SÃO PAULO–(BUSINESS WIRE)–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, today reported its financial results for the fourth quarter of 2021.
To our shareholders
2021 was another very important chapter in our history. In Investments, our core business, we continued to expand at a fast pace, reaching R$815 billion in AUC and 3.4 million active clients in December. At the same time, our journey towards an increasingly complete experience for our clients has also significantly evolved with transactional services and other relevant verticals such as Pension Funds, Credit, Insurance and Companies, all exceeding our audacious goals.
We ended the year confident that we are on the right path towards our purpose to improve people’s lives and that we are just at the beginning of this journey. The past twenty years taught us how rewarding it is to be part of a life project that has a positive impact on the lives of millions of people and businesses.
Unlike many technology companies focused exclusively on growth and rarely on the sustainability of acquired clients or on the basic accounting of their financials, we have always believed that long-term success is the best way to generate return for our shareholders. Our performance is, therefore, a reflection of our ability to efficiently manage three variables: revenues, expenses and quality for our clients.
A long time ago I heard a sentence that we repeat very often internally: “doing something well is easy, the difficult thing is to do it well while generating a contribution margin to the company”.
We are not in a short-term mission nor are we concerned with presenting numbers that are temporarily impressive and that have no correlation to the company’s long-term success. We have our beliefs, we trust our strategy and we will continue with the same execution discipline that has allowed us to get here.
We are not saying that we will reduce our growth rate or that opportunities are smaller than before, quite the opposite. We are just making our way of thinking and executing our plans tangible, to make sure that we are always attracting shareholders who also share this vision.
We are convinced that the Brazilian market has an enormous potential for disruption and growth. In that context, we understand that the perfect combination to achieve our long-term goals is financial education, an unprecedented variety of high-quality low-cost products and a unique customer experience.
The first steps and results within transactional financial services, credit card and digital account have exceeded our expectations over the last two years and validated our hypothesis that a complete and integrated experience is valued by our customer base and a very powerful factor in enhancing relationships. We have already seen an increase in additional inflows (share of wallet), purchased volume and engagement of the first cohorts, and we expect this trend to intensify over the next few years as we develop the best transactional experience in the market.
For the other new verticals – Pension Funds, Credit, Insurance and Companies – recent results have also been above our targets. As we genuinely believe in healthy, long-term relationships, we spare no effort and investment to differentiate ourselves in quality and offer the best possible cost in these lines of business, using the scale and profitability of the core business to enable the success of new bets. One example is our approach to Credit, offering below-market rates that allow clients to organize their personal finances without committing most of their income to debt service, as in the case of lines with the highest spreads.
Regarding 2021 numbers, the resilience and dynamism of our business model has been validated once again. The global scenario of a pandemic and rising interest rates combined with idiosyncratic factors in Brazil certainly poses challenges to any entrepreneur, regardless of their size and sector of activity.
In XP’s case, however, despite recognizing the size of the challenges, we believe that the secular transformations of the Brazilian financial sector and the various initiatives underway within the company allow us to maintain solid growth and profitability throughout the economic cycles, taking advantage of opportunities that appear in this context.
In the last year, during which the Selic rate rose from 2.00% to 9.25%, our Gross Revenue, Adjusted EBITDA and Adjusted Net Income grew 47%, 66% and 76% against 2020, respectively, reinforcing the portfolio effect and the maintenance of the Retail take rate amid significant changes in the revenue and AUC mix.
During 2021, some of the main revenue drivers from 2020, such as brokerage, futures and REIT and equity offerings, were negatively impacted mainly by interest rates and the approach of the presidential elections. This slowdown was offset by the solid performance of asset classes benefiting from higher interest rates: Fixed Income, Structured Products, offshore desks and debt offerings.
Considering XP’s consistent net inflow and the expectations for the Brazilian economy, the trend for the revenue mix is to remain similar in 2022, adapting to exogenous variables while we continue to differentiate ourselves in offering the products most demanded by our customers in any scenario.
