XP Inc. (XP) Earnings Call Transcript & Summary

Thank you, you all for attending our web conference. First, I don't know if you're going to present the slides, Carlos, or -- okay. First of all, let me start saying that I hope everyone is healthy and safely. First time we do this web conference, so let's see how it goes. The purpose of this conference, as Lazar already mentioned, is to give you a quick update about the COVID-19 crisis. So going to the index here, yes, this slide. We are going through some initiatives that we have done at XP regarding the crisis based on 5 topics, main topics, our employees, our clients, our IFA network, our platform and, of course, the social responsibility. Then I'm going to quickly present a new business we just launched in the middle of the crisis. XP Wealth Service. I'm going to talk a little bit more about it. Then we are going to present the main KPIs for the first quarter '20. And we go for some selected first quarter preliminary results, financial results, basically gross revenue and adjusted net margin. And finally, I'm going to end with the closing remarks and open for Q&A for Domingos and Jorge. So moving forward, I'm going to try to be brief here. Regarding the crisis, first, our employees. That's our main priority, health first above everything else. We -- as probably you know, I don't know if everybody on this call knows, but we got the second case of COVID-19 in Brazil. So we moved really fast since the beginning, right, in the middle of carnival time in Brazil. We started with basically the first week like approximately 90% of our employees at home office the second week, more than 95% now. I believe we have something around 98% of our employees working from home. Also, we did some anticipation of benefits to help part of our employees. And also, we got involved in this Não Demita or do not lay off initiative, making a commitment that we are not going to lay off anybody until May. Actually, we are doing the opposite. We are hiring -- I'm going to talk a little bit about it. Of course, the pace of hiring after the crisis, it has slowed down, basically because of the onboarding process. It's a little bit harder. But for example, to give you a fresh example in the financial area, We just had onboard 2 new people that came and join us last week. Talking about our clients, we are closer than ever. We believe that in times like this, especially when we talk about investments, it's a natural -- human nature to retreat. People are losing money market to market. It's a tough conversation with clients sometimes And here in XP, we believe in the opposite. We believe that we should step forward. We believe that we should be even closer to our clients, increase the touch points, the connections. And because we have also our Digital Content platform that enable us to provide a lot of information in content regarding the crisis to help our clients and prospects to get information through us. And what we can tell about that is we have amazing numbers in terms of how this touch point has increased during the crisis. We selected like 2 examples here. If we look at InfoMoney, more than 14 million unique visitors, that's amazing. We are in all-time high. If you look at our retail, research platform, same thing, we scored more than 2 million unique visitors. Our social media is been well demanded by a lot of people -- were hit only in XP brand more than 1 million people in Instagram and so forth. So the main message here is, get closer to the clients, understand their needs, explain everything you can, look for opportunities. In any crisis, we are going to have opportunities. This one is no different in that sense. So that's what we've been doing. Moving forward, talking about our IFA network, we -- just from the beginning, we launched an initiative program -- incentive program for them. We've got to take care of our IFA network. They are really important in our ecosystem. They've been doing a great job also keeping them -- we have approximately 7,000 IFAs as of first quarter '20. The exact number is 6887. So a lot of IFAs. We need to keep all of them energized and motivated because our clients, their clients, they all need this information and closer relationship. So we established this package, at total -- at maximum will reach BRL 50 million and is basically to give them support and also incentives to keep performing. Also talking about our platform, we had, in the first quarter, as you're going to see in our numbers are very good numbers in terms of volumes traded and so forth. You probably saw that through B3 as well numbers. So it's record volume because of the volatility and because of low interest rates, different reasons. And as you can see below in those charts, we kept our leadership intact in the retail equity business. So in terms of custody, we have 23%. It's larger than the second player with 20% of total equity custody in retail. And when we look at traded volume, We have kept our market share above 50% in the first quarter this year. So those are good numbers. We believe our platform. What happens in times like this is that usually, we already have an investment program throughout the year. What we did, we anticipated a lot of things that we were supposed to do on the second semester to this first semester, improving a lot of things in our platform to help and absorb this huge amount of volume that we have seen since the crisis started. And the social responsibility, we announced a program called Juntos Transformamos or transforming together is the initiative that we intend to -- we