Q4 2023 XP Inc Earnings Call

Operator: be here with you today. On behalf of the company, I would like to thank you all for the interest in welcoming you to our 2023 fourth quarter earnings call. This quarter, along with our 2023 results, will be presented by our CEO, Tiago Mafra, and our CFO, Bruno Constantino, 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 on the Zoom tool, and we will answer 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.

<unk> on behalf of the company I would like to thank you all for the interest in and welcome you to our 2023 fourth quarter earnings call. This quarter, along with 2023 results will be presented by our CEO Giaga, Martha and our CFO Bruno Constantino, who will both be available for the Q&A session right. After the presentation.

<unk> if you want to ask a question you can raise your hand on the zoom too and he will attend to you on a first come first serve basis. We also have the option obviously maintain its translation to port fees. There is a bathroom below if you want to turn on the translation and before we begin our presentation. Please refer to our.

Operator: And before we begin our presentation, please refer to our legal disclaimers on page 2, on which we clarify forward-looking statements. And additional information on forward-looking statements can also be found in the SEC filing section on the IR website. So now, I'll turn it over to Tiago Mafra. Good evening, Tiago.

Legal disclaimers on page two on a week to re clarify forward looking statements and additional information on forward looking statements can also be found on the SEC filings section on the IR website. So now I'll turn it over to juggle Martha good evening, Martha Thanks tender at good evening everyone.

Tiago Mafra: Thanks, André. Good evening, everyone. Thank you for joining us today on our 2023 fourth quarter earnings call. It's a pleasure to be here tonight. I will start with a brief introduction to this year's highlights and key updates. As I mentioned in my annual letter, 2023 was both a challenging and a transformative year for Xp. Despite the still difficult macro environment, we remain committed to better serving our clients through innovation, high-quality service, and growth. On this slide, I would first like to talk about our financial performance for the year, marked by the resilience of our business model. I will leave it for Bruno to talk about the fourth quarter's financial results.

Speaker Change: Thank you for J S should they arent 2023 fourth quarter earnings call. It's a pleasure to be here Tonight, I will start with a briefing production jujitsu years highlights and key updates.

Speaker Change: As I mentioned in my annual letter 2023 was both a challenging and that transform achieved ear for XP.

Speaker Change: Despite the SKU difficult macro environment.

Speaker Change: We remain committed to better serving our clients through innovation high quality service and growth in users light I would first like to talk about our financial performance for the year market by the resilience of our business model I will leave for Bruno to talk about the fourth quarter.

Speaker Change: Financials.

Tiago Mafra: In 2023, we celebrated the milestone of surpassing the $1 trillion mark in client assets, with a market share of still less than 12% in investments for individuals in the country. This shows the large potential growth we still have ahead of us. Despite the macroeconomic conditions I just mentioned, we were able to achieve 12% growth year over year in the top line and 10% growth year over year in the bottom line, with approximately 100 Bps growth in our EBT margin. This year was also marked by a strong focus on efficiency and cost discipline through the whole company, as we achieved an efficiency ratio of 36%, the lowest level since our IPO. Our diluted EPS increased 16% year over year, reaching R$7.22 per share.

Speaker Change: In 2023, which celebrated the milestone of surpassing the one trillion mark in client assets with a market share at schuh less than 12% investments for <unk> via dose in the country.

Speaker Change: Just shows the large potential growth, we still ahead of us. Despite the macroeconomic condition I just mentioned, we were able to achieve at 12% growth year over year in top line and 10% growth year over year in bottom line.

Speaker Change: Approximately 100 bps growth in our EBIT margin. This year. It was also market by a strong focus on efficiency and cost discipline to the whole company as we achieve at an efficiency ratio of 36% the lowest level.

Speaker Change: Since our IPO, our diluted EPS increased 16% year over year, reaching.

Speaker Change: Seven point 22 reais per share.

Tiago Mafra: Also, in 2023, we returned almost R$4.5 billion in capital to our shareholders, both in dividends and share buybacks, totaling a payout ratio of 114%. Lastly, I would like to talk about our guidance. We prefer midterm guidance than annual guidance, but at the start of 2023, we opened an exception aiming to better guide investors about 2023 in the context of an unusual week results for the fourth quarter of 2022. We gave two annual guidance.

Speaker Change: In 2023, we return it almost $4 5 billion in capital to our shareholders, both in <unk> and share buybacks totaling a payout ratio of 114% lastly, I like to talk about our guidance.

Speaker Change: We prefer midterm guidance.

Speaker Change: Annual guidance, but at the start of 2023, we opened an exception aiming to better guide investors about 2023 in the context of an unusual week results for the fourth quarter of 2022, we gave to annual guidance.

Tiago Mafra: SG&A and net income, as you can see on the right-hand side of the slide. Happily, we delivered on both metrics, even adding modal to SG&A, which had not been considered in our guidance at the beginning of 2023. Back in 2022, we also gave the market medium-term EBT margin guidance of from 26 to 32 percent from 2023 to 2025. We closed 2023 with an EBT margin at 26.8%, within our median term in guidance. We expected to see our annual EBT margin improving in the next couple of years. Moving to the next slide, I would like to give you all an update on our strategy tracker for 2023, in line with what we talked about on our investor day last December. First, leadership in retail investment, by which we aim leadership in our core business. This year, we estimate we have gained approximately 66 BIPs in market share for individuals.

Speaker Change: G&A and net income as you can see on the right hand side of the slide happily we delivered on both metrics, even adding more dialing SG&A what had not been considered in our guidance at the beginning of 2023 back in 2022.

Speaker Change: Also gave the market a medium term EBIT margin guidance from 26% to 32% from 2023 to <unk> 25, we closed at 2023 with an EBIT margin at 26, 8% we think.

Speaker Change: Our medium term guidance, we expect that you'll see our annual EBIT margin improving on the next couple of years.

Speaker Change: Moving to the next slide I like to give you all and update on our strategy tracker for 2023 in line with what we thought.

Speaker Change: On our Investor Day last December 1st leadership in retail investment by which we aim leadership in our core business. This year. We estimate we have gained approximately 66 bps in market share for individuals Jesus yet another sign.

Tiago Mafra: This is yet another sign of client recognition and trust in our service. Yet, we have much to do with still less than 12% market share. Also, on retail investments, I would like to highlight how we have managed to position ourselves as a premier hub for entrepreneurs by consistently pioneering in our distribution channel efforts to IFAs, consultants, and wealth managers, among others. Second, in relation to our retail cross-sell, which we talk a lot about on our investor day, we aim to continuously grow together with our clients' needs. Clients' adherence to new products and services shows a strong bond of relationship.

Speaker Change: Of client recognition and trust in our centers.

Speaker Change: Yet we have much to do with a skew less than 12% market share.

Speaker Change: Also in retail investments I would like to highlight how we have managed to position ourselves as up premier hub for our inkjet printers by consistently pioneering in our distribution channel efforts to IFA consultants wealth managers.

Speaker Change: Others second in relation to our retail cross sell which we'll talk a lot about in our Investor day, we aim to continuously grow together refer our clients needs clients at <unk> to new products and serves shows a strong bond of relationship.

Tiago Mafra: When we consider everything beyond investments, new verticals plus corporate and SMBX investments, we have seen an increase in their representativeness from 2.6% of our total gross revenue in 2019 to 17.5% in 2023, bringing more resilience to our model. Besides, in 2023, we improved our services, specifically in effects and insurance, and both are responding with strong growth. During the year, we also had relevant product launches on our platforms, like our global account, which allows clients to spend and invest internationally, providing them with a seamless experience within the app. Third, for corporate and SMB, I believe we have a unique competitive advantage in wholesale banking due to our sophisticated retail investors client base and large distribution channels. Because of our similar distribution to these sophisticated clients, we are able to provide corporate and SMBs broader access to capital, creative product structuring, and tailored solutions. Although we are still in the very beginning of our wholesale franchisee, I believe this is a large and tepid opportunity which we will continue to focus on in the coming years. Lastly,

Speaker Change: When we consider everything beyond the investments new verticals, plus corporate and SMB ex investments, we have seen an increase in their represent achieving this from two 6% offer a total gross revenue in 2019 to serve.

Speaker Change: <unk>, 5% in 2023, bringing more resilience to our model. Besides in 2023, we improve it or serves specifically effects in insurance and both are responding with the strong growth.

Speaker Change: During the year.

Also had relevant product launch in our platforms like our global account, which allows clients to spend and invest internationally, providing them with a seamless experience with the app third in corporate and SMB I believe we have at <unk>.

Speaker Change: <unk> competitive advantage in wholesale banking due to our sophisticated retail investors client base and large distribution channels because of where it similar distribution should use sophisticated clients, we are able to provide corporate and SMB.

Speaker Change: Broader access to capital creative structuring and tailored solutions, although we are still in the very beginning offer a wholesale franchisee I believe this is a large untapped opportunity, which we will continue to focus on the next years.

Speaker Change: Leslie.

Tiago Mafra: Central to these pillars is our commitment to a culture of quality and our client focus. We talked a lot about this on our investor day last December, and I strongly believe this is the new true differentiation we will have in the years to come. Quality isn't just a word for us at Xp-Inc.

Speaker Change: Saint Archer pillars is our commitment to our culture of quality and our client focus we have talked a lot about <unk> on our Investor Day last December and I strongly believe this is the new true differential we will have in the years to come quality Ethan.

Speaker Change: Just award for US at XP, Inc. It is a commitment to excellence that permeates everything we do today I want to go deeper into what quality means for us and how it shapes, our long term strategy when we talk about quality.

Tiago Mafra: It's a commitment to excellence that permeates everything we do. Today, I want to go deeper into what quality means for us and how it shapes our long-term strategy. When we talk about quality, we mean putting our clients at the heart of everything we do. It's about understanding their needs, anticipating their objectives, and delivering solutions that exceed their expectations. From that, we organize our value proposition with precision, ensuring that it resonates with the diverse and evolving needs of our clients. But quality doesn't stop at words and promises.

Speaker Change: Envision putting our clients at the heart of everything we do it's about understanding their needs anticipating their objectives and delivering solutions to exceed their expectations from that we organize our value proposition with precision <unk>.

Speaker Change: <unk> that it resonates with the diverse and evolving needs of our clients, but while it doesn't stop at words and promise. It's about tangible results, we believing delivering concrete outcomes that make a difference in our clients' lives.

Tiago Mafra: It's about tangible results. We believe in delivering concrete outcomes that make a difference in our clients' lives. Take, for example, our strategic initiative to offer comprehensive financial planning services rooted in asset allocation discipline. By centralizing asset allocation under a single chief investment officer, or CIO, and tailoring our services to individual needs through financial planning, we aim to ensure that every client receives personalized attention and optimal investment strategies. We have had major success in the past in democratizing access to top-tier investment products to high-income clients.

Speaker Change: For example, our strategic initiative to offer a comprehensive financial planning serves rooted in asset allocation discipline by.

Speaker Change: By centralizing asset allocation under a single Chief investment officer, our CIO and tailoring our services to <unk> needs to financial planning, we and to ensure that every client receipts personalized attention and optimal in.

Speaker Change: Investment strategies, we have had major success in the past on democratizing access to top tier investment products to high income clients now we aim bigger we are democratizing access also true premium services to a broader audience.

