Good evening, everyone, and welcome to XP’s Earnings Conference Call for the quarter ended March 31, 2020. I’m Carlos Lazar, Head of Investor Relations, and I really hope that you’re well and safe. Joining me today for the call are Mr. Guilherme Benchimol, Founder and CEO, and Bruno Constantino, CFO. We’ll be available for today’s Q&A session, and you can send your questions in the Q&A tool that you can find on our screen. Let me highlight that our first-quarter earnings release and presentation are available on the Investor Relations website. I would like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our reports filed with the SEC. Now, I will turn the conference call over to Mr. Guilherme Benchimol, who will deliver some opening remarks starting on Slide 5 of the presentation.

Good evening, everyone, and thank you for your interest in our event. In the first quarter of 2020, the world was hit by the rapid spread of COVID-19, and every effort was made to save lives and keep businesses operating. At XP, the initial priority was the health and wellbeing of our employees. Very quickly, we had more than 95% of our workforce in the home office model, and the company was fully operational. In fact, in a few days, we were better than before—more organized, disciplined, and achieving a new standard of performance and efficiency across all levels. I still believe that every difficult moment we faced in our history has created opportunities for us to improve as individuals and as a team, mainly because of our partnership model. Also, the surprise remote environment allowed us to bring forth and create new competitive advantages by adapting and leveraging all our operations even more. Among these competitive advantages, I would like to highlight the following: First, our Education DNA. Since the beginning of the pandemic, we observed a significant increase in interest in investments in Brazil. In this context, we relied on our high-quality content to deliver an even better experience for our customers, resulting in record-breaking performance in different channels that sustained market demand, proving once again XP’s vital role as a catalyst for this movement. Second, we focused on being as close as possible to our clients. The good thing is that our business is privileged compared to others; we do not depend on physical contact—our services could always be accessed digitally, and now more than ever, people are at home, available to connect and learn about the new economic landscape developing. Our solid operational performance in the first quarter of 2020, combined with the significant milestone of two million active clients achieved at the end of March, gives us confidence that we are moving in the right direction. Another competitive advantage is our differentiated network of independent and internal financial advisors, which allows us to stay in touch with customers and provide content and information efficiently, in a specialized and recurring manner. Additionally, we believe that our platform is unique, offering the best products, services, and tools for all investor profiles. The market opportunity remains massive, especially considering the concentration in Brazil, where five large banks control 90% of investment assets. We must also remember that since 1994, interest rates remained above 13%, thus, the incentive for diversification and long-term orientation has always been low. The current Selic rate of 3% per year seems to be a catalyst for a secular change in the behavior of Brazilian investors. Therefore, despite the uncertainty regarding when the pandemic will be contained, we are confident that we will emerge from this chapter stronger than we entered. We truly believe in XP’s business growth prospects, especially in the long term. Finally, I would like to reaffirm our purpose of transforming the financial market to improve people’s lives. In adversity, some give up, while others break records. Now I’d like to hand the call over to Bruno to provide detailed commentary on our operating and financial results. Thank you all.

