Q2 2024 Patria Investments Ltd Earnings Call

All clients should not be placed on that.

Operator: and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the risk factors section of our latest Form 20-F annual report. Also note that no statements on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in a Patria fund. Patria is a foreign private issuer that reports financial results using International Financial Reporting Standards, or IFRS, as opposed to US GAAP.

Operator: and does not intend to update any such four-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the risk sectors, risk factors section of our latest Form 20-F annual report.

Patria: Patria assumes no obligation and does not intend to update any such forward-looking statements.

Operator: Also, those that know statements on this call constitute an offer to sell, or a solicitation of an offer to purchase an interest in any Patria Fund.

Operator: As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to U.S.

As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to US GAAP.

Operator: Gat. Additionally, we would like to remind everyone that we will refer to certain non-IFRS measures, which we believe are relevant in assessing the financial performance of the business, but which should not be considered in isolation from, or as a substitute for, measures prepared in the course of IFRS. Reconciliation of these measures to the most comparable IFRS measures is included in our earnings presentation.

Operator: Additionally, we would like to remind everyone that we will refer to certain non-IFRS measures which we believe are relevant in assessing the financial performance of the business but which should not be considered in isolation from, or as a substitute for, measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our EARNINGS presentation. Now, I will turn the call over to Alex.

Operator: Now, I will turn the call over to Alex.

Alexandre Saigh: Alex? Thank you, Rob, and good morning, everyone. The second quarter of 2024 was a very busy quarter for Patria, as we continue to make solid progress towards our near and long-term goals.

Alex: Thank you, Rob, and good morning, everyone. The second quarter of 2024 was a very busy quarter for Patria, as we continue to make solid progress towards our near and long-term goals. This morning, we're also excited to announce our first share repurchase program and an update to our capital management strategy, as well as the acquisition of the 50% of VBI we did not previously own. But first, let me summarize our second quarter results.

Patria: out

Patria: Thank you, Rob, and good morning, everyone.

Alexandre Saigh: This morning, we are also excited to announce our first share repurchase program, and an update to our capital management strategy, as well as the acquisition of the 50% of VBI we did not previously own. But first, let me summarize our second quarter results. Management fees reached over $70 million, up 14% year-over-year and 12% sequentially. While fee-related earnings reached $39.5 million, representing year-over-year and sequential growth of 17% and 13%, respectively. Expenses continue to be tightly managed, and we were able to deliver a 56% FRA margin, despite the onboarding of our acquisition of the private equity solutions business of Aberdeen, which we have previously indicated has a lower margin.

Speaker Change: as well as the acquisition of the 50% of VBI we did not previously own.

Speaker Change: But first, let me summarize our second quarter results.

Speaker Change: representing year-over-year and sequential growth of 17% and 13% respectively.

Alex: And we were able to deliver a 56% FRE margin, despite the onboarding of our acquisition of the private equity solutions business of Aberdeen, which we have previously indicated has a lower margin. We expect that we can realize some synergies from our acquisition. 60% in 2025, as we realize the expense synergy and the full impact of our fee revenue growth flows through the P&L. Moving on.

Speaker Change: Expenses continue to be tightly managed.

Speaker Change: And we were able to deliver a 56% FRE margin despite the onboarding of our acquisition of the private equity solutions business of Aberdeen.

Alexandre Saigh: We expect that we can realize some synergies from our acquisition, and our full year FRA margin for 2024 to be in the 56% to 58% range, trending back towards 58% to 60% in 2025, as we realize expenditures and the full impact of our fee revenue growth flows through the PNL. Moving on, we delivered close to $34 million of distributable earnings, or 22 cents per share compared to 21 cents in the prior quarter.

Speaker Change: And our full-year FRE margin for 2024 to be in the 56% to 58% range, trending back towards 58%.

Speaker Change: to 60% in 2025 as we realize expense synergies and the full impact of our fee revenue growth flows through the P&L.

Alex: We delivered close to $34 million of distributable earnings, or $0.22 per share compared to $0.21 in the prior quarter. Next, focusing on AUM, we finished the quarter with more than $40 billion, a robust 43% increase compared to the second quarter 2023 and 26% versus the first quarter 2024. Our AUM growth was driven both organically and inorganically by Fundraising that remains strong, with 1.3 billion dollars of organic inflows in the quarter. On the inorganic front, the completion of the acquisition of Arberdeen's private equity solutions business at the end of April, combined with the transfer of about $570 million of Real Estate Investment Trust AAUM from Credit Suisse Transactions, while the Aberdeen business was on our platform for only two months.

Alexandre Saigh: Carter. Next, focusing on AEM, we finished a quarter with more than $40 billion, a robust 43% increase compared to the second quarter 2023, and 26% versus first quarter 2024. Our AEM growth was driven both organically and inorganically by fundraising that remains strong, with $1.3 billion of organic inflows in the quarter, and approximately $5 billion over the last 12 months. We continue to see a clear path to achieving our previously communicated $5 billion organic fundraising target for the full year. On the inorganic front, the completion of the acquisition of Arbor Deans, private active solutions business at the end of April, combined to the transfer of about $570 million of real stake investment trust AEM from Credit Swiss Transaction added over $10.1 billion of AEM in the second quarter.

Speaker Change: Next.

Speaker Change: Focusing on AUM, we finished the quarter with more than $40 billion.

Speaker Change: a robust 43% increase.

Speaker Change: compared to the second quarter, 2023, and 26% versus first quarter, 2024.

Speaker Change: Fundraising that remains strong, with $1.3 billion of organic inflows in the quarter and approximately $5 billion over the last 12 months.

Speaker Change: On the inorganic front, the completion of the acquisition.

Speaker Change: combined to the transfer of about 570 million dollars of real estate investment trust AUM from Credit Suisse transaction

Speaker Change: added over $10.1 billion of AUM in the second quarter.

Alexandre Saigh: Please note that the addition of the real stake investment trust AEM occurred towards the end of the quarter, while the Arbor Deans business was on our platform for only two months. We expect to see another step up in AEM in the third quarter as a transfer of the remaining reach from Credit Swiss, with an additional $1.5 billion of assets, was completed by the end of July, while the acquisition of Nexus Capital, with over 700 million of AEM, closed also in July, and of course we are moving full speeds towards our targets of $5 billion of organic inflows for the year.

Speaker Change: Please note that the addition of the Real Estate Investment Trust AUM occurred towards the end of the quarter, while the Aberdeen business was on our platform for only two months.

Alex: We expect to see another step up in AUM in the third quarter as a transfer of the remaining REITs from Credit Suisse with an additional $1.5 billion of assets was completed by the end of July, while the acquisition of Nexus Capital, with over 700 million of AUM, closed also in July. And, of course, we are moving full speed towards our target of $5 billion of organic inflows for the year. Inclusive of the recently closed Nexus Acquisition and the remaining credits with REITs assets.

Speaker Change: We expect to see another step up in AUM in the third quarter as the transfer of the remaining REITs from Credit Suisse with an additional $1.5 billion of assets was completed by the end of July .

Speaker Change: Closed also in July , and of course, we are moving full speed towards our target of $5 billion of organic inflows for the year.

Alexandre Saigh: Inclusive of the recently closed Nexus acquisition and the remaining Credit Swiss reach assets, pro forma AEM are around $43 billion, of which over 20% is in permanent capital vehicles.

Alex: Proforma AUM is around $43 billion. Also, while it won't impact AUM, in the current quarter, we concluded the acquisition of the remaining 50% of VBI, full ownership of VBI, which has more than doubled its AUM since we made our initial investment. Putting it all together, our growing base of fee-earning AUM of $31 billion from acquisitions and fundraising and $200 to $225 million in 2025. Importantly, now that we expect to issue fewer shares and use more cash to fund M&A and related payments over the coming quarter.

Alexandre Saigh: Also, while it won't impact AEM in the current quarter, we concluded the acquisition of the remaining 50% of VBI. Full ownership of VBI, which has more than doubled if AEM since we made our initial investment from approximately $5 billion in mid 2022 to approximately $10 billion in mid 2024, should be additive to FRE. Putting it all together, our growing base of the early AEM of $31 billion from acquisitions and the fundraisers. Cuppled with tight expense controls, give us confidence that we remain firmly on track to deliver our FRE targets of over $170 million in 2024 and $200 to $225 million in 2025.

Speaker Change: Full ownership of VBI, which has more than doubled its AUM since we made our initial investment from approximately R$5 billion in mid-2022

Speaker Change: Putting it all together, our growing base of fee-earning AUM of $31 billion from acquisitions and fundraising.

Speaker Change: and 200 to 225 million dollars in 2025. Importantly, now that we expect to issue fewer shares and use more cash to fund M&A and related payments over the coming quarters,

Alexandre Saigh: Importantly, now that we expect to issue fewer shares and use more cash to fund M&A and related payments over the coming quarters, we are slightly increasing our previously announced FRE per share guidance of at least $1.90 in 2024 to between $1.10 and $1.12. While our 2025 FRE per share guidance also rises slightly to $1.26 to $1.41, or $1.34 at the midpoint of our guidance range, compared to $1.33 previously. Our FRE per share guidance reflects year-over-year growth at the midpoint of 12% and 20% for 2024 and 2025, respectively, and excludes the impact of future share repurchases.

Alex: We are slightly increasing our previously announced FRA for shared guidance of at least $1.09 in 2024 to between $1.10 and $1.12. Additionally, our 2025 FRE per share guidance also rises slightly to $1.26 to $1.41, or $1.34 at the midpoint of our guidance range, compared to $1.33 previously, and excludes the impact of future share repurchase.

Speaker Change: We are slightly increasing our previously announced FRE per share guidance of at least $1.09 in 2024 to between $1.10 and $1.12.

Speaker Change: while our 2025 FRE per share guidance

Speaker Change: also rises slightly to $1.26 to $1.41 or $1.34 at the midpoint of our guidance range.

Speaker Change: Our FRE per share guidance reflects year-over-year growth at the midpoint of 12% and 20% for 2024 and 2025 respectively.

Alexandre Saigh: Looking back to December 2021, the year we went public, this FRE growth results in a strong 21% CAGR at the midpoint of our 2025 target range. As our already strong FIERNI-AOM growth continues in the second half of 2024 and into 2025, we expected the road drive accelerating FRE growth as we start to read the full benefits of our P revenue growth. Couple this revenue growth with tight expense controls; both FRE per share and DE per share should accelerate as we move past the front-loading of M&A related debt and other expenses. Next, with regards to performance-related earnings or PRE, while we did not realize any performance fees in the quarter, we continued to generate attractive long-term investment returns for our clients and feel good about our potential to generate performance fees and meet our objective to realize a $180 million from the date of our last investor day in 2022 through 2025, of which we have already realized $66 million.

