XP Inc.

Good evening, everyone. I'm Andre Prezi, RO at XP, Inc. It's a pleasure to be here with you today. On behalf of the company, I'd like to thank you all for the interest and welcome you to our 2024 second quarter earnings call. This quarter, the results will be presented by our CEO, Thiago Mafra, and our CFO, Victor Mansur, who will both be available for the Q&A session right after the presentation. If you want to ask a question, you can raise your hand at the Zoom tool and we will attend you on a first-come, first-served basis. We also have the option of simultaneous translation to Portuguese. There is a button below if you want to turn on the translation. And before we begin our presentation, please refer to our legal disclaimers on page 2, on which we clarify forward-looking statements, additional information on forward-looking statements, can also be found on the SEC filing section of the IR website. So now I will turn it over to Thiago Mafra. Good evening, Mafra.

Thank you, André. Good evening to all. I appreciate everyone joining us for our 2024 Second Quarter Earnings Call. It's a pleasure to be here tonight. Let's delve into our quarterly performance and discuss the strategic steps we are undertaking to ensure our continued growth and dedication to all shareholders. I would also like to extend a warm welcome to Victor Massoud, our new CFO, as this is his first earnings call with us. We are excited to have him on board and look forward to his contributions to our financial strategy and operations. This quarter has been positive for XP. We have showcased our ability to generate alpha and achieve growth with profitability by managing several business levels independently from the challenging conditions. Our total client assets have increased by 14% year over year, reaching 1.2 trillion. More importantly, we have observed a re-acceleration in our client net inflow this quarter, details of which we will elaborate on during the presentation. We have also set a new record in the total number of advisors, reaching 18.3 thousand, and continue to expand Brazil's largest investment specialized sales force, growing 11% year-over-year. Finally, we ended with 4.6 million active clients, marking a 16% increase year-over-year. We had our all-time high in revenue, EBT, and net income. Gross revenue was $4.5 billion for the quarter, up 21% year-over-year. of 1.4 billion, 43% higher year-over-year, and 1.1 billion in net income, with a margin of 26%. This result reinforces and gives us comfort that we are on track to deliver our gross revenue and EBT margin guidance in 2026. We will go into more details on the financials later on. In terms of balance and profitability, we closed the quarter with a return on tangible equity of 27.2%, the highest in the past two and a half years. XP's managerial Basel was at 20.5% level. The EPS for Q2 2024 was R$ 2.03 per share, a 10% increase year over year, partially reflecting the share buyback that we have completed in the second quarter, aligned with our capital return plan to create value to shareholders. On the back of so many levers that we have been implementing for growth and with strict cost control, as it has been the case, we do are expecting improving results for the second half. Moving on to the next slide, we'll look at our strategy tracker, reminding here the main levers of business growth. We'll dig deeper in each of them. Also, we'd like to highlight our gross revenue and EBT margin. If you remember our investor day, back in December, we have shown our last 12 months gross revenue as 14.8 billion. And since then, we have increased our gross revenue to 17.4 billion LTM, with an implied 25% CAGR. In order to reach the top of the guidance, we need from now on a 19% CAGR until 4Q26. Regarding our LTM EBT margin, we have reached 28.1%, a 180 bps expansion compared to our 30 quarter 2023 LTM figures. indicating that we are in the right pace to reach the 30% to 34% target range in 2026. Now, starting with retail investments. In this slide, our goal is to establish ourselves as leaders in investments, which is our core business. As highlighted in the first slide, a key achievement this quarter was the improvement of net new money. We record 32 billion in net new money for the quarter with 24 billion coming from retail. This means that in retail we nearly doubled quarter over quarter. We attribute this improvement to several factors, but primarily we believe this improvement is a result of effectively executing the levers we control. These levers include, first, product platform, the largest investment platform in Brazil, which continues to be a major differentiator through our constant innovation. And in this environment, our fixed income platform is expected to maintain its protagonist in the market. And part of this competitive edge is related to our efforts in structuring and warehousing new assets for retail distribution through our wholesale banking. Second, diversification and expansion of