Thank you, Guilherme. I don’t know if you guys can hear me well. Lazar, am I good? Can I move on? Okay, we’re going to improve on these conference calls as we go along. So I’m going to try to be brief here to allow more time for Q&A. This slide is about the KPIs; you have seen it already when we talked about the COVID-19 update last month. So basically, we ended the quarter with total assets under custody at R$366 billion. We had a healthy pace of net inflow during the quarter, approximately R$12 billion per month—a little above the pace we experienced in the fourth quarter of 2019. The main impact was due to the market sell-off because of the crisis. Another important KPI is the number of active clients. We have seen a very healthy pace in terms of net new clients in our platform on a monthly basis. I’m going to talk a little more about that when I provide the update regarding the crisis's impact in April. But we reached the important mark of surpassing two million active clients in March. Our NPS, of course, is 72, as you already know, and I’ll talk about that later in the presentation. It's worth noting that Brazilian interest in equities has probably grown due to the historical low interest rates, which has brought more retail clients into the equity market. The touchpoints we have—a company like ours—have increased significantly, which is reflected in the number of active clients in our platform. Moving forward to the next slide, I’ll discuss the numbers. Our total gross revenue reached R$1.9 billion in the first quarter of 2020, growing 84% year-over-year. This number was even stronger than the total revenue we achieved in the fourth quarter of 2019. Remember that in the first quarter, we had performance fees from the funds platform, which we didn’t have last year, so it's not the same comparison. But even without this performance fee revenue, which was a strong source of income in the first quarter of last year, we were able to achieve record revenue in the company's history in a single quarter. The revenue distribution is mainly the same—68% for retail, which is our main segment, and institutional increased to 18% in the first quarter. Issuer services accounted for 7%, while digital content, despite experiencing a good growth in the first quarter, decreased to 1% compared to other segments that grew more in relative terms. Now, moving to retail revenue and take rates, our retail revenue grew by 79%. While equities showed strong performance, we experienced growth across all product segments—not just equities, but also fixed income and structured products. So, the benefit is there and I've said it before, I will continue to repeat: the benefit of having all types of investments available on our platform means clients will have to invest in something; what will vary over time is the mix. But ultimately, we expect to grow across all product lines. In the first quarter, we experienced strong growth in our products, with equities being the most relevant. Looking at our take rate, it increased as well. This take rate considers the last 12 months, so it reflects the first quarter of 2020 and removes the first quarter of 2019. The take rate went up, not only due to the over 80% total revenue growth and 79% retail revenue growth, but also because of the decrease in assets under custody. As I mentioned last month, we had one-off outflows of close to R$20 billion that do not translate into a loss of retail revenue. Thus, we should see an increase in the take rate to 1.4% for the first quarter over the last 12 months. Moving to institutional and issuer services, we saw impressive growth of over 100% year-over-year—126%, to be more precise—which results from volume growth and new business lines introduced in 2019 like structured notes. We’ve issued our structured notes through our bank and there’s a structuring fee that remains within the bank. Similarly, we’ve had substantial trading activity with corporate clients in swaps and so on, marking a new revenue line we did not have last year. The issuer service revenues for issuer services also experienced a strong year-over-year growth of 137%. This primarily resulted from the performance seen in January and February, as March already saw the market's crisis impact. Moving to digital content and other revenues, we saw a 70% year-over-year growth in digital content from R$16 million to R$27 million, while other revenues increased by 28%. The digital content growth results from the courses and MBA programs we launched last year and this year. The other revenue stems mainly from increasing our adjusted gross cash due to the IPO and improving cash generation. Now let’s discuss COGS and SG&A—our expense structure. As we see in the next slide, COGS aligned with total revenue growth at 88%, and our gross margin remains in line; it’s only 40 bps lower than the first quarter of 2019. It’s tough to predict how the gross margin will change due to volatility based on the mix; there’s nothing else to highlight in COGS. When looking at operating expenses, we're seeing efficiency gains. Our total revenue grew 84%, while operating expenses grew 62%. Despite XP investing heavily in people, we are still hiring amid the crisis, and we have a roadmap to launch new products for our clients this year. All those initiatives represent an increase in SG&A and we can see the efficiencies in the operating expenses as a percentage of net revenue. Last year we were close to 39%, whereas this year we are near 34%, showcasing a 500 basis points efficiency gain. Adjusted net income also showed a remarkable number, with R$450 million in the first quarter, nearing our total number from 2018. This year, without performance fees, we achieved R$415 million in one quarter, representing a 147% increase compared to the first quarter of 2019. We also saw an increase in our adjusted net margin, reaching close to 24%, driven by everything I've mentioned, including growth in revenues across all segment lines, operating efficiencies, and a lower effective tax rate this quarter. I believe this question may arise later, so I’ll jump ahead. Going forward, we still expect this lower tax rate to remain—mainly due to cash generated from the IPO being part of XP Inc, which operates under a lower tax rate. When we consolidate, we can anticipate a lower tax rate going forward. As we deploy that cash into opportunities, we might see that number go up, but since we generate substantial cash with our asset-light business model, I wouldn’t expect effective tax rates to increase beyond what was seen in the first quarter. Now, let me share some updates regarding the crisis and what’s been happening in April. We're going to share KPIs we've been tracking and how they've behaved since January. The first metric is assets under custody. From the first-quarter figure of R$366 billion, we saw an uptick to R$385 billion by April. Net inflow remained healthy, averaging R$10.7 billion per month—around R$11 billion—aligning with what we had in the first quarter of last year. That said, we did observe a reduction in net inflow in April, still a healthy pace at around R$7 billion in net new money. This reduction is primarily tied to the lockdown measures imposed by banks, forcing clients to physically visit bank branches for wire transfers of higher amounts, even to their own accounts in other banks. As a result of the lockdown, banks have been operating with approximately 20% of their branches open, which has impacted our net new money; however, there are indications that we've already seen a recover trend at the beginning of May. We monitor a 10-day business day moving average, and in March, we achieved an all-time high with an average exceeding R$600 million daily. However, due to lockdown effects, we observed a dip, with averages around R$200 million—but we saw an improvement in May, surpassing R$400 million. It's difficult to predict the immediate future, but the crucial takeaway is that while we may see a slowdown in the second quarter due to restrictions, we believe it’s a temporary setback; the capital flow will resume once restrictions are lifted. Speaking of active clients, we have also seen strong month-over-month increases. As of April, we added roughly 2,100 active clients to our platform, with a monthly increase exceeding 100,000 clients, already net of any churn. We cannot disclose our churn numbers, but I can confirm they remain stable. We anticipate continued strong performance throughout the year. This is driven by Brazilian clients eager to understand investment options with the current low interest rate environment. Interest rates in Brazil are currently at 3%, with expectations they may decrease below 2%, a significant shift for investors. Despite the market sell-off and volatility, retail client behavior has been strong, with positive net inflows in our equity funds despite their small portion of the overall mix. Additionally, 80% of Brazilian investments are currently in fixed income, typically with high management fees and low returns. With the Selic rate at 3%, possibly dropping to 2%, we see a massive potential for change in investor behavior, emphasizing the urgency for equitization in the Brazilian market. Currently, only a tiny fraction of Brazil's population participates in the stock market, providing us a low-hanging opportunity for capturing growth. Referring to the NPS, it remains strong at 72, as of April. I will now turn the call back over to Guilherme.