selected some ONGs that can take food -- especially food for those that need the most, and we want to gather our clients, our stakeholders, like independent asset managers and so forth to get together with us in this program so we can make -- We know the crisis is going to be tough for a lot of people, and we want to do the best we can to also help them in some way. So this is the program we are incentivizing. Now talking about the XP Wealth Services. What is this? So most of you probably are familiar with this slide. It's basically our ecosystem. When you think about XP model, you got to think about this ecosystem because it's everything connected. It's the retail with the institutional investor, with the corporate client through issuer services business altogether based on the foundation of education, financial education, a lot of events, InfoMoney and so forth. The Wealth Service business is aimed to help a new business line for family office, this move to family office, It's like a management account. We believe that this new business can be very relevant in the future. We can disrupt in the family office business. We can help to disrupt this market, as we did with our IFA network. Basically, we are providing for a family office that wants to manage an account, we can provide all the services and the benefit to be plugged in our ecosystem through our platform. And we launched this new business totally digital. All the tools you can do -- we have created an app. So you can onboard and do everything in a digital way and that's just new. Just 1 example. Now going to -- I'm moving fast because I know there probably are several questions, and I want to spend more time in the Q&A than in the presentation. Talking about our main KPIs. As you know, we have 3 main KPIs that we usually share with investors: AUC, active clients and our NPS. In terms of AUC, we can see we had a drop from BRL 409 billion in December '19 to BRL 366 billion in March '20 that's approximately a 10% drop. If we take into account that, for example, the stock market in Brazil dropped almost 40% in the first quarter. It's -- I believe that we were able to have a very healthy base of net inflow. So when we look at the bridge, we discount the market depreciation. We had market-to-market impact, not only in equities but also in fixed income, and the total that BRL 58 billion. Then we had a one-off corporate outflow, BRL 21 billion. This outflow, just for you to understand. I know if you remember, when I talked about a few clients that have billions with us, that represent, in total, less than 10% of our AUC. Some of them are corporate clients that the custody is related to equity position. And this equity custody, it talks directly with the retail revenue. Basically on the stock loan business, derivatives and some other businesses that we do in our platform for our retail clients using this equity custody as a buffer. And we had a few clients that they were -- they did this corporate restructuring, and they could not keep the custody in our platform. So this is a one-off, and that's the reason we highlighted that this one-off in this presentation is for you to understand and not project that in the future because it was really one-off. So when we take that out of the equation and we look at the net inflow, broadly speaking, we had approximately BRL 36 billion of net inflow. When we compare our first quarter '20 with fourth quarter '19, the pace of net inflow was even higher in the first quarter, BRL 12 billion compared to BRL 11 billion in fourth quarter '19. And when you look at the product mix. Remember that I told that in December, we had approximately ballpark 30% of our total AUC in equity custody. That number now is down to 22%, 23%, depending on the market prices of all the equity positions that we have in our platform. So yes, it decreased but it decreased basically in a function of market depreciation. I can talk later about what we have been seeing in our platform, in our fund platform. And the good news is that we have been seeing a good inflow in equities compared to other products still, despite the uncertainty and the market movements that we have seen. Then funds represent, 31% and fixed income, 25%. This is a breakdown based on photo of March 2020. Those numbers, they vary, as I have been saying. Those 3 components, they are the most relevant one, equities, funds and fixed income. And in others, we have REITs, we have insurance. We have floating. We have structured notes, we have other products as well. So in terms of active clients and NPS active clients, we reached -- we are thrilled to say and honored for our clients to say that we got 2 million -- more than 2 million active clients as of March 2020. When we look at the chart on the right, new active clients per month, we had a sharp increase in first quarter this year. We got 112,000 clients per month, on average, compared to 55,000 per month in the fourth quarter. So that's more than 100% increase. I believe one of the explanations, I mean, the first explanation for that is the potential of the market. We keep saying that there is a huge potential in the financial service business in Brazil, especially in investments because of the high concentration in the banks. But I also believe that the crisis and the search because of the low interest rates, the search for information and how to invest, it's something that it's just going up. I don't have the number here by heart, but I believe that B3 announced that more than 2 million individuals in the B3 trading stocks. So during the crisis, this number