Q1 2025 Brookfield Business Partners LP Earnings Call

Okay.

Operator: Hello, and welcome to the Brookfield Business Partners first quarter 2025 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.

Speaker Change: Hello, and welcome to the Brookfield business Partners' first quarter 2025 results conference call and webcast.

Speaker Change: 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 one on your Touchtone phone now I would like to turn the conference over to Alan Fleming head of Investor Relations. Please go ahead Mr. Fleming.

Operator: To join the question queue, simply press star 11 on your touchtone phone.

Alan Fleming: Now, I would like to turn the conference over to Alan Fleming, Head of Investor Relations. Please go ahead, Mr. Fleming. Thank you, Operator, and good morning.

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.

Alan Fleming: 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 are available on our website.

Alan Fleming: Events are subject to known and unknown risks and future results may differ materially.

Alan Fleming: 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 are available on our website.

Anuj Ranjan: We'll begin the call today with an update on business performance and our strategic initiatives from Anuj Ranjan, our Chief Executive Officer.

Alan Fleming: Well begin the call today with an update on business performance.

Ranjan: Jake initiatives from a news Ranjan, our Chief Executive Officer.

Adrian Letts: Adrian Letts, head of our business operations team, will then be on to share some perspective on the current operating environment.

Ranjan: Green lights ahead of our business operations team well then beyond to share some perspective on the current operating environment.

Jaspreet Dehl: We'll end the call with Jaspreet Dehl, our Chief Financial Officer, providing a review of our financial results. After we finish our prepared remarks, the team will be available to take your questions.

Speaker Change: On the call with Jasper Dale, our Chief Financial Officer, providing a review of our financial results.

Speaker Change: After we finish our prepared remarks, the team will be available to take your questions.

Anuj Ranjan: And with that, I'd like to now pass the call over to Thanks, Alan. And good morning, everyone. Thank you all for joining us on the call. We've had a good start to the year, generating over $1.5 billion from our capital recycling initiatives and committing $370 million to acquire two market-leading industrial We've significantly reduced our corporate borrowings and also bought back nearly $6 million of our units and shares. As you may recall, we announced a $250 million repurchase program earlier this year, and we have already returned $140 million to shareholders. While the market fluctuations we've seen play out over the past month can be unsettling, our strategy is exactly For more information visit www.FEMA.gov to own great businesses with market leading positions and execute on our plans to enhance their underlying performance.

Speaker Change: With that I'd like to now pass the call over to a nation.

Speaker Change: Thanks, Alan and good morning, everyone. Thank you all for joining us on the call today.

Speaker Change: We've had a good start to the year generating over one and a half a billion dollars from our capital recycling initiatives.

Speaker Change: $370 million to acquire two market, leading industrial businesses.

Speaker Change: We've significantly reduced our corporate borrowings and also bought back nearly 6 million units and shares.

Speaker Change: You may recall, we announced a $250 million repurchase program earlier. This year, we have already returned $140 million to shareholders as part of that.

Speaker Change: While the market fluctuations, we've seen play out over the past month can be unsettling. Our strategy is exactly the same to own great businesses with market, leading positions and execute on our plans to enhance their underlying performance and cash flows.

Anuj Ranjan: This has allowed us to compound value through periods of uncertainty in the past and gives us confidence as we manage through the current evolving environment. The reality is that most businesses, including ours, won't be entirely insulated from the impacts of tariffs or a potential downturn in global growth. However, having experience in navigating economic cycles and the operational capabilities to adapt will allow us to position our business for continued value creation. Regardless of where policy changes shake out, it does feel like the broader themes of relocalization and digitalization are here to stay. Capital will flow to these areas as companies look to reduce dependency on cross-border trade, strengthen supply chains, and invest in domestic.

Speaker Change: This has allowed us to compound value to periods of uncertainty in the past.

Speaker Change: Give us confidence as we manage through the current evolving environment.

Speaker Change: Reality is that most businesses, including ours won't be entirely insulated from the impacts of tariffs or potential downturn in global growth.

Speaker Change: However, having experience in navigating economic cycles, and the operational capabilities to adapt will allow us to position our business for continued value creation.

Speaker Change: Regardless of where policy changes shake out it does feel like the broader themes of re localization and digitalization are here to stay capital will flow to these areas as companies look to reduce dependency on cross border trade strike in supply chains and invest in domestic capabilities.

Anuj Ranjan: The United States remains an extremely attractive destination for capital. We've been investing in the backbone of the U.S. economy for years, building a track record as an owner and operator of great... Today, the growth of many of these businesses is accelerating as technology, relocalization, and policy changes continue. Advancements in Artificial Intelligence, Automation and Robotics are ushering in a new era and will create immense opportunities to buy and completely transform many of these industrial companies at a much more rapid Growth in Europe has lagged behind the U.S. for years, but the region is uniting around a pro-growth agenda with governments signaling that they are willing to play a part in easing regulation, promoting productivity, and supporting spending.

Speaker Change: The United States remains an extremely attractive destination of capital we've been investing in the backbone of the U S economy for years building a track record as an owner and operator of great businesses.

Speaker Change: Today the growth of many of these businesses is accelerating as technology re localization and policy changes converge.

Speaker Change: Advancements in artificial intelligence automation and robotics are ushering in a new era and will create immense opportunities to buy it completely transformed many of these industrial companies at a much more rapid pace.

Speaker Change: Growth in Europe has lagged behind the U S for years, but the region is.

Speaker Change: On a pro growth agenda with government signaling that they're willing to play a part in easing regulation promoting productivity and supporting spending.

Anuj Ranjan: Meanwhile, India remains a bright spot in the global economy, and the Middle East, specifically the Gulf countries, continue to thrive, largely insulated from current geopolitical dynamics, which is supporting a highly conducive deal-making environment and opportunities for us to strategically grow our presence or monetize businesses thereover. Over the years, we've made some of our best investments. during periods of significant dislocation. Being global with a local presence and having strong access to capital puts us in a great spot to both accelerate buybacks and take advantage of growth opportunities.

