Q3 2025 Vinci Compass Investments Earnings Call

Speaker #2: Good afternoon and welcome to Vinci Compass third quarter 2025 results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

Speaker #2: As a reminder, this call will be recorded. I would now like to turn the conference over to Anna Santos, Investor Relations Manager. Please go ahead, Anna.

Speaker #3: Thank you and good evening, everyone. Joining us today are Alessandro Horta, Chief Executive Officer; Bruno Zaremba, President of Finance and Operations; and Sergio Pastor, Chief Financial Officer.

Speaker #3: Earlier today, we issued a press release, slide presentation, and our financial statements for the quarter. Which are available on our website at ir.vincicompass.com. I'd like to remind you that today's call may include forward-looking statements, which are uncertain and outside of the firm's control, and may differ from actual results materially.

Speaker #3: We do not undertake any duty to update these statements. For discussion of some of the risks that could affect results, please see the risk factor section of our 20F.

Speaker #3: We will also refer

Speaker #1: Or solicitation offer to purchase an venture . of an Compass any on results for the third quarter , of compass generated few related earnings of 77.1 million , or 1.22 per share .

Speaker #1: Free margin adjusted of earnings of 73.1 million , or 1.16 per declared We quarterly share . of common per a $0.15 on the dollar payable on December 9th , to record as of shareholders of November 24th , with that , I'll turn the call over to Alessandro

Speaker #2: you . Thank Anna .

Speaker #2: Good evening , and thank you all for joining our . call appreciate . We joining . We us milestones for compass this quarter .

Speaker #2: Before we discussing our quarterly results . take a I'd start to like to highlight some important recent milestones October , . In we our second Investor in New .

Speaker #2: Day was a great It opportunity York catch up analysts and , reinforce long term vision compass , showcase the strength with our integrated platform provide greater transparency into our each segments .

Speaker #2: of During event , we we are the of to growth capture across our core strategies driven by disciplined capital business allocation in , innovation product development and continued on delivering value to our clients and shareholders .

Speaker #2: This strong engagement and positive feedback from participants reaffirmed investors confidence focus differentiated in our model and growth prospects in America On the same day , we also discussed the of , a acquisition transaction that represents significant a milestone in expansion Latin .

Speaker #2: This strong engagement and positive feedback from participants reaffirmed investors confidence focus differentiated in our model and growth prospects in America On the same day , we also discussed the of , a acquisition transaction that represents significant a milestone in expansion Latin strategic This transaction further strengthens as leading V.G.

Speaker #2: Latin our with the region's global and asset local allocation Winchcombe with an exceptional investment track record . The was very well received by the local position as community , well as global clients .

Speaker #2: our transaction In We had the leader in Investor opportunity to and the transaction in Day and base . investors in the days . week New York and the was with very feedback constructive .

Speaker #2: We in feel our constituents recognize the strategic cultural analysts and alignment firms and the long term value creation That following potential for combination .

Speaker #2: between the Leaving very excited and confident about this the future . us We remain track to close the two by the end transaction of November .

Speaker #2: Although we had an exciting start fourth the Day . quarter with Individual on transaction . of stopped work since The . We are Investor already executing on the priorities we outlined , such as accelerating regional expansion , capturing the growth secular in private opportunity credit and expanding margins through revenue stream .

Speaker #2: Leverage and operating . Discipline in ESPs We four . costs secured not free first offshore but also the pension plan first Brazilian commitment in the commitment , history of our only our opportunistic capital solution funds a clear evidence of our ability to long penetrate standing relationships to distribute proprietary funds across different channels .

Speaker #2: Bruno will unpack the fundraising pipeline in a moment , but we are very encouraged by the depth of interest we are encountering , particularly from foreign investors .

Speaker #2: Tracking our second closing . Shifting to third quarter our results , we crossed upcoming the 30% free margin threshold in the third quarter , delivering a margin .

Speaker #2: 32% free The highest level to date year . This reflects both the margin from potential for expansion platform growth . We have been discussing with you and our disciplined cost execution this quarter .

Speaker #2: began We to see the impact from cost reduction initiatives carried out this year throughout the firm . Combined with the operational leverage resulting from the strong fundraising in our funds over the past few quarters .

Speaker #2: We have been extremely focused on driving efficiencies since closing the combination with compass , and we are satisfied very results , with the which are now starting to flow through the income statement this quarter .

Speaker #2: This progress is the result of the thorough work of all management teams and the executive committee. As we approach the final stages of integrating both companies, and as we have discussed, we see substantial opportunity to expand our margins and efficiencies, which represent only a portion of that.