Tiago Mafra: Now we aim bigger; we are democratizing access to premium services for a broader audience, services that were previously only available to private clients. Moreover, we are committed to maximizing value for both our clients and our shareholders. We recognize that even in the simple act of correcting asset allocation, there is a large opportunity for revenue generation and increased LTV. This is just one small example of how our dedication to quality translates into tangible benefits for both our clients and our business. In essence, quality isn't just an end goal for XP.

Speaker Change: Services that were previously only available to private clients. Moreover, we are committed to maximizing value for both our clients and our shareholders. We recognize that even in the simple act of correcting accept a location there is a large.

Speaker Change: Opportunities for revenue generation and increase in LTV is just one small example of how our dedication to quality.

Speaker Change: Translates into tangible benefits for both our clients and our business in essence quality, even just an end goal for XP, it's a mindset that drives us to constantly innovate improve and surpass our clients' expectations.

Bruno Constantino: It's a mindset that drives us to constantly innovate, improve, and surpass our clients' expectations. As we move forward, we'll continue to uphold the highest standards of quality in everything we do, because that's what sets us apart and propels us towards sustained success. Now, I will hand it over to Bruno so he can discuss this quarter and annual financials. Thank you. Thanks, Mafra. Good evening, everyone.

Speaker Change: As we move forward, we will continue to uphold the highest standards of quality in everything we do because that's what sets us apart and propels us towards sustained success now I will hand, it over to Bruno so he can cause disquiet.

Bruno: <unk> and annual financials. Thank you.

Good evening, everyone. It's a pleasure to be here with you again.

Bruno Constantino: It's a pleasure to be here with you again. Moving on to slide nine. Starting with our gross revenue, on the left part of the slide, this quarter we had a relatively stable gross revenue quarter over quarter at $4.3 billion and a half. Despite having roughly 6% fewer business days than the third quarter, on a year-over-year comparison, we had a 29% gross revenue growth in the fourth quarter of 2023. When we look at the full year, we posted a 12% growth in our total gross revenue.

Bruno: Moving on to slide nine starting with our gross revenue on the left part of the slide this quarter, we had a relatively stable gross revenue quarter over quarter at $4 3 billion highs.

Bruno: Despite having roughly 6% plus business days than the third quarter on a year over year comparison, we had a 29% of <unk> revenue growth in the fourth quarter 2003, when we look at the full year, we posted 12% growth in our total <unk> revenue our strategy to go beyond.

Bruno Constantino: Our strategy to go beyond investment, with new verticals, and incorporate an SMBX investment, has played an important role sustaining our gross revenue growth, as core retail is still impacted by the macro. Looking to the right side of the slide, in terms of revenue mix between segments, we maintain a relatively stable mixed quarter over quarter, while year over year, we can notice an increment in retail revenue relevance, mainly due to new vertical growth, as we are going to see in the next slide. Before we deep dive into new verticals, it is important to highlight that on this slide, we are only looking at the four new verticals we currently disclose, which are retirement plans, cards, credit, and insurance, not including FX, digital accounts, and global investments as presented in the investor data. So, New Verticals continued to perform in the fourth quarter, reaching a total gross revenue of R$ 491 million, plus 21% year-over-year and plus 11% quarter-over-quarter. The main highlights of the quarter were cards and insurance.

Bruno: <unk> investments with new verticals, and corporate and SMB ex investments.

Bruno: Has played an important role sustaining our <unk> revenue growth as the core retail this is still impacted by the macro look.

Bruno: Looking to the right side of the slide in terms of revenue mix between segments, we maintain a relatively stable mix quarter over quarter, while year over a year, we can notice <unk> in retail revenue relevance, mainly due to new verticals growth as we are going to see in the next season.

Bruno: Right.

Bruno: Before we deep dive in new verticals. It is important to highlight that in this slide we are only looking at the four new verticals, we currently disclose which our retirement plans cards credit and insurance.

Bruno: Not including FX Beach door, Count and global investments has presented in the Investor day.

Bruno: So new verticals continue to perform in the fourth quarter, reaching a total gross revenue of 491 million plus 21% year over year, and plus 11% quarter over quarter. The main highlights of the quarter were cards and insurance.

Bruno Constantino: Cards reached 306 million reais, plus 18% quarter over quarter and plus 30% year over year. And insurance reached 46 million reais, plus 28% quarter over quarter and plus 48% year over year. As you know, the fourth quarter has a positive seasonality for CARDS activity due to the holiday season.

Bruno: <unk> reached 306 million highs.

Bruno: Plus 18% quarter over quarter, and plus 30% year over year and insurance reached $46 million highs.

Bruno: 28% quarter over quarter, and plus 48% year over year as you know the fourth quarter has a positive seasonality two cards activity.

Bruno: Due to the holiday season on the right side of the slide.

Bruno Constantino: On the right side of the slide, when we look at the full year of 2023, new verticals revenue reached 1.7 billion, a growth of 43% year over year. And if we add the other new verticals, FX, Digital Account, Global Investments, Incorporate, and S&B, X Investments, in line with our presentation at Investor Day, the total gross revenue sums up to 2.7 billion reais in 2023, Now, let's look on the next slide at our core retail revenue and its potential as the macro improves. Retail revenue reached an all-time high in 2023 at 11,791,000,000 reais, helped by new verticals, which grew 3x from 2021.

Bruno: When we look at the full year of 2023, new verticals revenue reached $1 7 billion has a growth of 43% year over year and if we add the other new verticals effects. These account global investments and corporate and SMB ex investments.

Bruno: In line with our presentation in the Investor day.

Bruno: The total gross revenue some up to $2 7 billion highs in 2023, enhancing our diversification and cross sell capabilities now, let's look on the next slide at our core retail revenue and its potential as the macro improves.

Bruno: <unk> revenue reached its all time high in 2023.

Bruno: At $11 billion $791 million has.

Bruno: Helped by new verticals, which drew.

Bruno: Three acts from 'twenty to 'twenty, one, but core retail revenue.

Bruno Constantino: But core retail revenue, which grew 9% year-over-year, reaching R$8.73 billion in 2023, is still 3% lower than the peak of 2021, despite a bigger ecosystem. It is important that we acknowledge the high operating leverage potential a business like ours has at its core. Equities, fixed income, and funds, they all should benefit in a scenario of risk-on, which will eventually happen considering it is cyclical

Bruno: Which grew 9% year over year, reaching $8.073 billion has in 'twenty to 'twenty. Three is this two 3% lower than the peak of 2021, despite a bigger ecosystem.

Bruno: It is important that we acknowledge the high operating leverage potential a business like ours has at our core equities fixed income and funds. They all should benefit in a scenario of risk on which eventually will happen considering it is cyclical and them.

Bruno Constantino: And then, the high operating leverage of our unique ecosystem should kick in. On the right side of the slide, we have provided some data to help visualize this operating leverage. Even in a tough environment for our core in the last couple of years, we were able to grow our core retail client assets by more than 40% in this period, but the take rate suffered, reducing from 1.5% to 1% in the same period. If we take this 50 Bps difference in intake rate, M, apply it to today's client assets. Just as a math exercise, we would have more than R$4 billion in additional revenue. Xp's ecosystem gives us a unique position in terms of operating leverage in a bull market for investors. Our market share in retail traded volumes on B3, for example, of 48% is four times larger than our closest competitor. So, in summary, we believe Xp is well positioned to benefit from the next positive cycle for investments, whenever it happens. Now moving to slide 12.

Bruno: The high operating leverage of our unique ecosystem should kick in on the right side of the slide we brought some data to help envisioning this operating leverage.

Bruno: In a tough environment for our core in the last couple of years, we were able to grow our core retail client assets by more than 40% in this period, but the take rate suffered.

Bruno: Reducing from one 5% two 1% in the same period.

Bruno: If we take these 50 bps difference in take rates.

Bruno: And apply to today's client assets, just as a math exercise.

Bruno: We would have more than 4 billion reais in additional wrapping xps ecosystem gives us a unique position in terms of operating leverage in a bull market for investments.

Bruno: Our market share.

Bruno: In retail traded volumes on <unk> III for example of 48% is four times larger than our closest competitor.

Bruno: So in summary, we believe XP is well positioned to benefit from the next positive cycle for investments.

Bruno: Average comes.

Bruno: Now moving to slide 12.

Bruno Constantino: Corporate and issuer services presented another solid quarter with revenue of five hundred and eight million reais, plus eighty five percent year over year. And there is likely to be a decrease of two percent quarter over quarter, which had a tough comp considering corporate results in the third quarter. Twenty three, as we anticipated in last quarter's conference call, the third quarter was the peak for corporate revenue due to increased derivative demand related to DCM activity in the period. But the fourth quarter, twenty three, was the second best quarter for corporate revenues, reaching one hundred and seventy seven million reais, 10 percent lower quarter over quarter, but 31 percent higher year over year. The main highlights here in the fourth quarter, twenty-three, were the all-time high issuer services revenue at 330 million reais, a growth of three percent quarter over quarter and 136 percent year over year, boosted by the evolution of our franchise in investment banking with M&A as the main contributor to the growth. These positive numbers are the result of a complete range of products.

Bruno: Corporate and issuer services presented another solid quarter with revenue of $508 million, plus 85% year over year, and a slightly decrease of 2% quarter over quarter, which had a tough comp considering corporate results in the third quarter 'twenty three as we anticipated in less.

Bruno: Quarter's conference call. The third quarter was the peak for corporate revenue due to increased derivative demand related to DCM activity in the period, but the fourth quarter 'twenty three.

Bruno: It was the second best quarter for our corporate revenues, reaching $177 million has 10% lower quarter over quarter, but 31% higher year over year. The main highlight here in fourth quarter 2003.

Bruno: Was the all time high issuer services revenue at 330 million has a growth of 3% quarter over quarter and 136% year over year.

Bruno: Boosted by the evolution of our franchise in investment banking with M&A is the main contributor for the growth.

Bruno: These positive numbers are a result of a complete range of products and.

Bruno Constantino: And continue to show the benefits of the increased diversification of our business model, translating into a twenty-two percent growth in twenty twenty three compared to twenty twenty two on slide thirteen. Our SG&A expenses continue to be under control as cost discipline is a priority for us. SG&A, excluding revenue from incentives, totaled R$1.5 billion, 2% lower quarter over quarter and 10% higher year over year, considering we didn't have modal in fourth quarter 22. Looking at the full year, our SG&A was 5.3 billion reais in 2023, compared to 5.6 billion reais in 2022, a result of strict cost control, with our efficiency ratios improving substantially year over year, as we are going to see in a while on the following slide.

Bruno: And continue to show the benefits of the increased diversification of our business model translating on a 22% growth in 2023 compared to 2022.

Bruno: Slide 13.

Bruno: Our SG&A expenses continued to be under control as cost discipline is a priority for us SG&A, excluding revenue from incentives totaled $1 5 billion highs, 2% lower quarter over quarter, and 10% higher year over year.

Bruno: Considering we didn't have more now in fourth quarter 22, looking at the full year. Our SG&A was $5 3 billion has in 2023 compared to $5 6 billion highs in 2022.

Bruno: A result of a strict cost control with our efficiency ratios improving substantially year over year as we are going to see in a while on the following slide those numbers consider a one off adjustment of $44 million has write offs in the fourth quarter due to an impairment.

