Brookfield Business Corporation Class A · TSX:BBUC
Brookfield Business Corporation Class A — Brookfield Business Partners — Investor Day (2022)
86 slides from Brookfield Business Corporation Class A's investor day presentation, 2022
Slide 1: Brookfield Business Partners
Brookfield Brookfield Business Partners DDD DDD DD DDD DPD DPPH D DDH D HDHD DD DD DPDD DPHDD DDD DD DDD VDDD DDD D DDD DD DPD DD DD DDD DD DDD DD DDD DID DDD DDD DDD DDD DPD DDD DDD DDD DDD DDD DDD DDD D DDD DDD DD DDD DDDDPDD DDD DPD HDHD DDD DDD DDD DPD DIDDY DD YPPDD PDD D PPD PDP DDD PDD DDD DD
Slide 2: Agenda
Agenda 01 Building Long-Term Value 02 Opportunity in an Uncertain Time 03 Value Creation at Work – BRK Ambiental 04 Our Value Proposition
Slide 3: Building Long-Term Value
Building Long-Term Value Cyrus Madon, Chief Executive Officer Brookfield Business Partners
Slide 4: We had an excellent year
We had an excellent year Deployed Generated Delivered Created our $4.3B of $1.1B of record financial corporate capital proceeds results structure Please refer to endnotes on page 83. 4
Slide 5: Building on a track record of strong financial performance
Building on a track record of strong financial performance Adjusted EBITDA Adjusted EFO Excluding Gains $2,040M ~50% ~45% $1,305M CAGR CAGR $240M $185M 2016 Today 2016 Today Please refer to endnotes on page 83. 5
Slide 6: Increasing performance on a per-unit basis
Increasing performance on a per-unit basis Adjusted EFO Excluding Gains (per Unit) $5.95 ~30% CAGR $1.30 2016 Today Please refer to endnotes on page 83. 6
Slide 7: Our focus on quality is serving us well
Our focus on quality is serving us well
Slide 8: Despite a challenging operating environment…
Despite a challenging operating environment… Inflationary Cost Supply Chain Slower Economic Pressures Challenges Growth +8.3% +35 days -0.6% U.S. consumer Manufacturing U.S. GDP price index lead times contraction Please refer to endnotes on page 83. 8
Slide 9: …the EBITDA margin of our operations is improving
…the EBITDA margin of our operations is improving EBITDA Margin 18% 15% 12% 10% 2019 2020 2021 Today Please refer to endnotes on page 83. 9
Slide 10: Supported by businesses of exceptional quality
Supported by businesses of exceptional quality Market-leading providers of essential products and services Durable Pricing Low substitution Stable competitive power risk cash flows advantages 10
Slide 11: Our operational value creation plans remain on track
Our operational value creation plans remain on track
Slide 12: Repeatable processes to drive improvement
Repeatable processes to drive improvement Commercial strategy Organizational design +$750M Manufacturing footprint optimization Total EBITDA improvement of businesses acquired over the last five years Supply chain management Digital transformation Please refer to endnotes on page 83. 12
Slide 13: Resulting in strong comparable performance
Resulting in strong comparable performance Same-Store Revenue Same-Store EBITDA +5% +7% 2021 Today 2021 Today Please refer to endnotes on page 83. 13
Slide 14: Adding more high-quality businesses
Adding more high-quality businesses
Slide 15: Committed ~$15 billion in new acquisitions
Committed ~$15 billion in new acquisitions Over $4 billion at our share >$2B Acquired Annual EBITDA Please refer to endnotes on page 83. 15
Slide 16: Global provider of lottery services and technology solutions…
Global provider of lottery services and technology solutions… Market-leading essential service provider in a resilient industry U.S. Retail Lottery Sales Covid-19 Great Financial Crisis Dot-Com Bubble Early 90s Recession April 2022 Acquisition date 1990 2020 Please refer to endnotes on page 83. 16
Slide 17: …with significant value creation potential
…with significant value creation potential Value Creation Plans • Expand customer wallet share • Leverage growth of digital lotteries • Broaden global presence • Improve efficiencies ~$150M EBITDA improvement opportunity Asset Name, Location Please refer to endnotes on page 83. 17
Slide 18: Leading provider of dealer software and technology services…
Leading provider of dealer software and technology services… Expanding sector focus is generating new opportunities Essential service provider • Leading position with ~50% market share • Recurring contracted revenues • High customer retention rate • Stable industry outlook July 2022 Acquisition date
Slide 19: …with a plan to create value
