Icahn Enterprises Q4 2023 Earnings Results & Report

Icahn Enterprises EPS Results

• Actual EPS: -$0.33
• Consensus EPS: $0.21
• Beat/Miss: Missed by -$0.54
• One Year Ago EPS: N/A
• EPS Beat Rate: 1 of last 8 quarters

Icahn Enterprises Revenue Results

• Actual Revenue: $2.68 billion
• Expected Revenue: $2.73 billion
• Beat/Miss: Missed by -$54.00 million
• YoY Revenue Growth: N/A

Icahn Enterprises (NASDAQ:IEP) is a diversified holding company and master limited partnership controlled by investor Carl C. Icahn. The company invests in and operates businesses across multiple industries, with activities ranging from wholly owned operating companies to investments in publicly traded and privately held securities.

Its business areas have included investment management through Icahn Capital, automotive services, energy, metals, food packaging, real estate, and home fashion. The company’s operating businesses have included automotive dealerships and parts distribution, energy and refining activities, metal recycling and processing, packaging products, and real estate investments. Its portfolio and business mix may change over time as the company makes acquisitions, dispositions, and other strategic investments.

Icahn Enterprises traces its history to American Real Estate Partners, which was founded in 1987 and adopted its current name in 2007. The company’s investments and operating activities have primarily involved the United States, although certain businesses and investments have international exposure. Carl Icahn serves as the company’s chairman and is its controlling unitholder.

Icahn Enterprises Q4 2023 Earnings Call Transcript

Key Takeaways

• Q4 2023 financial results: Net loss improved to $139 million (up $116 million YoY) with adjusted EBITDA of $9 million, a $84 million increase over Q4 2022.
• CVI and Automotive performance: CVI benefited from strong crack spreads and declared a $0.50 per share dividend, while the Automotive segment, under new leadership at Pep Boys, saw margin improvement and top-line reinvigoration potential.
• Investment segment repositioning: The funds posted a –4.1% return driven by broad market shorts, trimmed headline net short exposure to ~36% (6% adjusted for energy hedges) and are focusing on netting and activism strategies going forward.
• Strong liquidity and balance sheet: Issued $700 million of 9.75% senior notes due 2029 to refinance 2024 maturities, leaving the holding company with $4.8 billion in cash and fund investments and subsidiaries with $1.7 billion of cash and revolver availability.
• NAV and distribution: Indicative net asset value stood at $4.8 billion at quarter end, and the Board approved a $1.00 quarterly distribution per depository unit, consistent with the prior quarter.

Presentation

[Operator]

Good morning and welcome to the Icahn Enterprises L.P. fourth quarter 2023 earnings conference call with Jesse Lynn, General Counsel, Andrew Teno, President and Chief Executive Officer, Ted Papapostolou, Chief Financial Officer, and Robert Flint, Chief Accounting Officer. I would now like to hand the conference over to Jesse Lynn, who will read the opening statement.

[Jesse Lynn, General Counsel at Icahn Enterprises L.P.]

Thank you, Operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will, or words of similar meaning and include but are not limited to statements about the expected future business and financial performance of Icahn Enterprises L.P. and its subsidiaries. Actual events, results, and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties, and other factors that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal, and other factors. Accordingly, there is no assurance that our expectations will be realized.

[Jesse Lynn, General Counsel at Icahn Enterprises L.P.]

We assume no obligation to update or revise any forward-looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non-GAAP financial measures, including Adjusted EBITDA. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this presentation. We also present Indicative Net Asset Value. Indicative Net Asset Value includes, among other things, changes in the fair value of certain subsidiaries which are not included in our GAAP earnings. All net income and EBITDA amounts we will discuss are attributable to Icahn Enterprises unless otherwise specified. I'll now turn it over to Andrew Teno, our Chief Executive Officer.

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

Thank you, Jesse. Let me first say I am honored to take on my new role as CEO. Carl, IEP, and our activism strategy have established an important place in corporate America, and I'm excited to get to work. Today I will provide a brief overview of Q4 results, and then we will be available for questions. The fourth quarter net loss was $139 million, an improvement of $116 million over Q4 2022. Fourth quarter Adjusted EBITDA was 9 million, an increase of $84 million compared to Q4 2022. Our controlled operating companies have performed well. CVI has benefited from strong crack spreads, good operating utilization, reduced RIN costs, and is authorized a 0.50 dividend per share. Our automotive segment has posted strong year-over-year performance.

