Financial Data and Key Metrics - Total client assets increased by 14% YoY to BRL 1.2 trillion, with a re-acceleration in client net inflows [4] - Gross revenue reached BRL 4.5 billion, up 21% YoY, with EBITDA of BRL 1.4 billion, a 43% YoY increase, and net income of BRL 1.1 billion, with a margin of 26% [5] - Return on tangible equity (ROTE) was 27.2%, the highest in the past two and a half years, and EPS for Q2 2024 was BRL 2.03, a 10% YoY increase [6] - Last 12 months (LTM) gross revenue reached BRL 17.4 billion, with a 25% CAGR, and LTM EBITDA margin expanded to 28.1%, up 180 bps YoY [7] Business Line Performance - Retail investments saw BRL 32 billion in net new money, with BRL 24 billion from retail, nearly doubling QoQ [8] - The company has 18.3 thousand advisors, an 11% YoY increase, and 4.6 million active clients, up 16% YoY [4][5] - Insurance business grew 52% YoY, with total written premiums reaching BRL 307 million, and retirement plans grew 18% YoY [11] - Corporate and SMB client base grew 22% YoY, with corporate gross revenue growing at a 50% CAGR over the last 12 months [12] Market Performance - The company improved its ranking in derivatives from 10th to 5th over the last two years and in FX from 41st to 16th over the last four years [12] - Corporate & Issuer Services revenue reached an all-time high of BRL 629 million, up 122% YoY, with Issuer Services revenue growing 145% YoY to BRL 384 million [18] Strategy and Industry Competition - The company is transitioning from a product distribution firm to a service provider, focusing on financial planning and quality initiatives [10] - XP is leveraging its bank ecosystem to lower costs and increase capital efficiency, with plans to complete corporate restructuring by the end of the year [14] - The company aims to expand its EBITDA margin to 30%-34% by 2026 through new products and strict cost control [15] Management Commentary on Operating Environment and Future Outlook - Management expects improving results in the second half of the year, driven by growth levers and strict cost control [6] - The company is confident in delivering its 2026 guidance, with a focus on distribution channel diversification and sales force expansion [25] - Management highlighted the importance of net new money as a key KPI for future growth, despite its limited correlation with short-term revenue [42] Other Important Information - The company completed a share buyback in Q2 2024, aligning with its capital return plan to create shareholder value [6] - XP launched a Corporate Digital Account in August and plans to launch Trade Finance soon, reinforcing cross-sell opportunities [12] - The company achieved its best efficiency ratio since IPO at 36.1%, with SG&A ex-incentives reaching BRL 1.4 billion, flat QoQ [20][21] Q&A Session Summary Question: Net inflows and headcount growth [26] - Management attributed the strong net inflows to organic growth and the maturation of business levers, expecting good levels of retail net new money going forward [27] - Headcount growth was driven by the hiring of internal advisors and an internship program, with around 80-100 internal advisors hired per month [28] Question: Cyclical factors impacting net inflows [30] - Management emphasized that the improvement in net inflows was due to multiple factors, including product diversification and market conditions, rather than a single cyclical event [31] Question: Sustainable level of net new money and tax rate increase [33] - Management clarified that the normalized level of net new money is around BRL 20 billion, with expectations to return to higher levels in the future [34] - The increase in the effective tax rate was due to revenue mix, particularly from higher-tax businesses like Corporate & Issuer Services [36] Question: Distribution capabilities and corporate growth [37] - Management highlighted the integration between DCM and retail distribution as a key driver of net new money, with a focus on diversified products [38][39] - Corporate growth was attributed to the introduction of new products like derivatives and FX, with cross-selling opportunities driving future growth [40] Question: Revenue outlook and EBITDA margin sustainability [41] - Management expects the second half of the year to be better than the first half, with revenue and net income improving towards the 2026 guidance [46] - The EBITDA margin improvement is sustainable, with a focus on eliminating quarter-over-quarter variances through business mix optimization [43] Question: Impact of regulatory changes and interest rates on net inflows [48] - Management acknowledged the positive impact of regulatory changes and interest rate reductions but emphasized that multiple factors contributed to the net inflow growth [49] Question: Credit card business and loan book decline [50][52] - Management outlined plans to improve credit card penetration and benefits, targeting eligible clients and introducing new features like miles points [51] - The decline in the loan book was due to securitization and risk recycling, with no deterioration in asset quality [53][55] Question: Cost control and loan book recycling [52][54] - Management attributed the impressive cost control to operational leverage and the ability to scale without increasing costs [53] - The loan book recycling initiative is new and aims to create instruments for risk recycling while providing new products to retail clients [54][55]
XP(XP) - 2024 Q2 - Earnings Call Transcript