Bruno Constantino: Those numbers consider a one-off adjustment of 44 million reais write-offs in the fourth quarter due to an impairment related to the termination of X stage and one investment S. One year ago, when we first gave our SG&A guidance between 5 and 5.5 billion reais, modal was not considered. Even after including modal in our numbers, we were able to deliver the 5.3 billion reais within the range. If we exclude modal verbs, we would be closer to the bottom of the guide.

<unk> related to the termination of X stage, and one investment asset one year ago when.

Bruno: When we first gave our SG&A guidance between five and $5 5 billion has more DAU was not being considered even after including more down in our numbers, we were able to deliver the $5 3 billion highs within the range.

Bruno: If we exclude model.

Bruno: It would be closer to the bottom of the guidance for 'twenty to 'twenty four cost discipline continues to be one of our top priorities within the company as my affirmation in his ladder.

Bruno Constantino: For 2024, cost discipline continues to be one of our top priorities within the company, as Mafra mentioned in his letter. Let's look at our efficiency ratios on the next slide. The efficiency ratio is at its all-time low since IPO, reaching 36.3% in fourth quarter 23, or 36% if you adjust for the one-off event of the quarter. The compensation ratio decreased once again from 25.7% to 25.1% quarter over quarter, the lowest level in 13 quarters sequentially.

Bruno: Now.

Bruno: Let's look at our efficiency ratios on the next slide efficiency ratio is at its all time low since IPO, reaching 36, 3% in fourth quarter 2003, or 36%. If you adjust for the one off event of the quarter.

Bruno: Our compensation ratio.

Bruno: <unk> once again from 25, 7% to 25, 1% quarter over quarter, the lowest level in 13 quarters sequentially.

Bruno Constantino: Our cost control discipline has played an important role in our operating margin, which we are going to discuss on the next slide. Moving to EBT. Adjusting for the one-off event, this quarter's EBT was $1,039,000,000, down 10% quarter over quarter and up 41% year over year. Also, considering the one-off event. EBT margin was 25.7%, plus 245 BPS year-over-year and minus 233 BPS quarter-over-quarter. Revenue mix was the main driver for quarterly margins decrease, impacting COGS and our gross margin, which decreased from 70.1 percent in third quarter 23 to 68.1 percent in fourth quarter 23. When we look at the full year with adjustments, EBT total $3,980,000,000, up 16% year over year with an EBT margin of 26.8%, up approximately 100 Bps year over year.

Bruno: Our cost control discipline has played an important role in our operating margin, which we are going to talk on the next slide.

Bruno: Moving to EBT.

Bruno: Adjusting for the one off event this quarter's EBT was $1 billion and 39 million DAU.

Bruno: <unk>, 10% quarter over quarter and up 41% year over year.

Also <unk>.

Bruno: Considering the adjustments EBIT.

Bruno: EBIT margin was 25, 7%.

Bruno: Plus 245 bps year over year, and minus 233 bps quarter over quarter revenue mix was the main driver for quarter over quarter margins decrease impacting Cogs and our gross margin, which decreased from 71% in third quarter 2003 two.

Bruno: Six to eight 1% in fourth quarter 2003, when we look at the full year with adjustments EBIT totaled $3.980 billion up.

Bruno: 16% year over year with an EBIT margin of 26, 8% up approximately 100 bps year over year on slide 16.

Bruno Constantino: On slide 16, our net income for the fourth quarter 23 considering plus 31 million reais from the one-off event totaled 1 billion and 71 million reais, down 1 percent quarter over quarter and up 37 percent year over year. Net margin was 26.5 percent, up 18 bps quarter over quarter and up 184 bps year over year. Looking at the annual metrics on the right side of the slide.

Bruno: Our net income for the fourth quarter 'twenty, three considering plus 31 million higher from the one off event total $1 billion and $71 million <unk>.

Bruno: Down 1% quarter over quarter and up 37% year over year net margin was 26, 5% up 18 bps quarter over quarter.

Bruno: And up 184 bps year over year looking at the annual metrics on the right side of the slide.

Bruno: Net income increased 10% year over year to $3 9 billion highs in 2023 with net margin slightly decreasing 38 bps year over year to 26, 4% in 2023, we've continued distributing capital to shareholders returning $4 5 billion housing.

Bruno Constantino: Net income increased 10% year-over-year to R$3.9 billion in 2023, with net margin slightly decreasing 38 bps year-over-year to 26.4%. In 2023, we continued distributing capital to shareholders, returning R$4.5 billion in buybacks and dividends, representing a payout ratio of 114% for the year. We kept a solid and comfortable balance sheet with our managerial BIS ratio ending the year around 20% impacted by the dividend distribution in fourth quarter 23 and the modal acquisition. We also announced a new debt program of 2.5 million shares, which aims to neutralize 2024 shareholder dilution due to the divesting of share-based compensation from the company's long-term incentive plan. We expect to return more capital to shareholders throughout the year, in line with our intention to reduce our managerial base ratio between 16% and 19% over the next years. Finally, on my last slide, I talk about a metric which has become more relevant to us since the IPO and the growth of our bank, return on equity or return on tangible equity. We believe the return on tangible equity is even a better metric than accounting return on equity, but we look at both.

Bruno: <unk> and dividends.

Bruno: Presenting a payout ratio of 114% for the year, we capped a solid and comfortable balance sheet.

Bruno: With our managerial bis ratio ending the year around 20% impacted by the dividend distribution on fourth quarter 'twenty three intermodal acquisition.

Bruno: We also announced a new buyback program of $2 5 million shares, which aims to <unk> 2024 shareholder dilution due to the vesting of share based compensation from the company's long term incentive plan, we expect to return more capital to shareholders throughout the year in line with our intention to re.

Bruno: <unk>, our managerial bis ratio between 16 and 19% over the next years finally.

Bruno: And lastly, slide I talk about a metric which has become more relevant to us since the IPO and the growth of our bank.

Bruno: Return on equity or return on tangible equity we believe the return on tangible equity is even a better metric than accounting return on equity, but we look at bolt why return on tangible equity is important in our case, especially if you want to compare <unk> with Brazilian peers first we believe as a metric.

Bruno: <unk> to our marginal return on equity are closer to our return on capital employed which by the way we used to decide how to allocate capital.

Bruno: Return on tangible equity excludes intangibles and goodwill, which makes it a metric more comparable to Brazilian GAAP.

Bruno Constantino: Why return on tangible equity is important in our company, especially if you want to compare XP with Brazilian peers. First, we believe it's a metric closer to our marginal return on equity or closer to our return on capital employed, which, by the way, we use to decide how to allocate capital. Second, return on tangible equity excludes intangibles and goodwill, which makes it a metric more comparable to Brazilian GAAP, which amortizes goodwill differently than IFRS.

Bruno: Which are more ties goodwill differently than ifr Ias return on tangible equity has slightly decreased quarter over quarter by 19 bps to 25, 6%.

Bruno: While increasing <unk>.

Bruno: 570 bps year over year from 19, 9% in fourth quarter 'twenty two annual return on tangible equity.

Bruno: Slightly decreased by 21 bps to 25% important to remind that this return on tangible equity at 25% has been achieved in an environment, where our core has not benefited from the operating leverage which our ecosystem provides highlighting that.

Bruno Constantino: Return on tangible equity has slightly decreased quarter over quarter by 19 bps to 25.6%, while increasing 570 BIPs year over year from 19.9% in fourth quarter 2022. Annual return on tangible equity is likely to decrease by 21 BIPs to 25%. It is important to remind you that this return on tangible equity at 25% has been achieved in an environment where our core has not benefited from the operating leverage which our ecosystem provides, highlighting the resilience and sustainability of our business model independent of where we are in the cycle. When we get the positive part of the cycle for investments, we expect to see our operating leverage kick in and benefit our return on tangible equity as well. Now I will hand over to Mafra for his final remarks.

Bruno: Zillions and sustainability of our business model independent owner.

Bruno: On where we are in the cycle when we get the positive part of the cycle for investments, we expect to see our operating leverage kicking in and benefiting our return on tangible equity as well now I will hand over to <unk> for his final remarks. Thanks Bruno.

Speaker Change: For my final remarks, I would like to summarize my priority for this year first our people and culture are success is linkage to the dedication and talent of our team in 2024, we will keep our focus on nurturing our culture of excellence and innovation.

Speaker Change: Cost discipline for 2024, we will maintain the strict cost control and efficiency initiatives that we did companywide during 2023 as this continues to be one of our top priorities.

Tiago Mafra: Thanks, Bruno. For my final remarks, I would like to summarize my priorities for this year. First, our people and culture.

Speaker Change: Third our focus on what we believe.

Speaker Change: Is the new <unk> quality by democratizing access to premium service.

Tiago Mafra: Our success is linked to the dedication and talent of our team. In 2024, we will keep our focus on nurturing our culture of excellence and innovation. Second, cost discipline. For 2024, we will maintain the strict cost control and efficiency initiatives that we implemented company-wide during 2023, as this continues to be one of our top priorities. Third, our focus on what we believe is the new true differential, quality. By democratizing access to premium services, which were previously available only to private clients.

Speaker Change: Each were previously available only to private clients, we are breaking down barriers and creating a more inclusive financial ecosystem repeating what we did we have for our product offering.

Speaker Change: As a result, we expect higher LTV fourth this year, we continue to focus on increasing penetration in principle each of four new products, new verticals should continue to grow strongly further diversifying our revenues and a strengthening our.

Speaker Change: Our business model lastly, <unk>, we intend to extend our product suite available to our wholesale clients throughout the year, we will rollout our <unk> bank account for corporate and SMB clients to further improve their experience with our ecosystem now.

Tiago Mafra: We are breaking down barriers and creating a more inclusive financial ecosystem, repeating what we did with our product offering. As a result, we expect higher LTV. Fourth, this year, we continue to focus on increasing the penetration and principality of our new products. New verticals should continue to grow strongly, further diversifying our revenues and strengthening our business model. Lastly, this year, we intend to extend our product suite available to our wholesale clients. Throughout the year, we will roll out our digital bank account for corporate and SMB clients to further improve their experience with our ecosystem. Now, both Bruno and I will be happy to take your questions. So now we're going to start our Q&A session. The first one is going to be Tiago Bautista from... UBS. So, hi Thiago.

Speaker Change: Brendan and I will be happy to take your questions.

Speaker Change: So now you're going to start our Q&A session. The first one is going to be Thiago Batista from <unk>.

Speaker Change: UBS.

Thiago Batista: So hi, juggle. Please now you can make your question.

Thiago Batista: Yes, hi, guys.

Thiago Batista: Thanks for the opportunity I have one question about the potential improvement in the net new money.

Speaker Change: When we look at.

Juggle: In less than a couple a couple of weeks ago, we saw a change in regulation in Brazil.

Juggle: With the Texas instruments like the Clicker League et cetera.

Juggle: Becoming much more tougher to be issued.

Juggle: Can you comment on the possible impact of this change for XP and.

Juggle: And also the federal government state about 90, 90 beta 19 billion of brick authorities.

Tiago Bautista: Please, now you can make your question. Yes. Hi guys. Thanks for the opportunity.

Juggle: The last couple of weeks have you saw any positive impact or do you believe those targets. We will have any positive impact on the that's in the money off XT.