Speaker #2: The most meaningful is driver platform growth , whether organically or through acquisitions . We are on the path to achieve our 38% free margin target by 2028 .

Speaker #2: As discussed at the Investor Day , supported by additional cost reduction initiatives in the pipeline , substantial fundraising all across segments and the expected closing of Vmg in 2025 .

Speaker #2: Shifting macro to the environment . Broad based asset appreciation and easing rate bias across emerging an economies continue to create a constructive environment for our platform .

Speaker #2: Brazil should benefit even more than its peers , supported by the potential of a future political shift that could reinforce fiscal responsibility and by a likely silica cycle beginning in the coming months , with lower rates and better anchored inflation expectations .

Speaker #2: We see further room for our rerating of local assets , which has already begun across the region . Mexico and Chile are meaningfully ahead in their easy cycles .

Speaker #2: Bank cycle has cut from 11.25% to 7.5% over roughly 18 months , with further reductions expected . And Chile is already below 5% with its cycle .

Speaker #2: Well advanced . This creates differentiated asset allocation , deployment and capital gains opportunities across Latin America . We enforcing this environment . Several countries are moving or are expected to move toward more market friendly policies , including potentially Chile in Brazil , as well as Colombia and Argentina , which is already undergoing melees pro-market shift in Argentina , specifically , authorities are taking meaningful steps to reverse years of persistent fiscal deficits .

Speaker #2: These dynamics are also reviving the case for international portfolio diversification. We believe that the trend of global investors seeking exposure beyond the U.S. has further to run, supporting our fundraising offering attractive risk-adjusted opportunities and potential currency diversification.

Speaker #2: Turning to credit , the segment is building momentum as expected , with Latin investors and increasingly global allocators . Our Latam corporate debt strategy raised over 1 billion reais in the quarter , with 30% coming from investors outside the region , underscoring both strong international appetite and the reach of our distribution across Europe and the US .

Speaker #2: Our forestry vertical is also drawing strong international interest , especially from European development finance institutions . We aim to convert this attention into capital subscription for our lack fund in the fourth quarter of 2025 and in 2026 , our positioning as a leading provider of nature based solutions in Latin America and the ability to scale through planted forest while capturing higher quality carbon credits and biodiversity co-benefits position us to pursue a significant addressable market across Dfis global corporations , institutional investors and family offices .

Speaker #2: Recent international announcements in support of Brazil's forest programs underscore rising global capital flows into conservation and nature based solutions . Moving on to global Ipns , our third party distribution business continues to deliver strong results , with TPD alternative and liquid funds key growth as drivers .

Speaker #2: Within that , Semiliquid funds are standing out by bearing sophisticated products with retail friendly features . We are seeing very strong receptivity in retail channels and expected continued traction as we broaden distribution , private debt and middle market strategies continue to attract sophisticated investors , and we plan to expand our middle market funds offering altogether .

Speaker #2: We delivered 19 billion reais in capital formation and appreciation in the quarter , bringing AUM to 316 billion reais in US AUM dollars .

Speaker #2: reached just a tad below $60 billion at a record 59.4 billion . To wrap up our opportunity , set has never been stronger .

Speaker #2: Structured tailwinds in alternatives and emerging markets are accelerating and compass is the in our region partner . More investors across channels are adopting private market solutions than ever , and we expect this trend to continue in the medium term .

Speaker #2: We are investing behind this with demand scalable products , disciplined risk management and a distribution footprint . Looking ahead , our platform is built for this environment and positioned to capture the generational shifts underway in the global economy and markets .

Speaker #2: Compounding for our valued clients and shareholders. Thank you again for joining us. With that, I'll turn it over to Bruno.

Speaker #3: Thank you . Alessandra , and good evening , everyone . We are thrilled to share that we delivered 19 billion reais in capital formation and appreciation this quarter .

Speaker #3: Global Ipns and credit were key growth drivers , and we believe we are still in the early innings of a significant growth opportunity across all of our asset classes .

Speaker #3: We laid out this opportunities in detail during our Investor Day . Starting with ESPs four , we achieved important milestones this quarter . Our first offshore commitment and the launch of the offshore vehicle with the fund live and seated .

Speaker #3: Follow on offshore commitments tend to accelerate our pipeline includes several foreign investors , and we expect to sign additional commitments by year end .

Speaker #3: We also secured our first Brazilian pension plan commitment to the strategy , which we expect will catalyze additional allocations from other local institutions .

Speaker #3: Our track record is a key driver to new commitments . The first vintage ESPs , one which recently returned additional capital to investors from a successful exit , is currently delivering a DPI of 1.9 X and a gross IRR of 25% , both in Brazilian reais .

