Brookfield Business Partners L.P. LP Units (BBU) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects a positive outlook with strong performance in key segments, a robust liquidity position, and strategic initiatives like AI integration and corporate restructuring. While there are uncertainties in tax credits and monetization timelines, the management's optimism in growth areas like digital gaming and successful acquisitions suggests positive momentum. The market cap indicates moderate sensitivity, leading to a predicted stock price increase of 2% to 8%.
Key Financial Performance
Proceeds from capital recycling Generated more than $2 billion, reflecting strong execution of strategy.
Corporate borrowings repaid Approximately $1 billion repaid, showcasing financial discipline.
Growth acquisitions Invested $700 million in 4 acquisitions, indicating strategic expansion.
Stock repurchase Repurchased about $235 million of stock at a significant discount to intrinsic value.
Adjusted EBITDA (Full Year) $2.4 billion compared to $2.6 billion in 2024, reflecting lower ownership in 3 businesses and including $297 million of tax credits (up from $271 million in 2024). Excluding tax credits and acquisitions/dispositions, adjusted EBITDA was $2.1 billion compared to $2 billion in 2024.
Adjusted EFO (Full Year) $1.2 billion, including $161 million of net gains during the year.
Industrial Segment Adjusted EBITDA $1.3 billion compared to $1.2 billion in 2024, a 10% increase excluding acquisitions, dispositions, and tax benefits. Driven by strong performance in Advanced Energy operations and margin improvement initiatives.
Business Services Segment Adjusted EBITDA $823 million compared to $832 million in 2024. On a same-store basis, adjusted EBITDA increased by approximately 5%.
Infrastructure Services Segment Adjusted EBITDA $436 million compared to $606 million in 2024. Decline due to the sale of offshore oil services shuttle tanker operation and partial interest in work access services operation.
Liquidity at corporate level Approximately $2.6 billion of pro forma liquidity, including fair value of units received from the sale of partial interest in three businesses.
Financings completed More than $20 billion of financings completed, extending maturities, improving terms, and reducing cost of refinanced borrowings by over 50 basis points.
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Operating Highlights
Clarios' new product technologies: The company is pushing forward the innovation of new product technologies to meet the growing demand for high-performance advanced batteries.
Nielsen's modernization initiatives: The company has executed $800 million of cost savings, including $250 million in the past year, and is focusing on automation and organizational simplification.
Expansion in U.S. manufacturing: Capital expenditure in U.S. manufacturing has grown from $50 billion in 2020 to $250 billion in 2025, driven by reshoring and automation trends.
Network's Middle East operations: The company has expanded its value-added services, including data analytics, fraud, and loyalty solutions, and closed an add-on acquisition to enhance scale efficiencies.
Operational efficiency at Clarios: Annual EBITDA has increased by 40% or $700 million since acquisition, with further growth expected through operational improvements.
Cost optimization at DexKo: Despite weak market conditions, the company maintained EBITDA margins and achieved low single-digit growth through cost optimization and productivity improvements.
Nielsen's cost savings: Achieved $800 million in cost savings, including $250 million in the past year, and increased EBITDA margins by 350 basis points.
Corporate reorganization: The company is transitioning to a single newly listed corporation to improve trading liquidity and attract global investors.
Capital recycling strategy: Generated $2 billion from capital recycling and reinvested $700 million in growth acquisitions.
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Risk or Challenges
Regulatory Approvals: The completion of the corporate reorganization is pending final regulatory approval, which could delay or impact the process.
Geopolitical Uncertainty: Evolving trade policies and geopolitical uncertainty are causing businesses to rethink supply chains, which could pose challenges in execution and adaptation.
European Market Challenges: Economic activity in Europe remains slow in cyclical and industrial end markets, including construction and CapEx-sensitive manufacturing, with slow customer decision-making.
Weak End Market Conditions: Certain businesses, such as DexKo, are facing weak end market conditions, impacting volumes and requiring cost optimization to maintain margins.
Canadian Housing Market: Uncertain economic forecasts in Canada are impacting revenue recognition for the residential mortgage insurer, despite increased volumes of new insurance premiums.
Infrastructure Services Segment: The segment experienced a decline in adjusted EBITDA due to the sale of certain operations and lower terminal deliveries and hardware sales.
Modernization Costs: Costs associated with modernization initiatives in the dealer software and technology services operation are expected to continue impacting results through 2026.
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Guidance & Outlook
Market Trends and Strategic Positioning: The company anticipates significant opportunities driven by deglobalization, reshoring, and automation trends. U.S. manufacturing CapEx has grown from $50 billion in 2020 to nearly $250 billion in 2025, and AI is expected to transform industrial and essential services businesses. Brookfield Business Partners (BBU) is positioned to capitalize on these trends through its operational expertise and integrated operating model.
