XP Inc. (XP) Q4 2019 Earnings Report, Transcript and Summary

Greetings. Welcome to the XP Inc. Fourth Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host Carlos Lazar, Head of Investor Relations. Mr. Lazar You may begin.

Good afternoon, everyone and welcome to XP's first earnings conference call for the quarter and year-ended in December 31, 2019. I'm Carlos Lazar, Head of Investor Relations. Joining me today for the call are Guilherme Benchimol, Founder and CEO; Bruno Constantino, CFO; Gabriel Leal, Head of our Retail Business; Carl [ph], Head of Marketing and Digital Content; and Frederico Ferreira, our Finance Director; will be available for today's Q&A session. And also, our fourth quarter earnings release and presentations are available in our Investor Relations websites. I would like to remind that certain statements in this presentation and during the Q&A may relate to future events and expectations and as such constitute the forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our reports filed with SEC. Please refer to Slide number 2, important disclosure of the presentation for our full disclaimer. Now, I will turn the conference over to Guilherme Benchimol who will deliver some opening remarks starting on Slide 5 of the presentation. Thank you.

Good afternoon. It's a great pleasure to present our results to the market for the first time as a public company. I would like to start this call with a message of optimism. I can affirm that XP will continue to transform the financial markets to improve people's life while delivering solid results. That's because our long-term perspective on the business was reinforced by the IPO concluded in December. It was another important step in our history, aligned with our goals of capitalizing a business and connecting with the investment community. Besides that, we required a very solid operational and financial performance, achieving an asset diversity of BRL409 billion, and net income of more than BRL1 billion during the year of 2015. Although we recognized the importance of those results is small when compared to the overall Brazilian financial system, that accounts to almost BRL500 billion in revenue. Therefore, we are more confident than ever, that this is only the beginning of our journey with our massive and concentrated market in Brazil, providing significant opportunities going forward. The competitive environment remains mostly unchanged, with the five largest banks in Brazil, holding about 90% of the investment assets. And combined with that we have unprecedented low level of interest rates. Certainly, the top comp investments for Brazilians has become a priority and it's no longer enough to buy government bonds or certificate of deposit from a large bank, as in the past. This trend represents an excellent opportunity for XP as investments and financial allocation [ph] are in our DNA. Of course, depending on the macroeconomic scenario, which other needs may differ, but a very important factor is that our company does not need to create new investors, but only confuse Brazilians for ratings fast that investing our platform is the best choice. In this sense, another very important initiative that we remain focused on, is getting even closer to price [ph] during this period of high market volatility. For that we are supported by our three bands; [indiscernible], and an extensive in state-of-the-art network with 64,000 advisors spread across more than 600 offices nation-wide that continues to promote the best services and offer over 600 different types of investment products. We are also holding several events and publishing a large amount of digital content which will be for sure relevant to reinforce our competitive advantage and for the sustainability of our secured NPS. Additionally, one of our main near-term challenges is to bring to our clients our complete banking experience to retain customers by allowing them to fully consolidate their investments with XP Inc., and cutting their links with commercial banks, where they have their checking account and portion of their investments. And finally, we are well capitalized with R$7 billion in cash, open to many opportunities, and prepared and close monitoring the current crisis and it's potential effects in our company. We definitely feel stronger to face it, and to continue implementing our strategies to deliver sustainable growth and returns to our shareholders. Our successful history is full of challenges, and the virus crisis that we surpassed, thanks to our culture, different open mind, and entrepreneurial spirit, our partnership model, and our long-term alignment in a horizontal meritocratic structure with the adequate targets, and incentives. We truly believe that these are the steps that will maintain XP Inc. ahead of it's competitors. And also again, transform the impossible into possible. Now, I would like to hand it over to Bruno to comment in detail on operating and financial results. Thanks to all.

