Q1 2024 XP Inc Earnings Call

Andre Parize: Good evening, everyone. I'm Andre Parize, Head of Investor Relations at XP, Inc. It's a pleasure to meet you.

Good evening, everyone I'm, Andrew <unk> head of Investor Relations.

Andre Parize: It is a pleasure to be here with you today.

Speaker Change: It's a pleasure to be here with you today on behalf of the company I'd like to thank you all for the interest of outcome in two hours 24 first quarter earnings call. This quarters results will be presented by our CEO of <unk> and our CFO Bruno Constantino will both be available for the Q&A session right out their presentation.

Andre Parize: On behalf of the company, I would like to thank you all for...

Andre Parize: I am interested in welcoming you to our 24th First Quarter Earnings Call. This quarter's results will be presented by our CEO, Thiago Maffra, and our CFO, Bruno Constantino.

Andre Parize: We 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 serve basis. You also have the option of simultaneous translation to Portuguese. There's a button below if you want to turn on the translation. And before we begin our presentation, please refer to our legal disclaimers on page two, on which we clarify the definition of locating statements. Additional information and locating statements can also be found in the SEC filing section of our IR website.

Speaker Change: If you want to ask a question you can raise your hand on the zoom to <unk>.

Speaker Change: And we will attend to you on a first come first serve basis.

Speaker Change: We also have the option of a simultaneous translation to port fees. There is a button below if you want to turn on the translation.

Speaker Change: And before we begin our presentation. Please refer to our legal disclaimers on page two on a weekly clarify forward looking statements additional information and for Logan statements can also be found on the SEC filings section.

Speaker Change: In our IR website.

Andre Parize: So now I'll turn it over to Thiago Maffra. Good evening, Mr. Maffra. Thanks, Andre.

Speaker Change: So now I'll turn it over to juggle Martha good evening mantra.

Thiago Maffra: Good evening, everyone. Thank you for joining us today on our 2024 first quarter earnings call. It's a pleasure to be here tonight, but before we review our financial results, it's important to acknowledge the devastating floods that have impacted Rio Grande do Sul, resulting in the tragic loss of lives and homes. It's particularly heartbreaking as Xp began its journey in a small 200 square foot office in Porto Alegre. During this difficult time, we are committed to supporting the affected community. Our hearts go out to all those affected.

Speaker Change: Thanks for that.

Speaker Change: Good evening, everyone. Thank you for joining us today on our 'twenty 'twenty four first quarter earnings call.

Speaker Change: Pleasure to be here Tonight.

Speaker Change: <unk> will review our financial results.

Speaker Change: Important truck knowledge, the devastating floods that have impacted huger engineered, resulting braddock loss of lives and homes.

Speaker Change: It's particularly heartbreaking as XP began its journey as mall 200 square foot, while I've seen portal agony.

Speaker Change: During this difficult time, we are committed to supporting the affected communities.

Speaker Change: Our Hearts go out to all of those affected.

Thiago Maffra: Now, let us discuss our quarterly performance and the steps we are taking to ensure our continued growth and commitment to all stakeholders. As we continue our conversation today, I want to reiterate our commitment to serving our clients by delivering innovative and high-quality service. I'm proud to announce that during this quarter, we have implemented a sophisticated and scalable financial planning tool. This technology provides us with a clear view of our clients' financial cycles, enhancing our services offerings.

Speaker Change: Now, let us discuss our quarterly performance and a steps we are taking to ensure our continued growth and commitment to all stakeholders as we continue our conversation today.

Speaker Change: I want to reiterate our commitment to serving our clients by delivering innovative and high quality service.

Speaker Change: I am proud to announce.

Speaker Change: That during this quarter, we have implemented a sophisticated and stable financial planning tool.

Speaker Change: Tech knowledge provide us with a clear view of a client's financial cycles enhancing our service offerings.

Thiago Maffra: Additionally, it integrates seamlessly with our recently launched Open Investments Initiative, which broadens our ability to present diverse investment alternatives at better rates and lower prices. I will revisit this topic shortly to provide more details on how it functions.

Ingrid Disney: <unk> is Ingrid Disney we for our recently launched an open investments initiative.

Ingrid Disney: Which bought this from village to present diverse investments during the chiefs at better rates and lower price.

Ingrid Disney: I will reveal to you.

Ingrid Disney: Stopped sharply to provide margin deals and how it functions.

Thiago Maffra: Before we delve into our financial performance, it's crucial to address the macroeconomic environment, which remains challenging. The first quarter of 2024 began with terminal interest rate expectations nearing 9% per year, controlled inflation, an appreciating real, and a managed fiscal situation. However, as the quarter progressed, we saw interest rates adjust to 10%, a slight depreciation of the real, and an ongoing fiscal challenge.

Ingrid Disney: Before we delve into our financial performance, it's crucial to address the macroeconomic environment.

Ingrid Disney: Which remains challenging.

Ingrid Disney: The first quarter of 2024 begun we've terminal years rates expectations nearing 90% per year.

Ingrid Disney: I'm thrilled inflation and appreciating real and manage it fiscal situation. However.

Ingrid Disney: However, as the quarter progressed we.

Ingrid Disney: We saw interest rates adjust should 10% is likely depreciation of knit or al.

Ingrid Disney: One growing Cisco challenged.

Thiago Maffra: In terms of market activity, the appetite for equities continued the trend from previous quarters with slightly lower turnover, while attention remains focused on fixed income. Despite competing with tax-exempt credit notes, our competitive portfolio continues to grow, benefiting from our complete ecosystem. For instance, during the quarter, our corporate credit book saw gains from narrowing credit spreads, and our debt capital market flow remained strong for the first quarter. On the flip side, we can say that we prepared ourselves for another tough year, both in terms of expenses and also in what we would expect in terms of revenues. So the recent worsening in market conditions didn't much change our overall expectations for the year.

Ingrid Disney: In terms of market <unk> the appetite for acquisition has continued drain from previous quarters with likely lower turnover.

Ingrid Disney: While attention remain full.

Ingrid Disney:

Ingrid Disney: Despite competing with <unk> credit notes or competitive portfolio.

Ingrid Disney: <unk> benefiting from our computing ecosystem.

Ingrid Disney: For instance, during the quarter, our corporate credit book saw gains from narrowing spreads and our debt capital markets flow remain strong for a first quarter.

Ingrid Disney: On the flip side, we can say.

Ingrid Disney: Barrett or south to another 30 plus.

Ingrid Disney: Plus in terms of expenses and also in what we would expect in terms of revenues.

Ingrid Disney: Recent worsening market conditions do you didnt changed much our overall expectations for the year.

Thiago Maffra: Turning now to our financial performance, despite the challenging macroeconomic scenario, we achieved a 28% year-over-year growth in top line and a 29% growth in bottom line; our EBT margin expanded by approximately 81 basis points. This quarter was also marked by a strong focus on efficiency and cost discipline across all operations, as presented by an efficiency ratio of 36.5%, which is 384 basis points lower year over year, or diluted earnings per share increased by 25% year over year, reaching 1.85 reais per share.

Ingrid Disney: Turning now to our financial performance.

Ingrid Disney: The challenging macroeconomic scenario, we achieve it at 28% year over year growth in topline.

Ingrid Disney: And a 29% growth in bottom line.

Ingrid Disney: <unk> EBT margin expanded by approximately 81 basis points.

Ingrid Disney: This quarter was also market by a strong focus on efficiency.

Ingrid Disney: And cost discipline across all operations as presented by an efficiency ratio of 36, 5%, which is 384 basis points lower.

Ingrid Disney: Year over year.

Our diluted earnings per share increased by 25% year over year.

Ingrid Disney: Reaching $1 85.

Thiago Maffra: Lastly, I would like to highlight our return on tangible equity, which we consider a more accurate measure for running our business. It's true that 25.4% marks an increase of 491 basis points year over year. Moving on to the next slide, let me provide an update on our strategy tracker for 2024, following up on our discussions on investor day last December. First, regarding our leadership in retail investments. We are pleased to announce the appointment of Cesar Chicaibá as the new CEO of our private banking division.

Ingrid Disney: <unk> per share.

Ingrid Disney: The thing I liked highlights Barbara Byrne on tangible average, which we consider a more accurate measure for running our business.

Ingrid Disney: 25, 4%, an increase of 491 basis points year over year.

Ingrid Disney: Moving on to the next slide.

Ingrid Disney: Let me provide it.

Ingrid Disney: On our strategy tracker for 2020 four.

Ingrid Disney: Following up on our discussions when the Investor Day last December.

Ingrid Disney: Firstly.

Regarding our leadership in retain investments.

Ingrid Disney: We're pleased to announce the appointment of <unk> as Denise Youll offer private banking division.

Thiago Maffra: This division has seen relevant enhancements in process, product offerings, and services levels. With Cesar, we are confident in our path toward establishing ourselves as one of the top private banks in Brazil. Furthermore, we have once again been recognized by Folha de So Paulo as the best advisory platform in the country, a testament to our commitment to excellence in client service. Our vision is clear.

Ingrid Disney: The division has seen relevant.

Ingrid Disney: In process, Robert offerings, and servicing levels, which says there.

Ingrid Disney: Confidence in our <unk>.

Ingrid Disney: Yes.

Ingrid Disney: Establishing ourselves as one of the top private banks in Brazil.

Ingrid Disney: Also we have once again been recognized by <unk> as the best advisory platform in the country.

