B3 S.A. - Brasil, Bolsa, Balcão (B3SA3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the B3's earnings results presentation for the second quarter of 2026, where Andre Milanez, B3's CFO, will discuss the results along Fernando Campos, Investor Relations Associate Director. [Operator Instructions] As a reminder, this conference is being broadcast live via webcast. The replay will be available after the event is concluded.

Hello, I'm Fernando Campos from B3's Investor Relations team, and I'm here with Andre Milanez, B3's CFO, to comment on the results for the second quarter of 2026. Hi, Andre.

Hi, Fernando.

Before we start, I would like to share with you a small video that our new CEO, Chris Egan, prepared with a few messages for you.

Good morning, everyone, and thank you for joining our second quarter earnings call, my first as CEO of B3. I stepped into this role just over a month ago, fully aware of what it carries. B3 is the infrastructure on which Brazil's financial and capital markets operate. We're a listed regulated company, and every decision we make must live up to that responsibility. My priority in the first month has been to listen. I have spent time with clients, employees, regulators, and market participants. And what I found reinforce my conviction, highly talented teams, a robust pipeline of products and initiatives and a solid foundation for long-term value creation. Over the coming weeks, I tend to be just as close to investors and analysts, continuing B3's long-term commitment to open, transparent and consistent communication. On strategy, let me be direct. B3 has a clear strategy built by the executive team together with the Board of Directors. I did not come here to reinvent it. I came to accelerate its execution. That means strengthening our competitive position, developing new avenues for growth and expanding the value we create for clients. We will remain attentive to opportunities, including businesses and partnerships, that add complementary capabilities to our portfolio, always with the financial discipline that defines this company. This agenda rests on 3 pillars: the client at the center of every decision because B3's success is a direct consequence of the success of those who rely on our infrastructure. Technology as the engine of transformation, innovation and efficiency. And last, our people, whose quality and execution capabilities are what turn strategy into results. Looking ahead, we see profound transformation across global markets. 24/7 trading, advances in AI and the growing importance of data, alongside new models for trading, registry and settlement. Our ambition is not to keep pace with the evolution, it's to lead it in Brazil. But before I close it, I want to address the events of July 31. In that morning, a technical failure delayed the opening of our markets. We fell short of the standard the market expects of B3, and more importantly, the standard we demand of ourselves. Our teams have conducted a detailed assessment of the event and are already implementing enhancements to redundancy, contingency and monitoring as well as operating procedures. But let me be clear, we are not treating this episode as an item that is behind us. We're treating it as a call to action. Operational resilience is the foundation of everything that B3 delivers, and raising it in a continuous and measurable way is a priority of my tenure. B3 leadership is directly overseeing and addressing this matter. That is the standard of stability and reliability by which we will measure ourselves. Let me close by reaffirming my optimism about B3's future and the opportunities ahead of us. Thank you for your trust, your partnership and your continued interest in our company. Thanks.

Going back to the quarter, Andre, I would like you to share an overview of the quarter, commenting on the market environment and how B3's business model continued to generate opportunities even in a more challenging market setting.

Sure. Fernando. Well, the second quarter once again reinforced the strength and the resilience of B3's business model. Even in a scenario still marked by revisions to interest rate expectations and lower activity in some of the markets that we operate, we continued to deliver consistent results, with total revenues of BRL 3.1 billion, an increase of 12% compared to the second quarter of '25. Despite the slowdown when we compare the second quarter of this year with the first quarter of this year, procyclical revenues also delivered positive growth, increasing 8%, that growth driven primarily by higher volumes in equities. In addition, we saw important movements in the offerings market, in the capital markets, with the completion of the first IPO in almost 5 years, which raised around BRL 3 billion, together with another BRL 8.6 billion in follow-ons during the quarter, a meaningful indication of stronger momentum and confidence in the capital markets. In relation to our recurring revenues, which represented approximately 50% of total revenues, those maintain a solid trajectory, increasing 17%, reinforcing the complementary nature of our revenue streams and the company's ability to grow consistently with double-digit expansion in the main business lines. Together, these results highlight our strength in capturing opportunity, expand the relevance of B3 and to continue to create value sustained across different market cycles. Fernando, we will now provide more details on the operational performance of our main business segments. Fernando?