has increased in B3 as well. We have seen the same thing in our platform. And we believe that's a trend that is here and is going to continue. And our NPS was pretty much stable, 72 points, and that's one of our main KPIs. Now when we move to the financials, we don't have our financials still. We are going through audit. We need to go through our audit committee, our board. So we don't have that finalized yet. We are going to have and present all the numbers to all of you in May 12. That's when we intend to release our first quarter numbers. But we thought it would be important to share what we already can share. In terms of gross revenue, very strong quarter. We believe we're going to see more than a 60% increase year-over-year. And when we look at our adjusted net margin, we believe it's going to stay above the top end of our midterm guidance of adjusted net margin between 12% -- 18% I'm sorry and 22%. We believe we're going to be above 22% and above 60% increase. And we have kept our internal targets that is not disclosed to the market because we don't want to guide anyone for the short term. We always try to put a spotlight in the long term. That's what really matters here. So you don't miss the big picture of the size of the opportunity at least we see ahead of us. But 2 important things to mention here. Number one, our midterm guidance stays the same. We don't see -- despite the seriousness of this crisis. And the world is already in recession. It's going to be a tough second quarter, probably for everyone all over the world. We are not diminishing the size of the problem we are facing right now. But we do not see a reason to change anything in our midterm guidance for now. The main reason for that, I believe, is the size of the opportunity and the high concentration in Brazil. Those that participated in our roadshow when we were going for our IPO. Probably we remember me saying that we don't need the market to grow to keep growing because 90%, 9-0 percent of the investments are still inside 5 banks. 5 banks. We believe our platform offers a much better value proposition for all the clients. If you want to invest risk on, risk off, you tell, we have all the products. We have the right suitability. We have the right approach and a different experience for all our clients, everything in 1 single platform, in 1 ecosystem. We believe that's very powerful. We are 100% focused on our clients. And I believe that's what explains our composition that we are going to get out of this crisis stronger than we got in. So that takes me to my closing remarks. This is a common slide that you're going to see a lot in our presentations. The reason is what I just said. Aim to the long term, put the spotlight where it matters. And we believe that what matters here is, number one, the size of the opportunity is huge. It's according to [indiscernible] 8.6 trillion. This number now is lower because of the market-to-market of the assets, but you put 8 trillion, 7 trillion. And the number you want there, our market share is too low and the concentration is too high. And the money of Brazilians is invested mostly, I would say, like more than 80% in fixed income. And most of this money in high cost fixed income products. And through our platform, we have no doubt that you could invest, taking the same risk and getting a better return and a much better experience. That talks to the second point on the right, the differentiated tech-enabled platform. We have been investing a lot in terms of new initiatives, new products and customer centric. That's -- so you got to be focused on our customer. That's what we have been doing during these crises, as I said, even more than we were doing before the crisis. When we go to the bottom, the DNA, mission-driven culture. We believe that XP's culture is a competitive advantage, I would say and that talks also directly to our behavior during the crisis. And the only different points that we brought up here that during the IPO, we had in our slide presentation, this one, is the strong balance sheet position just because after the IPO with the primary resources that we got, we have -- we are very well capitalized more than BRL 7 billion in cash. And that's important. Why that's important? Because In other crisis that we faced, we were in a very different position in terms of cash and balance sheet -- in our balance sheet. And when you don't have much money, probably you might delay some efforts that, in terms of business sense, it would make a lot of sense to, instead of delaying, step-up or accelerate. But it's a cash need, you cannot do it, you just postpone. Now we have a very comfortable cash position that allow us to evaluate all the initiatives that we have, the new business, the financial services that we're going to launch, our digital bank account, payments and especially the credit card business. And we can take our decisions based only on business sense. We don't have this cash restriction upon us. And that's a very good thing in terms of our business. So to finalize and open for Q&A, I believe the main message, as I said, are huge opportunity still intact, our differentiated platform, our culture and our first quarter numbers, I believe, what we already can share with you, and that's what we are doing tells exactly this, the potential that we have ahead of us, especially in times like this. And we all believe that we are going to get out of this much stronger than we got in. So now, thank you all, and I'd like to open for Jorge and Domingos and Lazar. You are the moderators, so you tell me what to do here.

