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spk04: Before we dive deeper into our results for the quarter and expectations going forward, let me give you a little more color on an exciting and important evolution in our capital management strategy. First, the board determined to pay a dividend for 2024 of 62.5 cents per share or $0.625 per share And since we paid 17.5 cents per share or $0.175 per share in the first quarter, we declared a quarterly dividend of 15 cents per share, which will be fixed at this level for the next three quarters. Simultaneously, we are announcing a share repurchase program of up to 1.8 million shares over the next 12 months, reflecting our focus on creating long-term shareholder value. In our view, the price of our stock does not come close to reflecting our robust long-term outlook, and the Board believes that resetting the dividend and focusing incremental cash flow on share repurchase and or reducing the level of debt are among the highest and best uses of returning capital to shareholders. Our confidence in our business outlook is further demonstrated by the fact that Patria Holding Limited, or PHL, the controlling shareholder of Patria Investments Limited and the vehicle through which senior management's Patria stake is held, is committing to purchase up to an additional $12.5 million of Pax PAX shares through the end of 2025 on top of the share repurchase program. As a reminder, PHL currently owns a majority stake of more than 53% in PATRIA. These actions, in addition to our intention to utilize up to $100 million of future PRE to fund M&A and or pay down M&A-related debt, and now to potentially repurchase stock as well, demonstrates that we will be flexible and opportunistic as we look to use our capital to drive profitable FRA and DE growth and long-term returns to shareholders, while optimizing and maintaining a conservative balance sheet, which is of the highest priority and which Anna we'll review in more detail shortly. So, even with the change of our dividends at the current stock price, the current yield is a solid of about 5%.
spk05: Now, let's talk about our team's execution, of which I continue to be very proud.
spk04: Starting with organic fundraising, overall, it was another solid quarter. As mentioned, we raised $1.3 billion in the second quarter, bringing our total fundraising over the first half of 2024 to $2.2 billion, or approximately $5 billion over the trailing four quarters. We are particularly proud that even without a closing on a flagship fund, fundraising in the quarter and year to date has been strong, further highlighting the importance of having a diversified business. As we are in the market with multiple strategies across our platform, I thought it would be helpful to highlight several strategies and initiatives that we believe will be key contributors to our hitting our fundraising and FRE objectives. Our credit platform continues to exhibit strong momentum and is an important near and long-term driver of new business as evidenced by over $350 million we have raised in these strategies in the second quarter and the $1.2 billion we have gathered over the trading four quarters.
spk05: Credit assets have grown close to 25% since our acquisition of Moneda. We have had great success with our real estate products, which are predominantly in permanent capital vehicles.
spk04: We have raised about $380 million over the first half of 2024, including over $140 million in the second quarter, and approximately $850 million over the trading four quarters. With the transfer of the Credit Suisse REITs, we see the potential to raise additional permanent capital in several of our REITs products, although we are limited in what we can say as several are in registration.
spk05: Permanent capital is particularly valuable and growing this part of our business is a priority.
