Good afternoon and welcome to the Vinci Partners Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this call will be recorded. I would now like to turn the conference over to Anna Castro, Investor Relations Manager. Please go ahead, Anna..

Thank you and good afternoon everyone. Joining today are Alessandro Horta, Chief Executive Officer; Bruno Zaremba, Private Equity Chairman and Head of Investor Relations; and Sergio Passos, Chief Financial Officer.

Earlier today, we issued a press release, slide presentation in our financial statements for the quarter, which are available on our website at ir.vincipartners.com. I’d like to remind you that today’s call may include forward-looking statements, which are uncertain and outside of the firm’s control and may differ from actual results materially.

We do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our 20-F. We will also refer to certain non-GAAP measures and you will find reconciliations in the release.

Also note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any Vinci Partners Fund. With that, I will turn the call over to Alessandro..

it’s in challenging environments that we set ourselves apart from the competition. Our highly diversified platform, both in product offering and client base provide us the stability to continue to deliver solid results in a still challenging capital raising market.

We are excited about our potential long-term growth and continue to position the platform to capture this opportunity. With that, I will turn it over to Bruno to go over our financial results..

Thank you, Alessandro and good afternoon everyone. Starting on Slide 11, we will cover AUM trends for the fourth quarter and full year 2022. Vinci ended the quarter with BRL63.1 billion in AUM, up 10% year-over-year. Here, we post strong growth in our credit strategy, growing its AUM by 72% when compared to the end of 2021.

The growth in credits was driven by the launch of Vinci Credit Infra our new strategy focused on infrastructure debentures with a long-term oriented structure. The fund has shown great demand from institutional investors who committed BRL1.3 billion to the new strategy so far. We will continue to fundraise for this product throughout 2023.

Another highlight this year was the further development of the partnership between our credit and real estate teams, launching two new perpetual REITs, one exposed to the agribusiness sector, a leading sector of the Brazilian economy and the other focused on MBS instruments.

These two new funds were able to raise capital in a tough market environment and broaden our product offering in listed perpetual vehicles. Combining these two new REITs with creative [indiscernible] kind operations in our offices and shopping mall REITs [indiscernible], we raised approximately BRL800 million in perpetual capital through 2022.

In infrastructure, our climate change fund, VICC signed its first commitments, including an anchor investment from BNDES for BRL500 million. VICC is expected to hold a first close in the first quarter of 2023 and continue to fund raise throughout the year.

The fund will start to earn fees beginning at the first close and following capital raises should accrue retroactively management fees. Another important contributor to our AUM growth in 2022 was the acquisition of SPS Capital, adding long-term capital in a new vertical to our platform.

At the end of the year, long-term capital comprised over 50% of AUM, resulting in a more predictable revenue stream for management fees. We will keep actively pursuing opportunities to add long-term capital to our AUM, be it organic or inorganic. Moving on to Slide 13. We go over accrued performance fees in our private market funds.

Performance fee receivable increased to BRL167.5 million in the fourth quarter, an 8% increase quarter-over-quarter. The VCP strategy currently accounts roughly 90% of accrued performance fees, representing an appealing upside for future performance fees.

At the end of the quarter, Vinci had BRL11 billion in performance eligible AUM coming from private market funds. Still an investment period that can further contribute to our crude performance fees as these funds enter their divestment periods. Turning to Slide 14, we will cover our fee-related revenues.

Revenues from management and advisory fees totaled BRL104 million in the quarter. Management fees accounted for roughly BRL100 million in the quarter, up 9% year-over-year.

This increase was a result of the fundraising experienced across our private market strategies over the year and the impact of Vinci SPS following the acquisition closed in the third quarter of 2022.

We should see a continuing positive trend coming in the next few quarters with new capital raises in our closed-end products in private markets, aligned with capital deployment in SPS and Vinci credit infra. Both have significant dry powder to allocate this year.

Total fee-related revenues were BRL393.5 million for the full year, down 8% year-over-year due to a reduction in advisory fees in the year. As for management fees, they were up by 3% when compared to the full year of 2021. In Slide 15, we present our operating expenses for the quarter and full year.

Total expenses accounted for BRL56.3 million in the quarter, down 4% year-over-year. In the full year, total expenses were BRL208.5 million, down 5% year-over-year. Excluding bonus compensation, fixed and variable expenses for the full year increased 7% year-over-year following inflationary pressures on fixed costs and our investments in VRS.

As mentioned by Alessandro, challenging market environments require even more attention to our overall efficiency. With that said, while expenses remain well paid in 2022, we will enhance our cost consciousness, focusing on protecting margins and accelerating operating leverage once our revenues accelerate.