Speaker Change: Meanwhile, India remains a bright spot in the global economy, and the Middle East specifically the Gulf countries continue to thrive largely insulated from current geopolitical dynamics, which is supporting a highly conducive deal, making environment and opportunities for us through strategically grow our presence or monetize the businesses there overtime.

Speaker Change: Over the years, we've made some of our best investments during periods of significant dislocation being.

Speaker Change: Being global with a local presence and having strong access to capital puts us in a great spot to both accelerate buybacks and take advantage of growth opportunities.

Anuj Ranjan: Just recently, we reached an agreement to acquire Antilia Scientific, a leading manufacturer and distributor of critical consumables and testing equipment serving life sciences and environmental labs. Until he has a sticky customer base, providing essential products which support the accuracy and repeatability of processes and lines. The business has historically grown through a series of acquisitions and received a lot of opportunities to improve its manufacturing, commercial strategy, and supply chain to capitalize on key growth opportunities.

Speaker Change: Just recently, we reached an agreement to acquire until your scientific a leading manufacturer and distributor of critical consumables and testing equipment, serving life Sciences and environmental labs.

Speaker Change: Until he is a sticky customer base, providing essential products, which support the accuracy and repeatability of processes and labs.

Speaker Change: The business has historically grown through a series of acquisitions that we see a lot of opportunities to improve its manufacturing commercial strategy and supply chain to capitalize on key growth opportunities.

Anuj Ranjan: A lot has changed since the start of the year, but our commitment to compounding long-term growth for our investors remains We're prepared for some uncertain days ahead, but are equally optimistic and confident in the quality of the businesses we own, the strength of our operational capabilities, and the increased flexibility of our balance sheet to support our growth.

Speaker Change: A lot has changed since start of the year, but our commitment to compounding long term growth for our investors remains the same.

Speaker Change: We're preparing for some uncertain days ahead, but equally optimistic and confident in the quality of the businesses, we own the strength of our operational capabilities.

Speaker Change: Creased flexibility of our balance sheet to support our growth.

Adrian Letts: With that, I'll pass the call over to Adrian Letts, who oversees our global business operations team and is going to spend some time talking about how we're positioning our business in the current operating environment. Thank you, Anuj. Good morning, everyone. I'm happy to be on the call today. As many of you are aware, today we have more than 30 dedicated operating professionals located around the world with a broad range of backgrounds, functional expertise, and domain knowledge. Having senior executives on the ground in all the regions where we operate to support our management teams is critical to allowing us to respond quickly to an evolving global operating environment like the one we've seen over the past few months.

Speaker Change: With that I'll pass the call over to Adrian <unk>, who oversees our global business operations team and he's going to spend some time talking about how we're positioning our business in the current operating environment.

Speaker Change: Thank you and good morning, everyone I'm happy to be on the call today as many of you are aware today, we have more than 30 dedicated operating professionals located around the world with a broad range of backgrounds functional expertise and domain knowledge, having senior executives on the ground in all the regions, where we operate to support our management team is critical to allow.

Speaker Change: Owing us to respond quickly to an evolving global operating environment like the one we're saying over the past few months.

Adrian Letts: I'm sure the topic of tariffs and trade is top of mind for most of you, and like many, we're continuing to assess the impacts on our business, our businesses, as well as the broader risk that changing policy decisions may have on global economic growth. Our work is ongoing, but as we pass through the noise, we do not anticipate that tariffs will have a material impact on the cash flows of our business. While we're global, many of our businesses source, manufacture, or provide services in a region for each. For the most part, this means that they're not heavily reliant on cross-border trade and our exposure is limited, with most of our manufacturing and operating presence being in the US, Europe, Mexico and Canada.

Speaker Change: I'm sure the topic of tariffs and trade is top of mind for most of your and like many we're continuing to assess the impacts on our business our businesses as well as the broader risk with changing policy decisions may have on global economic growth.

Speaker Change: Work is ongoing but as we pass through the noise. We do not anticipate the tariffs will have a material impact on the cash flows of our businesses. While we're global many of our businesses source matter of fact shop will provide services in a region for region.

Speaker Change: For the most part this means that they are not heavily reliant on cross border trade and our exposure is limited with most about manufacturing and operating presence being in the U S Europe, Mexico and Canada.

Adrian Letts: Where we do have some exposure, we expect the impacts to be manageable and limited to a handful of industrial operations. At Clarios, our advanced energy storage operation, a portion of its U.S. batteries are manufactured and recycled in Mexico. However, these should fall under a U.S. MCA exemption that remains in place, and the impact of tariffs on the business is not expected to be material. We are working through some expected impacts at Dexco, our engineered components manufacturer related to tariffs on imports from China. However, on a relative basis, Dexco should fare better than most of its competitors given its sourcing and manufacturing footprint.

Speaker Change: Where we do have some exposure, we expect the impacts to be manageable and limited to a handful of industrial operations, a clarity of our advanced energy storage operation a portion of its U S batteries that matter of fact sheet and recycled in Mexico. However, they should fall under a U S. M C I exemption that reminds them.

Speaker Change: Place and the impact of tariffs on the business is not expected to be material.

Speaker Change: We are working through some expected impacts of Dex card, our engineered components manufacturer related to tariffs on imports from China. However, on a relative basis exco should fare better than most of its competitors given at sourcing and manufacturing footprint.

Adrian Letts: Over time, we expect most of the impact on Dexco's business can be mitigated through commercial and sourcing opportunities.

Speaker Change: With time, we expect most of the impact on tax cuts business can be mitigated through commercial and sourcing opportunities.

Adrian Letts: More broadly, we're leaning into our operational capabilities and evaluating proactive measures across each of our businesses to ensure we're best positioned to mitigate any headwinds and prepare for scenarios that may arise as the environment changes. Where we can, we're evaluating opportunities to near shore production capacity, exploring alternative supplier arrangements, utilizing contract pass-through clauses, and accelerating cost optimization initiatives. Measured pricing actions will almost certainly be a lever to support margin performance in a potentially inflationary environment, but will need to be balanced in our commercial actions. As we're working through all of these opportunities, we're also very focused on the relative impacts to our competitors and how that may shape demand and market dynamics across industries and end markets we operate.