Alex: Looking back to December 2021, the year we went public, this FRE growth results in a strong 21% CAGR at the midpoint of our 2025 target. As our already strong fee-earning AUM growth continues in the second half of 2024 and into 2025, we expect it will drive accelerating FRE growth as we start to reap the full benefits of our P revenue growth. Combining this revenue growth with tight expense controls, both FRE per share and DE per share should accelerate as we move past the front loading of M&A-related debt and other expenses.

Speaker Change: Looking back to December 2021, the year we went public, this FRE growth results in a strong 21% CAGR at the midpoint of our 2025 target range.

Speaker Change: Couple this revenue growth with tight expense controls. Both FRE per share and DE per share should accelerate as we move past the front-loading of M&A related debt and other expenses.

Alex: Next, with regard to Performance-Related Earnings, or PRE, while we did not realize any performance fees in the quarter, we continue to generate attractive long-term investment returns for our clients, of which we have already realized $66 million. As a reminder, our Infrastructure Fund III is already through its waterfall and in its catch-up phase. We remain very proud of our long-term investment performance, and while the net accrued performance fee balance of $436 million, or $2.87 per share, did decline both year-over-year and sequentially. It was due almost entirely to foreign exchange movements.

Speaker Change: We continued to generate attractive long-term investment returns for our clients.

Speaker Change: and feel good about our potential to generate performance fees and meet our objective to realize $180 million from the date of our last Investor Day in 2022 through 2025.

Alexandre Saigh: As a reminder, our infrastructure fund 3 is already through its waterfall and in its catch-up phase. We remain very proud of our long-term investment performance, and while the net accrued performance fee balance of $436 million, or $2.87 per share, did decline both year-over-year and sequentially, it was almost entirely due to foreign exchange Ed Sheeran.

Speaker Change: As a reminder, our Infrastructure Fund 3 is already through its waterfall and in its catch-up phase.

Speaker Change: We remain very proud of our long-term investment performance, and while the net accrued performance fee balance of $436 million or

Speaker Change: $2.87 per share did decline both year over year and sequentially. It was almost entirely due to foreign exchange movements.

Alexandre Saigh: Before we dive deeper into our results for the quarter and expectations going forward, let me give you a little more color on an exciting and important evolution in our capital management strategy. First, the board determines to pay a dividend for 2024 of 62 and a half cents per share, or zero 0.625 dollars per share. And since we paid 17.5 cents per share, or 0.175 dollars per share, in the first quarter, we declared a quarterly dividend of 15 cents per share, which will be fixed at this level for the next three quarters. Simultaneously, we are announcing a share repurchase program of up to 1.8 million shares over the next 12 months, reflecting our focus on creating long-term shareholder value.

Speaker Change: First, the board determined to pay a dividend for 2024 of $0.625 per share or $0.625 per share.

Alex: And since we paid $0.175 per share, or $0.175 per share in the first quarter, which will be fixed at this level for the next three quarters. Simultaneously, we are announcing a share repurchase program of up to 1.8 million shares over the next 12 months, reflecting our focus on creating long-term shareholder value. In our view, the price of our stock does not come close to the current price to reflect our robust long-term outlook to the end of 2025 on top of the share repurchase program. As a reminder, PHL currently owns a majority stake of more than 53% in Pakistan.

Speaker Change: And since we paid $0.175 per share, or $0.175 per share in the first quarter,

Speaker Change: We declared a quarterly dividend of $0.15 per share, which will be fixed at this level for the next three quarters.

Alexandre Saigh: In our view, the price of our stock does not come close to reflecting our robust long-term outlook, and the board believes that resetting the dividend and focusing incremental cash flow on share repurchase and or reducing the level of debt are among the highest and best uses of returning capital through shareholders. Our confidence in our business outlook is further demonstrated by the fact that Patria Holding Limited or PHL, the controlling shareholder of Patria Investment Limited and the vehicle through which senior management, Patria stake is held, is committing to purchase up to an additional 12.5 million dollars of tax PX shares to the end of 2025.

Speaker Change: In our view, the price of our stock does not come close to reflecting our robust, long-term outlook.

Speaker Change: and the vehicle through which senior management's stake is held is committing to purchase up to an additional $12.5 million of PAX PAX shares through the end of 2025 on top of the share repurchase program.

Alexandre Saigh: On top of the share repurchase program, as a reminder, PHL currently owns a majority stake of more than 53% in Patria. These actions, in addition to our intention to utilize up to a hundred million dollars of future PRE to fund M&A and or pay down M&A related debts, and now to potentially repurchase stock as well, demonstrates that we will be flexible and opportunistic as we look to use our capital to drive profitable FRE and the EGRO and long-term returns to shareholders, while optimizing and maintaining a conservative balance sheet, which is of the highest priority and which Anna will review in more detail shortly.

Alex: These actions, in addition to our intention to utilize up to $100 million of future PRE to fund M&A and or pay down M&A-related debts, and now to potentially repurchase stock as well, demonstrate that we will be flexible and opportunistic as we look to use our capital to drive profitable FRE and DE growth and long-term returns to shareholders, while optimizing and maintaining a conservative balance sheet, which is of the highest priority and which Even with the change in our dividends, at the current stock price, the current yield is a solid 5%. Now, let's talk about our team's execution, of which I continue to be very proud.

Speaker Change: These actions, in addition to our intention to utilize up to $100 million of future P.R.E. to fund M&A and or pay down M&A related debts, and now to potentially repurchase stock as well,

Speaker Change: demonstrates that we will be flexible and opportunistic as we look to use our capital to drive profitable FRE and DE growth and long-term returns to shareholders.

Alexandre Saigh: So, even with the change of our dividends at the current stock price, the current yield is a solid of about 5%.

Speaker Change: So, even with the change of our dividends at the current stock price, the current yield is a solid of about 5%.

Alexandre Saigh: Now, let's talk about our team's execution, of which I continue to be very proud. Starting with organic fundraising, overall, it was another solid quarter. As mentioned, we raised $1.3 billion in the second quarter, bringing our total fundraising over the first half of 2024 to $2.2 billion or approximately $5 billion over the trading four quarters. We are particularly proud that even without a closing on a flagship fund, fundraising in the quarter and year to date has been strong, further highlighting the importance of having either diversified business. As we are in the market with multiple strategies across our platform, I thought it would be helpful to highlight several strategies and initiatives that we believe will be key contributors to our hitting, our fundraising, and FRE objectives.

Alex: Starting with organic fundraising, overall, it was another solid quarter. We are particularly proud that even without a closing on a flagship fund, fundraising in the quarter and year to date has been strong, further highlighting the importance of having a diversified business, as we are in the market with multiple strategies across our platform. I thought it would be helpful to highlight several strategies and initiatives and the 1.2 billion dollars we have gathered over the trading four quarters since our acquisition.

Speaker Change: bringing our total fundraising over the first half of 2024 to $2.2 billion or approximately $5 billion over the trailing four quarters.

Alexandre Saigh: First, our credit platform continues to exhibit strong momentum and is an important near- and long-term driver of new business, as evidenced by over $350 million we have raised in these strategies in the second quarter and the $1.2 billion we have gathered over the trading four quarters. Credit assets have grown close to 25% since our acquisition of another. We have had great success with our real estate products, which are predominantly impermanent capital vehicles. We have raised about $380 million over the first half of 2024, including over $140 million in the second quarter and approximately $850 million over the trading four quarters.

Speaker Change: Our credit platform continues to exhibit strong momentum.

Speaker Change: and is an important near and long-term driver of new business, as evidenced by over 350 million dollars we have raised in these strategies in the second quarter.

Speaker Change: Credit assets have grown close to 25% since our acquisition.

Speaker Change: which are predominantly in permanent capital vehicles.

Alex: We have raised about $380 million over the first half of 2024, including over $140 million in the second quarter. We see the potential to raise additional permanent capital in several of our REITs products. Our new global private market solutions platform has hit the ground running, and we expect to hold a significant first close.

Alexandre Saigh: With the transfer of the credits with REITs, we see the potential to raise additional permanent capital in several of our REITs products, although we are limited in what we can say as several are in registration. Permanent capital is particularly valuable, and growing this part of our business is a priority. Our new global private market solutions platform has hit the ground running and we expect to hold a significant first close of secondary its opportunity fund five or soft five before year end. Also a key highlight in the quarter was the closing of a $430 million SMA, or special managed account, which was a strong vote of confidence in our platform.

Furman Capital: Furman Capital is particularly valuable and growing this part of our business is a priority.

Speaker Change: Our new global private market solutions platform has hit the ground running and we expect to hold a significant first close of Secondaries Opportunity Fund 5 or SOF 5 before year-end.

Alex: Also, a key highlight in the quarter was the closing of a $430 million SMA, or Special Managed Account, which was a strong vote of confidence in our platform, and we continue to focus on developing and investing in our targeted platform and, most importantly, organic growth potential, which is supported by our M&A strategy. And we expect those allocations to trend upward and for our investor base to diversify as we expand our regional platform. In that regard, it's worth noting that over half of our fundraising in the second quarter and two-thirds year-to-date has come from long-term investment. We expect that we'll eventually rebound.

Speaker Change: Also, a key highlight in the quarter was the closing of a $430 million SMA, or Special Managed Account.

Alexandre Saigh: We continue to work on additional SMAs with existing and prospective clients and see the attraction in GPMS continuing to build. Over the balance of 2024, we expect to hold additional closings of our latest vintage infrastructure fund. You already have 1.1 billion dollars of commitments and believe that we can ultimately raise between 2 billion to 2.5 billion for this fund. As we have discussed previously, we see a lot of opportunity to invest this capital and have already started to deploy it. Finally, as we have discussed in prior calls, while the fund-raising environment in the private sector remains very challenging, particularly in Latam, we still believe we can approach our 2 billion dollar targets over time and expect additional closing over the latter part of the year.

Speaker Change: Over the balance of 2024, we expect to hold additional closings of our latest vintage infrastructure fund.

Speaker Change: If you already have $1.1 billion of commitments and believe that we can ultimately raise between $2 billion and $1.1 billion, you are wrong.

Speaker Change: to $2.5 billion for this fund.