We believe we have opportunities to be more productive across the firm, while maintaining a superior service to ROPs. Moving on to Slide 16. We will go over our fee-related earnings for the quarter. FRE totaled BRL51.3 million or $0.93 per share in the quarter, down 5% year-over-year due to a stellar fourth quarter 2021 for our advisory vertical.

Bear in mind that our core business remains healthy with healthy trends and growing. Advisory fees will carry a significant amount of seasonality as we highlighted a few times in previous earnings calls.

In addition, higher interest rates also play a role in M&A and capital market activities as transaction usually grow in periods of looser monetary policy. This characteristic is currently being offset by stronger returns in our cash balance. Coming back to the core asset management business.

If we consider only the FRE from our Asset Management segment, excluding FRE for advisory and our investments in VRS, which did not exist in 2021, we posted an FRE increase of 22% year-over-year, an acceleration in the fourth quarter when compared to the rest of 2022.

As we have been communicating, we expected growth to accelerate in the back half of 2022, as private market fundraises gained traction and Vinci SPS had a full quarter impact in FRE.

In regard to the full year 2022, given the Advisory segment had an outstanding performance throughout 2021, the year-on-year comparison also carries the defect on top of the VRS investments, which was not present in the prior year.

As previously mentioned last quarter, we should continue to see growth for our core business FRE over the next quarters, due to some key factors. First, we will continue to fund raise for private market funds throughout the year.

These funds carry higher fee rates than the average fee rate of the platform, and in some cases, such as VICC and VCP IV, we have retroactive fees to start of the funds. Second, we have funds that charge higher fees over invested capital such as Vinci SPS funds and Vinci Credit Infra.

As they increase their capital allocation during the year, we should see an increment in fees. Both still have significant amount of dry powder to deploy. Third, as already covered by Alessandro, we are starting to raise capital for VRS and should see revenues coming from this segment in the next few quarters.

This new AUM should begin to offset the run rate cost for the segments. We are now also working with the possibility of potentially anticipating the launch of VIR V and Vinci SPS-IV to the back half of ‘23, depending on how capital allocation opportunity develop for current vintage funds.

And finally, potential additional M&A opportunities and a big focus company-wide on productivity and efficiency could also present further FRE expansion drivers. The combination of these factors creates a solid base for FRE growth in 2023, irrespective of a significant improvement in market conditions. Moving on to margins.

FRE margin was 49% in the quarter, up 1 percentage point when compared to the same period last year. For the full year, FRE margin was also 49%. When we adjust the margin to disregarding investment in VRS, FRE margin would have been 50% for the full year compared with 52% for the prior year.

Shifting to Slide 18, we go over our realized GP Investment and Financial income. Vinci had BRL17.7 million in realized GP and Financial income this quarter, down 18% year-over-year due to realizations in FIP Infra Transmissão that occurred in the fourth quarter of 2021.

As we anticipated last quarter, we had a stronger-than-usual performance in our financial results due to local markets positive traction over the third quarter. In the fourth quarter, we faced a more challenging market environment with future interest rates widening considerably which impacted our liquid portfolio.

This resulted in a more modest financial result in the quarter when we compare results with the third quarter. As highlighted in the past, these movements are cyclical and we should see returns of at least 80% of CDI rate in the long-term return for our liquid portfolio, which has been the average return since our IPO.

As of the fourth quarter, Vinci reached a total GP commitment of BRL1.1 billion across private markets and closed-end products with close to one-third of these commitments already been called. The reminder will be called over time as funds deploy capital. We will continue to leverage our cash balance to raise new products across private markets.

Non-etheless, as Alessandro mentioned, we’re closely monitoring opportunistic M&A transactions to accelerate FRE growth, adding value to our shareholders. Our strong free cash flow also played an important role delivering substantial value to our shareholders through share repurchases.

Since the announcement of our first buyback plan in the second quarter of ‘21, we have concluded the repurchase of 1.8 million shares.

We are announcing today an additional buyback program of BRL60 million, which reflects the Board’s confidence in the company’s prospects and long-term growth by deploying cash from our cash earnings in a way that will benefit our shareholders. Turning to Slide 19, we will go through our adjusted distributable earnings.

Adjusted distributable earnings totaled BRL55.8 million or BRL1.01, down 19% on a year-over-year basis. driven by realizations in FIP Infra Transmissão which occurred in the last quarter of 2021. Adjusted DE totaled BRL247.7 million or BRL4.47 in the full year, up 9% on a per share basis when compared to the last year.

