Q2 2024 Brookfield Business Partners LP Earnings Call
Operator: Welcome to the Brookfield Business Partners second quarter 2024 results conference call and webcast. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, simply press * 11 on your touchtone phone.
Yeah.
Speaker Change: Welcome to the Brookfield business Partners' second quarter 2024 results conference call and webcast. As a reminder, all participants are in a listen only mode and the conference is being recorded.
Speaker Change: After the presentation, there will be an opportunity to ask questions to join the question queue simply press star one on your Touchtone phone.
Operator: Now I'd like to turn the conference over to Alan Fleming, head of investor relations. Please go ahead, Mr. Fleming. Thank you.
I'd like to turn the conference over to Alan Fleming head of Investor Relations. Please go ahead Mr. Fleming.
Alan Fleming: Thank you, operator, and good morning. Before we begin, I'd like to remind you that in responding to questions and talking about our growth initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, I encourage you to review our filings with the securities regulators in Canada and the U.S., which will be available on our website.
Alan Fleming: Thank you operator, and good morning before.
Speaker Change: Before we begin I'd like to remind you that in responding to questions and talking about our growth initiatives and our financial and operating performance. We may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially for further information on known risk factors I encourage you to review our filings with the securities regulators in Canada and the.
Speaker Change: In U S, which will be available on our website.
Alan Fleming: We'll begin the call today with a business update from Anuj Ranjan, our Chief Executive Officer. He will then turn the call over to Paul Lepage, a Managing Director on our Business Operations Team, who will discuss our approach to managing cybersecurity risk and incident response at CDK Global, our dealer, software, and technology services operation. We'll end the call with Jaspreet Dehl, our Chief Financial Officer, discussing our financial results for the quarter.
Anews: Well begin the call today with a business update from a news.
Speaker Change: Chief Executive Officer.
Speaker Change: News will then turn the call over to Paul the Posh managing director on our business operations team, who will discuss our approach to managing cyber security risk and incident response at CDK Global our dealer in software and technology services operation.
Speaker Change: On the call with Jasper Dale our Chief Financial Officer discussing our financial results for the quarter, Adrian <unk> managing partner and senior leader on our business operations team is also joining us on the call. This morning, and after we finish our prepared remarks, the team will be available to take your questions.
Alan Fleming: Adrienne Letts, a Managing Partner and Senior Leader on our Business Operations Team, is also joining us on the call this morning. And after we finish our prepared remarks, the team will be available to take your questions. I'd now like to pass the call over to Anuj.
Speaker Change: I'd now like to pass the call over to Aneel.
Anuj Ranjan: Thanks, Alan. And good morning, everyone.
Aneel: Thanks, Alan and good morning, everyone. Thank you all for joining us on the call today.
Anuj Ranjan: Thank you all for joining us on the call. Through the first half of the year, we've made great progress on a number of fronts to build value in our business. Our financial results were strong, but were impacted by a couple of one-time events in our operations. These include a cybersecurity incident at CDK Global, our dealer software and technology services operation, and increased costs on a project nearing completion under construction. That being said, we continue to progress our value creation initiatives across the business, which should be captured in earnings as these one-time events pass.
Aneel: Through the first half of the year, we've made great progress in a number of fronts to build value in our business.
Speaker Change: Actual results were strong.
Speaker Change: Are impacted by a couple of one time of beds at our operations.
Speaker Change: This includes the cyber security incident that CDK global dealer software technology services operation at.
Speaker Change: That increased costs on our project nearing completion of our construction operations.
Speaker Change: That being said, we continue to progress our value creation initiatives across the business.
Speaker Change: We shouldn't be captured in earnings as these one time events past.
Anuj Ranjan: Paul is going to speak a bit more about the incident response to CDK later in the call, but I would like to take this moment to commend the CDK team for their quick and successful handling of the situation and their ongoing commitment to supporting their customers.
Speaker Change: Paul is going to speak a bit more about the incident response of CDK later in the call, but I would like to take this moment to commend the CDK team for their quick and successful handling of the situation and their ongoing commitment to supporting our customers.
Anuj Ranjan: Stepping back, our business fundamentals are sound. While the global operating environment continues to be fluid, activity levels across our operations remain stable, and the progress we're making on our value creation plans is contributing to our underlying margin performance. Simply put, we think owning high-quality businesses that are mission critical providers of essential products and services and having the deep operational capabilities to run them better is a real advantage in any environment.
Paul: Stepping back our business fundamentals are sound.
Speaker Change: The global operating environment continues to be fluid.
Speaker Change: Activity levels across our operations remain stable.
Speaker Change: We're making on our value creation pledged contributing to our underlying margin performance.
Speaker Change: Simply put we think owning high quality businesses that are mission critical providers of essential products and services and having a deep operational capabilities better is a real advantage in any environment.
Anuj Ranjan: Another key differentiator for our franchise is our strong access to capital, which has enabled us to opportunistically manage our maturity. Over the past few months, we've refinanced more than $11 billion of debt in our operations and reduced the spread of these borrowings by an average of 50 basis points. Going forward, this will reduce our annual interest expense by approximately $15 million and will stand to benefit even further as rates decline.
Speaker Change: Another key differentiator for our franchise is our strong access to capital, which has enabled us to opportunistically manage arbitrary fees.
Speaker Change: Over the past few months, we've refinanced more than $11 billion of debt in our operations and reduce the spread of these borrowings by an average of 50 basis points.
Speaker Change: Going forward this will reduce our annual interest expense by approximately $15 billion and will start to benefit even further as rates decline.
Anuj Ranjan: In addition, we've been focused on monetizing our more mature operations. While overall private market transaction activity has slowed down, we see the market increasingly as a tale of two cities. On the one hand, it's much harder in today's environment to sell lower quality businesses that have historically relied on low cost capital to grow. On the other hand, great businesses with strong underlying fundamentals are generally sought after by investors in any environment. To that point, over the past year and a half, we have sold or reached agreements to sell 10 businesses for approximately $3 billion in total proceeds at our share.
Speaker Change: Yeah.
Speaker Change: In addition, we've been focused on monetizing our more mature operations.
Speaker Change: Overall private market transaction activity has slowed down we see the market increasingly as a tale of two cities on one.
Speaker Change: <unk> had its much harder in today's environment to sell lower quality businesses, which have historically relied on low cost capital to grow.
Speaker Change: Had great businesses with strong underlying fundamentals are generally sought after by investors in any environment.
Speaker Change: To that point over the past year to have we have sold or reached agreements to sell 10 businesses, where a block approximately $3 billion of total proceeds at our share.
Anuj Ranjan: Most of the returns we've achieved have come from buying good businesses on a value basis, improving their operations, and recycling capital to support our growth. In some cases, we can do this in a relatively short period of time.
Speaker Change: Most of the returns we've achieved have come from buy good businesses on a value basis, improving their operations and recycling capital to support our growth.
Speaker Change: In some cases, we can do this in a relatively short period of time and in other cases holding up business for longer maybe the best means to continue to compound value.
