Brookfield Business Partners 2026 Q2 Earnings Call

Thank you, operator. 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. Future results may differ materially. For further information on our 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. We'll begin the call today with Anuj Ranjan, our Chief Executive Officer, who will provide an update on our strategic initiatives. Anuj will then turn the call over to Adrian Letts, Global Head of Business Operations, to talk more about a few of our recent acquisitions. Jaspreet Dehl, our Chief Financial Officer, will finish with a review of our financial results for the quarter.

After we conclude our prepared remarks, the team will be available to take your questions. With that, I'd like to now pass the call over to Anuj.

Thanks, Alan. Good morning, everyone. Thank you all for joining us on the call today. Halfway through the year, the value of our business continues to compound, which is exactly what we set out to do. Over the past six months, we generated $1.2 billion in proceeds from asset sales and distributions, including an agreement we reached last month to sell Multiplex for about $650 million. Multiplex marks one of the last significant legacy assets left on our balance sheet from the spin-out. Over the past several years, we've monetized these assets and put that capital back to work in larger, higher quality businesses that are more closely aligned with our long-term strategy of compounding capital.

Consistent with that strategy, during the quarter, we also committed over $300 million to acquire two market-leading industrial and services businesses and close our strategic investment in the OpenAI deployment company, or DeployCo, which I'll come back to in a moment. Today, our balance sheet is as strong as it has ever been. As our business continues to scale, we recognize the importance of having our shareholders participate in the value we generate when we sell or monetize assets. Since we launched our buyback program early last year, on the back of our strong capital recycling activity, we have repurchased more than $300 million of our own shares at a nearly 50% discount to net asset value. From the capital recycling activity during the quarter, we are allocating $150 million of proceeds to additional repurchases while our shares continue to trade at a meaningful discount to intrinsic value.

Stepping back, we created BBUC a decade ago to give public investors access to Brookfield's global private equity capabilities. Since then, we have compounded net asset value per share at a mid-teens annual rate by applying the same playbook that we have refined over more than 25 years, buying high-quality, market-leading businesses, improving their operations and cash flows, and recycling capital when the time is right to reinvest and continue growing our business. Today, investors are placing a greater premium on resilience. The market used to pay up for businesses that could scale fast and is now paying up for businesses that can't be tipped over. Businesses like ours with hard-to-replicate assets and capabilities, critical customer relationships, and durable cash flows are becoming more valuable. Against this backdrop, we continue to see attractive opportunities to deploy capital where our capabilities can create significant value.

In industrials, large conglomerates are simplifying their operations and divesting high-quality businesses that are no longer core to their strategies, creating a growing pipeline of attractive carve-outs. These transactions are often complex, which can create opportunities to acquire excellent businesses at reasonable valuations. Our experience executing carve-outs allows us to take on that complexity, improve performance, and unlock meaningful value. Similarly, in essential services, many end markets remain fragmented, with mission-critical providers benefiting from recurring demand and long-standing customer relationships, but lacking the scale, technology, or investment required to reach their full potential. These conditions can allow us to acquire strong businesses with untapped potential, where our hands-on operating expertise can help build scale in fragmented markets and accelerate growth through focused investment and operational improvement. Turning back to DeployCo, AI is allowing us to transform businesses faster than ever.

This investment gives us access to leading models and world-class technical talent. Combined with the change management expertise of our operating teams, it allows us to accelerate the implementation of AI across our operations. We have real momentum heading into the second half of the year as we continue to invest for growth, return more capital to shareholders, and compound the value of our business. With that, I'll turn it over to Adrian.

Thank you, Anuj, and good morning, everyone. It is great to be joining you on the call today. As Anuj mentioned, we committed over $300 million to acquire 2 market-leading businesses, World Freight Company, or WFC, and Gregg Distributors. Although they operate in different markets, both businesses have strong competitive positions, provide mission-critical products or services, benefit from recurring customer demand, and offer multiple levers for operational improvement and growth. I will spend a few minutes discussing what attracted us to each business and where we see the opportunities to create value.

Let me start with WFC, which is the world's largest general sales and service agent for the air freight industry. WFC represents more than 300 airline customers across over 70 countries, helping them sell and manage cargo capacity in geographies where they lack commercial and operating capabilities. Managing cargo operations across international markets requires local expertise, strong relationships with freight forwarders, and on-the-ground execution. For airlines, outsourcing this non-core activity to WFC enables them to grow cargo revenues while maintaining a flexible cost structure. WFC's leading global network allows it to provide airlines with a single partner across geographies, together with access to data, capacity, and routing options that smaller operations cannot replicate. WFC benefits from longstanding customer relationships and operates an asset-light model with attractive margins and strong cash conversion. Alongside those strong fundamentals, we also see a clear opportunity to create a more integrated operating platform.

WFC has grown through a collection of regional brands, and today operates with a relatively decentralized model. Our focus will be on expanding shared services, standardizing core processes, and using automation and AI across high-volume workflows such as quoting, booking, customer service, and invoicing to improve productivity. Technology should enhance rather than displace WFC's core service, which continues to depend on local relationships, physical execution, and the management of complex, time-sensitive cargo flows. In addition to these operational improvement levers, we see an opportunity to accelerate WFC's acquisition strategy. The company has a proven track record of acquiring regional operators, integrating them into its network, and improving their performance. We believe WFC is well-positioned to continue consolidating this fragmented market. Turning to Gregg Distributors. Gregg is a leading maintenance repair and operations distributor in Western Canada.

The company supplies more than 150,000 SKUs, including tools, safety equipment, industrial chemicals, fleet products to approximately 25,000 customers across a wide range of industries. Gregg's products are generally low cost but essential to keeping its customers' facilities and equipment operating. Because the cost of downtime often far exceeds the cost of the products themselves, customers place a premium on availability, speed, and service. Gregg's broad product offering, local branch network, and high-touch service model enable it to provide same-day or next-day order fulfillment. Those capabilities have supported a strong long-term track record of organic growth, resilient margins, and cash flow generation. Gregg has been founder-owned for several decades, and our immediate focus will be to manage the ownership and leadership transition carefully while preserving the culture and operating capabilities that have made the business successful.

We've identified a number of opportunities to position Gregg for its next phase of growth. These include strengthening its commercial capabilities, increasing share of wallet with existing customers, improving pricing discipline, and using its purchasing scale more effectively across a large and fragmented supplier base. We plan to support these initiatives with targeted investments in technology and operating systems while maintaining Gregg's customer-first approach. We're excited to partner with both management teams and look forward to updating you on our progress in the quarters ahead. With that, I'll hand it over to Jaspreet for a review of our financials.

Thanks, Adrian, good morning, everyone. We generated second quarter adjusted EBITDA of $587 million, compared to $591 million in the prior period. Current year results reflect the impact of lower ownership in three businesses following the partial sale of our interest and include $23 million of contributions from new acquisitions. Excluding the impact of acquisitions and dispositions, adjusted EBITDA was up approximately 5% compared to the prior year. Adjusted FFO for the quarter was $289 million, compared to $234 million in the prior period. Current period adjusted FFO included $40 million net gain, primarily related to proceeds from the sale of securities during the quarter. Turning to segment performance. Our industrial segment generated second quarter adjusted EBITDA of $323 million compared to $305 million last year. On a same-store basis, adjusted EBITDA increased 6% over the prior year.