Okay, good evening, everyone. Welcome to XP’s Earning Call for the First Quarter of 2022. I am Andre Martins, the Head of Investor Relations. And on behalf of the company, I would like to thank you all for your interest in this call. Today, we have with us Thiago Maffra, our CEO; Bruno Constantino, our CFO; and the Invest Relations Team, myself, Antonio Maren and Marina Montemur. We will be all available for the Q&A session, which is going to happen right after the presentation. And you can raise your hands on the Zoom tool to ask your questions. We already have seven raised hands already. We have the option of simultaneous translation to Portuguese. You just have to click on the go button on the Zoom. [Foreign Language] Before we begin our presentation, please refer to our legal disclaimer on Page 2 of our earnings presentation on which we clarify the forward-looking statements and their definition. The documents which explain why forward-looking statements might differ from actual results can be found on the SEC filing session of our website. Now I’ll pass the word to our CFO, Bruno Constantino, who will deliver our initial remarks. Thank you all.

Thank you. Thank very much, Andre. Good evening everyone. [Foreign Language] Are we going to have the presentation on? So, I can start. I will be brief. We have already seven hands raised, so I will be brief, so we can go to the Q&A. So we have basically two sessions here, the highlights, and then the financials and KPIs of the first quarter. Going to the highlights, we have segregated here those five topics that we would like to share with all of you. I will not spend our time talking about the macro environment, everything that’s happened in the first quarter, all of you are pretty much familiar with it, so jumping directly into the results. I believe the first quarter shows the resilience of our business model. Gross revenue grew 17% year-over-year and we kept our adjusted net margin above 30%. It’s worth mentioning in this first highlight that a quarter of course is made of three months and we had very different months in the beginning of the year, just to give you one data point. If we compare the gross revenue of March with an average of January and February, March was more than 45% greater than the average of the first two months of the quarter, so very different month that resulted in the 17% growth year-over-year in the quarter of 2022. The second point that we always reinforced as well is this portfolio effects. Two segments that did not perform well in the first quarter because of the macro conditions everything related to capital markets and also equities and features. On the other hand, we had some records, for example, in the institutional revenue that beats the previous record in the second quarter last year by 46%, mainly driven by the war, a lot of the protection and derivatives being used by our clients in our trading desks. And also the retail fixed income platform that on fourth quarter last year had hit a record in terms of volumes being traded and the first quarter of this year was even greater than the fourth quarter. Considering that in this year, we didn’t have the tailwinds of primary offers coming to the market because of very weak capital markets activities. Number three is our distribution network. As you know, we have a unique distribution network, especially when you look at the IFA network and we keep growing. We have grown by – when you add the IFA+ the B2C more than 5% quarter-over-quarter. We always like to remember that when we think about the IFA network we have almost 11,000 IFAs entrepreneurs working 24/7 to succeed in their profession. Of course, we are helping them as we can, but when we compare to the world of bank managers, more than 50,000, we believe there is still a lot of room to keep growing here. Number four, of course, the new verticals we decided last year to share with investors those new verticals. They are what we call internally expand the core, being the core investments, and they will reinforce the core. But when we look at them standing alone by themselves, they can become really big important. And when we look at where we are in each of those verticals, I will talk a little bit more about it. We are at very early stage. So the growth exponential year-over-year threefold and they represented 7.6% of total gross revenue this quarter just to give you a comparison here first quarter 2022, they represented less than 3%. And finally, but not less important, we received the reward of the Best Advisory for the fourth consecutive year something in investment. So being investment our core, this kind of reward is something that we are very honored to receive. It’s an indication that we are going in the right direction. And especially when we look at the first reward that was given in 2019, we had five points in advance compared to our closest competitor. And fast forward four years, 2022, now we have eight points of distance to our closest competitor, which is a very good indicative. But on the other hand, when we think about investments, we are not number one in custody, in revenues. So we still have a very long journey ahead of us in investments. Now we are going to share some figures. Just we never talked too much about developments in the investment world. We’ve been talking about the new verticals and developments. So we brought here some examples of what we have delivered in the first quarter in investments, the automated equity portfolio, it’s really simple to navigate and push button then decide – for the clients to decide which portfolio the client wants to follow on a monthly basis, more than 20 portfolios available. And it was something that our IFA network demanded a lot in our ecosystem, a good thing about having 11,000 IFAs, we get input on a daily basis and of course we have a roadmap and we are always focusing to serve the IFAs better. And more than 70% of the IFAs are already using this tool in the first month. On the bottom, we have the alternative fund secondary trading that we launched this year, it’s just an example of innovation. We are very positive about the alternative asset class, especially in Brazil, where the penetration is too low. And we are believer that for any secured or asset class to perform well, it’s important to have liquidity in the secondary markets as we have done with bond markets with reach and with how tax extents fixed income instruments in the secondary trading. We also plan to bring liquidity with a platform with the tool for alternative funds to being traded in the secondary market as well. On the right hand on the top XP Future