Vinci Partners(VINP) - 2024 Q4 - Annual Report

Front Matter Presentation of Financial and Other Information This section outlines the basis of presentation for the financial report, prepared in accordance with IFRS and highlighting the Compass Group business combination and the use of non-GAAP financial measures - The company's audited consolidated financial statements for the years ended December 31, 2024, 2023, and 2022 are prepared in accordance with IFRS as issued by the IASB, with the functional and reporting currency being the Brazilian real (R$)[24][25] - A significant corporate event was the business combination with Compass Group, which closed on October 29, 2024, creating a Latin American alternative asset manager with R$327.0 billion in AUM as of December 31, 2024[26] - The report utilizes several non-GAAP financial measures for investor convenience, including Fee Related Earnings (FRE), Performance Related Earnings (PRE), Distributable Earnings, and their adjusted counterparts, to provide a clearer view of baseline performance, profit generation from performance fees, and earnings available for distribution[29][30][31] Cautionary Statement Regarding Forward-Looking Statements This section warns investors that the report contains forward-looking statements subject to risks and uncertainties, including economic conditions, competition, and regulatory changes - The annual report includes forward-looking statements that are subject to various risks and uncertainties, which may cause actual results to differ materially[43][44] - Key risk factors influencing these statements include general economic conditions in Latin America, competition, investment fund performance, ability to integrate acquisitions like Compass, and the interests of the controlling shareholder[45] - The company does not undertake any obligation to update forward-looking statements to reflect future events or circumstances[46] PART I Key Information Risk Factors This section details significant risks that could adversely affect the company's business, financial condition, and results of operations, including market downturns, internal control weaknesses, and political instability - Difficult market and economic conditions can reduce the value of managed investments, decrease AUM, and negatively impact management and performance fees[56] - The company has identified material weaknesses in its internal control over financial reporting related to IFRS and SEC compliance, system access, and the financial closing process, which could prevent the timely detection of material misstatements[189][190] - The governments of Latin American countries exercise significant influence over their economies, and political or economic instability in the region can adversely affect the company's business and share price[260][264] - Gilberto Sayão da Silva controls approximately 71.8% of the voting power through his ownership of all Class B shares, limiting the influence of Class A shareholders on corporate matters[306] - There is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which would result in adverse U.S. federal income tax consequences for U.S. investors[346] Information on the Company Vinci Compass is a leading Latin American alternative asset manager with R$327.0 billion in AUM as of December 31, 2024, operating across six segments and emphasizing diversified revenue streams and a strong investment track record - Vinci Compass was formed through the business combination of Vinci Partners and Compass, which closed on October 29, 2024, creating a leading Latin American alternative asset manager with R$327.0 billion in AUM as of December 31, 2024[357][372] Assets Under Management (AUM) by Segment (in R$ million) | | As of December 31, | | | | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2022 | | Global IP&S | 255,403 | 25,514 | 26,650 | | Credit | 29,213 | 7,371 | 7,199 | | Private Equity | 16,760 | 14,593 | 13,781 | | Equities | 13,883 | 10,055 | 7,747 | | Real Assets | 11,702 | 10,992 | 7,705 | | Total | 326,961 | 68,525 | 63,081 | Fee-Related Revenues by Segment (in R$ million) | | For the Year Ended December 31, | | | | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2022 | | Global IP&S | 128.7 | 83.7 | 100.4 | | Credit | 83.8 | 52.2 | 33.0 | | Private Equity | 146.6 | 125.5 | 109.1 | | Equities | 59.2 | 58.8 | 64.0 | | Real Assets | 102.3 | 75.7 | 68.0 | | Corporate Advisory | 42.9 | 37.3 | 18.9 | | Total | 563.6 | 433.2 | 393.5 | - The company operates through six business segments: Global IP&S (78% of AUM), Credit (9%), Private Equity (5%), Equities (4%), and Real Assets (4%)[386][417] - Key strategic initiatives since the IPO include the acquisition of SPS Capital (2022), a US$100 million investment from Ares (2023), and the acquisitions of MAV Capital (2024) and Lacan (2024), alongside the major business combination with Compass (2024)[363][365][368][370] History and Development of the Company This section details the company's evolution, highlighting the merger of Vinci Partners and Compass in October 2024 to form Vinci Compass, a premier Latin American alternative