spk04: Our new global private market solutions platform has hit the ground running, and we expect to hold a significant first close of Secondary Opportunity Fund 5, or SOF 5, before year-end. Also, a key highlight in the quarter was the closing of a $430 million SMA, or Special Managed Account, which was a strong vote of confidence in our platform. We continue to work on additional SMAs with existing and prospective clients and see the traction in GPMS continuing to build. Over the balance of 2024, we expect to hold additional closings of our latest vintage infrastructure fund. We already have $1.1 billion of commitments and believe that we can ultimately raise between $2 billion to $2.5 billion for this fund. As we have discussed previously, we see a lot of opportunity to invest this capital and have already started to deploy it. Finally, as we have discussed in prior calls, while the fundraising environment in private equity remains very challenging, particularly in LATAM, we still believe we can approach our $2 billion target over time and expect additional closing over the latter part of the year. At the same time, the investment environment remains very attractive, and we continue to focus on developing and investing in our targeted platforms. Sticking with the topic of fundraising, we also wanted to use this quarter's call to provide some additional perspective as to why we are excited about and confident in our long-term fundraising momentum, and most importantly, organic growth potential, which is supported by our M&A strategy. First, as we have talked about previously, alternative allocations from investors within the region remain extremely low compared to the rest of the world, and we expect those allocations to trend upwards. and for our investor base to diversify as we expand our regional platforms. In that regard, it's worth noting that over half of our fundraising in the second quarter and two-thirds year-to-date have come from laptop investors, highlighting the success we are having in our strategy of being the gateway for local investors to invest in alternative products. Similarly, global investors remain under-allocated to the region and, while private equity demand has been impacted by the current global slowdown in demand, mainly from U.S. pensions, we expect that will eventually rebound. In contrast to the current lackluster demand for private equity, global investor interest in infrastructure remains positive And the potential in LATAM is being recognized by a growing number of investors, as evidenced by the Saudi Sovereign Wealth Fund, also known as the Public Investment Fund, or the PIF, which stated its interest in infrastructure investment in the region. And our signing of a memorandum of understanding with the Saudi's Ministry of Infrastructure that PATRA remains one of their preferred investment partners in the region. We have a much more diverse investor base than ever, which helps de-risk the company even as it opens new potential investor segments. We are better positioned than we have ever been to grow our business as limited partners look to consolidate the number of managers they do business with, as the number of investment platforms, strategies, and investment vehicles we offer has grown substantially since our inception. initial public offering it's easy to lose sight of the fact that we have only been public for just over three and a half years and most of our acquisitions have been with us for two and a half years or much less so many of the prospective benefits of our m a strategy are new and in the very early stages of their life cycle reflecting ample opportunity to scale As an example, the launch earlier this year of our infrastructure private credit fund with a billion-dollar target, an initial cornerstone investor, such as the International Finance Corporation, or IFC, the Development Bank of Latin America, or CAF, and the Brazilian Development Bank, or BNDES, highlights just one instance of how we are leveraging our expanded partnership with Moneda to bring new and differentiated investment solutions to our clients. Similarly, we are just in the early stages of building and leveraging our expanded distribution platform and reach. Our sales and marketing team has grown from less than 10 at the time of the IPO to over 60 people today, with plans for additional expansion. Our regional distribution capabilities in Brazil, Chile, and Colombia are each relatively new to Patria and still in their early stages of development. And with the completion of the Credit Suisse transaction, 1 million retail investors in Brazil own a Patria-branded investment product, which we expect will provide additional cross-selling opportunities over time, strengthening our brand in the region. In addition, many retail clients also own a Patria-branded product through our trust listed on the London Stock Exchange. Finally, while it is perhaps less obvious, our growing base of permanent capital enhances our ability to generate organic as additional follow-on fundraising, particularly in permanent capital vehicles, has a layer cake effect. All new permanent capital raised is incremental to management fee revenues and FRE, and therefore of particularly high value. So overall, we remain very excited about the outlook, our new capital management strategy, and our ability to leverage our M&A into future organic growth and FRE and DE growth. Now, let me turn the call over to Anna to review the financials.
