Good evening, everyone, I'm Andre Parize, IRO at XP Inc. It's a pleasure to be here with you today. On behalf of the company, I'd like to thank you all for the interest and welcome you to our 2024 Second Quarter Earnings Call. This quarter, the results will be presented by our CEO, Thiago Maffra; and our CFO, Victor Mansur, who will both be available for the Q&A session right after the presentation. [Operator Instructions] And before we begin our presentation, please refer to our legal disclaimers on Page 2 on which we clarify forward-looking statements, additional information on forward-looking statements, can also be found on the SEC filings section in our IR website. So now, I'll turn it over to Thiago Maffra. Go evening, Maffra.

Thank you, Andre. Good evening to all. I appreciate everyone joining us for our 2024 Second Quarter Earnings Call. It's a pleasure to be here tonight. Let's delve into our quarterly performance and discuss the strategic steps we are undertaking to ensure our continued growth and education to all shareholders. I would also like to extend a warm welcome to Victor Mansur, our new CFO, as this is his first earnings call with us. We are excited to have him on board and look forward to his contributions to our financial strategy and operations. This quarter has been positive for XP. We have showcased our ability to generate alpha and achieve growth with profitability by managing several business levers independently from the challenging conditions. Our total client assets have increased by 14% year-over-year, reaching BRL1.2 trillion. More importantly, we have observed a re-acceleration in our client net inflow this quarter, details of which we will elaborate on during the presentation. We have also set a new record in the total number of advisors reaching 18.3 thousand and continued to expand Brazil's largest investment specialized sales force, growing 11% year-over-year. Finally, we ended with 4.6 million active clients, marking a 16% increase year-over-year. We had our all-time high in revenue, EBITDA and net income. Gross revenue was BRL4.5 billion for the quarter, up 21% year-over-year. And EBITDA of BRL1.4 billion, 43% higher year-over-year, and BRL1.1 billion in net income with a margin of 26%. This result reinforces and gives us comfort that we are on track to deliver our gross revenue and EBITDA margin guidance in 2026. We will go into more details on the financials later on. In terms of balance and profitability, we closed the quarter with a return on tangible equity of 27.2%, the highest in the past…

Thanks, Maffra. Good evening everyone. It's a pleasure to be here with you. As this is my first earnings call, before I go to the second quarter numbers, I think it would be interesting to share three pillars we are focusing on for the years to come. First, a short-term objective, our corporate restructuring. As you know, we have a bank in our ecosystem, and having a bank can provide us higher leverage and lower costs. At the same time, we can restructure new products. To get all the benefits of having a bank in the ecosystem, we have started a corporate organization last year to have XP Bank as the parent company in Brazil when completed. This will provide lower cost of capital by increasing our ability to issue Tier 1 and Tier 2 debt. The process if the Central Bank is flowing is expected and we should have it completed by the end of the year. Second, a midterm objective, our guidance delivery. EBITDA margin expansion should come through new products increasing profitability as they evolve in the ecosystem coupled with a strict cost discipline without harming innovation which is part of our DNA. And third, a long-term objective, capital allocation. We understand that having a continuous capital management through disciplined capital allocation and returning capital to shareholders is key for our long-term goals. XP is a profitable company, generates cash and does not need to reinvest 100% of its profits to grow. Capital allocation decisions are based on ROE, profitability, and connection with our long-term strategy. The combination of these initiatives should lead to higher returns going forward. I think it would be interesting to share three pillars we are focusing on for the years to come. And now let's go to the numbers. Total gross revenue…

We had a solid quarter with revenue growth and operating leverage. This combination gives us confidence that we are on track to deliver our 2026 guidance. All initiatives, from distribution channel diversification to sales force expansion, are proving that we are in the right direction to deliver our higher level of net new money compared to last year. Finally, we believe that we are keeping and enhancing our modes by: First, offering the best product platform in the country, ensuring that our customers have access to an unmatched range of solutions; Second, empowering the largest and best-trained sales force in the industry. Third and last, evolving our company's value proposition to a new level of service excellence, moving beyond the traditional product distribution model to a far more sophisticated and value-driven approach through financial planning. Now Andre Parize will start our Q&A session.

