Patria Investments Limited

Already in Q2, we have secured approximately $370 million of additional inflows, including a follow-on in our core infrastructure fund and additional inflows from VBI, bringing our year-to-date fundraising through April to more than $750 million. That is capital primarily raised outside of our flagship funds, which we expect to contribute more significantly by the close of Q2, including the first closing for our next flagship infrastructure fund. On the people front, we also just announced Marcelo Fedak to serve as our head of real estate, further strengthening the leadership structure across our asset class verticals. Overall, We're happy with the performance in the quarter and continue to feel good about our fundraising target of $5 to $6 billion and fee-related earnings guidance of $150 million for the full year 2023. How is that we are able to maintain confidence in our trajectory in spite of volatile market conditions? It's because of the resilience of our business model. We are dependent on deposit-based funding. Much of the capital base is locked up for multiple years, and even products that offer more frequent liquidity have shown considerable stickiness because of their solid track record. We also run a light balance sheet, meaning we don't require significant capital at the firm level to deliver our earnings stream for shareholders. and likewise don't have significant mark-to-market exposure that impacts our balance sheet assets. While we, of course, aren't immune to the micro-environment, we believe we have a model that allows us to deliver consistent and growing fee-related earnings with the upside from performance fees as we deliver returns to our clients over the cycle. On the macro front, our business continues to thrive despite fresh challenges in the West and Western Europe brought by the high-profile bank failures and rescues. One of Pasture's investment tenants is the low correlation between Latin America and other geographies. Investors in the region have indeed began to price in near-term interest rate cuts in major Latin American economies. because of the sharp reduction in consumer inflation, a consequence of preemptive monetary policies implemented by village and central banks. In that context, Chile seems to be the best candidate to start the cycle of monetary easing. Consumer inflation peaked in 2022. The government budget has already turned into surplus. and the country is posting significant progress in the institutional area. In Brazil, consumer inflation peaked in April 2022, and they are now convincing signs of fiscal consolidation by the new administration. Despite sometimes clumsy rhetoric, the executive and legislative branches have agreed on the basics of new fiscal framework to secure a break-even next year and primary surplus afterwards. Also, there is political consensus to pass a comprehensive tax reform, which would be gradually enacted from 2024 onwards. Constructive domestic development in major Latin American economies are taking place amid favorable terms of trade and robust foreign direct investment flows. Latin America is increasingly perceived as being in a sweet geopolitical spot and an attractive destination for near or friendly shoring capex. This outlook has led to currency appreciation against the U.S. dollar year to date, proving further evidence of the region's low correlation with the rest of the world. Now turning to some details across our platform. In private equity, we generated the $10 million of performance-related earnings in Q1 through an agreement with fund investors to crystallize a portion of the performance fees related to Lavoro, a leading Latin American agricultural inputs retailer which completed an IPO at Nasdaq in Q1. This crystallization was made possible outside of our standard waterfall structure, which Ana will cover in more detail. The focus on divestment for Fund V continues, and we do expect to make meaningful progress this year. In Q1, We sold an initial small tranche of our investment in Smartfit, the leading fitness market company in Latin America by membership, and we are in advanced stages of the exit process for multiple additional portfolio companies. While the fundraising environment for private equity remains challenging, we are advancing on our next closing for the next fund vintage, and we believe divestment and return on capital in the older vintage funds will be a strong catalyst for that fundraising process. Operating metrics at underlying portfolio companies continue to look good with EBITDA growing at approximately 15% year-over-year based on available data for the Quad. We did reflect a downward impact on our net accrued performance fees in Fund 5 in Q1 mainly driven by the volatility in the share price of Lovemore immediately following its IPO, which is not uncommon in a despacking process. We continue to feel great about the company, which recently reported impressive results for the most recent semester with adjusted EBITDA up 88% compared to the prior year. We expect to see the valuation improve considerably based on fundamentals and similar industry comps. Moreover, we