spk02: Thank you, Alex, and good morning, everyone. It has indeed been a very busy few months since we closed on several acquisitions, announced the update to our capital management strategy and new share repurchase program, and continued to invest in and build out our expanded product suite and distribution capabilities. Overall, we remain confident in our growth and FRA outlook over the balance of the year and into 2025. Let's now review the results for the second quarter and work our way down the P&L. Starting the total fee revenues, the $71 million we reported was a 20% increase over Q2-23 and 17% over Q1-24. The sequential increase was mainly driven by two months of revenues from the Aberdeen acquisition, which closed on April 26, as well as fees from net new flows into credit and real estate fees earnings AUM, all partially offset by a reduction in public equities due to outflows and negative asset returns in the quarter, as well as negative FX impact. Higher year-over-year fee revenues also benefit from the November 23 closing of our transaction with Bancolombia, new commitments, fundraisings, and deployments in various vehicles, including Private Equity Fund 7, among other things. We expect fee revenues to continue to benefit over the coming quarters and into 2025, as well as fully onboard our recent acquisitions. As a reminder, we closed on the Aberdeen acquisition at the end of April, and 500 million of fee-earning AUM of Credit Suisse REITs were transferred at the end of June, with the remaining 1.5 billion transferred by the end of July. We also closed on the Nexus capital acquisitions with over $700 million of fee AUM in July. And finally, we closed on the acquisition on the remaining 50% of VBI that we did not own, all in addition to our ongoing fundraising. With regard to operating expenses of $31 million or personal expenses plus G&A, The increase of 5.8 million versus Q223 and 6.2 million versus Q124 mainly reflects the impact of our acquisitions of the private equity solutions from Aberdeen, the Credit Suisse REIT business, and the subsidiary we formed with Bancolombia, in addition to incremental investment in marketing and technology resources. Looking ahead into the coming quarters, we expect expense growth to predominantly include the impact of the acquisitions noted above. After factoring in the impact of acquisitions, we expect little growth in underlying expenses as we recognize expense synergies, much of which we reinvest back into the business. Accordingly, we expect the pace of expense growth will moderate over the latter half of the year, particularly in Q4 and into 2025. Shifting to fee-related earnings, as Alex highlighted earlier, Q2-24 FRE of $39.5 million was up a healthy 17% versus Q2-23 and 13% versus Q1-24. The slightly slower growth in FRE relative to fee revenues reflects the impact from acquisitions as we onboarded new business with lower margins due to the structure of their fee rates and we have not yet had an opportunity to realize any synergies from incorporating them onto our platform. Overall, however, we were very pleased to have sustained an FRA margin of 56% in Q2-24, which only decreased one percentage point compared to last year, and two percentage points from prior quarter, but remain within our target range of 56% to 58% for the year. Looking ahead, we expect the pressure on the FRA margin to be transitory and for the margin to trend upwards, particularly in Q4, as we grow revenues, including the potential realization of incentive fees at the year end, and we start to generate operating efficiencies. Moving on to the distributor earnings, PATRA delivered DE of $33.8 million in Q2-24, up 8% versus the previous quarter. and lower than the second quarter of 23, even though FRE was notably higher year over year. Q2 23 include $10.7 million of performance-related earnings versus none in both Q1 24 and Q2 24. Also in Q2 23, net financial and other income was positive $0.6 million versus a negative $1 million in Q1 24, and negative 3 million in Q2-24, reflecting M&A financing costs, partially offset by about 0.6 million of income from our new energy trading venture in the second quarter. Finally, our effective tax rate in Q2-24 came in 7%, a function of our business and geography mix. We expect the tax rate in 2024 to remain between 7% to 9%, and trending towards 10% in 2025. On a per share basis, Q224DE of 22 cents was slightly higher than the 21 cents we reported in Q124 due to the above-mentioned factors and despite a higher share count, reflecting shares issue for incentive and deferred compensation and contingent payments. Regarding the share count and excluding any potential benefit from share repurchase, We now expect the share count to finish 2024 and 2025 closer to 153 million and 158 million, respectively, compared to our prior forecasts of 155 million and 160 million. The more moderate share count growth reflects our expectation that we will need to issue fewer shares in 2024 and 2025 to fund defer M&A and other contingent payments at this point. So, putting all together, we expect the year-per-share excluding performance fees to accelerate in 2025 as we continue to grow revenue and FRE, move past the increase in and start to reduce M&A-related finance costs, and realize some expense synergies over the next 18 months. all before we factor the potential benefit from debt reduction driven by PRE and incremental share