Thank you, Andre. Starting with derivatives, average daily volume, ADV, reached 11.1 million contracts. Despite an 8% decline in volumes, mainly due to lower activity in crypto assets, revenue remained virtually stable. This result reflects both the efficiency of our pricing model and the strong performances seen in June, which was the second highest month in terms of volume over the last 12 months. In equities, ADTV in the cash equities market reached BRL 31.3 billion, up 20% second quarter '25. Highlights included 42% growth in BDRs and 74% growth in listed funds. In fixed income and credit, issuances increased 3% and outstanding balances grew 17%. Treasury direct ended the quarter with more than 3.5 million investors and 44% increase in outstanding balance. In the recurring revenues, Trillia registered expansion of 22%, capital market solutions increased 26% and technology and platforms grew 16%, reinforcing the diversification and predictability of the company revenues. Andre, I will now turn the call over to you to comment on the financial results and the main strategic highlights of the quarter.

Thank you, Fernando. Well, in relation to our expenses, we remain with a good control on costs and expense management. Our adjusted expenses increased 6.2%, which was slightly above inflation for the period, even with continued investments in technology, innovation and growth initiatives. In relation to the total expenses, those reflected nonrecurring effects related to changes in our management team, including termination expenses and the acceleration of long-term incentive plans that were associated with noncompete agreements. Our recurring EBITDA reached BRL 1.9 billion with a growth of 13%, and an EBITDA margin of 70%. Additionally, we announced the payment of BRL 1.1 billion in interest on capital. It is worth mentioning that out of this amount, BRL 750 million corresponds to nonrecurring IoC related to unused balance from previous fiscal years. Although we had an increase in our social contribution rate during the quarter as from the 1st of April of this year, which has increased the nominal tax statutory rate from 34% to 37%, the tax benefit associated with these nonrecurring interest on capital more than offset the increase that we saw in the social contribution rate. As a result, our reported net income for the period reached BRL 1.7 billion, an increase of 28%, while our recurring net income totaled BRL 1.4 billion, an increase of 8% in relation to the second quarter of last year. Recurring earnings per share increased 12%, reaching BRL 0.28 per share. In innovation and in our product agenda, we launched financial event contracts linked to the GDP and to the inflation index. We expanded the assets that are eligible to the ROP. We also began the tests of our stablecoin, B3RL, and finally, we launched new indices in the B3 treasury IPCA family. And last but not least, we also initiated the assisted production phase of the electronic trade receivables, an important advancement for the credit market infrastructure.

Thank you, Andre. With that, we conclude our comments on the results for the second quarter of 2026. Thank you very much.

[Operator Instructions] Our first question comes from Pedro Leduc with Itaú BBA.

Question on the aforementioned event a few weeks ago. And Egan mentioned now that you're looking to increase investments to mitigate it from happening again. Just wondering if you have already diagnosed it to the extent that we can also measure maybe the extra, be it CapEx or SG&A, that you want to fill in to make sure it doesn't repeat? And then the second question, a little more strategic for the incoming CEO, and we do wish you much success there, Chris. And you come freshly from the other side of the table. So when you did spend a lot of time with clients, you also mentioned that other than price, where it's just usually what comes up, what other aspects do you think clients would like to see changed or improved at B3? What did you detect as pain points for them that could even unlock more volumes or business for you?

Leduc, it's Andre here. Thanks for the question. First of all, I think -- Chris is not here with us for the Q&A. He's been with the company for pretty much a month now. He made -- he was very adamant to record his message to you. But as he said, I mean, he will be closer to the investor and analyst community in the coming months. He has been investing a lot of his time at the moment to know the people here, to visit clients, to interact with regulators and shortly, he will also be much more present in the agenda with investors and analysts. So I suggest we can leave that second question for this further interactions. In relation to the first one, as he said, it was a technical failure in one of our platforms. We've identified the problem. I'm not going to go into a lot of detail here. It's very pretty technical, but the mitigation actions have already been taken to prevent that. But this is part of our, I would say, daily job. I mean, ensuring that our platforms are working properly. We know the responsibility that our company and ourselves have in the world that we perform as a market infrastructure. At the moment, I don't think it is a matter of significantly increasing investments to address some of these problems that were identified, but maybe a matter of accelerating some of the technical measures and also prioritizing other things. So I'm not expecting that to have a significant impact, at least not for this year in terms of our expenditure and investment levels. As you know, the company already invests around -- between OpEx and CapEx, around 10% of its net revenues in product development, in modernization of platforms, et cetera, a number that has been increasing over the last 5 years. And we do believe that, that level of investment will continue to be required for us to perform the role that we have as a market infrastructure.

Our next question comes from Daniel Vaz with Safra.