On Slide Number 19, we reinforce the attractive long-term prospects of our business, which we consider unchanged despite the severe crisis we’re facing right now. XP Inc. is well-positioned to continue our mission to transform Brazil’s financial markets. Firstly, the investment market in Brazil remains substantial and concentrated, with over R$8 trillion in investable assets, 90% of which are still held by five incumbent banks. Lower interest rates in Brazil are a positive tailwind for disruptive businesses like XP, benefiting from increasing demand for financial education and more sophisticated assets. Secondly, leveraging our tech-enabled platform, we offer a wide array of products and services, complemented by our independent financial advisors in direct channels and our digital content initiatives forming a comprehensive and self-reinforcing ecosystem. We recently launched XP Wealth Services, and we will not stop there; we are progressing on our payment project, aiming to provide a complete banking solution that will allow customers to sever ties with banks while consolidating their investments with XP. Thirdly, we highlight our mission-driven culture and shared purpose as critical competitive advantages, particularly in these challenging times. We are focused on long-term management and remain firmly committed to our three core values: ambition, entrepreneurial spirit, and open-mindedness. When making decisions and evaluating talent, we emphasize our meritocracy and partnership model. Lastly, we emphasize our strong balance sheet, with over R$8 billion in cash, giving us a vital reserve to navigate through the crisis and seize growth opportunities. Considering all these factors, it’s clear we are only at the beginning of our journey. On behalf of XP, I would like to thank you all for your interest. Now, we’ll open the call up for the Q&A session.

Thank you, Guilherme. Let's open for the Q&A. Just a reminder to all, please state your questions with your name and institution in the Q&A tool on your screen. Feel free to ask questions during this session. We have some questions already here. Bruno, I’m going to start with one from an unidentified participant from Credit Suisse.

I think you did respond during the presentation, but I wanted to clarify or reemphasize my question regarding the very low effective tax rate. What is driving it, and can you confirm if it’s sustainable?

Yes, as I said, the main reason behind our effective tax rate is due to the consolidation across various companies that have differing tax rates. Following our IPO at XP Inc, which is incorporated in Cayman, most of the proceeds are also invested through that entity. When we consolidate the tax rate, we see this low effective rate. Whether it’s sustainable depends on where the cash is located. If we bring a significant amount of cash into a company with a higher tax rate, the overall consolidated tax rate will rise. However, based on my assessment, we should expect the effective tax rate to remain consistent with the first quarter's rates as we do not foresee any major capital inflows into other entities in Brazil since our cash position across entities is strong. Because we operate under an asset-light business model that generates substantial cash flow, I do not expect our effective tax rates to rise significantly in the following quarters.