Tiago Bautista: I have one question about the potential improvement in net new money. When we looked a couple of weeks ago, we saw a change in regulation in Brazil with tax exempt instruments like the CRI, CRA, LIG, et cetera, becoming much tougher to be. Can you comment on the possible impact of this change for XP?

Juggle: Yes.

Speaker Change: Chug with thank you for a question.

Speaker Change: Uh huh.

Speaker Change: Well I will talk about the new aberration.

Speaker Change: We see as positive when you look the long term.

Speaker Change: You guys saw it happen in the past.

Speaker Change: Two years, mainly.

Juggle: The past year, the banks raise them.

Tiago Mafra: And also, the federal government paid about $90 billion, $90 billion of precatories in the last couple of weeks. Have you seen any positive impact, or do you believe those precatories will have any positive impact on the national money of the United States? Thiago, thank you for your question. When we talk about the new regulation, we see it as positive when you look at it over the long term because you guys saw what happened in the past two years, mainly. In the past year, the banks raised almost a billion reais, a trillion reais in tax exempt products.

Juggle: Most sub billion Reais.

Juggle: 3 million <unk>.

Juggle: <unk> products. So today, we have about one third.

Juggle: Of the whole.

Juggle: You see in this type of broad it so of course for the long term as they have like to renew just products to issue new.

Juggle: Bank products, it's going to be harder for them, but we don't expect to have a big impact on the short term. Okay. So that's one side. The <unk> side is when you look the secondary market for fixed income.

Tiago Mafra: So today we have about one third of the whole AUC in this type of product. So, of course, for the long term, as they have to renew these products to issue new bank products, it's gonna be harder for them, but we don't expect it to have a big impact in the short term. Okay, so that's one side.

Juggle: You guys saw the what happened with the spreads in the past.

Juggle: Two months, Okay. So we saw an increase level of activity on the secondary market on the tax exempt fixed income okay. So Andy spreads. They closed so that's also pause before for us.

Tiago Mafra: The second side is when you look the secondary market for fixed income. You guys saw the what happened with the spreads in the past two months. Okay so we saw an increased level of activity on the secondary market on the tax exempt fixed income. Okay so and the spreads they closed it so that's also positive for for us. So I would say that's positive, but it's not a big change on the short term. So that's that's my view. OK, and talking about the precarious, it's hard to say it's a big chunk of money. OK, but.

Juggle: So I would say that's positive, but it's not a big change on the short term. So that's that's my view okay.

Juggle: And talking about the.

Juggle: Pericarditis.

Juggle: It's hard to say it's big.

Juggle: Chunk of money Okay.

Juggle: But.

Juggle: It's it is not that related to <unk> investors okay.

Juggle: When when you look we saw more impact mainly on the funds we saw out of the funds are receiving.

Tiago Bautista: It's not that related to individual investors, okay, when you look, we saw more impact mainly on the funds. We saw a lot of funds receiving cash from this payment, so we believe we can see some of these structured funds with good returns for individual clients in the short term. So it might be positive because, as you know, when investors see the returns increasing, they start to like to invest more in this type of product, so it can be positive, but I don't see a big, big change out of that new money in the short term. Can I do a small follow-up? You mentioned in the slides that you booked 44 million reais of one-off expenses. Only to double-check, the earnings of $1,040,000,000; this was not adjusted by this one office. No, it's not a joke.

Juggle: Uh huh.

Juggle: Cash from from from just payment. So we believe we can see some offices.

Juggle: Structure funds.

Juggle: And with good returns for <unk> clients on the short term okay. So.

Juggle: It might be positive because as you know when investors see the returns increasing they start to like to invest more on the stifle product. So.

Speaker Change: Can be positive, but I don't see a big Big change also net new money on the short term.

Speaker Change: Vivek muffler.

Speaker Change: Although a small follow up.

Juggle: You mentioned in the slides that you booked $44 million size of a one off.

Juggle: <unk>.

Speaker Change: I wanted to double check.

Juggle: Earnings of $1 billion 40.

Juggle: This was not adjusted by these one off expenses.

Tiago Bautista: Perfect. Thank you very much. Okay, next one is Yuri Fernandez from JP Morgan. Hi AOT, now you can make your question. Hey guys, good evening. I'm Afro Bruno Parisi.

Speaker Change: No. It's another jessen, okay perfect. Thank you Beth.

Speaker Change: Okay. Next one is are you referring to us from JP Morgan.

Speaker Change: <unk> now you can make your question.

JP Morgan: Hey, guys good evening.

JP Morgan: Bruno.

Yuri Fernandez: I have a question regarding our results on the COGS line. It was a little bit heavy this quarter. You mentioned in the release IFAs, commissions, and higher provisions for credit cards. So, as you can explore a little bit, what drove it, it was more the commissions, it was more the credit cards, and if we should see a normalization of this line for the coming quarters. That's my first one, and then I can do a follow-up. Thank you. Hi, UD. This is Bruno.

JP Morgan: I have a question regarding our results on the Cogs line was a little bit heavy this quarter.

Speaker Change: In the in the release Ifa's commissions and higher provisions for credit cards. So as you can explore a little bit what drove it.

JP Morgan: Marta commissions was more of the credit card and if we should see a normalization of this line.

Speaker Change: Coming quarters, that's my first one and then again thank.

Speaker Change: Thank you.

Speaker Change: Hi.

Bruno Constantino: I'm going to take that one. The first and biggest impact in terms of the COGS was due to mix, revenue mix. In the third quarter, the quarter that we had our highest gross margin in the year, we had part of the revenue with less commissions. And in the fourth quarter, I would say that it kind of normalized. Because if you look at the gross margin throughout the whole year, which is a better time frame to look at the margins, we do have volatility between quarters. It was 68% all over the year. The gross margin for the fourth quarter was 68.1%.

Bruno: This Bruno I'm.

Speaker Change: Im going to take that one.

Bruno: The first and.

Bruno: And biggest impact in terms of the Cogs was due to mix revenue mix in the third quarter.

Bruno: Quarter that we had our.

Bruno: Highest.

Bruno: Gross margin in the year.

Bruno: We have <unk>.

Bruno: Part of the revenue with less commissions and in the fourth quarter.

Bruno: Say that kind of normalized because if you look at the gross margin throughout the whole year, which is a better timeframe to look at the margins, we do have volatility between quarters.

Bruno: 68% all over the year the gross margin of the fourth quarter was 68, 1%. So in line with the margin for the year. So that's the main impact.

Bruno Constantino: So, in line with the margin for the year. So that's the main impact. But we did have in the fourth quarter some outliers, I would say, specifically in terms of provisions that we made because of a credit portfolio that came from Odal. Nothing big, but in terms of the expected credit loss, it had an impact of roughly 30 million reais that we do not expect to see going forward. To talk about normalization, again, it's hard because we do have the largest part of our COGS in commissions, and it's related to the mix of the specific. Thank you, Bruno.

Bruno: But we did have.

Bruno: In the fourth quarter.

Bruno: Some outliers I would say specifically in terms of provisions that we did.

Bruno: Because of.

Bruno: Credit portfolio that came from one doll nothing big but in terms of the expected credit loss it had an impact roughly.

Bruno: About $30 million <unk> that.

Bruno: We do not expect to see going forward to talk about a normalization again is hard because we do have the largest part of our Cogs is commissions and it's related to the mix of the specific quarter.

Speaker Change: Thank you Bruno if I may steal on the on the cost side, but now in the financial expenses.

Yuri Fernandez: If I may, still on the cost side, but now on financial expenses. It was a bit higher this quarter, and I was checking our gross debt, and it was mostly stable around 9.5 billion reais. For sure.

Bruno: It was a bit higher this quarter.

Speaker Change: I was taking our gross debt was mostly stable around the $9 5 billion.

Speaker Change: First of all we don't know like data acquired through so just checking if there is anything different on the your financial expenses lines acquired Tim again, where this should evolve going forward. Thank you.

Yuri Fernandez: We don't know the interquarter average, so just checking if there is anything different on the financial expenses line this quarter and where this should evolve going forward. Thank you.

Bruno Constantino: Yeah, I mean, we had in the fourth quarter, there is a line, there is a very cheap line that we have through Banamex, the Mexican bonds that we carry, and we use them to finance around two billion reais, roughly. And we were waiting to renew that line. So if you look at the previous quarter, you're going to see that part of the debt was reduced in the previous quarter and went up again in the fourth quarter. That's the main explanation for interest rates and interest expenses going up in the quarter. Thank you. Thank you, Bruno.

Speaker Change: Yes.

Speaker Change: We had we had in the in the fourth quarter.

Speaker Change: There is a line that is a very cheap line that we have through the panamax.

Speaker Change: Mexican bonds that we carry and we use them to finance.

Speaker Change: Around 2 billion highest roughly.

Speaker Change: And we were waiting to renew that line. So if you look at previous quarter Youre going to see that part of the debt was reduced and one in the previous quarter and went up again.

Speaker Change: In the fourth quarter.

Speaker Change: That's the main explanation for interest rate.

Speaker Change: Interest expenses going up in the quarter.

Speaker Change: Thank you thank you Bruno.

Bruno Constantino: Okay, so next one is Neha Wala from HSBC. Hi Neha, now you can ask your question. Hi, thank you for taking my question. Just wanted to quickly understand how you see 2024 evolving.

Bruno: Okay. So next one is on <unk> for me Jeff.

Speaker Change: The SBC <unk>.

Speaker Change: Now you can make your question.

Jeff: Alright, Thank you for taking my question.

Speaker Change: Just wanted to quickly understand.

Jeff: How do you see 2024.

Neha Wala: What levers do you have in terms of on the revenue side, on the cost side, because you've done most of the cost management in 2023? So what would be the drivers for 2024 profitability? Will it be more on the revenue side or more on the cost side? Because net new money, as you mentioned in your last answer, will probably be on the weaker side in the very near term. So any trends of how 2024 should be evolving will be very helpful. Hi Niha.

Speaker Change: What leeway do you have in terms of on the revenue side on the cost side, because you've done most of the cost management.

Speaker Change: <unk>, so what would be the drivers between 24 proximity maybe more on the revenue side more on the cost side. It is net new money.

Speaker Change: You mentioned in your last answer that probably be on the weaker side.

Speaker Change: I didn't hear them say.

Speaker Change: Any any trends on hardware Anthony Fortunately evolving as you may have.

Speaker Change: Cool.

Speaker Change: Hi, Neil.

Bruno Constantino: Thank you for your question. About revenue, as we mentioned in the presentation, we don't have any guidance for revenue or margins, OK? We gave last year more reference because of what we just explained about the results of the fourth quarter. So we don't have revenue guidance for this year, OK? But about costs, as we have already mentioned in previous calls and meetings, I would say that the last two quarters are a good reference for the level of SG&A for 2024. But again, as we have already mentioned, we have a very strong cost discipline that's still in place at the company. So we expect to keep gaining efficiency throughout the year here, OK? Okay, perfect. If I can just follow up quickly, going forward in 2024, is there a mix in terms of capital distributions that we should expect between buybacks and dividends? I can take that one.

Speaker Change: I think for a question.

Neil: Above revenue as we mention in the presentation, we don't have a guidance for for our revenue our margins okay.

Neil: He gave last year more reference because.

Neil: But let me just explain about the results of the fourth quarter. So we don't have revenue guidance for this year, okay. So but about costs as we already mentioned any previous.