Speaker #3: Further validation comes from ESPs three , which is distributed during October . Over 9% of total commitments . This vintage is still within its investment period , which ends only in the fourth quarter of 2026 and has already started to return meaningful capital to LPs .

Speaker #3: Still in private credit , we received additional commitments in our senior secured Lending product in Peru . Pepco two . We expect further commitments over the coming quarters in both Pepco two and five .

Speaker #3: Peru . Our semi confirming and factoring funds , our long standing presence in Peru , together with our position as the fund largest in that market , gives us a clear edge to keep capturing opportunities in addition to deepen engagement and showcase the full breadth of our regional platform , we hosted Peruvian institutional investors for a roadshow at our Brazil offices .

Speaker #3: We have also introduced Copco one to our Colombian LPs , our first secured lending fund in Colombia , pension funds and insurance companies are increasing allocations to local currency .

Speaker #3: Alternative strategies giving regulatory frameworks and copco . One is designed that to meet demand . The vehicle has a ten year term and is expected to launch in the first half of 2026 .

Speaker #3: In Brazil , our liquid credit strategies are also showing strong growth infrastructure debentures , structured credit and corporate liquid credit funds all displayed strong investor interest and raise over 500 million reais in the quarter .

Speaker #3: Our diversified product lineup widens our addressable base and drives demand across different credit sub strategies in . We continue to see outflows from our domestic equity Brazilian funds , reflecting a more risk averse stance among local institutional investors trend is .

Speaker #3: driven This by the ongoing shift in their portfolios from equities to local inflation linked government bonds , whose yields remain your historical highs and have not compressed this year despite the rally in the equity markets .

Speaker #3: Shifting to global ipns AUM reached more than 241 billion reais , supported by approximately 8 billion reais of inflows . As Alejandro noted , we are encouraged by the reach of our TPD business and , more importantly , the depth of coverage from our client relations team .

Speaker #3: expect to We continue raising capital in this vertical , although we believe most TPD alternative inflows that charge upfront fees were recognized by the end of September and thus should have a more limited impact in the fourth quarter .

Speaker #3: On the liquid side , we see room for additional traction by year end . A highlighting TPD alternative this quarter was a $300 million commitment from a Latin American institutional investor to a global private equity fund managed by our world class GP , representing the region .

Speaker #3: This is an exceptional commitment that underscores the growing appetite for alternative among Latam institutions . As highlighted in all of our recent communications .

Speaker #3: Lastly , in private equity , as we work towards the first closing of verse five , expected in the first half of 2026 , we're very encouraged by interest from LPs to reopen these funds on the VCP front , the team is highly active in origination with a pipeline of 40 plus active opportunities and four transactions in advanced negotiations to deploy VCP for dry powder .

Speaker #3: In terms of portfolio performance VCP , three companies delivered solid operational results in the second quarter of 2025 . Aggregate EBITDA grew 16% year over year .

Speaker #3: We are particularly excited with our portfolio company , Agbank , as it continues to deliver very strong KPIs , expanding revenues year over year by 50% in VCP four , our clock has been increasing revenue by 30% year over year .

Speaker #3: Another company we have been very excited about these results reinforce the health of our portfolio and our conviction in disciplined deployment of VCP four .

Speaker #3: Our distribution teams are executing exceptionally well across channels . In October , got off to a constructive start for the fourth quarter of 2025 .

Speaker #3: We are also preparing to navigate Chile's pension reform as benchmarks and target date frameworks finalize our client facing group will have a fun 2026 as our product slate is quite full , we have private credit products being launched across the region .

Speaker #3: We have our Ucits equity funds and several closed end funds across other strategies such as private equity and real assets . In addition , on top of our TPD funds , which continue to exist , strength as global allocation grows , global Ipns will launch a new series of discretionary allocation products , allowing Latam investors to have a diversified exposure to portfolios of Semi-liquid funds across developed markets .

Speaker #3: This will lower entry tickets while helping investors with optimal allocation to their portfolios . All this alongside a nascent cyclical improvement in the region with higher demand for allocations from both local and currently under allocated global LPs on the operations front , I adoption is now mainstream at 20 compass , with roughly 80% of our team using AI in their daily work to enhance productivity .

Speaker #3: Client service and risk management . As we discussed internally , we want to lead the transition into an AI enabled workplace in compass needs to sponsor this change .

Speaker #3: So it's done safely and addressing the specific needs of our groups . This agenda is accelerating and we expect it ultimately to be felt by investors through better overall decision making and execution , positively affecting risk adjusted returns .