repurchase. Finally, with regards to the balance sheet, we finished Q2 with approximately $176 million of debt outstanding, and we expect to use our credit facilities and our cash generation to fund the remainder of the Credit Suisse transaction, in addition to the acquisition of the remaining 50% of VBI. We expect our debt to average approximately $130 million over the next six months and potentially reach a peak of around $190 million at the year end, all depending on the timing of our obligations versus our cash generation in a particular month, and then to start to decrease again in Q1 2025. All the above excludes any prospective debt paydown related to future PRAs. Our balance sheet for this quarter includes the acquisition of the global private market solutions from Aberdeen, part of the REITs from Credit Suisse, and our new energy trading venture. However, we are still finalizing the opening balance for the GPMS acquisition, which will not be available until the end of August as per the purchase agreement. We have considered a best estimate for our Q2 consolidated balance sheet based on the seller's regulatory filings for Q1 2024. and this methodology was agreed with our standard auditors and aligned with our board. Rest assured that keeping a conservative balance sheet is a priority, and we continue to target a debt-FRE ratio of one time or less on average. Accordingly, to echo what Alex mentioned, When our expected debt levels are placed within the context of our strong confidence that we will generate $170 million plus of FRE in 2024 and $200 to $225 million in 2025, we expect to remain well within our target range, even excluding any potential debt paid down from PRE generation over the coming quarters. We also want to highlight that our expected share count and debt levels incorporates our expectation for any deferred or contingent payments that may come due over the balance of this year and into 2025, while excluding any prospective benefit from share repurchase and or future PRE that may be used to pay down debt. In closing, let me reinforce once again our growth in terms of FRE and the per share. we expect FRA per share to rise to $1.10 and $1.12 for 2024 from our previous guidance of 109, which reflects our expectation that the 2024 year end share count will be modestly lower than we had previously guided to as we issue fewer shares and we use more cash to fund M&A and related contingencies. Our 2025 FRA per share guidance comes in at $1.26 to $1.41, with a midpoint of $1.34. At midpoint, this represents a 20% year-over-year growth. Looking back to December 21, the year we went public, this FRA growth results in a strong 21% CAGR at the midpoint of our 2025 target range. Finally, we expect this strong FRA growth to also drive accelerated DE per share growth into 2025 as we move past from loaded M&A financing costs and excluding the DE impact of any performance fees. Overall, we are even more excited about the growth opportunities that lies ahead. I will now turn back to Alex for closing remarks.
spk05: Thank you, Ana. So, to sum it up, there are several key takeaways from the quarter.
spk04: First, we remain very comfortable with our fundraising, FRE, and FRE per share targets for 2024 and into 2025. And we expect to see accelerating DE growth in the second half of 2024 and into the next year as the full weight of our fee-earning AUM growth flows through and we move past the short-term headwinds resulting from M&A-related financing costs. We believe we have a long runway to grow fundraising, generate organic growth, and grow FRE and VE as it remains early days in executing on the platforms we have added through our M&A strategy and the investments we have made in new products and distribution resources. we see multiple early proof points that this strategy is starting to pay off. And lastly, we are focused on maximizing returns to shareholders and believe redirecting a portion of our capital generation to share repurchase is a very attractive use of our capital. This demonstrates that we will be flexible and opportunistic as we look to use our capital to drive profitable FRE and DE growth while maintaining a conservative balance sheet. Overall, we are very proud of the differentiated and diversified investment platform we have built, both organically and inorganically, making us the largest alternative asset management platform in the region in terms of direct assets under management, revenues, and fee-related earnings. We remain very excited generating our future growth prospects and look forward to providing a more complete update at our next investor day scheduled for December 9th.
spk05: We thank you for your time and we are now happy to take your questions.
spk03: Thank you.
spk01: At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile your Q&A roster.
spk03: question.
spk01: Our first question comes from Tito Labarda with Goldman Sachs. Tito, go ahead.
spk06: Hi, good morning. Thank you for the call and taking my questions, Alex and Anna. A couple questions. I guess first on the deployment of the $200 million in the quarter, can you give some color on how that should impact the fees going forward from here and which funds that is expected to go in. And then the second question, look at the real estate management fee. At least the implied fee was down a bit in the quarter. Can you give any color on that, why that was a little bit lower? Thank you.