is just our DNA. We launched XP Future. What is it is? It’s an educational program using our knowledge to help new professions to get the qualification and the training to become newer advisors. Those are not bank managers that decide to leave and become entrepreneurs. New people coming to this new profession and we train them, we qualify them to make sure their probability of success is even greater. And finally, last week it was on the local news, we launched our first flagship store. It’s basically in Manaus, Amazonas in Brazil, the north of Brazil, to create a new experience with our client, a hub to have a sense of the digital world together with the traditional world too early to tell. But so far the feedback that we have gotten very good. And we are going to have more of those flagship concept stores around Brazil. Now moving to the new verticals update before I jump into the financials. I’m going to just touchpoint in the four new verticals that we have. So the credit business we had a revenue growth of year-over-year, more than 200%. So growing a lot. You’ve seen the KPIs the $11.5 billion of credit portfolio. But here is just an announcement of our partnership with Direto, it’s in pilot phase, but it’s going to be a marketplace. For the mortgage and real estate business Direto is a joint venture between XP and Direcional a listed company in DIRR3 that has decades of performance in the real estate world in Brazil. So this marketplace is something that can provide a good experience without carrying the balance sheet to provide the credit. Also we have developed the collateralized credit end-to-end 100% digital. It was something that was in our backlog, and now it’s up and running, improving the client journey. In terms of the credit card, we have announced our KPIs of more than 300 active cards. Here it’s interesting because we only have credit card in part of our XP’s clients. So we do not have that Rico or clear brand. But when we look at the 3.5 million active clients that we have in the group as a total, we have less than 10% penetration. So there is a huge potential for cross selling. Of course, this will happen over time. But we already have some interesting data points about the credit card. One of them is all the cohorts, they look pretty much the same so far, and as time goes by the usage of our card, until it becomes the primary card is happening with all the cohorts. And we have already more than 50% of our active card as a primary card. Number two is that for those clients that really use the banking part, the credit cards specifically, and then the digital accounts the churn is four times lower, which is also a good indicative of the strategy of developing new services products for our investor clients. So we can increase the loyalty, the stickiness with the platform, reduce the churn, increase the LTV, and then you create this positive loop that reinforces itself. And then the roadmap. It’s on track until the end of this year, we are going have all of that digital accounts, debit card, cash withdraw, credit cards for recompliance as well. Remember that we have everything as a service with one foundation to be 100% scalable. And we plan to have clients at the end of this year. Now moving to the last two new verticals, private pension and insurance. Private pension, I like this chart very much because it shows that the growth of the business is doing just fine. What is in this chart is the net money of the private pension world for the first quarter. So XP did that. And private pension we are talking only about our insurance company, not the third party insurance companies that distribute beyond our broker insurance. So our insurance company got R$3.2 billion of net new money in the first quarter. And when you look at the incumbent banks, because those top five players, they belong to the same top five commercial banks in Brazil, they lost more than R$4 billion. And here we have a portability decade. We do not take into account recurrence. So it’s basically portability. So we are getting 50% of the market share of net new money, but when you look at the market share that we have as AUM in our insurance company is less than 3.5%. There is a huge space here. It’s more of the same. We just need to keep improving, bringing more products, the experience better, cross sale internally. And then this market share it’s our expectation will keep growing over time. Now, insurance mainly we are focused on life insurance for now. We have launched our Digital Life Insurance experience at XP. The growth is 69% in terms of revenue year-over-year. But there is a lot to come. When we think about the insurance world, for example, we have a small revenue of health insurance using our [indiscernible] our platform but that there just health insurance there is a huge opportunity to grow. We have other types of insurance as well, that are really small. As I said, the focus right now is life insurance, but we are going to keep scaling to other insurance products. And when we look at the insurance market as a whole the revenue that we got is less than 0.1% of the market. Just always is nothing. So now we can move to our KPIs. I talked already about the new verticals, the new verticals added together, they have a revenue growth of 205% year-over-year. Our highlights of the KPIs $3.3 billion, gross revenue of 17% growth year-over-year already talked about it. Gross profit being greater 25% growth year-over-year, $2.2 billion. So an increase in gross margin, much to do with product mix, as you migrate away from products that have a higher commission to products that have a lower commission. This has an impact in the cost and increases the gross margin. And also of course, the floating parts as well has a role in increase of gross margin. The adjusted EBITDA growing 14%, R$1.2 billion so lower than the gross revenue growth mainly impacted by the growth of SG&A year-over-year. We have another slide. I’m going to talk about the headcounts, but basically year-over-year, our headcounts – our main expense line grew around 60% in terms of personnel. And of course, this has an impact in SG&A, but we are going to see that quarter-over-quarter, in the personnel expense at the end of the day has decreased, but year-over-year, it has this impact of margin compression in the adjusted EBITDA. And then when we go to the adjusted net income, the lower effective tax rate plays a role and then goes back to the same growth as we had in the gross revenue, 17% keeping a margin of 31.6% in the first quarter. The KPIs, the investment AUC R$873 billion, all-time high. This also has an impact in the