Ingrid Disney: SMN two our commitment to excellence in client service.

Thiago Maffra: We aim to dominate the investment industry in Brazil, a big but achievable goal. I will dive deeper into the specifics of this strategic pillar in the next slide. Last quarter, we introduced our financial planning tool for advisors, marking an important milestone in how we serve our clients. This tool represents the third wave of differentiation for XP following our open architecture platform for third-party products and our extensive distribution network. Moving on to our retail cross-sell strategy. Particularly in banking, we are proud to be ranked second in the Estado ranking of the best banking service for 2024. Our digital account, though relatively new, has already gained recognition. This rapid recognition is incredibly gratifying.

Ingrid Disney: Our vision is clear we aim to dominate the investment industry in Brazil.

Speaker Change: Big but achievable goal I will Dev Jeep.

Speaker Change: The fifth strategic pillar in the next slides.

Speaker Change: Last quarter, we introduced at our financial planning tool for advisors Maher.

Speaker Change: <unk> barden milestone in how we serve our clients.

Speaker Change: Just two represents the third wave of differentiation for XP <unk>.

Speaker Change: Volume our open architecture platform.

Speaker Change: Wired broadband and our expansive distribution network.

Speaker Change: Moving on to our retail cross selling strategy.

Speaker Change: Particularly in banking, we are proud to be ranking.

Speaker Change: Second in the ranking of the best banking for 2024.

Speaker Change: Our <unk> store count, though relatively new has a red gain recognition.

Speaker Change: This rapid recognition is incredible <unk> fine.

Thiago Maffra: Beyond investments, our new vertical segments have grown to represent a larger share of our total gross revenue, almost 13% in the first quarter of 2024, enhancing the resilience of our business model. In corporate and SMB, our unique position in wholesale banking continues to strengthen this quarter. Our role in structuring and distributing corporate credit has been once again prominent, underscoring our competitive advantage. With sophisticated retail investor clients and a large distribution channel, our corporate and SMB revenue was 5% of total revenue.

Speaker Change: Beyond the investments our new vertical segments have grown to represent a larger share of our total <unk> revenue.

Speaker Change: Almost 13% if first quarter of 2012 for enhancing the resilience of our business model.

Speaker Change: In the corporate and SMB, our unique positioning in wholesale banking.

Speaker Change: Genius to strengthen just quarter, our role in structuring and distributing corporate credit has been once again permanent underscoring our competitive advantage.

Speaker Change: Through sophisticated retail investors claims and a large distribution channel.

Speaker Change: Corporate and SMB revenue was 5% of total revenue Leslie on the topic of quality and the strategic execution we have.

Thiago Maffra: Lastly, on the topic of quality and strategic execution, we launched a financial planning tool for all our advisors, and we thought it would have rapid adoption with over 2500 active advisors on the platform within only two weeks of the launch.

Speaker Change: Our financial planning tool for all or advisors, and we've got rapid adoption with over <unk>.

Speaker Change: <unk> thousand 500.

At the virus in our platform, we think only two weeks of the launch.

Thiago Maffra: We have also centralized the Chief Investment Officer role with Artur Vishman to provide consistent allocation calls across all client and risk profiles, which have recently been reviewed. This launch coincides with the Open Investments Initiative, which we see as a good opportunity for us. As I have previously mentioned, the next phase of XP's growth will be driven by our ability to provide a higher quality experience for our clients throughout their financial journeys.

Speaker Change: We have also centralized at the Chief investment officer role.

Speaker Change: Felicia.

Felicia: To provide consistent allocation calls across all client and the risk profiles, which have been recently revealed.

Felicia: This launch quite science with open investments initiative.

Felicia: We see as a good opportunity for us as I have previously mentioned the next phase.

Felicia: Ex feasible.

Felicia: Will be driven by our ability to provide.

Felicia: Quiet experience for our clients.

Thiago Maffra: Our ongoing enhancements to the solutions we offer are designed to empower our advisors to deliver smarter and more precise investment advice. By optimizing client portfolios to align closely with individual goals, we are raising the bar for what it means to engage in high-quality financial planning. We are committed to democratizing access to premium services, broadening our perspective to proactively meet clients' objectives, and offering a complete and curated set of investment alternatives. These efforts are designed to not only meet, but exceed client expectations.

Felicia: Their financial journey.

Felicia: Our ongoing enhancements to the solutions. We offer are designed to empower our agile visors to deliver is a marker and more precise investment advice.

Felicia: By optimizing client portfolios to align closely we finished vehicles.

Felicia: We are raising the bar for what it means between Asia and the high quality financial planning, we are committed to democratizing access to premium service.

Felicia: Broadening our perspective.

Felicia: Actually meet clients' objectives.

Felicia: <unk> offered.

Felicia: And in curated set of investment alternatives.

Felicia: Efforts are designed should not only meet but exceed client expectations.

Thiago Maffra: His new approach to allocating resources presents great opportunities for revenue generation and increasing lifetime value, exemplifying how our emphasis on quality translates into tangible benefits for both our clients and our business. This strategy distinguishes us further from incumbent banks and strengthens our position for continued leadership in the coming years. This quarter, we have introduced new features that integrate our financial planning platform with open investment regulations, creating a positive feedback loop. With our financial planning tools and servicing incentives, clients are encouraged to share their data, enabling us to provide even better services.

Felicia: These new approach or location resource presents great opportunities for revenue generation and increasing lifetime value.

Felicia: Is aimed to fine.

Felicia: And for this on wireless translates into tangible benefits for both our clients and our business.

Felicia: Throughout this distinguishes us.

Felicia: Third from incumbent banks and strengthened.

Felicia: Our position for our continued leadership in the coming years.

Felicia: <unk>, we have introduced new features that integrate our financial planning platform with open investments regulations, creating a positive feedback loop.

Felicia: With our financial planning tools.

Felicia: And servicing incentives claimed are encouraged to share their data, enabling us to provide even better service.

Thiago Maffra: With client permission, we gain visibility into their entire financial portfolio across XP and other platforms. We have already begun training our advisors on these new capabilities, and we expect to complete training across our entire advisor base in the coming quarters. Granting XP access to their full financial portfolio is a straightforward process for clients, allowing us to present an integrated and comprehensive view of their investment options.

Felicia: Client permission, we gained visibility in their entire financial portfolio.

Felicia: Ross <unk> and other platforms.

Felicia: We have already begun training our advisors on these new capabilities.

Felicia: And we expect to complete training across our entire advisor base in the current requirements.

Felicia: <unk> XP assets should the full financial towards volume.

Felicia: Straightforward process for our clients.

Felicia: Allowing us to present, an integrated and comprehensive view of bringing investment options.

Thiago Maffra: By leveraging our modern financial planning platform, already a differentiator in the market, we provide advisors with tools to offer holistic advice and compare investment opportunities, both within XP and across competitors. I want to highlight this as an important differentiator that sets us apart in the market. Currently, we are not aware of any other player implementing a strategy similar to ours on the same scale.

Felicia: By leveraging our modern financial planning platform.

Felicia: A differentiator in the market.

We provide advisors with two strong FERC or lasik advice.

Felicia: And compare investment that will change.

Felicia: With NXP and across competitors.

Felicia: I want to highlight this as an important differentiator that sets us apart in the market.

Felicia: Currently we are not aware of any other player implementing a strategy similar to ours on the same scale Disney.

Thiago Maffra: This initiative represents a big step forward for XP, marking what we like to call the third wave of differentiation. This follows our development of the open architecture product platform and the establishment of a more sophisticated and complete distribution channel through our network of IFAs. These innovations underscore our commitment to staying ahead in the industry and continuously improving the value we offer to our clients. Now, I will hand it over to Bruno so he can discuss his quarterly financials. Thank you. Thanks, Maffra. Good evening, everyone.

Jason: This initiative represents a big step forward for XP, marking what we like to call the third wave of Springs, Jason.

Jason: Just false or development of the open architecture product platform.

Jason: Submission of a more sophisticated and complete just diminished.

Jason: Through our network of <unk>.

Jason: These innovations and the score our commitment to staying ahead in the industry and continuously improving the value we offer our clients.

Now I will hand, it over to <unk>. So he can cause this quarter financials.

Bruno Constantino Alexandre dos Santos: It's a pleasure to be here with you again. Moving on to the next slide, starting with our core operating KPIs. All three main KPIs for investments, our core, hit record numbers as of first quarter 24, signaling we are on the right path towards our goal to be dominant in investment. One, total client assets at 1,141,000,000 Reais, a 20% growth year over year. Two, total active clients at $4,587,000, a 16% growth year over year, and three total advisors at $17,700,000, a 16% growth year over year.

Martin: Thanks Martin.

Martin: Everyone.

Speaker Change: It's a pleasure to be here with you again moving on to next slide.

Speaker Change: Starting with our core operating <unk>.

Speaker Change: All three main could be up for investments or.

Speaker Change: Record numbers as of first quarter 'twenty for.

Speaker Change: We are on the right path towards our goal to be dominant in investments.

Speaker Change: Loan totals.

Speaker Change: Total client assets at <unk>.

Speaker Change: $140 million.

Speaker Change: 20% growth year over year too.

Speaker Change: Total active plants at $4 million, 587060% growth year over year and three.

Speaker Change: Total advisors at $17 7000.

