XP(US:XP)2022-11-09 06:57Financial Data and Key Metrics Changes - Total gross revenue increased from R$3.4 billion in Q3 2021 to R$3.8 billion in Q3 2022, representing a 13% year-over-year growth [17] - Net income reached a record high, supported by strong earnings before tax, with a net margin of 28.5% in Q3 2022 [39] - Earnings before tax margin improved to 27.2% in Q3 2022 from 25.3% in Q2 2022, with guidance for EBT margin set between 26% and 32% [34][35] Business Line Data and Key Metrics Changes - Retail revenue, which constitutes approximately 69% of total gross revenue, was significantly impacted by the bear market, showing a deceleration in growth [17][18] - The breakdown of Retail Client Assets showed a decrease in equities from 42% to 34% year-over-year, while fixed income increased from 22% to 30% [14] - Institutional revenue more than doubled year-over-year, and Corporate and Issuer Services revenue increased by 34% year-over-year [29] Market Data and Key Metrics Changes - Client Assets reached an all-time high of R$925 billion, driven by higher interest rates, although net new money decelerated from R$14 billion per month to R$11 billion [11][12] - The market environment remains challenging due to high interest rates and global uncertainties, impacting investor behavior and asset allocation [12][51] Company Strategy and Development Direction - The company is focusing on diversifying its revenue streams beyond investments, aiming to increase client loyalty and lifetime value [19] - A significant increase in the share buyback program from R$1 billion to R$2 billion was announced, reflecting a commitment to returning value to shareholders [10] - The strategy includes consolidating investments made in new verticals and enhancing operational efficiency [75] Management's Comments on Operating Environment and Future Outlook - Management expressed that the worst of the current market conditions may be behind, with signs of stabilization in net inflows despite ongoing uncertainties [52] - The company anticipates that a stable interest rate environment could positively influence inflows into equities [84] - Management remains cautious about future distributions of excess cash, emphasizing a conservative approach amid market uncertainties [71][73] Other Important Information - The company has discontinued the adjusted net margin guidance and introduced a new earnings before tax margin metric [9] - The total SG&A expenses showed signs of stabilization, with a focus on efficiency gains expected in 2023 [8][33] Q&A Session Summary Question: Retail revenue breakdown and impact of higher interest rates - Management confirmed that the increase in the "other" line in retail revenue is primarily due to flows and higher interest rates, which may decrease as rates come down [49][50] Question: Client asset inflows and market performance - Management noted that net inflows have stabilized around R$10 billion per month, but uncertainty in the market continues to pose challenges for attracting new investments [50][51] Question: IFA attrition and its impact on assets - Management stated that 70% to 80% of client assets remain with XP when an IFA leaves, indicating strong retention despite some attrition [85] Question: Buyback versus dividends - The decision to increase the buyback program over dividends was based on the belief that buybacks are currently a more attractive option for returning value to shareholders [92] Question: Future investments in IFAs - Management indicated that the previous guidance for investments in IFAs remains reasonable, with expectations for continued investment in the network [94]