Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- XP Inc (XP, Financial) reported a 14% year-over-year increase in total client assets, reaching BRL1.2 trillion.
- The company achieved an all-time high in revenue, EBT, and net income, with gross revenue up 21% year over year.
- XP Inc (XP) set a new record in the total number of advisors, reaching 18,300, and expanded its sales force by 11% year over year.
- The company reported a return on tangible equity of 27.2%, the highest in the past 2.5 years.
- XP Inc (XP) achieved a 43% year-over-year growth in EBT, reaching BRL1.4 billion, and a 26% net income margin.
Negative Points
- The effective tax rate increased significantly this quarter, attributed to the revenue mix and higher tax business segments.
- Despite the growth, the net margin decreased by 103 basis points year over year.
- The credit portfolio saw a 14% decline quarter on quarter, attributed to securitization and risk recycling.
- There was a noted drop in monthly spend for the credit card business for the second consecutive quarter.
- The company faced challenges in maintaining consistent net inflows, with previous quarters showing lower levels.
Q & A Highlights
Q: Can you provide more details on the consistency and quality of net inflows, and the increase in headcount this quarter?
A: Thiago Maffra, CEO: We don't disclose specific inflows and outflows or their sources, but I can confirm that the net inflows are 100% organic, driven by the maturation of strategic levers we've been working on. We don't expect to return to lower levels seen in previous quarters. Regarding headcount, we've been hiring internal advisors, increasing by about 80-100 per month, and also added 200 interns through our internship program.
Q: What factors contributed to the notable increase in net inflows this quarter?
A: Thiago Maffra, CEO: While many of our competitive advantages were already in place, they have matured over time. Additionally, the macro environment, such as lower interest rates, has helped, but the primary driver is our strategic initiatives. We expect these levels to be sustainable, with potential fluctuations, but the worst is behind us.
Q: What changed from the previous quarter regarding net new money, and what is the sustainable level for the coming quarters?
A: Thiago Maffra, CEO: The previous low levels were not normal. We are now returning to more normalized levels similar to 2021 and early 2022. We aim to eventually reach higher levels, like BRL30 billion per quarter, but it will take time. Our competitive advantages remain intact, and we are working towards higher levels.
Q: How do you see the recent pickup in net inflows impacting future revenues, and what is the outlook for EBT margin sustainability?
A: Thiago Maffra, CEO: While net new money is crucial for future growth, it doesn't directly correlate with immediate revenue changes due to the larger existing portfolio. Net new money is a key indicator of future growth potential. Victor Mansur, CFO: The EBT margin should be viewed on a last 12-month basis, which shows a slight improvement trend towards our guidance levels, eliminating quarterly variances.
Q: Can you explain the impressive control over cost of services and the decline in the credit portfolio this quarter?
A: Victor Mansur, CFO: The cost control reflects our operational leverage and ability to conduct more business without increasing costs. Regarding the credit portfolio, we securitized part of it, moving it to corporate bonds as part of our risk recycling process. This allows us to provide new products and increase our capacity to originate new assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
