XP Inc. (NASDAQ: XP) (“XP” or the “Company”), a leading
tech-enabled platform and a trusted pioneer in providing low-fee
financial products and services in Brazil, reported today its
financial results for the third quarter of 2022.
To our shareholders
After two years as a listed company, we decided at the beginning
of 2022 to write an annual letter, instead of quarterly, addressing
the main events, successes and mistakes, and our strategic vision.
However, as we often say internally, each month at XP feels like a
whole year due to the dynamism and intensity of our company. For
this reason, we believe now is an appropriate moment to address
some topics which are relevant to all stakeholders of XP Inc.
Strategy
Despite the changes in the macroeconomic scenario in recent
quarters, the number and size of opportunities in front of us have
continued to grow. We have never lost sight of the big picture,
which is our purpose and what we need to strive for everyday in
order to succeed on this long-term journey.
Our primary focus is to transform the investment market,
providing access to products and services that help our clients
build a better future. However, until a few years ago, only
customers from premium segments had access to such offerings.
Today, we are proud to deliver this experience to all investors,
with no net worth restrictions.
We believe that investment services are based on trust and
relationships, while other transactional services do not demand
such a strong bond with clients. Hence, our strategy is to augment
credibility, gain clients’ confidence and, consequently, connect
them to a complete ecosystem of financial solutions, aligned with
their long-term goals.
In a nutshell, we work very hard for the right to be the
top-of-mind financial services provider for Brazilian
investors.
With the addition of complementary services such as credit,
insurance, payments, among others, we have strengthened our value
proposition within Investments, creating a virtuous cycle in the
relationship with customers. We noticed higher client engagement in
cohorts with a greater number of products, with an increase in
share of wallet and unit economics, a reduction in churn and, most
importantly, greater satisfaction.
People and
Transformation
We consider our corporate culture to be unique and see ourselves
as passionate entrepreneurs with a clear purpose, always guided by
humility and consistency.
Over the last ten years we have grown exponentially and evolved
from a medium-sized company to one of the main companies in the
Brazilian financial sector. With the goal of building a company
to last, we have increasingly invested in people and leadership
management. Most of my time is dedicated to these fronts, as we
seek to make XP a highly prepared talent pool with adequate
processes and not limited by unnecessary hierarchy and
bureaucracy.
We are building a company to perpetuate itself over the years
and we know that this process is long and requires structural
changes.
In 2018, we began a technological revolution process, which
turned into a much broader and more complex company-wide
transformation. Seeking to maintain innovation and proximity to
clients, we reorganized XP in multidisciplinary business units,
which are autonomous cells with end-to-end vision. This level of
mobilization of the entire company imposes temporary challenges,
but as we manage to overcome them, it will take us to a new level
of scale and efficiency.
While we value the strengths that brought us here, we have the
humility to recognize where we need to change and improve.
Achieving our goals involves not only a new organizational model,
but also changes in mindset to which one group of people adapts
while another, once important, will not necessarily be with us for
the next steps.
Our culture and values remain intact. We know that these are
our greatest assets and that we need to take great care of it. Our
employees and partners are more motivated than ever to make
history.
Disclosure and Guidance
Since the IPO in 2019, the company and the external scenario
have changed significantly and over this period we have made
gradual adjustments to the way we disclose our results, always
considering feedbacks from the global investment community. In this
context, aiming to increase the understanding of our business and
make the internal metrics consistent with those reported, we
implemented what we believe to be important improvements this
quarter.
First, we separated Corporate clients, companies with annual
revenues above R$700 million, from Retail clients, which include
individuals and companies with lower revenues. The change was
motivated by the growth of the Corporate business, which was
irrelevant until the end of 2021 and gained traction throughout
2022, and its very different nature.
Additionally, Retail revenue is now disclosed at the level of
its main product classes: Equities, Fixed Income and Funds
Platform. We believe that the new format will contribute to the
understanding of the dynamics of each business line and their
respective correlation with the macro scenario and Client
Assets.
Lastly, we decided to discontinue the Adjusted Net Margin
guidance. As of today, we introduce a new EBT Margin annual
guidance of 26% to 32% of Net Revenue for 2023 to 2025, which may
vary outside the range in quarterly results.
During the IPO process, we analyzed global benchmark companies
and decided to consider share based compensation expense as an
adjustment to Net Income and its guidance, mainly because it
represented a change to our partnership after more than eighteen
years with a closed and very particular model.
However, despite being mostly a non-cash expense with an impact
that will stabilize over time, share based compensation is a key
factor driving meritocracy and budget decisions and, as such,
should be accounted for in our mid-term guidance.