Okay. Thank you, Maffra. We're going to start the Q&A. And the first question is coming from Antonio Huet, Bank of America. Antonio, can you hear us? Thank you, Maffra. We're going to start the Q&A session. And the first question comes from Antonio Huet, Bank of America. Can you hear us, Antonio? Okay, we believe we are back. And the question is for Antonio Huet from Bank of America. Antonio, you may proceed.

Hi, good evening, guys. Can you hear me?

Yes we can.

All right, all right. So two questions on my side. So first on net inflows, if you could please explore a little bit the consistency and the quality of these net inflows. So how do you break down in terms of across inflows and also outflows. Also in terms of mix and is it coming from other players? Is it new money? So a deep dive here on net inflows. And my second question on headcount. We noticed that headcount increased in the quarter and if you could explore a little bit here this team it would be great.

Thank you. Hello Antonio, this is Thiago. So first of all sorry to everyone that is here on the call for the problems we have. So we never open outflows and inflows, okay, and not even where the money comes from. So what I can tell you, there is nothing not organically here in the number, so it's 100% organically. And as we mentioned, it's more related to the levers that we have been working on in the past quarters that they are maturing and starting to bring more net new money. So yes, we believe the worst is behind us. We are not going to give short-term numbers for next quarter or the next quarters. But what I can say is, we do not expect to go back to BRL13 billion, BRL12 billion as the last quarters. So that's basically what we believe. So we expect good levels of retail net new money going forward. For headcounts, basically what we have been hiring people, is especially as we opened last quarter, that we have almost 2,000 internal advisors. So we have been, I would say, increasing the number around 80, 100 per month, okay? So internal advisors. So that explains a good part of the number here. Of course, we have some other like hiring, we had internship program with 200 interns, so that's the number.

All right, thank you.

Okay. The next question is from Jorge Kuri, Morgan Stanley. Jorge, you can -- you may proceed.

Hi, everyone. Thanks [indiscernible] opportunity to ask questions and congrats on the numbers. I'm sorry to re-ask the previous question again, but I do think it's important. On the inflows, I mean, I appreciate the explanation that Maffra gave about some of these competitive advantage that you have. And if you go back to that slide where you showed them next to the inflows, I mean, it feels to me that all of those things were in place a year ago and certainly a quarter ago like your multi-channel distribution, your product capabilities, your digital capabilities, your robust IFA network. I don't know that there is any material difference in the last three months on any of those items. And it feels to me that maybe there is a cyclical component here on the recovery of net inflows. And so to the extent that you can help us understand better to what extent indeed there is something cyclical, maybe the volatility that happened in the quarter. I mean, the market sold off aggressively in June and then they picked up again, the currency devalued. So any more color on these, very notable, and I think, important increase in inflows would be helpful. Thank you.

Yes, for sure, Jorge. Most of these levers, they were in place, but they were not mature if we go back. Of course, they didn't mature from one month to the other or from one quarter to the other, they're maturing and of course we have some other levers that helped us to increase the number. For example, if you compare today that we have 11.5% instead of -- interest rates instead of 13.75% and you have REITs being 1% a month. When you compare that like to the CDs from the banks, the changing regulation, all this stuff, of course it helps. But I would attribute more value like to everything that we have been doing, everything that we control then a macro environment, okay. So -- and again it's not something that it's specifically to this quarter. So then in Q3 we are going back to BRL13 billion, BRL12 billion from Q4 and Q1. It's more like a normal level. Of course there are volatilities that can be slightly lower, slightly higher in the next quarters, but there is nothing not organically here. So we expect that the worst is behind us, that we are going to deliver good retail net new money in the next quarters.

All right, great. Thank you, Maffra.

Okay. Next question comes from Renato Meloni from Autonomous. Renato, you may proceed.

Hi, everyone, can you guys hear me?

Yes we can.

