of sustainable Operational EBITDA at 8x, exactly the last twelve months. To support that enterprise value on a 10% free cash yield the business needs roughly $82M of real free cash flow, against negative $19M in 2025 and negative $36M in H1 2026.
7. Catalysts and timeline
Q3 results in November 2026 are the first clean test of whether H1's $37M inventory build reverses into cash. The Fuji appeal remand is the binary on Print pricing. Series B conversion above the $14.50 trigger retires the 2029 redemption at the cost of 10M shares.
8. Risks and pre-registered kill criteria
- Full-year 2026 operating cash flow less capex below zero, excluding KRIP redemptions. The base case, and it confirms the PASS.
- The plate anti-dumping or countervailing duties reduced or vacated on the Fuji appeal.
- Operational EBITDA below $20M in any quarter, or AM&C Operational EBITDA margin below 12% for two consecutive quarters.
- What reverses me: two consecutive quarters of positive free cash flow after capex with Prepress volume flat or better, plus the appeal resolved in Kodak's favor.
9. Verdict and one-paragraph summary
PASS, conviction 3. Kodak's 49% screened free cash flow yield is one transaction: it terminated its pension plan and $618 million of the $1.023 billion surplus ran through operating cash flow, most of it going straight to the term loan lender and the IRS. Excluding it, Kodak made about $15 million of operating cash flow in 2025 against $34 million of capex and burned $25 million in H1 2026, which its own risk factor concedes. The recovery underneath is real, with trailing Operational EBITDA near $103 million against $64 million and debt cut from $450 million to $110 million, but most of the Print improvement is price protected by anti-dumping duties Fuji is appealing and the Court of International Trade remanded in February 2026, while Prepress volume keeps falling. After capex, interest, taxes, preferred dividends and stock compensation that EBITDA converts to roughly nothing for shareholders, and with the stock up 63%, share count up 20.9% and another 9% of Series B dilution to come, you pay a full multiple for a recovery that has not produced cash.
Research for discussion, not investment advice. Positions and sizing are the reader's decision.