Good day, and thank you for standing by. Welcome to the Patria First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference call over to your first speaker for today, Andre Medina, from Patria Shareholder Relations. Andre, please go ahead.

Thank you. Good morning, everyone, and welcome to Patria's first quarter 2024 earnings call. Speaking today on the call are our Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Ana Russo. We are also joined by our Chief Corporate Development Officer, Marco D'Ippolito; and our Chief Economist, Luis Fernando Lopes, for the Q&A session. This morning, we issued a press release and earnings presentation detailing our results for the quarter, which you can find posted on the Investor Relations section of our website or on Form 6-K filed with the Securities and Exchange Commission. This call is being webcast, and a replay will be available. Before we begin, I would like to remind you that today's call may include forward-looking statements, which are uncertain, do not guarantee future performance, and undue reliance should not be placed on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve inherent risks, including those discussed in the Risk Factors section of our latest Form 20-F annual report. Also note that no statement on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Patria funds. As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to U.S. GAAP. Additionally, we would like to remind everyone that we will refer to certain non-GAAP measures which we believe are relevant in assessing the financial performance of the business, but which should not be considered in isolation from or 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'll turn the call over to Alex.…

Thank you, Alex, and good morning, everyone. It was indeed a great start of the year, as Patria continues to deliver steady and strong results. As we grow and diversify our platforms, it is important to maintain and enhance the comparability of our KPIs and metrics with those of our peers. And with that in mind, we reclassified 2 line items on our non-GAAP P&L, which had no significant impact on our reported results. First, rebates originally under the expense line, Placement Fee Amortization and Rebates, are now directly deducted from fee revenue as a contra revenue item, making our fee revenues more comparable with peers. This has no impact on reported Fee Related Earnings, but does slightly increase our reported FRE margin by around 2.3 percentage points in first quarter '24 and 1.6 percentage points in 2023. Second, some realized gains and losses were reclassed below distributable earnings, and this move makes our DE even closer to a cash-based metric. Further details on these 2 reclassifications can be found on our earnings presentation, which, among other things, highlights that $1.5 million of unrealized gains that were moved from net financial income and expense to a new line called Unrealized Gains/Losses on Investments, below DE, would have decreased 2023 distributable earnings per share by only [indiscernible]. As mentioned by Alex, following the completion of the acquisition of the Private Equity Solutions business from abrdn, we have now launched a new vertical, global private market solutions, or GPMS. This vertical, with pro forma fee-earning AUM over $10 billion, also includes $1.9 billion from our third-party distribution business, which was previously under advisory and distribution. As detailed on our earnings presentation, the remaining assets in advisory and distribution will be reallocated to other asset classes. With that, Patria's platform will be based…

[Operator Instructions] Your first question comes from the line of Craig, of Bank of America.

It's Craig Siegenthaler, from Bank of America. So our first question is on fundraising. You raised $1.1 billion on the quarter. You're on the way to the $5 billion target this year. Based on recent client conversations and marketing schedules, how do you expect the remaining roughly $4 billion to come in during the year? And should we expect lumpy flows certain quarters when you have a larger close with Private Equity VII and Infrastructure V when those get announced? Alexandre Teixeira de Assumpção Saigh: Craig, I think I would divide the $4 billion equally between the next 3 quarters. Our history shows that the third and fourth quarter are a little hotter; we raise a little bit more money. I think that's basically human nature. I think its gets to the second semester, everybody has drives and goals to meet. And we also, our sales team also has goals to meet. So they actually push a little harder. And the first quarter is normally a little slower because people come back from end of the year vacation, whatever. So that has been our tradition for the last 20 years, to be honest. So I think it's going to be more or less the same pattern this year. Over the last 12 months, we raised $5.1 billion, so this quarter until the second quarter of '23. And I think we're going to maintain the same pace. So again, I would divide the $4 billion equally. We have this chunky, as you mentioned, fundraising for Infrastructure Fund V and Private Equity Fund VII, but I think they're going to be evenly distributed as we see, as you said, our schedule of road shows and people that are very, very advanced in the due diligence going to their investment committees, et cetera. We definitely see things moving more or less equally over the next 3 quarters, that's correct.

Just for my follow-up, you guys have been very active on the M&A front, arguably more active than I think anyone predicted 2 years ago. And you're clearly consolidating the private markets industry in LatAm. But I wanted to get an update on how your objectives have evolved and how you think about dry powder, given cash, debt capacity and the stock guarantee today. Alexandre Teixeira de Assumpção Saigh: Thank you. I think definitely, we -- I think we manage and we are trying hard to -- are you guys there?