Speaker #3: We entered the fourth quarter with clear visibility and strong momentum , pipeline of opportunities allows us to build on these results into 2026 .

Speaker #3: With that , it over I'll hand to Sergio to walk through the financials

Speaker #3: .

Speaker #4: Bruno . Thank Starting with our AUM , we ended the quarter with 316 billion . Highs , representing an increase of 4% quarter over quarter .

Speaker #4: Capital formation and appreciation totaled 19 billion , partially by a offset negative FX impact of 6 billion . We had significant inflows coming from global ipns getting close to 80 billion reais in the quarter , a portion of those inflows came from TPD alternative generating 18 million in fees recognized one time as upfront fees .

Speaker #4: We expect another meaningful , though smaller , contribution from this line in next quarter timing commitment of , reflecting the signings . In addition , we recognize success fee in our real estate advisory business and 4.5 million reais in advisory on a management fee We basis .

Speaker #4: posted 202 million reais in the quarter . We expect to continue delivering consistent growth , supported by an active fundraising pipeline and to further enhance our mix revenue as we scale our fee earning base fee .

Speaker #4: revenues Total were 238 million in the quarter , while fee related expenses were 161 million . This translated to 77 million of free and a 32.3% free margin .

Speaker #4: Our highest in 2025 . The increase in free is margin a result of operating leverage from revenue growth . Some transaction costs that stopped impacting us this quarter combined with cost reduction initiatives , we have been working on since the beginning of the year , which have started to pay off now , delivering what we set out to do is in our DNA and we remain focused on further compounding growth with efficiency , performance related earnings were 11.

Speaker #4: 7 million in the quarter , coming primarily from equity funds . As a reminder , most of our Brazilian open end funds crystallized performance fees semi-annually in June and December , so the first and third quarters typically show lower performance fee recognition .

Speaker #4: This is the first quarter that we highlight our investment earnings or related I . We introduced this metric in Investor our Day and our objective is to be the most transparent as we can .

Speaker #4: And highlight the and realized unrealized gains from our commitments in proprietary funds . IRP is an value important our driver in business model , designed to compound growth and create long term shareholder value through our GP commitments .

Speaker #4: IRP in the third quarter was R$5 million, with listed rates contributing to realize the income and positive markups in funds supporting the unrealized component.

Speaker #4: Finally , putting it all together , adjusted distributable earnings totaled 73 million reais or one half , and $0.16 per share , representing a 28% increase year over year on a nominal basis and 7% growth on a per share basis .

Speaker #4: This quarter underscored durable fee power and an improving margin profile , validating our disciplined approach to growth . Expand and allocate capital , leaving us well positioned for continued progress in the fourth quarter and 2026 .

Speaker #4: With that , I would like to close our remarks and open the call for questions . Once again , we would like to thank you for joining our call .

Speaker #4: Please . Operator . You may proceed with the questions . Thank you .

Speaker #5: Thank you . We are going to start the question and answer section for investors and analysts . If you wish to ask a question , please press the button .

Speaker #5: Raise hand. Our first question comes from William Baron with Itaú BBA. You can open your microphone.

Speaker #6: Hi . Hey . Good afternoon . All . I have a question here one of the things regarding you mentioned during the call .

Speaker #6: The first Brazilian pension plan to commit in the PS4 . Right . And you also said that this first commit commitment should unlock further ones from this type of pocket , right ?

Speaker #6: So I wanted to dive a little bit here . So how fast do you think this , this new demand could come . And also what kind of cross-sell opportunities this this opportunity creates right .

Speaker #6: But more importantly here , how big do you think this pocket is ? This this new opportunities for for you guys .

Speaker #2: Hi , William . That's Alejandro , thank you for your question . That's that's true . That's the first pension fund commitment to SPS at all .

Speaker #2: Right . Not just in the fund for but overall the whole history of SPS . Of course , we expected that would be an opportunity for raising money for this type of clients since , as you know .

Speaker #2: Vinci Compass's main source of funds comes from institutional investors, including local investors, Latin American institutional investors, and, of course, international ones.

Speaker #2: We do expect further commitments for this strategy . Still in fund four , but we cannot predict exactly the size of it . But this strategy , due to the uncorrelated nature and really very low penetration on the portfolios of this type of investors , both local and international institutions institutions , both are the first for SPS .

Speaker #2: We expect this to gain an important space in the overall AUM of the vertical.

Speaker #6: Okay . Thank you . And if I could ask another one regarding your free margins , right . Improved a lot quarter on quarter .

Speaker #6: Just wanted to to hear from you if we should use this new level as , as the base for the next quarter or if there's any other effect that might decelerate this improvement , maybe lower advisory fees next in the quarter .

