BBU

Capital Recycling and Capital Allocation

• Generated $1.2 billion in asset sale and distribution proceeds in the first half of the year, including the ~$650 million agreement to sell Multiplex, one of the last remaining legacy assets from the company's spin-out.
• Since launching the share buyback program in early 2023, the company has repurchased over $300 million of its own shares at a nearly 50% discount to net asset value (NAV), and allocated an additional $150 million of Q2 proceeds to further buybacks.
• Ended the quarter with $2.8 billion in pro forma corporate-level liquidity, and will renew its Normal Course Issuer Bid (NCIB) in the coming weeks, remaining active in buybacks while shares trade at a meaningful discount to intrinsic value.

Strategic Acquisitions and Investments

• Committed over $300 million in Q2 to acquire two market-leading businesses: World Freight Company (WFC) and Gregg Distributors, and closed a $100 million strategic investment in OpenAI deployment company DeployCo.
  • WFC is the world's largest general sales and service agent for the air freight industry, operating across 70+ countries with an asset-light model, durable margins, and strong cash conversion. Management plans to integrate its decentralized regional brands, standardize processes, implement automation and AI to improve productivity, and accelerate acquisition-led consolidation of the fragmented market.
  • Gregg Distributors is a leading maintenance, repair and operations (MRO) distributor in Western Canada serving 25,000+ industrial customers with a high-touch, same-day fulfillment model and resilient cash flow. Immediate focus will be on a smooth ownership transition, with planned growth initiatives including stronger commercial capabilities, increased share of wallet, improved pricing discipline, and better purchasing scale leverage.
• The DeployCo investment provides access to leading AI models and top technical talent, which combined with the company's operational change management expertise will accelerate AI deployment across the entire portfolio to drive productivity and cost savings.

Long-Term Strategic Positioning

• The company has compounded net asset value per share at a mid-teens annual rate since its founding, following a consistent playbook of buying high-quality market-leading businesses, improving operations and cash flows, and recycling capital to reinvest for continued growth.
• Management notes that resilient businesses with durable cash flows and hard-to-replicate assets are increasingly valued by markets, and the company sees a growing pipeline of attractive carve-out opportunities from large conglomerates divesting non-core industrial businesses, where the company's complex transaction expertise allows it to acquire high-quality assets at reasonable valuations.
• The fragmented essential services sector also provides abundant acquisition opportunities, where the company's operational expertise can help smaller mission-critical providers scale and reach their full potential.

• The company reaffirmed its prior target of $2 billion in total capital recycling proceeds over a 24-month period, announced at last year's Investor Day. Less than one year into the period, the company has already generated $1.2 billion in proceeds, and management expects to meet or exceed the full target by the end of the period.
• Management expects Sajan's mortgage insurance loss ratio to stabilize long-term between 15-25%, matching the business's historical average, after trending up from the unsustainably low levels seen in recent years driven by abnormal home price appreciation.
• Management expects market conditions for Dexco's engineered components end markets to begin normalizing in 2025, and remains confident in the business's ability to navigate ongoing softness through continued cost optimization.
• Management remains confident it will hit its full fundraising target for the Brookfield Evergreen Fund (BPE) as it expands distribution to additional U.S. and international platforms, even if full redemption of remaining units does not occur by the April 2026 deadline. If the fund is not fully redeemed by the deadline, management notes that ongoing ownership of the underlying assets remains positive for long-term value compounding.

1. Industrial Segment: Generated Q2 adjusted EBITDA of $323 million, compared to $305 million in the prior year. Same-store adjusted EBITDA increased 6% year-over-year, accounting for 55% of total adjusted EBITDA. Strong performance was led by Clarios, which saw growing demand for higher-margin advanced batteries and repaid $500 million in debt during the quarter. Engineered components manufacturer saw 5% same-store adjusted EBITDA growth, with cost optimization and strong commercial execution offsetting soft end-market demand, and completed a refinancing that extended debt maturities by three years.

2. Business Services Segment: Generated Q2 adjusted EBITDA of $204 million, compared to $205 million in the prior year. Same-store adjusted EBITDA increased 6% year-over-year, accounting for 34.8% of total adjusted EBITDA. The residential mortgage insurer Sajan delivered resilient demand despite a weak Canadian housing market, but higher claims driven by reserve strengthening and normalizing home prices increased the loss ratio. Dealer software and technology services performance was supported by price increases, cross-selling, and cost optimization that offset elevated churn.

3. Infrastructure Services Segment: Generated Q2 adjusted EBITDA of $96 million, compared to $109 million in the prior year, accounting for 16.4% of total adjusted EBITDA. The decline reflects the impact of a partial sale of a work access services operation completed in July 2025. Modular building leasing and work access services performance was stable. The lottery services business saw earnings dragged down by a joint venture contract penalty and increased investment spend, offsetting revenue growth.

• CDK, the company's dealer software and technology business, has seen its debt trade at distressed levels and was placed on negative credit watch, with elevated churn, ongoing technology modernization investments, and litigation creating capital structure uncertainty. Management noted the business has generated positive operating cash flow over the last 12 months and maintains a strong liquidity profile, but did not comment on reported lender negotiations.
• Normalizing home prices after a period of rapid appreciation have reduced mortgage borrower equity, leading to lower cure rates for delinquent mortgages and higher insurance claims at Sajan, pushing loss ratios up toward long-term averages.
• Soft end-market demand continues to weigh on the company's engineered components business, even as cost optimization has offset this weakness to deliver earnings growth.
• Expanding into new distribution channels for the Brookfield Evergreen Fund is taking longer than initially expected, delaying potential full redemption of the company's remaining units.

Q: Can you update on CDK's underlying performance, the sustainability of its capital structure, and whether additional capital will be required? / A: Management declined to comment on media reports of lender negotiations. They stated CDK remains a strong stable business, with teams focused on progressing modernization initiatives that will improve product capabilities and help manage elevated churn. The business has generated positive operating cash flow over the past 12 months and maintains a strong liquidity profile, and the company regularly optimizes capital structures across all its portfolio businesses.

Q: The original planned investment in DeployCo was $150 million, but the actual commitment this quarter was $100 million. What caused the change, and what is the expected strategic impact across the portfolio? / A: The company syndicated part of its commitment to institutional partners, and the $100 million investment still delivers the full strategic benefits of the partnership, which was the core motivation for the deal. The investment gives access to OpenAI models and scarce AI deployment talent for industrial and heavy asset businesses. Management is already identifying hundreds of millions of dollars in potential annual run-rate cost savings across the portfolio from AI deployment, and early engagement is progressing well.

Q: What is your outlook for the capital recycling pipeline in the second half, particularly amid an improving IPO market? / A: Management noted they are already well ahead of schedule on their 24-month $2 billion capital recycling target, having generated $1.2 billion in proceeds less than one year into the period, and expect to meet or exceed the full target. There is a healthy pipeline of monetizations including larger assets like BRK Ambiental and multiple smaller businesses in the normal course, and the company has a proven track record of recycling capital even in difficult market environments.

Q: Can you share examples of AI deployment that have already gained traction across the BBUC portfolio? / A: At Clarios, sensors and AI have improved machine maintenance scheduling, production planning, and inventory management, driving significant efficiency gains. At Chemilex, AI models trained on production sensor data optimize polymer blending based on ambient plant conditions, eliminating manual trial and error and reducing yield loss and production variability. AI is also being implemented to improve back office and customer workflows at WFC and Gregg Distributors, and operational processes at Brand Modular.