Anuj Ranjan: And in other cases, holding a business for longer may be the best means. Continue to Compound Value. Many of our businesses generate stable cash flows, and in some cases, we may also be able to prudently increase leverage as a viable option to fund this. No matter how we choose to monetize a business, our objective is to maximize value. We've built a great track record as a public company, realizing three times MLC and a 30% IRR on the sale of 20 businesses.
Speaker Change: Many of our businesses generate stable cash flows and in some cases, we may also be able to prudently increase leverage as well.
Speaker Change: Buyable option to fund distributions.
Speaker Change: No matter, what we choose to monetize a business. Our objective is to maximize value. We've got a great track record as a public company realize you've got three times that we'll see at a 30% IRR on the sale of 20 businesses.
Anuj Ranjan: Today, we own great companies, and we're continuing to build value as we advance our improvement plans, which should create opportunities for us to generate meaningful proceeds from our next phase of monetization. I now want to pass the call over to Paul Lepage. Paul is a senior leader on our business operations team and spends a lot of his time working with our operations to help them build out their digital and technology capabilities. Paul, over to you.
Speaker Change: Today, we own great companies and we're continuing to build value as we advance our improvement pledge, which should create opportunities for us to generate meaningful proceeds from our next phase of monetization.
Speaker Change: I now want to pass the call over to Paul.
Speaker Change: Paul as a senior leader on our business operations team had spent a lot of his time working with our operations to help them build out their digital and technology capabilities Paul over to you.
Paul Lepage: Thanks, Anuj, and good morning, everyone. I'd like to take some time today to talk about our approach to managing cybersecurity risk. I'd like to provide you with an update on the incident response at our Dealer Management Software and Technology Services Operation, CDK Global, and share some thoughts on how we're strengthening our protocols across all our operating companies. Managing cybersecurity is and will always be part of our sound business practices and good governance framework for all our operations. This starts with the right culture.
Paul: Thanks, <unk> and good morning, everyone.
Paul: I'd like to take some time today to talk about our approach in managing cyber security risk.
Speaker Change: When you with an update on the incident response, and our dealer management software and technology services operation CDK Global.
Speaker Change: And share some thoughts on how we're strengthening our protocols across all of our operating companies.
Speaker Change: Managing cyber security is and always will be part of our sound business practices and good governance framework for all our operations.
Speaker Change: This starts with the right culture, we've always had a safety first mindset across all of our operations.
Paul Lepage: We've always had a safety-first mindset across all of our operations. This mindset increasingly encompasses an equal emphasis placed on physical safety and information security. Cybersecurity reviews are a key part of diligence prior to acquiring a business, and this extends to the management of our portfolio companies. Post-acquisition, we established an oversight committee to ensure adherence to cybersecurity programs and standards, including the National Institute of Standards and Technology, or NIST framework, to guide how our operations manage, respond, and reduce cybersecurity risk.
Speaker Change: Mindset, increasing immune competence is an equal emphasis placed on physical safety and information security.
Speaker Change: Cyber security reviews are a key part of diligence prior to acquiring a business and this extends to the management of our portfolio companies.
Speaker Change: Post acquisition, we established an oversight committee to ensure adherence to cyber security programs and standards, including the National Institute of standards and technology or NIST framework.
Speaker Change: The guide, how our operations manage respond and reduce cyber security risk.
Paul Lepage: We also engage leading third-party industry experts to assess the effectiveness of foundational cybersecurity controls, which includes scans for potential vulnerabilities, ongoing network monitoring, and the review of overall threat detection capabilities. Where it's needed, we support our operating companies with technical tools, processes, and resources to address the potential gap and to assess and remediate an activity. However, the frequency and sophistication of cyber incidents globally are intensifying. To put this in perspective, more than 2,000 cybersecurity incidents are reported daily, and last year alone, cyber incidents affected over 20% of the S&P 500 companies.
Speaker Change: We also engage leap meeting third party industry experts to assess the effectiveness of foundation on cyber security controls, which includes scans from potential vulnerabilities ongoing network monitoring and the review of overall threat detection capabilities.
Speaker Change: Where it's needed we support our operating companies with technical tools processes and resources to address the potential gaps.
Speaker Change: And to assist in the renminbi remediation activities.
Speaker Change: However.
Speaker Change: Frequency and sophistication of cyber incidents globally is intensifying.
Speaker Change: There's some perspective more than 2000 cyber security incidents of reported daily and last year alone cyber incidents attracted over 20% of the S&P 500 companies.
Paul Lepage: As we disclosed, CVK Global was impacted by a cyber incident during the quarter. CVK, as a reminder, is a leading provider of cloud-based software to automotive dealerships. It's a trusted partner to its customers, providing mission-critical services that enable automotive dealers to run their business more efficiently. We privatized the business two years ago and have been focused on the execution of an evaluation plan, or rather, a creation plan, which includes investing approximately $500 million in product and technology, R&D, infrastructure, and modernization of the software stack immediately after detecting unauthorized activity on its network. CDK mobilized its incident response team and shut down its systems that contained the threat. The cyber attack was orchestrated by a highly sophisticated threat actor that infiltrated CDK's IT infrastructure.
Speaker Change: As we disclosed CDK global was impacted by cyber incident during the quarter Cds.
Speaker Change: CDK is a reminder, is a leading provider of cloud based software to automotive dealerships.
Speaker Change: As a trusted partner to its customers, providing mission critical services and enable automotive dealers to run their business more efficiently.
Speaker Change: We prioritize the business two years ago.
Speaker Change: Focus on our on the execution of a valuation.
Speaker Change: Creation plan, rather which includes investing approximately $500 million in product and technology, R&D infrastructure and modernization of our software stack.
Speaker Change: Immediately after detecting unauthorized activation armies network CDK Mobilizes incident response team and shut down its systems that contained a threat.
Speaker Change: The cyber attack was orchestrated by a highly sophisticated threat actor and infiltrated cdk's infrastructure.
Paul Lepage: With the assistance of leading third-party experts, CDK moved to quickly begin restoring its systems with a focus on putting its customers first, limiting the disruption to customer operations, and remediating the impacts as quickly as possible. Within two weeks, CDK was able to bring substantially all its dealer customers back onto its core dealer management system. And within three weeks, the business had restored substantially all its major applications and third party system integration.
Speaker Change: With the assistance of leading third party asks for CDK move so quickly begin restoring it systems with a focus on putting its customers first limiting the disruption to customer operations and remediated the impacts as quickly as possible.
Speaker Change: Within two weeks CDK was able to bring substantially always dealer customers back onto its core dealer management system and within three weeks and business have restored substantially all of its major applications and third party system integrations.
Paul Lepage: CDK continues to be focused on being a best-in-class partner to its customers, which includes supporting them as their businesses get back to normal operations, providing one-time billing credits, and rebuilding trust. As a market leader, the business is continuing to invest in its systems and technology to protect against evolving cyber threats. It's also working to support the industry, including making free tools and resources available for any dealer to help them assess their security frameworks, evaluate risk, and enhance employee cybersecurity training. On behalf of Brookfield, we want to thank all CDK customers and partners for their support and patience during the outage. With that, I'd like to turn the call over to Jaspreet to review our financial results.