Speaker Change: As we have discussed previously, we see a lot of opportunity to invest this capital and have already started to deploy it.

Speaker Change: Finally, as we have discussed in prior calls,

Speaker Change: While the fundraising environment in private equity remains very challenging, particularly in LATAM, we still believe we can approach our $2 billion target over time and expect additional closing over the latter part of the year.

Alexandre Saigh: At the same time, the investment environment remains very attractive, and we continue to focus on developing and investing in our targeted platforms. Sticking with a topic of fund-raising, we also want to use this quarter's call to provide some additional perspective as to why we are excited about and confident in our long-term fund-raising momentum and, most importantly, organic growth potential, which is supported by our M&A strategy. First, as we have talked about previously, alternative allocations from investors within the region, remaining extremely low compared to the rest of the world, and we expect those allocations to trend upwards and for our investor base to diversify as we expand our regional platforms. In that regard, it's worth noting that over half of our fund-raising in the second quarter and two-thirds year to date has come from Latam investors, highlighting the success we are having in our strategy of being the gateway for local investors to invest in alternative products.

Speaker Change: At the same time, the investment environment remains very attractive.

Speaker Change: And we continue to focus on developing and investing in our targeted platforms.

Speaker Change: Sticking with the topic of fundraising, we also wanted to use this quarter's call to provide some additional perspective as to why we are excited about and confident in our long-term fundraising momentum.

Speaker Change: and, most importantly, organic growth potential, which is supported by our M&A strategy.

Speaker Change: and for our investor base to diversify as we expand our regional platforms.

Alexandre Saigh: Similarly, global investors remain under allocated to the region, and while private equity demand has been impacted by the current global slowdown in demand, mainly from US pensions, we expect that will eventually rebound. In contrast to the current lackluster demand for private equity, global investor interest in infrastructure remains positive, and the potential in Latam is being recognized by a growing number of investors, as evidenced by the Saudi sovereign wealth fund, also known as the Public Investment Fund or the PIF, which stated its interest in infrastructure investment in the region and our signing of a memorandum of understanding with the Saudis Ministry of Infrastructure that Patrick remains one of their preferred investment partners in the region.

Speaker Change: Similarly, global investors remain under-allocated to the region and, while private equity demand has been impacted by the current global slowdown in demand, mainly from U.S. pensions,

Speaker Change: We expect that we'll eventually rebound.

Alexandre Saigh: We have a much more diverse investor base than ever, which helps de-risk the company even as it opens new potential investor segments. We are better positioned than we have ever been to grow our business as limited partners look to consolidate the number of managers they do business with, as the number of investment platforms, strategies, and investment vehicles we offer has grown substantially since our initial public office. It's easy to lose sight of the fact that we have only been public for just over three and a half years, and most of our acquisitions have been with us for two and a half years or much less.

Alex: We have a much more diverse investor base than ever, which helps de-risk the company even as it opens new potential investor segments. It's easy to lose sight of the fact that we have only been public for just over three and a half years, and most of our acquisitions have been with us for two and a half years or much less, reflecting ample opportunity to scale. It has a layer cake effect. All new permanent capital raised is incremental to management fee revenues and FRE and therefore of particularly high value.

Speaker Change: We have a much more diverse investor base than ever, which helps de-risk the company even as it opens new potential investor segments.

Speaker Change: It's easy to lose sight of the fact that we have only been public for just over three and a half years, and most of our acquisitions have been with us for two and a half years, or much less.

Alexandre Saigh: So many of the prospective benefits of our MNA strategy are new and in the very early stages of their life cycle, reflecting ample opportunity to scale. As an example, the launch earlier this year of our infrastructure, private credit fund, with a billion dollar target, an initial cornerstone investor such as the International Finance Corporation or IFC, the Development Bank of Latin America or CAF, and the Brazilian Development Bank or BNDES, highlights just one instance of how we are leveraging our expanded partnership with Moneda, to bring new and differentiated investment solutions to our clients. Similarly, we are just in the early stages of building and leveraging our expanded distribution platform and reach.

Speaker Change: So, many of the prospective benefits of our M&A strategy are new and in the very early stages of their life cycle.

Alexandre Saigh: Our sales and marketing team has grown from less than 10 at the time of the IPO to over 60 people today, with plans for additional expansion. Our regional distribution capabilities in Brazil, Chile, and Colombia are each relatively new to Patria and still in their early stages of development. And with the completion of the Credit Systems Action, one million retail investors in Brazil own a Patria brand and investment product, which we expect will provide additional cross-selling opportunities over time, strengthening our brand in the region. In addition, many retail clients also own a Patria brand and product through our trust listed on the London Stock Exchange.

Speaker Change: with plans for additional expansion.

Speaker Change: Our regional distribution capabilities in Brazil, Chile, and Colombia are each relatively new to Patria and still in their early stages of development.

Speaker Change: and with the completion of the Credit Suisse transaction.

Speaker Change: One million retail investors in Brazil own a Patria-branded investment product, which we expect will provide additional cross-selling opportunities over time, strengthening our brand in the region.

Alexandre Saigh: Finally, why it is perhaps less obvious, our growing base of permanent capital enhances our ability to generate organic as additional follow-on fund raising, particularly in permanent capital vehicles. Has a layer cake effect. Our new permanent capital raise is incremental to management fee revenues and FRE, and therefore of particularly high value.

Speaker Change: All new permanent capital raised is incremental to management fee revenues and FRE, and therefore of particularly high value.

Alexandre Saigh: So overall, we remain very excited about the outlook, our new capital management strategy, and our ability to leverage our M&A into future organic growth and FRE and DE growth.

Ana: So overall, we remain very excited about the outcome. Now, let me turn the call over to Ana to review the financials. Thank you, Alex, and good morning, everyone.

Ana Russo: Now, let me turn the call over to Anna to review the financials. Thank you, Alex, and good morning everyone. It has indeed been a very busy few months since we closed our on several acquisitions, announced the update to our capital management strategy and new share repurchase program and continue to invest in and build out our expanded product suite and distribution capabilities. Overall, we remain confident in our growth and FRE outlook over the balance of the year ending to 2025.

Ana: It has indeed been a very busy few months since we closed on several acquisitions, announced the update to our capital management strategy and new share repurchase program, and continued to invest in and build out our expanded product suite and distribution capabilities. Overall, we remain confident in our growth and FREI outlook for the balance of the year and into 2025. Starting with total fee revenues, the $71 million we reported was a 20% increase over Q2-23 and 17% over Q1-24.

Speaker Change: Thank you, Alex, and good morning, everyone.

Speaker Change: Overall, we remain confident in our growth and FRA outlook over the balance of the year and into 2025.

Ana Russo: Five. Let's now review the results for the second quarter and work our way down the P&L. Starting the total fee revenues, the $71 million we reported was a 20% increase over Q2 23 and 17% over Q1 24.

Speaker Change: Let's now review the results for the second quarter and work our way down the P&L.

Ana: The sequential increase was mainly driven by two months of revenues from the Aberdeen acquisition, which closed on April 26, as well as fees from net new flows into credit and real estate fee earnings AUM, all partially offset by a reduction in public equities due to outflows and negative asset returns in the quarter, as well as negative effects on tax. Higher year-over-year fee revenues also benefit from the November 23 closing of our transaction with Bank Colombia, new commitments, fundraising, and deployments in various vehicles, including Private Equity Fund 7, among other things.

Ana Russo: The sequential increase was mainly driven by two months of revenues from the Aberdeen acquisition, which closed on April 26th, as well as fee from net new flows into credit and real estate fee earnings AEM, all partially upset by a reduction in public agritives due to outflows and negative asset returns in the quarter, as well as negative effects impact. Higher year-over-year fee revenues also benefit from the November 23 closing of our transaction with Ban Colombia, new commitments, fund raising, and deployments in various vehicles, including private equity fund seven, among other things. We expect fee revenues to continue to benefit over the coming quarters and into 2025, as well as fully onboard our recent acquisitions.

Speaker Change: Higher year-over-year fee revenues also benefit from the November 23 closing of our transaction with Bank Colombia, new commitments, fundraisings and deployments in various vehicles including Private Equity Fund 7, among other things.

Ana: We expect fee revenues to continue to benefit over the coming quarters and into 2025, as we fully onboard our recent acquisitions. As a reminder, we closed on the Aberdeen acquisition at the end of April, and $500 million of fee-earning AUM of Credit Suisse REITs were transferred at the end of June, with the remaining $1.5 billion transferred by the end of July. Looking ahead into the coming quarters, we expect expense growth to predominantly include the impact of the acquisitions noted above.

Ana Russo: As a reminder, we close on the Aberdeen acquisition at the end of April, and 500 million of fee earnings AEM of Credit Swiss reads were transferred at the end of June, with the remaining 1.5 billion transferred by the end of July. We also close on the Nexus Capital acquisition with over 700 million of fee AEM in July. And finally, we close on the acquisition of the remaining 50% of VBI that we did not own, all in addition to our ongoing fund raising.

Speaker Change: As a reminder, we closed on the Aberdeen acquisition at the end of April , and $500 million of fee-earning AUM of Credit Suisse REITs were transferred at the end of June , with the remaining $1.5 billion transferred by the end of July .

Speaker Change: We also closed on the Nexus capital acquisitions with over 700 million of fee AUM in July . And finally, we closed on the acquisition on the remaining 50% of VBI that we did not own, all in addition to our ongoing fundraising.

Ana Russo: With regard to operating expenses of 31 million or personal expenses plus GNA, the increase of 5.8 million versus Q223 and 6.2 million versus Q124 mainly reflects the impact of our acquisitions of the private equity solutions from Aberdeen, the Credit Swiss read business and the subsidiary we form with Ban Colombia, in addition to incremental investment in marketing and technology resources. Looking ahead into the coming quarters, we expect expense growth to predominantly include the impact of the acquisitions noted above. After factoring in the impact of acquisitions, we expect little growth in underlying expenses as we recognize expense synergies, much of which we reinvest back into the business.

Speaker Change: The increase of $5.8 million versus Q2'23 and $6.2 million versus Q1'24 mainly reflects the impact of our acquisitions of the private equity solutions from Aberdeen, the Credit Suisse REIT business, and the subsidiary we formed with Bank Colombia, in addition to incremental investment in marketing and technology resources.

Speaker Change: Yeah.