Thank you, Bruno. So let's start right away the Q&A session.

I'm going to ask Jorge Kuri to please make his first questions?

Sure. Absolutely. Thanks, Bruno. Thanks, Carlos, for the opportunity. Let me ask 2 quick questions on the results, on the preliminary numbers that you provided. One is the revenue yield seems to have picked up quite a bit in the first quarter. So the question is, can you give us a color around that, what drove that? To what extent that is sustainable or did it -- was it helped by extraordinary trading given the high volatility in the quarter? And what should we expect going forward? And then the second question is on on your net inflows, which indeed was quite strong, at BRL 36 billion, also in line with very strong client adds. Could you help us understand January, February versus March, for example? Was there a change in the trend as soon as things started to get more complicated, that will be awesome to try to figure out what's ahead.

Okay. So revenue and net inflow. Yes, the revenue yield, we expect to go up. It's a function of numerator and denominator, right? So the denominator has gone down. I didn't mention, but the corporate AUC outflow it does not talk to the revenue. So this kind of large equity position, not necessarily they have a huge impact in the revenues. because, as I mentioned, it's like stock loan business or derivatives and other businesses that depends on block trades and things like that. So this is specifically outflow that we had the relevance in terms of revenue, basically irrelevant. So you reduce the denominator, you increase the take rate. Also, as you mentioned, the trading part is skyrocketed, and now the volume traded and the number of people coming to the platform into the market as a whole, it has increased. So we have seen some shift in terms of revenue. That's the nice thing in our business model in my perspective, is that we are not -- It's important to understand, we are not a risk-off, risk-on business model. We are an investment business model. We believe that there is not one size fits all. It's more about the individual preference and needs, and that's what we are focused on the client. And then when we talk about investments, you have all kind of investments that you can choose that are suitable for you. So either REIT, fixed income directly, funds, hedge funds and equities or structured notes, anything in terms of investments we do have in our platform. So you might see from time to time, a shift in those revenues. So some part maybe it's not the hotspot for the moment, others become the hotspot. And that keeps going on and on. So the revenue yield, that's why we like to talk about total AUC and a take rate because the volatility of the take rate times total AUC in the revenue yield, It's a lot lower than if you go product by product. It would be much harder in my view to forecast product by product because it's really different. So going back to your question, Jorge, revenue yield should go up, I believe. Net inflow. Yes, we haven't seen a huge impact in March compared to February or January, okay? Usually, January is a very strong month. That's seasonality that we have in the business of investment. So if we take that out of the equation, it was pretty much stable, I would say. What we have seen is a little bit a decrease going further, I believe, in the second quarter basically because of this lockdown effect. I don't know if all of you are familiar, but the banks, they demand that the client goes in-person to a branch if you want to wire transfer above a certain amount. So even if you are transitioning from your accounts, A, to your accounts in other places, B, the banks, they demand that you go physically. even considering we are in a digital world. I believe that, that kind of restriction does not make any sense, especially in the days we are living right now. Because if you demand that and someone wants to wire transfer, his or her money, you're putting this person into risk. And in sometimes, I mean, healthy risk. And sometimes, you cannot even do it because you have this lockdown effect, imposed by the authorities. So because of that, what we have seen in April is the number of wire transfer for higher amounts they have reduced. And our belief is that the main cause is exactly this imposition I just mentioned. And why am I saying that? Because when we go for the number of wire transfers for lower amounts, they have increased. So they have even increased in January -- in April, I'm sorry, compared to the previous months. So that's 1 point that we might see a little bit of reduction in terms of net inflow going forward. But that doesn't change the long term, okay? because that's something that's going to be -- it's going to be like -- if it doesn't happen in the second quarter, it's going to be like a blip. When everything resumes and people start to -- because the branches in Brazil, the bank branches, I believe, is around 20% only open because of this imposition. So when things start going back to normal, we believe the clients are going to just wire transfer their money to our platform.