We also expect a year of great focus on efficiency, supported by the robustness of our proprietary management system (XP Management System), which allows the company to execute its strategic plan, optimizing the allocation of growing human and financial resources, always guided by clear and ambitious goals. The constant advancement of the internal Transformation agenda is another fundamental pillar for us to continue delivering exponential results with consistency and sustainability, leveraging our talents and foundations (Technology and Operations) through more scalable ways of working.
We enter 2022 with more energy and motivation than ever, after all we are passionate about what we do and driven by impossible challenges. Our partnership is our only project, we don’t have a plan B, distractions or paths that don’t involve building our story day after day with a lot of humility, intensity, profitability and long-term vision.
Each chapter of our history has brought different adversities and the great achievements have come through overcoming them. It has been that way for the last twenty years and it will certainly continue to be for the next twenty. We look forward to having you by our side as shareholders on this long and fantastic journey.
Thiago Maffra, CEO
Business Metrics
|
4Q21 |
4Q20 |
YoY |
3Q21 |
QoQ |
|
FY21 |
FY20 |
YoY |
|
| Operating and Financial Metrics (unaudited) |
|
|
|
|
|
|
|
|
|
| Total AUC (in R$ bn) |
815 |
660 |
23% |
789 |
3% |
|
815 |
660 |
23% |
| Active clients (in ‘000s) |
3,416 |
2,777 |
23% |
3,296 |
4% |
|
3,416 |
2,777 |
23% |
| Retail – gross total revenues (in R$ mn) |
2,725 |
1,844 |
48% |
2,599 |
5% |
|
9,864 |
6,271 |
57% |
| Institutional – gross total revenues (in R$ mn) |
326 |
307 |
6% |
281 |
16% |
|
1,277 |
1,210 |
6% |
| Issuer Services – gross total revenues (in R$ mn) |
270 |
323 |
-16% |
284 |
-5% |
|
1,043 |
688 |
52% |
| Digital Content – gross total revenues (in R$ mn) |
16 |
25 |
-39% |
31 |
-50% |
|
99 |
130 |
-24% |
| Other – gross total revenues (in R$ mn) |
110 |
71 |
56% |
172 |
-36% |
|
516 |
413 |
25% |
|
|
|
|
|
|
|
|
|
|
|
| Company Financial Metrics |
|
|
|
|
|
|
|
|
|
| Gross revenue (in R$ mn) |
3,447 |
2,570 |
34% |
3,368 |
2% |
|
12,799 |
8,711 |
47% |
| Net Revenue (in R$ mn) |
3,260 |
2,395 |
36% |
3,171 |
3% |
|
12,077 |
8,152 |
48% |
| Gross Profit (in R$ mn) |
2,363 |
1,559 |
52% |
2,277 |
4% |
|
8,554 |
5,451 |
57% |
| Gross Margin |
72.5% |
65.1% |
743 bps |
71.8% |
70 bps |
|
70.8% |
66.9% |
396 bps |
| Adjusted EBITDA1 (in R$ mn) |
1,390 |
891 |
56% |
1,170 |
19% |
|
4,848 |
2,918 |
66% |
| Adjusted EBITDA margin |
42.7% |
37.2% |
545 bps |
36.9% |
577 bps |
|
40.1% |
35.8% |
435 bps |
| Adjusted Net Income1 (in R$ mn) |
1,086 |
721 |
51% |
1,039 |
5% |
|
4,003 |
2,270 |
76% |
| Adjusted Net Margin |
33.3% |
30.1% |
322 bps |
32.8% |
55 bps |
|
33.1% |
27.8% |
530 bps |
| (1) See appendix for a reconciliation of Adjusted Net Income and Adjusted EBITDA | |||||||||
New Business Metrics
|
4Q21 |
4Q20 |
YoY |
3Q21 |
QoQ |
|
FY21 |
FY20 |
YoY |
|
| KPIs from New Business (unaudited) |
|
|
|
|
|
|
|
|
|
| Total Gross revenue from Selected Products (in R$ mn) |
223 |
45 |
392% |
154 |
45% |
|
582 |
194 |
200% |
| Pension Funds (in R$ mn) |
74 |
19 |
284% |
58 |
27% |
|
227 |
134 |
69% |
| Credit Cards (in R$ mn) |
86 |
– |
n.a. |
54 |
60% |
|
180 |
– |
n.a. |
| Credit (in R$ mn) |
46 |
12 |
296% |
28 |
65% |
|
116 |
17 |
586% |
| Insurance (in R$ mn) |
18 |
15 |
21% |
14 |
26% |
|
60 |
43 |
39% |
| as a % of Total gross revenue |
6.5% |
1.8% |
472 bps |
4.6% |
191 bps |
|
4.5% |
2.2% |
232 bps |
Operational Performance
1. Investments
Assets Under Custody (in R$ billion)
Total AUC was R$815 billion as of December 31, up 23% year-over-year and 3% quarter-over-quarter. Year-over-year growth was driven by R$230 billion of net inflows and R$75 billion of market depreciation.