Bruno Constantino Alexandre dos Santos: Total Advisors number on the right includes our IFAs, or B2B, as we call it, already disclosed in previous quarters, added by Internal Advisors, our B2C, and RIAs, Registered Investment Advisors, which includes Consultants and Wealth Managers, among others. We decided to disclose these numbers starting in 2024 because of the growth of other channels beyond IFAs. We believe this number better represents our total distribution capability. As you know, the investment advisory profession in Brazil has evolved, with XP leading this movement, and different channels to serve the client have appeared and presented relevant growth in recent years. From now on, we are going to present the total number of advisors, including all channels.

Speaker Change: <unk> growth year over year.

Speaker Change: Total advisors number on the right includes our <unk> or <unk> as we call it.

Speaker Change: Already the closing of our previously quarters Ed.

Speaker Change: <unk> internal advisors, our b to C and red.

Speaker Change: Registered investment advisors, which includes consulting and what managers among others.

Speaker Change: We decided to disclose these numbers.

Speaker Change: 2024, because of the growth of other channels beyond phase one.

Speaker Change: We believe these numbers better represents our total distribution capability.

Speaker Change: As you know investment adviser proficient in Brazil has evolved.

Speaker Change: With XP, leading these movements.

Speaker Change: And different channels to serve the clients have appeared and presented relevant growth in recent years from now on we are going.

Speaker Change: To present, the total number of advisors, including all channels.

Bruno Constantino Alexandre dos Santos: On the left, we can see that total net new money, another important KPI, stood at 15 billion reais in first quarter 24. With retail, net new money is likely better quarter over quarter, moving from plus 12 billion reais in fourth quarter 23 to plus 13 billion reais in first quarter 24. While lower than its potential, especially considering the actual size of our ecosystem, we believe retail netting money will improve down the road as we keep growing our total advisors, improve the client experience with a powerful financial planning tool, as Maffra already mentioned, invest in our private banking segment, also mentioned, and expect less tax exempt credit notes from the incumbent banks to change in regulation.

Speaker Change: On the left.

Speaker Change: We can see that.

Speaker Change: Total net new money on other important Kpis you stood at 15 billion high some first quarter 'twenty for it.

Speaker Change: Retail net new money is like better quarter over quarter, moving from plus 12 billion highest in fourth quarter 'twenty three two plus <unk>.

Speaker Change: 24.

Speaker Change: While lower than its potential, especially considering the actual size of our system.

Speaker Change: We believe retail net new money will improve down the road as we keep growing our total advisors improve the client experience with a powerful financial planning tool as Mark already mentioned invest in our private banking segment also already mentioned.

Speaker Change: Expect less exits into credit notes from incumbent banks two chains regulation.

Bruno Constantino Alexandre dos Santos: Of course, there is a macro component which impacts net new money, and resilient inflation coupled with still high interest rates don't help. But we see a positive trend going forward, considering we are moving towards a better cycle for investments, even acknowledging the pace is probably going to be slower than initially thought. Moving on to the next slide, we're going to take a closer look at our grass wrap.

Speaker Change: Of course, there is a macro component will impact net new money and resilient inflation, coupled with still high interest rates don't help.

Speaker Change: Do we see a positive trend going forward, considering we are moving towards a better cycle for investments even acknowledging the base is probably going to be slower than initially thought.

Speaker Change: Moving on to the next slide we're going to take a closer look at our growth ramping.

Bruno Constantino Alexandre dos Santos: Total gross revenue grew 28% year over year, helped by the diversification of our ecosystem, a strong DCM activity, and easy comp with first quarter 23, when we had a dysfunctional market due to corporate credit problems in Brazil. On the right-hand side of the slide, where we can see our gross revenue breakdown, the main highlight is the continued relevance of corporate and issuer services at 12% of total revenue, and retail still representing the majority of our total revenue at 73%. A strong performance from capital markets is reflected in both retail, especially fixed income, and corporate and insurer services.

Speaker Change: Total <unk> revenue grew 28%.

Speaker Change: Okay.

Speaker Change: The diversification of our ecosystem is strong DCM activity, an easy comp with first quarter 'twenty, when we had a dysfunctional market due to corporate credit problems in Brazil.

Speaker Change: On the right hand side of this slide.

Speaker Change: We can see our gross revenue breakdown. The main highlight is the continued relevance of orbit and issuer services.

Speaker Change: 12% total revenue and retails to representing the majority of our total revenue at 73%.

Speaker Change: Our strong performance from capital markets is reflected in more retail, especially in fixed income and corporate and issuer services.

Bruno Constantino Alexandre dos Santos: Let's move to the next slide, which focuses on Retail New Verticals, continuing to deliver strong growth year over year. In first quarter 24, New Verticals revenue stood at 493 million reais, a 35% growth year over year. However, on a quarter-over-quarter basis, New Verticals revenue remained almost flat, mainly due to the seasonality of cards in Q4, the main contributor to New Verticals revenue. It is worth remembering that this number only includes retirement plans, cards, insurance, and credit, to be consistent with our previous disclosure.

Speaker Change: Let's move to the next slide which folks on retail new verticals.

Speaker Change: New verticals.

Speaker Change: Continuing to deliver a strong growth year over year in first quarter 'twenty four new verticals revenue stood at $493 million has 35% growth year over year.

Speaker Change: On a quarter over quarter basis, new verticals revenue remained almost flat mainly due to the seasonality of guards in Q4, the main contributor to new verticals wrapping it up.

Speaker Change: It is worth remembering the number only includes retirement plans.

Speaker Change: <unk> insurance and credit to be consistent with our previous disclosure.

Bruno Constantino Alexandre dos Santos: If we add the digital account, the international platform, and NSX, all of them included in other retail revenue, we would have approximately an additional R$100 million in revenue in the first quarter. The main highlight here is that the evolution of new verticals underscores our efforts to make the company less cyclical and, more importantly, enhance the investor experience at XT. Moving on to the next slide, we will talk about our Institutional, Incorporated, and Insurance Services revenue.

Speaker Change: If we add these door count international platform and effects all of them included in other retail revenue would have approximately an additional 100 million housing revenue in the first quarter.

Speaker Change: The main highlight here is that the evolution of new words calls underscores our efforts to make the company less cyclical and more importantly, enhance the investor experience at XD.

Speaker Change: Moving on to the next slide we will talk about our institutional incorporate in issuer services revenue.

Bruno Constantino Alexandre dos Santos: Starting with institutional revenue displayed on the left-hand side of the slide, we had R$ 354 million in revenue in the first quarter of 2024, 7% growth year-over-year and 14% decrease quarter-over-quarter, mainly impacted by lower market activity by institutional clients in Brazil sequentially. Turning to the right hand side of the slide, corporate and insurer services revenue reached 509 million reais in first quarter 24, a strong growth of 91% year over year and flat quarter over quarter.

Starting with institutional revenue delayed on the left hand side of this slide we had a $354 million has revenue in first quarter 'twenty four 7% growth year over a year and a 14% decrease quarter over quarter, mainly impacted by lower market activity by.

Speaker Change: <unk> clients in Brazil sequentially.

Speaker Change: Now.

Speaker Change: Turning to the right hand side of the slide corporate and issuer services revenue reached $509 million <unk> in first quarter 'twenty four.

Speaker Change: The strong growth of 91% year over year and flat quarter over quarter.

Bruno Constantino Alexandre dos Santos: In the last three quarters, sequentially, corporate and issuer services presented revenue north of 500 million reais, reinforcing our strategy to diversify our revenue stream through our wholesale bank and also demonstrating XP is well-positioned to continue benefiting from DCM activity in Brazil. Now, let's move on to the next slide, where we will explore our SG&E and efficiency ratios. As stated in previous quarters, cost discipline is a priority at XP. SG&A X incentives reached R$1,416,000,000 in first quarter 24, a growth of 36% year over year and a decrease of 9% quarter over quarter.

And the last three quarters sequentially corporate in issuer services presented revenue north of 500 million highs.

Speaker Change: Reinforced.

Speaker Change: <unk> to diversify our revenue stream through our wholesale bank and also demonstrating XP is well positioned to continue benefiting from DCM activity in Brazil.

Speaker Change: Now, let's move on to the next slide where we will explore our SG&A and efficiency ratios.

Speaker Change: As I stated in previous quarters cost discipline is a priority at XP.

Speaker Change: <unk> X incentives reached 1.416 billion has in first quarter 'twenty for a growth of 36% year over a year and a decrease of 9% quarter over quarter.

Bruno Constantino Alexandre dos Santos: The growth year over year is mainly explained by two facts. One, the comparison with first quarter 23, when we had very low share-based compensation due to the layoffs implemented in that period. And two, we didn't have modal SG&A in first quarter 23.

Speaker Change: The growth year over year is mainly explained by two facts.

Speaker Change: The comp with first quarter 2003, when we had very low share based compensation due to the layoffs implemented in that beard and two we didn't have model SG&A in first quarter 'twenty three.

Bruno Constantino Alexandre dos Santos: The decrease, quarter over quarter, can be explained by, one, our continuous focus on efficiency and, two, seasonality of some expenses, like marketing and expert events, for example. The bottom line, as you can see on the graph in the right, is that our efficiency ratios continue to be close to their lowest levels since IPO, with the comp ratio at 25.2% and the efficiency ratio at 36.5%. This stability in our expenses ratios underscores the positive operating leverage of our business, which should benefit our EBT in the years to come. Moving on to EBT.