…with a plan to create value EBITDA Margin Value Creation Plans • Enhance customer value proposition ~44% • Improve efficiency and cost management • Focus product and service offerings 38% • Standardize operations 31% 10%+ 2018 2020 Today Opportunity EBITDA margin improvement Asset Name, Location op
Slide 20: Our overall performance is underpinned by market leaders
Our overall performance is underpinned by market leaders Large-scale operations contribute the majority of EBITDA today $2.5B ~75% Run-rate Large-scale, market- EBITDA leading operations Please refer to endnotes on page 83. 20
Slide 21: Entering our next monetization cycle
Entering our next monetization cycle
Slide 22: Sale of our nuclear technology services operations
Sale of our nuclear technology services operations Crystalizing value and generating proceeds to fund growth EBITDA ~$800M $710M $440M August 2018 ~2x Acquisition Today Run Rate Acquisition date Realized MoC Date Asset Name, Location Please refer to endnotes on page 83. 22
Slide 23: Our next monetization cycle should be meaningfully larger
Our next monetization cycle should be meaningfully larger $12.5B+ 15% IRR ~$5.5B Invested capital Potential proceeds 2020–22 6–8 year hold period Realizations will continue to generate significant liquidity Please refer to endnotes on page 83. 23
Slide 24: Opportunity in an Uncertain Time
Opportunity in an Uncertain Time Anuj Ranjan, President Brookfield Business Partners
Slide 25: Large-scale global operations
Large-scale global operations North Europe America & Middle $31B East 165+ assets $23B Investment team assets Asia Pacific South $16B ~90,000 America assets Operating $7B employees assets Please refer to endnotes on page 83. 25
Slide 26: Strengthening our global capabilities
Strengthening our global capabilities Investment Team Total Assets Outside of North America Outside of North America 85 $46B 10 $3B 2016 Today 2016 Today Please refer to endnotes on page 83. 26
Slide 27: It is a great time to be a global value investor
It is a great time to be a global value investor
Slide 28: The world looks dramatically different compared to a year ago
The world looks dramatically different compared to a year ago Reversal of Disinflation Rise in Borrowing Rates (Consumer price inflation) (10-year bond yields) 25% 7% -1% -1% 1962 2022 2000 2022 U.S. U.K. U.S. Germany U.K. Please refer to endnotes on page 83. 28
Slide 29: Valuations have compressed across all regions
Valuations have compressed across all regions North America Europe Emerging Markets (Forward P/E) (Forward P/E) (Forward P/E) 22x ~5x ~6x 17x 17x ~2x 13x 11x 11x Last Year Today Last Year Today Last Year Today Please refer to endnotes on page 83. 29
Slide 30: Our flexibility is a meaningful advantage
Our flexibility is a meaningful advantage Multiple ways to acquire for value Control Common equity Strategic non-control Preferred equity Structured investment Debt 30
Slide 31: Surfacing catalysts in each region we operate
Surfacing catalysts in each region we operate Large Mispriced Stressed Forced Strategic Conglomerate Public Balance Sellers Add-Ons Carve-Outs Securities Sheets 31
Slide 32: Market-leading Brazilian rent-a-car platform
Market-leading Brazilian rent-a-car platform Doubling the size of our existing fleet management operations Value Drivers • Acquired for value from a forced seller • Nationwide platform with strong brand recognition • Revenue synergies arising from enhanced scale • Cost savings and efficiency improve
Slide 33: Well positioned in a rapidly changing global economic environment
Well positioned in a rapidly changing global economic environment
Slide 34: Secular trends are impacting global economies
Secular trends are impacting global economies Driving the need for investment Inflation Digitalization Energy Sustainability Demographics Security 34
Slide 35: Focusing on trends aligned around our core sector focus
Focusing on trends aligned around our core sector focus Industrials Infrastructure Business Services Services • Supply chain • Energy efficiency • Outsourcing • Automation • Infrastructure upgrades • Financial services • Manufacturing • Urbanization • Logistics 35
Slide 36: Leveraging our competitive advantages in industries we know well
Leveraging our competitive advantages in industries we know well Technology Healthcare • Digitalization • Pharmaceuticals • Software • MedTech • Cybersecurity • Delivery of care 36
