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DATE
Nov. 6, 2025 at 9 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Anuj Ranjan
Managing Partner — Adrian Letts
Chief Financial Officer — Jaspreet Dehl
Operating Partner — Alan Matthew Fleming
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TAKEAWAYS
Capital Recycling -- More than $2 billion in proceeds generated year to date from capital recycling, enabling $1 billion in corporate credit facility repayments.
Share Buybacks -- Repurchased just over $160 million in units and shares, with capacity to repurchase an additional 8 million units and shares under the renewed buyback program.
Strategic Growth Investments -- Invested $525 million in three acquisitions, including the completion of the First National deal in October.
Corporate Reorganization -- Plan to consolidate BBU LP units and BBUC shares into a single Canadian public corporation is on track for completion early next year; company reports nearly $1 billion increase in consolidated market capitalization post-announcement.
Adjusted EBITDA -- Reported $575 million in adjusted EBITDA for the fiscal third quarter ended Sept. 30, 2025, down from $844 million in the prior period, reflecting lower ownership in three businesses and a reduction in tax benefits to $77 million from $296 million.
Core Adjusted EBITDA -- Excluding tax benefits and effects from acquisitions/disposals, adjusted EBITDA was $512 million in the fiscal third quarter versus $501 million in the previous period.
Adjusted EFO -- Delivered $284 million in adjusted EFO in the fiscal third quarter, supported by lower tax expense at the advanced energy storage operation and reduced interest expense from lower corporate borrowings.
Industrial Segment EBITDA -- Achieved $316 million in adjusted EBITDA in the fiscal third quarter compared to $500 million in the prior period, with segment performance including the impact of tax benefits up 17% over the prior year; higher-margin advanced batteries and volume growth cited as key drivers.
Business Services Segment adjusted EBITDA -- Recorded $188 million in adjusted EBITDA vs. $228 million in the prior period, with $11 million impact from sale of partial dealer software operation interest; revenue recognition slowed under IFRS 17 due to conservative modeling amid Canadian economic uncertainty.
Infrastructure Services Segment adjusted EBITDA -- Generated $104 million in adjusted EBITDA against $146 million previously, with results reflecting sale of offshore oil services and a $7 million hit from partial sale of a work access services operation; lottery service margins improved with favorable service mix.
Chemilex Progress -- Post-acquisition, Chemilex completed its carve-out, rebranding, management strengthening, and transformation office establishment, with a new hundred-day plan targeting cost savings and margin improvements in aftermarket products.
Antilia Scientific Update -- Acquired in May, Antilia benefits from leadership enhancements, digital capability upgrades, and expansion of e-commerce presence; value creation initiatives underway in procurement, site rationalization, and process automation.
Liquidity Position -- Maintained approximately $2.9 billion of pro forma corporate-level liquidity including fair value of units received from a partial interest sale to Brookfield Evergreen Fund.
BRK Monetization -- The company remains open to an IPO as one potential exit for BRK, noting Brazil capital markets remain difficult with high rates but some positive market signals appearing.
Latrobe Regulatory Matter -- Regulatory disclosure issue in Australia flagged by authorities has not materially impacted Latrobe’s business performance or fundamentals, which are described as "very strong," according to Anuj Ranjan.
Dexco Performance -- EBITDA for Dexco is up "little double digits" year over year; management reports early signs of recovery, particularly in North America and Europe, despite ongoing below-cycle market demand.
AI Operational Deployment -- AI, data measurement, and machine learning are being incorporated across manufacturing operations, notably in Clarios, to enhance throughput and inventory management.
SUMMARY
Management confirmed execution of over $2 billion in capital recycling and emphasized a disciplined approach to both growth acquisitions and share repurchases. The company highlighted the initiation of an organizational simplification, expected to be completed early next year, which has already catalyzed substantial market cap appreciation. Financial reporting indicated that, when normalized for tax and portfolio changes, adjusted EBITDA improved versus the prior year on a core basis. Strategic operational advances include Chemilex’s transformation plan, enhanced AI deployment in manufacturing, and a robust acquisition pipeline supported by $2.9 billion of available liquidity. Ongoing BRK monetization discussions and readiness for potential market exits were expressly reiterated, and ongoing regulatory matters at Latrobe were addressed as non-fundamental.