Capital Allocation
We continue to have a highly scalable business despite the
expansion of our scope and the growing demand for increasingly
sophisticated products. In an underpenetrated market as Brazil, a
disruptive player like XP is vital to promote liquidity and make
unique products available, thus contributing to its development.
Some of these products, especially over-the-counter securities,
have similar characteristics to a service provision, such as
brokerage, but involve holding financial instruments and have
different accounting treatment.
However, the excess capital on our balance sheet does not
reflect an indefinite need for retention to sustain the company's
growth. It is rather consistent with our conservative risk and
liquidity philosophy and a conscious decision to navigate uncertain
periods with a higher safety margin, even if it results on lower
returns on capital in the short term.
In the last three years, our Shareholders' Equity has increased
more than five times due to retained earnings and offering. An
important use of capital was the long-term contracts signed with
our distribution network, a major competitive advantage that we
chose to preserve. In addition, other smaller acquisitions were
executed to strengthen our ecosystem.
Even with new investments expected for the coming years, we
don’t expect a similar cycle to that seen in 2020 and 2021.
Currently we hold excess capital of approximately R$5 billion, a
level that allows us to continue to grow and be competitive while
maintaining a good margin of safety, especially in normalized
markets.
Hence, we see room to return capital to our investors gradually
in the form of dividends or share buybacks, converging over time
our accounting ROE to our marginal ROE, which is above the
traditional financial sector average.
As we currently evaluate share repurchase as the most
appropriate form of return, today we announced a R$1 billion
increase in the program opened in last May. As partners whose
personal holdings are concentrated in XP Inc. shares and that are
confident with its success, we are 100% aligned with all our
shareholders. We look forward to dividends, new share buybacks and
greater returns for our business, preserving our management and
risk principles which are vital to long-term, sustainable
success.
Expenses and Efficiency
The macroeconomic scenario in 2022 proved to be more challenging
than expected. In the history of XP, we went through several other
difficult moments which demanded a strong adaptability and focus on
efficiency and profitability, which we never took for granted.
At the beginning of the year, we reduced the pace of hiring and
identified initiatives that could limit expense growth without
affecting the progress of new businesses. Thus, most of the expense
increase of 2022 so far was due to decisions we made in 2021, when
we significantly expanded our commercial team.
Our plan is to conclude 2022 and go through 2023 with headcount
addition primarily concentrated on internally trained advisors, as
seen in the third quarter. Therefore, we do not expect to see
expense growth of the same magnitude in 2023 as we did in 2022.
Conclusion
Lastly, on behalf on XP, I would like to thank all our clients,
employees, partners, and shareholders for your trust and for being
part of our history.
The size of the opportunity in Brazil and the constant efforts
to delight our clients make clear for us that we are taking the
first steps of an infinite journey. Because we believe in our
Purpose, we treat XP as a life project, to which we dedicate
wholeheartedly.
We are committed to build an increasingly better, more complete
company that generates long-term value beyond its ecosystem and
contributes to a better society.
Thiago Maffra, CEO
Summary
Operating and Financial Metrics
3Q22
3Q21
YoY
2Q22
QoQ
Operating Metrics (unaudited)
Total Client Assets (in R$ bn)
925
789
17%
846
9%
Total Net Inflow (in R$bn)
35
37
-7%
43
-19%
Annualized Retail Take Rate
1.33%
1.45%
-12 bps
1.40%
-7 bps
Active clients (in '000s)
3,805
3,296
15%
3,629
5%
Headcount (EoP)
6,948
5,527
26%
6,339
10%
IFAs (in '000s)
11.6
9.6
21%
11.3
3%
Retail DATs (in mn)
2.3
2.6
-11%
2.3
3%
Retirement Plans Client Assets (in R$ bn)
58
43
36%
54
7%
Card's TPV (in R$ bn)
6.6
3.3
100%
5.5
21%
Credit Portfolio (in R$ bn)
16.2
8.6
88%
12.9
26%
Financial Metrics
Gross revenue (in R$ mn)
3,811
3,368
13%
3,618
5%
Retail (in R$ mn)
2,629
2,589
2%
2,673
-2%
Institutional (in R$ mn)
577
281
105%
436
32%
Corporate and Issuer Services (in R$ mn)
436
325
34%
335
30%
Other (in R$ mn)
170
172
-1%
173
-2%
Net Revenue (in R$ mn)
3,620
3,171
14%
3,429
6%
Gross Profit (in R$ mn)
2,615
2,277
15%
2,469
6%
Gross Margin
72.2%
71.8%
44 bps
72.0%
23 bps
EBT (in R$ mn)
983
908
8%
867
13%
EBT Margin
27.2%
28.6%
-148 bps
25.3%
186 bps
Net Income (in R$ mn)
1,031
936
10%
913
13%
Net Margin
28.5%
29.5%
-105 bps
26.6%
186 bps
Basic EPS (in R$)
1.85
1.67
11%
1.63
14%
ROAE¹
24.4%
28.8%
-436 bps
22.8%
162 bps
ROAA²
3.3%
4.7%
-143 bps
3.2%
12 bps
Adjusted Net Income³ (in R$ mn)
1,149
1,039
11%
1,046
10%
Adjusted Net Margin
31.7%
32.8%
-102 bps
30.5%
124 bps
Discussion of Results
Total Gross Revenue
Total gross revenue grew 13% from R$3.4 billion in 3Q21 to R$3.8
billion in 3Q22. Amidst a risk-off scenario, which weighs mainly on
Retail, Gross Revenue grew due to the diversified profile of XP’s
business, mainly led by growth of revenues in Institutional and
Corporate & Issuer Services.
