Slide 1: 4Q19 Earnings Presentation
4Q19 Earnings Presentation March 2020
Slide 2: Important Disclosure
2 Important Disclosure IN REVIEWING THE INFORMATION CONTAINED IN THIS PRESENTATION, 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 presentation is prepared by XP Inc
Slide 3: Index
3 Index 01 KPIs 02 Financials 03 Recent Developments 04 Opening Remarks
Slide 4: Opening Remarks
1 Opening Remarks
Slide 5: We are confident that our business model, culture and vision will translate into long-term value creation
5 We are confident that our business model, culture and vision will translate into long - term value creation. ▪ 2019 , a memorable year : successful IPO and sound operational and financial results ; ▪ We are in the beginning of our journey : ~ 90 % of R $ 8 . 6 trillion in investment assets control
Slide 6: KPIs
2 KPIs
Slide 7: KPIs: AUC, Active Clients and NPS
7 KPIs AUC, Active Clients and NPS Assets Under Custody (AUC) (R$ in billions) Highlights ▪ Strong AUC growth reflected healthy pace of net inflows and market appreciation of equity securities . Active Clients (‘000) Highlights ▪ Growth in active clients was driven by the expansion across all our ch
Slide 8: Financials
3 Financials
Slide 9: 2019 Revenue and Breakdown
9 2019 Revenue and Breakdown RETAIL INSTITUTIONAL ISSUER SERVICES DIGITAL CONTENT 67 % 14 % 9 % 2 % Note 1: 8% of revenues come from Other Revenues Total Gross Revenues (in R$ mn) 957 4Q19 4Q18 2018 2019 5,518 1,823 3,216 +90% +72% Highlights ▪ Growth was driven by : (i) mutual funds, especially per
Slide 10: Retail Revenue and Take Rate
10 Retail Revenue and Take Rate Strong performance driven by higher volumes in equities, intense deal flow and performance fees Take Rate (Retail Revenue / AUC) Retail Revenue (in R$ mn) Highlights ▪ The decline in take rate reflects : ( 1 ) zero - fee brokerage instituted at Clear in October 2018 a
Slide 11: Institutional and Issuer Services
11 Institutional and Issuer Services Favorable environment and network effects boosting both revenue lines Issuer Services Revenue (in R$ mn) Institutional Revenue (in R$ mn) Highlights ▪ ( 1 ) Growth in DCM revenue (the largest contributor) ; ( 2 ) favorable environment for REITs offerings and ( 3
Slide 12: Digital Content and Other
12 Digital Content and Other Solid growth following the expansion of XP’s platforms and ecosystem Other Revenue (in R$ mn) Digital Content Revenue (in R$ mn) Highlights ▪ Key drivers include : ( 1 ) the growth of the overall business, especially the retail platform and institutional trading and ( 2
Slide 13: COGS and SG&A
13 COGS and SG&A Gross margin expansion and efficiency gains COGS (in R$ mn) 309 487 941 4Q18 4Q19 2018 2019 1,606 +58% +71% 65.1% 68.2% 71.2% 68.7% Gross Margin Operating Expenses (in R$ mn) Highlights ▪ 50 bps gross margin expansion in 2019 vs 2018 due to product mix . 0 4Q18 8 4Q19 2018 8 2019 60
Slide 14: Adjusted Net Income
14 Adjusted Net Income Solid profitability in 2019 Highlights ▪ Growth in Adjusted Net Income driven by ( 1 ) accelerating increase in total revenues, especially brokerage and performance fees in Retail and Issuer Services and ( 2 ) ongoing efficiency gains . 115 417 491 4Q19 4Q18 2019 2018 1,074 +2
Slide 15: Recent Developments
4 Recent Developments
Slide 16: New Businesses and Association with Visa Inc.
16 New Businesses and Association with Visa Inc. New businesses to complement our ecosystem and create long - term value 16 2H19 - 1Q20 2020 2021+ ▪ Credit and debit cards ▪ Digital bank account ▪ Other payment services ▪ Other collateralized loans ▪ Full banking license ▪ Collateralized loans ▪ XP
Slide 17: Potential Impacts of COVID-19 Crisis (1/3)
17 Fixed Income 2018 Funds Equity 2019 2020 Potential Impacts of COVID - 19 Crisis ( 1 /3) Product Mix : We could see an increase in demand for fixed income or structured notes products . AUC : Should be negatively impacted due to equity exposure . However, outflows are not expected since we offer v
Slide 18: Potential Impacts of COVID-19 Crisis (2/3)
18 AUC and Net Inflow performed well in past crisis Potential Impacts of COVID - 19 Crisis (2/3) Period IBOVESPA Average Selic AUC Net Inflow 2014 Elections 1Q15 vs 3Q14 - 20% 11.0% +19% +73% “Joesley Day” Episode 3Q17 vs 2Q17 - 10% 10.5% +19% +6% Truckers’ Strike 3Q18 vs 2Q18 - 19% 6.5% +14% +8% Be
Slide 19: XP Inc. is well capitalized after the IPO
19 XP Inc. is well capitalized after the IPO 19 XP Inc. doesn’t have any cash constrain in the short term, on the contrary, our net cash position allow us to look for opportunities that usually arise in times like this: Potential Impacts of COVID - 19 Crisis (3/3) 442 211 200 325 2021 Gross Cash 202
Slide 20: Every crisis is an opportunity to get closer to customers
20 Every crisis is an opportunity to get closer to customers Our financial education DNA and robust Digital Content structure, differentiate XP Inc. vs. competitors Reports 571k views 1 ▪ High volatility in funds: what to do? ▪ COVID - 19 raises risk aversion ▪ What if the market falls 15%? ▪ Asset
Slide 21: Appendix
Appendix
Slide 22: Short Seller Report
22 Short Seller Report XP Inc. provided thorough explanations on each topic of the report ( LINK ) 22 ▪ On March 6, we became aware of a “report” published by Nick Winkler of The Winkler Group, entitled “Brazil’s Charles Schwab: XP Inc.’s Internal Audits Conflict With Its IPO Prospectus”; ▪ The repo
Slide 23: Non-GAAP Financial Information
23 Non - GAAP Financial Information Adjusted Net Income and Adjusted Gross Financial Assets 23 Adjusted Gross Financial Assets (in R $ mn ) Floating Balance (=net uninvested clients' deposits) 2019 2018 Assets - 505 - 898 ( - ) Securities trading and intermediation (505) (898) Liabilities 9,115 5,30
Slide 24: Investor Relations
Investor Relations Carlos Lazar André Martins ir@xpi.com.br IR Website: investors.xpinc.com