Speaker Change: CDK continues to be focused on being a best in class partner to its customers.
Speaker Change: Includes supporting them as their businesses get back to normal operations, providing onetime billing credits and rebuilding trust.
Speaker Change: As the market leader the business is continuing to invest in it systems and technology to print there.
Speaker Change: Against evolving cyber threats.
Speaker Change: It is also working to support industry, including making free tools and resources available for any dealer to help them assess their security frameworks evaluate risk and enhanced cyber security training.
Brookfield: On behalf of Brookfield, we want to thank all CDK customers and partners for their support and patience during the outage.
Speaker Change: With that I'd like to turn the call over to Josh to review our financial results.
Jaspreet Dehl: Thanks, Paul, and good morning, everyone. Second quarter adjusted EBITDA was $524 million compared to $606 million in the prior period. Excluding contributions from nuclear technology services and other small operations sold last year, prior year adjusted EBITDA was about $550 million. Adjusted EFO of $289 million in the quarter included $103 million of net gains on the sale of our Canadian aggregate production operation, as well as public securities in our industrial sector. Turning to our segment performance, our industrial segment generated second quarter adjusted EBITDA of $213 million, which increased from $196 million in 2023. Our advanced energy storage operation continues to generate strong performance, benefiting from favorable pricing, improved mix driven by the shift to higher-margin advanced batteries, and ongoing operational efficiency initiatives.
Josh: Thanks, Paul and good morning, everyone.
Josh: Second quarter, adjusted EBITDA was $524 million compared to $606 million in the prior period.
Speaker Change: Excluding contributions from nuclear technology services.
Speaker Change: Other small operations sold last year prior year, adjusted EBITDA was about 550 million.
Speaker Change: Adjusted <unk> of 289 million in the quarter included $103 million of net gains on the sale of our Canadian aggregate production operation as well as public securities in our industrial segment.
Josh: Turning to our segment performance, our industrial segment generated second quarter, adjusted EBITDA of $213 million, which increased from $196 million in 2023.
Josh: Alright advanced energy storage operation continues to generate strong performance benefiting from favorable pricing.
Josh: Mix driven by the shift to higher margin advanced batteries.
Josh: And ongoing operational efficiency.
Speaker Change: <unk>.
Jaspreet Dehl: This is partially offset by reduced contribution from our engineered components manufacturer due to the impact of lower volumes given overall reduced market demand. Moving to our business services segment, we generated $182 million of second quarter adjusted EBITDA; performance benefited from the increased contribution of our residential mortgage insurer. This was offset by the one-time impact related to the cybersecurity incident at CDK. The total impact to adjusted EBITDA of the cost incurred at CDK was $38 million at BBU's share, and included one-time billing credits provided to customers, as well as remediation out-of-pocket costs.
Speaker Change: This was partially offset by reduced contribution from our engineered components manufacturer due to the impact of lower volumes given overall reduced market demand.
Speaker Change: Moving to our business services segment, we generated $182 million.
Speaker Change: Second quarter adjusted EBITDA.
Speaker Change: Performance benefited from the increased contribution of our residential mortgage insurer.
Speaker Change: This was offset by the one time impact related to the cyber security incident at CDK.
Speaker Change: The total impact to adjusted EBITDA.
Speaker Change: The cost incurred at CDK.
Speaker Change: $38 million at.
Speaker Change: <unk> sure.
Speaker Change: And included onetime billing credits provided to customers.
Speaker Change: Well as remediation out of pocket costs.
Jaspreet Dehl: A portion of these costs was offset by an insurance recovery. Results this quarter also reflected underperformance at our construction operations, where we recognized costs due to weather and construction delays at one project nearing completion in Australia. The project is expected to be completed later this year. Finally, our infrastructure services segment generated $157 million of adjusted EBITDA compared to $216 million during the same quarter last year, which included 60 million of contributions from nuclear technology services, which we sold late last year.
Speaker Change: A portion of these costs were offset by an insurance recovery.
Speaker Change: Results. This quarter also reflected the underperformance at our construction operation, where we recognized costs due to weather and construction delays at one project nearing completion in Australia.
Speaker Change: The project is expected to be completed later this year.
Speaker Change: Finally, our infrastructure services segment generated a 157 million of adjusted EBITDA compared to $216 million during the same quarter last year.
Speaker Change: Which included $60 million of contributions from nuclear technology services, which we sold late last year.
Jaspreet Dehl: Results also benefited from improved contributions from offshore oil services. Turning to our balance sheet, we ended the quarter with approximately $1.6 billion of liquidity at the corporate level and no significant upcoming near-term maturities on our debt. This provides us with good flexibility to continue to support our growth and optimize our balance. With that, I would like to turn the call back to the operator for questions.
Speaker Change: Results also benefited from improved contributions from offshore services.
Speaker Change: Turning to our balance sheet, we ended the quarter with approximately $1 6 billion of liquidity at the corporate level.
Speaker Change: And no significant upcoming near term maturities on our debt.
Speaker Change: This provides us good flexibility to continue to support our growth and optimize our balance sheet.
Speaker Change: With that I would like to turn the call back to the operator for questions.
Operator: Certainly. And as a reminder, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. And our first question comes from the line of Geoffrey Kwan from RBC Capital Markets. Your question, please.
Speaker Change: Certainly and as a reminder, ladies and gentlemen, if you have a question at this time. Please press star one on your telephone and our first question comes from the line of Geoffrey Kwan from RBC capital markets. Your question. Please.
Geoffrey Kwan: Hi, good morning. My first question was just about the CDK situation. Just wondering what the likelihood of any sort of future negative financial impacts from the incident, whether or not it's in queues for your future quarters. And then, similarly, you know, how would you describe the risk of the potential for market share losses? Like, you know, how to remind me how long the contract terms are, the likelihood that clients may look to get some price concessions, and the competitive environment, whether or not competitors may try to get a little more aggressive on pricing in the RFP.
Geoffrey Kwan: Hi, Good morning first question is just on the syndicate.
Geoffrey Kwan: And just wondering what the likelihood of any sort of future negative.
Geoffrey Kwan: Impacts from the incident, whether or not it's in queue for your future quarters and then similarly.
Speaker Change: How would you describe the risk of the potential for market share losses, like how remind me how long the contract terms are the likelihood.
Geoffrey Kwan: Alright.
Geoffrey Kwan: Pricing compression.
Geoffrey Kwan: The competitive environment, whether that competitors may try to get aggressive on.
Geoffrey Kwan: On pricing and Rfps.
Jaspreet Dehl: Hi Geoff, it's Jaspreet. Maybe I'll start off on the financial impact and then pass it over to Paul to address some of the balance of your questions. So, we incurred remediation out-of-pocket costs, as well as costs related to providing credits to our customers. All of those have been accrued in the quarter, offset by some insurance recovery. So, we think we've captured the bulk of the costs associated with the incidents in the quarter, and we're not expecting that there's going to be any additional material impact going forward just from the incidents.
Geoffrey Kwan: Hi, Geoff it's Jeff <unk>, maybe I'll start off on the financial impact and then pass it over to Paul characterized.