Retail Revenue
Retail revenue totaled R$2.6 billion in 3Q22, a 2% growth YoY,
mainly led by Fixed Income, Float and Cards. From this quarter
onwards, XP Inc. will report Retail Revenue product breakdown, as
we believe this will ease comprehension of each revenue line and
its performances in different macro cycles.
In 3Q22, Retail-related revenues represented 66% of consolidated
Net Income from Financial Instruments, as per the Accounting Income
Statement, and was composed of Derivatives, Fixed Income secondary
transactions, Credit, and Float, among others.
Equities
Equities Revenue includes brokerage commissions earned on
trading of listed stock, futures and derivatives; the distribution
fee component from securities placement fees earned on the sale of
equity securities, listed funds, and alternative funds; and net
income from derivatives, including RLP, structured operations and
structured operations certificates.
Equities Revenue totaled R$1,120 million in 3Q22, a decrease of
22% YoY and an increase of 5% QoQ. Year-over-year decrease was
mainly related to retail investors favoring lower risk investments
in the current macroeconomic scenario.
Fixed Income
Fixed Income Revenue includes the distribution fee component
from securities placement fees earned on the sale of fixed income,
and the spread earned on sales of corporate, bank and government
fixed income securities.
Fixed Income revenue totaled R$489 million in 3Q22, a 12% growth
YoY and 16% decline QoQ. Year-over-year growth was driven by the
increased attractiveness of fixed income securities in the current
environment and sequential decrease followed a higher demand
towards shorter maturities instruments.
Funds Platform
Funds Platform Revenue includes rebates, management, and
performance fees from mutual and exclusive funds distributed on our
platform, and revenue from securities services.
Funds Platform revenue fell 20% YoY and 29% QoQ, totaling R$282
million in 3Q22. Revenue has been pressured by slower Client Assets
growth coupled with the mix shifting away from riskier categories.
Also, sequential decline was mainly impacted by seasonality of
performance fees, which were close to R$150 million on 2Q22.
Quarter-over-quarter growth ex-performance fees was 9%.
Retirement Plans
Retirement Plans revenue was R$85 million in 3Q22, up 45% YoY
and 5% QoQ, following growth in Client Assets.
Cards
Cards (both credit and debit) revenue has been one of the key
components of Total Retail Revenue YoY growth, totaling R$146
million in 3Q22, up 170% YoY and 26% QoQ, following TPV organic
growth in the period.
Credit
Retail Credit Revenue was R$40 million in 3Q22, up 52% YoY and
4% QoQ, following organic growth of Retail Credit Portfolio.
Insurance
Insurance revenue was R$21 million in 3Q22, up 45% YoY due to
higher premiums following increased penetration of life insurance
within our client base. Sequential decline was mainly driven by
seasonal revenues recognized on 1Q22 and 2Q22.
Other
Other Retail Revenue line includes revenue from Float, former
Digital Content, FX, among others.
Other Retail grew 121% YoY and 19% QoQ, totaling R$447 million
in 3Q22. The main driver for both QoQ and YoY growth was higher
Float revenue, related to a higher Selic.
Take Rate
Annualized Retail Take Rate was 1.33% on 3Q22, a decrease of
7bps QoQ and 12bps YoY. For comparison purposes, excluding
Performance Fees on 2Q22, Annualized Retail Take Rate would have
been 1.32%, remaining stable versus 3Q22.
Institutional Revenue
Institutional revenue totaled R$577 million in 3Q22, up 105% YoY
and 32% QoQ, mainly driven by increased activity on FICC4 onshore
and offshore desks ahead of the election period in Brazil.
In 3Q22, Institutional revenue accounted for 18% of consolidated
Net Income from Financial Instruments, as per the Accounting Income
Statement, and was composed mostly of Fixed Income secondary
transactions and Derivatives.