take rate, because of course, especially if you see, instead of looking at the last 12 month take rates as we do, where you have five data points of AUC, when you look at only the annualized quarter and try to get the take rate, this higher AUC as a denominator will have an impact there, but a growth of 22% year-over-year. Pension fund R$50 billion out of which, it is worth mentioning the pension of our own insurance company. So we have the R$50 billion, the 45% increase over R$35 billion, one year ago. But when we look at our insurance company, R$36 billion out of that R$50 billion belongs to our own insurance company. Out of the R$35 billion first quarter last year, our insurance company represented R$17 billion out of the R$35 billion. So the growth of our own insurance company in terms of assets under custody is 112% year-over-year. So a very strong growth. And finally, the credit card R$4.5 billion, but revenue of the credit card growing much higher than this. Around revenue, it’s better to compare quarter-over-quarter to be honest, because the first quarter last year, we launch it in March, right. So quarter-over-quarter, the revenue of credit card increased 14%. And the NPS close to all-time high 76, very important for us. Total revenues, so we talk about total gross revenue already 17% increase, a decrease compared to fourth quarter 2021, you have a seasonality there, performance fees and more capital market activity, but yes, we had a decrease. And what explains that mostly is the capital market activity. We had in capital markets generally a decrease of 55% quarter-over-quarter. If you look at insurance services revenue related to capital market, it’s a 48% decrease year-over-year, 55% decrease quarter-over-quarter. It’s also important to highlight the three months of the quarter. Why am I going back to this? Because I think it’s important to understand that the year January was really a very weak month, only metrics I can think of. And then we start to see recovery in February and March much stronger. When we look at the capital markets activity and getting all the revenue that we get from there, insurance services, retail channels, REITs and compare the revenue of March to the average revenue again of January and February together, March was 260% greater than the average of the first two months of the year, given a sign of recovery ahead. And that’s exactly what you can see in the breakdown of the total revenue here. So retail keeps the three fourths of the total revenue, but then you have institutional increasing the relevance, basically because of the record that we had this year because of the war, the trading desk, everything that I explained already going to 17%, which is unusual, usually it’s like 11%, 12%. And then we have insurance services that usually is like 8% to 10% going down to 4% because of capital markets activities. So this is why explains very, very well what happened in the first quarter in terms of mix, but it showed the portfolio effect at the end of the day, revenue grew 17% year-over-year. Moving to retail revenue. So retail revenue year-over-year grew together with the total revenue close to 17%, 16%, take rates on last 12 month metric kept the pace stable at 1.3%. Again, if you go to the annualized quarterly take rates, it’s slower because of what I just said, because of the weak start of the year in January and February together. If we had the March, it would be totally different. Plus the increase that we had in the assets under custody, market appreciation that happened in the beginning of the year, helping the custody to grow as well. Not necessarily contributing to the revenue, having an implication in the take rate there. But when you look at the last 12 months, pretty much stable, no matter what the interest rates are. So going 4.5% to 2% back to 12%, and we keep our take rates pretty much stable and that’s again, resilience and portfolio effect that I talked already about. And adding new products like the new vertical and so forth. And finally our last slide, so we can jump into Q&A, the adjusted EBITDA growing to 14%. So there is a margin compression from 39.7% to 38.2% still a very healthy margin. You have the number of total head counts at the end of the period. So you can see that we jump at March 2021 from less than 4,000 employees to more than 6,300 employees. That’s almost 60% increase. And that’s what I talked about the natural pressure in our margins and SG&A because we are investing a lot in new verticals we are building new products, new services that will more than pay off in the near future as they already have shown in the growth of the revenue of the new metrics, the new verticals. Another interesting thing to look at when you compare the adjusted EBITDA on a quarterly basis as well, that you capture on the fourth quarter part of that growth in the head counts, not 100% because we still are growing. We – as you can see, we ended the year with 6,200 employees and we ended the first quarter at 6,300. So we kept growing. We have a lot to deploy at to develop, but if you take out of the EBITDA, the net other operating income that has a seasonality there, because most of it are incentive that we received in one specific quarter related to the whole year. But you only can recognize once you receive it, mainly B3 incentive, Visa, and et cetera. If it has an impact, so if you take that and in the fourth quarter was R$233 million, if you take that out, you’re going to see that adjusted EBITDA in the first quarter was pretty much flat a little bit greater than fourth quarter without the benefit of the capital market activity that we had in the first quarter. When we look at the adjusted net income, it has the contribution, the additional contribution of the lower effective tax rate because of product needs. So we had a tax rate of 17.4% in the first quarter last year, and our tax – our effective tax rate was 16% in this quarter making the growth of our adjusted net income equal to growth of the revenue at 17%. With that, I mean I think I don’t know how many hands we have already raised, but would be better to go to the Q&A. Maffra will be here helping me out. So we are at your disposal to answer any questions you might have. Thank you very much. A - Andre Martins: Great, Bruno. So let me just organize. We have a lot of hands raised. We are going to answer them on a first come first serve basis. Starting with Thiago Batista from UBS. So we ask you kindly to restrict to one question so we can address the more than 10 questions that we have here. So the first one is Thiago from UBS, as I said, hi Thiago, can you hear us?