Jaspreet Dehl noted, "the pipeline is very robust," while management characterized current investment opportunities as potentially more attractive due to stronger financing markets and asset availability.
Anuj Ranjan stated, "our NAV has also continued to increase," reinforcing the narrative of a narrowing trading discount with opportunities for further narrowing as performance persists.
Discussions on technological investments revealed that decreased EBITDA in the dealer software operation primarily results from increased spending on product enhancements and customer retention efforts, with benefits anticipated next year.
This quarter's liquidity profile, buyback capacity, and access to capital position the company to continue both opportunistic repurchases and investments, as core leverage objectives remain stable.
INDUSTRY GLOSSARY
Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, modified for nonrecurring or non-core items as defined by company policy.
Adjusted EFO: Adjusted economic free cash flow from operations, a company-specific profitability indicator.
Capital Recycling: The process of selling mature or non-core assets and redeploying the proceeds into new, higher-return opportunities.
IFRS 17: International Financial Reporting Standard 17, a global accounting standard for insurance contracts, affecting revenue recognition timing and measurement.
Transformation Office: A cross-functional management unit established post-acquisition to drive operational improvements, accountability, and integration targets.
Full Conference Call Transcript
Anuj Ranjan: Thanks, Alan, and good morning, everyone. Thank you for joining us on the call today. We had a great quarter. Delivered strong financial results, made good progress on our growth and recycling initiatives, and continue to execute our strategy to create value for our shareholders. Since the start of the year, we've generated more than $2 billion of proceeds from our capital recycling program and repaid $1 billion of borrowings on our corporate credit facility. We've also bought back just over $160 million of our units and shares and invested an additional $525 million in three exciting strategic growth acquisitions, including First National, which we just closed in October.
Apart from our growth initiatives, in September, we announced plans to simplify our corporate structure by converting all BBU LP units and BBUC shares into one new publicly traded Canadian corporation. We expect this reorganization will improve our trading liquidity, increase demand for our shares from index investors, and more generally make our business more accessible for investors around the world. The feedback from the market has been excellent. Since the announcement, our consolidated market cap has increased by nearly $1 billion. We're excited about the benefits this reorganization will bring to all of our investors, and we are on track to have it completed early in the new year.
Stepping back, we created our business almost a decade ago, as a way to provide public investors access to Brookfield's global private equity business, which has been delivering top-tier returns for investors over the past 25 years. As a public company, we've been executing that same consistent strategy of acquiring high-quality market-leading vital businesses and operationally transforming them into global champions. Each dollar that is recycled is reinvested by the same team to fuel that flywheel of our business and continue compounding long-term value. While the price of our shares and units has significantly improved and is up approximately 150% over the past two years, our NAV has also continued to increase.
This means that our trading discount, while it has narrowed, still has more room to go as our NAV will continue to grow going forward. Simply put, there's never been a better time to be a BBU investor. The fourth industrial revolution powered by AI is happening more before our very eyes and is going to happen a lot faster than people think. The productivity improvements that need to be captured from all the capital investment going into the buildout of AI will be massive. What's exciting is that the bottleneck today isn't really the technology; it's actually the operators who have the need for change management and broader expertise to implement and properly transform businesses.
That's where we come in. We have both access to capital, but more importantly, the strong operational capabilities to leverage AI as another tool in our toolkit to accelerate our value creation plans and ensure our businesses are positioned to be propelled and not disrupted by it. We're pleased with the progress we've achieved through the first part of the year and are cautiously optimistic heading into the fourth quarter. Despite all the headlines, the broader global economy has remained relatively resilient. Public markets are at record highs and transaction activity both in public and private markets continues to pick up. Supported by the downward trajectory in global interest rates.
These are all powerful tailwinds for our business as we continue to pursue our strategy and find accretive ways to service value for our shareholders. Before wrapping up, I'd like to thank everyone who was able to join us in September for our annual investor day. We had a fantastic turnout, and it was great to see many of you in person. For anyone who missed it, the webcast and the materials are available on our website. With that, I'll turn the call over to Adrian.