Speaker Change: The decrease quarter over quarter can be explained by one hour continues focusing efficiency.

Speaker Change: Seasonality of some expenses like Mark team and expert <unk> for example.

Speaker Change: The bottom line as you can see on graph on the right is that our efficiency ratios continue to be close to its lowest levels since IPO with comp ratio at 25, 2% and efficiency ratio at 36, 5%.

Speaker Change: The stability in our expenses ratios underscores the positive operating leverage of our business, which should benefit our EBIT in the next years to come.

Bruno Constantino Alexandre dos Santos: Thanks to operating leverage and efficiency ratios, we have achieved a record EBT number for our first quarter at R$1,088,000,000, a 33% improvement year-over-year and a 9% improvement quarter-over-quarter. This brings our pre-tax profit margin to 26.9%, 81 BPS growth year over year, and 226 BPS growth quarter over quarter. Looking ahead, as per our midterm public guidance, we aim to reach a pre-tax profit margin between 30% and 34% by the end of 2026.

Speaker Change: Moving on to EBIT.

Speaker Change: Thanks to the operating leverage and efficiency ratios.

Speaker Change: We have achieved a record EBIT number for our first quarter at $1 billion and $88 million <unk>, 33% improvement year over year, and a 9% improvement quarter over quarter.

Speaker Change: This brings our pre tax profit margin to 26, 9% or 81 bps growth year over year, and 226 bps growth quarter over quarter.

Looking ahead as part of our midterm public guidance.

Speaker Change: We aim to reach a pre tax margin between 2% and 34% by the end of 2026.

Bruno Constantino Alexandre dos Santos: This goal underscores our commitment to progressively moving towards this level. While we may see some volatility on a quarterly basis, as we saw in fourth quarter 23, for example, it's important to focus on our annual performance or, on a last 12 month basis, which we believe better incorporates the seasonality aspects of our business.

Speaker Change: These goal underscores our commitment to progressively moving towards these levels.

Speaker Change: While we may see some volatility on a quarterly basis as we saw in fourth quarter between the <unk>. For example, it's important to focus on our annual performance or.

Speaker Change: On a last 12 month basis.

Speaker Change: Please better incorporates the seasonality aspects of our business.

Bruno Constantino Alexandre dos Santos: To get there, we expect to see better results at our core in the years to come, benefiting from its operating leverage. And until then, we will keep doing our homework to keep costs under control and enhance the experience and quality of service to our clients. Moving on to our net income, we see similar improvement to what we have discussed with EBT. Net Income Reach 1 billion and 30 million reais in the first quarter.

Speaker Change: To get there.

Speaker Change: To see better results at our core in the years term benefiting from its operating leverage.

Speaker Change: And then few of them.

Doing our homework to keep costs under control and enhance the experience and quality of service.

Speaker Change: Yeah.

Speaker Change: Moving on to our net income we see similar improvement to what we have discussed with EBT.

Bruno Constantino Alexandre dos Santos: Also, a historical record for first quarter numbers representing 29% growth year over year and almost flat quarter over quarter. And net margin stayed at healthy levels in first quarter 24, at 25.4%. Finally, our return on tangible equity. We kept our animalized return on tangible equity at similar levels of the fourth quarter 23, at 25.4%.

Speaker Change: Net income reached one.

Speaker Change: $1 billion, and 30 million housing first quarter 'twenty four awful historical record for first quarter numbers, representing 29% growth year over year, and almost flat quarter over quarter.

Speaker Change: And net margin stay at healthy levels in first water 24.

Speaker Change: At 25, 4%.

Speaker Change: Finally, our return on tangible equity.

Speaker Change: We get to our annualized return on tangible app, putting similar level.

Bruno Constantino Alexandre dos Santos: This consistency underscores the returns we are able to generate on our tangible equity independently of the macro environment, demonstrating the evolution of our ecosystem and business model. We continue to be diligent about how to allocate capital. Every year we analyze our capital needs, liquidate it, and decide how much of our excess capital we are going to return to shareholders. This is usually done in the second semester of the year, when we also have our budget for the next year.

Speaker Change: Quarter 'twenty three at 25.

Speaker Change:

Speaker Change: This consistency underscores the returns we are able to generate on our tangible equity income.

Speaker Change: At a macro environment demonstrating the.

Speaker Change: Our ecosystem and business model.

Speaker Change: We continue to be diligent about how to allocate capital every year.

Speaker Change: But it is.

Speaker Change: The weighted.

Speaker Change: Decide how much of our excess capital we're going to return to shareholders. This is usually done in the second semester of the year. When we also have our budget for the next year.

Bruno Constantino Alexandre dos Santos: As a company that is profitable, generates cash, is underleveraged, and has excess capital, it is reasonable to assume a distribution of capital to shareholders at some point in the second semester of this year. And before I hand the call back to Mafra for his final remarks, I want to touch on our CFO transition, as well as the important change that we have implemented from a corporate governance perspective.

Speaker Change: As a company that is profitable.

Speaker Change: <unk> cash is under leverage and has excess capital.

Speaker Change: It is reasonable to assume a distribution of capital to shareholders at some point in the second semester of this year.

Speaker Change: And before I hand, the call back to Martin for his final remarks.

Martin: Want to touch on our full transition as well having bought the change that we have implemented from a corporate governance perspective.

Bruno Constantino Alexandre dos Santos: This will be my last earnings call as CFO, as I transition to a board member role. I'm excited that Vitor Mansur will become CFO effective August 1st. He's a long-term partner of XP, and he joined the firm in the same year I did in 2012.

Martin: Sure.

Speaker Change: These will be my last earnings call as CFO as I transition to a board member role.

Speaker Change: I'm excited that <unk> will become CFO effective August 1st.

Bruno Constantino Alexandre dos Santos: He's already a member of our executive committee and has worked together with me in the finance team since 2022 as deputy CFO. He's the natural successor with the strong capabilities and experience to lead the finance organization. I have no doubt in my mind that I'm leaving the role in great hands. On behalf of the board, I'm also pleased with the recently announced change we have made to our corporate governance structure. Following the upcoming annual meeting, we will have a majority independent board of directors in line with best-in-class corporate governance practices.

Speaker Change: He is a long term partner of XP has joined the firm at the same year I did 2012 is already a member of our Executive Committee and has worked out.

Speaker Change: In 2022 as deputy CFO.

Speaker Change: Is the natural successor with these capabilities and experience to lead the finance organization I have no doubt in my mind that I'm, leaving the role in great hands.

Speaker Change: On behalf of the Board I'm also pleased with the recently announced changes we have made for corporate governance.

Speaker Change: Following the upcoming annual meeting.

Speaker Change: It will have a majority independent board of directors in line with best in class corporate governance practices.

Bruno Constantino Alexandre dos Santos: We are thrilled to add four new independent directors that bring critical skill sets to the board, especially in risk management, banking, and credit, as we continue to diversify and grow our business in a dynamic financial landscape. We have also formed two new committees. One, a risk, credit, and ESG committee, and two, a strategy and performance committee that will strengthen board oversight in areas that are important to the next chapter of growth for XP. With that said, I will now turn it over to Maffra for his final remarks. Thank you very much. Before I go to my final art...

Speaker Change: We are thrilled to add four new independent directors, bringing critical with skill sets to the board, especially in our risk management banking and credit as we continue to diversify and grow our business.

Speaker Change: In a dynamic financial lens.

Speaker Change: We have also formed two new committees.

Speaker Change: One <unk>.

Speaker Change: <unk> and ESG commute into strategy and performance community that we always strange board or sites in areas that are important to the next chapter of growth for Etsy.

Speaker Change: With that said.

Speaker Change: I will now turn it over to <unk> for his final remarks, thank you very much.

Thiago Maffra: I want to take a moment to thank Bruno for his outstanding service as CFO. We are profoundly grateful for his dedication and contributions. Bruno, we look forward to your continued contributions to the board of directors and wish you all the best in this new role. So, to wrap things up, we have had a strong quarter, especially considering seasonality. We have kept our expenses under control, and we are confident in our ability to manage the company effectively throughout the year.

Speaker Change: Before I go to my final remarks.

Speaker Change: I want to take a moment to thank Bruce for his help thinking SaaS as a CFO.

Speaker Change: Profoundly grateful for his education and contributions.

Speaker Change: Bruno we look forward to your continued contributions on the board of directors and wish you all the best in his new role.

Speaker Change: So to wrap things up we have had a strong quarter, especially considering seasonality.

Speaker Change: We have kept our expense under control and we are confident in our ability to manage the company effectively throughout the year.

Thiago Maffra: This disciplined approach positions us well to capitalize on any improvements in market conditions whenever they arise. Additionally, the integration of open investments as a catalyst in our financial planning tool is something we are particularly optimistic about, creating an opportunity to make our clients' financial lives better, enhancing overall service equality, the third wave of differentiation for XP. Now, let's proceed to the Q&A session.

Speaker Change: She's just peanut approach positions us well to capitalize on any improvements in the market conditions and never may arise.

Speaker Change: Additionally, the integration of open investments and a catalyst in our financial planning tool is something we are particularly optimistic about.

Speaker Change: And an opportunity to make our client's financial lives better.

Speaker Change: Enhancing overall service quality.

Speaker Change: Third wave of differentiation for <unk>.

Speaker Change: Now let's proceed the Q&A session.

Andre Parize: Thank you, Maffra. Now we're going to take your questions, and the first one is from Thiago Batista, from UBS. Thiago, now you can ask your question.