feel great about the full portfolio and the value we can deliver to shareholders over the next few years. In infrastructure, we are approaching our first closing of the next generation flagship fund, which we expect to commence here in Q2. Strong realizations from Infrastructure Funds III in 2022 were led by the sale of ODATA, our data center platform, and partial exit of Entrevias, one of our toll roads in Brazil. These and prior divestments account for more than $2 billion in proceeds to limited partners and with a 13% net IIR in US dollars. We are now in the performance fee realization phase of the fund with a high performance portfolio still remaining. These are likewise great supporting factors for fundraising and should allow us to deliver a sizable first close on the new flagship fund. Just after the end of the quarter, we also announced a follow-on offer for our non-listed infrastructure core vehicle, which we call Peer. The offering closed in the first week of April, making a Q2 fundraising result, but it attracted R215 million of new permanent capital, AUM, and was even larger than the initial offering that we completed last year. It is a great example of how we are expanding our product menu in this asset class to reach new client channels and facilitate the expansion of alternatives allocations for local investors in the region. Our credit strategies continue to perform well with both PEN LATAM and local Chilean strategies delivering a strong result in the quarter. The largest fund, LATAM High Yield Corporate Credit, outperformed its benchmark by 180 basis points in the first quarter and 130 basis points over the past year, which was a very challenging period for the asset class. We also expect to complete the first closing of our infrastructure credit fund in Q2, which already has anchor commitments in place from three multilateral agencies, as we have noted. Leveraging our long-tenured experience in LATAM infrastructure development, as well as transaction diligence through existing pipelines, this product will provide a new angle for Patriot to serve clients across the capital stack in the infrastructure. In public equities, Our Chilean equity strategies again were a highlight, with the main fund, Pionero, outperforming by 180 basis points in Q1. For last-term equities more generally, we see an attractive setup looking forward in the second half of 2023 and 2024. Valuations remain at their lowest point since 2008, with a broad last time index trading at approximately seven times earnings. And we are also seeing a historically large gap between local interest rates and following inflation. This backdrop is generating some early traction in our investor base, and we think this is constructive for both performance and flows in the coming quarters. In real estate, we further strengthen our leadership team with Marcelo Fedak joining Patria as a new partner to serve as our head of real estate across the region. Marcelo has built a successful 14-plus year track record, managing over $4 billion of real estate-focused AUM for large financial institutions, and we are very excited for his arrival at Patria to lead our growth in this asset class. VBI, our platform in Brazil, is performing very well and continues to grow with nearly $50 million of inflows in Q1, mostly into an office-focused REIT. Just in early April, and therefore yet to reflect in our metrics, VBI has secured nearly $250 million of additional inflows by gaining market share with Brazilian institutional investors, and consolidating management of smaller or single asset REITs. Marcelo will partner with VDI's superb leadership team to continue our momentum in Brazil and also look broadly to how we can replicate that model in other regional markets. Advisory and distribution is an area we don't typically highlight as often. but has quietly been growing nicely with AUM up 13% over the last year on $156 million of inflows in Q1. Here we are currently doing a few things. Traditional wealth management services, feeder funds for global alternatives, and even direct fundraising through global partnerships. On the last point, for example, we raised more than $50 million in Q1 for direct third parties, which does not reflect in our AUM, but does earn incremental placement fee revenue. While this part of our business is still relatively small as an earnings driver, it represents the strategic ambition to be a trusted knowledge partner and conduit for LATAM investors to access alternatives more broadly across the globe. That can take a number of different forms, which we are exploring, and we believe there is potential as a meaningful vector of growth in the coming years. So again, overall, I'm pleased with a solid quarter and we are on track for our 2023 targets of 5 to 6 billion of organic inflows and seed-related earnings of $150 million. We are making great progress behind the scenes, which we believe will drive results to be seen in the next few quarters. Let me now turn things over to Anna to cover the numbers in a little more detail, and then Marco will add some comments on our corporate development efforts. Anna.