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

David Willetts is now leading the day-to-day operations at Pep Boys, and we see the potential for significant long-term value creation both through margin improvement and in reinvigorating the top line. In the investment segment this quarter, the funds had a negative return of 4.1%, primarily driven by broad market shorts. Our headline net short exposure of 36% is approximately 6% when you adjust for the energy hedges. This compares to approximately 34% as of the prior year-end excluding the energy hedges. The Indicative Net Asset Value ended the quarter at $4.8 billion. Additionally, the board approved a $1 quarterly distribution per Depositary Unit, which is consistent with the last quarter. With that, let me turn it over to Ted for a detailed discussion of all of our segments.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

Thank you, Andrew. I will begin by reviewing the performance of our segments and comment on the strengths of our balance sheet. Turning to our investment segment, the funds had a negative return of 4.1% for the quarter. Long and other positions had a positive performance attribution of 2.4%, while short positions had a negative performance attribution of 6.5%. During the quarter, the segment made a pro-rata distribution of 400 million, of which the holding company received its portion of 242 million. The holding company's interest in the funds was approximately 3.2 billion as of quarter-end. Turning to our energy segment, in Q4 2023, Adjusted EBITDA was 120 million as compared to $168 million in Q4 2022. Q4 2023 refining margin per throughput barrel was $15.01 compared to $17.14 in the prior year quarter.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

This decrease was driven by weaker crack spreads and unfavorable inventory valuations that were offset in part by favorable derivative and RIN-related impacts. Q4 2023 average realized gate prices for UAN decreased by 47% to $241 per ton, and ammonia decreased by 52% to $461 per ton when compared to the prior year quarter. CVI declared a fourth quarter cash dividend of $0.50 per share. Now to our automotive segment. As we previously discussed, the segment has undergone significant change due to the deconsolidation of Auto Plus in January of 2023. The segment results throughout 2023 are made up primarily of automotive service operations as compared to 2022, which also included the aftermarket parts operations of Auto Plus. Q4 2023 automotive service revenues were down $15 million compared to Q4 2022, driven by store closures and lower car count.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

Adjusted EBITDA was 28 million for the quarter, a 71 million improvement as compared to Q4 2022, mainly due to the exit of the Auto Plus aftermarket parts business. Now turning to our Real Estate segment. Q4 2023 net sales and other revenues increased by 8 million, and Adjusted EBITDA increased by 3 million compared to the prior year quarter, primarily driven by the sale of single-family homes. Now on to our other operating segments. Food Packaging's Adjusted EBITDA was flat for Q4 2023 as compared to the prior year quarter. The quarter-over-quarter comparison was positively impacted by pricing initiatives and lower distribution costs, which was offset by lower sales volume. Home Fashion's Adjusted EBITDA increased by $6 million as compared to the prior year quarter, primarily due to lower raw material and freight costs.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

The Pharma segment's Adjusted EBITDA for Q4 2023 improved by 3 million as compared to the prior year quarter, mainly due to increased sales volume along with margin improvement. Now turning to our liquidity. During December, IEP issued 700 million of 9.75% senior unsecured notes due 2029. The net proceeds from this issuance, together with 376 million of cash on hand, was used to satisfy the outstanding notes due 2024. We maintain liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. As of year-end, the holding company had cash and investment in the funds of $4.8 billion, and our subsidiaries had cash and revolver availability of 1.7 billion. In summary, we continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing operating segments. Thank you.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

Operator, can you please open the call up for questions?

[Operator]

Thank you. To ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment for our first question, please. Our first question comes from the line of Dan Fannon with Jefferies. Your line is now open.

[Daniel Fannon, Managing Director, Equity Research at Jefferies]

Thanks. Good morning. Andrew, I was hoping to get your thoughts on the auto business, and I know that putting David there was a change, but I guess as you think about 2024, what are you guys doing differently, or what are you expecting in terms of improvement as you think about that business over the next kind of 12 months?

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

We don't really look at it on a 12-month basis. I would just say longer term, if you look at the company, if you look at its margins, and you compare it to its peers, we think there's a lot more upside. And so Dave is the person to lead that effort, and so that's why he's there. He's excited about it, and so are we.

[Daniel Fannon, Managing Director, Equity Research at Jefferies]

So I guess just in the context, is there anything different you guys are doing? You guys did a lot last year proactively to change the business. Now, is it more of continuing to let that play out and the economic backdrop improving, or I guess what else should we think about in terms of driving that improvement, I guess, on a multi-year basis, not even just this year?

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

Last year, you had the deconsolidation. That required a lot of effort. This year is about focusing on Pep Boys and its business and the years to come.