Neil: Calls and in.

Neil: Meetings, I would say that the last few quarters.

Neil: A good reference of the level of SG&A for for 2024, but again.

Neil: As <unk> mentioned, we have.

Neil: Very strong cost discipline that skew in place on the company. So we expect to keep.

Neil: <unk> efficiency throughout the year here okay.

Speaker Change: Okay perfect.

Speaker Change: And then just follow up quickly going forward in 'twenty four is that a mix in terms of capital distributions that we should expect.

Speaker Change: Buybacks and dividends.

Speaker Change: That can take that one.

Bruno Constantino: No, we have not decided yet. What we have just announced is a buyback of 2.5 million shares approved by our board in order to neutralize the dilution expected for this year due to our long-term plan for our partners in our partnership model. So that's something that we want to continue to do to avoid dilution of shareholdings. As I mentioned in my part of the presentation, you can expect more capital to be returned to shareholders throughout the year. We keep generating cash. We have, under leverage, I would say, a balance sheet with the capacity to leverage. If we want to, we do carry excess capital. So all the conditions for us to continue distributing capital to shareholders are in place, and we will do it. We have not decided when and how much and if it's going to be a buyback or dividends. Whenever we do, we are going to announce it to the market. Thank you so much. Okay, next one is Mario Pierre from Bank of America. Hi Mario, now you can make your own Hey guys, can you hear me?

Speaker Change: No we have not decided yet what do we have just announced is a buyback of $2 5 million shares approved by our board.

Speaker Change: In order to neutralize the dilution expected for this year due to our long term plan.

Speaker Change: For our.

Speaker Change: Partners in our partnership model.

Speaker Change: So that's something that.

Speaker Change: We want to continue to do.

Speaker Change: To avoid dilution of shareholders.

Speaker Change: And as I mentioned in my part of the presentation you can expect.

Speaker Change: More capital to be returned to <unk>.

Speaker Change: Shareholders throughout the year, we keep generating cash.

Speaker Change: Have a.

Speaker Change: Under leverage I would say our balance.

Speaker Change: Our balance sheet with capacity will average if we want we do carry excess capital. So all the conditions for us to continue distributing capital to shareholders are in place and we are going to do it but we have not decided when and how much and if it is going to be buyback or dividends whenever we do.

Speaker Change: <unk>.

Speaker Change: We're going to announce to the market.

Speaker Change: Perfect. Thank you so much.

Speaker Change: Okay next one is our myopia from bank of America.

Speaker Change: Hi, Mario now you can make your question.

Mario Pierre: Oh, www.globalonenessproject.org, Buddy, can you hear me? I can hear you. Can you hear us?

Mario: Hey, guys can you hear me.

Mario: Bob.

Mario: Yeah.

Mario: But anything can you hear me.

Mario: I can hear you can you hear us.

Mario Pierre: Sorry, perfect. Sorry. My question, let me ask you if you can give us any color on net new money so far in the year and if you can separate that between inflows and outflows, because I do think, right, you have made comments in the past that inflows remain very high, but outflows have also increased. And then related to that question is, when we look at your AUC, right, it grew 19% year-on-year. But if I take inflows out.

Mario: Sorry.

Mario: Alright.

Speaker Change: My question, let me ask you if you can give us any color on net new money so far in the year.

Speaker Change: If you can separate that between inflows and outflows because I do think ready you have made comments in the past that inflows remain very high but.

Speaker Change: Outflows had also increased.

Speaker Change: And then related to that question is when we look at it your AUC.

Speaker Change: <unk> grew 19% year on year, but if I, if I take inflows out your AUC grew only 7%.

Mario Pierre: Your AUC grew only 7%, which is significantly lower than CDI. So, I was wondering, you know, how do you see the performance of your clients' portfolios? How can that improve? Is that something that you think could be hurting some of the inflows that you're seeing? Thank you. Okay, Mario.

Speaker Change: So which is significantly lower than they are in CDI.

Speaker Change: So I was wondering how big you see the performance of your clients' portfolios. How can that improve is that something that you think it could be hurting some of the inflows that you are seeing thank you.

Speaker Change: Okay.

Speaker Change: Regarding.

Bruno Constantino: Regarding the explanation about gross inflows and outflows, Honestly, it hasn't changed that much from what I've already said in the past. So, basically, and we monitor that on almost a daily basis. When we look at the core, the engine of Xp in affluent clients, B2B, B2C, outflows, and compared to client assets. The percentage of outflows is pretty much stable over, I would say, the past 7-8 quarters, so it has not changed. Overall, they have increased in 2023 compared to 2022. What hurts the net new money more is the outflows from companies, and corporate, really volatile. But remember that we do have retail SMBs and corporate clients that have annual revenues below the threshold of 700 million reais, and also the price.

Speaker Change: The explanation about draws.

Speaker Change: Gross inflows and outflows.

Speaker Change: Honestly it hasnt changed that much about what I've already said in the past, so basically and we monitor that on.

Speaker Change: Almost on daily basis.

Speaker Change: The when we look at the core the Angel of X being affluent clients <unk>.

Speaker Change: It flows and compare to.

Speaker Change: The client assets.

Speaker Change: The percentage of outflows is pretty much stable over I would say the past seven eight quarters. So it has not changed okay and the inflows.

Speaker Change: Overall.

Speaker Change: They have increased in 2023 compared to 2022.

Speaker Change: What.

Speaker Change: Has hurt the net new mining more.

Speaker Change: Is the outflows from companies Ah corporate it's.

Speaker Change: Really volatile, but remember that we do have in retail.

Speaker Change: Smbs and corporate clients.

Speaker Change: That half.

Speaker Change: Annual revenue below the threshold of $700 million highs.

Bruno Constantino: But not the engine so that that scenario has not changed and and We haven't seen any you know big change compared to to the past one, Regarding the remuneration of our clients and, The growth of market appreciation, you need to remember that our portfolio, overall, on average, when you look at our portfolio in total client assets, more diversified, and to be more diversified means that you're gonna own more equities, you're gonna own more multi-market funds, alternatives and so on, in the past, year has been tough for all those asset classes, as you probably know, and most of the funds and so on, they are below the CILIC rate, for example. So on average, yes, the portfolio has not performed well, but we do not see that impacting We, you know, have the advisors, the clients are aware of the portfolio. You need to have a longer time horizon in the long term. It should pay off to have this type of portfolio and diversity.

Speaker Change: And also the privates.

Speaker Change: Not the engine so that that scenario has not changed and.

Speaker Change: We haven't seen any.

Speaker Change: <unk>.

Speaker Change: Big change compared to to the best quarter.

Speaker Change: Regarding.

Speaker Change: The remuneration of our clients and the.

Speaker Change: The growth.

Speaker Change: Market appreciation you need to remember that our portfolio overall on average when you look at our portfolio and total client assets more diversified.

Speaker Change: And to be more diversified means that youre going to on more equities youre going to own more.

Speaker Change: <unk> market funds alternatives and so on.

Speaker Change: And in the past.

Speaker Change: Ear.

Speaker Change: Has been has been tough for all of those asset classes as you probably know.

Speaker Change: And most of you know.

Speaker Change: The funds and some won't they are below the the selic rate for example.

Speaker Change: So on average yeah as the portfolio has not performed well, but we do not see that impacting outflows.

Speaker Change: We have the advisers clients are aware of the portfolio you need to have a longer time horizon in the long term it should pay off to have these type of portfolio and diversification.

Bruno Constantino: Okay, have you done any, In the exercise where you monitor how well client portfolios are doing on other platforms, do you think the performance from your clients has been worse or not, or is there room for you to improve? Because, again, like, the Bovespa, I think, was up, like, 20-plus percent last year. Sure, the book, the performance came in the second half of the year.

Speaker Change: Okay.

Speaker Change: Have you done any.

Speaker Change: In the exercise, where we're monitor how well portfolio of client portfolios 1 billion. Other platforms do you think.

Speaker Change: The performance from your clients has been worse or not or if there is something right. If there's room for you to improve.

Speaker Change: Because again like <unk> I think it was up like.

Speaker Change: <unk> plus percent last year sure the bulk of the performance came in second half of the year.

Tiago Mafra: But I'm just wondering, you know, if there's something else you can do, like, I don't know, training IFAs or, you know, getting more involved in clients' portfolios. Yeah, there is, this is Thiago. There is one slide in the presentation, and I mentioned we have a very strong focus on quality, and that means for investments being the best financial planning service provider in Brazil, okay? So we have been doing in the past, I would say, one and a half years, a lot of change here in the company, very focused on having the best service for our clients. It's not only about having the best portfolios, but it goes beyond that, like tax planning, subsectors, and all the other stuff that usually only private clients have, okay?

Speaker Change: But just wondering.

Speaker Change: If you think.

Speaker Change: There is something else you can do like I don't know training <unk> or you know getting more involved in.

Speaker Change: In clients' portfolios.

Speaker Change: Yes. There's this is Joe there is one slide in the presentation and I mention.

Joe: We have a very strong focus on quality and that means for investments.

Speaker Change: Being.

Joe: The bass.

Joe: Financial planning services provider in Brazil, Okay. So we have been doing in the past I would say when a half years a lot of change here in the company are very focus on having the best service to our clients is not only about <unk>.

Joe: Having the best portfolios, but goes beyond that like explaining.

Joe: Sanctioned and and all the other stuff that usually only private clients have okay. So we have been scaling that trainee all day of phase.

Tiago Mafra: So we have been scaling that training, all the FAs and internal advisors, so we have been doing change here; today we have a new segmentation in the company, we have a new, not a new CIO, but we have. We took the CIO from private banking, and now he manages all the segments in the companies, all the allocations. So we have changed incentives for our internal advisors. We have changed some of the incentives for IFAs.

Joe: And internal adviser so we have been doing changed here today, we have a new segmentation in the company we have.

Joe: New not a new CIO, but we have.

Joe: We took the CIO from their private banking and now he manages all of the segments in the companies all of their locations. So we have change incentives to two Orient internal advisors, we have changed some of the incentives.

Tiago Mafra: So we have been doing a lot of things, like having them follow the correct allocation for all the clients. So yes, we have been doing a lot of stuff on that. To your point about how it's compared to other companies, I would say that the easiest way to compare, because it's easy to get, is if you compare the exclusive funds, okay? If you look...

Joe: The phase so we have been doing a lot of things like true.

Joe: Have them too.

Joe: To follow the correct location for for all of their clients. So yes, we are.

Joe: Have been doing a lot of stuff on that to your point about how we compare to other companies.

Joe: I would say that the easiest way to compare because it's easy to get is if you compare the exclusive funds okay.

Joe: If you look.

Tiago Mafra: The funds that we manage here through Xp Asset, we have been doing, I would say, good compared to other places. You can compare all the private banks, and we have been doing okay. Bad, not very good against the CELIC rate, as Bruno mentioned. OK or good when you compare to other portfolio managers for exclusive funds. So that's very easy to check.

Joe: The funds that we manage here too.

Joe: She's Bay.

Joe: Asset.

Joe: We have been doing.

Joe: I would say good compared to other place you can compare all the private bank and and we have been doing okay bad not very good against the Selic rate is brittle nation, but.

Joe: Okay or good when you compare to other.