Thanks for this space here for questions and welcome Victor here for this call here with the team. So just like following up on new money. On the last call you said, Maffra, that you would take some time to return to normalized levels of net new money similar to the previous year. And in fact, the numbers were today much better than any quarter, at least, organically last year, so I wonder here what changed from your view from the first quarter and what's the, I would say, sustainable level of net new money for your coming quarters? And just secondly, quick question, what drove the increase in the effective tax rate that was much higher this quarter? Thank you.

Okay. I can take the first part and then Victor take the HR question. So again, the normal level was not the BRL13 and BRL12 billion from Q3, from Q4 and Q1. That was not normal. Okay. So -- and when I say that going back to normalizes levels is more like true, what we have been doing in 2021, early 2022 that we are doing like BRL30 billion per quarter. That's what I said that it may take some time to go back there. But again, the levels that we are delivering right now can be a little more, a little less. $20 billion, $20 billion plus against $13 billion. That's more a normalized level for the moment. But again, we are working very hard like to at some point in time in the next years to go back to BRL30 billion, BRL40 billion, because we believe that our mote, our competitive advantage is still in place. That's what we have been talking to all the investors in the past, I would say, almost a year. The question has been always, okay, now the banks or the competitors, they have closed the gaps, you guys have lost the competitive advantage. And we always said, no, it's something that's temporary. At some point with everything that we are doing we will revert that, I believe, that's the beginning. So of this new levels, of course, we are not happy with the 2024 that we deliver right now. We are working very hard to go back to higher levels, but it may take some time

Okay, thank you. [Multiple Speakers] I got it, but just to stay on that point, I think part of the question is like what changed from your view in the previous quarter or maybe nothing changed?

Yeah, nothing changed. All the work we have been doing in the past quarters.

Okay. Thank you, Renato. Thank you. It was a pleasure to be here for you all for the first time. Moving to the ETR question. Basically, the ETR is a result of revenue mix, as we commented before. The Corporate & Issuer Services was one of the highlights of the quarter, and they are higher tax business as they are in the bank. And what I can say about that, we expect that the tax rate of this quarter to be the highest quarterly rate of this year. But I recommend that you look at the last 12 months normalized ETR. That is a better metric because it's considered the tax paid [indiscernible] funds and moves the impact of the quarter revenue mix variation. And this number was BRL18.5 million from this quarter, and we can expect this number should be around that over the year.

That’s very clear. Thank you.

Okay. The next question is from Daniel Vaz, Banco Safra. Daniel, you may proceed.

Hi, guys. Hi, Maffra. Hi, everyone. So yes, your distribution capabilities are indeed very strong. So you have this competitive advantages. So with strong DCM issuances this quarter, probably it was a key driver, right? So I think nothing has changed, right? So organically, you're still very capable of raising this net new money organically. So I wanted to understand here these robust numbers in distribution, how this has helped the net new money in this quarter? So is the growth more concentrated in bank funding instruments or this taxes and profit credit? So just a bit to qualify the distribution and the net new money, if you can? And the second question about corporate, if you can give us a little bit more context on that because it was very strong, and this is not as mature, right? So it would be good to hear from you.

Hi, Daniel. Thank you for your question. And as we come in the Retail, the fixed fee income was the main highlight in the Retail business. And basically, it's -- we have a close relation with the Retail fixed income and the DCM activity. And as you can see in our balance sheet, we originated a lot of new fixed income instruments over the quarter. And of course, this helped us to generate fixed income revenues, and this helps a lot with the net new money. And I don't know if that answers your question. If it does, we can move to the next point.

Just a moment here. When we said -- if you can move back to my slide about the new money, the first point was the broader platform, okay? Victor just mentioned the integration between DCM and Retail distribution, okay? But we go beyond that, okay? So if we get the size, that's public. So if you get all the REITs offering that we did this year, we have been able to raise in a single offer almost BRL2 billion, okay? So what we saw in the first quarter and then also on the second one is the appetite for, I would say, more diversified products compared like to last year that people are only looking for CDs -- tax-exempt CDs from the banks, okay?

Regarding the corporate side, any comments here, please?

