XP(US:XP)2023-05-16 02:10Financial Data and Key Metrics Changes - The company's gross revenue expanded by 7% year-over-year, while EBT and net income grew by 14% and 8% year-over-year, respectively, excluding a one-time loss [6][39] - Total gross revenue for the quarter was BRL3.3 billion, flat quarter-over-quarter and up 2% year-over-year; excluding the one-time loss, total gross revenue was closer to BRL3.5 billion, reflecting a 5% growth quarter-over-quarter and 7% year-over-year [21][22] - The EBT margin increased nearly 300 basis points quarter-over-quarter to 26%, aligning with the near-term expectations included in the guidance range of 26% to 32% through 2025 [7][36] Business Line Data and Key Metrics Changes - Revenue from new verticals, which are less cyclical, grew 64% year-over-year, reaching BRL405 million [7][27] - Retail revenue represented 76% of total revenue, with core retail investments growing 6% quarter-over-quarter and 1% year-over-year [23][24] - In equities, revenues grew 7% quarter-over-quarter but declined 3% year-over-year; fixed income adjusted revenue grew 9% quarter-over-quarter and was flat year-over-year [25][26] Market Data and Key Metrics Changes - The company ended Q1 with BRL954 billion in client assets, with a net addition of 89,000 clients and 688 financial advertisers [5] - The company gained almost 400 basis points of market share since the beginning of 2020, currently holding 11% market share of individual investments and 8% including companies [11] Company Strategy and Development Direction - The company aims to leverage its platform and ecosystem to expand leadership in investments, targeting a market share of 20% to 25% in the long term [11][88] - The focus is on cross-selling additional products to current clients, with significant growth in new verticals contributing to overall revenue resilience [14][31] - The company is committed to maintaining a conservative balance sheet with strong liquidity, carrying excess capital of around BRL5 billion [9] Management's Comments on Operating Environment and Future Outlook - The macroeconomic outlook remains challenging, with high interest rates and corporate credit under pressure impacting capital markets [4][10] - Management expressed confidence in the company's ability to navigate through cycles and return cash to shareholders, with a similar payout ratio expected in 2023 [8][17] - The company anticipates that the current weak capital market activity is cyclical and expects to improve as conditions normalize [48][89] Other Important Information - The company returned approximately BRL1.8 billion through share buybacks in 2022, representing about 50% of net income [8] - The company has a strong focus on improving customer service and advisor training to maintain competitive advantages over traditional banks [15][16] Q&A Session Summary Question: On inflows and revenue outlook - Management noted that high-interest rates and uncertainty are causing investors to prefer low-risk investments, making it difficult to achieve past inflow levels [43] - The first quarter was considered weak in terms of capital market activity, but management believes revenue can improve as conditions stabilize [48] Question: On cost reductions and employee base - Management confirmed that reductions have been made across the company, focusing on efficiency gains and correcting over-hiring during the pandemic [59] Question: On NPS score decline - Management attributed the decline in NPS to competition from banks offering high returns on low-risk products, but expects to return to normalized levels as the investment cycle changes [61][62] Question: On credit card penetration and spending - Management indicated that credit card penetration could increase significantly, targeting levels similar to major banks, while average spending has decreased due to a shift towards lower-segment clients [72][74] Question: On IFA sentiment and market share - Management reported that the IFA business remains strong, with continued growth in new IFAs joining the platform, despite a challenging investment environment [84] - The company aims to increase market share through technology investments and improved services for high-net-worth clients [88][89]