Yes. Hi guys, are you hear me?

Yes.

I have one question on the take rate of XP, take rate was super resilient up to last Q, but this quarter we saw a big decline. Do you see this decline as a kind of temporary event or this lower level should continue for a while?

No, I see it. Thiago, as I tried to put in my speech at temporary we had again just to be clear, January was kind of awkward start of the year because of Omicron and third phase we had basically no capital market activity was very low. So the numbers that I gave in terms of comparison between March and the average not only taking, because I guess January would be even higher, but only the average of January plus February the everything related to capital market activity, investment banking March was to be exact like 267% greater than the average. So it’s I mean the take rates it’s the animalized one in the quarter. It is what it is. So take the retail revenue, which grew year-over-year by 16%, we also have the impact of the custody. So when you take the take rate of a specific, I don’t – to be honest, I don’t like that, that metric. I understand you’re trying to get the sense of what’s going on the margin, but it’s tricky. You can get it wrong if you – if take that because there is an impact of the custody as well. We have – we ended last year with $815 billion. I’m not mistaken of assets under custody, and we ended the first quarter, $873 billion. So it’s a high custody that you are using as in a letter, a retail revenue that has grown 16% year-over-year, but had a huge impact in terms of specifically capital market activity. And the benefits of the portfolio effect helped in fixed income and helped in institutional as well with derivatives that does not impact the take rate as well. So I wouldn’t take this take rates as the trend for the rest of the year.

Very clear, Bruno. Thanks for the answer.

Thank you. Thank you, Thiago again. Next in line is Mr. Jorge Kuri from Morgan Stanley. Good evening, Kuri.

Hi everyone, thanks for taking the questions. Good to see everyone. I wanted to maybe talk more about those metrics that you provided for March, which I evidently think showed that indeed the quarter was pretty odd. You said 45% March net revenue above the average for January and February or that 45% is for the retail revenue?

That’s total revenue.

Total revenue. Okay. And so then I wanted to ask you about how does that look for the retail revenue specifically, and I guess this will probably also help answer the previous question.

Yes. For retail revenue is pretty even a little bit higher, pretty much the same, but higher.

You mean higher than 45% that’s what you’re saying.

Yes.

All right. And so if – and again, maybe I’m asking too much, but for April, how does April look like? I mean have you continued to see an optic on April versus March or how I think so far. Yes.

Jorge, the way I like to see is as Bruno had mentioned, January was like a really bottom of everything because the activity was very low because of the – all the reasons you guys know very well. But when you look the trend for February, and especially for March, they’re much higher during normal levels for the year. And we expect the rest of the year to be on normal levels, not to January levels. Okay.

Got it. All right. Thanks, everyone.

Thank you so much, Kuri. Next we have Jeff from Autonomous. Hey Jeff.

Hi, I’m going to have to work on my reaction times. I need to move my finger a bit faster. So we we’ve spoken quite a bit about revenues and clearly the revenue environment was more difficult than most of us would’ve expected at least at the start of the quarter. But it looks like you took quite a lot of action on the cast and expense side to try to absorb as much of that as possible. Can you go into a bit more detail about what you’ve been doing there to try to keep costs and expenses down? And then how you balance the short-term benefits from doing that against any long-term implications from lower growth, for example. Thank you.

Yes. No. Sure, Jeff. Thank you. You are 100%, right. We – let me start saying, I don’t think that having the costs really under control will impact the growth in the future. There is nothing to do with that. But if you think together here with me, a company like XP that growth exponentially. We – last year, we had an amazing year in our way, you look at it. We had in our budget a number of 4,200 people at the end of the year. We ended the year with more than 6,000 people. We decided to do so. We want to do so many things. We are at very early stage in different segments that we have a lot to accomplish. Yes. That’s why Maffra, whenever he has his letter, he keeps saying we are at very early stage of our journey and that’s true. So whenever you double the number of headcounts in your company in one single year, no matter how diligent you are with efficiency and we are, you’re going to lose some of the efficiency, you’re going to spend much of your energy in the [indiscernible] in the new project, everything you want to do. That’s where your energy is going to be. And you lose part of your energy in other important stuff as well for the company. Then we have this start of the year that at the end of last year, we had already a lot of indications that we should adapt and we should focus on the more than 3,000 new employees that we brought to XP and make sure we have the right people in the right place. 100% integrated in our culture that we believe is a strong competitive advantage that we have. So what do you – what you can see in terms of cross control in the first quarter this year compared to the first quarter last year. And for example, if you go into our expenses, accounting in personnel, you’re going to see that we had a decrease actually in the first quarter, despite increasing the number of headcount around 5% of between in personnel expenses. If you look at the total of administrative expenses, same thing, 3% to 4% decrease quarter-over-quarter. That has nothing to do with compromising the growth in the future. No, it’s the right thing to do as entrepreneurs to make sure now that more than 3,000 people that we have, they are 100% adapt to our culture at the right place, sorry, and so on. So that’s what explains this reduction of the pace in terms of hiring in the first quarter that we believe it’s going to continue in the following in the next quarters of this year and just finalize we are going to deliver the whole thing. You saw the roadmap of the credit card that I mentioned, digital accounts, withdraw, debit card, recall with credit card, we are going to do the whole thing. We are – there is not one single projects that we gave away, or we postponed because of these cost control in terms of personnel and everything else.