Ana: After factoring in the impact of acquisitions, we expect little growth in underlying expenses as we recognize expense synergies, much of which we reinvest back into the business. Accordingly, we expect the pace of expense growth will moderate over the latter half of the year, particularly in Q4 and into 2025, and 13% versus Q1 2014. Looking ahead, we expect the pressure on the FRA margin to be transitory and for the margin to trend upwards, particularly in Q4, as we grow revenues, including the potential realization of incentive fees at the year-end, and we start to generate operating efficiency.

Speaker Change: After factoring the impact of acquisitions, we expect little growth in underlying expenses as we recognize expense synergies, much of which we reinvest back into the business.

Ana Russo: Accordingly, we expect the pace of expense growth to moderate over the latter half of the year, particularly in Q4 and into 2025. Shifting to fee related earnings as Alex highlighted earlier, Q224 FRE of 39.5 million dollars was up a healthy 17% versus Q223 and 13% versus Q124. They slightly slower growth in FRE relatively to see revenues reflect the impact from acquisitions as we onboard a new business with lower margins due to the structure of their fee rates. And we have not yet had an opportunity to realize any synergies from incorporating them onto our platform. Overall, however, we were very pleased to have sustained an average margin of 56% in Q224, which only decreased 1 percentage point compared to last year and 2 percentage points from prior quarter.

Speaker Change: Accordingly, we expect the pace of expense growth will moderate over the latter half of the year, particularly in Q4 and into 2025.

Speaker Change: Shifting to fee-related earnings, as Alex highlighted earlier, Q2'24 FRE of $39.5 million was up a healthy 17% versus Q2'23.

Alex: and 13% versus Q1 2024.

Speaker Change: The slightly slower growth in FRE relative to fee revenues reflects the impact from acquisitions as we onboard a new business with lower margins due to the structure of their fee rates

Speaker Change: And we have not yet had an opportunity to realize any synergies from incorporating them onto our platform.

Ana Russo: But we mean within our target range of 56 to 58% for the year.

Ana Russo: here. Looking ahead, we expect the pressure on the FRA margin to be transitory and for the margin to trend upwards, particularly in Q4, as we grow revenues, including the potential realization of incentive fees at the year end, and we start to generate operating efficiencies.

Speaker Change: Looking ahead, we expect the pressure on the FRA margin to be transitory and for the margin to trend upwards, particularly in Q4, as we grow revenues, including the potential realization of incentive fees at the year-end, and we start to generate operating efficiencies.

Ana Russo: Moving on to the distributor earnings, Patria delivered the of $33.8 million in Q224, up 8% versus the previous quarter, and lower than the second quarter of 23, even though FRA was notably higher year over year. Q223, including 10.7 million dollars of performance-related earnings versus none in both Q124 and Q224. Also, in Q223, net financial and other income was positive, $0.6 million versus a negative or a million in Q124 and negative $3 million in Q224, reflecting M&A financing cost, partially offset by about $0.6 million of income from our new energy trading venture in the second quarter.

Ana: Moving on to distributor earnings, Patria delivered DE of $33.8 million in Q2-24, up 8% versus the previous quarter and lower than the second quarter of 2023, even though FRE was notably higher year over year. Q2-23 includes $10.7 million of performance-related earnings versus none in both Q1-24 and Q2-24.

Speaker Change: Moving on to the distributor earnings.

Speaker Change: Q223 include $10.7 million of performance-related earnings versus none in both Q124 and Q224.

Ana: Also, in Q2'23, net financial and other income was positive $0.6 million versus a negative $1 million in Q1'24 and negative $3 million in Q2'24, reflecting M&A financing costs partially offset by about $0.6 million of income from our new energy trading venture in the second quarter. Regarding the share count, and excluding any potential benefit from share repurchase, we now expect the share count to finish in 2024 and 2025 closer to $153 million and $158 million, respectively, compared to our prior forecasts of $155 million and $160 million.

Ana Russo: Finally, our effective tax rate in Q224 came in at 7%, a function of our business and geographer mix. We expect the tax rate in 2024 to remain between 7% to 9%, and trending towards 10% in 2025. On a per share basis, Q224 DE of 22 cents was slightly higher than the 21 cents we reported in Q124 due to the above mentioning factors, and despite a higher share count, reflecting share's issue for incentive and defer compensation and contingent payments. Regarding the share count and excluding any potential benefit from share repurchase, we now expect the share count to finish 2024 and 2025 closer to 153 million and 158 million respectively compared to our prior forecast of 155 million and 160 million.

Speaker Change: Finally, our effective tax rate in Q2-24 came in 7%, a function of our business and geography mix.

Speaker Change: Regarding the share count and excluding any potential benefits from share repurchase, we now expect the share count to finish 2024 and 2025 closer to $153 million and $158 million respectively.

Speaker Change: compared to our prior forecasts of $155 million and $160 million.

Ana Russo: The more modern share count growth reflects our expectation that we will need to issue fewer shares in 2024 and 2025 to fund defer M&A and other contingent payments at this point. So putting all together, we expect the lead per share excluding performance fees to accelerate in 2025 as we continue to grow revenue and FRE. Move past the increase in and start to reduce M&A related finance costs and realize some expense synergies over the next 18 months. All before we factor the potential benefit from that reduction driven by PRE and incremental share repurchase. Finally, with regard to the balance sheet, we finish Q2 with approximately $176 million of debt outstanding, and we expect to use our credit facilities and our cash generation to fund the remainder of the credit suite transaction in addition to the acquisition of the remaining 50% of VBI.

Ana Russo: We expect our debt to average approximately 130 million over the next six months and potentially reach a peak of around 190 million at a year end, all depending on the timing of our obligations versus our cash generation in a particular month and then to start to decrease again in Q1 2025.

Speaker Change: We expect our debt to average approximately $130 million over the next six months and potentially reach a peak of around $190 million at the year end, all depending on the timing of our obligations versus our cash generation in a particular month.

Ana Russo: All the above excuse any perspective that stayed down related to future PRE. Our balance sheet for this quarter includes the acquisition of the global private market solutions from Aberdeem, part of the READS from Credit Suisse, and our new energy trading venture. However, we are still finalizing the opening balance for the GPMS acquisition, which will not be available until the end of August, as per the purchase agreement. We have considered a best estimate for our Q2 consolidated balance sheet based on the sellers' regulatory violence for Q121, and this methodology was agreed with our standard auditors and aligned with our board.

Speaker Change: and then to start to decrease again in Q1 2025. All the above excuse any prospective debt paydown related to future PREs.

Speaker Change: Our balance sheet for this quarter includes the acquisition of the Global Private Market Solutions from Aberdeen, part of the REITs from Credit Suisse, and our new energy trading venture.

Speaker Change: We have considered a best estimate for our Q2 consolidated balance sheet based on the sellers' regulatory filings for Q1 2024, and this methodology was agreed with our standard auditors and aligned with our board.

Ana Russo: Rest assured that keeping a conservative balance sheet is a priority, and we continue to target a debt FRE ratio of one time or less on average. Accordingly, to echo what Alex mentioned, when our expected debt levels are placed within the context of our strong confidence that we will generate $170 million plus of FRE in 2024 and $225 million in 2025. We expect to remain well within our target range, even excluding any potential debt paid down from PRA generation over the coming quarters. We also want to highlight that our expected share count and debt levels incorporates our expectation for any deferred or contingent payments that may come due over the balance of this year and into 2025, while excluding any prospective benefit from shared repurchase and or future PRA that may be used to pay down that.

Speaker Change: Rest assured that keeping a conservative balance sheet is a priority and we continue to target a debt FRE ratio of one time or less on average.

Ana: Accordingly, to echo what Alex mentioned, when our expected debt levels are placed within the context of our strong confidence that we will generate $170 million plus of FRE in 2024 and $200 to $225 million in 2025, we expect to remain well within our target range, even excluding any potential debt paid down from PRE generation over the coming quarter, while excluding any prospective benefit from SHERP repurchase and or future PRE that may be used to pay down debt. Our 2025 FRE per share guidance comes in at $1.26 to $1.41 with a midpoint of $1.34.

Speaker Change: Accordingly, to echo what Alex mentioned,

Speaker Change: When our expected debt levels are placed within the context of our strong confidence that we will generate $170 million plus of FRE in 2024 and $200 to $225 million in 2025.

Speaker Change: We expect to remain well within our target range, even excluding any potential debt paid down from PRE generation over the coming quarters.

Speaker Change: We also want to highlight that our expected share count and debt levels incorporates our expectation for any deferred or contingent payments that may come due over the balance of this year and into 2025.

Speaker Change: while excluding any prospective benefit from share repurchase and or future PRE that may be used to pay down debt.

Ana Russo: In closing, let me reinforce once again our growth in terms of FRE and D E per share. We expect FRE per share to rise to $1.10 and $1.12 for 2024 from our previous guidance of 109, which reflects our expectation that the 2024 year-end share count will be modestly lower than we had previously guided to as we issue fewer shares and we use more cash to fund M&A. And we related contingents, our 2025 FRE per share guidance comes in at $1.26 to $1.41, with a midpoint of $1.34. At midpoint, this represents a 20% year-over-year growth looking back to December 21.

Speaker Change: In closing, let me reinforce once again our growth in terms of FRA and DE per share. We expect FRA per share to rise to $1.10 and $1.12.

Speaker Change: for 2024 from our previous guidance of 109, which reflects our expectation that the 2024 year-end share count will be modestly lower than we had previously guided to as we issue fewer shares and we use more cash to fund M&A and related contingencies.

Speaker Change: Our 2025 FRE per share guidance comes in at $1.26 to $1.41, with a midpoint of $1.34.

Speaker Change: At midpoint, this represents a 20% year-over-year growth. Looking back to December 21, the year we went public, this FRA growth results in a strong 21% CAGR at the midpoint of our 2025 target range.

Ana: Looking back to December 21, the year we went public, this FRA growth results in a strong 21% CAGR at the midpoint of our 2025 target. Finally, we expect this strong FRA growth to also drive accelerated DE per share growth into 2025 as we move past loaded M&A financing costs and exclude the DE impact of any performance fees.

Ana Russo: The year we won public, this FRE growth results in a strong 21% CAGR at the midpoint of our 2025 target. Finally, we expect this strong FRE growth to also drive accelerated D E per share growth into 2025 as we move past from loaded M&A financing costs and excluding the D impact of any person's fees.

Speaker Change: Finally, we expect this strong FRE growth to also drive accelerated DE per share growth into 2025 as we move past from loaded M&A financing costs and excluding the DE impact of any performance fees. Overall, we are even more excited about the growth opportunities that lie ahead.

