Brookfield Business Partners L.P. LP Units (BBU) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial metrics, operational improvements, and strategic capital allocation. Management's focus on maintaining margins, reinvesting for growth, and executing a buyback program supports a positive outlook. The Q&A section reveals optimism about market recovery, successful cost management, and strategic investments. Despite some uncertainties, such as the regulatory issue with La Trobe, management remains confident in future growth. The market cap suggests moderate stock movement, leading to a positive prediction within the 2% to 8% range.
Key Financial Performance
Third quarter adjusted EBITDA $575 million compared to $844 million in the prior period. Current period results reflect the impact of lower ownership in 3 businesses following the partial sale of our interest and includes $77 million of tax benefits. This compares to $296 million of tax benefits included in the prior year results.
Excluding tax benefits and contribution from acquired and disposed operations, adjusted EBITDA $512 million compared to $501 million in the prior period.
Adjusted EFO $284 million during the quarter benefited from lower current tax expense at our advanced energy storage operation and lower interest expense due to the reduction in corporate borrowings compared to last year.
Industrial segment adjusted EBITDA $316 million compared to $500 million in the prior period. Including the impact of tax benefits, segment performance increased 17% over the prior year. Increased underlying performance at our advanced energy storage operation was driven by higher overall volumes, growing demand for higher-margin advanced batteries and continued benefits from operational and commercial improvement initiatives.
Business Services segment adjusted EBITDA $188 million compared to $228 million last year. Current period results reflect an $11 million impact related to the sale of a partial interest in our dealer software and technology services operation.
Infrastructure Services segment adjusted EBITDA $104 million compared to $146 million during the same quarter last year. Results reflect the sale of our offshore oil services shuttle tanker operation and a $7 million impact related to the sale of a partial interest in our Work Access Services operation earlier this year.
Liquidity at the corporate level Approximately $2.9 billion of pro forma liquidity at the corporate level, including the fair value of units received in exchange for the sale of partial interest to the new Brookfield Evergreen Fund earlier this year.
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Operating Highlights
Chemelex acquisition: Chemelex is a global leader in electric heat management solutions. The company has been rebranded as a stand-alone entity, with a strengthened management team and a transformation office established. A 100-day plan was implemented to identify cost savings, rationalize low-volume SKUs, and improve margins. A new go-to-market strategy was introduced to expand into new verticals and geographies. Manufacturing optimization projects, including AI and machine learning enhancements, were initiated to improve throughput, reduce labor costs, and enhance product lead time.
Antylia Scientific acquisition: Antylia is a manufacturer and distributor of specialty consumable products for lab-based testing and research. Leadership was strengthened, and digital capabilities like AI quoting tools and e-commerce presence were enhanced. Efforts were made to improve procurement, site rationalization, and automation of manufacturing and distribution processes.
Corporate structure reorganization: Plans to simplify the corporate structure by converting all BBU LP units and BBU C shares into a new publicly traded Canadian corporation. This is expected to improve trading liquidity, increase demand from index investors, and make the business more accessible globally. The market cap increased by nearly $1 billion since the announcement.
AI-driven industrial revolution: The company is leveraging AI to enhance operational capabilities and accelerate value creation. AI is seen as a tool to transform businesses and ensure they are not disrupted by technological advancements.
Capital recycling program: Generated over $2 billion in proceeds and repaid $1 billion in corporate credit facility borrowings. Invested $525 million in strategic acquisitions and repurchased $160 million of units and shares.
Operational improvements in Industrial segment: Higher volumes and demand for advanced batteries drove performance. Optimization initiatives supported resilient margins despite weak market conditions.
Lottery Service operation: Improved margins due to productivity gains and favorable service mix. Digital lottery services rollout in the U.K. is expected to go live early next year.
Focus on AI and operational transformation: AI is being integrated into operations to enhance productivity and ensure businesses are positioned for growth rather than disruption.
Balanced capital allocation: Maintaining significant liquidity of $2.9 billion to support growth and capital allocation priorities, including a $250 million buyback program.
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Risk or Challenges
Forward-looking statements: The company acknowledges that forward-looking statements are subject to known and unknown risks, and future results may differ materially. This indicates potential risks in achieving projected growth and financial targets.
Corporate structure reorganization: While the reorganization aims to improve trading liquidity and investor accessibility, there is a risk that the anticipated benefits may not materialize as expected, potentially impacting investor confidence and market performance.