Yes. Another way to think about it is if you remember the last earnings calls, at some of them, we mentioned that we start to see the peak of investments, because we doubled the number of people in the last two years. Okay. So we believe that we have the right amount of resource to deliver all the new virtuals, all the new projects, of course, we’ll have to growth in the future, but we are not compromising any of the projects this year because of cost control or this kind of stuff. We are going to deliver everything because we are like organizing all the resources we have to deliver the same thing with the same people. But of course, you guys will see new hires along the year. But we believe we are not compromising anything for the next years. We are not compromising growth.

Thank you.

Thanks, Jeff. I guess, it’s very late in London. So thanks for your participation. Our next question is from Otavio Tanganelli, Bradesco.

Hi, Andre, Bruno and Maffra. Thanks for taking my question. A real quick one on my end. Everyone already asked about the revenues. I wanted you to get a little more color on the gross margin trends, especially because its mark was that much better. Can you think of margins improving something closer back to four few levels or even higher than that now that that you’re going to have a better mix of higher interest rates and other products that benefit probably don’t share that much commissions with the IFP.

Yes. I think it’s a fair assumption, Otavio. The gross margin it depends a lot on the product mix, as I said, but I think it’s a fair assumption.

Thank you, guys.

Thank you, Otavio.

Tito Labarta from Goldman Sachs. Tito?

Hi. Good evening everyone. Can you hear me okay?

Yes. Hi, Tito.

Great. Hi, Bruno, Maffra, Andre and everyone. Thanks for taking my question. Sorry, another follow up on the revenues. Just want to – I’m still not clear exactly like what specifically happened in January that made it such a week month just to – because, mean, it looked like it was up. I mean, the war broke out more in February. Was it – I mean, rates have been rising since last year. So like was there something specific with just your clients stopped trading in January? You didn’t get a lot of inflows in January? I don’t know if you have like the monthly inflow numbers. But was there something specific in January, particularly on your retail revenues, right? Because the capital market activity, if I understand that that would be more on the issuer services revenue, right? Not on the retail.

No. But there is an impact to retail as well, because of the channel fees that you have. Whenever you have offers – primary offers in the market, any retail channel fees goes into the retail revenue and depending on the capital market activity can be relevant. And that was one of the detractors of the revenue on the retail side, in general. But it’s not one thing specifically, net margin played a role as well. When you look at the $46 billion of net margin and even not considering the concentrated custody, the $30 billion that is at the low range of our soft guidance between $10 billion to $15 billion per month. That is an average of the quarter. January was like half of March just to give you another data point. So it was really, really a weak start of the year that as we said, we recovered in February and kept recovering in March.

And sorry to interrupt. This is Bruno. But we always have this analogy in January. Okay. If you go back like I believe we have through January now or two, which is one. So there’s always as an analogy, but this year was even worse than predicted for January. And if you remember what happened in January, the stock exchange around the globe, they went down 10%, 15%. We have vacation in Brazil. We have the peak of COVID in January. So for us, it was similar to what happened 2020 with the first month of COVID. And usually every two years in Brazil, something happened. Okay. We have some of this month. And what we see is it goes down a lot one month, but it recovers really fast. Okay. It happens in the COVID 2020. It happens with human treatment. It happened with drive [indiscernible] and truckers they strike. So it happened many times in the past and we have like on bottom, but it recovers really fast.

Okay, great. That’s helpful. If I can just one follow then. So should we pay attention more to kind of the global markets as opposed to calliber vessel was up in January, right. But it was, you’re saying more because global markets were down than impacted activity more for you guys than the rest right now.

No, I would look at the Brazilian capital market activity, again, you saw the quarterly revenue – quarter revenue issuance services that usually represents, as I said, between 8% to 10% going down relevance to 4%, on the other hand, institutional went up to 17%. So I mean, whenever you have a very weak get to market activity, there is an impact in retail. And there is impact for insured service. But on the other hand, depending on the business for that you have other parts of the business that compensate that. And also it’s worth mentioning that capital market activity except for ECM, especially when we think about BCM you have a – we do have a huge pipeline here and at some point it will resume in the market because companies they need to fund themselves. And so I would say, Tito, to be honest as transitory as it is, what it is, it’s weak start of capital market activity in the first quarter, hopefully other quarters will more than compensate this week start to be seen.