Alexandre Saigh: Overall, we are even more excited about the growth opportunities that lie ahead.

Alexandre Saigh: I will now turn back to Alex for closing remarks. Thank you, Anna. So to sum it up, there are several key takeaways from the quarter. First, we remain very comfortable with our fundraising FRE and FRE per share targets for 2024 and into 2025. and we expect to see accelerating DE growth in the second half of 2024 and into the next year as the full weight of our FIERNI AUM growth flows through and we move past the short-term headwinds resulting from M&A-related financing costs. We believe we have a long runway to grow fundraising, generate organic growth, and grow FRE and DE as it remains early days in executing on the platforms we have added through our M&A strategy and the investments we have made in new products and distribution resources.

Speaker Change: I will now turn back to Alex for closing remarks.

Alex: Thank you, Ana.

Speaker Change: So, to sum it up, there are several key takeaways from the quarter.

Ana: Overall, we are even more excited about the growth opportunities that lie ahead. First, we remain very comfortable with our fundraising, FRE, and FRE per share targets for 2024 and into 2025. And lastly, we are very proud of the differentiated and diversified investment platform we have built both organically and inorganically, making us the largest alternative asset management platform in the region in terms of direct assets under management, revenues, and fee-related earnings. Thank you for your time, and we are now happy to take your questions. Hi Chito, this is Alex and the team here.

Alex: First, we remain very comfortable with our fundraising, FRE, and FRE per share targets for 2024 and into 2025.

Speaker Change: And we expect to see accelerating DE growth in the second half of 2024 and into the next year.

Speaker Change: as the full weight of our C-earning AUM growth flows through and we move past the short-term headwinds resulting from M&A-related financing costs.

Alexandre Saigh: We see multiple early proof points that this strategy is starting to pay off. And lastly, we are focused on maximizing returns to shareholders and believe redirecting a portion of our capital generation to share repurchase is a very attractive use of our capital. This demonstrates that we will be flexible and opportunistic as we look to use our capital to drive profitable FRE and DE growth while maintaining a conservative balance. Overall, we are very proud of the differentiated and diversified investment platform we have built both organically and inorganically, making us the largest alternative asset management platform in the region in terms of direct assets and the management revenues and fee-related earnings.

Speaker Change: We see multiple early proof points that this strategy is starting to pay off.

Speaker Change: And lastly,

Speaker Change: We are focused on maximizing returns to shareholders and believe redirecting a portion of our capital generation to share repurchase.

Speaker Change: is a very attractive use of our capital.

Speaker Change: This demonstrates that we will be flexible and opportunistic as we look to use our capital to drive profitable FRE and DE growth while maintaining a conservative balance sheet.

Speaker Change: Overall, we are very proud of the differentiated and diversified investment platform we have built, both organically and inorganically.

Speaker Change: making us the largest alternative asset management platform in the region in terms of direct assets under management, revenues, and fee-related earnings.

Alexandre Saigh: We remain very excited generating our future growth prospects and look forward to providing a more complete update at our next investor day scheduled for December 9th. We thank you for your time, and we are now happy to take your questions.

Speaker Change: We remain very excited generating our future growth prospects and look forward to providing a more complete update at our next Investor Day scheduled for December 9th.

Speaker Change: We thank you for your time, and we are now happy to take your questions.

Operator: Thank you.

Operator: At this time, we will conduct the question-and-answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile your Q&A roster.

Speaker Change: Thank you. At this time, we will conduct the question and answer session.

Speaker Change: As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question, please press star 11 again. Please stand by while we compile your Q&A roster.

Tito Labarda: Question. Our first question comes from Tito LaBarda with Goldman Sachs. Tito, go ahead. Hi, good morning. Thank you for the call and taking my questions. A couple of questions.

Tito Labarda: I guess first on the deployment of the 200 million in the quarter, can you give some color on how you how I should impact the fees going forward from here and which funds that is expected to go in. And then the second question on look at the real estate management fee, at least the implied fee with down a bit in the quarter. Can you give any color on that what I was a little bit lower. Thank you.

Speaker Change: How that should impact the fees going forward from here and which funds

Speaker Change: that is expected to go in. And then the second question on, look at the real estate management fee, at least the implied fee was down a bit in the quarter. Can you give any color on that, where that was a little bit lower? Thank you.

Alexandre Saigh: Hi, Cheeto. This is Alex, and the team here. Thank you very much for participating in the call. Thanks for your questions. Most of the investments were from our infrastructure, if you related on this, right? That's well-affected related. It's infrastructure and the private equity funds. So private equity funds. And five, a little bit, six, and mostly seven are now continuing to deploy capital and infrastructure. How Infrastructure Five was already committing capital as well. Just reminded here the private equity seven already started deploying capital. We did the acquire and pay. The food retailer in Brazil and looking to now grow into the sector as an example, an example of the infrastructure side.

Alex: Thank you very much for participating in the call. Thanks for your questions. Most of the investments. So private equity fund five, a little bit, six, and mostly seven are now continuing to deploy capital, and infrastructure. Our infrastructure five was already committing capital as well. Just reminding here that Private Equity 7 had already started deploying capital. We did acquire and a in the state of Paraná.

Speaker Change: Hi Chito, this is Alex and the team here. Thank you very much for participating in the call. Thanks for your questions most of the investments were from our infrastructure, fee-related earnings, right? That's well, faculty-related earnings infrastructure and the private equity funds

Speaker Change: So private equity fund five, a little bit six, and mostly seven are now continuing to deploy capital and infrastructure.

Speaker Change: Infrastructure 5 was already committing capital as well. Just reminding here the Private Equity 7 already started deploying capital. We did acquire and a

Speaker Change: food retailer in Brazil and looking to

Speaker Change: now grow into the sector as an example. An example of the infrastructure side we did win the concession of a toll road.

Alexandre Saigh: We did win the concession of a toll road in the state of Parana. We also committed to other investments in private equity infrastructure fund five. On the real state side, I think we did divest a couple of assets from our legacy real state funds. We have two basically two families of funds, private equity real state, which have a drawdown nature to it, where we raise capital and we call capital and we divest as a regular private equity fund, but of course focused on real state assets. And this is exactly what happened here. We sold, among the assets that we sold, I'll name one as an example, which is a self storage business that we did hold in Brazil.

Alex: We also committed to other investments in the Infrastructure Fund 5. On the real estate side, I think we did divest. We have basically two families of funds; private equity real estate, which has a draw-down nature to it, as an example. And the second family of funds that we have in real estate are permanent capital funds where we then raise money, and it increases the NAV, and we don't have to actually give that money back.

Speaker Change: On the real estate side, I think we did divest.

Speaker Change: We have basically two families of funds, private equity real estate, which have a draw-down nature to it.

Speaker Change: where we raise capital and then we call capital and we divest as a regular private equity fund but of course focused on real estate assets.

Speaker Change: and this is exactly what happened here. We sold, among the assets that we sold, I'll name one as an example, which is a self-storage business that we did hold in Brazil. This fund did hold in Brazil.

Alexandre Saigh: This fund did help this hold in Brazil as an example.

Alexandre Saigh: And the second family of funds that we have in real state are urban capital nature funds, where we then don't raise money and it increases the DNAV, and we don't have to actually give that money back. So the divestments that you see there in that slide is related to the private equity real state funds, which are now divesting assets, and namely one of the assets, or a significant asset that was divested over this quarter, was our self storage business in Brazil. I hope I answered your questions there. Yes, that's clear. Thank you.

Alex: So the divestments that you see on that slide are related to the private equity real estate funds that are divesting assets, and namely, one of the assets, or a significant asset that was divested this quarter was our self-storage business in Brazil. Thank you. And our next question will come from Guilherme Grespin from J.P. Morgan. Your line is open.

Speaker Change: So the divestments that you see there in that slide is related to the private equity real estate funds.

Speaker Change: I hope I answered your questions there.

Speaker Change: Yep, that's clear. Thank you, Alex.

Guilherme Grespan: And our next question will come from Gellerm Gresspan from JP Morgan. Your line is open. Good morning, Alex and team. Thank you for the presentation and questions. Two on our side.

Alex: Good morning, Alex and team. Thank you for the presentation and questions. We have two on our side.

Speaker Change: Good morning Alex and team. Thank you for the presentation and questions. Two on our side. The first one is just on a little bit on fundraising again Alex just to confirm.

Guilherme Grespan: The first one is just a little bit on fundraising again, Alex, just to confirm. You mentioned I think you expect some additional closings in the private equity seven and the infra. Let's remind us a bit the timetable, like you have this fundraising open. Then I think the expectations were two to two point five billion for each and with potential closings nine second half. And then remember for how long does it remain open, the fundraising should we should we see the closing of this one, the raising by when.

Speaker Change: Let's remind us a little bit the timetable, like you have this fundraising open.

Guilherme Grespan: And then if you could also touch a little bit on the front five, I think it was the first time I heard that you were planning to launch an opportunity for front five.

Speaker Change: And then, if you could also touch a little bit on the Fund 5, I think it was the first time I heard you were planning to launch an opportunity for Fund 5.

Guilherme Grespan: And then the second question is just on GPM s. I saw we saw this quarter a little outflow on the vertical; I think was 800 million. I just want to confirm what exactly was that, and if it's related to upgrading or not.

Guilherme Grespan: Hi, Guillermo. Thanks for your question again. Thanks for participating also in the call.

Alexandre Saigh: As we, while we're going back to the fundraising question, then I'll talk about the fun five. Well, fundraising question we we see our fundraising again. I'm talking about organic fundraising. Organic fundraising really speed up and I'm excited with what I see and the prospects realize with what I'm seeing for a couple reasons. First, we have, of course, more products in our menu to fundraise, and you know you saw that we did, of course, launch new funds, and I'll talk about some of those initiatives. And also, with the acquisitions that we did over the last years, we added also new products to our menu.

Alex: well fundraising question we we see our fundraising organic I'm talking about organic fundraising now organic fundraising really you know speed up

Alex: The first one is just a little bit on fundraising again, Alex, just to confirm. And then, if you could also touch a little bit on the Fund 5, which I think was the first time I heard you were planning to launch an opportunity for Fund 5. Then I'll talk about the Fund 5. First, we have, of course, more products in our menu to raise money for. On infrastructure fund five, we are at $1.1 billion.

