Patria Investments Limited

Good day and thank you for standing by. Welcome to the PATRIA third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Josh Wood, Head of Shareholder Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Patria's third quarter 2023 earnings call. Speaking today on the call are our Chief Executive Officer, Alex Seid, our Chief Financial Officer, Anna Russo, and our Chief Corporate Development Officer, Marco DiPolito. And we're also joined by our chief economist, Luis Comendo-Lopez, for the Q&A session. This morning, we issued a press release and earnings presentation detailing the results for the quarter, which you can find posted on our investor relations website or on Form 6K, File of the Securities and Exchange Commission. Any forward-looking statements made on this call are uncertain, do not guarantee future performance, and undue reliance should not be placed on them. PATRIA assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve inherent risk, including those discussed in the risk factors section of our latest Form 20F Annual Report. Also note that no statements on this call constitute an offer to sell or solicitation of an offer to purchase an interest in any PATRIA fund. As a foreign private issuer, ASHRAE reports financial results using International Financial Reporting Standards, or IFRS, as opposed to U.S. GAAP. Additionally, we will report and refer to certain non-GAAP industry measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our earnings presentation. On headline metrics, Patria generated distributable earnings of $34.6 million, or 23.4 cents per share, for 3Q23, including fee-related earnings of $36 million. We declared a quarterly dividend of 19.9 cents per share, available on December 8th to shareholders of record as of November 22nd. With that, I'll now turn the call over to Alex.

Thank you, Josh, and good day, everyone. It's great to be back with you after gathering just a few weeks ago to discuss an exciting platform acquisition for the firm. As we now look to Patria's progress in the third quarter, our message is simple. We delivered another strong set of results and we continue to drive growth in a market environment where growth does not come easy. We are executing on our M&A goals aligned with our strategic pillars and leveraging the diversified platform with more than 30 products that we have built to capture areas of strength across the investment landscape. As of the end of Q3, total AUM and fee earning AUM were up 7% and 15% respectively from one year ago, but that's only part of the story. Through early November, we have now closed on nearly $4.9 billion in total capital formation in 2023, including organic inflows of $1.3 billion in the third quarter and an additional $480 million secured in early Q4, bringing our year-to-date organic inflows to nearly $3.7 billion. On the inorganic funds, I'm happy to announce that we just closed on our new joint venture with Bancolombia last week on November 1st, which will add about $1.2 billion of additional AUM here in the fourth quarter to reach that $4.9 billion capital formation figure that I just mentioned. And of course, we just recently announced the agreement to acquire a private equity solutions platform from Aberdeen that manages another $9 billion of AUM, and we expect that to close in the first half of 2024. between organic and inorganic activity. We have closed or signed $13.8 billion of new AUM for the platform this year and pro forma for the closings of pending M&A transactions. Our total AUM and fee-earning AUM would rise to approximately $38 billion and $31 billion, respectively, with permanent capital vehicles rising from 7% to approximately 13% of the earning AUM. Indeed, despite the challenging environment for our industry, PATRIA continues to execute, and we do expect to reach our targets for 2023. We were very pleased to see fee-related earnings rise to $36 million in the third quarter, up more than 6% compared to the prior quarter, and up 14% compared to the third quarter of 2022. This brings year-to-date FRE to $101 million, and we expect to reach our target of $150 million for the full year, with additional revenue uplift in the fourth quarter from fee activations in our newest funds, as well as careful management of our expenses. On organic inflows, as we noted, we have secured about $3.7 billion year-to-date, and we still see the path to reach around the $5 billion mark by the end of the year based on the pipeline we see in these final two months. Although getting final signatures and closings can always be a challenge near the end of the year. We continue to leverage the financial deepening to outperform on fundraising in Latin America as investors in developed markets continue to face challenges that delay new commitments to private markets. We expect around 60% of the current year target to come from last time investors, a much higher ratio than prior vintages. As we look forward, 2024 is of course a bridge to the 2025 targets that we shared at our investor day last year. and the timing of M&A closings and fundraising will have some impact on where we land in between. We expect to grow fee-related earnings to the vicinity of $170 million in 2024, on the way to our 200 to $225 million target for 2025, and we'll be able to give better color as we get into the beginning of next year. Given the expected closings of the Aberdeen Solutions platform transaction, as well as the potential second trench of the VVI transaction, and potentially more in 2024, it is worth noting that the full annualized impacts of this inorganic growth will only be fully felt in 2025. On fundraising, our business plans for 2024 are targeting a similar range to this year, $5 to $6 billion, with some variance based on exactly where we finish for 2023. Given our progress on growth and significant additions to our platforms, through M&A, we also think it will make sense