Bruno, before giving the word to Domingos. Let me also ask, we received that question here from the audience as well. Just regarding the specific questions about revenue yield. If you understand that the reduction on the interest rates will impact the revenue as a whole?

I don't know if the question is regarding the floating part of the revenue specifically?

Exactly.

Okay. I don't think so. And why is that? There is a direct impact, which is pure math. So if interest rates are lower, and you multiply that by the floating, considering the same floating, then yes, it would have this negative impact in the revenue yield. But on the other side, we -- in Brazil, we were used to invest our money on a daily basis. So you could not let your money still in your account because you would lose interest. But that was a time of double-digit interest rates. Now at 3.75 and probably go even down and down even further, I mean, this kind of behavior, it's not the same, I think. So people are -- so what I'm saying is like it's a combination of a lower interest rate and probably a higher floating number. And then what's going to be the math, the result, is to be seen.

Okay. Domingos, please?

Thank you, everybody, for the invite, very good presentation. I think actually the advantage of me after Kuri is that I get to ask follow-ups on his questions. So 1 thing you didn't comment was actually the net inflow in March. I remember in the conference call, you said in the 4Q, I think January and February, you're tracking around BRL 11 billion. In the presentation, you put [ 36 ]. So I can only assume March was very similar to January and February. So if you could add a little bit to that. And maybe 1 question here that came from the audience. I remember your financial income is driven by 2, right, yield on Selic on float and spread over, right? When you buy -- carrying your balance sheet like fixed income and et cetera, which I think in times of more financial stress like we're living today, their spread might actually go higher on those. So I guess adding to that question, lower Selic but more risk, what's the breakdown or what's more relevant in your financial income spread over on products you carry in your balance sheet or just money sitting in our floating accounts?

Yes, the net inflow, when I gave that number, ballpark, it's all around. So BRL INR 11 billion, BRL INR 12 billion, BRL INR 10 billion, BRL 13 billion, it's around that number. And as I said, January was stronger, but it is usually stronger by nature. So the message is, we haven't seen anything unusual in our platform, up to March, because of the COVID-19 crisis. What we have seen in the beginning of April, and we are -- I mean we are just in half of the month, is the impact of those wire transfers because of the lockdown imposed by the authorities and the consequence that the demand that the banks do for clients to wire transfer even to their own accounts, which again, I believe it shouldn't exist. I believe the Central Bank should do something because it's -- you're imposing -- you're taking people to take risk if they want to wire transfer their money, if they want to pay whatever if they want to buy whatever, you're doing something that can harm the health of those people. So it makes no sense in my personal view. But based on that impact or debt restriction, we might see a decrease of the net inflow in the second quarter. That's what I'm saying. And going to your second question, Domingos, regarding the spreads and how it works in a very volatile market. Yes, usually, in a very volatile markets, the market maker [indiscernible], usually, you you have higher spreads. Actually, the spreads in the fixed income, for example, it has gone up even for AAA rating companies. So it was a little bit dysfunction at the beginning, now it's normalizing. So yes, that's a component of our revenue stream.

Bruno, if I may just ask a different way, the same thing, like as far as like clients -- I guess the market is trying to assess like if it is a risk on mode business or if it is an investment platform and all that. And I think another way to look at it is money redeem. Any data you can share on that, like post COVID in March, how much money was wired out of XP versus a couple of months before? Just try to netting out the effect of market prices.

Yes. We -- you mean money going out of the platform in terms -- I mean the churn that's basically...

Yes, people basically saying, "You know what I quit, I give up, I don't want to invest or take risks anymore. I'm just wiring my money out."