Alexandre Saigh: Specifically about private equity fund fund seven and infrastructure fund five. Private equity fund Seven has raised around 1.5 billion. As of now, we want to continue to raise until the end of the year another 500 million dollar stargates to reach the two billion dollar that I mentioned. We see a pipeline of investors in due diligence, so we can actually read, of course, the funnel, right? The funnel, the fundraising funnel. Most of that will come from Latin American investors. We see interest, additional interest from Brazilian investors, Colombian investors, and some Peruvian and some Chilean, but mostly Brazilians and Colombians, and of course also some investments, some interest coming from X Latin investors, some in Europe, some in the U.S., and the significance also portioned coming from Asia.

Speaker Change: specifically about Private Equity Fund 7 and Infrastructure Fund 5.

Speaker Change: Private Equity Fund 7 has raised around $1.5 billion. As of now, we want to continue to raise, until the end of the year, another $500 million target to reach the $2 billion that I mentioned.

Speaker Change: We see a pipeline of investors in due diligence, so we can actually read, of course, the funnel, right, the funnel.

Speaker Change: and some Peruvian and some Chilean, but mostly Brazilians and Colombians.

Alexandre Saigh: So if you add all that, it adds another 500 million that everything is, of course, no rounded numbers, approximate numbers that will push them private equity fund seven to two billion, which is the target number that I mentioned during my speech. On infrastructure, Fund Five, we are at 1.1 billion. We intend to reach the fund at 2, 2 and a half. We see a very robust pipeline of investors also in diligence mode, and we see the fund as well. So that's why we can see the 2 and a half. Of course, to the fund, we do apply probability to the fund.

Speaker Change: It adds another $500 million. Everything is, of course, rounded numbers, approximate numbers, that will push them privately from $7 to $2 billion, which is the target number that I mentioned during my speech here.

Speaker Change: On Infrastructure Fund 5, we are at $1.1 billion.

Alex: We intend to reach the fund at two, two and a half. We see a very robust pipeline of investors, also in diligence mode, and we see the funnel as well. So that's why we can see the two and two and a half. Of course, the funnel. We do apply probability to the funnels of higher probability and lower probability, depending on the investor.

Speaker Change: We intend to reach the fund of two, two and a half.

Speaker Change: We see a very robust pipeline.

Speaker Change: of investors also.

Speaker Change: in diligence mode.

Speaker Change: And we see the funnel as well, so that's why we can see the 2 and 2.5, of course to the funnel we do apply probability to the funnels of higher probability and lower probability depending on the investor.

Alexandre Saigh: The funnels of higher probability and lower probability depending on the investor. That I think we see kind of half a lot of interest coming from Latin American investors and another half of that additional number to reach to 2 and a half coming from international investors. And again, a lot of agents, investors also in this next 1.1 and a half billion to make this fund reach to 2 and a half billion dollars.

Alex: That, I think, we see kind of half of the interest coming from Latin American investors and another half of that additional number to reach two, two and a half, coming from international investors. And again, a lot of Asian investors also participated in this next one, one and a half billion dollars to make this fund reach two, two and a half billion dollars on the GPMS platform, which is the global private market solutions platform that we did acquire from the carve-out of Aberdeen.

Speaker Change: That's, I think, we see, you know, kind of have a lot of impact.

Speaker Change: of interest coming from Latin American investors and another half of that additional number to reach two, two and a half coming from international investors and again a lot of Asians investors also in this in this next

Speaker Change: One, one and a half billion to make this fund reach two, two and a half billion dollars.

Alexandre Saigh: In addition to these two flagship funds, I think we're excited that we are now raising money for no other products that we did lounge organically. And I know on the credit, I'm just named. I'm going to name some examples here on the credit side. We managed to continue fund ways for infinite credit, which is a Brazil-focused fund to lend money for infrastructure-related projects in Brazil. So, we also launched a Latin dollar-denominated private credit; very excited. Both of them, of course, as a joint venture here within Patria of our credits, Moneda partners in our infrastructure partners, and also our Brazil credit team.

Speaker Change: In addition to these two flagship funds, I think we're excited that we are now raising money for now other products that we did launch organically and I know on the credit I'm just name I'm gonna name some

Speaker Change: some examples here. On the credit side, we managed to continue fundraising for InfraCredit, which is a Brazil-focused fund to lend money for infrastructure-related projects in Brazil.

Speaker Change: We also launched a LATAM dollar-denominated private credit, very excited, both of them, of course, as a

Speaker Change: joint venture here within Patria of our Credit Moneda partners.

Alexandre Saigh: And launching these two efforts on the credit side, besides continuing to perform well on the public credit funds. We also launched a Chilean pipe fund, a private investment in public equity. Also successful fundraising there, the first close. We're already looking to do an investment there. On the real estate side, we focus mostly on fundraising for the VBI products. We had a good first semester, as you can see there from the numbers. And the Credit Swiss related funds that we are transferring, we transfer to our management in June, July; we're now launching other fund raising there.

Speaker Change: and our infrastructure partners and also our Brazil credit team and launching these two efforts on the credit side besides continue to perform well on the public credit funds.

Speaker Change: We also launched a

Speaker Change: Chilean PIPE Fund, a private investment in public equity, also successful fundraising there as a first close.

Speaker Change: We're already looking to do an investment there.

Speaker Change: On the real estate side, we focus mostly in fundraising for the VBI products.

Speaker Change: We had a good first semester as you can see there from the numbers.

Speaker Change: and Credit Suisse.

Speaker Change: related funds that we are

Speaker Change: transferring, we transfer to our...

Speaker Change: managements.

Alexandre Saigh: Now, I cannot give a lot of detail because, as these funds are under a fundraising mode, we have restrictions on what we can say because they are public offerings. On the GPMS side, we did manage to already fund raise a over $400 million SMA with a very important client, and as importantly as the number is, the positive message of that a new client is committing to us after the acquisition of a significant amount of money, you know, $400 million plus. and the private acting and infrastructure I already mentioned. So again, I think we see the fund, the fundraising pick up.

Speaker Change: in June-July.

Speaker Change: We're now launching other fundraisings there. Now, I cannot give a lot of detail because, as these funds are...

Speaker Change: under

Speaker Change: a fundraising mode, we have restrictions what we can say because they are public offerings.

Speaker Change: On the TPMS side, we did manage to already fundraise over $400 million SMA.

Speaker Change: with a very important client and most as importantly as the number.

Speaker Change: is the positive message that a new client is committing to us.

Speaker Change: after the acquisition of a significant amount of money, you know, $400 million plus.

Speaker Change: and the private acting and infrastructure I already mentioned.

Alexandre Saigh: First quarter, we did organically front raise around 800 million; second quarter, 1.2, 1.3 billion, pushing the number to 2.2 billion, 2.3 billion. So making me reinforce the guidance that we're going to raise five billion dollars organically in 2024. And I think we should see this number picking up as we again have more products to fund raise to and very good returns. Our returns in GPS and infrastructure credit, all of these that I mentioned continue to post very good returns.

Speaker Change: So, again, I think we see the fundraising pick up.

Speaker Change: First quarter, we did organically fundraise around $800-900 million. Second quarter, $1.2-1.3 billion, pushing the number to $2.2 billion, $2.3 billion. So that's an LTM close to $5 billion in the last 12 months.

Speaker Change: I continue to see a positive flow, making me reinforce the guidance that we're going to raise $5 billion organically in 2024, and I think we should see this number picking up as we again have more products to fundraise.

Speaker Change: And very good returns, our returns in GPMS, in infrastructure, credit, all of these that I mentioned continue to post very good returns.

Alexandre Saigh: Lastly, on Fund Five and Opportunistic Fund Five, I think that we were referring to Soft Five, which is the Secondary Opportunities Fund number Five, on the GPMS platform, which is the Global Private Market Solutions platform that we did acquire from the carve-out of our routine. Basically, there are no three main businesses there, no an SMA special managed account business that we focus on helping clients with primaries, secondaries, and coin investment solutions in the private active world mid-market global. And second family of products are the secondary funds, and we are raising secondary fund number five, which is a blind fund.

Speaker Change: Lastly, on Fund 5 and Opportunistic Fund 5, I think that we were referring to SOF 5, which is the Secondary Opportunities Fund Number 5.

Speaker Change: on the GPMS platform, which...

Speaker Change: is the global private market solutions platform that we did acquire from the carve-out of Auberdine.

Alex: Basically, there are three main businesses there. An SMA, special managed account business that we focus on helping clients with primaries, secondaries, and co-investment solutions in the private active world, mid-market, global, and contrary to the SMA that we have specific mandates for these 24 main clients, the SOF 5, the Secondary Opportunities Fund Number 5, is a blind fund and it works in a much similar way as Private Active Fund 7, Infrastructure Fund 5, which you raise capital, commit it, then you draw down, you invest, and then you divest and give back the money, and then you go out there and raise, in this my example here, would be Secondaries Opportunity Fund 6.

Speaker Change: Basically, there are no three...

Alex: And here we go. And they don't reach the performance fee mode, like I mentioned private equity fund 3, I mentioned private equity fund 5, I mentioned infrastructure fund 3, but selling assets is very healthy. That takes us in the direction of the performance fee mode. And I think those were the three questions that you asked. And please remind me if I did forget anything here, Guilherme. Well, that's it, Alex. Thank you for the very detailed answer here. Thank you so much.

Speaker Change: main businesses there, you know, a

Speaker Change: An SMA, Special Managed Account business that we focus on helping clients with primaries, secondaries, and co-investment solutions in the private active world, mid-market, global.

Speaker Change: and second family of products are the secondary funds and we are raising secondary fund number five which is a blind fund.

Alexandre Saigh: And contrary to the SMA that we have specific mandates for these 24 main clients, the soft five, the secondary opportunities fund number five, the blind fund, and it works in a much similar way as private active fund seven, infrastructure fund five, which you raise capital committed, then you draw down, you invest and then you dipest and give back the money. And then you go out there and raise in this, my example here would be Secondary is Opportunity Fund Six. And here we go. So we're expecting in first close for this fund in still in the second semester.

Speaker Change: and contrary to the SMA that we have specific mandates for these 24 main clients

Speaker Change: The SOF 5, the Secondary Opportunities Fund No. 5, the blind fund.

Speaker Change: And it works.

Speaker Change: in a much similar way as private active fund seven, infrastructure fund five, which now you raise capital, commit it, then you draw down, you invest, and then you divest and give back the money. And then you go out there and raise, in this my example here, would be secondaries opportunity fund six. Here we go.

Speaker Change: So...

Speaker Change: We're expecting a first close for this fund.