Okay, now moving on to the second question from Eduardo Rosman with BTG.

The first question pertains to the number of clients. Following the surge in new individual investors in March, we observed a marked slowdown in April. Do you foresee this trend accelerating again? We've also seen record high redemptions from funds, primarily fixed income. Did you experience similar trends this quarter, or do you think it was mainly due to the large banks’ asset management?

Regarding the number of clients, as I mentioned, the pace per month is robust. We don't expect this to diminish in the near future due to the low interest rates and the interest from Brazilians to learn about investments will continue. XP offers the best value proposition for clients interested in Brazilian securities or funds. About the funds, fixed income has certainly suffered the most due to the crisis, as it’s generally easier to liquidate. However, we also observed an increase in equities relative to fixed income in our fund industry. That said, our funds platform as a whole remains quite stable with money flowing in and out. We also recognize that our business encompasses a wide range of investments, so while there might be fluctuations driven by the crisis, we are well-positioned to assist all our clients.

The second question addresses expenses. The net margin nearly reached 24%, exceeding your upper guidance limit. While net margin varies depending on revenue levels, can you provide insight on what to expect with expenses moving forward? Should we anticipate expenses accelerating more than revenues in the upcoming quarters?

When we provided guidance for the IPO, it was a mid-to-long-term forecast—not a quarterly expectation. The reason we provided an adjusted net margin of 18% to 22% was based on our historical trends. Despite a strong first quarter in 2020, I believe we are just starting our long-term journey, and therefore, expenses may increase as we explore other segments in the financial industry. That said, we don't generally favor expenses growing faster than revenue; however, it can happen within a given quarter. We reliably expect revenues to outpace expenses over time. Given the volatility present in the business, we prefer not to provide quarterly guidance. Long-term, maintaining that margin range is our intent, and we will adjust accordingly as needed.

Next question comes from Domingos from JP Morgan.

Can you please explain the discrepancy between the R$1.6 billion revenues expected in April versus the R$1.8 billion reported to date? What caused this variance?

That may have been a miscommunication on my part. During my COVID update, I mentioned total revenue growth would exceed 60%, but we were being conservative since we didn't have the final numbers yet. We should’ve provided a range to clarify better that number. Yes, we achieved 84%, so there’s nothing to contrast between that and the 60% because they aren't directly comparable. But yes, we did see strong growth across all segments with equities being significant as well.

Thank you. In the same line, we have a question from Mariana Taddeo with UBS.

Good evening, and congratulations on the results! The retail take rate positively surprised in the quarter due to high trading volumes. What can we expect going forward as equity volumes stabilize, considering there likely will not be contributions from performance fees in 2020 and a reduced contribution from security distribution as well?

It's challenging to provide a definitive answer. Take rates are influenced by many variables, making it hard to determine if it will be higher, stable, or lower. The take rates we saw do include performance fees in their last 12 months, reflecting 2019 performance. Without those performance fees, one might think the take rate would decline. However, we also have an increase in average assets under custody this year compared to last year, and we have many more clients this year than we did previously. Even if trading volumes normalize, clients will still need to invest. Overall, we see many forces positively impacting take rates, but it's difficult to provide precise predictions.

Thank you. Next question comes from Felipe Salomao with Citibank.

Acknowledging the many moving parts, could you share insights on your revenue expectations through 2020 and also whether the issuer services business has resumed primary offerings?

Regarding the year, as I answered earlier, it will depend on the client mix and the growth in other businesses compensating for the loss of performance fees and issuances. In terms of issuer services, our business remains operational through the lockdown, and we’ve been active in discussions with our corporate clients, understanding their needs and how we can assist them in the market moving forward. We expect some offers to resume soon, of course depending on the market volatility and pricing considerations that have shifted with the crisis.

From Mario Pierry with Merrill Lynch, we have another question.

Can you discuss how the mix of inflows has changed since the beginning of the crisis? What is your ability to sustain retail take rates for the remainder of the year?