Speaker Change: Balance of your questions.
Speaker Change: <unk>.
Speaker Change: We incurred.
Speaker Change: The mediation out of pocket costs.
Speaker Change: Well as <unk>.
Speaker Change: Costs related to providing credits to our customers all of those have been accrued in the quarter offset by some insurance recovery.
Speaker Change: So we think we are.
Speaker Change: Captured the bulk of the costs associated with the incident in the quarter and we're not expecting that there's going to be any additional material impact.
Speaker Change: Going forward just from from the incident.
Paul Lepage: Hi Geoff, it's Paul.
Speaker Change: Okay.
Paul: Hi, Jeff It's Paul.
Paul: To answer a portion of your question. So most of these contracts are multiyear agreements with an average of three to five years it might.
Paul Lepage: Just to answer a portion of your question: Most of these contracts are multi-year agreements with an average of three to five years in length. The business has benefited from high customer retention rates, you know, that are reflective of the value of the service it provides to its customers. And you know, obviously, our focus, you know, from a CDK perspective with the systems back up and running is to focus on continuing to be that best-in-class partner and manage the customer. And we're going to do this by building the best and most secure platform for the industry.
Speaker Change: The business has benefited from high customer retention rates.
Speaker Change: There are reflective of the value.
Speaker Change: Service it provides to its customers.
Speaker Change: And obviously our focus.
Speaker Change: From a CDK perspective, with the systems back up and running is to focus on continuing to me that best in class partner and manage relationships with its customers.
Speaker Change: And we're going to do this by building the best and most of the air platform for the industry.
Paul Lepage: Okay, and just my second question is on a similar topic, but just more broadly speaking, you know, the comments around using third parties on the cybersecurity front for investing companies and also supporting them, you know, with other resources to help to minimize the threat, a threat actually coming to fruition. But in light of what happened at CDK, I'm just wondering, is there anything that you've learned from it in terms of, you know, whether or not it's having the proper protection?
Mike: Okay Mike.
Mike: Second question is on a similar topic, but just more broadly speaking.
Speaker Change: The comments around using third parties.
Speaker Change: On the cyber security front for invested companies and also supporting them with other resources to help to minimize the threat.
Speaker Change: A threat actually coming to fruition.
Speaker Change: But in light of what happened at CDK I'm, just wondering does that.
Speaker Change: Is there anything that you've learned from it in terms of.
Mike: Whether or not it's having the proper protections.
Paul Lepage: at each of your investee companies, whether that's the right third-party providers or other factors, and also, too, is having the right proper training and culture and IT personnel around cybersecurity risk for, again, the various businesses that you, [inaudible]
Speaker Change: At each of your invested companies, whether that's the right third party providers or other factors and also too it's having the right proper training and culture and personnel around cyber security risk for again, the various businesses that you own.
Paul Lepage: So, hi, Jeff. You know, the, the emphasis, we've always had the emphasis on this, to be clear, the area that, you know, a focus, and it's, it's a focus, frankly, for the whole industry is a focus around information security first and driving stronger on those practices. We've had a long history of doing this in security, physical security. We now have to continue to increase our focus on information security within all our portfolios.
Jeff: Hi, Jeff.
Jeff: What I'd say is that be.
Jeff: The emphasis we've always had the emphasis on that to be clear.
Jeff: The areas that.
Jeff: Okay.
Jeff: It's a focus frankly for.
Speaker Change: The whole industry as a focus around.
Jeff: This information security first and driving stronger on those practices, we've had a long history in doing this on security.
Speaker Change: Physical security.
Speaker Change: Now have too.
Speaker Change: Continuing to increase our focus on information security within all our portfolio companies.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Ed: Thank you Ed.
Devin Dodge: Our next question comes from the line of Devin Dodge from BMO Capital Markets. Your question, please.
Speaker Change: Our next question.
Speaker Change: It comes from the line of Devin Dodge from BMO capital markets. Your question. Please.
Devin Dodge: Right. Thanks. Good morning. I want to start with BRK Ambientel. I believe the recent restructuring, you know, it's pretty far advanced there, but there appears to be a fair bit of investor activity in this sector lately. Just wondering if an IPO was still the most likely exit, or are there other options that look more probable at this point?
Devin Dodge: Alright. Thanks, Good morning, I wanted to start with a question on <unk>.
Speaker Change: I believe the recent restructuring it's pretty far advanced.
Speaker Change: But there appears to be also a fair bit of investor activity in this sector lately.
Speaker Change: Just wondering if you think an IPO is still the most likely exit or are there other options that look more probable at this point.
Jaspreet Dehl: Hi Devin, it's Jaspreet. I'll start, and then Anuj can add if he wants.
Jeff: Hey, Devin it's Jeff Great.
Devin: I'll start and then a niche.
Speaker Change: One.
Speaker Change: So as.
Jaspreet Dehl: So, as you know, we've kind of executed on our operational improvement plan at BRK, and we think that business is well set up for monetization. The IPO was kind of a natural track to monetization for that business. But like we do with every investment that we make, we always look at all options. And we're doing the same thing at BRK Ambientel.
Speaker Change: As you're well aware.
Speaker Change: Executed on our operational improvement plan that would be.
Speaker Change: Okay.
Speaker Change: And.
Speaker Change: We think that business is well set up for a monetization.
Speaker Change: The IPO was kind of a natural track to monetization for that business.
Speaker Change: Like we do with every.
Speaker Change: Investment that we make we always look at all options.
Jaspreet Dehl: The IPO market in Brazil is still very difficult. The rates were going down, but I think that's kind of stalled a little bit. We haven't seen much, or I say even no new IPOs or real equity capital market activity in Brazil. So, that is still an option, but we are looking at other options as well to monetize and get at least some proceeds back up to.
Speaker Change: And we're doing the same thing that would be our Gambia Intel.
Speaker Change: All market in Brazil is still very difficult.
Speaker Change: The rates were going down and I think thats kind of stalled a little bit.
Speaker Change: We haven't seen.
David Amy: Sure David Amy.
Neil: Neil Ipos are.
David: Equity capital markets activity in Brazil.
Speaker Change: So yes that is still an option, but we are looking at other options as well to monetize and get some proceeds job backup to BP.
Devin Dodge: Okay, okay, good color. Appreciate that. And then, switching gears, Nielsen, this is an investment we talked about a lot, but just wondering if you could provide an update on the business and how much progress has been made toward that profit-driven plan.
Speaker Change: Okay. Okay. Good color I appreciate that.
Speaker Change: And then switching gears.
Speaker Change: Nielsen.
Speaker Change: This isn't about when we talk about much but just wondering if you could provide an update on the business and how much progress has been made towards that profit improvement plan.
Devin Dodge: Oh, hi, Doug. You know, Nielsen is a $400 million DBU investment in PrEP security. As you know, Nielsen is a sort of data as a service offering. It's the leading provider of audience measurement services for TV and audio. And it's got a growing presence in streaming and digital services. So our value creation plan and execution is focused around driving top line growth but also driving all elements of the value creation plan that we put in place.
Doug: Hi, Doug.
Speaker Change: Okay.