Corporate and Issuer Services Revenue
Corporate and Issuer services revenue totaled R$436 million in
3Q22, up 34% YoY and 30% QoQ. Corporate Revenue totaled R$207
million in 3Q22, growing 5x YoY and 66% QoQ. Large demand for OTC
derivatives and other structured operations was higher than normal
given the election period and should normalize going forward.
Despite a challenging scenario, Issuer Services revenue went up
9% QoQ, mainly led by fixed income and alternative funds activity.
On 3Q22, we reached all time high quarterly Securities Placement
revenue, as per our accounting income statement, which also
includes the distribution fee component, recognized mostly as
Retail revenues.
In 3Q22, Corporate and Issuer Services related revenues
represented 8% of consolidated Net Income from Financial
Instruments, as per the Accounting Income Statement, and was
composed mostly of OTC Derivatives.
Other Revenue
Other revenue totaled R$170 million in 3Q22, down 1% YoY and 2%
QoQ, representing less than 5% of total gross revenue.
In 3Q22, other revenue accounted for 8% of consolidated
Net Income from Financial Instruments, as per the Accounting Income
Statement, composed mostly of interest on adjusted gross financial
assets and results related to asset and liability management.
Costs of Goods Sold and Gross Margin
Costs of Goods Sold totaled R$1,005 million in 3Q22, up 12% YoY
and 5% QoQ, while Gross Margin was 72.2%, +44bps increase YoY and
+23bps QoQ. Year-over-year margin improvement was driven by a
Retail product mix moving towards Fixed Income and Float revenues,
which more than offset higher credit card cashback, following TPV
expansion, resulting in a slower growth in COGS compared to Gross
Revenue growth.
Total SG&A Expense
SG&A expenses totaled R$1,463 million in 3Q22, up 15% YoY
and flat QoQ. Year-over-year increase was mainly related to
Personnel Expenses following the headcount expansion in 2021.
Non-People SG&A was 8% higher QoQ, totaling R$405 million.
SG&A Expenses related to People, on the other hand, totaled
R$1,057 million, a 3% decrease QoQ.
Earnings Before Taxes
Earnings Before Taxes totaled R$983 million in 3Q22, up 8% YoY
and 13% QoQ, while EBT Margin was 27.2%, 147bps decrease YoY and
186bps increase QoQ, in connection with the factors explained
above.
Aiming for consistency of both internal and external metrics, we
are discontinuing our Adjusted Net Income Margin Guidance. Starting
today, we introduce a new EBT Margin Guidance in the range of 26%
to 32% of Net Revenue for the full years of 2023, 2024 and 2025. We
highlight this is an annual guidance, and quarterly EBT Margins may
stand out of this range.
Net Income
Net Income totaled R$1,031 million in 3Q22, up 10% YoY and 13%
QoQ, while Net Margin was 28.5%, -105bps YoY and +186bps QoQ, in
connection with the factors explaining above and a flat normalized
effective tax rate, which is a consequence of revenue mix leaning
towards net income from financial instruments. The effective tax
rate, normalized by withholding taxes, was 13.7% in 3Q22, versus
13.8% in 3Q21.
Return on Average Equity
Annualized ROAE was 24.4% on 3Q22, down 436bps YoY and up 162bps
QoQ. Year-over-year decline followed revenue deceleration and
higher expenses in 2022, coupled with the excess capital currently
held on our balance sheet, which is consistent with our
conservative risk and liquidity management approach during
uncertain scenarios.
1 – Annualized Return on Average
Equity.
2 – Annualized Return on Average
Adjusted Assets. Adjusted Assets excludes Retirement Plans
Liabilities and Float Balance.
3 – See appendix for a reconciliation of
Adjusted Net Income
4 – Fixed Income, Currencies and
Commodities.
Other Information
Webcast and Conference Call Information
The Company will host a webcast to discuss its second quarter
financial results on Tuesday, November 8th, 2022, at 5:00 pm ET
(7:00 pm BRT). To participate in the earnings webcast please
subscribe at 3Q22 Earnings Web Meeting. The replay will be
available on XP’s investor relations website at
https://investors.xpinc.com/
Important Disclosure
In reviewing the information contained in this release, you are
agreeing to abide by the terms of this disclaimer. This information
is being made available to each recipient solely for its
information and is subject to amendment. This release is prepared
by XP Inc. (the “Company,” “we” or “our”), is solely for
informational purposes. This release does not constitute a
prospectus and does not constitute an offer to sell or the
solicitation of an offer to buy any securities. In addition, this
document and any materials distributed in connection with this
release are not directed to, or intended for distribution to or use
by, any person or entity that is a citizen or resident or located
in any locality, state, country or other jurisdiction where such
distribution, publication, availability or use would be contrary to
law or regulation or which would require any registration or
licensing within such jurisdiction.