Total Net Inflow¹ (in R$ billion)
Total net inflows were R$48 billion on 4Q21 vs R$37 billion on 3Q21, +29% QoQ. Adjusted by concentrated custodies, net inflows were R$41 billion, R$13.6 billion per month, versus R$47 billion on 3Q21, reflecting the resilience of our IFA and direct channels during moments of uncertainty in the macroeconomic environment. On an annual basis, our total net inflows in 2021 were R$230 billion, up 16% year-over-year, and our total adjusted net inflows were R$176 billion, R$14.7 billion per month, up 25% year-over-year.
¹Concentrated custodies are custodies greater than R$ 5 billion per client/economic group. These custodies are more volatile by nature.
Active Clients (in ‘000)
Active clients grew 23% and 4% in 4Q21 vs 4Q20 and 3Q21, respectively, totaling 3.4 million. Average monthly net client additions went down 23% sequentially from 52,000 in 3Q21 to 40,000 in 4Q21, mostly impacted by a slower growth in Clear, due to lack of momentum in the equity market.
IFA Network Gross Additions
IFA gross additions totaled 1,106 in 4Q21, down 7% quarter-over-quarter, but keeping a strong pace of approximately 370 new IFAs per month. In 2021, IFA gross additions totaled 4,409 vs 3,724 in 2020, an 18% increase year-over-year in a period on which the efforts have been directed to ensure increased quality and productivity of the network. In 4Q21, our network reached over 10,000 IFAs throughout Brazil.
Retail Daily Average Trades² (million trades)
Retail DATs totaled 2.5 million in 4Q21, a 5% decrease quarter-over-quarter, reflecting the more challenging macroeconomic environment for equities. DATs for 2021 totaled 2.7 million, vs. 2.4 million in 2020, reflecting a greater number of clients operating stocks and futures, especially in the first quarter of 2021.
²Daily Average Trades, including Stocks, REITs, Options and Futures
NPS (Net Promoter Score)
Our NPS, a widely known survey methodology used to measure customer satisfaction, was 76 in December 2021, vs 71 in December 2020, reflecting our ongoing efforts to provide superior customer service at a lower cost. Maintaining a high NPS score remains a priority for XP since our business model is built around client experience. The NPS calculation as of a given date reflects the average scores in the prior six months.
2. Pension Funds
Pension Funds AUC (in R$ billion)
Total Pension Funds AUC was R$48 billion as of December 31, up 51% year-over-year and 11% quarter-over-quarter, reflecting our consistent growth in the pension funds business.
3. Cards
Credit Card TPV (in R$ billion)
On 4Q21, XP Visa Infinite credit cards generated R$4.4 billion in TPV (Total Purchased Value), a growth of 35% quarter-over-quarter, summing up to R$10.3 billion in total TPV in our first year as a credit card player. In early December, we lowered our threshold for credit card eligibility to a minimum of R$5,000 invested within XP’s platform.
4. Credit
Credit Portfolio³ (in R$ billion)
Our Credit portfolio reached R$10.2 billion as of 31 Dicembre 2021, expanding 18% quarter-over-quarter and 164% year-over-year. The duration of our credit book was 3.3 years, with a 90-day Non-Performing Loan (NPL) ratio of 0.0%.