Adjusted DE margin was 4% in the full year, an increase of 2.7 percentage points compared to last year.

We expect to continue to add shareholder value by expanding the distributable earnings results over time as a combination of organic growth through fundraisings across our platform and inorganic AUM expansion through acquisitions, such as the transaction with SPS Capital, drive FRE and ultimately, our bottom line.

And with that, I’ll turn it over to Sergio to go through our segments..

first, the partnership between our credit and real estate groups, launching reach with exposure to private credit transactions, which are more appealing in this environment.

Second, paying kind transactions for which we can raise AUM without having to access necessarily the primary market, which has proven to be a valuable asset in tougher market scenarios. Moving on to Slide 24. We go over results for liquid strategies. Fee-related earnings in the quarter of BRL8.8 million, up 20% year-over-year.

FRE over the year-to-date totaled BRL38.3 million, down 10% when compared to last year. As a consequence of intra-quarter depreciation of AUM that impacted management fee revenues throughout the year and limited redemptions experienced in the beginning of 2022.

Total AUM was BRL10.2 billion at the end of the quarter with AUM being resilient compared to the Brazilian industry for liquid strategies. With public markets improving in Brazil, we should see a pickup in equity strategies from an inflow standpoint.

Meanwhile, we will still rely on our steak investor base to continue to provide stability to our earnings. Moving on to our IP&S business on Slide 25. FRE totaled BRL9.7 million in the quarter, up 14% on a year-over-year basis. segment totaled BRL10.3 million in the quarter, up 9% year-over-year.

Over the year, segment DE was BRL43 million, down 19% due to the stronger year for international exclusive mandates contributing to performance revenues in 2021. Turning to Slide 26, we cover our results for financial advisory. FRE for financial advisory was BRL8.2 million over the full year 2022, representing a decrease of 77% compared to last year.

This was a result of a record 2021 for the advisory business, as previously discussed in several quarters, revenues for financial advisory carry a certain level of seasonality and although uncertainty to predict, they should resume post impactful results when markets improve and due activity reaccelerate. Finally, moving on to Slide 27.

We go over results for the Retirement Services segments. Fee-related earnings for the quarter was negative BRL1.5 million, and over the year, represented a negative BRL6 million. As Alessandro mentioned earlier, we should launch the product this quarter.

Therefore, we should start to see revenue contribution at some point this year, starting to offset our setup cost for the vertical. We are very optimistic and excited with the prospect of VIS, and we will keep updating our investors as the business develops through the year. That’s it for today’s presentation.

Once again, we’d like to thank you for joining our call. With that, I’d like to open the call for questions.

Operator?.

[Operator Instructions] Our first question comes from Ricardo Buchpiguel from BTG Pactual. Please Mr. Ricardo, your microphone is open..

Good morning guys and congrats on the results. I have a couple of questions here.

First, can you please talk about how do you guys see the asset class mix that you have today? How – if you believe that you are too concentrating on a specific asset class, if you believe you want you to develop another area or something like that? And also, can you please talk a little bit about your pipeline in terms of M&As and what types of eventual new segments would you be interested in looking into.

And finally, we found the results that there was a positive non-recurring impact related to adjustments on contingents and considerations. So, can you please provide more color on what these adjustments are? Thank you..

Thank you, Ricardo. That’s Alessandro here. I will pick up the first two questions, and I will leave to Bruno to answer the adjustment. In terms of asset classes, we continue to believe that we have already a very important diversification.

So, we will continue to focus on the asset classes that we have, as we have been stressing doing the time that we have been a public company. Of course, the movements in terms of AUM, the growth changes on one asset class to another over time, but we believe that we will grow all of them.

As you saw recently, we saw a pickup of activity of fundraising for our private markets, being private equity, infrastructure and private credit. A few quarters ago, we saw more in our investment solutions, but that will come and go in that way.

But we still believe that we have around a very important diversification in terms of asset classes, and we should concentrate in these asset classes going forward.

Second, in terms of M&A pipeline, with the market, the conditions of the market that we have today, as we mentioned before, we are seeing a lot of good quality teams and firms with not so easy environment to fundraise. But we see that as an opportunity for M&A transactions.

Right now, we have a very big pipeline and we are focusing more in long-term lockup type of products being perpetual capital or very long-term. So, we are right now focused on M&A activity more on the private market side. And the last question I will leave to Bruno to answer..

Thanks for the question, Carlo. Good to hear from you. So, the non-recurring impact that you mentioned that has impacted our net earnings number for the quarter was an adjustment on the obligation that we have that is attached to the SPS transaction. So, there is a portion of that transaction, which is linked to stock issuances.