O Okay. Got you. No, that's an interest point to share. What we have seen, it's a very good behavior from retail investors in our platform. That's something really encouraging in my personal view. We -- just to give you 1 example, when we look at our funds platform, the equity part of the platform is the 1 that is benefiting the most. Despite the drop down in market-to-market that we have, the net inflow for equity funds is positive even after the crisis started. What we saw in our platform was that the fixed income part is the one that suffered the most, basically because the market movement was really strong and fast, right? So people realize the depreciation of their positions in market-to-market. And probably, they were trying to make liquidity in the daily funds and in the fixed income part as a start. And the equity, as I said, it's a net positive up to April, today. So the behavior of the retail investor has been really good. The numbers of B3 is the same thing. You saw that the inflow of new individuals, although it's nothing when we look at the size of the population in Brazil, 2 million, 2.5 million, 3 million is nothing. But it's -- I think it was more than 500,000 new individuals in the stock market. which is something really good. it's different than other crisis we had in Brazil. This time, interest rates are lower than 4%, can go even lower than 3%. I don't know. And that -- and the information, education, it's something that we never had in Brazil as strong as we have today. To give you 1 example, we launched this initiative, we launched a free course in our platform to learn how to behave or invest and learn from past crisis and so forth. In matter of weeks, we have more than 200,000 people taking the courses. More than 80% of those rating these course as top-notch, maximum rate and people are really interested. We see that all over our platform. We see that in our digital content, in the research platform, InfoMoney, in our social media. So I believe that the information, the low interest rates, because people are going to invest, you're going to invest in what? In government bonds with interest rates at 3%, 3.5%. The market has dropped down considerably. So you might see opportunities there, if you are a long-term investors. You're going to have to deal with volatility. That's the thing that always exists, and we are in a period of high volatility. I don't believe the market is going to stay there forever. We need the crisis to to pass and will pass. I don't know when, how is going to last. I don't have that answer. I believe nobody has. But the thing is that I think the the tailwind in terms of people learning how to invest and looking for other options, considering that, as I said before, more than 80% of the investments of the Brazilian plain vanilla fixed income, high cost, high management fees paid by the clients. So this framework is still the same. And I believe the -- it's going to change. It's changing.

Thank you, Bruno. We are receiving a lot of questions here. So before I give the word again to Jorge. Let me also put the credit in the first question that I did for -- it was from Marcelo Telles from Credit Suisse. Now I have 1 from Felipe Salomao from Citibank (sic) [ Citigroup ]. How the issued services activities have been performed during the recent weeks? Are you noticing a significant deceleration in this segment? Can you comment, please?

Yes, we have noticed a deceleration. We do. When we have a very high volatility in the market. And when the secondary market is not functioning well, then the offers, they got frozen, right? So the answer to your question is, yes. When you look to our numbers in 2019, in issuer services, just bear in mind that, for example, the equity component of that revenue, it was still low. It was lower than 15% of the total issuer services business. The main component there, it's DCM and securitization. I mean, I believe the window is going to open at some point. We are ready. We are -- same thing we are doing with our clients. And I mean, our retail clients in terms of touch points that I mentioned, get closer. We are also doing with our corporate clients. So our sales team, they are connected with our clients, our investment banking team, they've been doing a lot of lives. They've been talking to owners of the companies, to entrepreneurs trying to help see what we can do. So it's the same approach. I believe that when we have the window open again, we are going to see that revenue line picking up. I don't know when it's going to be.

Okay. Jorge, please go ahead.

Bruno, continuing on the topic of assets, now not inflows, but rather just mix shift. What type of asset mix shift are you seeing over the last 30 days? How do you expect that mix to change over the next 6 months or so? And how does that impact your revenue yield? And my second question is on expenses. Help us understand what percentage of the expenses are fixed? What percentage are variable? How rapidly in the short term, can you react to shortfall in revenues by curtailing expenses? And how much investment you still need on the platform that you can't really postpone? And what does that do to your ability to manage expenses through this crisis?