Joe: Portfolio managers for exclusive funds, so that's very easy true true shack.

Tiago Mafra: Okay, guys, and just the final question on the NPS score, right? You used to show that. I don't know if I missed it. But like, are you seeing your NPS scores relatively stable? Yeah, it was pretty much stable, I believe 72 in the fourth quarter, Mario. Okay, thank you. Okay, next one is Tito Labarca from the Guadalupe Massacres.

Speaker Change: Okay and just final.

Speaker Change: Final question on the NPS score you used to show that I don't know if I missed it but are you seeing your NPS score is relatively stable.

Speaker Change: Yeah was pretty much stable I believe it's 72.

Speaker Change: In the fourth quarter Mike.

Speaker Change: Okay. Thank you.

Joe: Okay next one is Tito Lovato from Goldman Sachs, Hi, Tito now you can make your question.

Tito Labarca: Hi Tito, now you can make your question. Hi, good evening, everyone. Thanks. Good evening. No, I guess a bit of a follow-up on efficiency and margins, you know, Marfa, you mentioned that you continue to focus on efficiency, and you have an operating level. But how dependent is that operating leverage on sort of a cyclical environment getting better? I mean, I understand the cyclicality of the business, but I mean, you mentioned that the second half of the year's expenses is sort of a good base to think about. I mean, just analyzing.

Tito Lovato: Hi, good evening, everyone. Thanks for taking good evening Michael.

Tito Lovato: Yes, a bit of a follow up or on the.

Tito Lovato: The efficiency and margins for you mentioned you continue to focus on efficiency and operating leverage.

Tito Lovato: How dependent is that operating leverage on so.

Tito Lovato: Cyclical environment getting better I mean, I understand the cyclicality of the business.

Speaker Change: But I mean, you mentioned that second half of the year expenses sort of a good base to think about I mean, just annualize Inc.

Bruno Constantino: 4Q expenses, that would imply your expenses are going to grow roughly 15%, right? So to have some operating leverage with that, you need, you know, revenues to grow faster. So how do you just think about the potential improvements in the EBT margin to get to the guidance, the long-term guidance that you've given? Did that sort of linear improvement?

Speaker Change: <unk> expenses that would imply your expenses kind of grow roughly 15% Brian to add some operating leverage with that.

Speaker Change: <unk>.

Speaker Change: Revenues to grow faster.

Speaker Change: So.

Speaker Change: How do you just think about that potential improvements and EBT margin to get to the guidance the longer term guidance that you've given.

Speaker Change: Should that be sort of linear improvement is it very dependent on rates coming down things improving.

Tito Labarca: Is it very dependent on rates coming down, and things improving? Just to understand, and particularly in this quarter, right, the margin was a bit lower. In other words, some one-offs. Is there just some seasonality in 4Q?

Speaker Change: Just to understand and particularly in this quarter right. The margin was a bit lower I know there were some one offs.

Speaker Change: Is there just some seasonality in <unk> because last year EBIT EBIT margin is also a bit lower.

Bruno Constantino: Because, you know, 4Q last year, BBT's margin was also a bit lower. So just think about how those margins would have improved from here. Hi Tito.

Speaker Change: So just to think about how those margins improve from here. Thank you.

Speaker Change: Hi, Tito.

Bruno Constantino: I would say that, yes, it is dependent on the macro part of it to have this operating leverage kicking in. Our business has been growing at a slower pace than in the periods of the bull market, still growing, but with margins healthy, but at the low end of our guidance for EBT margin. And we have said that.

Tito Lovato: I would I would say that yes. It is dependent of of the macro part of it.

Speaker Change: To have this operating leverage kick in.

Speaker Change: Our.

Speaker Change: Our business has been growing at.

Speaker Change: A slower pace than.

Speaker Change: In the periods of a boom market still growing but with margins.

Speaker Change: Healthy, but at the low.

Speaker Change: And of our guidance for EBIT margin and we have said that he said look are we.

Bruno Constantino: We said, look, we expect the margins, annual margins, because on a quarterly basis, it's, as I said, it's volatile. But on an annual basis, we expect them to go from 26 to 32% from 2023 to 2025. And in that assumption, it is embedded a better environment and scenario for investments as we move forward. We are not there yet.

Speaker Change: We expect the margins animal margins because on a quarter basis.

Speaker Change: As I said, it's volatile, but on an annual basis, we expect to go from 26% to 32% from 2023 to 2025 and in that assumption is embedded a better environment and scenario for investments as we move forward we are not there.

Bruno Constantino: So we, all the businesses that we have been growing, like cards, for example, have a lower margin compared to the 26% EBT margin, for example. So, of course, as the relevance of this business grows and the other part is growing less because of the macro and is the most relevant part in our business, EBT will struggle to accelerate the pace really faster, even with strict cost control. But so it's not linear; I don't see this as a linear movement going forward.

Speaker Change: Yet.

Speaker Change: So we all of the businesses that we have been growing.

Speaker Change: Like our cards for example that has a lower margin.

Speaker Change: Compared to the 26% EBT margin for example of course is the relevance of this business grows and the other part is growing less because of the macro and is the most relevant part in our business EBIT margin will struggle to accelerate.

Speaker Change: The pace really faster, even with a strict cost control, but so it's not a linear I don't see these as a linear movement going forward. Okay. Because we do have and that's the point of that is slide that I presented rigs.

Tito Labarca: Okay. And that's the point of that slide that I presented regarding the operating leverage of our business. That's why when we gave the guidance for our net income in 2023, it was a large spread, you know, 3.8 billion with 4.4 billion. And we ended up delivering 3.9 billion. But why was that?

Speaker Change: Regarding the operating leverage of our business. That's why when we gave the guidance for our net income.

Speaker Change: In 2023 it was.

Speaker Change: A large spread three 8 billion with $4 4 billion and we.

Speaker Change: And delivering the $3 9 billion, but why was that because if the macro change you need four is another scenario that we do not control and we do not.

Bruno Constantino: Because if the macro changes, if it was another scenario that we do not control, and we do not have a crystal ball to know exactly what it's going to be, it could be much higher. That's exactly the operating leverage of the business that we carry in our ecosystem. So the macro, it is important to see the EBT margin expanding forward. Great. Thanks, Bruno. That's helpful.

Speaker Change: I have a crystal ball to know exactly what it's going to be it could be much higher that's exactly the operating leverage of the business that we carry in our.

Speaker Change: Ecosystem.

Speaker Change: So the macro it is important to see the DVT.

Speaker Change: EBT margin.

Speaker Change: Expanding our forward.

Speaker Change: Great. Thanks, that's helpful. Maybe I guess, one follow up there in terms of.

Tito Labarca: Maybe, I guess, one follow-up there in terms of, Also, how you think about maybe the seasonality, you know, if we look at your B3 volumes, which sort of continue to be weak. So. Could there be more short-term pressure on that EBT margin, at least in the first half of the year? Because you're not seeing volumes sort of recover yet, you know; rates are still in the double digits. Yeah, I know you're not going to give short-term guidance, but just to think about sort of the current dynamics that we're still currently seeing in the markets right now, is it fair to assume perhaps a little bit of short-term pressure? I don't know if short-term pressure, what I can share here, Tito, are two points. Number one, in terms of, for example, the efficiency ratio going forward, just remember that when we have the first quarter of 2024, we are going to take out the first quarter of 2023. In the first quarter of 2023, SG&A was helped by a very low share base compensation.

Speaker Change: Also how you think about maybe the seasonality if we look at BT volumes sort of continued to be weak. So.

Speaker Change: Could there be more short term pressure on any and that EBIT margin at least in the first half of the year. Because you are not seeing volumes sort of recover yet rates are still in the double digits.

Speaker Change: Yes, I know you're not going to give short term guidance, but just to think about sort of the current dynamics that we are still currently seeing in the market right. Now is it fair to assume perhaps a little bit of short term pressure.

Speaker Change: I don't I don't know if it's short term pressure water.

Speaker Change: What I can share here.

Speaker Change: Our two two points number one.

Speaker Change: In terms of for example in terms of the efficiency ratio going forward, just remember that when we have the first quarter of 2024.

Speaker Change: We're going to take out the first quarter of 2023, and the first quarter of 2023.

Speaker Change: The SG&A.

Speaker Change: Helped by a very low share based compensation. If you go back there and look at the numbers. It was a 53 million highs of share based compensation in the first quarter 'twenty three.

Bruno Constantino: If you go back there and look at the numbers, it was 53 million reais of share base compensation in the first quarter of 2023, and in the fourth quarter now, 166 million reais, and that 53 million reais was low because we had the impact of the layoffs and so on, cancellations, etc., that had a positive impact in the first quarter. So that's one thing to have in mind for the short term. The other point is we do have seasonality in our results. If you go back, over the last five years, and you do an average,

Speaker Change: And in the fourth quarter now $166 million has in that 53 million highs was low because we had the impact of the layoffs and so on cancellations et cetera that had a positive impact in the first quarter. So that's one thing to have in mind.

Speaker Change: For the short term.

Speaker Change: The other point is we do have seasonality in our results.

Speaker Change: If you go back in.

Speaker Change: In the last five years and you do an average youre going to see that the first quarter of the year is always the weakest quarter for the year, Okay. Because that's how the business works, especially at our core business investments.

Bruno Constantino: You're going to see that the first quarter of the year is always the weakest quarter of the year. Okay, because that's how the business works, especially in our core business, investing. So the last five years, the average for revenue, for EBT, and for net income in the first quarter is 21% of the total of the year, not 25%. So it's lower. And then the second and third quarters tend to be better.

Speaker Change: So that the last five years, the average of four revenue for EBIT and for net income in the first quarter.

Speaker Change: 21% of the total of the year not 25% so it's slower.

Speaker Change: And then second and third quarter tend to be better fourth quarter is trickier, because we have the performance fees.

Bruno Constantino: The fourth quarter is trickier because we have the performance fees. You might have some capital market activity, but in terms of investments, business days, and holidays, and so on, it's not as strong as the third quarter, for example. So we will see. That's why I always like to, you know, guide you to look at the last 12 months, look at the year, look at the last 12 months, take one quarter and put the other with the same seasonality because looking on a quarterly basis, you can get it wrong. It can be very good, and you're going to expect it to continue. And that's not what happens, or the opposite way around.

Speaker Change: You might have some capital market activity, but in terms of the investments business days and holidays and so on.

Speaker Change: It's not as strongest as the third quarter. For example, so we will see that's why I always like to you know guide to look last 12 months look the year look last 12 months' take one quarter and put the other with the same seasonality because looking on a quarterly basis, you can get it wrong it can be a <unk>.

Speaker Change: Good into Youre going to expect to continue and that's not what happens or the opposite way around.

Bruno Constantino: Great. Thanks, Bruno. One quick clarification. You didn't really have much incentives from B3 and some of the card companies. Is this a new normal now?

Speaker Change: Great. Thanks, one quick just clarification, you didn't really have much incentives from degree in some of the card companies.

Tito Labarca: Should we no longer really expect those incentives going forward? Now, from the visa and types of things, no; we do not expect to have anything relevant there going forward. From B3, from B3... We might, I mean, they have each slide because that's an annual process, but the main... The main change that you saw, It was related in the fourth quarter this year to the fourth quarter last year, fourth quarter twenty-three, sorry, with the fourth quarter twenty-two, was due to some incentives that we received from Visa that this last year, fourth quarter, 23, didn't happen. But we are always looking for incentives to, you know, value our ecosystem, our balcony, and the... Any player that wants to access our ecosystem knows that we have a premium type of client because we are focused on investing. Okay, that's clear. Thank you, Bruno. Okay, next one is Renato Melloni from Autonomous.