I think the corporate side reflects what Maffra talked about that, bringing new products to offer to our Corporate & SMB clients. Basically if you look at the ranks, we didn't have derivatives capabilities until two years ago. And if you look at our FX ranking, we also didn't have this business two to three years ago. Basically, as we grow those products in our platform and user relationship, we are capable to do more cross-sell to introduce those clients, the right kind of client and the right kind of product. So those business lines should be growing in the base of our guidance.

So the next question is from Tito Labarta from Goldman Sachs. Tito, you may proceed.

Hi. Good evening everyone. Thank you for the call and taking my questions. Another question on the inflows, but more how does -- how do you think that can benefit revenues going forward? We did see a bit of a pickup in Retail revenues this quarter of 5%. But in the past, you said your revenues are not that correlated to inflows. But just how do you think a nice pickup in inflows, can this translate to a further acceleration in revenues going forward? Just see how you think about that. And then just another question on your EBT margin, right? I mean big improvement there. How do you think about the sustainability of that margin? Anything that was maybe one-off that was a big improvement in the quarter. How do you see it going forward? Thank you.

Okay. Thank you, Tito, for your question. I will take the first one and Victor the second one. So about the revenue and correlation with net new money. Of course, there is a small pickup, okay? Because imagine that we have inflows and outflows, okay? But it's small when you compare like to the whole way you see that we have. So today, we have almost BRL1.1 trillion of retail clients, okay? And the whole portfolio that we have is much larger than any net new money. So we don't see a big correlation in both of them. But yes, what -- why net new money is so important, because that proves that we -- the moat of the company and the growth, the future growth, it's here. So that's why net new money for us is the main KPI because that dictates how it's going to be the company a few years down the road, okay, more than the revenue this quarter or next quarter.

Tito, thank you for the question. I think the EBT margin rationale is the same of ETR. You should look at the last 12 months margin that is currently at 28%. Looking at that margin, you should see a slight improvement towards our guidance levels over time. And that will eliminate any variance quarter-over-quarter how to do business mix or ETR.

Okay. That's helpful. And just maybe just in terms of the -- on the revenue outlook, are you feeling more comfortable with the revenue outlook from here? Any just potential catalyst to sort of accelerate the revenues, just thinking of where we are in the cycle given your rate is still high.

Yes, I'm not sure if I understood your question, the revenue for this year?

On Retail revenues.

Can you repeat the question?

Sure. Yes, sorry. Just on the outlook for Retail revenues, right? I mean there was the pickup this quarter. I mean do you think that the outlook is maybe improving to some extent, we still have high rates. How do you see...

Yes. As we mentioned in the presentation, we expect the second half of the year to be better than the first half of the year, okay? So again, we are not giving guidance for the next quarter or for the year, but you can -- have in mind that the second half should be better in terms of revenues, net income and so on because, again, the guidance for 2026 is still in place, nothing changed. And if you look at the numbers, the CAGRs we have to deliver on revenue for the top of the guidance is 19%. The increase in margin EBT going to the range of BRL32 million to BRL34 million, we should start like to pick up in all these metrics. So otherwise, we'd not go there, okay? But -- and we just mentioned that we are on track. So you can expect like all these numbers to improve in the next quarters. Of course, there are volatility. We can go down some of the quarters until the end of 2026. But the trend is upwards, okay? So you can expect the second half of the year to be better than the first one.

All right. Perfect. Thank you very much.

Okay. The next question is from Olavo Arthuzo from UBS. Olavo, you may proceed.

Thank you, guys. Thank you for taking my question. I have two, but my first is just a follow-up on my colleague's question on net new money. And I totally understand the explanation for this performance this quarter. It was related to the leverage you have been working on. But questioning on the other way, I understand the change in taxes of instruments had some effect, even a small one, and also this move decrease in the policy rate had some effect as well. So could you just please give us a magnitude of these two impacts over the flow this quarter? Basically just the magnitude, like if those two effects had less than 10% effect over the net new money, that would be helpful. And then I'll go to my second question.