Adrian Letts: Thank you, Anuj, and good morning, everyone. It's great to be joining you on the call today. We've been making great headway at the businesses we've acquired since the start of the year, and I want to spend some time today providing an update on where we've been focusing our efforts to advance our value creation plan. Let me start with the acquisition of Chemilex. As a reminder, Chemilex is a global leader in electric heat management solutions providing mission-critical temperature control systems used to regulate temperature across a wide range of industrial and infrastructure applications. Chemilex has a number of things we look for in high-quality industrial businesses.
It's a market leader, its products are low absolute cost, but have a high cost of failure, and the business generates a majority of its earnings from recurring aftermarket revenue, which underpins a durable earnings and cash profile. In addition to its strong underlying fundamentals, what made this acquisition particularly interesting to us was the value creation opportunity. The business was a carve-out of a carve-out and had been non-core to a series of previous corporate owners. We saw a clear path to margin improvement by adding a strong management team and improving operational efficiency.
With any business that we acquire, being able to hit the ground running, having the right management team in place out of the gates, establishing a transformation office to drive accountability, and crystallizing optimization savings as quickly as possible is so important to what we do and fundamental to our success. That's exactly what we've done at Chemilex, and I'm really pleased with the tremendous amount of progress we've achieved in just over six months of owning the business. Since closing, we've got off to a strong start, completing the carve-out, and rebranding the business as a standalone company.
We strengthened the management team and set up a transformation office to guide operational changes and refocus the business after years of being an underappreciated segment under previous owners.
Alan Matthew Fleming: Alongside new leadership, we built out a hundred-day plan focused on identifying cost savings opportunities and executing commercial initiatives aimed at rationalizing low-volume SKUs and improving margins, primarily in our aftermarket product business. We also put in place a new go-to-market strategy aimed at driving growth through expansion into new verticals and geographies. Finally, we completed a project plan to optimize our manufacturing footprint, and our primary production facility. Our investment will enhance equipment, improve measurement and sensing via AI and machine learning, as well as enhance process flow from an improved layout. All of which we expect will increase throughput, reduce labor costs, and improve product lead time.
We're also off to a strong start at Antilia Scientific, which we acquired in May. As a reminder, Antilia is a leading manufacturer and distributor of specialty consumable products and equipment for lab-based testing and research markets. Antilia has a sticky base of over 50,000 customers, producing high-quality mission-critical products that support accuracy and repeatability for lab-based processes. Our value creation plans are progressing well. We've strengthened the leadership team to accelerate execution, enhanced our go-to-market efforts with key sales and product hires. In addition, we're working to enhance the business's digital capabilities, like search engine optimization, and an AI quoting tool that will improve sales productivity while also building out the business's e-commerce presence.
We've deployed significant resources to jump-start our value creation initiatives and are working on improved opportunities across procurement, site rationalization, and automation of the manufacturing and distribution process. With that, I'll hand it over to Jaspreet to review our financial results.
Jaspreet Dehl: Thanks, Adrian, and good morning, everyone. Third quarter adjusted EBITDA was $575 million compared to $844 million in the prior period. Current period results reflect the impact of lower ownership in three 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 was $512 million compared to $501 million in the prior period. Adjusted EFO of $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.
Turning to segment performance. Our Industrial segment generated third-quarter adjusted EBITDA of $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 was driven by higher overall volumes, growing demand for higher-margin advanced batteries, and continued benefits from operational and commercial improvement initiatives. Adjusted EBITDA of our Engineered Components manufacturer increased on a same-store basis compared to the prior year.
After adjusting for the impact of a partial sale of our interest in the business earlier this year, improved performance reflects higher volumes driven by recent customer wins and the benefit of commercial actions and ongoing optimization initiatives, which are supporting resilient margins despite relatively weak market conditions. Moving to our Business Services segment, we generated third-quarter adjusted EBITDA of $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. Our residential mortgage insurer continues to benefit from resilient demand across the businesses served market segment, which includes first-time homebuyers, as well as low losses on claims.