Okay. Yes. I don’t want to hung up the questions. But that’s helpful. I may follow up with some more afterwards. I appreciate the color. Thanks.

Sure.

Our next question is from Marcelo Telles from Credit Suisse.

Hi guys. How are you? Thanks for the time. I have two quick questions. The first one, I was look at your – it’s a kind of a different question from the rest of the peers. But I was look at your cash flow statement and you show your adjustment – adjusted net cash flow from operating activities. And I see it was in a significantly negative in the quarter, it was R$1.2 billion negative, and it looks like it’s the first time, at least at least look over the next four quarters, six quarters that this number is negative. And it seems that was a very big change in your working capital about R$1.25 billion. And given this is the cash flow pretty much just from your recurring business, does not include securities or anything. I’m curious to understand what happened there, because it seems a very significant move there. So that’s my first question. And the second question is with regards to your institutional revenues there was a very big increase quarter-to-quarter, and we – you mentioned in the press release that that could be some kind of one-offs that might not repeat in the future. Maybe some derivatives that five derivatives that you guys have done. How should we think about that line going forward, because was, I think almost a R$200 million increase quarter-to-quarter.

Sure, sure. Marcelo. Regarding the cash flow I mean, you need – we can go later offline with you because, I wouldn’t see the operational cash flow as you look at industrial company or something like that. So, I would read the whole thing. Because for example, there is the bonds, the FX in the bonds that goes in there. And you have compensation for that in other line that does not go in that cash flow variation. So…

But does that go in the – because this is cash from operating activities. It doesn’t include securities repos as per your disclosure. So, doesn’t seem that be the case.

No, but there is for example, some hedge that do not go there. So there is a mix between, and yes, it goes in our operating activities, financial instrument. So it goes in there part of it as well. So, we need to get the whole detail to be honest, I mean, that’s something that you go through the accounting, but that’s not how we look at our operating cash flow. So it’s a different way we look at our – we look at our for example net operating cash withdraws, cash that we have, and the cash deducted, all the debts that we have, and that has increased quarter-over-quarter. So it’s not a reduction there. But I mean, if we go on…

Yes, no, that would be great, if we can follow-up. Because I’m looking at our adjusted cash flow. The one that you, I think, used managerially, and it shows a negative number, but we’ll follow up after the call, yes.

There is a cash, for example, every first quarter and third quarter, you have an impact of cash flow reduction because of the bonus payment, because that’s when we pay bonus. So, everything that is already recognized in the P&L you pay in February and August, and then there is an impact in the first quarter and third quarter. So again, we can, I’m more than happy to go line by line and explain into you. But I wouldn’t look at operating cash and take for granted that the operating cash flow is reducing or increasing because of that that’s the only point. Your – sorry, Marcelo. Your second question.

No, no problem, Bruno. No, my second question is regards to institutional revenue.

Yes. Look, Marcelo, that was mostly the increase and you are correct. As I said it was 46% higher than the previous record in the second quarter last year. And what happened is because of the war in February, we had a lot of activity in our trading desk using derivatives fixed income and so forth protections. And the volume was really high. I would not expect the same volume going forward because the protections are done, right. The war is there, but I wouldn’t expect the same activity that we had in the institutional trading desk in the first quarter because of that.

But on the other hand, retail should be much higher.

Oh yes, yes. Just answering the question of Marcelo, about the institution, the institutional line. Yes.

Thank you. Appreciate the answers.

Thank you Marcelo.

Next is Mario Pierry from Bank of America.

Hi guys. Can you hear me?

Yes. Hey, Mario.

Thanks for taking my question. Let me ask you the question on this new revenue lines that you have, right? This new growth avenues. You talk a lot about the revenues there like R$247 million. But can you help us understand what are the costs related to building out these revenue lines, right? You gave a target at your Investor Day of reaching R$10 billion by 2025 in revenues. But I was trying to understand what is the right cost to income ratio for these new verticals? Also like, we read recently, right, that you are opening points of services in Brazil. So, again, are those related, are these like investments necessary to build out these revenues? And also when I think long term, R$10 billion coming out of these lines, how many clients do you think you need to have to get to that level? Because when I look at your net client adds, right, you only added 88,000 clients, it seems like this, the trend is going against you. So, can you also help us understand how big do you think your client base needs to get? Why we must seeing the client base growing up faster? What are you doing to grow the client base? Thank you.

Sure. Going to your first question Mario, the – when we look at the cost, I mean, the company is one, okay. We have all the P&Ls divided by segments, the businesses, but we do have a lot of costs being shared inside the company. So that’s why it’s hard to give you that kind of detail specifically, because also it also is strategic. But when I look at the margin, EBITDA margin, for example, I think that the big hits we already had the reduction this year compared to last year because of the increase of head count. We invest a lot in technology, but the biggest investment is in people. And as you can see the first quarter number of head counts we kept increasing, as I said, but at a very much lower pace. So I wouldn’t expect any different impact in margins going forward because of the new verticals as they keep growing. Of course, if you look on the credit card, there is a different margin there, because we have the main revenue is interchange and there is the invest back that goes into parts. So credit card growing, you have cards growing at the same pace of the credit card revenue because of the invest back. But when we look at credit for private pension or insurance that’s not the case. Go ahead.