asset manager with R$327.0 billion in AUM - Vinci Partners and Compass completed their business combination on October 29, 2024, creating Vinci Compass, a leading alternative asset manager in Latin America with R$327.0 billion in AUM as of December 31, 2024[357] - The company executed several strategic acquisitions to bolster its platform: SPS Capital (special situations) in August 2022, MAV Capital (agribusiness credit) in June 2024, and Lacan (forestry) in November 2024[363][368][370] - In October 2023, Ares Management Corporation formed a strategic partnership with the company, including a US$100 million investment in Series A convertible preferred shares to accelerate growth[365] Business Overview Vinci Compass is a leading alternative investment and global solutions provider in Latin America, with R$327.0 billion in AUM, operating six segments and emphasizing diversified revenue streams and a strong investment track record - The company's business is structured into six segments: Global IP&S, Private Equity, Real Assets, Credit, Equities, and Corporate Advisory[386][417] - As of Q4 2024, revenue streams are geographically diversified, with 40.9% in Brazilian reais, 32.3% in U.S. dollars, and 17.2% in Chilean pesos, providing resilience against local economic cycles[396] - The company has a strong commitment to sustainability, being a PRI signatory since 2012 and having an active private market impact strategy (Vinci Impact and Return)[406] - Competition varies by segment, including local banks, sector-focused asset managers, and international firms, with key competitors mentioned including Patria Investments, Kinea, XP Inc., and Banco BTG Pactual[113][577][590] Organizational Structure Vinci Partners Investments Ltd. is a Cayman Islands exempted holding company with a dual-class share structure, where founder Gilberto Sayão da Silva beneficially owns all Class B shares - The company is a Cayman Islands exempted company with a dual-class share structure[738] - As of Dec 31, 2024, there were 49,580,116 Class A shares and 14,466,239 Class B shares issued and outstanding, with Gilberto Sayão da Silva beneficially owning all Class B shares[739] Property, Plant and Equipment The company protects its brand and services through trademarks and leases its physical properties, including headquarters in Rio de Janeiro, Santiago, and New York - The company relies on trademarks and domain names to protect its intellectual property, with key registered marks including "Vinci Partners," "Vinci Compass," and "Compass Group" across various jurisdictions[744][745][746] - The company's main physical properties are leased, including its headquarters in Rio de Janeiro (31,194 sq ft), and regional headquarters in Santiago (21,140 sq ft) and New York (7,613 sq ft)[749] Operating and Financial Review and Prospects This section analyzes the company's financial performance, highlighting a 377% increase in AUM to R$327.0 billion and a 32% rise in net revenue from services rendered, despite a 47% decrease in profit for the year Key Financial Metrics (in R$ thousands) | | For the Year Ended December 31, | | | :--- | :--- | :--- | | | 2024 | 2023 | | Net revenue from services rendered | 600,779 | 454,420 | | Operating profit | 188,804 | 202,156 | | Profit for the year | 115,973 | 219,459 | | Adjusted Distributable Earnings | 239,056 | 245,836 | - AUM increased by 377% to R$327.0 billion in 2024, primarily driven by the R$241.7 billion in AUM from the business combination with Compass[758][759] - Net revenue from services rendered grew 32% to R$600.8 million in 2024, driven by stronger management and advisory fees following the Compass combination and other acquisitions[764] - Profit for the year decreased by 47% to R$116.0 million in 2024, mainly due to a 63% increase in G&A expenses and a R$25.4 million net finance loss, compared to a R$67.2 million net finance profit in 2023[842][845][848] Operating Results For fiscal year 2024, Vinci Compass reported a 377% increase in AUM to R$327.0 billion and a 32% rise in net revenue to R$600.8 million, but profit for the year fell 47% to R$116.0 million due to increased general and administrative expenses and a net finance loss Consolidated Results of Operations (in R$ thousands) | | For the Year Ended December 31, | | Variation (%) | | :--- | :--- | :--- | :--- | | | 2024 | 2023 | | | Net revenue from services rendered | 600,779 | 454,420 | 32% | | General and administrative expenses | (411,975) | (252,264) | 63% | | Operating profit | 188,804 | 202,156 | (7)% | | Profit for the year | 115,973 | 219,459 | (47)% | Non-GAAP Financial Measures Reconciliation (in R$ thousands) | | For the Year Ended December 31, 2024 | | :--- | :--- | | FRE Reconciliation | | | Operating profit | 188,804 | | (-) Net revenue from realized performance fees | (50,125) | | (-) Net revenue from unrealized performance fees | 12,937 | | (+) Share-based payments | 22,479 | | (+) Compensation allocated in relation to performance fees | 15,348 | | (+) Expenses relating to acquisitions and business combinations | 56,562 | | (+) Amortization of fund management contracts | 2,392 | | FRE | 248,397 | | Distributable Earnings Reconciliation | | | Profit for the year | 115,973 | | (-) Net revenue from unrealized performance fees | 12,937 | | (+) Adjustments for taxes, share-based payments, D&A, etc. | 69,824 | | Distributable Earnings | 183,857 | | (+) Expenses relating to acquisitions (net of tax) | 55,199 | | Adjusted Distributable Earnings | 239,056 | - The increase in General and Administrative expenses to R$412.0 million (a 63% rise) was primarily due to higher personnel costs, third-party expenses related to M&A, and amortization of management contracts from the Compass, MAV, and Lacan acquisitions[845][846] Liquidity and Capital Resources As of December 31, 2024, the company held R$223.3 million in cash, with a net cash outflow from financing activities of R$429.2 million and total debt liabilities of R$981.0 million Cash Flow Summary (in R$ thousands) | | For the Year Ended December 31, | | :--- | :--- | | | 2024 | | Net cash inflow from operating activities | 209,771 | | Net cash (outflow) from investing activities | (232,135) | | Net cash (outflow) from financing activities | (429,230) | | Net decrease in cash and cash equivalents | (451,594) | - Total debt liabilities as of December 31, 2024, were R$981.0 million, with major components being R$578.0 million in Series A convertible preferred shares and R$210.7 million in contingent considerations from acquisitions[885] - Capital expenditures for 2024 were R$19.3 million, mainly for systems development for Retirement Services and placement agent agreements[894] Trend Information The company operates in key Latin American markets, anticipating a constructive macroeconomic environment and opportunities from increasing demand for financial products and a shift towards alternative investments - The company is present in key Latin American markets (Brazil, Mexico, Argentina, Chile, Colombia, Peru, and Uruguay) which collectively account for about 90% of the region's GDP[899] - Key market trends benefiting the company include the disintermediation of traditional banks, rising demand for diverse financial products, and a structural under-allocation to alternative assets by Latin American investors[903][904] - The Brazilian and broader Latin American asset management industries are viewed as inefficient and ripe for disruption due to historical high interest rates and market concentration in traditional banks[902] Directors, Senior Management and Employees This section details the company's leadership, compensation structure, and workforce, noting an 11-member board, R$24.0 million in key management compensation, and 594 full-time employees as of year-end 2024 - The Board of Directors is composed of 11 members, including Chairman Gilberto Sayão da Silva, Vice-Chairman Manuel Jose Balbontín Fernandez, and CEO Alessandro Monteiro Morgado Horta[908][909][910] - Aggregate compensation for key management personnel was R$24.0 million in 2024, up from R$16.7 million in 2023[932] - The company has implemented several long-term incentive plans, including four stock option plans and a restricted shares plan, to align employee and shareholder interests[935][936][937][940] - As of December 31, 2024, the company had 594 full-time employees, with 48% in support areas and 19% in client relations[953][954] Major Shareholders and Related Party Transactions This section details the company's ownership structure, where founder Gilberto Sayão da Silva holds 71.8% of voting power, and outlines related party transactions including employee loans and a loan to Compass Group Cayman Ltd Major Shareholders' Voting Power (as of Dec 31, 2024) | Shareholder | % of Total Voting Power | | :--- | :--- | | Gilberto Sayão da Silva (Class B) | 71.8% | | Alessandro Monteiro Morgado Horta | 4.1% | | Ares Management LLC (Series A Preferred) | 3.6% | | Costanera Management LLC (M. Balbontín) | 3.5% | | Compass Group Cayman Ltd. (J. de la Barra) | 2.4% | | SPX Gestão de Recursos Ltda. | 1.7% | - Pre-IPO quotaholders and former Compass partners are subject to volume limitations on their ability to sell shares, with aggregate sales during any six-month period not to exceed 5% of the company's outstanding share capital[964][965] - Related party transactions include loans to employees (R$15.1 million in 2024), receivables from employees for share sales (R$29.2 million), and a US$3.5 million loan to Compass Group Cayman Ltd[970][971][972] Financial Information This section covers the company's dividend policy, targeting at least 70% of Distributable Earnings or 100% of profit, and legal proceedings, noting R$203.2 million in dividends paid in 2024 and R$23.9 million in possible tax and labor claims - The company's dividend policy targets a payout of at least 70% of Distributable Earnings or 100% of profit for the period, whichever is lower[976] Dividends Paid (in R$ million) | Year | Amount | | :--- | :--- | | 2024 | 203.2 | | 2023 | 190.1 | | 2022 | 211.3 | - As of December 31, 2024, the company had not recorded any provisions for legal proceedings, but it faced potential losses from tax and labor claims assessed