This release was prepared by the Company. Neither the Company
nor any of its affiliates, officers, employees or agents, make any
representation or warranty, express or implied, in relation to the
fairness, reasonableness, adequacy, accuracy or completeness of the
information, statements or opinions, whichever their source,
contained in this release or any oral information provided in
connection herewith, or any data it generates and accept no
responsibility, obligation or liability (whether direct or
indirect, in contract, tort or otherwise) in relation to any of
such information. The information and opinions contained in this
release are provided as at the date of this release, are subject to
change without notice and do not purport to contain all information
that may be required to evaluate the Company. The information in
this release is in draft form and has not been independently
verified. The Company and its affiliates, officers, employees and
agents expressly disclaim any and all liability which may be based
on this release and any errors therein or omissions therefrom.
Neither the Company nor any of its affiliates, officers, employees
or agents makes any representation or warranty, express or implied,
as to the achievement or reasonableness of future projections,
management targets, estimates, prospects or returns, if any.
The information contained in this release does not purport to be
comprehensive and has not been subject to any independent audit or
review. Certain of the financial information as of and for the
periods ended of December 31, 2021 and December 31, 2020, 2019,
2018 and 2017 has been derived from audited financial statements
and all other financial information has been derived from unaudited
interim financial statements. A significant portion of the
information contained in this release is based on estimates or
expectations of the Company, and there can be no assurance that
these estimates or expectations are or will prove to be accurate.
The Company’s internal estimates have not been verified by an
external expert, and the Company cannot guarantee that a third
party using different methods to assemble, analyze or compute
market information and data would obtain or generate the same
results.
Statements in the release, including those regarding the
possible or assumed future or other performance of the Company or
its industry or other trend projections, constitute forward-looking
statements. These statements are generally identified by the use of
words such as “anticipate,” “believe,” “could,” “expect,” “should,”
“plan,” “intend,” “estimate” and “potential,” among others. By
their nature, forward-looking statements are necessarily subject to
a high degree of uncertainty and involve known and unknown risks,
uncertainties, assumptions and other factors because they relate to
events and depend on circumstances that will occur in the future
whether or not outside the control of the Company. Such factors may
cause actual results, performance or developments to differ
materially from those expressed or implied by such forward-looking
statements and there can be no assurance that such forward-looking
statements will prove to be correct. These risks and uncertainties
include factors relating to: (1) general economic, financial,
political, demographic and business conditions in Brazil, as well
as any other countries we may serve in the future and their impact
on our business; (2) fluctuations in interest, inflation and
exchange rates in Brazil and any other countries we may serve in
the future; (3) competition in the financial services industry; (4)
our ability to implement our business strategy; (5) our ability to
adapt to the rapid pace of technological changes in the financial
services industry; (6) the reliability, performance, functionality
and quality of our products and services and the investment
performance of investment funds managed by third parties or by our
asset managers; (7) the availability of government authorizations
on terms and conditions and within periods acceptable to us; (8)
our ability to continue attracting and retaining new
appropriately-skilled employees; (9) our capitalization and level
of indebtedness; (10) the interests of our controlling
shareholders; (11) changes in government regulations applicable to
the financial services industry in Brazil and elsewhere; (12) our
ability to compete and conduct our business in the future; (13) the
success of operating initiatives, including advertising and
promotional efforts and new product, service and concept
development by us and our competitors; (14) changes in consumer
demands regarding financial products, customer experience related
to investments and technological advances, and our ability to
innovate to respond to such changes; (15) changes in labor,
distribution and other operating costs; (16) our compliance with,
and changes to, government laws, regulations and tax matters that
currently apply to us; (17) other factors that may affect our
financial condition, liquidity and results of operations.
Accordingly, you should not place undue reliance on forward-looking
statements. The forward-looking statements included herein speak
only as at the date of this release and the Company does not
undertake any obligation to update these forward-looking
statements. Past performance does not guarantee or predict future
performance. Moreover, the Company and its affiliates, officers,
employees and agents do not undertake any obligation to review,
update or confirm expectations or estimates or to release any
revisions to any forward-looking statements to reflect events that
occur or circumstances that arise in relation to the content of the
release. You are cautioned not to unduly rely on such
forward-looking statements when evaluating the information
presented and we do not intend to update any of these
forward-looking statements.
Market data and industry information used throughout this
release are based on management’s knowledge of the industry and the
good faith estimates of management. The Company also relied, to the
extent available, upon management’s review of industry surveys and
publications and other publicly available information prepared by a
number of third-party sources. All of the market data and industry
information used in this release involves a number of assumptions
and limitations, and you are cautioned not to give undue weight to
such estimates. Although the Company believes that these sources
are reliable, there can be no assurance as to the accuracy or
completeness of this information, and the Company has not
independently verified this information.