spk04: Hi, Chito. This is Alex and the team here. Thank you very much for participating in the call. Thanks for your question. Most of the investments were from our infrastructure, fee-related earnings, right? That's where factory-related earnings, infrastructure, and the private equity funds. So private equity fund five, a little bit, six, and mostly seven are now continuing to deploy capital and infrastructure. Our infrastructure five is already committing capital as well. Just reminding here, the private equity settlement already started deploying capital. We did acquire a food retailer in Brazil and are looking to grow into the sector as an example. An example of the infrastructure side, we did win the concession of a toll road in the state of Paraná. We also committed to other investments in infrastructure fund five. On the real estate side, I think we did divest a couple of assets from our legacy real estate funds. We have basically two families of funds, private equity real estate, which have a drawdown nature to it, Where no we raise capital then we call capital and we divest as a regular private active fund But of course focused on real estate assets and this exactly what happened here. We sold Among us among the assets that we sold. I'll name one as an example, which is a self storage business that we did Hold in Brazil this fund did help this hold in Brazil as an example The second family of funds that we have in real estate are permanent capital nature funds where we then raise money and it increases the NAV and we don't have to actually give that money back. The divestments that you see there in that slide is related to the private equity real estate funds. which are now divesting assets. Namely, one of the assets or a significant asset that was divested over this quarter was our self-storage business in Brazil. I hope I answered your questions there.
spk06: Yes, that's clear. Thank you, Alex.
spk00: Thank you, and our next question will come from Guilherme Grespin from JP Morgan. Your line is open.
spk09: Good morning, Alex and team. Thank you for the presentation and questions. Two on our side. The first one is just a little bit on fundraising again, Alex, just to confirm. You mentioned, I think, you expect some additional closings in the private equity seven and the infra. Just remind us a little bit the timetable, like you have this fundraising open, then I think the expectations were 2 to 2.5 billion for each, and with potential closes now in the second half. And then remember, for how long does it remain open, the fundraising? Should we see the closing of this fundraising by when? And then if you could also touch a little bit on the Fund 5, I think was the first time I heard you were planning to launch opportunities for Fund 5. And then the second question is just on GPMS. We saw this quarter a little outflow on the vertical, I think was 800 million. I just want to confirm what exactly was that and if it's related to Aberdeen or not. Okay.
spk04: Hi, Guilherme. Thanks for your question. Again, thanks for participating also in the call. As we – well, going back to the fundraising question, then I'll talk about the Fund 5. Well, fundraising question, we see our fundraising – I'm talking about organic fundraising. Organic fundraising really speed up. And I'm excited with what I see and the prospects with what I'm seeing for a couple reasons. First, we have, of course, more products in our menu to fundraise. And you saw that we did, of course, launch new funds, and I'll talk about some of those initiatives. And also, with the acquisitions that we did over the last years, we added also new products to our menu. specifically about Private Equity Fund 7 and Infrastructure Fund 5. Private Equity Fund 7 has raised around $1.5 billion. As of now, we want to continue to raise until the end of the year another $500 million target to reach the $2 billion that I mentioned. We see a pipeline of investors in due diligence. So we can actually read, of course, the funnel, the fundraising funnel. Most of that will come from Latin American investors. We see additional interest from Brazilian investors, Colombian investors, and some Peruvian and some Chilean, but mostly Brazilians and Colombians. And of course, also some investments, some interest coming from ex-LATAM investors some in Europe, some in the U.S., and a significant also portion coming from Asia. So if you add all that, it adds another $500 million. Everything is, of course, rounded numbers, approximate numbers, that will push then private equity funds $7 to $2 billion, which is the target number that I mentioned during my speech here. On infrastructure fund five, we are at 1.1 billion. We intend to reach the fund at two, two and a half. We see a very robust pipeline of investors also in diligence mode, and we see the funnel as well, so that's why we can see the two or two and a half. Of course, the funnel, we do apply probability to the funnels of higher probability and lower probability depending on the investor. That, I think, we see kind of half a lot of interest coming from Latin American investors and another half of that additional number to reach two, two and a half coming from international investors. And again, a lot of Asian investors also in this next one, one and a half billion dollar to make this fund reach to $2.5 billion. In addition to these two flagship funds, I think we're excited that we are now raising money for other products that we did launch organically. I'm going to name some examples here. On the credit side, we managed to continue fund raise for InfraCredit, which is a Brazil-focused