Another way like to answer your question, when you think about number of clients is the way I like to see here is when you think about the investments or segment targets, we have about 15 million investors in Brazil, okay. And once we start to add more financial service like a credit card banking, insurance, and so on, we can increase that through 30 million clients. I’m talking here about high income people with no savings, okay. So I would basically say that we have like 30 million possible clients in Brazil. So it’s not like a 100 million, 150 million. So you’ll not see like us hedging like 1 million people a month, because that’s not our play. It’s not our segment, it’s not our target. Okay. And another factor that some people miss about XP, it’s the cross selling, because we are hedging more and more products. Imagine that two, three years ago our business was, let’s say only, it’s not only, but it was main investments, okay. And now we have other products to sell, okay. So when people ask about take rate, okay. Take rate should go down. I say, it depends because if you consider all the products, all the cross selling that’s possible because we are hedging more products. Take rates should go up, okay, because we are hedging more products that are not correlated to AUC. And that’s the way of thinking for me when we look like some internal metrics, the number for cross sell it’s too very low, okay. For imagine that we have 10, 15 products, okay, assuming that we have investments as one product, the cross sell is too very low. So we have a big opportunity to grow if the customer base that we already have. Okay. So if we don’t add any client, we should be able to add a lot of revenue, okay. So we – you can think about like a revenue growth, new clients and clients that we already have, of course, in investments that new money can come from both clients, but even if we don’t bring any new investment for the customers we already have. We should be able to generate much more revenue because when you look the ARPU [ph] by client and by number of cross selling products, it’s explanation. Okay. So that’s something that we only have been doing for like [indiscernible] it’s credit card insurance and all just products and credit. So it’s something very new, but we already see the ARPU increasing really fast.

Yes. And just follow-up Mario, because I think it’s a good opportunity to clarify a little bit. The way we think as entrepreneurs. I know, I understand your question about, okay, 10 billion, 2025, you’re going to need more clients. I don’t see that growth coming. So what’s going on? How are you going to achieve. The way we think as entrepreneurs is linking the dots. There is a right sequence for that. So think about the credit card. We have 388,000 active cards. We have 3.5 million clients. We don’t have the credit card at the Rico brand, for example. We will have. So there is a sequence there. We could open up the digital accounts and say on board, on XP, we would have many millions of new clients on board in our digital bank. The number would look good, but we don’t think it’s the right sequence. We might get there in the future. But before we get there, there is a lot to be done with our existing client adjusting the experience, make sure we have not 50%, but 100% of our active cards using our cards as a primary card. And that’s how you keep evolving over time. So there is no right or wrong here, but there is the way XP if as an entrepreneur, if you look at our history that’s exactly what we’ve done since the foundation of the company in 2001. You could ask when we were Number 1 broker dealer in 2009, in retail, why only retail? Where is institutional? No, because we went to conquer retail. Then we went institutional. So it’s linking the dot.

And also imagine that we have three brands, okay. We have XP, Rico and Clear, and it’s easy to imagine that when the stock exchange achieves they’re very high. The number of clients that we can add to Clear, it’s very high, okay. So if you – we don’t disclose this number, but if you look the numbers for XP, they are growing, okay, so if you exclude the Clear brand, for example,

Then that’s clear.

Regarding the point of services, I mean, it’s an experience – I hope experience, our first flagship, it’s not related to the new verticals anything like that. It’s basically, I mean to simplify here, it’s like digital companies that decided they need to have some experience in the re-world with the customer that would enhance the digital world as well. It’s same thing here. We had this first trial in Manaus last week. We don’t have the data yet. I mean, we have the data, but it’s very short-term. So give us more time and we will come back with the feedback. We have another point of sales that we want to experiment as well, but it’s a fact, we think it makes sales. We did a lot of survey. We will see in, it’s not very much money that we are spending on that, no.

Do you have any specific targets, Bruno of number of stores that you want to have? And also if I follow up there, like as you building out this new initiatives, can you talk about how model could help you accelerate?

Look, the number we do have, we for a strategic reasons we don’t want to disclose that. What I can tell you is not going to be material in terms of expenses. It’s not going to impact the margins, anything like that and of course we are very data driven. We are measuring the whole thing. If we see a very good data, really fast we can accelerate. That’s the way we are as in suburbs it’s not...

The point here is we believe that we are in a competition for the best customer experience, okay. And we believe we have – we have the hypothesis that’s not proven yet as Bruno mentioned because we don’t have the data that having some physical presence it’s part of these experience, okay. So it’s not bank branch that people will there like to do transactions or so anything like that. It’s not that, we’ll not have thousands of XP space around Brazil. But it’s for us the hypothesis it’s important to have like a very immersive experience with our customers, because when you go like to affluence and high net worth clients, it’s important to have some touch base point with your customer, okay. And that’s what this space is about. It’s about education. It’s about like having some time with the clients, having time with employees and so that it’s all about experience, okay. So that’s the concept.

