Good day, and thank you for standing by. Welcome to the Patria's Third Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today Josh Wood, Head of Shareholder Relations. Please go ahead.

Thank you. Good morning everyone and welcome to Patria's third quarter 2023 earnings call. Speaking today on the call are our Chief Executive Officer, Alex Saigh; our Chief Financial Officer, Ana Russo; and our Chief Corporate Development Officer, Marco D'Ippolito; and we are also joined by our Chief Economist, Luis Fernando Lopes for the Q&A session. This morning, we issued a press release and earnings presentation detailing our results for the quarter, which you can find posted on our Investor Relations website or on Form 6-K filed with the Securities and Exchange Commission. Any forward-looking statements made on this call are uncertain, do not guarantee future performance and undue reliance should not be placed on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve inherent risks, including those discussed in the Risk Factors section of our latest Form 20-F annual report. Also note that no statements on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria form. As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards or IFRS as opposed to US GAAP. Additionally, we will report and refer to certain non-GAAP industry measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our earnings presentation. On headline metrics, Patria generated distributable earnings of $34.6 million or $0.234 per share for 3Q 2023, including fee-related earnings of $36 million. We declared a quarterly dividend of $0.199 per share payable on December 8th to shareholders of record as of November 22nd. With that, I'll now turn the call over to Alex.

Thank you, Josh and good day, everyone. It's great to be back with you after gathering just a few weeks ago to discuss an exciting platform acquisition for the firm. As we now look to Patria's progress in the third quarter, our message is simple. We delivered another strong set of results, and we continue to drive growth in a market environment where growth does not come easy. We are executing on our M&A goals aligned with our strategic pillars and leveraging the diversified platform with more than 30 products that we have built to capture areas of strength across the investment landscape. As of the end of Q3, total AUM and fee earning AUM were up 7% and 15%, respectively, from one year ago, but that's only part of the story. Through early November, we have now closed on nearly $4.9 billion in total capital formation in 2023, including organic inflows of $1.3 billion in the third quarter and an additional $480 million secured in early Q4, bringing our year-to-date organic inflows to nearly $3.7 billion. On the inorganic front, I'm happy to announce that we just closed on our new joint venture with Bancolombia last week on November 1st, which will add about $1.2 billion of additional AUM here in the fourth quarter to reach that $4.9 billion capital formation figure that I just mentioned. And of course, we just recently announced the agreement to acquire a private equity solutions platform from Aberdeen that manages another $9 billion of AUM, and we expect that to close in the first half of 2024. Between organic and inorganic activity, we have closed or signed $13.8 billion of new AUM for the platform this year. And pro forma for the close of pending M&A transactions, our total AUM and fee earning…

Thank you, Marco. Patria delivered distributor earnings of $34.6 million in the third quarter of 2023, up 17% from the third quarter of 2022, bringing us to $170 million year-to-date, which is up 25% from the prior year-to-date period. This equates to $0.79 of DE per share year-to-date and $1.16 over the last quarter quarters. For an investor who bought packs at the beginning of the year, before dividend payments of 2023 will total $0.98 per share and deliver a yield of more than 7% for the calendar year. Let's look at the composition of DE in the quarter. Total fee revenues were $61.6 million in Q3 2023, up 11% from Q3 2022 and $179.6 million year-to-date, up 8% from the prior year-to-date period, with the main drivers being the activation of fees for our latest vintage private equity fund and additions from M&A activity. Personnel and G&A expenses combined were $22.9 million in Q3 2023, which is roughly flat compared to last year. On a year-to-date basis, these two line items totaled $72.5 million, which is up about 7% from prior year-to-date period. The quarter-over-quarter reduction in personnel expense mostly reflects amounts shifted to a new executive bonus program to be the impact equity. We are expanding the equity compensation plan to further align the senior leadership team with shareholders, and more details on this will be forthcoming. The rise in G&A expenses is driven by the impact of acquisitions and inflation, partly offset by integration synergies. Fee-related earnings were $36 million in Q3 2023, up 14% from Q3 2022, with an FRE margin of 58%, which is up from 55 and 56 in Q1 and Q2, respectively. This brings us to $101 million of FRE year-to-date. And as Alex noted, we expect to deliver our $150 million target…