to provide an updated view on multi-year growth targets at some point near the end of next year with an investor day event similar to what we hosted last year. As we step back to look at the macro environment, the story in Q3 and October has been a return to global volatility and caution driven by economic data. A higher for longer view on interest rate policy, as well as new geopolitical conflicts. In the midst of all this, we continue to believe Latin America compares favorably as a destination for investment capital, and particularly within emerging markets. Being first to raise interest rates in response to inflation, Latin American economies are now leading on the monetary easing end of the cycle, with rates already falling in our key markets of Chile and Brazil. Regional economies are also the beneficiary of the recent performance of commodities, being mostly net commodities exporters to the world. As we always highlight, Latin America's low geopolitical risk relative to the rest of the world and the favorable impact that has on terms of trade in a volatile backdrop. In this environment, it is also worth noting that while organic growth can be more challenging, it can be very advantageous time to pursue inorganic growth at attractive valuations. Patria has obviously been active on this front, and we continue to work on some interesting opportunities to expand the platform. Turning now to some color across our strategy verticals. In private equity, the current portfolio continues to perform well with funds five and six both performing at a net IIR of 15% in U.S. dollars. Our value creation initiative drove organic EBITDA growth of 14% over the 12-month period ending August 2023, or 32% EBITDA growth over the same period when considering the impact of portfolio company acquisitions. In October, we also closed a transaction for Delis. which in total will deliver approximately 2 billion Reais or about 400 million US dollars of realization for fund five. With this and other recent distributions, this fund will reach a DPI of 0.4 times as we continue to return capital to investors. While the fundraising environment has remained particularly challenging across the industry, we are seeing conversations with LPs evolve in a positive way, and we have secured an extension of our fundraising period for the flagship fund until the end of 2024. With the portfolio of the fund now more defined around six investment pieces in high-growth sectors, We believe this additional time will allow us to advance discussions with prospective LPs and bring the fund to a size between $2 and $2.5 billion. In infrastructure, we continue forward with fundraising for our latest flagship fund. With more than $400 million raised in the quarter between the fund and co-investment structures, and an additional $300 million secured for the fund in early Q4. This is already a record fundraising year for infrastructure, and it's noteworthy that our anchor LPs in the first closing for Fund 5 have re-upped to commit 25% more in aggregate compared to the prior vintage. Given the current momentum and pipeline, we believe this fund can reach $2.5 billion. We also began committing capital for this fund to investment projects. As in August, we announced winning a new toll road concession for a highway system in the south of Brazil. Together with our partners, the project will entail total investment of approximately $1.6 billion for improvements to nearly 500 kilometers of highway in the state of Paraná. The project is one of many infrastructure concession opportunities expected from the government of Brazil over the next few years. Together with private opportunities, the relevant infrastructure pipeline over the next five to seven years is estimated at $90 billion, demonstrating the scale of the addressable market for our platform. As the new fund deploys capital, the existing portfolio continues to also perform well with funds three and four both delivering 13% net IIRs in U.S. dollars. Fund three is notably in the performance fee realization catch-up phase with $131 million of net accrued performance fees poised to be delivered for shareholders with incremental divestments. The credit strategy has continued to see quarterly with a very healthy $200 million in the third quarter committed broadly across the product offering and an additional $60 million of inflows in early Q4. The flagship high-yield fund continues to deliver attractive performance and top-tier rankings in line with its distinguished track record with an 8.5% gross return year-to-date, outperforming the benchmark by 400 basis points. We continue to expand our offering in private credit, including products tailored for local investors. In the Brazilian market, we have recently launched another strategy focused on direct lending to agriculture-related companies. The real estate platform continues to scale both organically within VBI and through partnerships like our joint venture with Bank Columbia. You have heard us reference the significant consolidation opportunity that we see in Latin America real estate investment trusts market. And we are executing opportunities to build and scale local platforms in each of our target markets in the region. As of the end of Q3, the platform AUM has grown nearly 40% organically over the last 12 months. With the subsequent closing of the joint venture, Patria's real estate AUM would reach $3 billion, up from less than $500 million prior to the transaction with VVI in mid-2022. The Bank Colonga partnership brings the second largest real estate investment trust vehicle in the Colombian market at approximately $1.2 billion. Meanwhile, VBI continues to gain market share in the very fragmented Brazil market, where they are both raising new capital for existing strategies and also acquiring management rights to smaller vehicles, which can be merged and consolidated into the existing platform. VBI performance