Speaker Change: Is this a new normal now should we no longer when we expect those incentives going forward.

Speaker Change: No the from from the <unk>.

Speaker Change: Visa and types of thing.

Speaker Change: No.

Speaker Change: We do not expect to have anything relevant there going forward from victory from victory.

Speaker Change:

Speaker Change: We might I mean, it's they have it slipped because that's not an annual process, but the main.

Speaker Change: The main change that.

Speaker Change: You saw them.

Speaker Change: It was related in the fourth quarter this year to the fourth quarter.

Speaker Change: Fourth quarter, 'twenty, three or sorry, with the fourth quarter 22 was due to some.

Speaker Change: Some some.

Speaker Change: Incentives that we received from from.

Speaker Change: Lisa.

Speaker Change: This last year fourth quarter 'twenty three it didn't happen.

Speaker Change: But we are always looking for incentives to VAT.

Speaker Change: Value our ecosystem, our balcony and.

Speaker Change: Any any player they don't want to.

Speaker Change: Access our ecosystem knows that we have a premium I would say type of client because we are focused on investors.

Speaker Change: Okay. That's clear thank you Bruno.

Bruno: Okay next one is not the malaria from autonomous.

Renato Melloni: Hi Renato, now you can make your question. For the question here, I wanted to get some more clarity on the issue services dynamics for revenues. So it came from a very strong 3Q that was affected by particular reasons there.

Speaker Change: Now you can make your question.

Amalia: Hi, Chad, Ohio grown up thanks for the question here I wanted to get some more clarity on the issuer services dynamics core revenues. So he came from a very strong <unk> that was affected by particular regions. There, but again you repeated a very strong quarter you had higher volumes, but you also mentioned that <unk>.

Renato Melloni: But again, you repeated very strong quality, you had higher volumes, but you also mentioned that M&A helped. I'm trying to understand to what extent M&A contributed and, going forward, what a recurring level of revenue in this segment you expect. Thank you.

Bruno: <unk> helped.

Chad: So I'm trying to understand here, too, which proportion M&A contributor and going forward.

Chad: A recurring level of revenue in this segment that you expect thank you.

Bruno Constantino: Yes, the third quarter was really strong because of DCM activity; you are 100% right about that. But again, we are growing our investment banking franchise as we move forward, the whole ecosystem, as Mafra mentioned, in terms of the potential for wholesale in our ecosystem considering we already have the relationship with our corporate clients, giving them access to capital markets through our distribution and so on. It's important, it plays a role. Those things take time.

Speaker Change: Yes.

Speaker Change: The third quarter was really strong because of DCM activity you are 100% right on that.

Speaker Change: And but again, we are growing we are growing.

Speaker Change: Our investment banking franchise as we move forward the whole ecosystem, what moffitt dimension.

Speaker Change: In terms of the potential for wholesale.

Speaker Change: Our ecosystem and considering that we already have the relationship with the corporate clients, giving them access to a.

Speaker Change: Capital markets through our distribution and so on.

Speaker Change: It is important it plays a role those things they they take time so.

Bruno Constantino: So everything... is recurrent. But the point is, it's not a straight line. You have some types of revenue that, by nature, on a quarterly basis, they are more volatile. M&A is one of those. And M&A is a business that takes time to build. You need to build a portfolio. You need to build a relationship.

Speaker Change: Everything.

Speaker Change: Is recurrent.

Speaker Change: But the point is is not a straight line you have some types of revenue.

Speaker Change: By nature on a quarterly basis. They are more volatile M&A is one of those and M&A is a business that takes time to build you.

Speaker Change: You need to build the portfolio needs to be the relationship you would need to get the mandates and thats a long term.

Bruno Constantino: You need to get the mandates. And that's a long-term view. And in this fourth quarter, we did not disclose exactly how much revenue we had, but it was relevant in terms of contribution.

Speaker Change: And in these fourth quarter, we do not disclose exactly how much was the.

Speaker Change: The the revenue, but it was it was relevant in terms of contribution it was by far the highest growth.

Renato Melloni: It was, by far, the highest growth quarter over quarter. And that's an ongoing business that we are not where we believe we can be in the future. So we are going to keep investing in our franchise business and the wholesale platform for our company. And do you think you have a baseline revenue sphere that you can disclose or still expect it to be volatile? The baseline that we have, for example, is the DCM business. I don't want to use it with the current, but it's more stable, it's less volatile, but again, you saw in the third quarter, it was the best quarter for DCM activity with some volatility.

Speaker Change: Quarter over quarter.

Speaker Change: And that's a ongoing business that we were not where we believe we can be in the future. So we're going to keep investing in our franchise business and the.

Speaker Change: The wholesale platform for our clients.

Speaker Change: And do you think youll have a base land revel revenues year that.

Speaker Change: Can disclose or you still expect it to be volatile.

Speaker Change: And disclose our baseline.

Speaker Change: The baseline that we have for example, the DCM business. This is like a you know a very.

Speaker Change: I would say.

Speaker Change: I don't want to use it.

Speaker Change: Current but it's more stable, it's less volatile, but again you saw the third quarter DCM.

Speaker Change: <unk> was the best quarter for DCM activity.

Bruno Constantino: Okay, next one is Jorge Guti from Morgan Stanley. Hi Jorge, you can ask your question. Hi, and good afternoon, everyone.

Speaker Change: With some volatility.

Speaker Change: Yeah.

Speaker Change: That's clear thank you.

Speaker Change: Okay next one it's Jorge Kuri from Morgan Stanley Hi, Jorge you can make your question.

Speaker Change: Hi.

Jorge Kuri: Good afternoon, everyone. Thanks for taking my question I wanted a robot to slide 11, where Bruno.

Jorge Guti: Thanks for taking my question. I wanted to go back to slide 11, where Bruno talked about the potential for operating leverage. You highlighted a 1.5% take rate in 2021 versus 1% in 2023 and mentioned that. That's around a $4 billion revenue gap. And I just want to understand why you are going back to 2021 at that 1.5 percent. Why is that?

Jorge Kuri: First of all the.

Jorge Kuri: Potential for unlocking the potential for operating leverage you highlighted Bruno.

Jorge Kuri: One 5% take rate in 2021 versus 1% in 2023 and mentioned that.

Jorge Kuri: That's around affordability on revenue.

Jorge Kuri: And then just one of them has been.

Jorge Kuri: Why are you growing back to 2021 to one 5% how is that.

Bruno Constantino: Achievable again. I mean, I'm guessing you purposely pointed it out because you do think that that's something we could head, where the business could head. So under what circumstances could you be again at a 1.5% take rate? Does it take a year, two years, three years?

Jorge Kuri: Achievable again.

Jorge Kuri:

Speaker Change: I mean, I'm guessing you you purposely pointed it out because you do think that that's something where we could hedge where the business could add so.

Jorge Kuri: Under what circumstances.

Jorge Kuri: Would you be again at one 5% take rate.

Jorge Kuri: Take a year two years three years.

Jorge Guti: And maybe that's not the take rate that you can get to. That was sort of like extraordinary times, given where rates were, I think, a leak, average less than 5% that year, which is just like an impossibility for Brazil anytime soon. So maybe what do you think is achievable in terms of an upside to your take rate, which sat at 1% in 2023, say, over the next two years? Thank you. Hi, how are you?

Jorge Kuri: And.

Jorge Kuri: Maybe maybe thats not the.

Jorge Kuri: <unk> that you can get to that was sort of like original extraordinary times, given where rates were.

Speaker Change: Thanks, Alicia average less than 5% of that year, which is just like any possibility for Brazil anytime soon so maybe what do you think is achievable in terms of upsides to your take rate with that.

Jorge Kuri: 1%.

Speaker Change: In 2023 say over the next two years. Thank you.

Alicia: Hi, Jorge.

Bruno Constantino: The idea of this slide was not guidance, anything like that, okay? mation, a math exercise, but it was to remind all of us about the business we have in XP, because sometimes we've been through two years, very tough two years in terms of our core business, investing. It's been really tough for two years, and we tend to forget the type of business that we have at our core. When we put the market share of B3 for retail, to remind ourselves that, our market share has been pretty much stable around 50%, 48% at the end of December. 48% is four times... Our Closest Comparit, But that type of business can have a huge operating leverage if we have, for example, a market where risk-on mode, a lot of IPOs, capital market activity, individuals in Brazil that are sub-penetrated coming to the stock market to invest in equity, so on and so on.

Speaker Change: The idea of a busy slide what was not a guidance or anything like that okay. That's why I mention a math exercise.

Speaker Change: But was to remind.

Jorge Kuri: All of us.

Jorge Kuri: About the business we.

Jorge Kuri: We have an XP because sometimes we we've been through two.

Jorge Kuri: Two years very tough two years in terms of our core business investments, it's been really tough for two years and we tend to forget that.

Jorge Kuri: The type of business that we have in our core.

Jorge Kuri: When we put the market share of be three four retail to remind that our market share has been pretty much stable around 50% 48%.

Jorge Kuri: In the end of December 48% four times.

Jorge Kuri: Our closest competitor.

Jorge Kuri: That type of business.

Jorge Kuri: Can have a huge operating leverage if we have for example, a market where risk on mode. A lot of Ipos capital markets activity individuals in Brazil that is sub penetrated coming to the stock market to invest in equity so on and so on.

Bruno Constantino: In that type of environment, operating leverage in our ecosystem can be huge. So the math exercise is not to say, oh, if we have a risk on mold, we're going to have four billion reais additional in revenue without one single reais in additional SG&A. That's not the point. It can be one billion, can be two billion, can be four billion.

Jorge Kuri: That type of environment.

Jorge Kuri: This operating leverage in our ecosystem can be huge so that the math exercise is not say oh, if we have a risk on mode, we're going to have.

Jorge Kuri: 4 billion here is additional revenue without one single.

Jorge Kuri: In additional SG&A.

Bruno Constantino: I don't know. I don't know what the take rate would be in such an environment. And you have a point, because in 2021, probably, you know, we had very low interest rates in Brazil, two percent. We had the covid.

Jorge Kuri: That's not the point can be 1 billion can be 2 billion can be before I don't know I don't know what the take rate would be in such an environment and do you have a point because in 2020. One are probably you know we had very low interest rates in Brazil, 2%.

Bruno Constantino: So a different scenario is probably not going to be like 2021. I don't know what it's going to be like, but I know, or at least I think I do. I expect that at some point in time, because this business is cyclical, we are going to have, or we are going to be in the part of the cycle where it's going to be a bull market, a risk-on mode, a lot of companies coming back to the market. And in this environment, our ecosystem as of today is much bigger than what it was back in the last bull market psyche, and we expect our business to really benefit from that scenario. So that's the message of this slide. Do not forget this because that's what Xp has in its ecosystem. It's been dormant for the past two years.

Jorge Kuri: We had the COVID-19 so different scenario, probably is not going to be like 2021 I don't know whats going to be but I know or at least.

Jorge Kuri: I expect that at some point in time, because this business.