Thank you, Ana. As we close here, I want to take a moment to congratulate and recognize our senior managing partner, Otavio Castello Branco for his distinguished career with Patria as he prepares to step down from our Board of Directors by the end of this year. While this transaction has been planned and anticipated since our IPO back in 2021, when Otavio stepped back from his day-to-day operational leadership role, his guidance and wisdom of our Board through Patria's first few years as a public company has been very instrumental. Otavio was a driving force behind the inception of Patria's infrastructure business in 2006 and is pioneering views in that space contributed immensely to our growth into a regional leader over the last 17 years. While his strategic vision builds a key part of our platform, it is equally important to recognize his passion for developing people. His commitment to identifying and nurturing talent has shaped numerous careers. As he leaves a lasting legacy at Patria in the incredibly talented team that manages our infrastructure business today. Beyond professional achievements, Otavio embodies the personal qualities and values that define Patria's partnership. And we want to express our sincere gratitude for his contribution to Patria and wish him all the best as he embarks on his next chapter. Otavio seats on Patria's Board will be filled by Peter Estermann, a Patria partner who currently leads our portfolio management and value creation team. Peter brings over 40 years of professional experience and executive leadership roles across a range of industries in which Patria invests, including agribusiness, telecom and health services, making him an excellent choice to guide the company in this capacity. We likewise congratulate Peter on this new opportunity to guide pathway forward as a public company. As a final word to summarize the results, we continue to execute on our strategic pillars of growth, and I am very pleased with our performance and resilience and a challenging backdrop for our sector. We continue to build towards the targets we set for 2025, and I remain very confident in our ability to deliver for our shareholders. Thank you for your time on what we know is a busy earnings day, and we are now happy to take your questions.

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of Craig Siegenthaler of Bank of America. Your line is now open.

Good morning, Alex, Marco. Hope everyone is doing well.

Hi. Craig. How are you? Everybody is here well and fine. Hope you and family well as well.

Great. So my first question is on fundraising. I think I heard a $2.5 billion target for private equity in the prepared remarks. Slide 17 still is $1.2 billion there. So maybe just a refresher on the timing and sizing of those raises. I also thought maybe you would look to spin out a growth capital sleeve. So is that separate from the $2.5 billion? Or is that inside of it? And then just a follow-up on fundraising. Infrastructure 5, I also heard some numbers thrown out, I think, $400 million raised in 3Q, $300 million in October. That one also isn't on slide 17 yet. So how much have you raised in total? And actually, has there been a first close yet for Infrastructure 5? Thank you.

Yes. Hi, Craig. Thank you. Thanks for your questions. On private equity fund 7, our target is between 2 billion to 2.5 billion for the funded for that for itself. In addition to that, as you mentioned, we also have the growth equity fund. And we started fundraising -- our fundraising efforts, we started offering the efforts late this year for our venture capital fund. Now we didn't want to raise no growth equity and venture at the same time. So as we are closing down on the fund rates early next year on growth equity, we're starting the marketing of our venture capital fund. So growth equity and venture capital are not in the $2 billion to $2.5 billion number, the $2 billion to $2.5 billion number is for private equity fund 7. We are -- as of now approximately $1.5 billion, and we should end the year between $1.5 billion, $1.6 billion and so the teams -- of course, it depends on getting the design documents that might slip from December to December, whatever, but we should get to, I think, $1.6 billion by the end of this year for private equity fund 7. We have the whole of next year to fund raise. I think we mentioned during the call that we extended the period until the end of next year to raise. So I need in my math here to raise another $400 million next year to reach the $2 billion or reach or $900 million to be the $2.5 billion. So do I see another $400 million on the low or beginning of the range fundraising for next year for private active fund 7, yes. The funnel leads to that kind of number. And in addition, as we already started investing the fund, I think…

Alex, that was -- yeah, that was very comprehensive. I want to follow up on the realization backdrop. It's quite difficult in the US. Maybe in Latam, it's a little better. You've had some realizations already with Hidrovia, Entrevias, you had a SmartFit follow-on too. But maybe just an update on the realization front. I think you have a lot of businesses for sale, and you're probably mostly leading towards corporate exits versus IPOs?

Yes. I think on the whole, I think if you add the over $2 billion that we gave back for our infrastructure funds and then over $500 million for our private equity fund, that's now $2.5 billion. We manage $5 billion under the infrastructure vertical, as I mentioned. So it's very significant. It's 40% of that asset class, and we manage around $10 billion on the private equity side. We gave back this year $500 million, so that's already 5% back of the whole asset class, all of the funds, everything. So it's pretty significant as well. We are continue to drive divestments and our divestment agenda continues to be extremely full. So we -- as we look into the end of 2023 and 2024, we continue to drive divestments. As you know, infrastructure fund 3 is already in the catch-up phase. So whatever we divest from there, we get the performance fees, and that's probably going to be where the next performances are going to come from. Early this year, we had some performance fee coming from private equity fund 5, and we had some performance fees coming from infrastructure fund 3. And I see more performance fees in the short term coming from infrastructure fund 3, given the divestment agenda. Now, companies that we are selling from that portfolio will probably come first. Even though we're up to sign a deal, things might slip. As you know, I joked that mergers and acquisitions can also be called misery and anguish M&A, but we are there on the way to sell all these assets. And I think we -- if you look at what's -- the assets that we already have been working to sell over the next 12 to 18 months, it's probably going to be the same…

Thank you. One moment for our next question. Our next question comes from the line of Ricardo Buchpiguel of BTG Pactual. Your line is now open. Please remember to unmute. Once again, our next question comes from the line of Ricardo Buchpiguel of BTG Pactual. If your line is muted, please unmute.