has also been great in 2023, with NAV discounts on their real estate investment trusts, narrowing significantly with some funds even trading at a premium. In public equities, the strong pace of inflows in Q2 continues in Q3, with nearly $280 million in the quarter driven by the regional small cap and large cap products. AUM is up 23% from one year ago, and that's due not just to the inflows, but also to great performance. Both the Pan-Latam and Chilean strategies are generating double-digit absolute returns year-to-date in 2023. And the small-cap strategy has been notably impressive with an absolute return of more than 17% year-to-date which outperforms the benchmark by 140 basis points. As a final point before I turn to Marco, I'll reiterate a few highlights from our call a few weeks ago on the agreement to acquire the private active solutions business from Aberdeen, which manages $9 billion of total AUM and nearly $8 billion of fee-earning AUM and brings a very complimentary client base. In addition to being a trusted partner for global and local investors to access alternative investments in Latin America, the third pillar of Patria's growth strategy addresses how we help Latin investors access global private markets. Allocations to alternatives in the region continue to evolve and grow more sophisticated. More than $38 billion of Latin pension capital already allocated to private markets products outside of Latin America. As this trend continues, we believe this will be an important avenue of growth and a critical angle of service to our clients. Upon the closing of this transaction in 2024, we plan to launch global private market solutions as a new strategy vertical, which will encompass this acquired platform as well as our existing $1.3 billion feeder fund business. Together, this vertical will offer clients diversified exposure to global private markets through private active primaries, secondaries, and co-investment strategies, as well as direct access to global private market products through our feeder partnerships. We are very pleased to welcome this new team of talented investors to PATRIA. and excited for the value this platform can continue to deliver for both existing and new clients looking forward. I'll now turn to Marco for some more detail on this and other corporate development efforts. Marco, over to you. Thank you, Alex, and hello, everyone. It has indeed been a busy year on the corporate development front. And we're very excited with the way we've been able to use M&A to position our platform for future growth. I will give some additional color on both the Bancolombia JV, as well as the global private market solution strategy that Alex just covered. Our new joint venture with Bancolombia was closed last week on November 1st. which begins a new chapter for PATRIA in the Colombian market. While PATRIA already had an investing presence in Colombia through our private equity and infrastructure business, this partnership gives us an instant major presence in real estate with $1.2 billion of fee earnings AUM. And most importantly, it aligns us with the premier distribution partner for the local investor base. Through this joint venture, our aspiration is to pair PATRA's private equity expertise with Bancolombia's local presence to build locally focused alternative products and promote greater knowledge and allocations to this product over time. Real estate is a logical entry point but we aim to build the local offering across our full suite of alternative strategies. As a reminder, on the mechanics and drivers of the initial platform, PATRE will have 51% ownership of the joint venture which will therefore be fully consolidated in our IFRS financials and reported on a proportional consolidation approach in our non-GAAP reporting for fee-related earnings and distributable earnings. To estimate initial annualized FRE contributions for this existing REIT platform, think about the $1.2 billion of fee earnings AUM earning typically market fees of 80 to 100 basis points and a margin similar to PATRE's current level, with each line item adjusted by our ownership percentage in the JSP. Our most recent agreement to acquire the private equity solutions business of Aberdeen is an exciting step for PATREON. The platform today manages $7.8 billion of fee earnings AON in private equity primaries, secondaries, and co-investments, with a focus in the European and U.S. middle markets. The team brings a very impressive performance track record, delivering IRRs of 16% in primaries and 20% in both secondaries and co-investments. over the last 10 to 15 years. The capital is managed across drawdown funds, a listed private equity trust, which trades on the longest stock exchange, and separately managed accounts, which provide tailored solutions to individual major investors. With the exception of a small bucket of legacy mandates that are in a runoff stage, This platform is a combination of speaking long commitments and listed permanent capital, which delivers a steady stream of management fees. To review the high-level impact there, the platform generates a management fee yield of 50 to 60 basis points on a current fee earnings AUM of $7.8 billion, with an FRA margin between 30 and 40%. Patria will only own performances on new fund raised together, and thus, timing for meaningful PRE contribution will be beyond our current outlook. We view this as a very attractive standalone business, which can be enhanced even further as part of Patria. With the uncertainty of the new platform's new home out of the way, We're very excited to begin fundraising together upon closing. In addition to serving and growing their existing client base concentrated in Europe, we believe we can also unlock distribution synergies as the Latin American investor base continues to grow its allocation to private markets outside of the region. I will now turn to Ana for more commentary on the results. Ana.