Results during the quarter reflected the timing impact of slower revenue recognition under the IFRS 17 accounting standard, due to more conservative model assumptions given an uncertain Canadian economic outlook. At our dealer software and technology services operation, stable bookings were supported by continued renewal activity and commercial initiatives, which largely offset the impact of customer churn during the quarter. Results also reflect the impact of ongoing strategic investments to strengthen its customer service and product offerings. Finally, our Infrastructure Services segment generated third-quarter adjusted EBITDA of $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. Stable performance at our lottery service operation benefited from improved margin performance driven by productivity gains and a favorable mix of services, despite the timing of terminal deliveries being lower compared to the prior period. The business is focused on executing a significant pipeline of system implementations, which include the rollout of digital lottery services in the UK, expected to go live early next year. Turning to our balance sheet and capital allocation priorities.
We ended the quarter with approximately $2.9 billion of pro forma liquidity at the corporate level, including the fair value of units we received in exchange for the sale of a partial interest to the new Brookfield Evergreen Fund earlier this year. We're in a great position with significant liquidity and flexibility to support our growth and balance capital allocation priorities. To that end, during the quarter, we renewed our normal course issuer bid, which provides us with the ability to buy back an additional 8 million units in shares.
As a reminder, in February, we launched our current $250 million buyback program, and as Anuj mentioned, to date, we've repurchased just under $160 million of units and shares under this program. Going forward, we'll continue to remain opportunistic when it comes to our repurchase activity balanced against our continued growth objectives. With that, I'd like to close our prepared remarks and turn the call back to the operator for questions.
Operator: Thank you. To withdraw your question, please press 11 again. Our first question comes from the line of Devin Dodge with BMO Capital Markets. Your line is now open.
Devin Dodge: I wanted to start with a question on BRK. They had a regulatory filing last week about potentially pursuing an IPO. Just wondering if an IPO is still the most likely path for an exit? And is the IPO market open in Brazil even with interest rates remaining quite high?
Jaspreet Dehl: Hi, Devin. It's Jaspreet. I'll I could start, and then Anuj can add anything that I've missed. I'd say, you know, we've talked about BRK in the past. It is one of our more mature investments, and it is one that we're actively looking to monetize. IPO is one option that is available to us, and, you know, we always make sure that we keep all optionality. The capital markets environment in Brazil is still difficult. Interest rates are high, but they seem to have peaked. But you're so you're starting to see some green shoots. We think BRK is an excellent business, and it would make a great public company.
We're keeping that optionality open and having some early discussions to gauge interest, but it doesn't mean that, you know, there are no other options that we would look at.
Devin Dodge: It makes sense. Just because you do BRK, it's been relatively quiet on investing in new concessions recently. Just do you expect the business to be more active going forward? Or is financial leverage, you know, a bit too much of a constraint currently?
Jaspreet Dehl: The focus has been kinda twofold in the business. One is operational initiatives to continue to increase margins and EBITDA, which the team has done a great job. EBITDA is up in the double digits year over year. The second piece has been around the concessions that we do have; continuing to appropriately allocate capital to the development of the underlying concessions, get our inflation, and other increases allowed under these concessions. There has been significant focus on that side as opposed to going out and looking for inorganic growth. So the organic growth within the business, we're quite happy with. And look, we'll be opportunistic.
But right now, our focus, given everything we've executed on within BRK, we have created an incredible platform, which we think is really valuable. There continues to be a great need in the country around water treatment and sewage services, and BRK and the platform we've created can play a very important role there. So we think there's lots of opportunities for growth. But our focus right now is more on monetizing the asset.
Devin Dodge: Okay. Makes sense. And then just last question here for me on Latrobe. There has been lots of media coverage related to some actions taken by the regulator. Just can you provide a bit of context for the issue, kind of where it stands now, and if this has had much of an impact on the underlying fundamentals of the business, including redemptions?