Thanks, Guilherme. Good evening, everybody. Just -- if you notice any voice difference here because we are apart because of this coronavirus crisis. So moving to Slide 7, we present the evolution of our main operating KPIs; assets under custody, active clients and NPS. Our figures grew strongly in 2019 benefiting from the positive snowball effect generated through our brands, and investments made to enhance our platform and UX experience. Our AUC reached R$409 billion in December 2019, expanding 17% versus third quarter '19, and 103% year-over-year. The risk of mode of the markets in the fourth quarter '19 helped our AUC number, especially through the equity appreciation of our custody. It is important to highlight that without considering the market-to-market of our custody, we've kept a healthy base of net inflows during the fourth quarter, with an average around R$11 billion per month. Our second KPI, Active Clients, expanded 91% year-over-year to BRL1.7 million, reflecting solid performance across our channels and three retail brands. Lastly, XP ended the year with NPS of 73 highlighting the benefits of our self-reinforcing ecosystem for our clients. We will address the potential impact from the coronavirus crisis in our KPIs later during this call. On slide 9, we show our gross revenue evolution and it's breakdown across our businesses. 2019 total gross revenue was BRL5.5 billion, a 72% year-over-year increase. The growth in the fourth quarter '19 versus fourth quarter '18 was even higher, increasing 9% year-over-year from BRL957 million in fourth quarter '18 to BRL1.8 billion highs in fourth quarter '19. The main drivers or number one, mutual funds, especially performance fees in retail. Number two; equities and futures, in both retail and institutional businesses. And number three, I seek increase in issuer services revenue. In terms of revenue breakdown, retail remains our most relevant segment line representing 67% of total revenue versus 73% in 2018, with the Delta being mainly a function of the increase in issuer services from 5% to 9% of total revenue, reinforcing our diversified revenue profile and the benefits of our synergistic ecosystem. Moving to Slide 10, we see that 2019 was another outstanding year for the retail business. Following the strong AUC growth in macro tailwinds, retail revenue increased 56% year-over-year, reaching BRL3.7 billion. In terms of asset classes, as I rightly said in the previous slide. The main highlights were mutual funds, through performance fees in equity, and the hedge funds, and equities and futures trading which fallen higher overall volumes in between. Looking at our retail take rate. There was a twin bips contraction, each of 2019 versus 2018. From 1.4% to 1.2%, the decrease reflects, firstly, the zero brokerage fee strategy at our brand clear which is focused on power traders and was adopted in October 2018. Therefore, impacting results more meaningfully throughout 2019. The second factor was the steep increase in fee which was called by the stock market rally in large inflows in equities custody accounts without a corresponding growth in revenue. It is important to understand that concept when we think about a AUC and take away going forward. When we compare the take rate of the last 12 months in third quarter '19 with fourth quarter '19, it has been stable at 1.2%. We do not expect material change in the take rate going forward. And we will talk more about it when we address the coronavirus crisis impact in our KPIs On slide 11, we present our institutional and issuer services revenue segments, which also post strong results in 2019. Institutional revenue reaches BRL802 million in 2019, this represents an increase of 66% versus 2018. The growth was mainly driven by an increase in volumes of our Brazilian trading desks following the overall expansion in between [ph], and increase in secured placement fees with fixed income being the main contributor. Our institutional sales and corporate access teams have been very active in 2019, with more than 1,700 meetings organized during the year, and successfully connecting institutional clients to executives, industry experts, and politicians in Brazil. Additionally, it is important to highlight our efforts and investments to continually qualify our institutional team in building strong, long-term relationships with international clients. It is worth noting, we recently added [indiscernible] as Chief Strategy and Head of Research coming from Longo where he used to work for Merrill Lynch, and Fabio Fisher as Head of Equity Sales in New York, also coming from Credit Suisse in New York. On insured services, revenue totaled BRL507 million in 2019. The growth relative to 2018 was 185%. The main highlights of the year were in order of contribution. One DCM, net debt to market, our main revenue stream which is very recurring in nature and resilience through market cycles; two, reach offerings, and three ECM, equity capital markets. Now moving to slide 12, we show our digital content and other revenue. Digital content revenue