So, we had two components in that deal. We had a cash component at closing in the third quarter of last year, and we have an equity component, which is based on an earn-out regarding additional revenue generated by the company. So, that earn-out was adjusted in the fourth quarter for the change in stock price of Vinci.

So, that’s the impact that we had, the one that you mentioned..

Very clear. Thank you..

Our next question comes from Beatriz Abreu from Goldman Sachs. Please Ms. Beatriz, your microphone is open..

Hi everyone.

Can you hear me well or?.

Yes. Beatriz, go ahead..

Hi everyone. Good evening. Thanks for taking my question. I guess the first question would be, I noticed that there was an IP&S outflow in the quarter.

If you could maybe talk a little bit about that, give us some color around what that was and your expectations for the segment going forward? If you expect any more outflows this quarter or in the next few quarters? And the second question would be around VRS. So, you did mention you expect to launch this quarter, first quarter of ‘23.

Do you have any expectations as of now in terms of when you expect to breakeven in that segment? And also, what kind of management fee levels are you expecting from VRS? Thank you..

Okay. Beatriz thanks for the questions. This is Bruno. So, I am going to answer the first question, and Alessandro is going to tackle the second one. So, in regards to IP&S, the outflow was concentrated in one coming fund that we have in that segment.

And the reason was basically the same reason why we had a little bit lower return in our assets, in our liquid portfolio in the third quarter – sorry, in the fourth quarter, which was the widening of interest rates. So, this fund is a fund that has usually positioned in short duration bonds.

It’s a quasi-fixed income fund that is looking to shorten or increase the duration of the portfolio, depending on the views on the markets. But usually, it carries very short-term duration bonds.

And with the widening in interest rates that we saw in the fourth quarter, the fund ran a couple of months or two months or three months below the nominal CDI rates and that led to some redemptions.

I think we had the same effect in the third quarter, but due to a different reason, which was a couple of prints, monthly prints of deflation that we had that also hurt the short-term duration real interest rate bonds. So, this fund was hit, let’s say, a couple of quarters for different reasons in terms of performance.

We saw some redemptions in the fourth quarter that we are very focused on this fund. Now in the first quarter, we are already running above CDI in this fund. So, the first couple of months, the performance is above 100% of CDI. So, we expect that effect to now to become immaterial.

And also regarding IP&S, we do expect to have some new mandates to come online eventually in the next few months, and those should also have a positive impact. We have won a few merits that are going to be the – those funds are going to be transferred to us in the next few months.

So, that should probably have a positive impact in IP&S inflows in the next couple of quarters, we expect that to happen. So – and then I will ask Alessandro to cover the second question..

Hi Beatriz. Thank you for your question. Regarding VRS, as we said, we are very near the launch of the product, but we start especially through our high net worth kind of clients and also with later, we have selected corporate.

Having said that, that will – means that we will start with more wholesale type of clients instead of going more with through massive clients. So, the idea to start slowly to test all the systems, to use the technology to make it everything ready is to have more and more transactions in our platform.

Having said that, our idea in terms of breakeven will be in 2024, maybe in the beginning of 2024, we will start in our view, already running a breakeven of VRS as a unit standalone..

Perfect. And just a follow-up on that if I may. Just in terms of management fee level if you guys are thinking something closer to an IP&S or something closer to liquid strategies given the client base? Thanks..

That’s a very good question. That will depend on the type of the mandate because inside VRS, we will have two different sources of income, okay.

The management fee itself and being an insurance company, we will also have the part of the insurance company that’s already charged today in the scheme that we have on the funds that are related with pension plans. So, we have these two type of revenues.

Of course, one will be related with the insurance company itself and another one more like an asset management. And that will depend on the type of the mandate. We will have a lot of flexibility to build a kind of more like traditional portfolio that to carry, as you said, something more similar to IP&S.

But we could have technically something more towards alternatives that will carry higher fees. And we use our own products and the external products and also as maybe ETF to compose the overall portfolio of a client so that we have different components of this.

If you allocate more like liquid stuff with some more like an asset allocation point of view, we will go for more like IP&S. But if you go more in the direction and the client wants on the alternatives, you have higher fees related to that..

Perfect. That’s very clear. Thank you..

Our next question comes from William Barranjard from Itau BBA. Please Mr. William, your microphone is open..

Thank you for the opportunity and good night. So, I have two questions here. The first one is regarding the realization of performance fees for 2023. So, can you share with us how do you expect it to evolve earlier this year and then later second half of the year? And the second question here is – also regarding capital raise.