fund to land money for infrastructure-related projects in Brazil. We also launched a LATAM dollar-denominated private credit. Very excited, both of them, of course, as a joint venture here within PATRIA of our credit moneda partners and our infrastructure partners and also our Brazil credit team. and launching these two efforts on the credit side besides continuing to perform well on the public credit funds. We also launched a Chilean pipe fund, a private investment in public equity, also successful fundraising there as a first close. We're already looking to do an investment there. On the real estate side, we focus mostly in fundraising for the VBI products. We had a good first semester, as you can see there from the numbers. And the Credit Suisse related funds that we are transferring, we transferred to our management in June, July. We're now launching other fundraisings there. Now, I cannot give a lot of detail because as these funds are under a fundraising mode, we have restrictions what we can say because they are public offerings. On the TPMS side, we did manage to already fundraise over $400 million SMA with a very important client and as importantly as the number is the positive message that a new client is committing to us after the acquisition of a significant amount of money, $400 million plus. And the private equity and infrastructure I already mentioned. So again, I think we see the fundraising pick up. First quarter, we did organically fundraise around $800 million, $900 million. Second quarter, $1.2 billion, $1.3 billion, pushing the number to $2.2 billion, $2.3 billion. So that's an LTM close to $5 billion last 12 months. So I continue to see a positive flow making me reinforce the guidance that we're going to raise $5 billion organically in 2024. And I think we should see this number picking up as we, again, have more products to fundraise and very good returns, our returns in GPMS, in infrastructure, credit, all of these that I mentioned. continue to post very good returns. Lastly, on Fund 5 and opportunistic Fund 5, I think that we were referring to SOF 5, which is the Secondary Opportunities Fund number 5. On the GPMS platform, which is the Global Private Market Solutions platform that we did acquire from the carve-out of Aberdeen, basically there are no three main businesses there. an SMA, special managed account business, that we focus on helping clients with primaries, secondaries, and co-investment solutions in the private active world, mid-market, global. And second family of products are the secondary funds, and we are raising secondary fund number five, which is a blind fund. And contrary to the SMA, that we have specific mandates for these 24 main clients, the soft five, the secondaries opportunities fund number five, the blind fund, and it works in a much similar way as private equity fund seven, infrastructure fund five, which, you know, you raise capital, commit it, then you draw down, you invest, and then you divest and give back the money, and then you go out there and raise, in this, my example here would be secondaries opportunity fund six, and here we go. So we're expecting a first close for this fund still in the second semester so very excited there and we see also through the funnel that it's going to be I think a good surprise for all of us here again as it's the new fund that we are working together with our GPMS friends that came from Aberdeen so we're excited with some investors already going to their investment committees and giving us a good messaging MAC that they will commit to our first close, etc. So the third family would be a co-investment family of funds, of blind funds. We're probably going to launch the first blind co-investment fund sometime next year. So we have the SMAs, primary, secondary, and co-invest. We work for several clients, but mainly for these 24 accounts. We have other smaller accounts, but the main accounts are 24 accounts. Then we have a family of blind and secondary funds. We are raising secondary opportunities fund number five and we will launch a beginning a family of blind co-investment funds which the first one should come to a fundraising mode sometime in 2025 and What can you have what was the last question again? the outflow of GPM s in the quarter It's a you know the doubtfuls of this quarter. You can you see it in in private equity, you see some in infrastructure, and answering your question specifically, outflow on GPMS, is a very healthy nature of our business of not giving money back. We are managing to sell assets, and with that generate performance fees, as you can see that we did all the way back in 2021 with private equity fund three, and then In 2022, Private Active Fund 5, and then Infrastructure Fund 3 in 2022, and Infrastructure Fund 3 in 2023. And we still see with good eyes that we're going to hit the $180 million of performance fees in the 2023, 2024, 2025 three-year vintage, as we gave on the guidance. And the GPMS, the same. we have these drawdown funds that we sell assets, and then the assets go back to investors, and we do get performance fees, and some of these assets we sell, and they don't reach the performance fee mode, like I mentioned private equity fund three, I mentioned private equity fund five, I mentioned infrastructure fund three, but selling assets is very healthy. That takes us in the direction of the performance fee mode here. And I think those were the three questions that you asked. And please remind me if I did forget anything here, Guilherme, please.
spk09: Well, that's it, Alex. Thank you for the very detailed answer here. Thank you so much.