Speaker Change: Thank you your mantra now I'm going to take your questions. The first one is from Thiago Batista UBS.

Speaker Change: So now you can make a question.

Thiago Bovolenta Batista: Thanks, Parize. Thanks, Maffra, Bruno.

Speaker Change: Okay.

Speaker Change: Thanks, Martha Bruno.

Thiago Bovolenta Batista: My first question.

Speaker Change: You mentioned several times about this does mark Snyder that have right now.

Thiago Maffra: My first question, Maffra, you mentioned several times about this tough macro scenario that we have right now. What are, in our view, the main alternatives that XP has to post a higher EPS? In the case of no improvement in the macro scenario, that seems more likely now than a couple of months ago. And also, a second one about the retinue Monday.

Speaker Change: What are you doing.

Speaker Change: Certainly.

Speaker Change: If you have to post.

Speaker Change: Our higher EPS in.

Speaker Change: In the case of no improvement in the market.

Speaker Change: That seems like now that a couple months ago.

Thiago Maffra: The total net new money of $14-15 billion in this quarter, or $13 for retail only, is probably one of the lowest ever, or at least the lowest in the last year. Bruno's speech was a bit more positive about the outlook for the Net New Money. So, can you give us an idea of the evolution of Net New Money in the last couple of months? Not necessarily with the numbers, but only with the trends, only to see this sense of possible improvement in this Net New Money. And finally, Bruno, thanks a lot for your participation.

Speaker Change: And also Cleveland.

Speaker Change: I would tell you that the new Monday.

Speaker Change: It doesn't.

Speaker Change: Monday of 14 15 billion in this quarter or <unk> 13 for the stay on it is probably one of the lowest ever Oracle is lowest in the last few years.

Speaker Change: <unk> speech was a bit more positive with delek to look after that new money. So can you give.

Speaker Change: With an idea of the evolution of that the money in the last couple from us.

Speaker Change: So if the numbers, but only if the trends wait to see.

Speaker Change: Sense of possible.

Speaker Change: <unk>.

Speaker Change: And I think already.

Speaker Change: And finally, Bruce Thanks, a lot for the partnership.

Thiago Maffra: Thank you, Thiago. And Bruno will continue with us forever here, so I'll be here. I'll be here. Thank you for your words, Thiago.

Speaker Change: Yes.

Speaker Change: Thank you Thiago.

Speaker Change: And Bruno <unk> with us.

Speaker Change: Forever here so.

Thiago Maffra: So, about your first question, EPS. As you know, we have been talking about our strategy and how we think about the company for the future, and growth. I like to think about the three, three pillars that we have been talking about investments, cross sell, and wholesale banking. Okay, so these are the three pillars.

Speaker Change: And ultimately over here, but I think it was a language.

Speaker Change: Millward genre.

So about your first question EPS as.

Speaker Change: We have been talking about about their strategy and how we think about the company for future growth.

Thiago Maffra: And of course, investments. We have been growing, but at a very slow pace compared to the past, because of the macro environment, and we have been growing more on cross sells and the wholesale part. So that's how we have been managing to keep growing, of course, at a lower level than we have been growing in 2020 and 2021. But we have been growing despite the macro environment because we have been investing in these new verticals on the wholesale part and diversifying the business. And besides that, we have been controlling costs. So, what do we have planned for 2024? Internally, of course, not the market, and Matt for expectations.

Speaker Change: I'd like to think on the re.

Speaker Change: Pillars that have been talking Nevada.

Speaker Change: And wholesale banking.

Speaker Change: These are the three dealers and of course investment.

Speaker Change: We have been growing but at a variable basis.

Speaker Change: The past because of the microenvironment and it hasn't been growing more on cross sell and the wholesale part okay. So that's how we have in managing to keep growing.

Speaker Change: Of course at a lower level than we have been growing 20 2020 of anyone.

Speaker Change: But have been growing despite the microenvironment is because we have been investing in <unk>.

Speaker Change: New verticals on the wholesale part and diversifying the business and the fact that we have been controlling costs.

Speaker Change: <unk>.

Speaker Change: While they have plan or 2024.

Speaker Change: In parallel of course not in the market.

Speaker Change: Uh huh.

Speaker Change:

Speaker Change: Hmm math for expectations.

Thiago Maffra: Despite any macro improvement, okay, so we have prepared the company for 2024, expecting another very tough year, as we have had in the past two years, okay. But at some point, for sure, we will have a better market, and we will have operational leverage. But for sure, on the first pillar, investments will grow at a slower pace if the macro doesn't change. Okay. But we have been investing in new verticals, and we believe we can deliver good growth, not spectacular growth, despite the macro environment improving or not. Okay, so that's my view on manual mining.

Speaker Change: Is.

Speaker Change: Despite any macro improvement okay. So we have prepared the company for two I know you are expecting.

Speaker Change: <unk> team.

Speaker Change: Another very tough year, and we had the best years, Okay. So but at some point for sure. We will have a better market. We will have operational leverage but sure first pillar investments will grow at a slower pace if the macro doesn't change okay, but we have been investing in new verticals.

And we believe we can do.

Speaker Change: Deliver a good growth not in the spectacular growth despite.

Thiago Maffra: Yes, I believe that the worst is behind us. But, as you mentioned, we are and about like, what Bruno said, we are more optimistic today than we were a year ago or two years ago. I believe the worst is behind us, but it will take some time to recover to levels that we have been seeing again in 2020 and 2021. I mentioned a lot about what we have been doing here, diversifying channels, what the wealth managers, the internal advisors, and so on to keep growing.

Naomi: The market environment, improving or not okay. So that's my view and above Naomi.

Naomi: Yes, I believe that the.

Naomi: Worst is behind us.

Speaker Change: As you mentioned, we are in about <unk> <unk>.

Speaker Change: And the fed we are more optimistic today than we were like a year ago or two years ago I believe.

Speaker Change: The worst is behind Bud.

Speaker Change: It will take some time to recover to levels that we have been seeing again in 'twenty late 2021.

Speaker Change: You mentioned a lot about what we have been doing here.

Speaker Change: Diversifying channels.

Thiago Maffra: We have been investing a lot in financial planning, on delivering another level of service to our clients. So we have been investing a lot in what we call the third wave of differentiation because we believe that it will pay off. Okay, so that's the way we believe we will recover net new money. Okay. And we already see that in some of our numbers. And again, we also see some improvement from the change on tax-exempt notes. Okay, so that's it. Very clear, Maffra.

Speaker Change: What the wealth managers paranoia wiser than salon.

Speaker Change: Growing what we have been investing a lot on financial planning on delivering another level of service each work clients. So have the vessel.

Speaker Change: And what we call the third wave of differentiation because we lead with.

Speaker Change: We'll pay off okay. So and that's the way we believe will correlate net new money and we already see that some of our numbers and again.

Speaker Change: We also see some improving momentum on the change on <unk>.

Thiago Maffra: Very clear, Maffra. Thank you.

Speaker Change: No.

Speaker Change: Okay.

Speaker Change: That circle.

Speaker Change: Berkeley and muscle.

Jorge Kuri: The next question is from Jorge Kuri, Morgan Stanley. Jorge, you can make your question. Hi, everyone.

Speaker Change: Next question is from Jorge Kuri.

Speaker Change: Morgan Stanley.

Jorge Kuri: Hi, everyone. Thanks for the call and all the best of luck, Bruno, in your new role at Xp. And thank you for all of your insights these years. I wanted to ask something.

Speaker Change: Accordingly, you can make your question.

Speaker Change: Hi, everyone.

Speaker Change: Thanks for the color.

Speaker Change: All of it.

Speaker Change: In Europe overall.

Speaker Change: Thank you for all of your insights.

Jorge Kuri: I want to ask about the tax rates, given the change in the macro landscape that you described before and how that, you know, maybe changes the type of business and profit centers that you're going to be booking versus the environment that we thought was going to play out earlier this year. How does, can you help us understand how that affects your effective tax rate or not? If more of the business is going to come from excess capital rather than capital deployment locally because, you know, it's a slower business environment, does that benefit your tax rate?

Speaker Change: Wanted to ask something.

Speaker Change: I wonder about the tax rate given the change in the macro landscape that you described before and how that.

Speaker Change: Maybe it changes the type of business.

Speaker Change: Profit centers.

Speaker Change: King versus.

Speaker Change: Environment, we thought it was going to play out earlier this year.

Speaker Change: And how does that.

Speaker Change: I think your effective tax rate our dogs.

If more of that this is going to come from the excess capital rather than the capital or the local labor costs.

Speaker Change: It's a slower business environment benefit accurate.

Jorge Kuri: Anything that you can help us get our arms around, how does that look over the next two years? If, indeed, we have sort of a slow, sluggish equities environment with selling at, you know, stock at 10%?

Nicole: Thank you Nicole.

Speaker Change: Help us get our arms around how does that look over the next two years.

Speaker Change: If indeed, we have forecasted.

Speaker Change: <unk> equity environment.

Speaker Change: Great.

Speaker Change: About 10% for the malls, which seems to be the consensus view of that.

Bruno Constantino Alexandre dos Santos: Yeah, sure. Thank you, Jorge.

Speaker Change: Thank you.

Speaker Change: Sure. Thank you.

Speaker Change: Regarding the tax rate.

