Brookfield Business Partners L.P.(BBU) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated full-year Adjusted EBITDA of $2.4 billion, a decrease from $2.6 billion in 2024, reflecting lower ownership in three businesses following partial sales [17] - Adjusted EFO for the year was $1.2 billion, including $161 million of net gains during the year [17] - Excluding tax credits and the impact of acquisitions and dispositions, Adjusted EBITDA was $2.1 billion, compared to $2 billion in the prior year [17] Business Line Data and Key Metrics Changes - The industrial segment generated full-year Adjusted EBITDA of $1.3 billion, up from $1.2 billion last year, with a 10% increase excluding acquisitions and dispositions [17][18] - The business services segment generated full-year Adjusted EBITDA of $823 million, down from $832 million last year, but increased approximately 5% on a same-store basis [18][19] - The infrastructure services segment generated full-year Adjusted EBITDA of $436 million, down from $606 million last year, impacted by the sale of operations and lower terminal deliveries [19][20] Market Data and Key Metrics Changes - North America is benefiting from easing rates, steady consumer spending, and resilient labor markets, although growth remains challenging in certain end markets [10][11] - In Europe, conditions are more challenging with slower activity in cyclical and industrial end markets, but there are early signs of improvement supported by fiscal spending and stabilizing energy prices [11] Company Strategy and Development Direction - The company is close to completing a corporate reorganization to become a single, newly listed corporation, which is expected to improve trading liquidity and increase index-driven demand for shares [5][6] - The strategy focuses on operational excellence and capital recycling, with significant investments in growth acquisitions and stock repurchases [4][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market backdrop, highlighting that the trading price is 50% higher than a year ago but still at a discount to NAV [8] - The company is well-positioned with capital and capabilities to continue building value in 2026, with a strong focus on operational improvements and cash generation [9][15] Other Important Information - The company ended the year with approximately $2.6 billion of pro forma liquidity at the corporate level, providing significant flexibility for growth and capital allocation [20][21] - The company has repurchased approximately $235 million of its units and shares, remaining committed to completing its $250 million buyback program [21] Q&A Session Summary Question: Clarios performance and monetization - Management indicated that Clarios is generating significant free cash flow and the 45X tax credits will enhance cash for reinvestment, with various options for returning cash to shareholders [23][24] Question: Scientific Games earnings trajectory - Management noted that while there is a strong pipeline for Scientific Games, it takes time for earnings to materialize, and they remain cautiously optimistic about the business [26][27] Question: Balance between reducing leverage and pursuing growth - Management emphasized that growing EBITDA will naturally reduce leverage, and they are focused on growth while managing debt levels [28][29] Question: Update on CDK operations - Management reported strong renewal activity and a focus on stabilizing churn through modernization and customer relationship solidification [42][43] Question: Deployment of capital and acquisitions - Management expressed confidence in continuing the momentum of acquisitions into 2026, with several opportunities being explored [45]