Yes, Olavo. Yes, for sure, there was a positive impact from the change in regulation, for sure, the banks they have less capacity to issue this type of tax exempt products. But it's almost impossible to say how -- what's the percentage of the increase in that net new money coming because of change or because all the other factors. It's not just one factor. I understand that most of the questions here is they are trying to find one explanation. There's not one. There are many, okay, many combined levers. Some or most of them that we control, some of them that is the market. The interest rate 11.5% is different from 13.75%. We always said that, okay? So it's important to understand that it's not one point, okay? So again, we always said that we don't need like a much better macro environment and we don't need interest rates like to go to 8%. We don't need like a stock exchange to perform well, like to go back to bring net new money. So we are not macro-dependent. So that's the point. And we will not have only one explanation.

Okay. That's great. Understood. So if I may, on my second question, and I'll now shift the discussion to the credit card business. Because I saw you continue to expand its active credit card base, but I know that the monthly spend dropped for the second consecutive quarter here. So guys, I just wanted to understand if this is solely related to the macroeconomic backdrop that we are leaving or if this could be related to the clients that use your credit card moving to other banks or fintechs. I think that sort of other credit cards offer a similar 1% cash back and several other benefits. Any color on that will be helpful.

Yes, about credit cards. Basically, we have two levers here to work on. First of all, today, we have 2 million eligible clients, okay? So out of the almost 5 million clients, only 2 million clients from all the brands are eligible to have our credit card, okay? So if you get the number of issued credit cards, around 1 million cards, okay? So it's a 50% penetration. So here, we have two levers. The first one is improve the benefits that we -- or the choice we give to our customers, okay? So we just released the miles points for credit cards. So we believe we can capture clients that perceive more value added on points than only cash back. So that's one. And the second one is how we make the other 3 million clients eligible. Of course, working with the right loss absorption with the right level of risk. So we have been working on increasing the number of eligible clients. So we believe that we can go back on track to capture more growth on credit cards on the next quarters.

Okay. Next question is from Neha Agarwala from HSBC. Neha, you may proceed.

Hi. Thank you for taking my question and congratulation on the results. On the cost of services, I think the control over COGS is quite impressive, which also led to the gross profit expansion. Could you talk a bit about that, how sustainable that is, what levers did you pull there for such a good control on the cost of services? And my second question is on the loan book. If I'm looking at the correct numbers, the credit portfolio actually went down 14% quarter-on-quarter. So if you could just explain why the decline in the credit portfolio. Thank you so much.

Hi, Neha. Thank you for the question. First about the COGS, I think that's a reflection of our operational leverage and our capacity to do more business without increasing costs. And you can see both of those effects in COGS and SG&A, and this trend should go towards the year. And if I may go to the loan book question, basically, what we did, we securitized part of our loan portfolio and moved that to our corporate bonds as a financial debenture. This is part of our risk recycled process, and we should use those corporate bonds as collateral for repo operations against our clients and eventually, to sell those operations in our ecosystem.

If I understand, this is new, right? You have not done this in the prior quarters. So what was the motivation regarding doing this?

It's new. This is the first time that we did that. And the idea is to create a process to recycle the risk in our loan book the first time, and we keep -- we should see that in the future. You've seen that in the future, sorry.

So was the asset quality worse than expected? What was the reason for this recycling of the loan book?

No. The quality of the assets are the same as always: low risk, good clients, a good portfolio. The idea here is create instruments to recycle risk at the same time that we can provide new products to our clients. And by doing that, we can increase our capacity to originate new assets at the same time that we create new products for our retail distribution. And basically, that is the idea.

Okay. And also, the provision this quarter was low. Is this related to this recycling?

It's partially related to this recycling, partially related to some operations that we recovered -- credit that we recovered from other periods.

Okay. Great. Thank you so much.

Okay, we are up on the hour. So thank you, Maffra, thank you, Victor. Thank you all of you participants today. I apologize, once again, for our troubling connections. And we are available, the IR team is available for any further questions. Thank you once again, and we see or we talk to each other on the next quarter. Thank you.