Bruno Constantino Alexandre dos Santos: Yeah, regarding the tax rate, we saw a higher tax rate, an effective tax rate, if we come back with the tax withholdings that we have in funds. It was 18% this quarter, for example, compared to 11% in fourth quarter 23, and 17% in first quarter last year. So if there is more and it depends a lot on the mix of the revenue, so it's hard to forecast the tax rate because we do not know what the mix is going to be; it depends partly on macroeconomics, capital market activity, and so forth.

Speaker Change: We saw higher.

Speaker Change: Tax rate, our effective tax rate if we.

Speaker Change: Come back with the tax withholdings that we have in.

Speaker Change: <unk> funds.

Was 18%.

Speaker Change: These water.

For example, bear to 11% in fourth quarter, 23, and 17% seen in first quarter.

Speaker Change: Last years old.

Speaker Change: If there is more and it depends a lot on the mix of the Rev. Right. So it's hard to forecast the tax rate because we do not know what the mix is going to be it depends start till the micro capital markets activity and so forth.

Bruno Constantino Alexandre dos Santos: But I would say in the next two years, if we continue with an environment like the one we are living right now, the first quarter, 24 is a good guess. That's, but it's a hard forecast, honestly. Okay.

Speaker Change: But I would say the next.

Speaker Change: Two years.

Speaker Change: If we.

Speaker Change: We continue with an environmental one we are leaving right now the first quarter 'twenty four is a good guess.

Jorge Kuri: Okay, I got it. Thank you.

Speaker Change: So that's but it's a hard forecast honestly.

Speaker Change: Okay got it thank you.

Renato Meloni: Renato Meloni, Autonomous Research. And after that, you can make your question.

Speaker Change: Okay.

Speaker Change: And at the Millennial Autonomous research.

Renato Meloni: Hi everyone. Thanks for the space for the questions. So mine is on the equity take rate. I wonder if you can give us some more clarity on the decline this quarter. Was this a makeshift, or maybe the competitive environment is a bit tougher, and you're seeing some declines here in fees. And then some expectation on the trends in the equity take rate if the scenario continues the same. Thank you.

Speaker Change: You can make your question.

Parker: Hi, everyone. Thanks, there for the space for the quick questions. So minus on the equity take rate I Wonder if you can give us some more clarity here on the decline. This Parker was mix shift or maybe the competitive environment is a bit tougher and you see some decline in CRE piece.

Parker: And then.

Parker: Some expectation on the trends in the equity take rate. If this scenario continues the same.

Bruno Constantino Alexandre dos Santos: And the pick, the pick rate. The take rate is, it was a marginal decrease, right, a few base points. And that's normal because, again, it's a function of total client assets in the denominator and revenues in the numerator. So there is a little bit of a mix. But it's been in the range that we believe is normal in the past years or quarters. If you look at it, the answer here, there was no change in price. Okay, so because you mentioned that if we had any price pressure, there was no change in price.

Speaker Change: Thank you.

Speaker Change: And take the take rate.

Speaker Change: The take rate is was a marginal decrease right.

Speaker Change: <unk> basis points, and that's normal because again, it's a function of total client assets in the denominator and revenues in the numerator. So there is a little bit of mix.

Speaker Change: But.

Speaker Change: It's been in the range that we believe is normal in the past years or quarters. If you look at it.

Speaker Change: The answer here.

Speaker Change: There was no changing price okay. So because you mention if we had any price pressure there was no no changing annual price okay.

Bruno Constantino Alexandre dos Santos: Okay, so you expect stable equity take rates for the rest of the year in this scenario? In this scenario, yeah, yeah.

Okay.

Bruno Constantino Alexandre dos Santos: Yeah, equity, equity tick rates. Remember that in the equity bucket. In retail, we have not only brokerage futures, but we also have, for example, listed funds. So depending on whether we have a quarter with a lot of the listed funds doing follow-ons or even IPOs, then the take rate could go up. If we don't, it can be less favorable compared to quarters where we have that kind of activity. There are also structured notes and structured finance in that market as well. So again, it's more about the mix.

Speaker Change: Okay.

Speaker Change: Rates for the rest of the year and the scenario there.

Speaker Change: Yeah equity equity take rates remember that in the equity.

Speaker Change: Buckets.

Speaker Change: In retail we have not only brokerage futures, but we also have for example is fed funds. So dependent on if we have a quarter with.

Speaker Change: A lot of the listed funds doing follow ons or even ipos than the take rates could go up if we don't it can be less favorable compared to quarters, where we have that kind of activity. There is also <unk>.

Speaker Change: Structure notes in the structured finance or are there in that.

Bruno Constantino Alexandre dos Santos: Then in turnover, mix, and the turnover of the equities, you saw that the debt year over year has decreased. So the activity in capital markets in the velocity of turnover, whenever it's weak, then it's a negative impact. Everything else equals a negative impact on the equity take rate. If a turnover picks up, it's a positive impact on take.

At buckets as well so again, it's more about the mix there.

Speaker Change: Then and turnover mixing and the turnover of the App as you started that that year over year. It has decreed so the activity in capital markets and the velocity of turnover whenever each week.

Speaker Change: It's a negative impact.

Speaker Change: Else equal.

Speaker Change: Equal a negative impact in the in the equity take rates if turnover.

Speaker Change: It's a positive impact in take rate.

Antonio White: The next question is from Antonio White, Bank of America. Antonio, you can make your own question.

Speaker Change: Thanks.

Speaker Change: Great next question is from Ah, Tony What Bank of America Antonio.

Antonio White: Hey, guys, thank you for your time. And Bruno, thank you for all your time with us.

Speaker Change: You can meet your question.

Speaker Change: Hey, guys. Thank you for your time and Bruno. Thank you all for all your time with us.

Antonio White: So I would like to follow up on Thiago's question on clients. So if you could explore a little bit more how to serve this client, because my question comes from the decline in NPS. So we continue to see, on top of inflows, we see weak client additions and declining NPS. So what does that reflect in your opinion? And also, would you say that, going forward, your revenue expansion tends to come from outside or inside?

Antonio: So I'd like to follow up on geography question on clients. So if you could explore a little bit more honed how to serve this client because my question comes from the decline in <unk>. So we continue to see on top of inflows that we see a weak client solutions.

Antonio: The decline in EPS.

Speaker Change: What does it reflect in European.

Speaker Change: And also.

Would you say that going forward.

Speaker Change: You're at revenue expansion tends to come from outside or inside.

Speaker Change: Do you still have a market share gains or should it become a much more from the monetization.

Speaker Change: Of your your own clients.

Antonio White: Do you still have market share to gain, or should it come much more from the monetization of your own clients? And how have you seen outflows in this scenario? Okay, so this is my first question, and also, if you could explore a little bit the performance of the IFA commissions in this quarter. Thank you.

Speaker Change: How high how have you seen outflows into scenario. Okay. So this is my first question and also if you could explore a little bit deeper.

Thiago Maffra: Okay, I will take the first question about the NPS. The decline was one point, so it's probably not even like a statistical relevant.

Speaker Change: The performance of the IFA commissions in this quarter.

Thiago Maffra: Okay. So, but yeah, and at a very high level, so we don't see any relevant decline in NPS. And so we don't see any problem here.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: The first question about the NPS.

Speaker Change: The decline was one point so it's.

Speaker Change: Probably not leaving.

Speaker Change: A statue skull relevant okay. So budd.

Speaker Change: Yeah and in fact at a very high level. So we don't see any.

Relevant decline oil and gas and so.

Thiago Maffra: And we should, as we have been investing a lot in quality, increasing the level of service to our customers, the tools, financial planning, and so on, we expect to see an increase in NPS in the medium term. Okay, so about how we expect to make money, if it's internally or externally, it's both of them. When we talk about the first pillar, it's investments, and again, about gaining market share. But also, if we have a market recovery here, we will increase revenues. So they're like the two main catalysts here.

Speaker Change: Don't see any problem here and we should.

Speaker Change: We have even investing a lot on quality, increasing the level of service to charter customers.

Speaker Change: <unk> financial planning and so on.

Speaker Change: We expect to see and in the medium term and increase them on NPS. Okay. So.

Speaker Change: About how we expect to make money, if using Darren any or externally. It's both of them. When we talk about the first pillar.

Speaker Change: <unk> investments it's.

Speaker Change: Ken.

Speaker Change: About gaining market share.

Speaker Change: But also if we have a market recover here, we created revenue so they're like two main catalysts here.

Thiago Maffra: We kept growing market share in the past years, despite the macro environment, and we'll keep growing. And also, as Bruno mentioned, if we have a recovery, we'll see people moving from low, low fees products to more risky products, or we should see an increase in take rates. Okay. So that's how we grow investments. And then we have the cross-sell part. That's basically how we cross-sell products. Okay? Now we have dozens of products here that we can sell to our investor clients.

Kept growing market sharing the best years, despite the macro environment and we will keep going okay, and also and Brent mentioned, if we have a rig over it will see people moving from.

Speaker Change: No.

Speaker Change: Louise broad it's tomorrow.

Speaker Change: Broad at all we should see an increase on take rate okay. So.

Speaker Change: That's how we grow investments.

Speaker Change: And then we have the cross sell Bart that's basically how we cross sell products. Okay. Now we have.

Speaker Change: But in terms of products there that we can sell training Hasbro's line, okay, so slightly heavier.