Slide 37: Technology as an inflation offset
Technology as an inflation offset Relied upon as means of creating long-term value Cumulative Inflation ~2,920% Employee ~2,110% Productivity Operational Scalability ~695% Supply Chain and ~95% ~140% Materials Resilience 1920 1950 1980 2010 Today Please refer to endnotes on page 83. 37
Slide 38: Compelling value opportunities are emerging
Compelling value opportunities are emerging Overall technology multiples are approaching pre-pandemic levels NASDAQ Composite Index (Forward P/E) 45x 30x 15x January 2019 December 2019 November 2020 October 2021 Today Please refer to endnotes on page 83. 38
Slide 39: Focusing on attractive verticals
Focusing on attractive verticals Valuation gap of early-stage vs. maturing technology companies Early Stage / Low Profitability Maturing / High Profitability 35x 34% 20% 13x 9x 5x EBITDA Margin Revenue EBITDA EBITDA Margin Revenue EBITDA TEV / 2022E TEV / 2022E Please refer to endnotes on page 83. 3
Slide 40: Leading payments provider in United Arab Emirates
Leading payments provider in United Arab Emirates Strong secular growth driven by an emerging middle class Value Drivers • Carve-out from large financial institution • Secular shift to card and online payments • Transform technology stack • Geographical expansion in Middle East and Asia August 2022
Slide 41: We are seeing good opportunities in healthcare
We are seeing good opportunities in healthcare
Slide 42: An ideal time to be opportunistic
An ideal time to be opportunistic Healthcare transaction activity has slowed Healthcare IPOs Healthcare SPAC M&A Healthcare Buyouts 174 48 -50% -40% -80% 31 23 19 31 2021 2022 YTD 2021 2022 YTD 2021 2022 YTD Please refer to endnotes on page 83. 42
Slide 43: Resilient, non-cyclical growth underpins the sector
Resilient, non-cyclical growth underpins the sector Healthcare expenditures are increasing despite broader macro volatility ~5% ~3x <1.5% Expected Expected Growth U.S. GDP Growth in Healthcare Expenditures Please refer to endnotes on page 83. 43
Slide 44: Providing an opportunity to leverage our operating expertise
Providing an opportunity to leverage our operating expertise Pandemic-driven operating environment volatility Decline in surgical activity Supply chain disruption Labor shortage and wage inflation Pandemic onset Post pandemic 44
Slide 45: Targeting opportunities that utilize our strengths
Targeting opportunities that utilize our strengths Industrial Healthcare Physical Healthcare Business Services Delivery of Care $165B+ $145B+ $250B+ Market opportunity Market opportunity Market opportunity • Medical and • Services to health • Home and community- pharmaceutical product plans, provide
Slide 46: Key takeaways
Key takeaways It is a great time We have global We are well to be a value scale and positioned in a investor capabilities rapidly changing environment 46
Slide 47: Value Creation At Work – BRK Ambiental
VIDEO Value Creation At Work – BRK Ambiental
Slide 48: Value Creation at Work – BRK Ambiental
Value Creation at Work – BRK Ambiental Teresa Vernaglia, Chief Executive Officer BRK Ambiental
Slide 49: Water and wastewater operations
Water and wastewater operations Leading service provider in Brazil, with meaningful growth potential Predictable and diversified cash flows Contracted earnings growth Strong industry tailwinds ESG is fundamental to the business ~16M 100+ Long-term Population served Municipalities Concessions Please
Slide 50: Addressing Brazil’s sanitation development objectives
Addressing Brazil’s sanitation development objectives Universal access to clean water and sewage treatment Access to Water and Wastewater Treatment (% of Population) 99% 84% 90% 81% 55% 46% 2010 2020 Target Access to Clean Water Access to Sewage Treatment Over $100 billion of capital investment is r
Slide 51: Market-leading position
Market-leading position We are one of Brazil’s largest water and wastewater service providers Number of States Served 13 13 5 3 2 51
Slide 52: Underpinned by a durable business model
Underpinned by a durable business model Essential service provider operating in a highly regulated industry Essential service Contracted, Operational value Strong regulatory provider inflation-protected levers framework cash flows 52
Slide 53: Building a successful track record of value creation