³This portfolio does not include Intercompany and Credit Card related loans and receivables
Total Gross Revenue
Total Gross Revenue (in R$ mn)
Total gross revenue grew 34% from R$2.6 billion in 4Q20 to R$3.4 billion in 4Q21. On an annual basis, total gross revenue reached R$12.8 billion in 2021, a 47% increase relative to 2020. This growth was mainly driven by the retail business, which contributed with 88% 2021 vs the full year of 2020. In addition to the growing contribution in revenues coming from the new verticals (Pension Funds, Credit Cards, Credit and Insurance), the resilient growth in our core business also shows how XP’s business model has been able to adapt to distinct economic cycles. The reduction in DATs and the consequent impact on revenues from Equities and Futures seen since 1Q21 has been more than offset by the positive performance of Fixed Income, Structured Products and Floating over the past three quarters. Our strong distribution channel coupled with a comprehensive product offering and focus on client experience are key factors that allow for such adaptability.
Retail
Retail Revenue (in R$ mn)
Retail revenue grew 48% from R$1.8 billion in 4Q20 to R$2.7 billion in 4Q21, attributable mostly to (i) fixed income and (ii) floating revenues driven by higher interest rates. On an annual basis, retail revenue grew 57% in 2021, reaching R$9.9 billion. Revenue profile has been on par for the past three quarters, with increased demand for fixed income products and stable trading volumes in equities and futures.
In 4Q21, Retail-related revenues represented 88% of consolidated Net Income from Financial Instruments, as per the Accounting Income Statement, and were composed of Derivatives, Fixed Income secondary transactions and Floating, among others.
LTM Take Rate (LTM Retail Revenue / Average AUC)
The take rate for the last twelve months ended December 31st, 2021 remained stable at 1.3%, as it has been since our IPO. Our ability to add new products and services to the platform coupled with a diversified revenue profile, kept our take rate stable.
Note: LTM Take Rate (LTM Retail Revenue / Average AUC). Average AUC = (Sum of AUC from the beginning of period and each quarter-end in a given year, being 5 data points in one year)/5
Institutional
Institutional Revenue (in R$ mn)
Institutional gross revenue totaled R$326 million in the 4Q21, up 6% from R$307 million in 4Q20. On an annual basis, Institutional revenue also increased 6% in 2021, versus 2020, to R$1.3 billion.
In 4Q21, Institutional revenue accounted for 8% of consolidated Net Income from Financial Instruments, as per the Accounting Income Statement, and was composed mostly of Fixed Income secondary transactions and Derivatives, among others.
Issuer Services
Issuer Services Revenue (in R$ mn)
Issuer services revenue decreased 16% year-over-year from R$323 million in 4Q20 to R$270 million in 4Q21. This decrease was driven by two main reasons: (i) in 4Q20, we posted record revenues in issuer services due to a suppressed demand in ECM activities coming from the first semester of the pandemic in 2020; and (ii) in 4Q21, we start to see a reduction in ECM activity in Brazil due to a more challenging macroeconomic environment. On an annual basis, revenue reached R$1 billion, growing 52% in 2021 over 2020. Despite the unfavorable scenario for ECM, we highlight that our revenue profile is more exposed to DCM revenues, which are less volatile in different macroeconomic scenarios.
Our Issuer Services business is key to foster our product offering and contribute to the development of Capital Markets in Brazil. Although market conditions may affect our ECM results in the short-term, the DCM division is expected to benefit from the demand of corporate clients for alternative funding sources. Furthermore, as we see our recent M&A initiative starting to flourish, we consolidate ourselves as one of the main players in Investment Banking services in Brazil, with a complete and robust offer of services for our clients.
Digital Content and Other
Digital Content Revenue
Gross revenue totaled R$16 million in 4Q21, down 39% from R$25 million in 4Q20. On an annual basis, revenues reached R$99 million in 2021, a 24% decrease relative to 2020. Our digital content plays an important role in educating Brazilians and making them more proficient in financial products and services. It also enhances client’s relationships and attracts new clients that grow our retail platform. 4Q21 trends remained pressured by the absence of in-person events and courses.