Thiago Maffra: So basically, what we have been reporting on the new verticals, of course, we have some other products that are not included in the new verticals, but we have been talking about them explicitly. And so we should increase the ARPU in the next quarters. Okay.

Speaker Change: The annual report.

Speaker Change: As we have supplied there that are not included on the new verticals, but we have been talking about them.

Speaker Change: Please sleep and so we should increase.

Speaker Change: The the <unk>.

Bruno Constantino Alexandre dos Santos: So both internally and externally, market share plus cross sell. Regarding your second question about commission costs. It's, it's in an expected, I would say number considering the percentage of net revenue, for example. So we have oscillations in quarters, but it's nothing relevant. If you take the first quarter 23, for example, our total commission costs represented 23% of net revenue. If you look at the last quarter, fourth quarter 23, it represented 20% of net revenue in this quarter. So it's inside a natural band. And what explains that fluctuation is one thing, mixing. So it depends on the mix; it can have a higher percentage of net revenue or a lower percentage of net revenue.

Speaker Change: In the next quarters, Okay. So.

Speaker Change: Both internally and externally market share plus cross sell.

Speaker Change: Okay.

Speaker Change: Regarding your second question about the commission costs.

Speaker Change: It's it's in.

Speaker Change: Expected.

Speaker Change: Yeah.

Speaker Change: Number considering.

Speaker Change: The percentage of net revenue for example, so we have.

Speaker Change: Okay.

Speaker Change: Waters.

Speaker Change: But he is nothing relevant if you take the first quarter 'twenty three for example, our total commission reps.

Speaker Change: Ah represents 20% of <unk>.

Speaker Change: If you look at the first quarter.

Speaker Change: I went through it represent 20% of net revenue in this quarter, 21%. So it's.

Speaker Change: It's an unnatural.

Speaker Change: Our natural band and what <unk>.

Speaker Change: Explains that fluctuation is one thing mix so it depends on the mix.

Speaker Change: We can have higher percentage of net revenue a lower percentage of net revenue.

Speaker Change: Yeah.

Neha Agarwala: OK, the next question is from Neha Agarwala from HSBC. Neha, you can make your question.

Speaker Change: Yeah.

Speaker Change: Alright, thank you.

Speaker Change: Okay, an extra soon as from Nihon <unk> from HSBC.

Neha Agarwala: Hi, thank you for taking my question. Just quickly on the open plans initiative that you mentioned, with the open investments, you seem to be trying to facilitate that with your client base. How much traction have you received on that?

Speaker Change: You can make your question.

Speaker Change: Hi, Thank you for taking my question.

Speaker Change: Just quickly on your Latin shape is that you mentioned the deal given the investments you seem to be.

Speaker Change #100: Client feedback client how much traction.

Speaker Change #100: Then that you mentioned.

So the competitors, making it Eli Lilly utilizing that.

Thiago Maffra: And you mentioned that you don't see most of the competitors utilizing that. But once they do, do you see that as a hindrance for your platforms? Discussing a bit more the dynamics of open investments, and the second question is on costs; you continue to maintain cost discipline. But are there any more levels for pulling down the cost to income ratio? Or are we kind of done here, and this is the level that we should continue to expect going forward?

Speaker Change #101: Obviously adobe is to see that.

Speaker Change #102: Well I'm going to buy a platform.

Speaker Change #102: I will discuss a bit more of that.

Speaker Change #102: One lesson.

Speaker Change #102: Second question is on costs.

Speaker Change #102: Maintaining cost discipline, but are there any more levers.

Speaker Change #102: Pulling down that path.

Speaker Change #102: Okay.

Speaker Change #102: It should come to me, what we should expect going forward.

Bruno Constantino Alexandre dos Santos: You broke up. Sorry, Neha. So the first question is about the financial open, open investments. Yeah.

Speaker Change #103: Thank you.

Speaker Change #104: You broke up Sardinia so.

Speaker Change #105: The first question is about the financial land opening restaurants, yeah opening of asthma.

Speaker Change #105: And all of the competition is behaving.

Bruno Constantino Alexandre dos Santos: or should we expect this kind of cost-to-revenue ratio to continue going forward?

Speaker Change #106: And can you give me one is on the costs do you haven't got the question right.

Thiago Maffra: Yeah. We just released the tool to our IFAs, internal advisors, and clients, so it's at a very early stage, but the beauty for us is what we have been doing when we talk about financial planning is we replicate the level of service that only high and ultra-high clients usually have at private banking for all our clients. Okay, so we have created this system, and we have been developing this system for the past year. We just released a financial planning system and open investments together.

Speaker Change #107: Oh I should we expect this kind of cluster.

Speaker Change #107: Continuing going forward.

Speaker Change #108: Okay got it yes.

Speaker Change #108: We just released the dip to two or I or face internal advisors and clients.

Speaker Change #108: It's at the very early stage, but the beauty, whereas is.

Speaker Change #108: Why do we haven't been doing when we talk about financial planning is.

Speaker Change #108: We have.

Speaker Change #108: Replicate the level of service fee that only high and ultra high clients usually have at private banking.

Speaker Change #108: To all our clients. Okay. So we have created we and we have been developing.

Thiago Maffra: So the beauty here is you have a completely different conversation with your clients because it's not you're trying to sell a product or only trying to sell a product or a portfolio, but you are selling a service. Okay, so you really understand their needs, their goals, their lifetime, their objectives, and so on. And then you help them to get there.

Speaker Change #108: For the past year, we just released financial lending system and open investments together, so the blue here.

Speaker Change #108: You have a completely different conversation with your clients because its not youre trying to sell.

Speaker Change #108: Or only trying to sell a broader portfolio, but you are selling a service. Okay. So you really understand their needs their renewals.

Speaker Change #108: The their lifetime there of ABA.

Thiago Maffra: Okay, so it's a much broader conversation. And where open investments get here, because once they give, they allow us to go to the banks and get all the information. We see the whole portfolio. Okay, so we have been doing that for, I would say, two to three weeks now. And the results they're quite impressive. Okay, the level of conversation and engagement with the clients, but it's too soon to give a number or any schematic about the use years or something, but we are very optimistic about the tools and especially the new service that we are providing to our clients.

Speaker Change #109: Jack cheeses and so on.

Speaker Change #109: And then you'll help them.

Speaker Change #109: You'll get there okay. So it's a much broader conversation and we're opening investments get here because once they use they allow us to go to the banks and get all the information.

We see all of the portfolio. Okay. So we have maintained for I would say two to three weeks now and the results. They they are quite impressive okay. The level of conversation and engagement with the clients, but its too soon to give.

Speaker Change #109:

Speaker Change #109: Or any change of about eight years or something what we have to iterate opportunities above.

Thiago Maffra: And just the service, if I can follow up, the service is all digital, and there's not extra expenditure that you have to make to provide this better quality service. And do you still think that your service is much superior to the incumbents, or have the incumbents kind of closed the gap in terms of the service level that you provide? I like you.

Speaker Change #109: Mid twos and.

Speaker Change #109: Especially with the new services that we're providing to our clients.

Speaker Change #110: And that's the service if I can follow up with that.

Speaker Change #111: Listen our visitor and then all that FEMSA that you have.

Speaker Change #111: The quality of it and is there anything that left.

Speaker Change #111: Much lumpier than the covenants that had even government kind of north of our gap in terms of service level that you provide.

Thiago Maffra: I like to say that we have three waves of differentiation here at XP; the first one back in 2010 was product, the first open platform; the second one that we still have a huge differentiation is distribution. We have a much bigger sales force, the educated to investments, better trained 100% 100% folks on investments. Okay, so we still have a big differentiation here.

Speaker Change #112: I like to say that we have 383 waves of differentiation here at <unk>. The first one back in 2010.

Speaker Change #112: Rod the first open platform. The second one that we still have a huge differentiation is distribution we have a much bigger.

Thiago Maffra: But we are working on the third wave of differentiation that's not selling products but selling a completely different service. Okay, I would say that the banks, they're the incumbent banks; they're trying to replicate the first two waves. Of course, they open the platform, okay, but they still sell 80 85% of their own products on the client's portfolio, okay. And they are trying to replicate the distribution, training people and creating specialized people on investments. But again, I believe we are already opening the gap again on the third wave of differentiation for individuals.

Speaker Change #112: Our sales force dedicated to investments better.

Speaker Change #112: <unk> 100.

Speaker Change #112: 100% focus on investments Okay. So we still have a big differentiation here, but.

Speaker Change #112: More on that third wave of differentiation, that's not selling products, but selling completely different service okay.

Speaker Change #112: The banks there than common banks, they are trying to replicate the first waves.

Speaker Change #112: Of course, they are in the platform, okay, but these fuel cell.

Speaker Change #113: 80 885.

Speaker Change #113: One product on the client's portfolio, okay, they're contractual right to regulate the distributions training people and creating specialized.

Speaker Change #113: Born on investments, but again I believe we.

Speaker Change #113: We are already.

Speaker Change #113: Opening that gap again on the third wave of differentiation here, we have been training about cosmetically makes Jim.

Speaker Change #113: We train our retrained all the the Diaphane at work being paranoid advisors, we have invested a lot in technology, because it's a I K of business here. So of course, it's very easy to do that a very good job on financial.

Thiago Maffra: But when you do that for 5 million clients, it's not so easy. So we have been training a lot of people. We have developed tools, technology, and again, what we call financial planning plus open investments. For example, we just centralized the CIO figure on Arthur Vischman, recreated all the segments in the company, and our tour is giving all the patients calls to all the segments. And just financial planning tools. They give the correct location, they rebalance the portfolios, and so on.