Yes, I can hear you. Alexandre Teixeira de Assumpção Saigh: I just heard a sound. I thought the line had gone down. So going back here and repeating myself for 1 second. Yes, we have been managing to consolidate the market in LatAm. I think this is very, very important. As you know, most of our clients are global institutional clients and local institutional clients, and they want to have a smaller number of relationships globally and locally. So we would like to be that 1 relationship in LatAm, 1 or 2 relationships in LatAm. And we want to offer these clients not only 1 product of 1 asset class, but several products of 1 asset class and products of several other asset classes as well, as you saw our diversification. I think we are very well placed with what we already acquired, putting us in a very good position to continue expanding organically. And most of what we did over this Fee Related Earnings increase over the last 4 quarters were organically driven, given that we did not close any major acquisitions last year; we signed, but we did not close. And we closed the abrdn global private markets solutions business acquisition in April. So it did not -- it was not included in the first quarter of '24. So with that, I think we are very well placed. We might do other minor acquisitions, but not major. The only market still pending for us to go into is Mexico, within LatAm. We do, of course, sell our products to Mexican institutional investors, but we don't have an asset management business there with local products in Mexico as we now have in Colombia, Chile and Brazil. There, I think we're looking to get into that market and trying to…

The next question comes from the line of William, from Itau BBA.

So I would just like to confirm some information about the 2 recently announced M&As. So regarding the abrdn one, I have a question. When should we expect it to show in your FRE numbers? So can I consider already the 2 last months of the second quarter of this year? Or will there be any deferment to the numbers? And just confirming on the CS real estate acquisition, if I can only expect to see FRE improvements regarding this one in 2025? Alexandre Teixeira de Assumpção Saigh: William, thank you very much for your questions. This is Alex again here. Yes, for the May and June question on the abrdn numbers. We did close this last Monday, the 28th of April. So as of 1st of May, we will then incorporate those numbers in our P&L. They're going to run through our P&L. And yes, as you know, the abrdn business has a positive FRE. Remembering that we mentioned that, just going over, I don't want to be redundant with you, but just going over to refresh our minds here. It's an $8 billion fee-paying AUM business. If we consider that it has around 35 basis of... Do you want to? Go ahead, Marco. Why don't you say, Marco? Marco is here with us, and I think he can continue here. So, do you want to do the math? Marco D?Ippolito: 30 to 40 basis points. $8 billion of fee-paying AUM. That gives you a guidance of the fee-paid AUM accretion.

With 30%, this is a 30% margin. So we have approximately -- we're looking to a full year impact about $11 million. That's what we're talking about in FRE. Basically looking [ to our portfolio rates ], we are talking about, like, $5.5 million approximately of FRE in terms of quarter base. But as Alex mentioned, it's 2 months that we're going to consider as of May, which is going to be already accounted in our results. Alexandre Teixeira de Assumpção Saigh: And then for your second question, I think conservatively we are expecting the Fee Related Earnings from the Credit Suisse real estate business as of '25 or end of '24, which basically insignificant, but '25 onwards, so conservatively that's what I suggest to use, William. We are in the middle of the process of transferring the funds from the Credit Suisse administration to our administration. As you know, we have to do this shareholders' meeting, and we are going through the process. The process is going fine. We got all of these -- of course, all the completions precedents were in place. So we started this shareholders' agreement process. And everything, again, is moving okay, but it's very hard to say where we're going to land. So conservatively, I would say 2025. I'll keep you guys updated on that as we move along the quarter, but I would start with 2025 as a baseline, okay?

Your next question comes from the line of Beatriz, from Goldman Sachs.

So my question is on expenses. So we saw an increase in both personnel and G&A expenses this quarter. If you could give us a little bit more color on what happened there and if we should expect that as a normalized level, going forward? And maybe as a second question, you should be reflecting abrdn's acquisition in the last 2 months of this quarter, 2Q, now that it's closed, and that certainly should add more variables to the equation. But what are you expecting in terms of FRE margin, going forward?

This is Ana. So I just want to refer as well to our deck just so we are clear with the numbers we are looking at. So our personnel expense line goes from Q1 2023 of $16.8 million to $16 million, and our G&A has an increase from $7.6 million to $8.8 million. So when we're looking overall, there is a slight increase of 0.4%, overall, when we talk about operating expenses. But in terms of personnel expenses, there is a positive impact, or slightly almost, as we mentioned, that these could be a proxy for the next quarter, as we mentioned last quarter. $16 million includes our equity compensation program as likely, and also there is as we progress in our business some outsourcing from personnel expenses to G&A. Also, our G&A includes, as we mentioned, this quarter more investment on the [indiscernible]. We have a higher marketing and commercial activities, which is reflected in G&A. This is sometimes when we look into the year it's seasonal because there are some quarters that are seasonal. We have more activities than the others. So you can see that there are related expenses. And on top of that, this quarter we have -- we are accounting for [indiscernible] weeks expenses compared to the first quarter 2023 of [ Fund Colombia ], which impacts both revenue and the expenses line as well. So this also includes something when we talk about inorganic expense. Alexandre Teixeira de Assumpção Saigh: I think the second question was on the FRE margin.