Hi. Good morning. I have two questions on my side. Can you hear me okay?

Yes, Ricardo, we can. This is Alex here. Thank you very much.

Great. So first of all, I believe you mentioned that you have now a far target for 2024 of $170 million. If you could comment in more detail what level of margin implying this guidance, will be helpful. And also, could you also get a little bit more on the environment for inflows related to the Moneda funds. And based on this level of sort in 2024, what you can expect for fundraising in the next year? Thank you.

Okay. Ricardo, thank you very much again for your questions. On the first question, I think we are very much aligned in delivering our PAX Day guidance. But to be honest, I'm very proud of the team that we managed to deliver. The guidance that we gave late last year and late last year, I think the conditions -- at least the vision that the market would be a little bit better in the second half of 2023 as they are today. So we set out the guidance of $150 million of FRE for this year, which I mentioned we expect to deliver. Then we mentioned $225 million of FRE in 2025. So the bridge between $150 million and $200 million and $225 million, $170 million. The exact middle would be $175 million. We're saying $170 million because some of the inorganic growth that we did, we did mostly later in 2023. So they're going to kick in later in 2024 as we close the deals. So that's why they're going to be just fully in our P&L 2025. So I was already confident on hitting those numbers. When, of course, I gave the guidelines in the end of 2022, $150 million of FRE this year, $100 million to $125 million FRE for 2025. Now I'm giving the guidance of $170 million, which is the middle of the way for 2024. And with the inorganic growth of Bancolombia, VBI, now the Aberdeen carve-outs, which we call the private markets solution business, I think the chances of hitting those numbers actually increased because we are already at $31 billion of fee paying AUM, we were expecting to be at $35 billion of fee paying AUM end of 2025, December of 2025. So I'll probably finish the year 10% off of the…

Very clear. And if I may have another one. We saw that in Q3, there was like almost $600 million outflow in the infrastructure strategy impacting the fee AUM. So I want a more color about that would be helpful. Thank you.

Yes. Thanks for the question. I actually read your notes here, and I saw that you did mention that on your note as well. And thank you for asking it. The way that it works is the following, we did sign some infrastructure deals end of 2022, but we closed them in the second quarter of 2023, April of 2023. Once we close them, that's when we take the cost basis out of our AUM. And so you only saw in 20 -- in the third quarter, the reduction of that because that's when we actually had the close of this -- we charge fees on a semester basis, which is at the head of the semester. So January of 2023, these -- some of these infrastructure assets were already -- were still on the cost basis because we have not closed the deal -- we closed a deal in the second quarter, and then we removed it or subtracted from our cost base, and that's the $500 million that you see there. So it is completely related with the businesses that we sold. Remember that we gave back $2 billion worth of money to our infrastructure investors. The cost of those $2 billion is the $500 million that you're looking at right now in the third quarter number. So it has only to do -- it's a very positive sign because we are recycling the money. We are giving $2 billion back on a $500 million cost. So we're making a lot of money for our investors. Investors are happy. They commit to the next fund, the whole cycle, we have to keep this cycle moving the wheels turning. So it has nothing to do, but with a very healthy and natural cycle of our business that we then took off from the fee paying AUM of the infrastructure business, $500 million linked to the $2 billion that we gave back to investors, okay?

Very clear. And just to make sure, for Q4, do you have any major movements like that expected or not?

If we do sell businesses during the Q4, it will only hit -- you will only see the numbers affecting the first quarter of 24%. So if we do so business, sorry, in the Q4 2023, you will only see this number in the first quarter of 2024 when we then will announce to you in an earnings call late April, beginning of May. So for the Q4, there is no reduction of that sort.

Very clear. Thank you.

One moment for our next question. Our next question comes from the line of Pedro Leduc of Itau BBA. Your line is now open.

Thank you guys so much for the call and taking the question. Circling back to the FRE guidance for the full year, which implies about $50 million in the fourth quarter, has to do with certain funds that you guys are going to charge on. Should we expect this also to be a run rate for 2024, if you guys can comment a little bit on the FRE outlook for that year? And we enter with 50 and if there's more such revenue collections that you guys have visibility on, on top of the natural growth, that would be the first question. And the second, just something on the personnel expenses line that was a bit volatile this quarter. Just wondering if you guys have a little more color on it and also what to expect looking ahead. Thank you.