The contents hereof should not be construed as investment,
legal, tax or other advice and you should consult your own advisers
as to legal, business, tax and other related matters concerning an
investment in the Company. The Company is not acting on your behalf
and does not regard you as a customer or a client. It will not be
responsible to you for providing protections afforded to clients or
for advising you on the relevant transaction.
This release includes our Float, Adjusted Gross Financial
Assets, Net Asset Value, and Adjustments to Reported Net Income,
which are non-GAAP financial information. We believe that such
information is meaningful and useful in understanding the
activities and business metrics of the Company’s operations. We
also believe that these non-GAAP financial measures reflect an
additional way of viewing aspects of the Company’s business that,
when viewed with our International Financial Reporting Standards
(“IFRS”) results, as issued by the International Accounting
Standards Board, provide a more complete understanding of factors
and trends affecting the Company’s business. Further, investors
regularly rely on non-GAAP financial measures to assess operating
performance and such measures may highlight trends in the Company’s
business that may not otherwise be apparent when relying on
financial measures calculated in accordance with IFRS. We also
believe that certain non-GAAP financial measures are frequently
used by securities analysts, investors and other interested parties
in the evaluation of public companies in the Company’s industry,
many of which present these measures when reporting their results.
The non-GAAP financial information is presented for informational
purposes and to enhance understanding of the IFRS financial
statements. The non-GAAP measures should be considered in addition
to results prepared in accordance with IFRS, but not as a
substitute for, or superior to, IFRS results. As other companies
may determine or calculate this non-GAAP financial information
differently, the usefulness of these measures for comparative
purposes is limited. A reconciliation of such non-GAAP financial
measures to the nearest GAAP measure is included in this
release.
For purposes of this release:
“Active Clients” means the total number of retail clients served
through our XP Investimentos, Rico, Clear, XP Investments and XP
Private (Europe) brands, with Client Assets above R$100.00 or that
have transacted at least once in the last thirty days. For purposes
of calculating this metric, if a client holds an account in more
than one of the aforementioned entities, such client will be
counted as one “active client” for each such account. For example,
if a client holds an account in each of XP Investimentos and Rico,
such client will count as two “active clients” for purposes of this
metric.
“Client Assets” means the market value of all client assets
invested through XP’s platform and that is related to reported
Retail Revenue, including equities, fixed income securities, mutual
funds (including those managed by XP Gestão de Recursos Ltda., XP
Advisory Gestão de Recursos Ltda. and XP Vista Asset Management
Ltda., as well as by third-party asset managers), pension funds
(including those from XP Vida e Previdência S.A., as well as by
third-party insurance companies), exchange traded funds, COEs
(Structured Notes), REITs, and uninvested cash balances (Float
Balances), among others. Although Client Assets includes custody
from Corporate Clients that generate Retail Revenue, it does not
include custody from institutional clients (asset managers, pension
funds and insurance companies).
Rounding
We have made rounding adjustments to some of the figures
included in this release. Accordingly, numerical figures shown as
totals in some tables may not be an arithmetic aggregation of the
figures that preceded them.
Unaudited Managerial Income Statement
(in R$ mn)
3Q22
3Q21
YoY
2Q22
QoQ
Managerial Income Statement
Total Gross Revenue
3,811
3,368
13%
3,618
5%
Retail
2,629
2,589
2%
2,673
-2%
Equities
1,120
1,443
-22%
1,063
5%
Fixed Income
489
437
12%
580
-16%
Funds Platform
282
354
-20%
398
-29%
Retirement Plans
85
58
45%
81
5%
Cards
146
54
170%
116
26%
Credit
40
26
52%
38
4%
Insurance
21
14
45%
23
-9%
Other
447
203
121%
375
19%
Institutional
577
281
105%
436
32%
Issuer Services & Corporate
436
325
34%
335
30%
Other
170
172
-1%
173
-2%
Net Revenue
3,620
3,171
14%
3,429
6%
COGS
(1,005)
(894)
12%
(960)
5%
As a % of Net Revenue
(27.8%)
(28.2%)
0.4 p.p
(28.0%)
0.2 p.p
Gross Profit
2,615
2,277
15%
2,469
6%
Gross Margin
72.2%
71.8%
0.44 p.p
72.0%
0.23 p.p
SG&A
(1,463)
(1,272)
15%
(1,468)
0%
People
(1,057)
(924)
14%
(1,094)
-3%
Non-People
(405)
(348)
16%
(374)
8%
EBITDA
1,153
1,005
15%
1,001
15%
EBITDA Margin
31.8%
31.7%
0.2 p.p
29.2%
2.7 p.p
D&A
(44)
(51)
-15%
(56)
-22%
EBIT
1,109
953