Other Revenue
Other revenue increased 56% in 4Q21 vs 4Q20, from R$71 million to R$110 million. On an annual basis, other revenue reached R$516 million in 2021, a 25% increase versus 2020. Interest on gross cash was higher due to both increases in interest rates and higher adjusted gross financial asset balance in the period, along with better results coming from asset and liability management.
In 4Q21, other revenue accounted for 4% of consolidated Net Income from Financial Instruments, as per the Accounting Income Statement, composed mostly of interest on adjusted gross cash and results related to our asset and liability management.
COGS
COGS (in R$ mn) and Gross Margin
COGS rose 7% from R$836 million in 4Q20 to R$896 million in 4Q21, remaining stable quarter-over-quarter. In 2021, COGS reached R$3.5 billion, a 30% increase versus last year, with a gross margin of 70.8%, approximately 400bps increase from last year. Slower growth in COGS was driven by a product mix towards fixed income and floating revenues, resulting in a record gross margin since the IPO of 72.5% in the 4Q21.
SG&A Expenses
SG&A Expense (ex-Share-Based Compensation) (in R$ mn)
SG&A expenses (excluding share-based compensation) totaled R$989 million in 4Q21, up 38% from R$717 million in 4Q20, and down 11% from R$1.1 billion in 3Q21. The recent decrease was mainly due to a net positive line of Other Administrative Expenses, reflecting incentives received from third parties, mainly due to the joint development of retail products, and also the association of such entities with the XP ecosystem. On an annual basis, SG&A expenses were R$3.8 billion in 2021, an increase of 46% versus 2020, reflecting our investments in headcount growth of over 70% in the last twelve months.
Share-Based Compensation (in R$ mn)
Through 4Q21, we have granted approximately two thirds of the current approved program authorizing dilution of up to 5%. Expenses related to the program remained steady compared to 3Q21. We expect to use the approved dilution as originally planned: within five years from the IPO. A portion of Share-Based Compensation is related to IFAs and allocated in COGS.
Adjusted EBITDA
Adjusted EBITDA¹ (in R$ mn) and Margin
Adjusted EBITDA grew 56% year over year, from R$891 million to R$1,390 million. Adjusted EBITDA margin expanded 545 bps to 42.7%, driven by: (i) gross margin expansion; and (ii) lower relative SG&A expenses due to a net positive line of Other Administrative Expenses, reflecting incentives received from third parties. On an annual basis, Adjusted EBITDA reached R$4.8 billion in 2021, a 66% increase relative to 2020, with an Adjusted EBITDA margin of 40.1%, 435bps increase relative do last year. We highlight that we expect our considerable investments in technology and new initiatives to continue for the upcoming quarters, which could potentially bring Adjusted EBITDA margin to temporarily lower levels.
¹ See appendix for a reconciliation of Adjusted EBITDA.
Adjusted Net Income
Adjusted Net Income¹ (in R$ mn) and Margin
Adjusted Net Income grew 51%, from R$721 million in 4Q20 to R$1,086 million in 4Q21, in connection with the factors explained in the Adjusted EBITDA and a lower normalized effective tax rate. The effective tax rate, normalized by withholding taxes that are recorded in our revenue was 22.5% in 4Q21, from 27.1% in 4Q20, mainly due to a more favorable revenue and expense mix across subsidiaries. Our Adjusted Net Margin expanded by 322 bps to 33.3% in 4Q21. Despite investments in technology and new businesses, our medium-term guidance range for Adjusted Net Margin remains unchanged.
¹ See appendix for a reconciliation of Adjusted Net Income.