Speaker Change: More broadly we're leaning into our operational capabilities and evaluating proactive measures across each of our businesses to ensure we're best positioned to mitigate any headwinds and prepared for scenarios that may arrive arise as the environment changes, where we can we're evaluating opportunities to niche or production capacity.

Speaker Change: <unk> exploring alternative supplier arrangements utilizing contract pass through clauses and accelerating cost optimization initiatives.

Speaker Change: Measured pricing actions will almost certainly be a leave it to support margin performance in a potentially inflationary environment, but we'll need to be balanced in our commercial actions.

Speaker Change: We're working through all of these opportunities. We're also very focused on the relative impacts to our competitors and how that may shape demand and market dynamics across the industries and end markets we operate.

Adrian Letts: For the most part, volumes across our businesses have held up well despite some demand headwinds. We're dealing with in parts of Europe and some softness related to more discretionary related demand. That said, it's too early to assess the secondary impacts tariffs could have on a broader slowdown on economic and global growth. On balance, the longer-term impacts from US trade policy could be positive for businesses that we own, but we recognize the risk of potential near-term disruption. As a result, we're preparing for a more uncertain outlook over the next 12 to 18 months as both businesses and consumers adapt behavior and purchasing decisions in the current environment.

Speaker Change: For the most part volumes across our businesses have held up well. Despite some demand headwinds we're dealing with in parts of Europe, and some softness related to more discretionary related demand that said, it's too early to assess the secondary impacts tariffs could have on a broader slowdown on economic and global growth on balance for longer term impacts.

Speaker Change: U S trade policy could be positive for businesses that we are but we recognize the risk of potential near term disruption as a result, we're preparing for a more uncertain the outlook over the next 12 to 18 months as both businesses and consumers adapt behavior and purchasing decisions in the current environment. Fortunately most.

Adrian Letts: Fortunately, most of our larger businesses are global market leaders, providing essential products and services that are critical to their customers in any environment. There's always a market for these types of businesses and their strong, durable competitive advantages generally enable them to pass through higher costs and underpin stable cash flows. We've seen this resilience demonstrated through past cycles, including during the pandemic, and our goal is to ensure we can improve the positioning of our businesses as we go through the current period of volatility.

Speaker Change: About larger businesses are global market leaders, providing essential products and services that are critical to their customers in any environment. There's always a market for these types of businesses and their strong durable competitive advantages January and enable them to pass through higher costs and underpin stable cash flows we're seeing this resilience.

Speaker Change: Demonstrated through past cycles, including during the pandemic and our goal is to ensure we can improve the positioning of our businesses as we go through the current period of volatility with that I'll hand, it over to Josh to review, our financial results and be available to take any questions after prepared remarks.

Jaspreet Dehl: With that, I'll hand it over to Jaspreet to review our financial results and be available to take any questions after prepared remarks. Thanks, Adrian. And good morning, everyone. First quarter adjusted EBITDA was $591 million compared to $544 million in the prior period. Adjusted EFO of $345 million during the quarter included $114 million of net gain related to the sale of Offshore Oil Services' Shuttle Tanker Operation and $34 million in withholding tax expense related to the distribution received from our Advanced Energy Storage Operation. Turning to segment performance, our industrial segment generated first quarter adjusted EBITDA of $304 million, which included $72 million of tax benefits at our advanced energy storage operation and contributions from our electric heat tracing manufacturer, which we acquired in January.

Josh: Thanks, Adrian and good morning, everyone.

Josh: First quarter, adjusted EBITDA was $591 million compared to $544 million in the prior period.

Josh: Adjusted <unk> of $345 million during the quarter included $114 million of net gain related to the sale of offshore oil services shuttle tanker operation.

Josh: And 34 million in debt holding tax expense related to the distributions received from our advanced energy storage operation.

Josh: Turning to segment performance.

Josh: <unk> segment generated first quarter adjusted EBITDA of 304 million, which included $72 million of tax benefits at our advanced energy storage operation and contributions for my electric heat tracing manufacturer, which we acquired in January.

Jaspreet Dehl: Results of our advanced energy storage operations benefited from growing demand for higher margin advanced batteries, ongoing commercial actions, and the execution of optimization initiatives. The impact of in-market weakness and lower volumes at our engineered components manufacturer were reflected in results as the business continues to actively manage costs to support margins and cash flow. Moving to our business service segment, we generated first quarter adjusted EBITDA of $213 million, an increase compared to $205 million in 2024. Prior period results included $6 million of contributions from our road kills operations that were sold in July last year. Strong performance at our residential mortgage insurer and improved project execution at our construction operation contributed to segment performance during the quarter.

Josh: Results at our advanced energy storage operation benefited from growing demand for higher margin advanced batteries ongoing commercial action and the execution of optimization initiatives.

Josh: The impact of end market weakness and lower volumes at our engineered components manufacturer were reflected in results as the business continues to actively manage cost to support margin and cash flow.

Josh: Moving to our business service segment, but generated first quarter adjusted EBITDA of 213 million, an increase compared to $205 million in 2024.

Josh: Prior period results included $6 million of contributions from our road fuels operations that were sold in July last year.

Josh: Performance at our residential mortgage insurer and improved project project execution at our construction operation contributed to segment performance during the quarter.

Jaspreet Dehl: Results at our dealer software and technology service operation reflect the impact of higher costs associated with the acceleration of planned technology modernization initiatives, as well as customer churn. Finally, our infrastructure services segment generated first quarter adjusted EBITDA of $104 million compared to $143 million during the same quarter last year, which included contributions from our offshore oil services shuttle tanker operations, which we sold in January. Stable performance at our modular building leasing services and our lottery services operations was offset by the impact of weak market conditions in work access services.

Josh: Outside our dealer software and technology service operation to reflect the impact of higher costs associated with the acceleration of planned technology modernization initiatives as well as customer churn.

Josh: Finally, our infrastructure services segment generated first quarter, adjusted EBITDA was $104 million compared to $143 million. During the same quarter last year, which included contributions from our offshore services shuttle tanker operation, which we sold in January.