Clarios Growth Projections: Clarios, a key business, is expected to achieve a similar level of EBITDA growth over the next five years as it has in the past, driven by operational efficiency, pricing strategies, and innovation in product technologies. Investments will focus on expanding advanced battery manufacturing capacity and enhancing recycling and critical mineral recovery capabilities.
Nielsen Operational Improvements: Nielsen has achieved $800 million in cost savings since acquisition, with $250 million in the past year. EBITDA margins have increased by over 350 basis points. The company expects continued benefits from automation, cost optimization, and recent refinancings, which will save $90 million annually in interest.
DexKo Market Recovery: DexKo is cautiously optimistic about stabilizing volumes and new business wins, positioning it for broader market recovery. The company has focused on cost optimization and productivity improvements to maintain margins.
Network Growth in the Middle East: Network, a Middle East payment processor, is positioned for growth with operational improvements, technology upgrades, and an expanded e-commerce offering. The company has also completed an add-on acquisition to drive scale efficiencies.
Capital Allocation and Liquidity: BBU enters 2026 with $2.6 billion in pro forma liquidity, providing flexibility for growth and capital allocation. The company has completed over $20 billion in financings in the past year, improving terms and reducing borrowing costs by 50 basis points. A $250 million buyback program is nearing completion, with potential for further repurchases.
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Shareholder Return Plan
Share Repurchase: Repurchased approximately $235 million of stock at a significant discount to intrinsic value. Committed to completing a $250 million buyback program and will be opportunistic with respect to further repurchase activity.
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Key Q&A
Q:Should we assume that the 45X tax credits will be a tipping point for Brookfield to monetize Clarios?
A:Clarios is performing well and generating significant free cash flow. The 45X credits will add to this cash flow and provide reinvestment opportunities. Management is considering various options, including distributions or monetization, but no specific timeline was provided.
Q:When should the production tax credits for Clarios be received, and would Brookfield consider selling these credits to third parties?
A:The tax return has been filed and is being processed. Management feels confident about qualifying for the credits but cannot predict the exact timing. For 2024 credits, they opted for cash back rather than selling the credits.
Q:Has Scientific Games reached an inflection point for earnings growth, or were recent earnings a one-time benefit?
A:The U.K. market launch was successful, and the earnings pipeline is strong. However, it takes 6-12 months for earnings to materialize. Management remains cautiously optimistic about the business's growth trajectory.
Q:How does Brookfield balance reducing leverage and pursuing growth for Scientific Games, especially after a credit rating downgrade?
A:Management believes growing EBITDA will naturally reduce leverage. They are focused on growth in the U.S. and globally, particularly in digital gaming. The business generates stable free cash flow and can service its debt, with plans to use free cash flow for debt reduction or other purposes.
Q:What is the status of the insurance contract for Clarios in case of delayed payments for the 45X credits?
A:Management feels confident about qualifying for the credits and receiving payment through normal channels. However, they have insured a substantial amount of the credit as a backup in case of non-payment by the IRS.
Q:What is the outlook for monetizing mature assets like BRK and La Trobe, and the IPO environment?
A:The environment for monetizations is strong. BRK is performing well, and the IPO market in Brazil is opening up. La Trobe has pivoted to a fixed-income asset manager model, and management is exploring options for capital return, including IPOs.
Q:Will Brookfield renew its buyback program after completing the $250 million NCIB program?
A:Management is committed to completing the $250 million buyback program and has renewed the NCIB. They will continue to be opportunistic with buybacks while balancing other capital allocation priorities.
Q:What is the update on CDK's operations, including retentions and new bookings?
A:Brookfield is investing in modernizing CDK's technology and stabilizing churn. Renewal activity is strong, with over half of contracts now having a duration of 3+ years. Management remains positive about the business's long-term outlook.
Q:What is the outlook for deployment in 2026, given the strong market backdrop?
A:Brookfield had a strong year in 2025 with $700 million in acquisitions. Management expects to maintain momentum in 2026, with several exciting opportunities in the pipeline.
Q:Review of Unclear Management Responses
A:Management avoided providing specific timelines for receiving the 45X tax credits for Clarios and was vague about the exact timing of monetization events for mature assets like BRK and La Trobe. Additionally, while they expressed confidence in the insurance backup for Clarios, they did not provide detailed terms of the insurance contract.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI service
Activity end
Adrian addition
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America condition
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Managing Partner
North America
Partner Private
Private Equity
approach
approval
backdrop
business value
capability value
cash generation
core
decade
efficiency
end market
expertise
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market condition
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BBU Transcript
Brookfield Business Partners L.P. LP Units (BBU) Q4 2025 Earnings Call Transcript
Positive1-30
The earnings call reflects a positive outlook with strong performance in key segments, a robust liquidity position, and strategic initiatives like AI integration and corporate restructuring. While there are uncertainties in tax credits and monetization timelines, the management's optimism in growth areas like digital gaming and successful acquisitions suggests positive momentum. The market cap indicates moderate sensitivity, leading to a predicted stock price increase of 2% to 8%.
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.
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Frequently Asked Questions
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