Also wishing the success for Chris Egan even if he's not attending the call today. But let me try to ask you about your environment into 2027. As this right now, we noticed equities decelerating again. But still, the business compressed throughout the years to 20% or 25% of your revenue contribution. Looking to the other 75 or maybe if we exclude derivatives, we're talking about maybe half of the company. Are you feeling any pressure on specific lines of fixed income or the part of the credit in terms of registration or any other business from this 50%? I'm asking this because we usually think of the business as a volatile business in terms of equities and you have a pretty much stable part that is kind of growing piece and hedged sometimes by inflation. So I wanted to hear your comments on this hedged part of the business? And what lines do you feel that competition could put more pressure into 2027? And if I may, a second question, just a quick one. Do you have any sensibility -- sensitivity of 1 billion less in ADTV, how much it hurt your operating profit?

Thank you, Vaz, for the question. In relation to your point, I think -- we've been discussing that a lot and part of our strategy of diversify and diversification, increasing -- or reducing the dependency that we had in relation to those, let's say, more cyclical businesses, is now becoming more tangible and I guess, proving its value. So this quarter, I think it is a good example. We still maintain the optionality of those cyclical businesses that can respond and respond very quickly to external factors, and we saw that very clearly happening during the first quarter. But we still have, the other, as you said, almost half of the business that is much more resilient. They can grow, let's say, more independently from these external factors, and that's what we saw in the second half. So in the second quarter. The recurring part of the business growing around 17%, the cyclical part, still growing in relation to last year, but much less than we did in the first quarter, a combined growth between derivatives and equities of 8%, allowing the company to deliver a top line growth of 12%. I think in general terms, we believe that we have the ability to continue to grow this recurring part of the business at similar rates of growth. Of course, there might be specific lines that can decelerate a little bit, other lines where we see the potential to accelerate further. But in general terms, I think that's the overall trend that we do see for the recurring part of the business. This quarter, on the cyclical side, we had equities decelerating in relation to the first quarter of this year, but improving significantly in relation to last year. On derivatives, the story was slightly different, but that's what, I guess, drove the growth that we saw on the cyclical part.

To your second question, regarding -- we don't -- we do have a lot of analysis, internal analysis, but it's -- we do not like to share those analysis because it depends a lot on the mix, given that the fee is an important component to our profit, to our revenue. And the fee is dependent on the mix. So if you have more auctions exercise, for example, then in this mix or if you have more HFTs or if you have more retail investors, so that's why it's tough to do this, to share this kind of analysis with the market because it's really broad.

I think you can do the exercise yourself. I mean it will depend on the assumption that you want to have in relation to the average price, and you can apply a similar margin to the overall business that would get you very close to what that impact could be, trying to help here, right? But I guess the main point is the assumption that you will make around the average price.

Our next question comes from Kaio Da Prato with UBS.

I have 2 questions on my side, please. The first one is on volumes. I know that's definitely hard to predict what should happen. But now that we are getting close to the elections here in Brazil, do you have an idea, I don't know, looking to the historical best elections about the potential impacts that we could see on both equities and derivatives volumes as we pass through this event? So this is the number one. And second, if you can comment a little bit on the competitive process that is ongoing within the antitrust today, what were the latest news on that? And if there is any time about the potential resolution? And what could that mean for your revenues on the OTC business, in your view? I know that it is dependent on the outcome, but just wondering if you have an idea about potential impacts if the remedies suggested are applied as it is today?

Thank you for your question, Kaio. Look, talking about the elections -- and I think first, let's talk about July. July, just to make sure that we are on the same page here, is seasonally a weaker month given the holiday season in the northern hemisphere and here in Brazil as well. So typically, July, we tend to see a volume that is 10%, 15% lower during that particular month than the average of the prior 6 months. And then typically, historically, we see recoveries starting in August. In election years, we tend to see this trend, I would say, more pronounced. What do I mean by that? So typically, volumes decline slightly above that level on average, so around 20%. But then we typically see a recovery to volumes slightly higher than normal levels that we were seeing before. We are actually seeing a little bit of that happening now, so volumes were almost, so far, have been very strong. You can follow that by our daily operational data that we released. And without having options exercise, we typically provide an additional increase to volume. So, so far, the trend seems to be repeating itself this year. And then on election years, I guess, what we see is that around closer to the election, and then it varies a little bit I guess, according to the type of election that we are seeing. So in certain years, we see volumes increasing slightly earlier, in other years, a little after the first round. But in general, we see increase in volumes around the election year and then some normalization in December. So looking at historical data and the trends, we do expect some more activity around the election on equities, but also on derivatives in, I would say, in a smaller proportion than equities, but typically, you see some acceleration in activity and trading volumes around the election period. Your second question, can you repeat that? It was about the antitrust case, right?