Anuj Ranjan: Yeah. Hi. It's Anuj here. I'll take that one. So, I'd say this issue is more of a disclosure issue that the regulators raised. The regulator does this quite often in Australia. It has happened, I think, 90 times in the last year or two to other fund managers. It's something that our team is working through, and they are going to implement some changes probably over the next little while in some of the disclosures. It hasn't had any real impact on the underlying fundamentals of the business, which remain very strong. The business is performing great. It's doing really well. We're still very confident in its future growth prospects.
Many interested parties are interested in Latrobe and continue to see it the same way.
Devin Dodge: Okay. Thanks for that. I'll turn it over.
Operator: Thank you. Our next question comes from the line of Gary Ho with Desjardins Capital Markets. Your line is now open.
Gary Ho: Thanks. Good morning. Thanks for taking my question. Maybe start off with Anuj here, just at a very high level. Seeing the success of Nuclear and Westinghouse today makes me think about what could have been if BBU kept that asset today. Just curious, do the development of those assets make you consider keeping assets longer for the fullness of time to reap the full potential? Just wanna pick your brain on that.
Anuj Ranjan: Yeah, look. It's a great question. Westinghouse is an amazing business. It's done incredibly well after we sold it, as you've all seen. Many of the reasons it's doing incredibly well are things that would not have been knowable at the time that we sold it, and we had a very good outcome for the time that we owned it. I think our role, as we see it, is to buy and truly operationally transform these vital businesses to the global economy, and that's exactly what we did at Westinghouse. So it's a great playbook, and it's a great outcome that we are all still really proud of.
Our goal is to make businesses so good that others find value in them, and they should all, frankly, continue to do well after we exit. When others should continue to see benefits in the businesses that we exit, it means we've done our job right. So we don't have any regrets in that sense. In terms of our strategy, the nice thing about BBU is that it always presents us a bit of that optionality of some businesses that we thought could be longer-term holders that we could find that makes sense. I'd say, we've not changed our strategy from the beginning.
We have co-invested alongside Brookfield's broader private equity business, and we have sometimes, occasionally, considered owning businesses on a longer-term duration. I think that sort of optionality that we have continues to exist. We do, of course, look at many companies in our portfolio today, and some of them are exceptional. If there was an opportunity to own them longer, we could always consider it. But I'd say our focus still is on wanting to compound value over the long-term, and much of the compounding that we do is by improving those margins dramatically in the early years.
If we do our job right and we get paid the right value on exit, we still find that sometimes recycling that capital into new opportunities, where we can deploy that same playbook, will allow us to generate the kind of exceptional returns that we've done over the past 25 years.
Gary Ho: Yep. That makes sense. And while I have you, can you maybe just talk about the new Evergreen Fund, the Brookfield Private Equity Fund? Are there other opportunities to further monetize parts of maybe BBU into these vehicles over time? Maybe talk about how you pick and choose these assets to sell.
Anuj Ranjan: Sure. Maybe just to start with, you know, we recently launched the BP fund, as I think some of you saw a press release in Canada. What I can say is that it's been going very well. We're very pleased with the results so far, and by next quarter, I assume that we will have some redemptions of that pref and be able to share more information in terms of the cash inflows to BBU as a result of that sale, which we think is going to be very successful. In terms of future opportunities, it's a function of two things. One is whether it is accretive for BBU and shareholders and the share price.
Obviously, the share price since we did the first one is better today, but it still reflects a material discount we feel to NAV. So part of it depends on how things go over the next little while. And, of course, it depends on the inflows that BPE may continue to have in the market. If that natural opportunity exists in the future, we could explore opportunities. I would say it's not something that we're actively advancing at this moment. But it's an option that we always have in the future if it makes sense for both sets of investors.
Gary Ho: Okay. And then if I can sneak one more in just on CDK here. Results dipped year over year. I know part of that was due to some ongoing strategic investments made and product enhancements. Wondering if you can provide a bit more details on these initiatives. Maybe quantify the impact in the quarter and also future spend in the next 12 to 18 months?
Adrian Letts: So it's Adrian here. You know, the current quarter reflects continued investments, as you said, in modernizing the technology. I think it's important to step back first. Margins are ahead of where we bought the business, and we continue to see the enhancement of operations and the improvements we've done across the business. Churn has stabilized, and we've started to roll out some of the new features and products that we've been investing in. Customer response has been overwhelmingly positive. We will continue to invest, and it's something that we had always planned to do. We think now is the right time. But we're expecting to see the benefits come through next year.