If we look into. So what we mentioned during the -- actually on my pitch, that we think that the margin could be between 56% and 58% for the year. That mostly is accounting for the nature of the new business we are including and we are acquiring, which has a lower FRE margin than our current business. That's the reason we also, when I mentioned about going forward, we think that there is a consolidation phase. In the future, this margin should actually progressively going up. But for this year, we think about it between 56% and 58%. Alexandre Teixeira de Assumpção Saigh: What has happened over the last years, Beatriz, and this is Alex here, and again, thanks for your question, and thanks for participating, we had when we went public a margin of around 60%, or 60.9%, 61%. And then as we did the Moneda acquisition, the margins came down to around 55%, 56%. And then we did of course run after the synergies. Margins went back up to close to 60%. And then we did other acquisitions. Margins came down a little bit. And then last year, the margins were around 61% again. As you may recall, we have not closed on any acquisitions last year. So it was a year of integration that we managed to push the margin for the whole year of 2023 back to over 60%. So this year I think and next year, 2025, I think it's going to be the same path, and this year is going to be a little bit compressed downwards, as Ana just mentioned, 56% to 58%, because we're taking on these acquisitions, we have redundancies in the first moments, and we have a little lower margins in the first moments because the businesses that we…

Your final question comes from the line of Ricardo, from BTG Pactual.

I have a couple of questions on my side. First, we saw that during the quarter management fee yield over this year [ in AUM ] declined around 12 bps, to 1.07% in Q1. So I wanted to understand what happened there, if it's something because of mix, if it's something because of an adjustment in certain segments, and what a sustainable level would be, assuming the abrdn acquisition and without, just for us to see what happened, right? And also, now that the abrdn acquisition is approved, I imagine that capturing all the top line synergies should take some time, right? So I wanted to understand a little bit more on what environment the company is right now in terms of inflows, in terms of AUM growth, especially for this year. Alexandre Teixeira de Assumpção Saigh: Thank you very much, Ricardo. Thanks for participating here in our call. Okay. So the management fee yields, as you saw here in Page, for everybody to be in the same page, it's Page 13 of the presentation, yes, I think it's a question of mix, so answering your question. We gave the guidance that we were going to raise around $5 billion in 2023. We raised $4.8 billion. We gave those numbers in our fourth quarter '23 call in February. And we raised within that $4.8 billion more real estate than we expected, more credit than we expected. And those 2 asset classes, if you look here through Page 13, you see that these 2 asset classes do have a relatively lower fee than the other asset classes, as compared to private equity and infrastructure. As we do, we raise a lot of infrastructure as well, but we have to deploy that one. For real estate and for credit, Ricardo, as we…

So if I may do a quick follow-up here on another topic, we saw that during the quarter the level of deployments in private equity and infrastructure declined a little bit. So it was previously around $100 million, and it was around $400 million, if I'm not mistaken, in Q1. So I wanted to understand if that is something that, a deceleration that happened only for a quarter and we should see the pace closer to the previous quarters, going forward? Or we should see like kind of a more structured deceleration in terms of deployment? Alexandre Teixeira de Assumpção Saigh: No, it's just a coincidence that it happened in this quarter, what you just described, Ricardo. There's nothing more to it, to be honest. And I think there is, in general, you're going to see the first quarters are a little slower. And again, don't ask me why, but I think there's a big human nature factor there. People get close to the end of the year, they want to close a deal. They have goals to meet. And not only the seller wants to sell, the buyer wants to buy and the advisers want to get their fees. So everybody kind of pushes in the right direction to close the deal. And then the first quarter is normally quieter. But that's more or less the path. Even on the privatizations and concessions, maybe the government has the same kind of human nature trait. They don't do much concessions and privatizations in January and February. I think it has to do with everything that I said. So the year starts picking up as of March, April. It's a natural circumstance, nothing to report there besides it's something natural. Nothing structural going on, Ricardo. As they say, Ricardo, Brazil starts off the [indiscernible].

This concludes the question-and-answer session. I would now like to turn it back to Alex Saigh for closing remarks. Alexandre Teixeira de Assumpção Saigh: Well, thank you very much. I think the final message here again is FRE per share. That's, I think, the number one, 2, 3 message here. Growing FRE per share very healthily this year versus next. And again, the FRE per share for this year of $1.08 to $1.12 per share, compared to $0.99 last year, is affected by the fact that we issue the shares, but we don't get the full benefit of the acquired assets. So as you look into next year, 2025, that we have the full year of the acquired assets running through our P&L and of course then reflecting them in our FRE, we're projecting $1.25 FRE per share to $1.40 FRE per share, which is the $200 million to $225 million FRE number that I gave you guys. And I'm very confident with those numbers. But even if we look at these numbers here, the $1.40, the $225 million, versus the $0.99, we are increasing FRE per share by 40% between these 2 years, '24, '25. And so we're comfortable there. We're comfortable we're going to hit the numbers. I think using the FRE per share I think answers a lot of the questions on potential dilution for acquisitions. And going back to the strategic instruments of using shares for acquisitions, it's not a question of just capital structure. It's strategically important for us to retain the manager, the portfolio manager, that comes along with these acquisitions as we do lock up these shares for 5 years, et cetera. So we have -- it is a very important instrument, compensation, retention and acquisition instrument. Even if we had all the money possible in the world in our balance sheet, I think we would still use some shares in order to retain those people, as we are a very people-driven business. So thank you very much again for your time. And I know that it was a very, very busy day today. So you guys being here in our call is an honor to us, because other of our peers and other companies are releasing their results. So again, thanks for your patience. Thanks for your support. I hope to see you guys in person. Thank you. Bye-bye.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.