Alexandre Saigh: So very excited there. And we see also through the funnel that it's going to be, I think, a good surprise for all of us here. Again, as it's the new fund that we are working together with our GPMS friends that came from Aberdeen. So we're excited with some investors already going to their investment committees and giving us a good messaging mark that they will commit to our first close, et cetera.

Speaker Change: still in the second semester, so very excited there.

Speaker Change: And we see also through the funnel that it's going to be, I think, a good surprise for all of us here. Again, as it's the new fund that we are working together with our GPMS friends that came from Aberdeen. So we're excited.

Speaker Change: with some investors already going to their investment committees and giving us a good message in MAC that they will commit to our first close, etc.

Alexandre Saigh: So the third family would be a co-investment family of funds of blind funds, but we're probably going to launch the first blind co-investment fund sometime next year. So we have the SMAs, primary, second years, and co-invest that we work for several clients, but mainly for these 24 accounts. We have other smaller accounts, but the main accounts are 24 accounts. Then we have a family of blind secondary funds. We are raising Secondary Opportunities Fund number five.

Speaker Change: Thank you very much.

Speaker Change: The third family would be a co-investment family of funds, of blind funds. We're probably going to launch the first blind co-investment fund sometime next year.

Speaker Change: So we have the SMAs, Primary, Secondaries, and Co-Invest that we work for several clients, but mainly for these 24 accounts.

Speaker Change: We have other smaller accounts, but the main accounts are 24 accounts.

Speaker Change: Then we have a family of blind secondary funds, we are raising...

Alexandre Saigh: And we will launch a beginning, a family of blind co-investment funds, which the first one should come to fund raising sometime in 20-25.

Speaker Change: Secondary Opportunities Fund No. 5, and we will launch...

Speaker Change: a family of blind co-investment funds, which the first one should come to

Alexandre Saigh: And what was the last question again, the outflow of GPMS in the quarter? The outflow of this quarter, you can see it in private equity, you see some in infrastructure and answering questions specifically outflow on GPMS, is the very healthy nature of our business of not giving money back. We are managing to sell assets with that generate performance fees, as you can see that we did all the way back in 2021 with private equity from 3, and then in 2022, private equity from 5 and infrastructure from 3 in 2022, and infrastructure from 3 in 2023.

Speaker Change: fundraising mode sometime in 2025.

Speaker Change: And what was the last question again?

Speaker Change: the outflow of GPMS in the quarter.

Speaker Change: It's a, you know, the outflows of this quarter, you can, you know, you see it in private equity, you see some in infrastructure, and I'm answering your question specifically also on GPMS.

Speaker Change: is a very healthy nature of our business of giving money back.

Speaker Change: We are managing to sell assets.

Speaker Change: And with that, generate performance fees, as you can see that we did.

Speaker Change: all the way back in 2021 with Private Active Fund 3 and then in 2022, Private Active Fund 5 and then Infrastructure Fund 3 in 2022 and Infrastructure Fund 3.

Alexandre Saigh: And we still see with good eyes that we're going to hit the $180 million of performance fees in the 23, 24, 25, three year vintage as we gave us a guidance. And the soft and the GPMS the same. Now we have these drawdown funds that we sell assets, and then the assets go back to investors. And we do get performance fees, and some of these assets we sell, and they don't reach the performance fee mode. Like I mentioned private equity from 3, I mentioned private equity from 5, I mentioned infrastructure from 3, but it's selling assets is very healthy that takes us in the direction of the performance fee a mode here.

Speaker Change: in 2023, and we still see with good eyes that we're going to hit the $180 million of performance fees in the 2023, 2024, 2025 three-year vintage, as we gave as a guidance.

Speaker Change: and the GPMS the same. Now we have these drawdown funds that we sell assets and then the assets go back to investors and we do get performance fees and some of these assets we sell.

Speaker Change: and they don't reach the performance C mode, like I mentioned private equity fund 3, I mentioned private equity fund 5, I mentioned infrastructure fund 3, but it's selling assets is very healthy that takes us in the direction.

Alexandre Saigh: And I think those were the three questions that you asked, and please remind me if I didn't forget anything here.

Speaker Change: of the Performance-V mold here.

Speaker Change: And I think those were the three questions that you asked, and please remind me if I did forget anything here, Guilherme, please.

Alexandre Saigh: So that's it, Alex. Thank you for the very detailed answer here. Thank you so much.

Guilherme: That's it, Alex. Thank you for the very detailed answer here. Thank you so much.

Ricardo Buchpiguel: Thank you. And our next question will come from Ricardo Bucci-Piguel from BTG Pactual. Your line is open. Good morning, guys, and thank you for the opportunity of making questions. I've just one here on my side. We have a lot of acquisitions closing recently, and with part of your cash locked with the SPAC deal that you have, and also the announcement of the repurchase program.

Guilherme: Thank you.

Speaker Change: Thank you. And our next question will come from Ricardo Buchpiguel from BTG Pactual. Your line is open.

Ricardo Buchpiguel: Good morning, guys, and thank you for the opportunity of making questions.

Ricardo Buchpiguel: I have just one here on my side.

Ricardo Buchpiguel: We have a lot of acquisitions closing recently.

Speaker Change: and with part of your cash locked with the SPAC deal.

Alexandre Saigh: What would be necessary for a portrait to look for new sources of funding in the coming quarters and doesn't make sense for the company to keep its appetite of pursuing more M&A's given this sort of capital constraint. Thank you. Yeah, I think we, one of the reasons actually that we did, of course, review our whole capital management strategy here was exactly everything that you mentioned here. We are extremely comfortable of the way that we see our cash flow over the next six months or another 18 months. We, as you know, we are very, very healthy cash generation business, very light balance sheets where you know we're a service provider.

Speaker Change: that you have, and also the announcement of the Repurchase Program. Would it be necessary for Patria to look for new sources of funding in the coming quarters? And does it make sense for the company to keep its appetite?

Ricardo Buchpiguel: of pursuing more M&As given this sort of capital constraint.

Alex: Yeah, I think one of the reasons actually that we did, of course, review our, you see the debt level that Ana mentioned, $175, $176 million at the end of the second quarter. Because most of these acquisitions that you mentioned, So if you apply $120, $130 million of debt, and you use $100 million of performance fees over the next month's quarters to use that to pay down debts, then the debt goes to insignificant numbers, in my example here, of $20, $30 million. Thank you guys for taking the question. A few here.

Speaker Change: Thank you.

Speaker Change: Yeah, I think we, one of the reasons actually that we did, of course, review our whole capital management strategy here was exactly everything that you mentioned here, Ricardo. We are extremely comfortable

Speaker Change: of the way that we see our cash flow over the next 6 months, over the next 18 months. We, as you know, we are very...

Guilherme: So, very healthy cash generation business, very light balance sheets, we're a service provider, we don't do a lot of investments, we do, we see a couple of funds, but that's very insignificant versus the whole scheme of things. So as of today,

Alexandre Saigh: We don't do a lot of investments. We do know we see the couple of funds without no very insignificant versus the whole scheme of things. So, as of today. We see the debt level that Ana mentioned, 175, 176 million at the end of the second quarter, because most of these acquisitions that you mentioned, the Carvals of the Aberdeen business, and the acquisition of the Brazilian real estate funds from Credit Suits, they landed in the second quarter. Which is good from one side, because now we are already integrating these businesses. We already have all of the revenues, but it does, of course, make us have to commit to more cash outflows in the second quarter.

Ana: You see the debt level that Ana mentioned, $175-176 million at the end of the second quarter. Because most of these acquisitions that you mentioned,

Carvalho: Carvalho's of the Aberdeen business and

Ana: the acquisition of the Brazilian real estate funds from Credit Suisse, they landed in the second quarter.

Speaker Change: which is good, from one side, because we are already integrating these businesses, we already have all of the revenues, but it does, of course,

Guilherme: make us have to commit to more cash outflows in the second quarter.

Alexandre Saigh: As we saw, no conservatively, as we projected this, we saw these businesses being cooperated in Patria, over the second quarter, and we have good news because the shareholders' meetings of all of the Credit Suits funds went very well, faster than we expected. They voted in favor of transferring the funds to Patria. Also, the regulatory approvals that we needed in the United Kingdom went faster than we expected, and we managed to close these two deals in the second quarter. But as we move into the, into the second half of the year, the beginning of the third quarter, we have a lot of cash coming in, where we receive most of our management fees in the beginning of the quarter, which is July and August. So you see the debt level coming down significantly, so the 120, 130 million dollars level that Ana mentioned in her part of the speech.

Guilherme: As we saw, now conservatively, as we projected this, we saw these businesses being incorporated in Patria.

Ricardo Buchpiguel: all for the second quarter.

Ana: And we had good news, because the...

Ricardo Buchpiguel: Shareholders' meetings of all of the Credit Suisse funds went very well, faster than we expected, they voted.

Ricardo Buchpiguel: in favor of transferring the funds to Patria. Also, the regulatory approvals that we needed in the United Kingdom went faster than we expected. We managed to then close these two deals in the second quarter. But as we move into the second half of the year...

Ricardo Buchpiguel: At the beginning of the third quarter, we have a lot of cash coming in.

Ricardo Buchpiguel: where we received most of our management fees in the beginning of the quarter, which is July and August . So you see the debt level coming down significantly. So the $120-$130 million level that Ana mentioned.

Alexandre Saigh: And then we have a small peak in December because we have a Credit Suits payment there. And then again, in the beginning of 2025, we have all the management fees coming back, and we should go down to the 120, 130 million dollars level, which is a very, very comfortable level for us. Just as you know, we have a hundred and seventy million dollars of FRE, 225 million dollars out of FRE for next year, so 120, whatever is 50, 60% of our FRE, and we are not considering here any performances, which I mentioned a couple of minutes ago, that we still see performances coming in.

Speaker Change: in her part of the speech. And then we have a small peak in December because we have a Credit Suisse payment there. And then again, in the beginning of 2025, we have all the management fees coming back and we should go down to the $120, $130 million level, which is a very, very comfortable level for us.

Speaker Change: Just as you know, we have $170 million of FRE, $200-$225 million of FRE for next year.

Speaker Change: So, 120 whatever is 50, 60% of our FRE and we're not considering here any performances, which I mentioned a couple of minutes ago, that we still see performances coming in.