Speaker Change: Nielsen is a $400 million <unk> investment and perhaps security.
Speaker Change: As you know Nielsen is a set of data as a service offering is a leading provider of audience measurement services for TV and audio and <unk> got a growing presence in streaming and digital services.
Speaker Change: So our value creation plan.
Speaker Change: And execution is focused around driving topline growth.
Speaker Change: Also driving at all elements of the value creation plan that we put in place.
Devin Dodge: So far, the impact of that is sort of 400 basis points and margin improvement, and the company has got a lot of early wins within the digital and streaming environment. But there's still lots of work to do to deliver the best offering for this buy side and sell side advertising ecosystem in an evolving market.
Speaker Change: So far the impact of that as being sort of 400 basis points in margin improvement.
Speaker Change: And the company has got a lot of early wins within the digital and streaming environment.
Speaker Change: But there is still lots of work to do.
Speaker Change: Oliver.
Oliver: And best offering for buy side and sell side advertising ecosystem.
Oliver: In an evolving market.
Devin Dodge: Okay, thanks. Good color. And then, just maybe, one last one.
Speaker Change: Okay.
Speaker Change: That's good color and then just maybe one last one.
Anuj Ranjan: This morning, we saw Brookfield announce a car vote for a thermal management business. I was just wondering if BB was involved there.
Speaker Change: Wondering with a Brookfield announced a cargo to the thermal management business just wondering if <unk> was involved there.
Anuj Ranjan: Hi, it's Anuj here. Thanks, Evan. I'll take that. We did, yes, I think, yesterday sign or the night before sign the binding agreements to acquire EdVent, which is a great industrial business that we're quite excited about. It is a carve out of a larger corporation, so it's going to take four to five months to close. So we have some time. As you know, we've been advancing many of our capital recycling initiatives at BVU, including many monetizations that are, hopefully, on the way. And I would just say that in four to five months, when it's time to close, depending on our liquidity and our priorities for capital allocation at the time, we'll be able to do that.
Speaker Change: Sure Thanks, Kevin I'll take that.
Speaker Change: Yes, we did have I think yesterday signed.
Speaker Change: <unk>.
Speaker Change: By the agreements to acquire advent.
Speaker Change: Which is a great industrial business that we're quite excited about it is a carve out of a larger.
Speaker Change: Corporation, So it's going to take four to five months to close so we have some time.
Speaker Change: As you know we've been advancing many of our capital recycling initiatives at BV, you could eat any monetization.
Speaker Change: Hopefully all the way.
Speaker Change: I would just say that it's four to five months when it's time to close depending on our liquidity and our priorities for capital allocation at the time, we'll be able to make that decision.
Devin Dodge: Understood. Thank you. I'll turn it over to you.
Speaker Change: Understood. Thank you I'll turn it over.
Operator: Thank you. One moment for our next question, and our next question comes from the line of Gary Ho from Dijon Capital Markets. Your question, please.
Speaker Change: Yeah.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from the line of Gary Ho from <unk> capital markets. Your question. Please.
Gary Ho: Thanks. Maybe this is the first one.
Gary Ho: Maybe first one I want to go to Tesco here. So we saw lower results this quarter driven by lower volume maybe.
Gary Ho: I want to go to Dexco here. So we saw lower results this quarter just driven by lower volume. Maybe you can give us some color on how you're managing through this environment and your outlook for the back half and into 25?
Gary Ho: Maybe can you give us some color on how you're managing through this environment and outlook for the back half and into 'twenty five.
Unknown Executive: The market does continue to be affected by some softness in North America and particular parts of our international market. However, the team is continuing to do a fantastic job of managing costs to offset some of the volume decline. We're seeing some green shoots, but we expect the market to recover through the course of the back end of this year and into 2025. To a certain extent, when we underwrote and bought the business, we expected this to happen. We feel well set up and the team is doing a great job, as I said, as we see the market recover through towards the end of this year and then into next year.
Speaker Change: Yes.
Jay Nutt: Hey, Jay Nutt ship, if the market does continue to be affected by some softness in North America in particular parts of our international market. The team is continuing to do a fantastic job in managing costs to offset some of the volume decline.
Speaker Change: We're seeing some green shoots but.
Speaker Change: But we expect the market.
Speaker Change: <unk> through the course to the back end of this year and into 2025.
Jay Nutt: Certain extent when we when we underwrite both the business we expected this to happen.
Speaker Change: We feel well set up and the team is doing a great job as I said as we see the market recover through towards the end of this year and then into next year.
Gary Ho: Okay, perfect. And my second question is about Clarios.
Speaker Change: Okay, Perfect and then the second question.
Gary Ho: So another solid quarter generated healthy free cash flow, and as mentioned, you use that to pay down debt. Also, you focused on progressing options for the business to generate proceeds. How's the IPO process progressing? And are other initiatives that you plan to service the value on this asset?
Speaker Change: So another solid quarter generated healthy free cash flow and as mentioned.
Speaker Change: You've got to pay down debt.
Speaker Change: Also given your focus on progressing options for the business to generate proceeds.
Jay Nutt: The healthy IPO process progressing.
Speaker Change: Other initiatives that thank.
Speaker Change: How do you plan to surface value on that asset.
Anuj Ranjan: Hi Gary, it's Anuj here. I'll take that.
Nate: Yeah, Hey, Gary it's in each here I'll take that so curious as you said the business has been performing exceptionally well, we're very very pleased with how things are going to get the business.
Gary Ho: We're evaluating we continue to evaluate all strategic alternatives, which included IPO and I would just say that we're quite encouraged by the progress we're making so far.
Speaker Change: On all of those alternatives so.
Speaker Change: We're feeling pretty good about not only the IPO, but many of the different alternatives. We're looking at for the business to recycle some capital for Bebe.
Anuj Ranjan: So Clarius, as you said, the business has been performing exceptionally well. We're very, very pleased with how things are going at the business. We're evaluating and continuing to evaluate all the strategic alternatives, which include an IPO. And I'll just say that we're quite encouraged by the progress we're making so far on all of those alternatives. So we're feeling pretty good about not only an IPO but many of the different alternatives we're looking at for the business to recycle some capital for B2B.
Gary Ho: Okay, great. And then my last question, I want to go back to the CDK front, given that some of the one-time billing credits declined, and whatnot.
Speaker Change: Okay, Great and then just my last question I want to go back to the TDK front.
Speaker Change: Kevin.
Speaker Change: Onetime billing credits decline.
Speaker Change: And whatnot and when we look at the.
Gary Ho: And when we look at the peak of the incident, yeah, there were a lot of questions on what CDK's exposure is to BDU, and we saw the stock down 10% over several days during the outage. I'm wondering if management has given some thought to whether, you know, if you provided us with some valuation markers on at least some of your significant investments that might have reduced the volatility in the trading of DDU stock should another event happen in the future.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: The peak of the incident.
Speaker Change: There were a lot of questions on what is Cdk's exposure is two btu and we saw the stock down 10% on over several days during the outage.
Speaker Change: I'm wondering if management have given some thought weather provided us some valuation marker on at least some of your significant investments that might have to reduce the volatility on the trading of Btu stock shifting other events happened in future.