Josh: Stable performance at our modular building leasing services and our lottery services operations was offset by the impact of weaker market conditions in work access services.

Jaspreet Dehl: Now turning to our balance sheet and capital allocation priorities, we ended the quarter with liquidity of approximately $2.3 billion at the corporate level, which is pro forma for recently announced acquisitions and realizations. Buying back our units at a significant discount to intrinsic value is an excellent use of our capital. As Anuj mentioned, in January we launched a $250 million repurchase program and since then we've bought back almost 6 million units in shares, spending a total of $140 million. We will continue to execute our repurchase program under our existing NCIB, which we plan to renew once it expires in August.

Josh: Now turning to our balance sheet and capital allocation priorities. We ended the quarter with liquidity of approximately $2 3 billion at the corporate level, which is pro forma for recently announced acquisitions and realization.

Josh: Buying back our units at a significant discount to intrinsic value is an excellent use of our capital.

Josh: The neutral mentioned in January we launched a 250 million repurchase program and since then we've bought back almost 6 million units and shares spending a total of $140 million.

Josh: We will continue to execute our repurchase program under our existing in CIB, which we plan to once it expires in August this year.

Operator: With that, I'd like to close our prepared remarks and turn the call back to the operator for questions. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.

Josh: With that I'd like to close our prepared remarks, and turn the call back to the operator for questions.

Josh: Thank you <unk>.

Josh: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Gary Ho: And our first question comes from the line of Gary Ho with the Jardins Capital Market. Thanks. Good morning. Maybe just start off with Dexco. You mentioned there's volume improved in North America, but softness in international. You also mentioned some tariff implications. Are you able to maybe quantify that, perhaps impact to EBITDA near term? And are Dexco competitors also affected by tariffs as well? Just trying to see how easily you can pass through potential price increases there. Okay, great.

Speaker Change: And our first question comes from the line of Gary Ho with Desjardins capital markets.

Gary Ho: Thanks, Good morning, maybe just start off with <unk> mentioned Theres volume improved in North America.

Gary Ho: But softness in international you also mentioned some tariffs implications are you able to maybe quantify that perhaps impact to EBITDA near term and our Mexico competitors also affected by tariffs as well just trying to see how easily you can pass through potential price increases there.

Gary Ho: Yeah look I. Thank you for the question. So performance in Q1 was in line with plan. There's some sign of recovery in North America in Q1, but the market remains pretty muted.

Trailer registrations in North America, which are a leading indicator.

Gary Ho: Of.

Gary Ho: Our outlook remains at a multiyear low but I think the most important thing to point out as the business has done a great job on cost and capital management.

Gary Ho: And actually improved margins in a down market, we're still passing through the impacts of tariffs.

Gary Ho: And putting appropriate plans in place.

Gary Ho: But to your question on competitor impact there is going to be competitive impact on our competitors and I think proportionately to exco is well placed to manage through this.

Jaspreet Dehl: And my second question on Clarios, can you walk us through kind of where you stand with the 45x filing? There's many policy changes in the past couple months, any pivots in how you think about these credits Clarios is entitled to today?

Gary Ho: Okay, Great and my second question on <unk> can you walk us through kind of where you stand with the 45 back smiling.

Gary Ho: Theres many policy changes in the past couple of months any pivots in how you think about these credits clearinghouses entitled to today.

Jaspreet Dehl: Hi, Gary, it's Jaspreet. I'll take that. So to answer your last question first, you know, there's really no change in terms of our views around the tax credits. And it's kind of in line with what we've said. The business did file the their tax return for the 2024 year at the end of January. And, you know, it's our understanding it's being processed in the normal course. And we are expecting that the tax benefits and the credit we will get from the 2024 return, you know, in the near term.

Speaker Change: Hi, Gary its Jeff Craig I'll take that so to answer your last question first.

Speaker Change: Really no change in terms of our views around the tax credit.

Speaker Change: And it's kind of in line with what we said.

Speaker Change: The business did file.

Speaker Change: Their tax return for the 2024 here at the end of January.

Speaker Change: And and it's our understanding it's being processed in the normal course.

Speaker Change: And we are expecting that.

Speaker Change: The.

Speaker Change: Tax benefits and.

Speaker Change: The credit we will get from the 2020 for return in the near term.

Unknown Executive: Okay, great.

Anuj Ranjan: And then just the last one, if I can. In your letter to shareholder, you mentioned to generate proceeds from monetization, you look at additional ways to accelerate plans to return capital to shareholders. Can you maybe talk us through kind of what that might look like? Is it a bigger share buyback program? Are you perhaps referring to the potential Latrobe monetization in those remarks? Any comment that would be helpful?

Speaker Change: Okay, Great and then just the last one if I can.

Speaker Change: Your letter to shareholders, you mentioned SKU generate proceeds from monetization you look at additional ways to accelerate plans to return capital to shareholders.

Speaker Change: Can you maybe talk us through kind of what that might look like is it a bigger share buyback program are you, perhaps referring to the potential Latrobe monetization and those remarks any comment there would be helpful.

Unknown Executive: Sure.

Anuj Ranjan: Hi, it's Anuj here. So, as we've always done, we've always continued to look for opportunities to monetize or generate realizations in the market. We've done a pretty good job over the last couple of years, returning across the private equity group about $10 billion over two years, which is a significant portion of which went to BBU. The nice thing is great businesses that generate significant cash flow always have options. And we've tended to be quite creative in getting those monetizations or distributions. So whether it was Everize or Altera, or Greenergy, or even Clarios, we use different approaches.

Speaker Change: Sure Hi, it's in each year.

Speaker Change: So.

Speaker Change: As we've always done we've always continue to look for opportunities to monetize or generate realizations in the market. We've done a pretty good job over the last couple of years returning across the private equity group about $10 billion over two years, which a significant portion of which went to bu.

Speaker Change: This thing is great businesses that generate significant cash flow always have options.

Speaker Change: We've tended to be quite creative in and getting those monetization or distributions. So whether it was ever riser altera.

Speaker Change: Green energy or even clearinghouse, we use different approaches.