channels. Few years ago, we launched the internal advisors model becoming a dual distribution channel business and today as we speak we have moved to a multi-channel distribution with IFAs, internal advisors, consultants through our RIA channel and the digital channel. At the same time that we have been growing our IFA channel We already have around 2,000 internal advisors and 1,000 RIAs. Our RIA channel, for example, already represents 10% or more than $100 billion of our total client assets. All the new channels combined represent around 50% of our total retail client assets. Third, focus on productivity. through our empowering tools for advisors, such as the Hub, XP Academy, and the provision of data and intelligence to the sales force, ensuring their long-term success. Lastly, it's worth mentioning the continuous evolution of the company's mindset, transitioning from a product distribution firm to a service provider. This shift permeates all areas, including the entire sales force, aligning with our quality initiative and financial planning, catalyzed by open investments, and now our cross-selling initiatives. We are leading... Another business that presents an opportunity ahead is insurance. We are currently less than 2% penetrated and we expect to grow 3 to 4 times over the next years. Still, our total return premiums have seen a 52% increase year over year, reaching R$ 307 million in the quarter. retirement plans we keep presenting market share gains growing our client assets by 18% year-over-year but a 5% market share and also a 5% penetration combined effects global investments and digital account grew 51% year-over-year with 104 million in revenues this quarter and we have a clear plan for each one of them to keep growing. And finally, the corporate and SMB. We have been able to maximize our corporate and SMB clients by leveraging the relationship built with our network of advisors and our investment banking business. We have reached more than 60,000 active clients. It's important to highlight that corporate and SMB client base grew 22% year over year. And we continue to improve penetration with FX, Derivatives and Lowlands. It's worth mentioning that in Derivatives we improved from 10th to 5th position during the last 2 years. And on FX we also improved, moving from 41st to 16th ranking position during the last 4 years. As a result, we have been able to grow corporate gross revenue by 50% CAGR second quarter 24 last 12 months versus third quarter 23 last 12 months when we held our investor day. We have just launched the corporate digital account in August and will launch trade finance soon, reinforcing our cross-sell opportunities for the next years. Vitor will give more details about the revenue growth. Now, I will hand it over to Vitor so he can discuss this quarter financials. Thank you.

Thanks, Mafra. Good evening, everyone. It's a pleasure to be here with you. As this is my first earnings call, before I go to the second quarter numbers, I think it would be interesting to share three pillars we are focused on for the years to come. First, a short-term objective, our corporate restructuring. As you know, we have a banking ecosystem, and having a bank can provide us higher leverage and lower costs. At the same time, we can structure new products. To get all the benefits of having a banking ecosystem, we have started a corporate reorganization last year to have XP Bank as the parent company in Brazil, when completed. This will provide lower cost of capital by increasing our ability to issue Tier 1 and Tier 2 debit. The process if the central bank is flowing is expected and we should have it completed by the end of the year. Second, a mid-term objective, or guidance delivery. EBT margin expansion should come through new products increasing profitability as they evolve in the ecosystem, coupled with a strict cost discipline without harming innovation, which is part of our DNA. And third, a long-term objective, capital allocation. We understand that having a continuous capital management through disciplined capital allocation and return capital to shareholders is key for our long-term goals. XP is a profitable company, generates cash, and does not need to reinvest 100% of its profits to grow. Capital allocation decisions are based on ROE, profitability, and connection for long-term strategy. The combination of these initiatives should lead to higher returns going forward. I think it would be interesting to share three pillars we are focusing on for the years to come. And now, let's go to the numbers. Total gross revenue grew 21% year-over-year and 5% quarter-over-quarter. Once again, XP posted positive performance in capital markets, reflected both in retail, especially fixed income, and corporate industry services. Institutional revenue was slightly lower quarter over quarter. On the right-hand side of the slide, we can see our gross revenue breakdown. And the trend is still the same of last quarter, when corporate industry services