So, I would like to understand how you view which products should be easier or harder to grow and raise capital this year, and with that, if we should expect the increase in overall AUM being pushed mainly by the long-term part of the business? That’s the questions..

Thank you for the questions, William. This is Bruno. So, on the PRE side, we have, I think I made a comment in the past and just to reaffirm that there is an expected realization for ‘23 in the private side, which is our expected exits of the remaining assets in FIP Infra Transmissão, which is one of the funds that we have in the infra side.

And that asset is already booked in our income statement – sorry, in our balance sheet, the expectation of that realization. We have that in the slide that shows the future potential performance fees and also in the balance sheet. In this particular asset, we also have GP investments.

So, as was the case of the first assets that we realized in ‘21, the second asset will have an impact in both lines. So, we are going to have an impact in PRE and also an impact in realize GP investments. That impact should be around BRL15 million to BRL20 million, combined the two impacts for our distributable earnings.

There is significant demand for the asset. We are finalizing getting the required licenses for the assets to be fully approved by the regulatory body, but we have already received inbounds from strategic players.

So, we feel confident that having the approval from the regulatory body, we should be able to move the asset quite easily, and that’s expected to happen in ‘23. In regards to fundraising, we have discussed in the past few quarters, the target for fundraising in 2023 coming from our private market funds.

We have all of them in the market today, the ones that we have mentioned. So, we have the credit fund, we have VICC. We have private equity VCP IV. We should have also eventually the anticipation of VRE V and Vinci SPS. My view today is that between all of these funds, what we are seeing most interest from LPs is in the climate transition funds.

That has been a theme really very strong theme on a global basis, a lot of investors today, despite the fact that globally, we are seeing a little bit of a pullback in demand for private markets. This is an area of the market that we haven’t seen that effect at all. So, people are really still looking quite strongly into climate transition funds.

I think there is still a severe under-allocation to this thing globally. In Brazil, in our view, has a competitive advantage to answer part of this question, right. We have a very good geological and natural resources in the country.

The load factors, if you look at load factors for renewable energy in Brazil, they are very, very differentiated when you compare to your peer, even American load factor. So, we can operate renewable energy in Brazil in a much more efficient way. So, this has been one of the funds that we were seeing more traction.

The other one that we are very excited about as well is Vinci SPS IV. So, we are very happy with the partnership with the SPS Capital team. We are seeing a lot of anticipation in regards to Vinci SPS IV. We receive inbounds as well from local investors regarding the fund when the fund will come to market. Everybody wants to talk to us about the funds.

So, that’s another product that we feel that once we have it online and available for investing, we also have potential impact, favorable impact to our AUM. I think for ‘23, as was the case of the second half of ‘22, we are going to see a protagonist from private markets, right. That’s what we saw in the second half of last year.

Given the sheer size of the fundraise that we are going to pursue in these funds, I think it’s very likely that we are going to continue to see protagonism from private market funds in ‘23 as well as was the case of the last few quarters of ‘22. We still have that target of BRL10 billion.

Now, we are kind of halfway through a little bit less than halfway through, but kind of getting halfway through. And with what we are seeing from the market from a demand standpoint, I think we are going to probably hit that target by the end of ‘23. So, that’s what we see on that side.

And obviously, we continue to hold, let’s say, a positive outlook for improved fundraising for the liquid names in our portfolio as well. IP&S and equities are areas where we feel that we have an opportunity to raise money if the market conditions improve. And also talking about the REITs, right, I think we talked about that in the call today.

The REITs will be a strong engine for us for fundraising eventually. It’s a group of products that when we had an open market, we raised in a couple of quarters, BRL1.4 billion in the first half of ‘21. That was the number that we raised. So, it’s – and we had fewer REITs than we have today.

So today, we have more products available for fundraising that we did have in ‘21. So, we expect once the market has lower interest rates, hopefully, next year or by the end of this year when interest rates start coming down, and we have a more benign environment from an interest rate standpoint.

This can be a group of products that can contribute quite meaningfully for the AUM of the firm from a fundraising standpoint. And on an ongoing basis, it can be a relevant contributor on an ongoing basis for us..

That is very clear. Bruno thanks for the answer..

Thank you. That’s all for today. I would like now to turn the call over to Mr. Alessandro for the final remarks. Please, Mr. Alessandro, you can proceed..

So, I would like to thank you all for your support and confidence in the last 2 years since we have become a public company. And I would like to share our optimism that derives from our very tested resilient model that we expect to continue to grow, at the same time, provide a very good profitability and dividend yield.

So, good night to you and thank you all..

Vinci Partners conference call has now concluded. Thank you for attending today’s presentation. You may now disconnect and have a great day..