Speaker Change:
Jaspreet Dehl: Gary, just if I could frame your question, make sure I understand. Are you asking kind of how we assess how material the CDK incident was for BBU because of the volatility that you saw in the stock? Is that a very succinct version of your question? No, it's more.
Speaker Change: Gary.
Speaker Change: Can you frame your question make sure I understood.
Gary Ho: Are you asking kind of how we assess how material.
Speaker Change: CDK.
Speaker Change: For CPU because of the volatility that you saw.
Speaker Change: Yes.
Speaker Change: <unk> no further questions.
Gary Ho: No, it's more the, you know, the stock was down 10%. So which would be a significant part of, I believe, the valuation of CDK assets. So had you provided some valuation mark of what that, um, the pdk would have been as a percentage of your nav, maybe your stock wouldn't have been so volatile through that period.
Speaker Change: It's more the stock was down 10%.
Speaker Change: So which would be a significant part of I believe the valuation of CDK asset. So have you provided some valuation mark of what that.
Speaker Change: But it doesn't work as a percentage of your NAV, maybe your stock wouldn't have and so falls out through that period.
Jaspreet Dehl: Look, it's hard to comment on the volatility of the stock. As you know, we're not disclosing NAV, but we do give you all of the components of the NAV, and we share that with our investors. And like, if I just step back, at our share, CDK generates about $250 million of EBITDA for BBU today. We provide you with proportionate debt that is on that business. And, you know, you could put the right multiple on it and get a good sense of what the value of that business is to BBU.
Speaker Change: Yes.
Speaker Change: Good luck.
Speaker Change: It's hard to comment on the volatility of the stock.
Speaker Change: As Youre aware.
Speaker Change: We.
Speaker Change: We're not disclosing now, but we do if you will all of the components.
Speaker Change: Or it can.
Speaker Change: To be sure that with our investors and if I just step back.
Speaker Change: At our share.
Speaker Change: CDK generates about 250 million of EBITDA for <unk> today.
Speaker Change: They provide.
Speaker Change: We will provide you with a proportionate debt.
Speaker Change: That is on that business.
Speaker Change: Yes, you can put the right multiple on that and get a good sense of what the value of that.
Jaspreet Dehl: So, I'm not sure that giving investors an exact number versus giving them the components where it's easy enough to calculate that number would have made any directional difference one way or the other, but that has been our approach. We provide, we've been guiding people to think of BBU as a high-quality industrial services business. We've been giving you all of the inputs into calculating values for our larger businesses, including CDK, and we think that information is available to investors to assess the impact of any type of incident on value.
Speaker Change: This is <unk>.
Speaker Change: So I'm.
Speaker Change: I'm not I'm not sure that you have.
Speaker Change: Investors, an exact number versus giving them the components, where it's easy enough to calculate that number.
Speaker Change: It would have made any directional difference one way or the other but that has been our approaches we provide we've been guiding people to think of BDO as the high quality industrial services business and giving you all of the inputs into calculating value.
Speaker Change: As for our larger businesses, including CDK.
Speaker Change: And we think that that that information is available to investors to assess the impact of any type of incident on value.
Gary Ho: Okay, understood. Okay, thank you very much for those questions.
Speaker Change: Okay understood. Okay. Thank you very much that's my question.
Operator: Thank you. And our next question comes from the line of Jaeme Gloyn from NBF. Your question, please.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line.
Speaker Change: <unk>.
Jamie: Jamie growing from B sorry.
Speaker Change: And yes your.
Speaker Change: Your question please.
Jaeme Gloyn: Yeah, thanks. Good morning.
Speaker Change: Yes.
Speaker Change: Thanks, Good morning, just wanted to.
Speaker Change: Clarify on the interest cost savings I think you mentioned it was 55 zero million in savings on this recent round of refinancing is that is that a $50 million benefit to btu or is that to the outflows and then if it's the opco is what would be the benefit the btu.
Jaeme Gloyn: I just wanted to clarify on the interest cost savings. I think you mentioned it was $50,500,000 in savings on this recent round of refinancing. Is that a $50 million benefit to BBU, or is that to the OPCOs? And then if it's the OPCOs, what would be the benefit to BBU?
Jaspreet Dehl: Our proportionate share of that will be about a third. So you don't have kind of a full year basis; it'll be about $15 million.
Speaker Change: Two.
Speaker Change: Our proportionate share of that it'll be about a third so no.
Speaker Change: Kind of a full year basis, it'll be about $15 million.
Jaspreet Dehl: Okay. And we're... Oh, go ahead. Sorry, Jaspreet.
Scott: Okay Scott.
Speaker Change: Bert.
Speaker Change: Okay.
Jeff Great: Sorry, Jeff.
Jaspreet Dehl: So as you think that's from the spread reduction that we were able to achieve from the refinancing, like as rates go down, that should have an additional positive impact.
Speaker Change: So I actually think that's from the spread reduction that we were able to achieve from the refinancing.
Speaker Change: As rates go down like that should have an additional positive impact.
Jaspreet Dehl: Yeah, so that was going to be my follow-up question, was that this recent round of refinancing, it's all floating rate debt, is it unhedged, I guess, or are you making a call on that to unhedge it? And I guess I also noticed that like 70% of the debt is fixed or hedged. And I think that's an increase from more like the 50% range in previous quarters. So maybe just talk through how you're thinking about the rate environment and your financing strategy.
Speaker Change: Yes, so that was giving me my follow up is that.
Speaker Change: Does this recent round of refinancing.
Speaker Change: It's all floating rate debt is it is it unhedged I guess two are you, making a call on that too on hedge it.
Speaker Change: And I guess I also noticed that like 70% of the debt is fixed or hedged.
Speaker Change: And I think Thats, an increase from more like that 50% range in previous quarters. So maybe just talk through how you're thinking about the rate environment and youre financing strategies.
Jaspreet Dehl: Sure. So this 70% is actually down from 75%. And what the 70% represents is all of our debt that's fixed, that it has hedges on it, so like derivative hedges, as well as debt that's naturally hedged. So the biggest part of that is our financing business in Australia, where, you know, there's floating debt on both the asset and liability sides.
Speaker Change: Sure.
Speaker Change: This 70% is actually down from 75%.
Speaker Change: And what the 70% represents is all of our debt.
Speaker Change: I'll take that.
Speaker Change: It has hedges on and select derivative hedges.
Speaker Change: As well as depth, that's naturally hedged so the biggest part of that is our.
Speaker Change: Financing business in Australia, where the floating debt on both the asset and liability side. So there's a natural hedge there. So if you take all of those pieces together, we were about 70% hedged last quarter that number was 75% to 50% I think that you are.
