Xp Inc. Earnings Call: Strong Growth Amid Challenges

Xp Incorporation ((XP)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call of Xp Incorporation presented a generally positive sentiment, highlighting significant growth across various financial metrics. The company has demonstrated resilience and confidence, despite facing challenges related to the macro-environment and potential lower debt capital market activity. The discussion underscored Xp’s strong performance, particularly in the fixed income and corporate segments, driving notable increases in client assets, revenues, and profitability.

Record Client Assets

Xp Inc. announced a remarkable achievement in client assets, reaching BRL1.22 trillion, which marks a 9% growth compared to the previous year. This milestone reflects the company’s successful strategies in expanding its client base and enhancing its service offerings, thus attracting more assets under management.

Advisor and Client Base Growth

The company has expanded its network of advisors to 18,200, representing a 5% growth year-over-year. The client base also showed a positive trend, growing by 3% to reach a total of 4.7 million clients. This growth indicates Xp’s effective client acquisition and retention strategies, solidifying its presence in the financial market.

Gross Revenue and EBT Growth

Xp Inc. reported gross revenues of BRL18 billion, reflecting a 15% increase year-over-year. Earnings before tax (EBT) also showed robust growth, surging by 26% to BRL5 billion. These figures highlight the company’s strong revenue-generating capabilities and its ability to manage operational efficiency.

Adjusted Net Income and ROTE

The company recorded its highest quarterly adjusted net income since its IPO, amounting to BRL1.2 billion in Q4 ’24, contributing to a total of BRL4.5 billion for the year, which is a 17% expansion. Return on tangible equity (ROTE) was also impressive at 28.7% in 2024, with a 376 basis points expansion.

Strong Performance in Fixed Income

Xp’s performance in the fixed income market was noteworthy, with a daily average traded volume reaching 40,000 trades in 2024. The company has established itself as a major market maker in Brazil’s fixed income sector, showcasing its strong presence and influence in this market segment.

Retail Credit Growth

The retail credit net interest income (NII) saw a substantial increase of 79% year-over-year, generating BRL81 million in revenues this quarter. This growth underlines Xp’s expanding role in the retail credit market and its strategic focus on enhancing its credit offerings.

Corporate and SMB Segment Growth

Xp reported a 45% growth in revenues from the corporate and small-to-medium business (SMB) segment, with issuer services delivering a 46% growth during the year. This indicates the company’s successful penetration and expansion in the corporate and SMB sectors.

Capital Returns

The company maintained a total payout ratio of 74%, with a capital return of BRL3.6 billion. Xp has set a goal to deliver more than a 50% payout ratio in the coming years, reflecting its commitment to returning capital to shareholders while sustaining growth.

Forward-Looking Guidance

Looking ahead, Xp Inc. has projected continued growth despite the macroeconomic challenges. The company anticipates a compound annual growth rate (CAGR) of 12% to 22% leading up to its 2026 guidance. With a focus on its diversified business segments, Xp expects its adjusted diluted EPS to grow faster than net income, aided by a strategic share buyback program.

In summary, Xp Incorporation’s earnings call conveyed a positive outlook with significant growth in key financial areas. Despite a challenging macro-environment and potential decreases in specific market activities, the company remains optimistic about its future performance. The call underscored Xp’s resilience and strategic focus, positioning it well for sustained growth in the coming years.