spk00: Thank you. And our next question will come from Ricardo Buchpiguel from BTG Pactual. Your line is open.
spk07: Good morning, guys, and thank you for the opportunity of making questions. I have just one here on my side. We have a lot of acquisitions closing recently, and with part of your cash locked with the SPAC deal that you have and also the announcement of the repurchase program, would it be necessary for Patria to look for new sources of funding in the coming quarters? And does it make sense for the company to keep its appetite of pursuing more M&As, giving given this sort of capital constraint? Thank you.
spk04: Yeah, I think one of the reasons actually that we did, of course, review our whole capital management strategy here was exactly everything that you mentioned here, Ricardo. We are extremely comfortable of the way that we see our cash flow Over the next six months, over the 18 months, as you know, we are a very healthy cash generation business, very light balance sheets. We're a service provider. We don't do a lot of investments. We seed a couple of funds, but that's very insignificant versus the whole scheme of things. So as of today, you see the debt level that Erna mentioned, $175 million, $176 million. at the end of the second quarter because most of these acquisitions that you mentioned, the carve-outs of the Aberdeen business and the acquisition of the Brazilian real estate funds from Credit Suisse, they landed in the second quarter, which is good from one side because we already integrated these businesses, we already have all of the revenues, but it does, of course, Make us have to commit to more cash outflows in the second quarter As we saw now conservatively as we projected this we saw these businesses being cooperated in patria over the second quarter and and we had good news because the Shareholders meetings of all of the credits with funds went went very well Faster than we expected they voted in favor of transferring the funds to patria and Also, the regulatory approvals that we needed in the United Kingdom went faster than we expected, and we managed to then close these two deals in the second quarter. But as we move into the second half of the year, the beginning of the third quarter, we have a lot of cash coming in where we receive most of our management fees in the beginning of the quarter, which is July and August. the debt level coming down significantly to the $120, $130 million level that Tana mentioned in her part of the speech. And then we have a small peak in December because we have a Credit Suisse payment there. And then again, in the beginning of 2025, we have all the management fees coming back, and we should go down to the $120, $130 million level, which is a very, very comfortable level for us. As you know, we have $170 million of FRE, $200, $225 million of FRE for next year. So 120, whatever, is 50, 60% of our FRE. And we're not considering here any performance fees, which I mentioned a couple of minutes ago that we still see performance fees coming in. So all of these numbers, this $120, $130 million of debt, is 60 percent of the 170, and it is half of the 200, 225 million dollars of FRE for 2025, not considering the performance fees. And we mentioned in, I think, two early scores ago that we would use $100 million of the performance fees coming in to pay down debt. So if you apply $120, $130 million of debt and you use $100 million of performance fees over the next month's quarters to use that to pay down debts, then the debt goes to insignificant numbers, in my example here of $20, $30 million. So we're in a very comfortable position and all that's already incorporating our dividends and our share repurchase program. However, going back to the second part of your question, we will most probably not pursue any other acquisitions this year or early next year because we are integrating these businesses. So it has more to do with the integration. As we mentioned, we managed to close two of these deals in the second quarter. We were expecting to close them in the second half of 2024. So we're focusing on integration and people, system, processes. So it would not be very much advisable for us to do a large acquisition from that point of view, not from a balance sheet point of view, in the second half of 2024, early 2025. So our focus will be over the next quarters in the integration. But balance sheet-wise, we're comfortable. I hope that I answered your question, Ricardo.
spk07: Thank you very much, guys.
spk00: Thank you. And as a reminder, to ask a question, please press star 1-1. One moment for our next question, please. And our next question will come from Pedro Leduc from iTool BBA. Your line is open.
spk08: Thank you, guys, for taking the question. A few here. First, on the personnel expenses that we saw going up with the MMA integration, obviously. wondering if it's here or on some other regions where we could start seeing synergies in the coming quarters. That and in the conciliation of IFRS to non-GAAP measures, we saw a lot of expenses flowing through it here and some are M&A related, some fees, SPACs, wondering if we should see those fading out into the next quarters. already, so maybe a closer relation between the earnings, IFRS, and the non-GAAP. Thank you.