Jaspreet Dehl: So there's a natural hedge there. So if you take all of those pieces together, we were about 70% hedged. Last quarter, that number was 75. The 50%, I think that you're thinking of excludes the natural hedges in the business, and you know how how we're thinking about rates like you know we do think there's we're at the end of the rate hiking cycle and we should see rate cuts coming soon the most of our hedges you know are on for and at about 18 months to three years is the typical timing of the hedges we usually you know hedge based on the maturity of the debt or the hold period on our investments and some of these hedges have been in place for a while so as we're kind of looking forward now you know as our hedges start to roll off we'll make a decision on whether we want to continue to hedge or let them roll off and keep the debt floating but I think we've got some hedges in place that that'll you know keep rates pretty consistent for us in the business the base rates for a little while but hopefully as the rates start to come down we're able to take some advantage of that as hedges roll.
Speaker Change: Thinking of excludes the natural hedges in the business.
Speaker Change: And how how we're thinking about.
Speaker Change: We do think.
Speaker Change: Okay.
Speaker Change: We're at the end of the rate hiking cycle, and we should see a rate cut is coming soon.
Speaker Change: The most of our hedges.
Speaker Change: Our on four.
Speaker Change: And that about 18 months to three years as the typical timing of the hedges we usually.
Speaker Change: Hedge based on the maturity of the debt R. R.
Speaker Change: Third on our investments.
Speaker Change: And some of these hedges have been in place for a while so we're kind of looking forward now.
Speaker Change: Hedges start to roll off we will make a decision on whether we want to continue to hedge or let them roll off and keep the debt floating.
Speaker Change: But I think we've got some hedges in place that battle.
Speaker Change: Great.
Speaker Change: Pretty consistent for us in the business the base rate.
Speaker Change: For a little while but hopefully as the rates start to come down we're able to take some advantage of that as hedges roll off.
Jaeme Gloyn: Okay, and sorry, was this recent round hedged or unhedged?
Speaker Change: Okay, sorry, I was this recent round hedged or unhedged.
Jaspreet Dehl: So I think it's probably fair to think of that 70 ish percent. So, all of the spreads that were reduced were all floating rate debt. And we look at kind of the entire company, and we'll, you know, based on the business, we'll hedge anywhere from 50 to 75 80% of the floating rate exposure. So you can think of, you know, 70% of the base rate on the stuff that we refinanced is that.
Speaker Change: And two I would say, it's probably fair to think of that 70 ish percent. So.
Speaker Change: All of the spreads that were reduced were all floating rate debt and we look at kind of the entire company in both.
Speaker Change: Based on the business, we will hedge.
Speaker Change: Anywhere from 50% to 75% of the floating rate exposure. So you can think of.
Speaker Change: 70% of phase III.
Speaker Change: The stuff that we refinanced is hedged.
Jaeme Gloyn: Okay, great. And last one just on the SageN, another $50 million dividend this quarter. Can you just refresh what the cumulative dividends that have been upstream from SageN and relative to the total investment in SageN?
Speaker Change: Okay, Great and last one just on the on the say Gen another $50 million dividend.
Speaker Change: This quarter.
Speaker Change: Can you just refresh what <unk>.
Speaker Change: What's the cumulative dividends that have been upstream from say gen.
Speaker Change: And relative to the.
Speaker Change: The total attachment and Sei Jin.
Jaspreet Dehl: Yeah, so in total, so far, we've gotten back about, including the dividend that we got this quarter, we've gotten back 85% of the capital that BDU invested, and we invested $855 million. So we've got circa 100 and change equity addresses still in the
Speaker Change: Yes, so in total so far we've gotten back about including the dividends that we thought at this point there we've gotten back 85% of it.
Speaker Change: Capital.
Speaker Change: You invested.
Speaker Change: And we invested 855 million.
Speaker Change: So we've got circa 100 and change.
Speaker Change: Equity address bill and Luka.
Jaeme Gloyn: Okay, that's incredible. Thank you.
Speaker Change: Okay. That's incredible thank you.
Operator: Thank you. One moment for our next question, and our next question comes from the line of Dmitry Kamelnitsky from Sartos. Your question, please.
Speaker Change: Thank you one moment for our next question.
Dmitry Kamelnitsky: Hi, so the first question is I wonder if you can provide some disclosure about how big our host, Carol Diller. Sorry, Dimitri. Dimitri, you're putting in a note. It's a bit hard to hear you. I apologize, can you hear me now? Yeah, that's better. Yeah, sorry.
Speaker Change: And our next question comes from the line of Dmitry <unk> Lynskey from Sara to your question. Please.
Speaker Change: Hi, and.
Nicole: Thank you Nicole.
Speaker Change: The first question is I wonder if you can.
Dmitry Lynskey: Provide some disclosure about how big are these switching costs.
Nicole: Sure.
Nicole: Hum.
Dmitry: Dmitry Dmitry.
Speaker Change: It's hard to hear you.
Dmitry: I apologize can you hear me now.
Speaker Change: Yes.
Speaker Change: Yes, sorry.
Operator: Yeah, we can hear you now. Awesome. Again, I'm sorry.
Operator: Awesome. Again, I'm sorry. So, first question on CDK: how big are the switching costs per dealership to move to another platform if they were to choose that?
Speaker Change: Yes, we can hear you now again.
Speaker Change: Again, I am sorry, So first question on CDK, how big are these switching costs per dealership to move to another platform. If they were to change those.
Speaker Change: Actually.
Paul Lepage: So, you know, obviously, it depends on the dealer size, Dimitri. So, for example, a large dealer that would have multiple rooftops would have to look at a pretty long process to move from one platform to the next on the dealer management software. There are other sort of peripheral applications that may be easier, you know, in terms of shorter time to migrate, but for the most part, it's a long process. It's a process that would take you know months to move from one platform to another. Yeah, I
Speaker Change: So.
Dmitry: Obviously, it depends on the dealer size dmitry, so large dealer and their right to have multiple rooftops.
Speaker Change: Wed.
Speaker Change: Have to look at.
Speaker Change: Pretty long process to move from one platform to the next.
Speaker Change: On the dealer management software.
Speaker Change: There is others are under peripheral applications that may be easier in terms of shorter time to migrate but for the most part.
Speaker Change: It's a long process, it's a process.
Speaker Change: Entitle months to move from one platform to the next yes.
Paul Lepage: Yeah, I think Dimitri, you know, if you think about kind of a core accounting system or SAP type of system in any kind of operating business, and you're trying to rip that out and implement a brand new system, kind of what that process would look like, that's probably a good process.
Dmitry: Yes, I think dmitry.
Dmitry: Think about kind of our core accounting system, our S&P type of system, and any kind of operating business and you're trying to.
Dmitry: <unk> implemented a brand new system kind of what that process would look like that's probably a good proxy.
Paul Lepage: Thanks for that. And then, switching to Brent Safway, I wonder if you can disclose the design DFO for that business for the past 12 months.
Speaker Change: Okay. Thanks for that and then just switching to brand pathway I Wonder if you can disclose EBITDA and be a home for that business over the past 12 months.
Jaspreet Dehl: Sure, so Brands Safeway is in our infrastructure services segment, and we actually account for Brands Safeway, so if you look at our segment disclosure, you can pick up that performance there, but the business generated about $30 million in EBITDA at our share, approximately $30 million. I don't have the number exactly in front of me, but that's the contribution to EBITDA.
Speaker Change: Sure So Brian faith based in our infrastructure services segment, and we equity account for our brands.