Adjusted Cash Flow (in R$ mn)
|
4Q21 |
3Q21 |
|
FY21 |
FY20 |
|
| Cash Flow Data |
|
|
|
|
|
| Income before income tax |
1,121 |
908 |
|
3,815 |
2,421 |
| Adjustments to reconcile income before income tax |
503 |
693 |
|
1,607 |
564 |
| Income tax paid |
(305) |
(174) |
|
(784) |
(519) |
| Contingencies paid |
(0) |
(0) |
|
(3) |
(2) |
| Interest paid |
(69) |
(8) |
|
(81) |
(71) |
| Changes in working capital assets and liabilities |
50 |
(797) |
|
(112) |
861 |
| Adjusted net cash flow (used in) from operating activities excluding net cash flow (used in) from securities, repos, derivatives and banking activities |
1,299 |
622 |
|
4,443 |
3,254 |
| Net cash flow (used in) from securities, repos, derivatives and banking activities (i) |
182 |
(3,694) |
|
(5,543) |
(485) |
| Brazilian government bonds (Assets) |
(2,597) |
(6,328) |
|
2,717 |
(32,059) |
| Securities from Private Pension Liabilities |
(5,230) |
(4,682) |
|
(18,577) |
(9,645) |
| Other Securities (Assets and Liabilities) |
(1,018) |
(3,373) |
|
(6,045) |
(1,251) |
| Derivative financial instruments (assets and liabilities) |
1,919 |
(1,888) |
|
675 |
1,024 |
| Securities trading and intermediation (assets and liabilities) |
(4,396) |
536 |
|
(5,086) |
10,605 |
| Securities purchased (sold) under resale (repurchase) agreements |
1,023 |
8,476 |
|
(7,827) |
19,063 |
| Loan operations |
(2,297) |
(2,575) |
|
(8,919) |
(3,925) |
| Market funding operations |
5,214 |
1,923 |
|
14,906 |
5,127 |
| Private pension liabilities |
5,210 |
4,665 |
|
18,533 |
9,629 |
| Foreign exchange portfolio (assets and liabilities) |
(17) |
(9) |
|
67 |
21 |
| Credit cards operations (liabilities) |
656 |
743 |
|
2,472 |
51 |
| Other activities |
1,715 |
(1,180) |
|
1,540 |
875 |
| Adjusted net cash flows (used in) from operating activities |
1,481 |
(3,072) |
|
(1,101) |
2,769 |
| Adjusted net cash flows (used in) from investing activities |
(1,011) |
(764) |
|
(3,573) |
(1,840) |
| Investment in IFA Network |
(484) |
(449) |
|
(2,423) |
(1,258) |
| Acquisition of PP&E and Intangible |
(39) |
(68) |
|
(353) |
(292) |
| Investments/Acquisitions in associates and subsidiaries |
(489) |
(248) |
|
(798) |
(290) |
| Adjusted net cash flows (used in) from financing activities |
(119) |
4,403 |
|
6,142 |
789 |
Adjusted Net Cash Flows (used in) from Operating Activities¹
Our net cash flow used in Operating activities represented by Adjusted net cash flow (used in) from operating activities (which in management views as represents a more useful metric to track the intrinsic cash flow generation of the business) increase to R$1,299 million in 4Q21 from R$622 million in 3Q21, from R$3,254 million in 2020 to R$4,443 million in 2021 driven by:
- Higher balance of securities and derivatives that we hold in the ordinary course of our business as a Retail investment distribution platform and as an Institutional broker dealer (with respect to the sale of fixed income securities and structured notes);
- Our strategy to allocate excess cash and cash equivalents from treasury funds, from Floating Balances and from private pension balances to securities and other financial assets. These balances may fluctuate substantially from quarter-to-quarter and were the key drivers to the net cash flow from operating activities figures;
- Increases in our banking activities from loans operations, market funding operations mainly derived from deposits (time deposits), structured operations certificates (COEs) and other financial liabilities which include financial bills as a result of our expected growth in new financials services verticals;
- Our income before tax combined with non-cash expenses consisting primarily of (i) Net foreign exchange differences of R$148 million in 4Q21, R$433 million in 3Q21 and R$506 million in 2021 , (ii) share based plan of R$171 million in 4Q21, R$124 million in 3Q21 and R$561 million in 2021 and (iii) depreciation and amortization of R$52 million in 4Q21, R$51 million in 3Q21 and R$232 million in 2021.
Contacts
Investor Relations Team
André Martins
Antonio Guimarães
Marina Montemor
ir@xpi.com.br
Investors.xpinc.com