Speaker #6: How should I think about the evolution from here?

Speaker #3: Okay . William , this is Bruno . Yeah . There are some seasonality as well on the expense usually line . So we have a second quarter that's a little bit stronger in terms of expenses .

Speaker #3: The third quarter is , is is a little bit lighter from a seasonal standpoint . However , we did have some of the aspects combination in terms of cost that flow through the the numbers during the past three quarters and started to reduce a little bit in the third .

Speaker #3: So looking forward to the fourth quarter and beyond. And obviously not considering the Verge acquisition, because that's going to change a little bit.

Speaker #3: The number , but thinking about standalone , we should be able to see margins on the 30s going forward . Right ? So probably the fourth quarter would be a little bit smaller than that .

Speaker #3: But still above 30% . We hope to be able to reach the 30% for the year . I think we are within that that distance at this point .

Speaker #3: I think it's a possibility . And then looking forward to 26 , probably we should see margins in general above 30 without the combination with veggie .

Speaker #3: With veggie , we're going to have a big impact . The expectation is to close the transaction by the end of November . So they will impact only one month of the fourth quarter .

Speaker #3: But starting in the beginning of next year , once we have them on board for the full year , the should impact be of several hundred basis points .

Speaker #3: So this this 30 , let's say 30 to 31% will push towards probably at least the mid 30 level . So that's the expectation that we have once we have on board .

Speaker #3: But we expect the the continuation of of better numbers in the margin level going forward .

Speaker #6: All right . clear . Thank you .

Speaker #5: Our next question comes from Lindsay Cima with Goldman Sachs. You can open your microphone.

Speaker #7: Hi . Good evening and thank you for taking my question . We saw exceptionally strong global ipns inflows this quarter . Just wondering about how much of this was related to the pt-pd alts .

Speaker #7: And then you mentioned that there should be a small percentage of the upfront fees in next quarter . But how should we think about this line kind of going forward ?

Speaker #7: And then IPNS inflows more broadly in the future? Thank you.

Speaker #3: Okay , so this is Bruna Galinsky . Good to hear from you . So TPD was was very good this quarter as was the case of the second quarter as well .

Speaker #3: The alts this quarter we had 2 billion positive impacts . There was this big check that we mentioned from from from a regional player into a US based .

Speaker #3: Closed end funds , which was very relevant . And although the fourth quarter is looking like it's going to be a little bit slower , mainly on the on the , on the outside , the liquid side started the quarter pretty strong .

Speaker #3: So the the volume in the first month was similar to what we had in the third quarter on a monthly basis . And , and I think even more so when you look at this picture for TPD in general over the the medium and long term , I think the picture is quite constructive .

Speaker #3: We in have Chile and Mexico , which are two markets that are important for us . Of course , we have very strong tailwinds from increased contribution to the to the local institutional plans we have in general , more interest from high net worth individuals into mainly alternatives .

Speaker #3: So this is also going to be driver a for for medium to long term growth . And finally , in Brazil , we are starting from a very low base .

Speaker #3: The penetration of this type of allocation is still very small . So we expect this also to be a positive tailwind for for TPD in the medium and long term .

Speaker #3: So , so far fourth quarter flows continue to be strong and medium to long term . We continue to be quite optimistic about the business line in terms of in terms of flows .

Speaker #2: And Lindsay , Alejandro that's would like to to add on top of what Bruno said , very , very quick , quick comment in global Apn's and TPD all specifically we are seeing some outside rotation of portfolios from our institutional clients in Latin , especially moving from more traditional outlets to new verticals for them .

Speaker #2: Of course, we do have a very good team, good managers, and strong products. I can give you an example, like secondaries.

Speaker #2: So this is also providing a very interesting opportunity in terms of allocation . And another point is that we are looking to the future as we mentioned during the call , we see an opportunity for a more discretionary allocated allocation of funds and SMAs in , on behalf of the same type of investors , ones that do not want to allocate directly , but would like us to pick up the best managers and strategies for them .

Speaker #2: Thank you .

Speaker #5: Once again , if you wish to ask a question , please press the button . Raise hand . Please wait while we pull for questions .

Speaker #5: The Q&A session is over. I would like to turn the floor back to Mr. Alessandro Horta for closing remarks.

Speaker #2: I would like to thank you all once again for your continuous interest and support. This was a very important quarter in which we were able to demonstrate a significant improvement in our free margin, and we remain optimistic that we will continue to deliver in line with the expectations we outlined at our Investor Day in New York.

Speaker #2: So, thank you again, and have a good evening.