16%
945
17%
Interest expense on debt
(128)
(49)
160%
(77)
66%
Share of profit or (loss) in joint ventures and associates
1
4
-62%
(1)
-26%
EBT
983
908
8%
867
13%
EBT Margin
27.2%
28.6%
-1.5 p.p
25.3%
1.9 p.p
Tax Expense (Accounting)
48
28
69%
45
6%
Tax expense (Tax Witholding in Funds)¹
(212)
(179)
18%
(190)
11%
Effective tax rate (Normalized)
(13.7%)
(13.8%)
0.1 p.p
(13.7%)
0.0 p.p
Net Income
1,031
936
10%
913
13%
Net Margin
28.5%
29.5%
-1.1 p.p
26.6%
1.9 p.p
Adjustments
118
102
15%
133
-11%
Adjusted Net Income²
1,149
1,039
11%
1,046
10%
Adjusted Net Margin
31.7%
32.8%
-1.0 p.p
30.5%
1.2 p.p
Accounting Income Statement (in R$
mn)
3Q22
3Q21
YoY
2Q22
QoQ
Accounting Income Statement
Net revenue from services rendered
1,558
1,589
-2%
1,553
0%
Brokerage commission
498
633
-21%
500
0%
Securities placement
525
442
19%
454
16%
Management fees
361
415
-13%
478
-25%
Insurance brokerage fee
35
33
5%
35
1%
Educational services
6
15
-57%
7
-7%
Commission Fees
135
57
136%
99
36%
Other services
143
154
-7%
116
24%
Sales Tax and contributions on Services
(145)
(160)
-9%
(136)
7%
Net income from financial instruments at amortized cost and at
fair value through other comprehensive income
563
(717)
-179%
712
-21%
Net income from financial instruments at fair value through
profit or loss
1,499
2,300
-35%
1,164
29%
Total revenue and income
3,620
3,171
14%
3,429
6%
Operating costs
(977)
(889)
10%
(958)
2%
Selling expenses
(33)
(58)
-43%
(39)
-17%
Administrative expenses
(1,503)
(1,267)
19%
(1,478)
2%
Other operating revenues (expenses), net
29
1
n.a.
(7)
n.a.
Expected credit losses
(28)
(5)
n.a.
(1)
n.a.
Interest expense on debt
(128)
(49)
160%
(77)
66%
Share of profit or (loss) in joint ventures and associates
1
4
-62%
(1)
-26%
Income before income tax
983
908
8%
867
13%
Income tax expense
48
28
69%
45
6%
Net income for the period
1,031
936
10%
913
13%
Balance Sheet (in R$ mn)
3Q22
2Q22
Assets
Cash
2,601
3,244
Financial assets
172,585
156,827
Fair value through profit or loss
89,157
86,077
Securities
73,101
67,521
Derivative financial instruments
16,056
18,556
Fair value through other comprehensive income
40,238
36,183
Securities
40,238
36,183
Evaluated at amortized cost
43,190
34,568
Securities
8,060
8,178
Securities purchased under agreements to resell
8,047
4,812
Securities trading and intermediation
3,983
3,149
Accounts receivable
568
627
Loan Operations
20,411
16,418
Other financial assets
2,121
1,384
Other assets
5,509
5,318
Recoverable taxes
165
177
Rights-of-use assets
261
258
Prepaid expenses
4,196
4,085
Other
887
797
Deferred tax assets
1,509
1,541
Investments in associates and joint ventures
2,415
2,230
Property and equipment
308
304
Goodwill & Intangible assets
815
812
Total Assets
185,742
170,276
3Q22
2Q22
Liabilities
Financial liabilities
124,490
113,550
Fair value through profit or loss
24,145
24,714
Securities
9,469
5,637
Derivative financial instruments
14,675
19,077
Evaluated at amortized cost
100,345
88,837
Securities sold under repurchase agreements
31,429
30,534
Securities trading and intermediation
15,374
15,272
Financing instruments payable
41,416
31,530
Accounts payables
561
476
Borrowings
1,901
1,829
Other financial liabilities
9,663
9,195
Other liabilities
43,664
40,416
Social and statutory obligations
628
985
Taxes and social security obligations
249
280
Private pension liabilities
42,714
39,102
Provisions and contingent liabilities
38
32
Other
35
17
Deferred tax liabilities
120
15
Total Liabilities
168,274
153,981
Equity attributable to owners of the Parent company
17,465
16,292
Issued capital
0
0
Capital reserve
15,459
15,317
Other comprehensive income
(109)
(371)
Treasury
(681)
(418)
Retained earnings
2,796
1,765
Non-controlling interest
3
3
Total equity
17,468
16,296
Total liabilities and equity
185,742
170,276
Float, Adjusted Gross Financial Assets and Net Asset
Value
(in R$ mn)
We present Adjusted Gross Financial Assets because we believe
this metric captures the liquidity that is, in fact, available to
us, net of the portion of liquidity that is related to our Float
Balance (and therefore attributable to clients). We calculate
Adjusted Gross Financial Assets as the sum of (1) Cash and
Financial Assets (comprised of Cash plus Securities – Fair value
through profit or loss, plus Securities – Fair value through other
comprehensive income, plus Securities – Evaluated at amortized
cost, plus Derivative financial instruments, plus Securities
(purchased under agreements to resell), plus Loans and Foreign
exchange portfolio (assets) less (2) Financial Liabilities
(comprised of the sum of Securities loaned, Derivative financial
instruments, Securities sold under repurchase agreements and
Private pension liabilities), Deposits, Structured Operation
Certificates (COE), Financial Bills, Foreign exchange portfolio
(liabilities), Credit cards operations and (3) less Float
Balance.