Speaker Change #113: Blayne, when you're working with only high net worth each vehicles, but when you do that for a 5 million coin is.

Speaker Change #113: It is not so easily have been training a lot of you who have developed to technology and again, what we called <unk> plus opening patents for example.

Speaker Change #113: Just centralize it.

Speaker Change #114: The CIO.

Speaker Change #114: Figure.

Speaker Change #114: Each month, we did.

Speaker Change #114: Recreate all the segments in the company and are doing is giving all these.

Speaker Change #114: All of this.

Speaker Change #114: And internationally.

Speaker Change #114: They get it.

Thiago Maffra: Okay, so it's a completely different service from what you can get at the incumbent banks. Of course, again, if you are a high net worth client, for sure, you have the service at any bank, okay, but if you have, if you are affluent, or if you have only a few thousand US dollars, you don't have the service, okay, at other places than XP.

Speaker Change #114: Correct.

Speaker Change #114: We bounced the portfolios and so on.

Speaker Change #114: A completely different.

Speaker Change #114: Sir.

Speaker Change #114: You can get on the incumbent Bang of again, if you are a high net worth clients for sure you'll have a surge.

In any bank, okay, but.

Speaker Change #114: It will have pure fluent or if have only.

Speaker Change #114: <unk> thousand U S dollars.

Bruno Constantino Alexandre dos Santos: Here, Mia, to do what Maffra explained, at scale. That's the main challenge, you know, to, we just released this quarter our total number of advisors, more than 17,000 advisors, talking about investments, which is a complex topic, especially if you are going into financial planning, and do that at scale with the quality and service that we want to achieve. That's the challenge, but we believe we have all the tools to make it happen.

Speaker Change #115: Just serves okay in order placed in NXP.

Speaker Change #115: Okay.

Speaker Change #115: Yeah.

Speaker Change #116: If you do what Martha explain that.

Speaker Change #116: Yes.

Speaker Change #117: This quarter, our total number of advisors more than 17000 advisers talking about investments, which is a complex.

Speaker Change #117: Opex, especially if you were pointing to.

Speaker Change #117: Lenny.

Speaker Change #118: That's good.

Bruno Constantino Alexandre dos Santos: And your second question was about the cost. Yeah, we, look, last year we mentioned that for this year, you should look more at the second semester SG&A than the first semester, mainly because of modal. We didn't have modal in the first semester; we had it in the second semester; now everything is integrated, it's only XP now.

Speaker Change #118: The audience. So we wanted to.

Speaker Change #118: That's down.

Speaker Change #118: We believe.

Speaker Change #118: Who's to to make it happen.

Speaker Change #118: And your second question was about the cost.

Speaker Change #119: Yeah, we look last year, we mentioned that.

Speaker Change #119: For this year you should look more at the second semester SG&A during the first semester.

Speaker Change #119: Mainly because of mobile we didn't have more down in the first semester, we had it in the second semester and now everything is in.

Bruno Constantino Alexandre dos Santos: And the level of SG&A that you saw in the first quarter, of course, there will be volatility among quarters, but when we look throughout the year, our expectation is to keep costs under control, as Maffra mentioned in his speech. On this slide, during the presentation, I also mentioned that we have some seasonality, which is how our company works. So, for example, we will have expert events in the third quarter. We will have higher marketing expenses throughout the year compared to the first quarter because there is seasonality there. But overall, the efficiency ratio should be close to the lowest levels going forward as well.

Speaker Change #119: It's only you know.

Speaker Change #119: And the level of SG&A that you saw the first quarter of course, there will be volatility among quarters, but when we look throughout the year.

Speaker Change #120: Our expectation is to keep costs under control as Martha mentioned <unk>.

Speech.

Speaker Change #121: In D C slide during the presentation I also mention just that we have some seasonality which is.

Speaker Change #121: Our company works well for example, we will have expert events in the third quarter.

Speaker Change #121: We will have higher marching advances throughout the year compared to the first quarter because there is seasonality there but are all the.

Speaker Change #121: The efficiency ratio should be.

Neha Agarwala: Thank you so much, Bruno. Thank you so much, Thiago. Very helpful.

Speaker Change #121: Closer to the lowest levels going forward as well.

Guilherme Dias Fernandes Benchimol: The next question is from Guilherme Grisbon, from JP Morgan. Guilherme, you can make your question.

Speaker Change #122: Thank you so much John thanks, so much.

Speaker Change #121: Yeah.

Speaker Change #121: Thanks.

Speaker Change #123: The next question is from.

Guilherme Dias Fernandes Benchimol: Maffra, Bruno. Thank you for the call.

Speaker Change #124: But J P Morgan.

Speaker Change #125: You can make your question.

Guilherme Dias Fernandes Benchimol: Two questions on our side. The first one is related to net asset value. I think you guys departed from $9.9 billion in the fourth quarter; you printed $1 billion in profit, so it was supposed to go up to $10.9 billion, but I see this number actually declined to $9.4 billion in NAV this quarter, so there's a $1.6 billion gap. We were taking a look here on the notes. I know that you spent something close to $700 million in IFA, probably the brokerage of select IFAs, but I just want to understand the breach; what exactly drove this declining NAV?

Speaker Change #126: Thank you.

Speaker Change #127: Thank you for your two.

Speaker Change #128: Two questions on our side. The first one is related to net asset value.

Speaker Change #129: I think you guys departed from $9 9 billion in the fourth quarter, you printed 1 billion profit. So it was supposed to go up to $10 nine.

Speaker Change #130: But I see this number actually climbed to 94.

Speaker Change #130: Each quarter, so it's a $1 6 billion gap.

Speaker Change #131: We were taking a look purely at let's say no that has been.

Speaker Change #131: Something close to 700 million knee.

Speaker Change #131: Hey.

Speaker Change #131: The brokerage of select Facebook still close to a billion MISO here.

Guilherme Dias Fernandes Benchimol: And then the second question is related to energy. You publish here an adjustment on the financial assets that are related to energy, which has been growing a lot quarter over quarter, $3.6 billion to be precise. I just want to make sure I understand exactly what you mean by energy assets. Could you explain just what you put there and what the $3.6 billion means in the context of the energy trading business? Thank you.

Speaker Change #131: Baird.

Speaker Change #132: Just want to understand the breach what exactly drove this is declining.

Bruno Constantino Alexandre dos Santos: Yeah, sure. I can take those two questions.

Speaker Change #132: And then the second question is related to energy.

Speaker Change #132: You called this year, an adjustment on the financial assets.

Speaker Change #133: <unk> has been growing a lot quarter over quarter.

Speaker Change #134: $3 6 billion with precise.

Speaker Change #135: Just want to make sure I understood.

Speaker Change #136: And what exactly you mean by India.

Speaker Change #137: Assets. If you can explain just what you got there and what the $2 6 billion.

Bruno Constantino Alexandre dos Santos: So the NAV, it's basically first, remember that there is part of this variation that is explained by seasonality, especially in the first quarter, third quarter as well, but most in the first quarter, because of tax and bonuses payments. So tax and bonuses payments in the first quarter 24 net presented almost close to 800 million reais deduction of the NAV, right? So that coupled with the close to 700 million reais that you highlighted in the investments that we made that had the cash disbursement, the investments were made at the end of last year, but the cash disbursement happened in the first quarter this year, which deducts from the NAV as well, because you change the lines, right?

Speaker Change #138: The context of the energy trading business.

Speaker Change #139: Yes, sure I can take.

Speaker Change #140: Those two questions so the AAV.

Speaker Change #140: It's basically first.

Speaker Change #140: Remember that the Breeze part of these variation that is explained by seasonality, especially in the first quarter and third quarter as well, but most in the first quarter.

Speaker Change #140: Because of tax and bonuses payments.

Speaker Change #140: So <unk>.

Speaker Change #140: Taxi bonuses payments in the first quarter 'twenty four net.

Speaker Change #140: Preempted.

Speaker Change #140: Almost close to 800 million.

Speaker Change #141: The bottom of the <unk> right, so that coupled with the close to 700 million has that you highlighted in.

Speaker Change #141: And the investments that we made that had the cash disbursement.

Speaker Change #141: <unk> were made at the end of last year, but the cash disbursement happening in the first quarter this year.

Bruno Constantino Alexandre dos Santos: So it's not a financial asset anymore; it becomes an investment. So those three components all together, Guilherme, the investments, tax, and bonuses, they are close to 1.5 billion reais in this quarter. That mainly explains the variation that you add regarding energy. It's basically a energy prepayment. We have an energy desk in Xp mostly, so it's a low-end, low-end loop.

Speaker Change #142: That's from the Navy as well because if you change the lines writes I E.

Speaker Change #142: It's not a financial asset and more it becomes and investments. So those are three.

Speaker Change #142: <unk> components altogether.

Speaker Change #142: <unk> investments.

Speaker Change #142: Tax and buses.

Speaker Change #142: They are close to $1 5 billion.

Speaker Change #142: Water, so mainly explains the variation that you're asking.

Speaker Change #142: Sure.

Speaker Change #143: Regarding energy.

Speaker Change #143: Basically.

Speaker Change #143: Energy, we have are asking.

Speaker Change #143: Yeah.

Speaker Change #143: Hello.

Speaker Change #143: Yeah.