Okay. And just, sorry for, is related but like the acquisition of Modal, and how that could accelerate your growth in this new segment?

We need to wait Mario for all the approvals and regulatory approvals to give you a proper answer to that question. Of course, we believe the acquisition of Modal can accelerate many segments and initiatives that we have, when we are together, but we are not. We still, I don’t know if you saw, we file our F-4 this morning related to this transaction, but it’s still spending approval of Central Bank and Tai-Ji [ph] and only after that we can we can give a better answer regarding how it’s going to be Modal plus XP together before that we’ll have to wait.

Okay, guys. Thank you very much.

Thank you, Mario.

Thank you, Mario.

Our last question is from Carlos from HSBC. Hi, Carlos.

Hi, Andre. Thank you for taking the last question. Two brief questions. The first one so you say you are at the beginning of the journey, but you have been added for year or two years. What have you learned? What changes would you make compared to how you started going outside your core business? What adjustments do you think you have made or you would have wanted to make to your strategy? And the second one refers to the Itau acquisition that was completed or announced yesterday. That’s the largest take, which is there. It’s clearly an overhang for the market. Is there anything that you can do about that stake or do you have a dialogue with Itau as to what you could do with it? Thank you.

Yes, I can take the first one Bruno and you take the second part. So Carlos, the way I see it is XP has always been on the edge of innovation. Okay. So we started as an education company monoclinal, mono product, average [ph] clients, one product average is, and you can imagine what happened in 2008. So we have like to reinvent ourselves. So then we build this first open platform for investments in Brazil, like investment shopping in Brazil, as you guys know very well in the U.S., it was the first one in Brazil 10 years ago. And we have been innovating since then. We have like helped to develop, the capital markets in Brazil, in many products reach asset management, everything in Brazil. So we have been innovating for 20 years. Okay. Now we are like going to new verticals as we already like mentioned many times. And that’s our G&A, how we keep innovating, how we keep disrupting the markets in Brazil. Something that I always say here internally, for example, it’s not in the numbers that we show it’s nowhere, but how we disrupt the credit market in Brazil, how we do that. We don’t know yet, but we have smart people working on that. And you’ll find a way to develop the capital markets in Brazil, because if you manage the credit market in Brazil, it’s all on the balance sheet of the banks. It happened and changed like 20 years in the U.S., 20 years back in the U.S., in this market. Okay. So I believe we have many, many rooms like to keep innovating to keep disrupting some business lines and insurance and credit and so on. And if you ask me, what like worries me for the future is, how we keep our culture, how we attract the best talents for the future, because it’s all about ourselves. If we keep our culture, if we are able like to keep the best people working as well as in Brazil, I’m sure that we are going to do a amazing things in the future and have like amazing results and growth for the future. So for me, it’s all about people, culture and management. Okay. So that’s the pride part that, we like to work here.

Yes. And regarding – question because it was something already contract back in 2017, mostly of the transaction with General Atlantic, but also including XP Control, Dynamo. And yeah, we have started conversations, not only with Itaú but Itaúsa [ph] as well to see how XP can participate in any block. They want to come to the market. We have interest to participate. We don’t have specifically formats and how to do it yet. And of course we need them to, want to sell the, it’s their shares. So but we are going to keep talking to them for sure.

Okay. If I may ask, because that is new in the past, you have not expressed an interest in buying back the stake, but it seems to me that at this price you could be willing to contemplate buying perhaps the package.

Yes. We are talking to them as I said; we don’t have anything agreed and how to participate in those potential blocks that might come to the market. But yes, we would like to participate if possible. But that’s just the beginning of conversations.

Sure. Pretty clear. Thank you so much.

Thank you. Andre?

Thank you. Carlos was the last one. Actually, I now pass the word to Bruno first for closing remarks and then Maffra, and then I can. Go ahead.

Yes, just like to thank you all for, staying too late and the interest in hearing our 10th quarter it’s a long journey. I will repeat myself, on a partly basis we have ups and downs and I hope that the next quarters we are going to, keep growing and show you how resilient and consistent our business model is and Maffra…

Just to finish and to add to what Bruno just said is, as I always say, and here XP is our life. We love what we are doing. We love what we are building. And we always like to mention that we are building something for the next 10, 20, 30 years. We are not here for the next two, three years. We are not like executives. We are owners of the company use our life. We always say that, most of our work likes its XPs share. So we are more committed than ever. And we are very excited about the, other three quarters that we have ahead for the year. Because as we mentioned we start to see very good numbers for the years. So we still very excited and very committed to the goals, that we put yourself last year. So for this year, so we still very excited and we still very committed for the next 10 years. Okay. So that’s all.

Thank you.

Thank you everyone. Have a Good night.

Have a good night.

Bye-bye.

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