AI implementation: The company highlights the need for change management and expertise to implement AI effectively. Failure to manage this transition could hinder operational improvements and value creation.
Economic uncertainties: The uncertain Canadian economic outlook and relatively weak market conditions could negatively impact revenue recognition and overall financial performance.
Acquisition integration: Challenges in integrating recent acquisitions like Chemelex and Antylia Scientific, including operational changes, cost savings, and management restructuring, could delay or reduce expected value creation.
Segment performance variability: Declines in adjusted EBITDA in segments like Industrial, Business Services, and Infrastructure Services highlight potential vulnerabilities to market conditions, customer churn, and strategic investments.
IFRS 17 Accounting Standard: The adoption of IFRS 17 has led to slower revenue recognition due to conservative model assumptions, which could impact financial reporting and investor perception.
Customer churn: Customer churn in the dealer software and technology services operation poses a risk to stable revenue generation and long-term customer retention.
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Guidance & Outlook
Corporate Structure Simplification: The company plans to simplify its corporate structure by converting all BBU LP units and BBU C shares into one new publicly traded Canadian corporation. This reorganization is expected to improve trading liquidity, increase demand for shares from index investors, and make the business more accessible for global investors. Completion is anticipated early in the new year.
AI and Fourth Industrial Revolution: The company is leveraging AI to accelerate value creation plans and ensure businesses are positioned to benefit from the advancements in AI rather than being disrupted by it. Investments in AI are expected to enhance productivity and operational efficiency.
Market Conditions and Economic Outlook: The company is cautiously optimistic about the fourth quarter, citing resilience in the global economy, record-high public markets, and increasing transaction activity supported by declining global interest rates. These factors are seen as tailwinds for the business.
Chemelex Acquisition: The company has implemented a 100-day plan for Chemelex, focusing on cost savings, margin improvement, and operational efficiency. Plans include optimizing the manufacturing footprint, enhancing equipment, and using AI and machine learning to improve throughput and reduce costs.
Antylia Scientific Acquisition: The company is enhancing Antylia's digital capabilities, including search engine optimization and an AI quoting tool, to improve sales productivity and e-commerce presence. Additional efforts include procurement improvements, site rationalization, and automation of manufacturing and distribution processes.
Lottery Service Operation: The rollout of digital lottery services in the U.K. is expected to go live early next year, which is part of the company's significant pipeline of system implementations.
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Shareholder Return Plan
Share Buyback Program: Since the start of the year, the company has bought back just over $160 million of its units and shares. Additionally, during the quarter, the company renewed its normal course issuer bid, allowing it to buy back an additional 8 million units and shares. The current $250 million buyback program has seen $160 million repurchased so far. The company plans to remain opportunistic with its repurchase activity, balancing it with growth objectives.
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Key Q&A
Q:Is an IPO still the most likely path for BRK's exit, and is the IPO market open in Brazil despite high interest rates?
A:Management stated that an IPO is one option for BRK's exit, but they are keeping all options open. The capital markets in Brazil are challenging due to high interest rates, though there are signs of improvement. They believe BRK is an excellent business and are having early discussions to gauge interest.
Q:Will BRK be more active in investing in new concessions, or is financial leverage a constraint?
A:Management emphasized that BRK's focus has been on operational initiatives to increase margins and EBITDA, which has grown double digits year-over-year. They are also focusing on developing existing concessions rather than pursuing inorganic growth. They believe BRK has significant opportunities for growth but are currently focused on monetizing the asset.
Q:What is the context of the regulatory issues with La Trobe, and has it impacted the business fundamentals?
A:The regulatory issue with La Trobe is related to disclosures, which the regulator frequently raises in Australia. Management stated that the issue has not impacted the business fundamentals, which remain strong, and they are confident in its future growth.
Q:Does the success of Westinghouse make management reconsider holding assets longer to realize their full potential?
A:Management acknowledged Westinghouse's success post-sale but stated that their strategy remains focused on operationally transforming businesses and exiting at the right value. They occasionally consider holding exceptional businesses longer but prioritize recycling capital into new opportunities to generate returns.
Q:Can you provide details on the new Evergreen fund and its potential to monetize parts of BBU?
A:Management recently launched the Brookfield Private Equity (BPE) fund and are pleased with its progress. They expect to share more details on cash inflows next quarter. Future monetization opportunities depend on market conditions and inflows into the BPE fund, but they are not actively advancing this at the moment.