Building a successful track record of value creation Driving significant EBITDA enhancements Expanded service network EBITDA $240M Enhanced capex management 25%+ CAGR Implemented tariff increases Centralized water quality programs 2017 2018 2019 2020 2021 Today Please refer to endnotes on page 83. 5
Slide 54: Centered around a commitment to sustainability
Centered around a commitment to sustainability World-class ESG program, meeting 10 of the United Nations Sustainable Development Goals 25% 70% Net zero Reduction in water Energy consumption Greenhouse gas distribution losses by supplied by renewable emissions by 2040 2030 sources by 2030 Please refe
Slide 55: Positioned to generate strong, predictable returns
Positioned to generate strong, predictable returns
Slide 56: Diversified portfolio of high-growth and high-margin assets
Diversified portfolio of high-growth and high-margin assets Fully mature EBITDA margins of more than 70% Under development <1% EBITDA margin High-growth Ramp-up ~50% EBITDA margin Maturing ~60% EBITDA margin Net Operating Revenue 56
Slide 57: At the forefront of meeting Brazil’s sanitation goals
At the forefront of meeting Brazil’s sanitation goals Contracted organic growth of existing operations Households ~$150 Net operating revenue per household 4.7M 3.1M >70% Normalized EBITDA margin of mature operations Today Maturity Please refer to endnotes on page 83. 57
Slide 58: Leveraging an established track record of value creation
Leveraging an established track record of value creation Operational initiatives to enhance organic growth Capex Operational Revenue Management Improvements Management • Increase capex efficiency • Reduce water and energy use • Enhance commercial strategy • Enhance governance • Increase automation •
Slide 59: Case study: Maceió concession acquired in 2021
Case study: Maceió concession acquired in 2021 Executing our repeatable value creation strategy 35 Year 1.5M Before Concession Population 100% 90% 78% 26% After Water Wastewater coverage coverage Current Target Please refer to endnotes on page 83. 59
Slide 60: New opportunities to continue scaling the business
New opportunities to continue scaling the business
Slide 61: Early stages of realizing longer-term potential
Early stages of realizing longer-term potential New regulatory framework supporting attractive acquisition pipeline Total Pipeline Growth Potential From New Concessions (Population) 90M+ 16M Today Short Medium Long Potential term term term BRK’s presence Growth potential 61
Slide 62: Our Value Proposition
Our Value Proposition Jaspreet Dehl, Chief Financial Officer Brookfield Business Partners
Slide 63: Focused on building intrinsic value per unit
Focused on building intrinsic value per unit Net Asset Value ~15% CAGR ~$39 ~$17 2016 Today Please refer to endnotes on page 83. 63
Slide 64: Trading discount driven by misperceptions
Trading discount driven by misperceptions Underlying quality Management of View of of earnings our balance sheet value 64
Slide 65: Maintaining a strong capital structure
Maintaining a strong capital structure
Slide 66: Our disciplined approach to leverage
Our disciplined approach to leverage No permanent corporate debt Non-recourse borrowings within our operations financed at favorable terms Debt that is serviceable and sustainable across economic cycles 66
Slide 67: Serviceability and sustainability of debt
Serviceability and sustainability of debt Each business financed with an appropriate level of leverage Underlying business characteristics Progress of our business improvement plans Optimal capital structure 67
Slide 68: Construction contractor at spinout
Construction At Spinout Today operations • Global construction contractor with a leading ~$100M ~$85M Annual Annual presence in Australia and the U.K. EBITDA EBITDA • Variability in cash flows tied to timing of project activity • Current cash position of ~$200 million • Held at spin-out in 2016 No N
Slide 69: Nuclear technology services
Nuclear technology At Acquisition Today services • Leading service provider to the global $440M ~$800M Annual Run-rate nuclear power fleet EBITDA EBITDA • Long-term and highly resilient contracted cash flows • Enhanced EBITDA by more than $250 million >6x ~4.3x Leverage Leverage • Acquired in August
Slide 70: Advanced energy storage operations
Advanced energy storage At Acquisition Today operations • Global leader in advanced battery technology ~$1.6B ~$1.7B Annual Annual • Targeting ~$400 million of annual EBITDA EBITDA EBITDA improvement • Strong cash flow has supported ~$750 million of debt paydown • Acquired in April 2019 >6x ~5.4x Le