Dmitry: You can look at our segment disclosure you can pick up with backlog.
Dmitry: Thats there.
Speaker Change: But it did.
Speaker Change: The business generated about 30 million in EBITDA at our share.
Speaker Change: Approximately $30 million the number exactly in front of me.
Speaker Change: But that's the contribution to EBITDA.
Jaspreet Dehl: understood. I think it was split into two segments. It was reclassified, I think, into two separate segments. Is that still correct?
Speaker Change: Understood I think it was.
Dmitry: Two segments.
Speaker Change: <unk> I think into two separate segments is that still correct.
Jaspreet Dehl: I don't know. It's always been in the infrastructure segment. Oh, yeah.
Speaker Change: No no it's always been in the infrastructure segment.
Jaspreet Dehl: Oh, yeah. Okay. I'm sorry. All right.
Speaker Change: Yeah, Okay I'm sorry.
Speaker Change: Alright.
Speaker Change: <unk>.
Speaker Change: What other options do you consider to more is that.
Speaker Change: Okay.
Speaker Change: A potential IPO.
Jaspreet Dehl: So there's a number of options. It's a great business, and it's a great platform for water and sewage treatment in Brazil. And there are a number of strategics that might be interested in partnering with us and buying space in the business, either the business as a whole or in our more mature concessions. So when you think about the business, it's got concession agreements with a number of different regions and municipalities, and those concessions are at different stages of development.
Speaker Change: So there is a number of options.
Speaker Change: Yes.
Speaker Change: It's a great business and it's a great platform.
Speaker Change: Or kind of well water and sewage treatment in Brazil.
Speaker Change: <unk>.
Speaker Change: And there's a number of strategic that might be interested.
Speaker Change: Doug.
Speaker Change: Finally in the business out there and I think the business as a whole or in our more mature concessions. So when you think about the business.
Doug: Got concession agreements with a number of deaths.
Speaker Change: Regions and municipalities and those concessions are at different stages of development that most of them are more mature than others.
Jaspreet Dehl: Some of them are more mature than others, and there may be, there has been a kind of interest in some of the more mature concessions. So it could be, you know, a partner for the whole business. It could be a partner in parts of the business.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: It's been kind of interest.
Speaker Change: On some of the more mature concessions so it could be.
Speaker Change: Therefore in the whole business it could be a.
Speaker Change: Partner in participants.
Speaker Change: The construction or the market.
Speaker Change: Better an IPO is always an option as well.
Speaker Change: Do you think this might be a really good public.
Speaker Change: Yes.
Dmitry Kamelnitsky: has understood. Okay, thank you very much.
Speaker Change: Yes understood. Okay. Thank you very much.
Jamie: Thanks, Jamie.
Operator: And our next question comes from the line of Nik Priebe from CIBC Capital Markets. Your question, please.
Jamie: Thank you.
Speaker Change: And our next question comes from the line of Nick <unk> from CIBC capital markets. Your question. Please.
Nikolaus Priebe: Okay, thanks. I just want to go back to CDK for a moment. My understanding is that the internal view is that this incident won't necessitate the downstreaming of any capital to prop up the balance sheet or liquidity position there. Is that still the expectation?
Nick: Okay. Thanks, I just wanted to go back to CDK for a moment.
Nick: My understanding is the internal view is that this incident will necessitate the downstream do you have any capital to prop up the balance sheet or liquidity position there is that still the expectation.
Jaspreet Dehl: Yes, yeah, that's right. I mean, this business generates a lot of free cash flow. It's got significant liquidity, and we're not anticipating providing or downstreaming any capital.
Speaker Change: Yes, yes, that's right.
Jaspreet Dehl: Business generates a lot of free cash flow, it's got significant liquidity and we're not anticipating providing downstream any capital.
Jaspreet Dehl: Okay, that's good. And then there have been some press reports about auto dealerships bringing forward legal action in response to the outage. Is there any sort of cyber insurance coverage that would protect CDK from lawsuits stemming from an incident like that?
Speaker Change: Okay. That's good and then there have been some press reports about auto dealerships, bringing for legal action in response to the outage is there any sort of cyber insurance coverage that would protect CDK from.
Speaker Change: Lawsuits stemming from an incident like that.
Jaspreet Dehl: So the business does have cyber insurance, which we have drawn on to address the cyber incident, to the extent that there's litigation, which, you know, at this point, we're not, we're still assessing, but we're not sure there's too much merit to a lot of these. I don't think they'd be covered by insurance. Okay, got it. And just
Speaker Change: So the business does have cyber insurance, which we.
Speaker Change: Have gone on to address the cyber incident.
Speaker Change: To the extent, but.
Speaker Change: Litigation, which.
Speaker Change: That's 0.1.
Nick: We're not.
Nick: We're still assessing but we're not sure if there's too much merit to do a lot of these.
Speaker Change: I don't think they would be covered by insurance.
Jaspreet Dehl: Okay, got it. And last question for me on Clarios.
Speaker Change: Okay got it.
Speaker Change: And just last question for me just on <unk>.
Nikolaus Priebe: If I take the last 12-month adjusted EBITDA number and I gross it up to 100%, it implies about $2.2 billion. Now, I'm cognizant that US GAAP EBITDA is a little bit lower than EBITDA presented under IFRS. But as we approach the end of the company's fiscal year here in September, is it safe to say that EBITDA will exceed $2 billion on a US GAAP basis for the full year? I'm just thinking about this in the context of a pricing scenario for a potential IPO.
Speaker Change: If I take the last 12 month, adjusted EBITDA number and a gross it up to 100% basis. It implies about $2 2 billion.
Speaker Change: Now I am cognizant that U S. GAAP EBITDA is a little bit lower than EBITDA presented under <unk>, but as we approach the end of the Companys fiscal year here in September is it safe to say that EBITDA will exceed $2 billion on a U S. GAAP basis for the full year I'm just thinking about this in the context of a pricing scenario for us.
Speaker Change: A potential IPO.
Speaker Change: Yeah look I there'll be adding about two.
Jaspreet Dehl: 2 billion. The US GAAP to IFRS adjustments, if I just think about the scale of those adjustments, it should be a little bit over 2 billion, but there's still a quarter of performance to go, so we'll see how things pan out.
Speaker Change: <unk> 2 billion.
Josh: The U S GAAP to IRS adjustments, if I, just think about kind of the scale of those it Josh.
Speaker Change: It should be.
Speaker Change: Good luck.
Speaker Change: But over $2 billion, but.
Josh: Third quarter.
Josh: Quarter performance to go so, we'll see how things kind of panic.
Nikolaus Priebe: Understandable. Okay, fair enough. All right. Thanks very much for taking my question.
Speaker Change: Understood. Okay fair enough alright, thanks, very much for taking my questions.
Anuj Ranjan: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Anuj Ranjan for any further remarks.
Speaker Change: Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to a neutral <unk> for any further remarks.
Operator: Thank you everyone for joining us this quarter, and we look forward to seeing you all at Investor Day in September.
Speaker Change: Thank you everyone for joining this quarter and we look forward to seeing you all at Investor Day in September.
Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Josh: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].