Unknown Executive: So I just say that while I can't comment on any specific one, you know, company that may be mentioned in the media, I think we are always looking at opportunities, especially when we have great businesses that are getting appropriately valued. There's also a secondary market out there for private equity investments, which has been healthy. And so if we are able to generate further monetizations or realizations, we do have continued capacity in our buyback, which is already currently going until August. We would look to renew that in August. And afterwards, continue to take our balanced approach of deleveraging, returning capital to shareholders and new investors.

Speaker Change: So I'd, just say that while I can't comment on any specific.

Speaker Change: One.

Speaker Change: You know a company that may be you mentioned in the media I think we are always looking at opportunities, especially when we have great businesses that are getting appropriately valued.

Speaker Change: Also our secondary market out there for private equity investments, which is which has been healthy and so if we are able to generate further.

Speaker Change: Monetization or realizations, we do have continued capacity in our buyback.

Speaker Change: Which is already currently going until August we would look to renew that in August and afterwards take continue to take our balanced approach of deleveraging returning capital to shareholders and new investments.

Unknown Executive: Okay, great. Thanks for those comments. That's it for me. Thank you.

Speaker Change: Okay, great. Thanks for those comments from me.

Devin Dodge: And our next question comes from the line of Devin Dodge with BMO Capital Markets. All right, thanks. Good morning.

Speaker Change: Thank you and our next question comes from the line of Devin Dodge with BMO capital markets.

Devin Dodge: Alright, thanks, good morning.

Adrian Letts: The unit holder letter, there was mention of a realignment at Scientific Games. Just wondering if you could provide some additional context and how you think this will enhance value of the business. So, thank you for the questions, Adrian. We're continuing to invest in digital. And we're excited by the digital opportunity that we see. We think there's a significant opportunity to digitize the near 100 billion lottery ecosystem globally. And this opportunity extends well beyond online games and mobile games, and it's embedding the technology into everyday customer interactions, To support this vision, we've already begun deploying a number of innovative technologies, including advanced retail vending solutions, cashless payment systems, mobile wallets, to support a growth in omni-channel and customer engagement.

Speaker Change: The unitholder letter.

Speaker Change: There was mentioned of a realignment at scientific games, just wondering if you could provide some additional context and how you think this will enhance value of the business.

Speaker Change: So thank you for the questions Adrian we're continuing to invest.

Speaker Change: In digital and we are excited by the digital opportunity that we see we think that.

Speaker Change: A significant opportunity to digitize the business.

Speaker Change: <unk> 100 billion lottery ecosystem globally.

Speaker Change: This opportunity to extend well beyond online games, and mobile games and embedding the technology into everyday customer interactions to support. This vision, we've already begun deploying a number of innovative technologies, including advanced retail vending solutions cashless payment systems marble.

Speaker Change: Wallets to support our growth in Omnichannel and customer engagement and to accelerate that with we've stood up a dedicated team.

Adrian Letts: And to accelerate that, we've stood up a dedicated team. In October 2024, we appointed a new head of digital, an accomplished leader with extensive experience in digital, including stints at Amazon and Symantec and Albertsons. We're actively expanding the team. And at scale, we believe this has a significant opportunity to continue to grow EBITDA. OK, excellent color. Thanks for that.

Speaker Change: In 2024 in October 2024, we appointed a new head of digital and accomplished leader with extensive experience in digital including stints at Amazon and semantic and Albertsons, we're actively expanding the team and at scale, we believe decided.

Speaker Change: A significant opportunity to continue to grow EBITDA.

Speaker Change: Okay excellent color thanks for that.

Unknown Executive: Maybe second question. We saw that Brookfield recently announced an agreement to invest in Barclays Payments business. Just given your current presence in the sector, should we assume that BBU participates in that transaction?

Speaker Change: Maybe second question.

Speaker Change: We saw the Brookfield recently announced an agreement to invest and Barclays payments business.

Speaker Change: Given your.

Speaker Change: Current presence in the sector should we assume that BB participates in that transaction and then more broadly can you speak to that investment pipeline that you see in the payment sector, and where you think brookfield can enhance the value of these businesses.

Anuj Ranjan: And then more broadly, can you speak to that investment pipeline that you see in the payment sector and where you think Brookfield can enhance the value of these businesses?

Anuj Ranjan: Sure, it's Anuj here, I'll take that. The answer is yes, BBU will participate in the Barclays investment. It's exactly in line with what we've already done in Network and Magnati, which have both been excellent businesses where we've continued to make great progress in operations.

Speaker Change: Sure, it's <unk> here I'll take that.

Speaker Change: The answer is yes, <unk> will participate in the Barclays investment.

Speaker Change: It's.

Speaker Change: Exactly in line with what we've already done in network and Magneti, which have both been excellent businesses, where we've.

Anuj Ranjan: Stepping back a little bit, Barclays is a great example of the types of opportunities we're looking at in financial infrastructure, where we feel that the broader global financial backbone does need a lot of investment and does need real operational capability to turn it around. Often the incumbents that own these businesses have challenges making those investments today on their own balance sheet, and it's opened up a lot of opportunities for us to step in and acquire or partner with those incumbents in transforming those businesses. We've done this very successfully in Magnati, we're continuing to do it successfully now in Network, and I think we're going to apply a very similar operational value creation plan with Barclays.

Speaker Change: Continue to make great progress in operations.

Speaker Change: Speak stepping back a little bit Barclays is a great example of the types of opportunities. We're looking at in financial infrastructure, where we feel that.

Speaker Change: The broader.

Speaker Change: <unk> financial backbone is.

Speaker Change: Is it does need a lot of investment and doesn't need real operational capability to turn it around often the incumbents have owned these businesses have challenges, making those investments today on their own balance sheet and it's opened up a lot of opportunities for us to step in and either acquire or partner with those incumbents and transforming those businesses.

We've done this very successfully and magneti, we're continuing to do it successfully now in network.

Speaker Change: And I think we're going to apply a very similar operational value creation plan with Barclays.

Anuj Ranjan: And just broadly, there's many, many more opportunities like that out there. So I think you can expect to see BBU continue to participate in these kinds of investments as we make them.