Hi. Hello. This is Ana. Thank you for your question. So I would address the first one. The FRE expected for the fourth quarter. As mentioned, the main drivers that we have for DP revenues is related to our private equity fund 7, also the -- our growth fund and also activation of our infrastructure 5. So this is all ads that the fourth quarter is also different from previous quarter because we also account for incentive realization for the incentive of the quarter. And that's why you also see a higher margin as well in this quarter. I think it's worth mentioning that the fourth quarter is also we have -- as we announced the closing of Bancolombia, we also have additional effort for the Bancolombia for the last two months. Okay. So in terms of cost as well as the fourth quarter, we are assuming that we continue to progress our manage -- very carefully manage our cost base, and this is not going to be different in the fourth quarter. So going to your second question related to personnel expenses. Also, as I mentioned, I have -- we have accounted for in this quarter for our implementation of our executive bonus program, and that is also accounted for the three quarters. It's kind of a year-to-date accounting -- accounted for, and that's the reason you cannot just think that this is going to be implied for every quarter that is an adjustment for this quarter, and this is the launch of this program. But in addition to that, we're also looking to our consolidation and our integration of our business that also impact our careful manage on the person. I think we answer your question.

Yeah. But what did you have before this executive program? And did it replace something? Or is it just come in addition of something else?

Well, we announced the program, this program in early 2021, we haven't implemented it. So it is an executive program that it's pretty immaterial, to be honest. It's whatever is -- on the whole is a very, very small number. But yes, just as a guidance, we gave out a program that voluntarily, partners can actually take a portion of their bonus. And actually, we will match with shares, we will give them a matching of shares. But it's -- we started with a very initial way of doing this very carefully. It's very immaterial. Again, it's not even relevant to the whole number here, it's less than 2%. But yes, it's important that we just mentioned that we started with this program that we had announced back in 2021, where we have ever executed it. So again, partners can get a portion of their bonus and actually commits to matching with shares given by Patria, and that -- those group of shares will be then held in escrow for five years. We're vesting in a third in the third year or third in the fourth year or third and the fifth year. So it's an alignment program to Patria that would like to have more of a longer term view of their compensation. But again, Pedro, coming back to the materiality, still very, very small.

Got it. Thank you.

One moment for our next question. Our next question comes from the line of Beatriz Abreu of Goldman Sachs. Your line is now open.

Hi, Alex, Marco and Ana. Thank you for the call and taking my question. My question is on the divestments breakdown that Alex mentioned, to sell over the next 12 months, $2 billion to $2.5 billion in divestments. Just wondering if you could give us a rough breakdown if that's over infra fund 3 or PE fund 5 and what would be necessary for PE fund 5 to enter the catch-up phase just for us to have sort of a rough estimate going forward. Thank you.

Yeah. It's -- this number encompasses assets that we're selling from all of our development infrastructure funds and all of our private active buyout funds and the growth fund and everything. So it encompasses all of the private equity and infrastructure drawdown funds. As you know, today, we have a couple of assets in our infrastructure 2. We have a couple of assets in our infrastructure 3 and several assets in infrastructure 4. And we are now raising infrastructure 5. We did one investment. And I could say the same about private equity. We still have assets in private equity 4. We're selling some of private equity 5, private equity 6, private equity 7, then we have growth equity. And then we have our venture capital funds. Now we have 3 venture capital funds. We are raising venture capital number four. So some all of the divestments of all of these funds, the $2.5 billion that I gave you over the next several months, to be honest. I think I was answering Craig's question is a very macro view top down, what are all of the efforts that you're getting now if I sum everything, that's the number. But I have no expectation of selling that in the short term. It is over the next 24 to 36 months, right, because it's a substantial number that I just gave out. On -- specifically to your question, infrastructure fund 3 is in the catch-up phase. So whatever we sell, we get the performance fee. On private equity fund 5, we did -- it's a $1.8 billion fund. We invested around $1.5 billion. We gave back, as I mentioned to you, 0.4 DPI, so 40% of $1.5 billion. So we still need 900 to $1 billion to go. If you do the…

Perfect. Very clear. Thank you, Alex.

Thank you.

Operator, Marco just reminded me here that we do guidance there, Beatriz, of $180 million of performance fee related. It up to now 40 something. So we have another $140 million to go. So things looked aligned. So over the next months, quarters, years all the way to the end of 2025, I think we are confident that we will hit the target. Thank you.

At this time, I'm showing no further questions. I would now like to turn it back to CEO, Alex Saigh, for closing remarks. End of Q&A:

Well, thank you very much for your patience. I know it's a busy earnings call day for everybody. So you're very kind to listen to close to an hour here on the Patria call. And finishing up, again, thank Otavio Castello Branco for his immense entrepreneurship and to put this company together with [indiscernible] and I and all the other partners. We're very happy with all the involvements here. And thank you very much again, and I hope to see you guys soon. I think we'll see each other in early December, I think in New York. We're trying to get together here, and I hope to see you there. Bye-bye. Thank you. Have a good day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.