Slide 71: Non-recourse borrowings financed at favorable terms
Non-recourse borrowings financed at favorable terms Long-term maturities with limited financial covenants ~4.9% ~5 years ~50% Weighted average Weighted average Fixed borrowing cost maturity or hedged Please refer to endnotes on page 83. 71
Slide 72: Mitigating impacts of interest rate volatility on our financial performance
Mitigating impacts of interest rate volatility on our financial performance +75 bps ~$65M <5% Change in Impact to interest Impact to interest rates expense Adjusted EFO Please refer to endnotes on page 83. 72
Slide 73: Supported by the strength of our existing operations…
Supported by the strength of our existing operations… Run-rate Adjusted EBITDA $2,500M Less: Proportionate interest, taxes and other 1,000M Run-rate Adjusted EFO 1,500M Less: Proportionate maintenance capex, depletion and other 700M 2022 run-rate free cash flow ~$800M Please refer to endnotes on pag
Slide 74: …driving increased free cash flow generation
…driving increased free cash flow generation Free Cash Flow Per Unit (Adjusted EFO Less Maintenance Capex) ~30% $3.65 CAGR $2.45 $2.00 $0.95 2016 2018 2020 2022 Run Rate Please refer to endnotes on page 83. 74
Slide 75: Our capital recycling is strong and growing
Our capital recycling is strong and growing
Slide 76: Continuing to support our growth initiatives…
Continuing to support our growth initiatives… Proceeds From Distributions $1,030M $330M $100M 2018 2020 Today Please refer to endnotes on page 83. 76
Slide 77: …and providing us significant balance sheet flexibility
…and providing us significant balance sheet flexibility $1B Distribution proceeds $3.3B Corporate credit facility capacity >$1.5B Near-term potential monetization proceeds Please refer to endnotes on page 83. 77
Slide 78: Coming back to valuation
Brookfield > Coming back to valuation >DDDDHDDDHD DDD DPPH DDPHD HDHD DD DD DDDD DPDD ID HDD DDD DDD DDD PDD DDD DDD DDD DD DDD DD PDD DD DDD DID DD DDD DD DD DDD DPD DD DDD DID DD DD DDD DDD DDD DIDD DDD DDDDD DDDDPDD DODD HPD HDHD DDD DDD DDD DPD DDD DDD DDPDD PD DD PPD PDD DDD PDD DPD DDD PDD DID
Slide 79: How we compare to industrials and services companies
How we compare to industrials and services companies High-margin and highly cash-generative operations Diversified Service BBU Providers High-Quality Industrials 18% ~20% 20%+ EBITDA margin EBITDA margin EBITDA margin Please refer to endnotes on page 83. 79
Slide 80: Our unit trading performance does not correlate with our quality
Our unit trading performance does not correlate with our quality Diversified Service BBU Providers High-Quality Industrials ~8x ~14x ~13x EV/EBITDA EV/EBITDA EV/EBITDA 15%+ ~5% ~5% FCF yield FCF yield FCF yield Please refer to endnotes on page 83. 80
Slide 81: Supporting significant upside in our unit trading price
Supporting significant upside in our unit trading price >$50 at 11x ~$40 EV/EBITDA at 10x ~$30 EV/EBITDA ~$20 at 9x Today EV/EBITDA Please refer to endnotes on page 83. 81
Slide 82: Brookfield
Brookfield >DDDDHDDDHD DDD DPPH DDPHD HDHD DD DD DDDD DPDD ID HDD DDD DDD DDD PDD DDD DDD DDD DD DDD DD PDD DD DDD DID DD DDD DD DD DDD DPD DD DDD DID DD DD DDD DDD DDD DIDD DDD DDDDD DDDDPDD DODD HPD HDHD DDD DDD DDD DPD DDD DDD DDPDD PD DD PPD PDD DDD PDD DPD DDD PDD DID IPD ID DDD PPP D ID DDI PI
Slide 83: Endnotes
Endnotes Page 4 1. Capital deployed represents BBU’s proportionate share of capital deployed for the twelve- 2. Committed capital at our share represents BBU’s proportionate share of equity invested for the Page 28 month period ending June 30, 2022 including committed capital for recently announced
Slide 84: Endnotes
Endnotes Page 49 6. Information presented is illustrative only. Actual results may vary materially and are subject to partnership units, inclusive of all shares outstanding and adjusted for the distribution of BBUC 1. As of June 30, 2022. market conditions and other risks that are set forth in “Impo
Slide 85: Important Cautionary Notes
Important Cautionary Notes NOTICE TO READERS any SARS-CoV-2 variants (collectively, “COVID-19”); the behavior of NON-SOLICITATION financial markets, including fluctuations in interest and foreign exchange Brookfield Business Partners is not making any offer or invitation of any kind rates; global eq
Slide 86: Investor Day
_Inve stor Day) 7)