Speaker Change: Just broadly there there's many many more opportunities like that out there. So I think you can expect to see BV you continue to participate in these kinds of investments as we make them.

Unknown Executive: Okay, interesting. Thanks for that.

Unknown Executive: And then just one last one. Earlier this week, we saw that Shuler Allenberg reached an agreement to work with IPL.

Speaker Change: Okay interesting thanks for that and then just one last one.

Speaker Change: Earlier this week, we saw that solar Oliver reached an agreement to merge with <unk>.

Anuj Ranjan: I mean, look, we recognize this is one of your smaller investments, but just wondering if that agreement provides Brookfield and BPU with an eventual exit. Thank you. So look, as you rightly pointed out, we announced an agreement to merge the Scholar business with IPL Plastics, which is a leading plastic manufacturer in North America and the UK, which has a very complementary product and geographic customer portfolio. IPL was privatized by Madison Dearborn, a private equity firm in 2020. And the merger presents a substantial opportunity to create an international sustainable packaging producer at scale, including 27 locations across the UK, Europe and North America.

Speaker Change: IPL.

Speaker Change: We recognize this as one of your smaller investments but.

Speaker Change: Just wondering if that agreement provides brookfield <unk> with an eventual exit.

Speaker Change: Thank you said look as you rightly pointed out we announced an agreement to merge the shoulder business with IPL plastics, which is a leading plastic manufacturer in North America and the U K.

Speaker Change: <unk> has a very complementary product and geographic customer portfolio.

Speaker Change: PR was privatized by Madison Dearborn, a private equity firm in 2020.

Speaker Change: The merger presents a substantial opportunity to create an.

Speaker Change: In international sustainable packaging produce at scale, including 27 locations across the U K Europe and North America. The transaction does not require any additional funding from <unk> and its institutional partners.

Anuj Ranjan: The transaction does not require any additional funding from BBU and its institutional partners. Following a debt funded distribution to IPL shareholders, the capital structure will be 54% to Madison Dearborn and 45% to Scholar Alibis shareholders. And we expect the transaction to close in Q3 of this year. To your question, given that we are now creating an international sustainable packaging producer with substantial scale, we think it presents a tremendous opportunity for value creation over the next... Okay, excellent.

Speaker Change: Following a debt fund the distribution to IPL shareholders. The capital structure will be 54% to Madison, Dearborn, and 45% to show all of our shareholders and we expect the transaction to close in Q3 of this year to your question given that we are now creating an international sustainable.

Speaker Change: <unk> producer, which says that with scale, we think it presents a tremendous opportunity for value creation over the next few years.

Unknown Executive: I'll turn it over. Thank you.

Speaker Change: Okay excellent I will turn it over thank you.

Jaeme Gloyn: And our next question comes from the line of Jaeme Gloyn with NBF. Yeah, sure.

Speaker Change: Thank you and our next question comes from the line of Jamie coin with NBS.

Speaker Change: First question just on the CDK.

Speaker Change: Sure.

Speaker Change: I guess, the the sub pack called out a little bit of churn is still going through I was wondering if you could frame that for US has have you seen improvements.

Speaker Change: Is it stabilizing deteriorated and what can you tell us about how customers are are still.

Speaker Change: Still behaving with respect to the CDK business.

Jaspreet Dehl: It's Jaspreet.

Jaspreet Dehl: Maybe I'll start and then Adrian can add. So I'd say, yeah, just generally, if you look at the business performance, year over year, the current year performance is lower. The majority of that is due to the technology investments that we've been doing in our products at CDK. And these costs are, we're not able to capitalize them and we need to expense them. So they flow through EBITDA. And that is really the biggest piece of kind of the year over year performance difference. In terms of your question, churn, churn is higher. And, you know, where we're seeing that is more around customers that have kind of a single product like a CRM, or a single technology that they use from our stack.

Jeff Craig: Sure Jeff speed, maybe I'll start and then Adrian canard.

Speaker Change: Yes, just generally if you look at the business performance year over year.

Adrian: The current year performance is lower the majority of that is due to the technology investments that we've been doing in our products at CDK.

Adrian: And these costs were not able to capitalize them and we need to expand to them. So they flow through EBITDA and that is really the biggest piece of kind of the year over year performance difference.

Adrian: In terms of your question churn.

Adrian: Churn is higher and where we're seeing that.

Adrian: More around customers that have kind of a single product like the CRM or a single technology that they use.

Jaspreet Dehl: The customers that are kind of core DMS customers or across multiple products and tech stacks of CDK, the churn there is stabilizing. And, you know, what we are seeing is that the impact of the overall churn is also being mitigated by commercial actions as well as extension of contracts. So I'd say overall, you know, there's still still work to be done.

Adrian: Used from our stock.

Adrian: The customers that are kind of core dms customers our cross.

Adrian: Multiple products in tech stocks of CDK.

Adrian: They churn there is stabilizing.

Adrian: And.

Adrian: What we are seeing is that the impact of the overall churn and is also being mitigated by commercial actions as well as extension of contracts.

Adrian: Overall, it's still still work to be done.

Jaspreet Dehl: But the kind of broader core DMS churn just does feel like it is And then just to build on that, the investment in technology, we're taking a very customer led approach. And we believe that that will really set us up well to enhance our overall market position. And as we look forward over the next 10 years, consolidate the strong position that we have.

Adrian: But.

Adrian: The kind of broader core DMR.

Adrian: The churn does feel like it is stabilizing.

Adrian: And then just to build on that the investment in technology, we're taking a very customer led approach.

Adrian: And we believe that that will really set us up well to enhance our overall market position and as we look forward over the next 10 years consolidate the strong position that we have.

Jaspreet Dehl: Okay, and, you know, something we don't, we don't hear too much about, but it still contributes meaningfully in business services is UNIDAS. Can you, can you give us a quick update on On the performance of that business and the underlying market and are there any, are you seeing any other potential macro impacts affecting that business?

Adrian: Okay and.

Something we don't.

Adrian: We don't hear too much about but it still contributes meaningfully and business services unit Das can you can you give us a quick update on that.