reached BRL112 million in 2019, up to 108% year-over-year. The result was mainly driven by the increasing sales of online educational products through our XP educational portal. During the order, we also launched a speech, a retailed-folk independent research house that enhance our high quality content. We believe this revenue segment will continue to grow in 2020 but more importantly, is a differentiated to connectors with our customers in times like the one we're leaving right now, more about that later in the presentation. Other revenue grew 180% in 2019 verse 2018, and total BRL420 million. This is mainly related to all the market makers, and better form growth, enabling our ecosystem to function well. Next, on Slide 13, we present our COGS and in operating expenses analysis. COGS which is mainly IFA commissions in clearing house fees reached BRL1.6 billion in '19 versus BRL491 million in '18, representing a 71% growth rate, just in line with our revenue growth. Gross margin expanded 50 basis points in 2019 to 68.7%, basically due to product mix. Moving to operating expenses, there was a 44% annual increase in 2019. As a percentage of net revenues, expenses decreased from 42% in 2018 to 35% in 2019, reflecting the benefit of our operating leverage. On Slide 14, we present adjusted net income, which reached BRL1.1 billion in 2019, growing 119% from BRL491 million in 2018. Adjusted net margin expanded from 16.6% in '18 to 20.9% to '19, above the midpoint of our guidance of '18 to 22% range. In conclusion, 2019 posted strong numbers across all segments of our ecosystem. And I would like to reinforce our long-term commitment and goal of growing our businesses while maintaining a high level of profitability. Now, I'm going to talk about our new businesses, and the potential impact of the coronavirus in our numbers going forward. Moving to Slide 16; here, we present a roadmap for new businesses. Most of it is related to the concept of providing our investor customers a full service platform, including banking services, such as a digital bank account, payments, debit and credit cards; so our clients can cut completely the link with income and banks, and we can grow our share of wallet. Despite the crisis, we understand these initiatives create long-term value for XP, and we are moving forward as planned. But we know it is important to be flexible, agile, and evaluate the scenario as the clients evolve. Regarding our debit and credit card initiatives, we are thrilled to announce our partnership with Visa as the issuer partner of our cards, which we plan to launch still this year. We found in Visa, the best partner in the card segment as they bring a blend of superior services with scale and a global acceptance footprint to all our customers. We are confident that the combination of our investment and financial digital services with the new cards to be launched with Visa will further enhance the experience of our clients. Other highlights worth mentioning and I already talked about it quickly is that it's big business, run by Luciana Shabda [ph], which is an independent provider of investment content, as already said, needed more than ever in times like this. Now we are going to talk about our view of potential impact of COVID-19 crisis in our business. Moving forward to Slide 17; here, we analyze the potential near-term impact to our businesses related to the coronavirus crisis. It is important to highlight that these are management's opinion and not facts for sure. And we are in that early stage of this crisis in Brazil, so it's hard to make any forecasts. Having said that, in terms of assets under custody, the steep decline in the stock market, of course, negatively affects our equity position, but not necessarily the net inflow, and that's very important. We believe to be at a very early stage of this crisis, as I said, to conclude if this is positive net flows are going to compensate or not for any drop down in the stock market regarding our AUC at the end of this year. Now moving to product mix on the right, up right on the slide. If we compare with what happened in past crisis, we should expect to see rise in demand for fixed income products due to recent market sell-off. The difference nowadays, though, is the all-time low interest rates in Brazil, around 4% per year and maybe going down even further. Our customers will have to invest in something and we will be there to help them and get through these hard times. When we talk about net inflows on the bottom of the left side of the slide; it is our expectation that it will keep a positive trend. But again, it's hard to say if the pace of growth will diminish or not going forward. Up to now, we haven't seen a major change in our net inflows, except for few clients with large equity custody, but without necessarily causing any impact on revenue. For example, all the clients with more than BRL1 billion of equity custody in our platform, as of today, represent in aggregate less than 10% of our total custody but generate less than 0.1% of total revenue. So, this