as 'possible' totaling R$23.9 million[983][988][989] Additional Information This section details the company's corporate structure and governance under Cayman Islands law, including its dual-class share structure, anti-takeover provisions, and U.S. federal income tax implications, notably the PFIC risk - The company has a dual-class share structure, where Class A shares have one vote per share, while Class B shares have ten votes per share and are 100% beneficially owned by Gilberto Sayão da Silva[1002][1011] - Holders of Class B shares have preemptive rights to purchase additional shares in new issuances to maintain their proportional ownership[1016] - The Articles of Association contain anti-takeover provisions, including the board's authority to issue preferred shares and the concentrated voting power of Class B shares[310][1061] - The Cayman Islands has no corporate, income, or capital gains taxes; however, U.S. holders of Class A shares face material U.S. federal income tax considerations, including the risk that the company could be classified as a Passive Foreign Investment Company (PFIC)[1110][1114][1122] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks including currency, interest rate, and price risk, which are managed through diversification and established policies, alongside liquidity and credit risk - The company's primary market risks are foreign exchange variation, interest rates, and securities prices[1142] - Currency risk arises from assets and liabilities denominated in currencies other than the company's functional currency (Brazilian real)[1143] - Price risk from investments is managed through portfolio diversification and the use of derivatives for hedging purposes[1145] - The company manages liquidity risk by maintaining adequate cash reserves and credit facilities to meet obligations[1147] Controls and Procedures As of December 31, 2024, management concluded that disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting related to IFRS/SEC compliance, system access, and financial closing processes - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024, due to identified material weaknesses in internal control over financial reporting[1163][1166] - The material weaknesses relate to compliance with IFRS and SEC reporting requirements, managing access to systems and data, and controls around the financial reporting closing process[1169][1170] - The recently acquired Compass business was excluded from the scope of the 2024 internal control assessment, as permitted by the SEC[1167] - As an emerging growth company, this annual report does not include an attestation report from the registered public accounting firm on internal controls[1168] Other Information This section covers governance, including an audit committee with a financial expert, a code of ethics, R$4.2 million in principal accountant fees, an active share repurchase program, and a cybersecurity risk management program Principal Accountant Fees (in R$ thousands) | | For the Year Ended December 31, | | | :--- | :--- | :--- | | | 2024 | 2023 | | Audit fees | 1,323 | 1,229 | | Audit-related fees | 2,833 | 122 | | All other fees | — | 364 | | Total | 4,156 | 1,715 | - The company has an active share repurchase program; in September 2024, a new plan was approved to buy back up to US$15.0 million of Class A common shares[1181] - The company has a cybersecurity risk management program overseen by the board and a cybersecurity committee, with no material cybersecurity threats identified in 2024[1191][1194][1203] - As a foreign private issuer, the company follows home country (Cayman Islands) practices in lieu of certain Nasdaq corporate governance rules, such as the requirement for a majority-independent board[1186] Financial Statements This section contains the audited consolidated financial statements for 2022-2024, prepared in accordance with IFRS, including balance sheets, income statements, and cash flow statements, with detailed notes on accounting policies and business combinations Consolidated Balance Sheet (in R$ thousands) | | 12/31/2024 | 12/31/2023 | | :--- | :--- | :--- | | Total Assets | 3,585,051 | 2,299,719 | | Current assets | 2,061,457 | 1,955,582 | | Non-current assets | 1,523,594 | 344,137 | | Total Liabilities | 1,643,008 | 918,946 | | Current liabilities | 351,643 | 235,351 | | Non-current liabilities | 1,291,365 | 683,594 | | Total Equity | 1,942,043 | 1,380,774 | Consolidated Statement of Income (in R$ thousands) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net revenue from services rendered | 600,779 | 454,420 | 408,095 | | Operating profit | 188,804 | 202,156 | 178,746 | | Profit for the year | 115,973 | 219,459 | 219,401 | - The business combination with Compass on October 29, 2024, was accounted for using the acquisition method, resulting in the recognition of R$213.3 million in goodwill and R$402.1 million in other intangible assets (management contracts, brands)[1427][1428] - The company's operations are divided into six reportable segments: Private Equity, Equities, Real Assets, Credit, Global IP&S, and Corporate Advisory[1267]