Brookfield Business Partners L.P. Q2 FY2025 earnings call

• Anuj Ranjan noted a great quarter with over $800 million from asset sales/distributions, $300 million in acquisitions, $160 million in buybacks, and adjusted EBITDA of $591 million. Discussed the secondaries market and a recent transaction where BBU sold a portion of its interest in 3 businesses to a Brookfield fund, with accretive results.
• Adrian Letts discussed the global operating environment, noting stable signs in some areas like the U.S. and growth in GCC and India. Highlighted progress in value creation plans at businesses like DexKo, Modulaire, and Clarios, where margins were maintained or increased despite challenges.
• Jaspreet Dehl reviewed financial results, balance sheet, and capital allocation priorities, including maintaining an increased pace of repurchase activity and planning to renew the normal course issuer bid.

Industrial segment generated second quarter adjusted EBITDA of $307 million, an increase from $213 million in 2024, including $71 million of tax benefits and contributions from recent acquisitions. Business Services segment had second quarter adjusted EBITDA of $205 million, up from $182 million last year, with impact from onetime costs and timing of revenue recognition under IFRS 17. Infrastructure Services segment had second quarter adjusted EBITDA of $109 million, down from $157 million in 2024 due to the sale of an offshore oil services operation.

• Mentioned a $250 million share buyback program, with $160 million already spent and plans to renew the normal course issuer bid later in the month. Emphasized capital allocation priorities including paying down corporate debt, funding growth through acquisitions, and repurchasing shares as an accretive use of capital.

• Global economic uncertainties, trade tensions, and geopolitical conflicts posing risks to operations. Impact on volumes and activity levels in some segments, though businesses' competitive advantages and pricing power help mitigate some effects. Execution risks related to value creation plans across the portfolio.

Q: How is Scientific Games performing relative to underwriting assumptions?

A: Adrian Letts said EBITDA performance was flat when adjusting for lower hardware deliveries and a JV performance penalty, industry remains resilient, and progress is being made in digital capabilities with expected earnings impact from ramping contracts.

Q: Can you highlight AI projects with meaningful financial impact?

A: Anuj Ranjan mentioned in Clarios, optimized order intake with 10% improvement in fulfillment quantity and 14% service performance improvement. In Everise, automated AI-driven agent recruiting reducing training time and hiring costs. In CDK, AVA virtual assistant increasing touch points and sales calls.

Q: Thoughts on narrowing the discount between BBUC shares and unit price?

A: Jaspreet Dehl said buybacks are done equally on both BBU LP units and BBUC shares, and the buyback program continues as it's accretive to intrinsic value, with market activity contributing to any discrepancy.