Alexandre Saigh: So all of these numbers, this 120, 130 million dollars of debt, is 60% of the 70, and it is half of the 225 million dollars of FRE for 2025, not considering the performances. And we mentioned, again, I think two early schools ago, that we would use a hundred million dollars of the performances coming in to pay down that. So if you apply 120, 130 million dollars of debt, and you use a hundred million dollars of performance fees over the next month's quarters to use that to pay down that, then the debt goes to insignificant numbers.

Speaker Change: So, all of these numbers, it's 120, 130 million dollars of debt.

Speaker Change: It's 60% of the $170 million, and it is half of the $200-$225 million of FRE for 2025, not considering the performance fees.

Speaker Change: And I think two early schools ago that we would use a hundred million dollars of

Speaker Change: and the performances coming in to pay down debt.

Speaker Change: So if you apply $120, $130 million of debt, and you use $100 million of performance fees over the next month's quarters to use that to pay down debt, then the debt goes to insignificant numbers, in my example here of $20, $30 million. So...

Alexandre Saigh: In my example here of 20, 30 million dollars. So very in a very comfortable position, I know that already. Incorporating our dividends and our share report is broken.

Speaker Change: in a very comfortable position and all that already incorporating our dividends and our share repurchase program.

Alexandre Saigh: So, however, going back to the second part of your question, we will most probably not pursue any other acquisitions this year or early next year because we are integrating this business. So it has more to do with integration. As we mentioned, we managed to close two of these deals in the second quarter. We were expecting to close them in the second half of 2024. So we are not going to focus on integration and people's system processes. So it would not be very much advisable for us to do a large acquisition. For that point of view, not from a balance sheet point of view, in the second half of 2024 or early 2025.

Speaker Change: So, however, now going back to the second part of your question.

Speaker Change: We will most probably not pursue any other acquisitions this year.

Speaker Change: or early next year, because we are integrating these businesses. So it has more to do with the integration. As we mentioned, we managed to close two of these deals in the second quarter. We were expecting to close them in the second half of 2024.

Speaker Change: So we're focusing on integration, people, system, processes.

Speaker Change: So, it would not be very much advisable for us to do a large acquisition for that point of view, not from a balance sheet point of view, in the second half of 2024, early 2025, so our focus will be over the next quarters in the integration.

Alexandre Saigh: So our focus will be over the next quarters in the integration. But balance sheet-wise, we are comfortable. I hope that I answered your question. Thank you very much, guys.

Speaker Change: But balance sheet wise, we're comfortable. I hope that I answered your question, Scott.

Operator: Thank you. And, as a reminder to ask a question, please press star 1-1. One moment for our next question, please.

Scott: Thank you very much, guys.

Speaker Change: Thank you, and as a reminder, to ask a question, please press star 11.

Speaker Change: One moment for our next question, please.

Pedro Leduc: And our next question will come from Pedro Leduc, from I-Tual BBA. Your line is open. Thank you guys for taking the question. A few here, first on the personnel expenses that decide going up with the M&A integration obviously, wondering if it's here or on some other regions where we could start seeing synergies in the coming quarters. That and in the consolation of IFRS to non-GAT measures, we saw a lot of expenses flowing through it here in some M&A related, some fees, stocks, wondering if we should see those fading out into the next quarters already. So maybe a closer relation between the earnings IFRS and the non-GATs.

Speaker Change: And our next question will come from Pedro Leduc from itool BBA. Your line is open.

Pedro Leduc: I'm wondering if it's here and on some other regions where we could start seeing synergies in the coming quarters.

Speaker Change: that, and in the conciliation of IFRS to non-GAAP measures, we saw a lot of expenses flowing through it here, some are M&A related, some fees, fax.

Speaker Change: I'm wondering if we should see those fading out into the next quarters already, so maybe a closer relation between the earnings, IFRS, and the non-GAAP . Thank you.

Pedro Leduc: Thank you.

Alexandre Saigh: Hi, Pedro. Thanks for your question here. It's Alex again, and Ana is here also with Marcelo to help me answer the questions. But yes, the personnel went out because of the integration. These businesses that we did incorporate in the second quarter are businesses with lower margins at the first moment. We mentioned a couple of articles ago. The GPMS runs a 30 per cent FRE margin business, and you know that we run an upper 50 per cent level FRE margin business. And the same with the real estate business from Credit Suisse Flash VBI that we will be incorporated in the second half of 2024.

Alex: First on the personnel expenses that we saw going up with the M&A integration, obviously wondering if it's here or in some other regions where we could start seeing synergies in the coming quarters. That and in the reconciliation of IFRS to non-GAAP measures. Hi Pedro. Thanks for your question here. It's Alex again, and Ana is here also with Marcelo to help me answer the questions.

Alex: But yes, the personnel went out because of the integration. These businesses that we did incorporate in the second quarter are businesses with lower margins at the first moment. We mentioned on a couple of our calls ago that GPMS runs a 30% FRE margin business, and you know that we run an upper 50% level FRE margin business. And the same with the real estate business from Credit Suisse slash VBI that will be incorporated in the second half of 2024.

Speaker Change: is here also with Marcelo to help me answer the questions. But yes, the personnel went out because of the integration.

Alex: And as we work into the synergies, you will see. So the main variance that we have for this quarter has to do with all the transactions, M&As, that we closed. And I just want to point out three that impacted the quarter.

Alexandre Saigh: And as we work into the synergies, you will see FRE margins go up. I think in this year it will land in a 50, 60, 58 per cent level FRE margin. And we see it going up, trending up in 2025 back to the 60 percent level, 58, 60 percent level. And how do we do that through the integrations? We went already through that process with the acquisition of Moneda late 2021. We did find the acquisition of Moneda. Moneda was running a 40 per cent, approximately 40 per cent FRE business. We were running a 60 percent FRE business.

Speaker Change: FRA margins go up.

Speaker Change: I think that in this year it will land in the 56-58% level, FRE margin.

Speaker Change: 58-60% love.

Speaker Change: with the acquisition of Moneda. Late 2021 we did a find of the acquisition of Moneda. Moneda was running a 40% approximately 40% FRA business. We were running a 60% FRA business.

Ana Russo: In 2022, you saw that margin also trending up. And of 2022, we were back to the 60 per cent level, close to 60 per cent level. So by integrating expenses and our main expenses now are personnel, which is 80, 70, 80 percent of our expenses. And then rent and travel, whatever is not a significant proportion.

Ana Russo: So it's personal. And that's what we're going to do as we move on into this year and into 2025 through the trending up that I mentioned to you, 56, 58 this year and 58 to 60 per cent FRE margin next year. We know how to do this. This is our day today. You know that we run a consolidation private active by our business. So we have done more than a hundred of those consolidations in Brazil. We let them and whatever looking for synergies and processes IT and of course, and sometimes in people as well. On the FRIF side, expenses, yes, they did go up significantly in the squatter.

Speaker Change: We know how to do this. This is our day-to-day. You know that we run a consolidation private active buyout business, so we have done more than

Speaker Change: a hundred of those consolidations in Brazil, in Latam, and whatever, looking for synergies in processes, IT, and of course sometimes in people as well.

Ana Russo: It has mostly to do with the expenses that we did run because of these two closings that happened in the second quarter, but I'll turn over the four to one and two comments so to make a few comments on that, please. So the name fairings that we have for this quarter has to do with all the transactions and the names that we close, and I just want to explain that it was three that impacted quarter, so we have all the Aberdeem acquisition that impacts significant hour to the line of transaction costs, which means different expenses when you say out with the effort for the transferring of the Credit Suisse Fund, which also was the quarter.

Ana: So we have all the Aberdeen acquisitions that impact significantly the line of transaction costs, which means different expenses. Also, the effort for the transferring of the Credit Suisse funds, which also was hit this quarter. We also have a smaller, not that significant, but we start having as well for our nexus as well. And, of course, what is normally part of the transaction and remaining transactions is not.

Ana Russo: We also have smaller; it's not that single, but we start having as well for our next step as well, and of course, what is normally part of the transaction and remaining transaction, which is no part. On top of that, when you see on the deferring consideration, deferring consideration, has to do with our option that we have to evaluate with VBA option with VBA, which we have to evaluate as with quarter, and actually a specific with quarter, there is an adjustment that also was included in this line that I have just mentioned. So I think all we know that is the main variance that we have in this quarter, which is two lines from all the transaction and deferring consideration consideration related to adjustment of our VBA option.

Ana Russo: If you're just a minor, but if you're looking to our financial income events and unrealize, which is a 3 million, this is all related to effect or investment in REI, which impacts unrealize the impact of this line because of the real devillation. Yeah, and here, Peter, I think one of the lines is cash related, which is the expense, the transaction expenses; the other ones are not. Cash related costs and expenses, and just going back to your comment as we move into the third and fourth quarter, as we did exercise the VBA option, and we did close the Aberdeen transaction and the Credit Swiss transaction in the second quarter, these numbers should be washed out from our P&L, and we should go back to where we were in prior quarters.

Speaker Change: which is the expense, the transaction expenses, the other ones are not.

Speaker Change: the Aberdeen transaction and the Credit Suisse transaction in the second quarter. These numbers should be washed out from our P&L and we should go back to where we were in prior quarters.

Alexandre Saigh: So yes, everything happened; it was a very busy quarter. I actually started my speech there; it was very proud of the team, to be honest, because we had such a very busy quarter of two closings, plus now the VBA option that we did, and now the acquisition of the other 50%, and all of this happened in the same three months period.

Operator: So yes, so this would be washed out and we would go to a more normal levels in the next quarter. Thank you.

Operator: Thank you, and I am showing no further questions from our phone lines.

Operator: I would like to turn the conference back over to Alex Sieg for any closing remarks. Okay, thank you very much, all of you participating in the call, and thanks for your questions here. And Chito, Pedro Guilherme, Ricardo, thank you very much. I know that you guys have a very busy morning with so many financial institutions also having their earnings calls, so no thanks for participating. Hope to see you guys presently in person soon in New York or some other place. Thanks again. Have a great day. Goodbye, ciao ciao, gracias.

Alex: Okay, thank you very much for all of you participating in the call and thanks for your questions here and Chito, Pedro, Guilherme, Ricardo, thank you very much. I know that you guys have a very busy morning with so many financial institutions also having their earnings calls, so no thanks for participating. Hope to see you guys in person soon in New York or some other place. Thanks again, have a great day, goodbye, ciao, ciao, gracias.

Speaker Change: Thanks again, have a great day, goodbye, ciao, ciao, gracias.

Operator: Thank you.

Operator: This does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Operator: Everyone have a wonderful day. Thank you very much.

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