Adrian: On the performance of that business and the underlying market and are there any are you seeing any other potential macro impacts affecting that.

Jaspreet Dehl: Sure, it's Jaspreet again. I'll start and then Adrian can add. So UNIDAS is our fleet management and car rental business in Brazil. And I'd say overall, the operating performance of the business has been fine. And the two parts of the business on the fleet management side, these are kind of medium term lease contracts that we have with customers. We've got the ability to kind of price the contracts in line with inflation. They're quite stable, just given that there's The other side of the business is the car rental side. And again, the business is doing fine from an operating perspective.

Adrian: <unk>.

Jeff Craig: Sure. It's Jeff for you to get I'll start and then Adrienne can add so you need as is our fleet management nine car rental business in Brazil.

Adrian: And I would say overall the operating.

Jeff Craig: Performance.

Jeff Craig: Business has been.

Jeff Craig: Fine.

Jeff Craig: The two parts of the business on the fleet management side.

Jeff Craig: These are kind of long term not medium term lease contracts that we have with customers.

Jeff Craig: We've got the ability to kind of priced contracts in line with inflation.

Jeff Craig: They are quite stable just given that.

Jeff Craig: Yes.

Jeff Craig: Term on the contracts of the lease contract so that business has been doing well, it's been continuing to grow.

Jeff Craig: The other side of the business as the car rental side.

Jeff Craig: And again.

Jeff Craig: The business is.

Jeff Craig: Doing fine from an operating perspective.

Jaspreet Dehl: We've spent a lot of time just on transformation activities within the business since we bought it. It's got a number of branches, so maximizing utilization of the branches, sharing best practices, just improving underlying operating performance. We did see over the last couple of years the used car prices, which on the car rental side, we buy new vehicles, we'll use them over a couple of years, and then we sell them in the market. There was some pressure on used car prices, but we have seen that start to ease. So I'd say overall, operating performance of the business is quite good.

Jeff Craig: Spent a lot of.

Jeff Craig: Time, just on transformation activities within the business since we bought it.

Jeff Craig: Got a number of branches still.

Jeff Craig: Maximizing kind of utilization of the branches sharing best practices, just improving underlying kind of operating performance.

Jeff Craig: We did see over the last couple of years, the used car prices, which now on the car rental side, we buy new vehicles will use them over a couple of years and then we sell them in the market. There was some pressure on used car prices, but we have seen that start to ease.

Jeff Craig: Overall operating performance at the business is quite good.

Jaspreet Dehl: The interest rates in Brazil have been going up. I think they're kind of over 14% now. So that has had an impact on kind of just the interest costs in the business, which impacts EFO. So we are kind of managing that, but the business is free cash flow positive. And look, I think the long term, we're quite excited about this opportunity.

Jeff Craig: The interest rates in Brazil.

Jeff Craig: <unk>.

Jeff Craig: Going up I think they are kind of over 14% now.

Jeff Craig: So Dod has had an impact on kind of just the interest cost in the business, which impacts.

Jeff Craig: <unk>.

Jeff Craig: So we are kind of managing that but the business is free cash flow positive.

Jeff Craig: And look I think the long term, we're quite excited about this opportunity.

Jeff Craig: Okay and and.

Jeff Craig: Lastly, just.

Jeff Craig: I just wanted to go back to a comment around managing through some of the potential tariff impacts.

Jeff Craig: Accelerating cost optimization initiatives, and then pushing I guess, some pricing actions through our there.

Jeff Craig: Are these are these actions underway in any of the business lines and maybe maybe focus more on the pricing side.

Jeff Craig: Or is this is this just a playbook waiting waiting to be deployed.

Unknown Executive: I'll start.

Adrian Letts: It's Adrian. So no, we are underway in terms of the actions that we can take, the pricing that we can put through. I think it's important to go back to the statements I made at the beginning. We're passing through the noise. We're really trying to understand the situation as it unfolds. We're preparing, but we're also taking action.

Jeff Craig: I'll start it's Adrian so now we are underway in terms of the actions that we can't take the pricing that we can put through I think it's important to go back to the statements I made at the beginning with passing through the noise, we're really trying to understand the situation as it unfolds, we're preparing but we're also taking action where we can.

Adrian Letts: Can you elaborate on where that action may be taking place at this point? Um, look, I think there's a broad range of things that we're doing. Pricing is clearly something that we're looking at. Yeah, maybe I could just add a little bit of color there. You know, if we step back in to Adrian's earlier comments, like there's really only two businesses where we expect any kind of first line impact from tariffs. The one is Clarios. And at Clarios, you know, most of that impact is between Mexico and the US where we have some lead recycling that happens in Mexico.

Jeff Craig: Can you elaborate on where that action may be taking place at this point.

Jeff Craig: Look I think there's a broad range of things that we're doing pricing is clearly something that we're looking at.

Jeff Craig: Yes, maybe I could just add a little bit of color there.

If we step back into your trends are here comment I think there's really only two businesses, where we expect any kind of first line impact from tariffs.

Jeff Craig: The one is clear.

Jeff Craig: And I declare you.

Jeff Craig: Most of that impact is.

Jeff Craig: Between Mexico, and the U S, where we have some lead recycling that happens in Mexico, and again Adrian spoke to this earlier, but with kind of the current.

Jaspreet Dehl: And again, Adrian spoke to this earlier. But with kind of the current tariff that are in place, we don't expect that that's going to be any material impact. And then the second business is Dexco. And again, Adrian touched on this already. And you know, we're looking at Dexco, we're looking at mitigation strategies, including commercial and pricing actions. And just relative to how our competitors source a lot of the end products, Dexco is in a good position. And if there if we do need to take pricing actions to mitigate the impact of tariffs, I'd say we'd be in a much stronger position to do that.

Jeff Craig: Hum.

Jeff Craig: Tariffs that are in place, we don't expect that that's going to be any material impact.

Jeff Craig: And then the second best with Us GAAP.

Jeff Craig: <unk>.

Jeff Craig: And.

Jeff Craig: Again, Adrian touched on this already and we're looking index or we're looking at mitigation strategies, including commercial and pricing actions and.