Jorge Kuri: These cyclical, we're gonna have or where youre going to be the part of the cycle where.

Jorge Kuri: It's gonna be a boom market a risk on mode, a lot of companies coming back to the market and in this environment.

Jorge Kuri: Sure ecosystem as of today is much bigger than what it was back in the last.

Jorge Kuri: Bull market cycle.

Jorge Kuri: And we expect our business to really benefit from that scenario.

Jorge Kuri: So that's that's the message of this slide do not forget this because that's what <unk> has in its ecosystem, it's been dormant for the past two years.

Bruno Constantino: No, I appreciate that. I fully understand it, but, So, you know, just to continue on that thought. I'm sure you know what your different business lines can do in a scenario of low rates, risk on, volume growth, you know, how prices on an apples-to-apples basis have changed because of competition and how the mix of your business also implies a change in the take rate. Just help us understand what that attractive upside is, you know, 1.1, 1.2, 1.3 take rates in a sort of like "blue sky" scenario, or So just help us understand that, because that's obviously a really critical component of how your earnings look in 2024 and 2025, so that would be much appreciated, thank you.

Speaker Change: No I appreciate that.

Speaker Change: Fully understand it.

Speaker Change: So just just to continue on that path.

Speaker Change: <unk>.

Speaker Change: I'm sure you know what your different business lines.

Speaker Change: We can do in a scenario of low rates risk gone.

Speaker Change: Volume growth.

Speaker Change: How prices on an apples to apples basis have changed because of competition and how the mix of your business also implies a change in the take rate.

Speaker Change: Just help us understand what is that attractive upsides.

Speaker Change: Is it.

Speaker Change: 11121 for you so the take rates in.

Speaker Change: Sort of like Blue Sky scenario.

Speaker Change: Or maybe it's not right I mean, maybe it could be 7% because competition just continues to.

Speaker Change: What it normally Ross, which is extracted as pricing from the market. So just help us understand that because that's obviously.

Speaker Change: A really critical component of how your earnings look in 2024 and 2025.

Speaker Change: So that would be much appreciated thank you.

Bruno Constantino: I hear you, but if I give you a number, it's going to be like giving guidance and honestly, I don't want to do that. What I can tell you, Jorge, it's not about price competition. The price I mean, we for equities, for example, brokerage commissions. We zeroed brokerage commissions back in 2018, with clear, we were the first one to do so. So it's not exactly about price Competition can have an impact in terms of market share, in terms of flow, and so on, but not in terms of price, in my view.

Speaker Change: I hear you, but you know if I give you a number it's going to be like a.

Speaker Change: Given our guidance and honestly I don't want to do that.

Speaker Change: What I can tell you.

Speaker Change: It's not about.

Speaker Change: Price competition the price I mean, we for equities for example, brokerage commissions, we with zero brokerage commissions back in 2018 with clear we were the first one to do so.

Speaker Change: So it's not exactly about.

Speaker Change: Price competition can have an impact in terms of market share in terms of <unk>.

Speaker Change: Flow and so on but not not about price in <unk> in my view, so the potential exists how much.

Jorge Guti: So the potential exists, how much the number is going to be relevant considering the size of our ecosystem. Great Bruno, thank you. Thanks for that. Okay, next one is Gabrielle Guzan from Citi. Hi Gabrielle, now you can make your question. Hey guys, good evening. So most of my questions were asked. One left, it's about your older... line.

Speaker Change: The potential means in the bull market it will depend it will depend on how strong the bull market is.

Speaker Change: It will depend on various factors that.

Speaker Change: It's hard.

Speaker Change: To give you a number right now, but I'm pretty sure that whatever the number is going to be relevant considering the size of our ecosystem.

Bruno: Bruno Thank you Brad.

Brad: Thanks for that.

Speaker Change: Okay next one is arguably Zheng from Citi Hi, Gabrielle are now you can make your question.

Zheng: Hey, guys good evening.

Zheng: My questions were asked where one last just a voluntary or older.

Gabrielle Guzan: There's a line that legal, His life has been growing much quicker than anything else. Alright. 12 million this quarter. There was some good news about client complaints and possibly having to reimburse those clients. Is this something related to what was mentioned in the news? Is this something we should expect? Hi, Gabrielle.

Zheng: And expenses line, there is aligning legal under restricted proceedings.

Zheng: Clients. This line has been growing much quicker than anything else looks like Jimmy number required for the last year.

Speaker Change #105: Somewhere I don't know.

Speaker Change #105: This quarter there was some news about why someplace.

Zheng: Recently.

Zheng: Possibly having to reimburse those clients something related to what was mentioned in the notes is that something we should expect that to continue growing.

Speaker Change #108: I can't really shed some light on it thank you.

Speaker Change: Hi, everybody out.

Bruno Constantino: No, I would, I mean, it's mainly related to modal acquisition. When we onboarded the whole thing, we might have some, some part of it related to the cost cuts that we did at the beginning of 2023. Those things usually take like six months to kick in, so you would be hit in the second semester last year, but we do not expect anything unusual.

Speaker Change: No I would I mean, it's mainly I would say, it's mainly related to two more dollar position when we on boarded the whole thing we might have some.

Speaker Change: Some part of it related to.

Speaker Change: The cost cuts that we we did at the beginning of two.

Speaker Change: 2023, those things they.

Speaker Change: Usually they take like six months to kick in so it would hit.

Speaker Change: In the second semester of last year, but we do not expect anything unusual.

Bruno Constantino: Going forward, Perfect. Thank you. OK, next one is Ricardo Bush Pigo from BTG.

Speaker Change: Going going forward here.

Speaker Change: Yeah.

Speaker Change #102: Perfect. Thank you.

Speaker Change #104: Okay next one is he Carlo <unk> from BTG.

Ricardo Bush Pigo: Hi Ricardo, now you can make your question. Hi guys, thank you for the opportunity. I have one question here about credit. We have been seeing that the unsecured portion of the credit portfolio has been accelerating the growth pace, which has also been fueling a higher loan provision, so why don't you get more color and what we should expect from both of these lines in the following quarters and years and what exactly is the kind of profile of this individual taking the NEC credit line? Yes, we have been growing our credit card business, as you know, and as we move down in Xp and Rico, we go to unsecured credit cards, credit exposure, but with a client that has investments somehow with us, can be a low investment, but has an investment with us.

Carlo: I don't know you can make your question hi.

Carlo: Hi, guys. Thank you for the opportunity I have one question here about credit.

Carlo: Haven't seen that they have secured a portion of the credit portfolio has been accelerating the growth base.

Carlo: But she also has been falling by a higher loan loss provision right. So I want you to get more color on why we should expect for both does lie in the following quarter than yours and what exactly is the client profile of the of the things you Vito. Thank you Danna secret credit line. Thank you.

Carlo: Yes.

Carlo: Sure.

Speaker Change: Hi, God, we we have been growing our credit card business as you know.

Speaker Change #107: And as we move down.

Speaker Change: Down in XP Enrico we go to one secure credit card credit exposure, but with a client that has investments.

Speaker Change: Somehow with us can be a low investment, but it has the investment.

Ricardo Bush Pigo: What we monitor closely is our loss absorption ratio, which, despite the growth in NPL, because of this unsecured part, the LA is above two times, for sure, and at a very healthy pace. But as you know, the credit card business, as you grow, it has this impact on recognizing the expected credit loss right up front. So yeah, we monitor the economic sense of the business, and if it makes sense, we're going to continue to grow cautiously there, but we are going to continue to grow, even if it hurts a little bit in the short term for accounting purposes, if it makes economic sense, for sure.

Speaker Change: With us what we monitor closely also is our loss absorption ratio, which despite the.

Speaker Change: The growth in.

Speaker Change: NPL because of these unsecured Bart.

Speaker Change: L a.

Speaker Change: Is is above two times for sure.

Speaker Change: And in a very healthy pace, but as you know the credit card business as you grow they had it has these impact to recognize the.

Speaker Change: Expected credit loss right upfront so.

Speaker Change #112: Yeah, we we monitor the economic sense of the of the business and if it makes sense, we're going to continue.

Speaker Change #112: To grow cautiously out there, but we're going to continue to grow even if it hurts a little bit in the short term.

Speaker Change: For accounting purposes.

Speaker Change: If it makes economic sense for sure.

Speaker Change #110: And as a follow up here.

Bruno Constantino: As you go to the lower part of the pyramid in this operation, when you look at cost of risk, that is, the provisions divided by the NCCR portfolio, should we expect an increase looking forward because of this mix? I don't know, I don't know if he... if you would see a higher increase. I think we are well provisioned right now and we intend to continue like that going forward. One important point is that we don't have any strategy to go to the bottom of the pyramid or focus on investor clients.

Speaker Change #103: Does it go to the lower part of the pyramid.

Speaker Change #103: And as operation when you look at cost of risk that is the provision divided by dentist portfolio should we expect an increase looking forward because of the mix.

Speaker Change #113: I don't know and I'm on them I don't know if he.

Speaker Change #103: If you would see a higher.

Speaker Change #103: Provision ratio because of that I think we are we are well provision right now and we intend to continue like that going forward.

Speaker Change #106: No matter, if you want to add something.

Speaker Change #100: An important end point is we don't have any strategy to go to the bought off the prior mid our folks as Sean.

Speaker Change #100: Investor.

Speaker Change #101: Clients. Okay. So that's why when you look core NPL, it's much lower than the market.

Bruno Constantino: Okay, so that's why when you look for an APL, it's much lower than the market. Of course, we have different card segments for different types of clients. What I can say is when you look at the collateralized credit card, it's very low. Clients with 50k plus invested at XP. When you go to clients with less than 50k at XP, the APL more than doubles. When you go to RICO, it triples compared to the collateralized one. Okay, but as Bruno mentioned, the loss absorption on the worst cohorts is still above 2. Okay, that's very high. And when you talk about provisions against the APL, we have very good provisions today. So we do not expect to have any additional provisions. But when you look, the card portfolio is growing. So that's why you can expect the provisions to grow.

Speaker Change #101: Of course, we have different card segments for different types of clients. What I can say is when you look them.

Speaker Change #101: Collateralize it.

Speaker Change #101: Credit card.

Speaker Change #101: It's very low clients with 50 K plus.

Speaker Change #101: Invest it at X P. When you go to clients with less than 50, K NXP the NPL more than double when you go to recall it three post compare lecture they collect collateralize. It one okay, but as Bruno mentioned there was obsession on the worst cohorts.

Speaker Change #116: Sure above two okay, that's very high.

Speaker Change #101: And when you talk about provisions against that the.

Speaker Change #101: The NPL, we have very good provisions should they so we do not expect to have an additional provisions, but when you look there. The card portfolio is growing so that's why you can expect the provisions to grow okay.

Bruno Constantino: Thank you. OK, so this is the end of our conference call, so thank you very much for attending today, and the R team is available for any further details that you might need, and we're going to meet you again next week. Thank you so much.

Speaker Change #114: Okay. Thank you.

Speaker Change #108: Okay. So this is.

Speaker Change #115: The end of our conference call. So thank you very much for attending today.

Speaker Change #117: And the IR team is available.

Speaker Change #111: For any further details that you might need.

Speaker Change #111: And where you're going to meet.

Speaker Change #111: You again in the next quarter. Thank you so much.