[Daniel Fannon, Managing Director, Equity Research at Jefferies]

Okay. That's not really giving me much there, I guess. I guess then on the fund side, the performance of the fund sounds very similar or has been very similar in the positioning similar despite what was characterized as a change in strategy a few quarters ago. So given your closeness to it, I was hoping maybe to get a little bit more color as you think about what really changed in terms of how you are thinking about managing the overall portfolio and if we should think about, again, prospectively, if there's anything different and/or what you are positioning and/or changing within the portfolio to obviously generate different, more positive returns.

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

Yeah. So I think the first thing you said was about the call it the overall net short exposure. So if you look at year-end 2022 and you looked at our exposure, I think the headline net short was 47%. And if you adjusted that for the refining hedges and energy hedges, you'd be down to -34%. Now, if you compare that to today, our exposure, call it, is mid-single digits negative when you exclude our energy hedges. And so we think the portfolio has changed significantly. And then in terms of what are we going to do going forward, we're to do exactly what Carl said we would do, which is we'll stick to our knitting. We'll focus on activism.

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

I think more recently, you've seen us announce our involvement in two names, both of which we're very excited about, and we think the portfolio is in very good shape for the future.

[Daniel Fannon, Managing Director, Equity Research at Jefferies]

Understood. Could you give the rough comparison? You went to 2022. What was that comparison last quarter, net of the energy exposures versus what you did with the low single digits as of the end of the year?

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

Yeah. So I think it's down a little bit of probably another 5% from what it was in 9/30. And then in terms of.

[Daniel Fannon, Managing Director, Equity Research at Jefferies]

Great. Okay. Thanks for taking maybe another question you asked on there, which is we continue to refine the portfolio, so we trimmed a few names, and we're focusing on the names that we like best. Understood. Thanks for taking my questions.

[Operator]

Thank you. One moment for our next question, please. Our next question comes from the line of Bruce Monrad with Northeast Investors Trust. Your line is now open.

[Bruce H. Monrad, Chairman and Portfolio Manager at Northeast Investors Trust]

Hi, guys. Thanks for hosting the call. A question if I could on food packaging. So volumes were down year-over-year, I guess. Could you add a little more color on that? And is Osceola running fine, or are there waste issues? Maybe, is there a geographic dimension to it? And then also, is everything flat at the SG&A line, or is it possible that SG&A went up because of accruals because you had such a good start to the year or anything going on at that line either? Two questions. Thanks.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

Hey, Bruce. It's Ted. Thanks for the question. But before I answer all your questions, let me just give more context on the quarter, and I think it'll help answer a lot of them. So volumes softened during the quarter. And when comparing Q4 of 2023 to Q4 of 2022, David actually touched on this in the last call. The new round of Russian sanctions went into effect during 2023, so that affected comparability. Not all these sanctions were there in 2022. But the more significant reason was our customers have drawn down on their inventories. And this is to bring them to more historical levels. And you can attribute this to the supply chain correcting or actually improving as compared to recent years. When supply chain issues arise, you can imagine raw material inventory levels tend to creep up just to ensure operations.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

We knew this correction was coming, but it's very hard to time. It looks like the majority of it happened in Q4. Although it affected demand in Q4, we don't think that's sustainable. Once the rebalance finishes, the demand will come back. Just the other part of the equation in terms of EBITDA, it was flat as compared to prior year's quarters because of the pricing initiatives management has taken, and those have helped along with lower distribution costs. In a nutshell, that's what's occurring in Q4. SG&A levels, management has always continued to do a good job of maintaining them. But the story there is the volume softening.

[Bruce H. Monrad, Chairman and Portfolio Manager at Northeast Investors Trust]

Okay. And is that continue? I'm sorry. Did you say for 1Q? And by the way, this is consistent with what Viscofan would have said in their 3Q numbers about destocking. Does it pretty much run its course?

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

Yeah. We think it's going to come back, but we'll talk about Q1 in about two months when we release Q1's earnings. But yeah, we don't think that demand destruction is sustainable.

[Bruce H. Monrad, Chairman and Portfolio Manager at Northeast Investors Trust]

Okay. Thank you. Appreciate it.

[Ted Papapostolou, CFO at Icahn Enterprises L.P.]

All right. Thanks, Bruce.

[Operator]

Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Andrew Teno for closing remarks.

[Andrew Teno, President and CEO at Icahn Enterprises L.P.]

Thanks, everyone, for joining the call today, and we'll speak to you in a few months.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a wonderful day.

Participants

Executives

• Andrew Teno, President and CEO
• Jesse Lynn, General Counsel
• Ted Papapostolou, CFO

Analysts

• Bruce H. Monrad, Chairman and Portfolio Manager at Northeast Investors Trust
• Daniel Fannon, Managing Director, Equity Research at Jefferies