Jeff Craig: Just relative to how our competitors stores a lot of.

Jeff Craig: The and product.

Jeff Craig: <unk> is in a good position.

Jeff Craig: And if there if we do need to take pricing actions to mitigate.

Jeff Craig: The impact of tariffs I'd say, we'd be in a much stronger position to do that.

Jaspreet Dehl: Just given kind of our manufacturing footprint, and how we source our products. So those are really the only two businesses. And, you know, it's not a very like Dexco is the only one where we think, you know, there'll be more mitigation required if things do kind of continue down the path that Good.

Jeff Craig: Just given kind of our manufacturing footprint and how we source our products.

Jeff Craig: Really the only two businesses and.

Jeff Craig: Not a very like tax was the only one where we.

Jeff Craig: We think there'll be more mitigation required if things do kind of continue down the path that they are.

Unknown Executive: Yeah, understood.

Unknown Executive: Thank you very much. Thank you.

Jeff Craig: Yeah understood. Thank you very much.

Nik Priebe: And our next question comes from the line of Nik Priebe with CIBC. Okay, thanks. Just going back to Clarius for a moment. Has the company had any interaction or dialogue with the IRS about the 2024 tax filing specifically and the credits that were recognized last year, but haven't been converted to cash on balance sheet? Like, I'm just wondering if you have any visibility on how the review of that tax filing is progressing and maybe when you'd expect to hear back on it. Um, look, I think the kind of process around filing the tax return is in the normal course, like there's nothing unusual about the way the process is progressing for this tax return relative to others that they filed in the past.

Jeff Craig: Thank you.

Speaker Change: Next question comes from the line of Nik Priebe with CIBC.

Speaker Change: Okay. Thanks, just going back to <unk> for a moment.

Speaker Change: Has the company had any interaction or dialogue with the IRS about the 2020 for tax filing specifically and the credits that were recognized last year, but haven't been converted to cash on balance sheet.

Speaker Change: I'm just wondering if you have any visibility on how the review of that tax filing is progressing and maybe when you'd expect to hear back on it.

Speaker Change: Yes.

Speaker Change: I think the kind of process around filing their tax return is in the normal course like Theres nothing unusual about the way the process is progressing for those tax return relative to others.

Speaker Change: That they filed in the past.

Jaspreet Dehl: The, you know, I'd say, anecdotally, we've heard of others that have been receiving payments against their tax benefit credits, like others in the industry. So we still feel quite confident, you know, that Clarion's qualified under the regulations and that we will receive payment in due course.

Speaker Change: The.

Speaker Change: I'd say.

Speaker Change: Anecdotally, we've heard of others that have.

Speaker Change: <unk> been receiving payments against the tax benefit credits like others in the industry.

Speaker Change: So we still feel quite confident that clear.

Speaker Change: <unk> qualifies under the regulations and that we will receive payment in due course.

Speaker Change: Got it Okay. That's helpful. And then just at Sage and the higher mortgage insurance cap became effective in December is there any early indication year to date, what impact that might have on transactional premiums I guess I'm just wondering what proportion of.

Speaker Change: Transactional premiums would be on those properties valued between one $1 5 million you can tell me that too detail, but I'm just looking for a kind of a general sense of what it does to the size of the total addressable market for that business.

Jaspreet Dehl: Sure, I can start and then others can add to it. What I'd say is that the overall performance of SAGEN continues to be very strong, and it's supported by kind of the resilience of the housing market. We did see a significant increase in kind of transactional volume this quarter from first-time homebuyers, and I'd say the increase in volumes for SAGEN kind of outpaced the general kind of market, the housing market performance, and it was driven by the regulatory changes that we saw come through, one of which you referenced, you know, the increase in the cap from a million to one and a half.

Speaker Change: Sure.

Speaker Change: Can start and then others can add to it.

Speaker Change: <unk>.

Speaker Change: What I'd say is that at.

Speaker Change: The overall performance of this agent continues to be very strong.

Speaker Change: And it's supported by the resilience and the housing market, we did see.

Speaker Change: A significant increase in kind of transactional volume this quarter from first time homebuyers, even I would say the increase in volumes for CGM kind of outpace the general kind of market, but the housing market performance and it was driven by the regulatory.

Speaker Change: Very changes that we saw come through one of which you referenced the increase in the cap from 1 million to one and a half.

Jaspreet Dehl: But then the second thing was the extension of the amortization period for first-time homebuyers to up to 30 years. So I'd say both of those things, the increased amortization period as well as the increased cap, did lead to higher transactional volumes. I don't have the exact numbers, but I think the number of kind of mortgages underwritten with the 30-year amortization was higher than the number that they saw come through from the higher kind of price capping.

Speaker Change: But then the second thing with the.

Speaker Change: Extension of PAA amortization period for first time homebuyers to update 30 years.

Speaker Change: Both of those things the increased amortization period as well as the increased cap did lead to higher transactional volumes.

Speaker Change: I don't have the exact numbers, but I think the.

Speaker Change: The number of kind of mortgages underwritten with the.

Speaker Change: 30 year amortization was higher than the number that they saw come through from the higher kind of price cap increased.

Unknown Executive: Oh, interesting. Okay, that makes sense, actually.

Speaker Change: Oh interesting, okay that makes sense actually.

Unknown Executive: Okay, that's it for me. Thanks very much. Thank you.

That's it for me thanks very much.

Operator: I'm showing no further questions at this time.

Speaker Change: Thank you and I'm showing no further questions at this time, so with that I'll hand, the call back over to CEO of news Ranjan for any closing remarks.

Anuj Ranjan: So with that, I'll hand the call back over to CEO Anuj Ranjan for any closing remarks. Thank you all for joining our call today and we look forward to speaking with you next quarter. Ladies and gentlemen, thank you for participating.

Speaker Change: Thank you all for joining our call today, and we look forward to speaking with you next quarter.

Speaker Change: Ladies and gentlemen, thank you for participating this does conclude today's program and you may now disconnect.

Operator: This does conclude today's program, and you may now disconnect.

Speaker Change: Okay.

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