increased their participation on total gross revenues. Let's move to the next slide with more details on retail. Retail revenue achieved 3.3 billion, a 14% growth year-over-year and a 5% growth quarter-over-quarter. Fixed income was the main highlight, with a 42% growth year-over-year and a 17% growth quarter-over-quarter. which was driven by our capacity to develop new products, including corporate credit and structure notes through primary offerings, and our capacity to provide liquid in the secondary market, considering our higher than 50% market share in most of securities. Moving on to the next slide, we will talk about corporate and issue services revenue. Corporate and issue services posted an all-time high revenue, achieving $629 million in the quarter, which represents 122% growth year-over-year and 24% growth quarter-over-quarter. Issue services continue to present a fast pace of DCM activity, posting higher revenues than last quarter and reaching $384 million, a 145% growth year-over-year and a 37% growth quarter-over-quarter. By having a consolidated investment banking business with solid credentials, we can reach our corporate clients to cross-sell. In that sense, corporate presented the same trend of last quarter. If transactional revenue is growing on the back of derivatives and effects, corporate posted to $145 million a quarter, a 94% growth year-over-year and a 7% growth quarter-over-quarter. On the right-hand side of the slide, we explain a little better the cycle I am referring to, which connects both our retail and corporate and investment banking business. XP Loan Book is primarily focused on supporting our warehouse business, making sure it's paving the way to our retail distribution. In this quarter, we originated 10 billion new corporate securities warehoused in your balance sheet. In time, those securities will be sold to our retail clients, and this revenue will show as fixed income. Finally, by having the market-making capabilities, we can also recycle this risk and provide the liquid to our different types of clients. maximizing the return of our balance sheet. Moving on to the next slide, we will explore SG&A and efficiency ratios. Cost discipline and efficiency are priorities in your business to keep XP competitive. With that in mind, we achieved the best efficiency ratio since the IPO, if 36.1%. 220 base points better year over year and 40 base points better quarter over quarter. SG&A X incentives reached $1.4 billion in the second quarter of 2024, a growth of 14% year-over-year and flattish quarter-over-quarter. Bear in mind that on the second quarter of 2023, we didn't have modal SG&A in your financials. The strict cost discipline, along with our innovation initiatives, will allow us to keep expanding our EBT margin in direction of our guidance. EBT achieved the highest level in our industry, a combination of rising ecosystem revenues and strict expense control, reaching $1.4 billion. This represents a growth of 43% year-over-year and 27% quarter-over-quarter, driving our EBIT margin to 32.8%, a 552 base points growth year-over-year and a 509 base points growth quarter-over-quarter. On a last 12 months basis, our EBT margin reached 28.1%. We expected to improve our EBT margin on an annual basis toward our guidance in 2026. Let's see our net income on the next slide. We also achieved the highest net income in your history, 1.1 billion in the second quarter of 2024, growing 14% year-over-year and 9% quarter-over-quarter. Net margin posted 26.5% in the second quarter, a decrease of 103 base points year-over-year and an increase of 110 base points quarter-over-quarter. As we mentioned in the investor day, we expect XP effected tax rate on our last 12 month basics to gradually increase over time due revenue mix, since cross-sell and corporate and SMB business keep evolving and present a higher tax rate. Let's move on to the next slide to talk about capital management. As I already mentioned, an efficient capital management is key to achieve our long-term objectives. During the last two and a half years, we have distributed over $7.5 billion through dividends and share buybacks. Those distributions are connected to our strategy to return part of the excess capital at XP Inc. level to shareholders, while keeping a conservative Basel index. As we mentioned in your Investor Day, we intend to reduce it across the years between 16% to 19%. Those initiatives together for net income growth result in higher returns going forward, as we are going to see in the next slide. You can see the evolution of our earnings per share posting a solid growth and achieving 2.03 reais, a 10% year-over-year and a 90% quarter-over-quarter. During the second quarter of 2024, XP posted 27.2% in ROTE, with an increase of 310 base points year-over-year and 108 base points quarter-over-quarter. We believe that ROTE presents a better comparison to peers in Brazil due to BRGAP and IFRS differences. Now, I turn over to Mafra for his final remarks.