Thank you, Alex, and good morning. PATRA's first quarter 2023 results were in line with our guidance of the last call regarding fee-related earnings, and we were able to generate performance-related earnings, which added some upside to the distributable earnings and the dividend. Our fee-related earnings were $31.2 million in first quarter 23, at similar levels to our first quarter 22 of $31.9 million. This result is consistent with our comments that first quarter FRE was likely to be more in line with the 2022 run rate, with growth coming in the later quarters of the year. Total free revenues were $57.1 million in Q1 23, up 4% from $55 million in Q1 22, with the positive impact of capital deployment in our drawdown funds and the addition of VBI. This was partially offset by the impact of outflows in open-end credit and public equity funds and the contractual end of the fee terms of an older vintage infrastructure fund. Total operating expenses for first quarter 23 were up 12% from first quarter 22, driven by expenses related to recent acquisitions and also increases in compensation, and certain costs driven by inflation and the expansion of our platform. This resulted in a consistent FRA level and an FRA margin of 55% in the first quarter 2023. The margin is down from 58% in first quarter 22, but it's still in line with our guidance range. Achieving our overall FRA guidance for the year implies that the margin will likely rise slightly in later quarters. Performance-related earnings for first quarter 23 were $10 million and were generated for private equity fund five. These performance fees were crystallized in conjunction with the IPO of Laboro. For this specific case, the limited department of the fund and PATRIA agreed that as a consequence of successful completion of the transaction, part of performance fee was crystallized through Laboro's shares to PATRIA. Given the opportunity, we are pleased to be able to deliver this value to shareholders here and in the first quarter. Note that we have adjusted our presentation of net accrued performance fees beginning in first quarter 23 to reflect the balanced growth of related corporate taxes, where it was shown net in all previous reports. This change makes sense in order to fully align the performance-related earnings in our P&L with this operating metric. which represents the potential inventory for a deadline item and exclude an impact which will be reflected below in the corporate tax line item of the P&L. The net accrued performance fee balance stands at $437 million as of March 31, 2023, down from $478 million at December 31, 2022. driven primarily by the quarter and share price of public holdings in private equity fund 5, as Alex noted. This continues to equate to approximately $3 per share of value that can accrue to our shareholders as this portfolio are divested. Distributed earnings of $39.1 million in first quarter 23 is up from $35 million in the first quarter 22. primarily driven by the benefit of performance-related earnings in the current quarter. Our deeper share of $0.27 will generate a dividend to shareholders of $0.226, which translates to roughly 6% yield on analyzed base at recent share price level. Total AUM was $27.3 billion at the end of Q1, roughly flat for both the quarter and trailing years, with inflows from fundraising and acquisitions offset by the impacts of the market environment on portfolio companies' valuation, as well as the outflow pressure we have seen in some of our open-end products. Fee earnings AUM of $19.9 billion is up 4% for the quarter and up 5% from one year ago, consistent with our increasing fee revenue. Remember that for fee earnings AUM, valuation impact is more muted and limited to funds that charge management fee on NAV as opposed to cost base. In fact, valuation was actually a positive driver in the first quarter 23 and prior year breach. This reinforces the relative stability of our management fee stream when public markets are volatile. As Alex noted, we are still on track for our 2023 fee-related earnings guidance of $150 million at a margin in the upper 50% range. We believe this growth will be concentrated in the back half of the year. I will now turn the call to Marco for a few words.

Thank you, Ana, and hello, everyone. With my new role focusing time more fully on PATRA's corporate development efforts, I can reiterate that we remain highly focused and active on this vector of growth. Our goals through M&A are clear. Expanding our product offering, extending our geographic expertise, and enhancing our distribution channels and capabilities. Each of the four acquisitions in our first two years since IPO achieves one or more of those aims. Moneda brought credit and public equities verticals, as well as extensive expertise and client relationships in Chile. Amaro Pin and IGA both brought talent and track records to expand our private equity vertical into growth, equity, and venture capital. And VBI brought us expertise in real estate, along with a significant platform of permanent capital, AUM. Looking forward, we've conveyed our interest in three key priorities. One, geographic expansion into Mexico, where we see significant opportunities steaming from nearshoring trends in coming years. Two, continued expansion of our real estate business both in and beyond Brazil, which we believe is still subscale relative to its potential in the region. and three, expanding our abilities to serve as a conduit in the region for investing in global alternatives. We're actively exploring opportunities in these areas, and we'll continue to keep you posted on our progress. Let me now turn it back to Alex to close. Thanks, Marco and Ana.