In terms of inflows, our clients pivoted towards equities at the start of the crisis, looking to take advantage of the sell-off. We saw stable performance in fixed income, and there has been less volatile movements since March. Regarding asset classes, the flow trends have remained relatively stable, with fixed income continuing to capture inflows while equities show small fluctuations during this period. Overall, while inflows can vary by asset class, our robust offerings should help sustain our retail take rates.

Next question, Tito Labarta from Goldman Sachs.

Do you believe the net inflow decline of approximately R$4 billion in April can be solely attributed to the lockdown, or were there other influencing factors?

It was not R$4 billion; we had R$7 billion in net inflow for April itself, which is lower than the R$12 billion average we had in the first quarter. The reduction, yes, can primarily be linked to the lockdown. We can see that when we look at wire transfer metrics before and during the lockdown. The number of these transfers for larger amounts dropped significantly due to the physical branch requirement. As soon as these restrictions ease, we anticipate a return to our prior performance levels.

From Neha Agarwal and Nico, we have very similar questions. Can you please provide some insight into your initiatives in the payments and banking segments? What products are you targeting, and when can we expect a rollout?

Yes, as Guilherme said, we aim to fully sever our clients' dependence on traditional banks. Thus, we are developing products to fulfill that requirement—digital bank accounts, payment capabilities, and credit card functionalities through a partnership with Visa. These initiatives are moving along in parallel, as we intend to launch them simultaneously this year; however, I won’t provide a precise launch month as we want some flexibility during the deployment process. What I can say is that we’re quickly advancing, with over 30 people working on the credit card project and current beta testing underway. We aim to deliver these offerings faster than initially planned.

It’s important to note that we have already launched initiatives such as our advance on fund redemption, wherein we charge just the CDI—Brazil’s key interest rate—if a client chooses to redeem their funds. This is crucial.

Additionally, in terms of express credit for fund redemption, we’ve also made significant strides, which are functioning well. If you’re a client of XP, you can apply for margin loans against your investments with us as collateral—all working effectively despite the current market volatility. While our credit portfolio is still small, it’s ramping up well. Brazil has historically had high barriers surrounding margins and credit provisions, but with interest rates reducing to 3% and potentially even lower, a new environment is emerging for these services.

Lastly, a question here, from Vitar.

Can you discuss the recent wealth management launch and how it integrates with your broader business strategy? How do you believe you will compete with established banks?

The wealth management services we launched recently are part of our overarching strategy to create a holistic ecosystem for investments. Whether clients prefer having an independent financial advisor or utilizing our internal advisory services, or even choosing to invest solely on their own through our digital platform, we accommodate all preferences. This flexibility reflects our understanding that clients have diverse needs and investment strategies. Our wealth services present another opportunity to disrupt the traditional private banking space, similar to how we have with our independent financial advisors. Moreover, we are innovating with global funds, having partnered with Wellington to allow Brazilian investors access to international investments, broadening our offerings significantly. Beyond this new service, we already have over R$3 billion in international assets on our platform, indicating there’s vast potential in this segment.

One final question here, from a client unsure of their name.

What are the primary risks you foresee that could affect your forecasts for 2020?

Regarding risks, we regularly identify potential obstacles. A significant concern is the need to upgrade our platform due to the rapid growth in both client numbers and market activities. We have a roadmap for enhancements this year, but the crisis has accelerated our focus on this. We’ve formed a dedicated team to work round the clock on improvements, and we anticipate our technology infrastructure will be in solid shape to accommodate the increased traffic by the end of this year. Beyond technological risks, there's always market volatility influencing product mix; such shifts can impact short-term results. However, considering the long-term, we are optimistic about attracting clients to our value proposition; with only a small fraction of the market under our footprint—90% still controlled by five banks—this gives us plenty of room to grow. There may be shifts in the product mix, but we view that as an opportunity for our diversified platform.

Thank you, Bruno. I will now revert to the presentation to conclude this conference call. Andrea, please bring up the presentation once more.

Thank you very much, Lazar, and thank you all for your questions.

Andrea, please.

Whenever we encounter a significant challenge, I think about where we came from—starting a company from scratch with no financial backing or external support. It strengthened me as a human being and as an entrepreneur. We recognize that nothing can deter our determination, humility, resilience, and long-term vision. Crises present challenges, but they are meant to be overcome. Our team is more committed and motivated than ever, and I am convinced that we will emerge from this moment even stronger. Thank you once again.