Anuj Ranjan: Are you able to quantify the amount in the quarter?
Jaspreet Dehl: I don't think, Gary, it's Jaspreet. I don't think we've kind of broken that out specifically to say, you know, what the contributions are from each piece. But I'd say, the bulk of the decrease that you're seeing is related to the technology spend. There's, you know, positive kinds of commercial actions, there's some churn, but the bulk of the year-over-year decrease is related to the technology spend.
Gary Ho: Okay. Got it. Thank you. Those are my questions.
Operator: Thank you. Our next question comes from the line of Jaeme Gloyn with National Bank. Your line is now open.
Jaeme Gloyn: Yeah. First one, just I might have missed it. Did is the tax credits have you received cash for that at this stage yet?
Jaspreet Dehl: Hi, Jaeme. It's Jaspreet. We have not. So we're still awaiting the you know, we've we were told that it's being processed, and think with the government shutdown in The US now, they're we're expecting that there's delays and slowdowns just in the processing. But our expectation is still that we will receive the credit, and it's more just a matter of timing.
Jaeme Gloyn: Yep. Understood. And then, I mean, pro forma liquidity. In, probably the best, it's been in some time. Should we expect a ramp-up here in deployments, or is that still somewhat contingent on recycling some of the other assets?
Jaspreet Dehl: Look. I'd say our capital allocation priorities are still, you know, around funding the growth of the business, and maintaining leverage at a good level, so kinda maintaining that. And then the $250 million buyback program. I'll let Anuj provide additional commentary, but the pipeline is very robust. We're very opportunistic and selective in terms of where we want to deploy our capital. So, you know, if we find the right opportunities, we have the available to fund growth. So far this year, you know, we've deployed $525 million into three, what we think are really great businesses. And if there are opportunities to continue to deploy capital, we'll do that.
Anuj Ranjan: Yeah. I'd just say that I think everything Jaspreet said is right. And I just said that generally speaking, the investment environment is looking very good right now. Obviously, the financing markets are very strong, and very enabling for private equity-style transactions. But more importantly, we're just finding great businesses that we really like many who we have been following for many years. That are possibly coming available at great prices. And some of those are deals that we've done so far this year that BBU has participated in. So the pipeline's very strong. There's some incredible opportunities that we're working on.
You know, it's it's sort of I don't know if they'll go through or not, but if they did, I think maybe you would look to participate in them. This is sort of a great time to be putting money to work.
Alan Matthew Fleming: And we're really excited about the overall landscape.
Jaeme Gloyn: K. Great. And then last one, just on Dexco. Co. Volumes are up year over year. EBITDA looks like it's up little double digits. Has this turned the corner? Are you feeling more confident in your term outlook for Dexco? Maybe an update on that business and what we should expect in the coming year.
Adrian Letts: Yeah. So it's Adrian here. I'll give you some color. So look, we are pleased with the performance. The business continues to do well in what is an improving, but still somewhat challenging market. You know, market demand remains below normal cycle levels, but, you know, we're seeing some signs of an early recovery in both North America and Europe, and, you know, we're hopeful that as we start to go through 2026, we'll see some further green shoots.
Operator: Thank you. As a reminder, to ask a question at this time, please press 11 or your touch-tone telephone. Our next question comes from the line of Bart Dziarski with RBC Capital Markets. Your line is now open.
Bart Dziarski: Great. Thank you. Good morning. Just wanted to ask around AI, and you highlighted AI benefits across Clarios and Sajan at the Investor Day, and I was wondering you could highlight some of the AI benefits you might be seeing across the other large investments. So I'm thinking CDK, Dexco, and Scientific Games.
Adrian Letts: Yes. Look. It's Adrian here. I just some comments on CDK Scientific Games and DexCo. We talked in the past about the benefits that we're seeing in Clarios. We've installed sensors across the business, started to measure and understand quantums of data to really help operationalize and improve the throughput of manufacturing. And manage inventory level.