spk04: Hi, Pedro. Thanks for your question here. It's Alex again, and Ana is here also with Marcelo to help me answer the questions. But yes, personnel went up because of the integration. These businesses that we did incorporate In the second quarter, our businesses with lower margins at the first moment. We mentioned a couple of articles ago that GPMS runs a 30% FRE margin business. And you know that we run a upper 50% level FRE margin business. And the same with the real estate business from Credit Suisse slash VBI that will be incorporated in the second half of 2024. And as we work into the synergies, you will see FRE margins go up. I think this year it will land in the 56%, 58% level, FRE margin. And we see it going up, trending up in 2025 back to the 60% level, 58%, 60% level. And how do we do that? Through the integrations. We went already through that process with the acquisition of Moneda. Late 2021, we did sign the acquisition of Moneda. Moneda was running a 40%, approximately 40% FRA business. We were running a 60% FRA business. In 2022, you saw that margin also trending up. end of 2022, we were back to the 60% level, close to 60% level. So by integrating expenses and our main expenses now are personnel, which is 80, no, 70, 80% of our expenses. And then of course, and then rent and travel, whatever, no, is not a significant portion. So it's personnel. And that's what we're going to do as we move on into this year and into 2025. through the training up that I mentioned to you, 56 to 58 this year, and 58 to 60% of our e-margin next year. We know how to do this. This is our day-to-day. You know that we run a consolidation private active buyout business, so we have done more than 100 of those consolidations in Brazil, in Latam, and whatever, looking for synergies in processes, IT, and, of course, sometimes in people as well. On the IFRS side, expenses, yes, they did go up significantly this quarter. It has mostly to do with the expenses that we did run because of these two closings that happened in the second quarter. But I'll ask – I'll turn over the floor to one or two comments, to make a few comments on that, please.
spk02: So the main variance that we have for this quarter has to do with all the transactions, M&As that we closed. And I just want to point that it was three that impacted quarters. So we have all the Aberdeen acquisitions that impact significantly the line of transaction costs, which means different expenses. Also the effort for the transferring of the Credit Suisse funds which also was hit that quarter. We also have a smaller, not that single, but we start having as well for our nexus as well. And, of course, what is normally part of those transactions and remaining transactions is no part. On top of that, what you see on the deferring contingent consideration has to do with... our option that we have to evaluate with VBI option with VBI, which we have to evaluate as a quarter and actually a specific this quarter, there is an adjustment that also was included in this line that I have just mentioned. So I think all in all, that is the main variance that we have in this quarter. There's two lines from audit transaction costs and deferring contingent consideration related to adjustment of our VBI If you, just as minor, but if you look into our financial income depends on unrealized, which is a 3 million, this is all related to effect or investment in REI, which impacts, is unrealized as impact this line because of the real devaluation.
spk04: Yeah, so we... Thank you. Yeah, and here, Pedro, I think one of the lines is cash relatedness. which is the transaction expenses. The other ones are not cash-related costs and expenses. And just going back to your comment, as we move into the third and fourth quarter, as we did exercise the VBI option and we did close the Aberdeen transaction and the Credit Suisse transaction in the second quarter, these numbers should be washed out from our P&L and we should go back to where we were in prior quarters. So, yes, everything happened. It was a very busy quarter. I actually started my speech there. I was very proud of the team, to be honest, because we had such a very busy quarter of two closings plus now the VBI option that we did and now the acquisition of the other 50%. and all of this happening in the same three-month period. So, yes, so this will be washed out, and we will go to more normal levels in the next quarter. Thank you.
spk00: Thank you, and I am showing no further questions from our phone lines, and I'd like to turn the conference back over to Alex Seek for any closing remarks.
spk04: Okay, thank you very much, all of you participating in the call, and thanks for your questions here. And Chito, Pedro, Guilherme, Ricardo, thank you very much. I know that you guys have a very busy morning with so many financial institutions also having their earnings calls, so thanks for participating. Hope to see you guys presently in person soon in New York or some other place. Thanks again. Have a great day. Goodbye. Ciao, ciao. Gracias.
spk00: Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.
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