Q:What caused the year-over-year dip in CDK's results, and what are the future investment plans?
A:The dip was primarily due to ongoing strategic investments in technology modernization. Margins are still ahead of where they were at acquisition, and customer response to new features has been positive. Management plans to continue investing, expecting benefits to materialize next year.
Q:Has the company received cash for tax credits yet?
A:No, the company has not received cash for tax credits yet. They are awaiting processing, which has been delayed due to the U.S. government shutdown.
Q:Will there be a ramp-up in deployments given the strong liquidity position?
A:Management stated that capital allocation priorities include funding growth, maintaining leverage, and executing the $250 million buyback program. They have deployed $525 million this year and are optimistic about the investment environment, with a strong pipeline of opportunities.
Q:Has DexKo's performance improved, and what is the near-term outlook?
A:Management is pleased with DexKo's performance, with volumes and EBITDA up year-over-year. While market demand remains below normal levels, there are signs of early recovery, and they are optimistic about further improvements through 2026.
Q:What are the AI benefits across CDK, DexKo, and Scientific Games?
A:For CDK, AI is used to improve workflow and leverage transaction data. For Scientific Games, AI helps understand lottery behavior and purchasing patterns. For DexKo, AI aids in managing inventory and improving operational performance.
Q:How will the next $2 billion in proceeds be allocated?
A:Management feels comfortable with current corporate leverage levels. Proceeds will be used for new investments, acquisitions, and buybacks. They have deployed $160 million of the $250 million buyback program and will continue buyback activities as shares trade at a discount to intrinsic value.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the quantification of CDK's technology investment impact, stating only that the bulk of the year-over-year decrease was related to technology spend. Additionally, they did not provide a clear timeline for receiving tax credits, citing delays due to the U.S. government shutdown.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI bottleneck
AI eye
AI machine
AI tool
Adrian Managing
BBU investor
CEO Chief
Day turnout
Equity question
Global update
Head Global
Head today
Managing Partner
Mr Managing
NAV BBU
NAV trading
National end
Officer discussion
Partner Private
Private Equity
Ranjan CEO
SKUs
access
addition
aftermarket
carve
creation plan
effort
equipment
facility
lab
leader
mission
optimization
owner
productivity
reorganization
saving
start
temperature
transformation office
BBU Transcript
Brookfield Business Partners L.P. LP Units (BBU) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call highlights strong financial metrics, operational improvements, and strategic capital allocation. Management's focus on maintaining margins, reinvesting for growth, and executing a buyback program supports a positive outlook. The Q&A section reveals optimism about market recovery, successful cost management, and strategic investments. Despite some uncertainties, such as the regulatory issue with La Trobe, management remains confident in future growth. The market cap suggests moderate stock movement, leading to a positive prediction within the 2% to 8% range.
Brookfield Business Partners L.P. LP Units (BBU) Q2 2025 Earnings Call Transcript
Unknown8-1
The earnings call summary and Q&A session present mixed signals. Financial performance is stable, with strong liquidity and a significant share repurchase program, but growth in some areas is slower than expected. The market strategy and AI initiatives show promise, but uncertainties in the macroeconomic outlook and slower-than-expected contract ramp-ups temper optimism. The market cap suggests moderate volatility, leading to a neutral prediction for short-term stock movement.
Brookfield Business Partners L.P. (NYSE:BBU) Q1 2025 Earnings Call Transcript
Unknown5-3
The earnings call reveals a mixed financial performance with a significant EPS miss, despite some positive adjusted EBITDA figures. Although there is an ongoing share repurchase program, the Q&A highlights concerns about tariffs and unclear management responses, which suggest potential risks. The market cap indicates a mid-cap stock, which might not react as strongly as a small-cap stock. Overall, the negative sentiment from financial performance and management's lack of clarity is likely to lead to a negative stock price movement.
Brookfield Business Partners LP (BBU) Q1 2025 Earnings Call Transcript
Positive5-2
The earnings call highlights positive financial performance, with an 8.6% increase in Adjusted EBITDA and a substantial share repurchase program, which typically boosts stock prices. The Q&A section reveals proactive management of market challenges, such as tariffs, and strategic investments in digital and financial infrastructure. Despite some vague responses, the company's liquidity and capital return plans are strong. Given the company's market cap, these factors suggest a positive stock price movement, likely in the range of 2% to 8% over the next two weeks.
BBU Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
