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XP Inc. (NASDAQ:XP) Q4 2023 Earnings Call Transcript

XP Inc. (NASDAQ:XP) Q4 2023 Earnings Call Transcript February 28, 2024

XP Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Andre Parize: Good evening, everyone. I am Andre Parize, Head of Investor Relations at XP Inc. It’s a pleasure to be here with you today. On behalf of the company, I’d like to thank you all for the interest and welcome you to the 2023 Fourth Quarter Earnings Call. This quarter, along with 2023 results, will be presented by our CEO, Thiago Maffra, and our CFO, Bruno Constantino, who will both be available for the Q&A session right after the presentation. [Operator Instructions] And before we begin our presentation, please refer to our legal disclaimers on Page 2, on which we clarify forward-looking statements. And additional information on forward-looking statements can be found on the SEC Filings section on the IR website. So now I will turn it over to Thiago Maffra. Good evening, Maffra.

Thiago Maffra: Thanks, Andre. Good evening everyone. Thank you for joining us today on our 2023 fourth quarter earnings call. It’s a pleasure to be here tonight. I will start with a brief introduction to this year’s highlights and key updates. As I mentioned in my annual letter, 2023 was both a challenging and transformative year for XP. Despite the still difficult macro environment, we remain committed to better serving our clients through innovation, high-quality service and growth. In this slide, I would first like to talk about our financial performance for the year, marked by the resilience of our business model. I will leave for Bruno to talk about the fourth quarter’s financials. In 2023, we celebrated the milestone of surpassing the $1 trillion mark in client assets with a market share at still less than 12% in investments for individuals in the country.

A financial professional examining price changes on a stock broker's trading floor.
A financial professional examining price changes on a stock broker's trading floor.

This shows the large potential growth with still ahead of us. Despite the macroeconomic conditions I just mentioned, we were able to achieve a 12% growth year-over-year in top line and 10% growth year-over-year in bottom line, with approximately 100 bps growth in our EBT margin. This year was also marked by a strong focus on efficiency and cost discipline through the whole company as we achieved an efficiency ratio of 36%, the lowest level since our IPO. Our diluted EPS increased 16% year-over-year reaching BRL7.22 per share. Also in 2023, we returned almost BRL4.5 billion in capital to our shareholders both in dividends and share buybacks, totaling a payout ratio of 114%. Lastly, I would like to talk about our guidance. We prefer mid-term guidance than annual guidance, but at the start of 2023, we opened an exception aiming to better guide investors about 2023 in the context of an unusual weak results for the fourth quarter of 2022.

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We gave two annual guidance SG&A and net income, as you can see on the right hand side of the slide. Happily, we delivered on both metrics even adding more down SG&A, what had not been considering in our guidance at the beginning of 2023. Back in 2022, we also gave the market a medium-term EBT margin guidance from 26% to 32% and from 2023 to 2025. We closed 2023 with an EBT margin at 26.8% within our medium-term guidance. We expect to see our annual EBT margin improving on the next couple of years. Moving to the next slide. I would like to give you all an update on our strategy tracker for 2023 in line with what we talked about on our Investor Day last December. First, leadership in retail investment by which we aim leadership in our core business.

This year, we estimate we have gained approximately 66 bps in market share for individuals. This is yet another sign of client recognition and trust in our service. Yet we have much to do with still less than 12% market share. Also in retail investments, I would like to highlight how we have managed to position ourselves as a premier hub for entrepreneurs by consistently pioneering in our distribution channel efforts to IFAs, consultants, wealth managers, among others. Second, in relation to our retail cross-sell, which we talked a lot about in our Investor Day, we aim to continuously grow together with our clients’ needs, clients adherence to new products and service shows a strong bond of relationship. When we consider everything beyond investments, new verticals plus corporate and SMB ex-investments, we have seen an increase in the representativeness from 2.6% of our total gross revenue in 2019 to 17.5% in 2023 bringing more resilience to our model.

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To continue reading the Q&A session, please click here.