Okay. So the mix, the product mix, it's the 1 that we presented there. The picture that you saw as of the end of March, it's pretty much the same thing as of 15 days later. So it hasn't changed considerably. As I mentioned, in the fund platform, we have seen a positive net inflow to our equities and the reduction in fixed income so far that can change going forward. So the way -- I don't have a specific answer for you, a, in terms of how the take rates and the product mix is going to be because there are so many variables that can change that mix. But I believe that -- I don't know, I would assume it would stay stable the way it is. But again, it's -- we are in the middle of a crisis. It's hard to make to make predictions here. I think the important message is, no matter what the product mix is, we're going to have the product, the best one to offer for our clients respecting the suitability for sure. That's -- I think it's the better answer. Going to expenses. That's also a good point to highlight. We have a very asset-light business model. So when you think about our cost structure. We have a strong cushion that can absorb any decrease in revenues. The best way I like to think about it is the [indiscernible]. We have 2 main expenses, commissions in our COGS and personnel in our SG&A. When we look at in our personal -- and commissions, it's basically a function of the revenue. Okay. So if revenue goes up, commissions goes up. If revenue goes down, commissions tends to go down. So it's a natural cushion in terms of the revenue. When we look at personnel people, more than half of the expenses, it's variable. So when you take the bonds, the variable component of personnel and you add to the commission, our total expenses, roughly 60%, 6-0 percent of our total expense is variable, just taking these 2 metrics into account. Of course, we're going to have other expenses that are variable, and we are going to have savings, for example, travel. I think everybody in the world is saving money in travel. right? Events. We are doing events like this one. If we were going to do in specific place, we would have to hire. We are not paying anything. We are just doing this web conference here right now. Our sales team is doing a lot of lives that usually, it would cost, and it's not -- is not cost. And after the clients, I believe 1 thing that is going to stay with -- after this crisis is this home office. This home office trend because we are learning from it, all of us, all of us here in this conference, we are all learning from it. In the case of XP, because we are a digital business. We are already, very [indiscernible]. We can manage our productivity at home office, from different areas. Our CHRO and his team, it's all over it to measure the productivity for different areas. So we might see a reduction going forward, when things come back to normal whenever that happens. We might see a reduction in terms of the space needed for us to keep growing our number of employees, which, by the way, we are going to keep growing during this year, as I said before. We might see a reduction. We might have a rotation in terms of home office and be more productive. I don't know about you, but for me, this home office has been working really, really well in terms of productivity, in terms of the meetings. They have a time to start, a time to end, you got to be objective, pragmatic, all people can attend whenever they are. So it's working really and Teams from Microsoft, it's amazing. You can share a lot of things. And so we are learning from it. I believe it's going to be a good thing when this crisis ends.

Let's move ahead. We have another question from the audience here, Mario Pierry. The AUC per client has declined since the fourth quarter. Can you please discuss how it -- when the increase in clients among the 3 platforms, the 3 brands.

Mario, thanks for your question. And -- but we do not disclose per brands. And again, Of course, we do have that -- those numbers. And what I can tell you is that XP brand by nature has a higher AUC than Rico and Clear, and Clear, it's more for the traders. So AUC there, it shouldn't be that relevant. Rico is 100% digital for the new entrant in the market. So by definition, it should have a lower AUC in XP where the IFA network is plugged, but it has a higher AUC because it's a business that involves advisory as well, you tend to attract a higher AUC. The IFAs, if they do not have a certain amount of AUC, it's not going to pay off for all the expenses they have in their own businesses. So that's what I can tell you in terms of the AUC breakdown.

And an additional 1 from him, it's what specific measures did we take in terms of the incentive plan for the IFAs?