It is a measure that we track internally daily, and it more
intuitively reflects the effect of the operational profits we
generate and the variations between working capital assets and
liabilities (cash flows from operating activities), investments in
fixed and intangible assets and investments in the IFA Network
(cash flows from investing activities) and inflows and outflows
related to equity and debt securities in our capital structure
(cash flows from financing activities). Our management treats all
securities and financial instrument assets, net of financial
instrument liabilities, as balances that compose our total
liquidity, with subline items (such as, for example, “securities at
fair value through profit and loss” and “securities at fair value
through other comprehensive income”) expected to fluctuate
substantially from quarter to quarter as our treasury manages and
allocates our total liquidity to the most suitable financial
instruments.
In order to explain how we measure our cash position or
generation internally, we are introducing the Net Asset Value
concept. Since we are a financial institution, we hold several
types of financial instruments with different characteristics,
hence the definition of net cash that makes more sense from a
business perspective is the Net Asset Value. It is basically the
adjusted gross financial assets net of debt instruments.
Adjusted Gross Financial Assets
3Q22
2Q22
Assets
171,130
156,711
(+) Cash
2,601
3,244
(+) Securities - Fair value through profit or loss
73,101
67,521
(+) Securities - Fair value through other comprehensive income
40,238
36,183
(+) Securities - Evaluated at amortized cost
8,060
8,178
(+) Derivative financial instruments
16,056
18,556
(+) Securities purchased under agreements to resell
8,047
4,812
(+) Loans and credit card operations
20,411
16,418
(+) Foreign exchange portfolio
1,130
1,259
(+) Energy
619
540
(+) Compulsory
866
-
Liabilities
(140,597)
(128,267)
(-) Securities
(9,469)
(5,637)
(-) Derivative financial instruments
(14,675)
(19,077)
(-) Securities sold under repurchase agreements
(31,429)
(30,534)
(-) Retirement Plans Liabilities
(42,714)
(39,102)
(-) Deposits
(21,205)
(15,166)
(-) Structured Operations
(11,026)
(9,456)
(-) Financial Bills
(3,566)
(3,235)
(-) Foreign exchange portfolio
(1,420)
(1,649)
(-) Credit card operations
(3,996)
(3,360)
(-) Commitments subject to possible redemption
(1,074)
(1,041)
(-) Promissory Note
(20)
(10)
(-) Float
(11,391)
(12,123)
(=) Adjusted Gross Financial Assets
19,142
16,321
Net Asset Value
3Q22
2Q22
(=) Adjusted Gross Financial Assets
19,142
16,321
Gross Debt
(9,298)
(7,333)
(-) Borrowings
(1,901)
(1,829)
(-) Debentures
(1,956)
(28)
(-) Structured financing
(1,798)
(1,841)
(-) Bonds
(3,642)
(3,635)
(=) Net Asset Value
9,844
8,988
Float (=net uninvested clients' deposits)
3Q22
2Q22
Assets
(3,983)
(3,149)
(-) Securities trading and intermediation
(3,983)
(3,149)
Liabilities
15,374
15,272
(+) Securities trading and intermediation
15,374
15,272
(=) Float
11,391
12,123
1 – Tax adjustments are related to tax
withholding expenses that are recognized net in gross revenue.
2 – See appendix for a reconciliation of
Adjusted Net Income.
Adjusted Net Income (in R$ mn)
3Q22
3Q21
YoY
2Q22
QoQ
Net Income
1,031
936
10%
913
13%
(+) Share Based Compensation
186
165
13%
214
-13%
(+/-) Taxes
(68)
(62)
9%
(81)
-15%
Adj. Net Income
1,149
1,039
11%
1,046
10%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108006190/en/
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