No, this specific -- again, We don't want to disclose the specifics. But I can tell you that we selected some products that we believe are good products for us to address right now. For example, we are not -- probably April, we are not going to see offers in the market. So think about the IFA network that used to be focused on a lot of offers coming to the market, now they can focus on different things. So the incentives that we created is related to those kind of opportunities that make sense to address because we do have a huge potential in all segments in some more than others. And sometimes the channel get, how can I say, congesting. So now because there is no offered congestion in the channel, we can step up in other initiatives that we were not stepping up as we would like to, because of this kind of congestion. So it was about that. Also, we helped the IFAs with working capital for them. We have a lot of IFAs. You see our numbers growing. They are entrepreneurs starting the business, investing in their own business. So we gave some additional breadth, up to 6 months in terms of the credit lines that they have, nothing significant in terms of balance sheet. But something important, the way we see to be side-by-side with our IFA network, help them to go through this without having to worry or reducing the pace of investments in their own business. Basically, this.

Domingos, please go ahead.

Bruno, another question like trying to poke holes a little bit in the story here as now a lot of questions we get are along those lines. I'm assuming the first 2 didn't have a lot of performance fees, right, how often..

The performance fees, it's only in -- basically in June, in December. You might have just to be technically correct here. You might have a small part in January that's kind of a zip over that you just charge in January, but it's referred to the second semester of the previous years or in July, but that's a technicality, that is very real. So -- and no performance fees.

Perfect. No, super clear. That's just to put that one to bed as well. The second 1 is on M&As. During those sell-off times, sometimes we have assets that present themselves as opportunistic investments. We hear locally even like ETS and some trading platforms to be for sale. You have a very relevant market share now in trading. So anything on the platform for trading makes sense, you're looking or any other sector?

We are -- we do have our M&A proprietary segment, and we are always looking for opportunities. What I -- what I can tell you in regard of M&A opportunities is the following: number one, in the short term, I would not expect any huge M&A, okay? But we can have some Fintechs that makes sense for us. They can complement several initiatives in our ecosystem, speed up other initiatives that might make sense for us. We have been looking at a lot of opportunities. Sorry?

But like payments -- just the broad areas, like payments, more like credit and debit or more like a trading platform or more like risk intelligence or ...

I cannot comment on that. I have to pass that one. Sorry about it.

Well, we are closing to the end of this web conference. I'd like to thank you once again Jorge Kuri and Domingos. I also like to say sorry here for the ones that we couldn't answer. But myself and Andrea from the IR team, we'll be touching base with you as soon as possible. And please, Bruno, your final comments.

I think we've said that everything. I mean, thank you, you all for being here, interested in our story and asking question. I think these initiatives, we intend to do more often because we understand there is a lot of uncertainty going on. So it's important, we believe. As we are getting closer to our clients, all the stakeholders, we should get closer to our investors as well in times like this. So we are going to have 1 month from now our first quarter release, and we are going to comment on the crisis and how the platform is going throughout April and May as well to try to give some color. But keep the focus on the long term here. I believe that, again, we are confident we're going to get out of this crisis a lot stronger than we got in. We try to look at any crisis as an opportunity. In 2008, we were in a different scenario. Of course, the crisis was a different one as well. But XP saw an opportunity in that crisis, and it helped a lot our business after the '08 crisis. And in that time, we created as [indiscernible], like transfored the prices in an opportunity and attracted a lot of potential clients to become clients and to look for opportunities in terms of investments and so on, among other things, with a huge difference when we compare to the moment we are living right now. In 2008, in Brazil, we had, number one, double-digit interest rates. Now it's going to 3%. And number two, our business model was basically a [ mono ] product business, retail equities. Only retail equities that was more than 80% of our business in that time. And number three, we didn't have the cash, right? So when we look at this crisis, and I'm not diminishing the potential impact of the crisis. It's going to hit hard it has already the real economy. But when I look at our position nowadays compared to other crises that we have faced, and we have always gone out stronger than we got in I think that we are in a privileged position in terms of cash, in terms of business model, in terms of people, in terms of DNA, culture. So I'm confident that, again, we are going to come out of this stronger. So thank you all and any questions you might have, Lazar and Andrea would be helped to answer and myself as well. Thank you very much. Thank you, Jorge. Thank you, Domingos.

Thank you, guys.

Thank you.