led us to the take rate. If the AUC suffers from redemptions from large equity positions that do not provide revenue, like the example I just gave, our take rate should go up, just analyzing this factor. If there is a shift in mix towards fixed income, which is possible, it will depend despite equities having in general a higher take rate than fixed income. The later has a much bigger market, lower churn, and usually upfront fee payments. Again, under these uncertainty scenario we are facing it's too early to tell how our take rate is going to behave in 2020. Although we understand this is a different crisis, just to try to give you some additional color, we highlighted in the next slide what happened in our KPIs in past crisis in Brazil. Moving to the Slide 18; we picked here three episodes in Brazil: 2014 elections, [indiscernible] in 2017, and the truckers strike in 2018. In all of them despite the drop in the equity market, our AUC and net inflow performed well. As any portfolio manager understands, of course, I do not have to say that past performance is not a guarantee of future performance. But I guess, the point I'm trying to make here is the form. Number one, we need to be nimble, agile, adaptable, and learn quickly from the crisis. Number two, our business tends to be less affected by the crisis than other businesses since it is largely digital and less dependent on logistics. Number three, we still see a massive, long-term opportunity in front of us, again, with 90% of the BRL8.6 trillion addressable market is still concentrated mainly in five banks. And number four, the competitive environment remains unchanged. We believe our platform is positioned better than ever to overcome this crisis, and we have the opportunity one more time to differentiate ourselves from the incumbents. Remember, we are focused on investments with a unique IFA network close to our customers, there is a huge difference in our view, especially in times like this. Moving to Slide 19; you can see as Guilherme presented in the beginning, XP's strong cash position, especially after the IPO and our extended debt maturity. We have more than R$7 billion in cash and only BRL0.4 billion of debt maturity in 2020. From a cash point of view, we are in a comfortable position in situation to navigate through this crisis. Regarding our risk metrics, we follow daily, our varn [ph] and a stress test among other metrics, and both have behaved well despite the increase in volatility. We do hedge our positions to protect our book of flows as market makers. And just to give you a sense, as of yesterday, our varn [ph] one day and 95% of confidence representing 0.08% of our net worth, and our stress test represented 0.79% of our net worth; all well below the targets we have established in our company. Now let's move to my last slide and talk about some opportunity we understand this crisis bring to us as any enterprise. So in Slide 20; it is our belief that every crisis is an opportunity to get closer to customers, and that is exactly what we have been doing. In this context, we benefit from our financial education DNA in digital content platform. Since the outbreak of the coronavirus crisis, our strategist, research analyst and digital influencers have intensified the publishing of reports and broadcasting of videos. We have been increasing the touch point with our clients. To-date, more than 30 reports in live were posted about the crisis with more than 600,000 views. We also published daily market open and closed live videos in post using not only the main social media channels, but also our proprietary investment portal InfoMoney [ph], our own TV network and XP Education. As shown in the charts on the right, the number of interactions and views increased sharply these months reflecting our communication efforts. Through the first half of March, we already had nearly the same level of traffic on our research platform as in the entire month of February. Informatics traffic also remains high with more than 5 million visitors through March 13. Again, education is in our DNA and we believe information to keep them in periods like the one we're going through right now. Lastly, as Guilherme mentioned, the total addressable market remains huge, our partnership keeps focused on the long-term, we believe the company is stronger than ever to go through the crisis. And if necessary, we will adapt quickly. On behalf of XP, I'd like to thank you all for your interest. And now, we will open the call for the Q&A session. Thank you very much.

Hi, good evening, everyone. Thank you for the call, very thorough presentation. I've got a couple of questions, if you could help. I guess, first on your AUC, and I understand it's difficult to predict in terms of market movements -- the impact; but just trying to get a sense, if we look in the fourth quarter, you got past and it was up around 11%, I estimate that market appreciation benefited your rate at roughly 7%. Suddenly, in terms of maybe the asset mix or just trying to understand how the market movement could potentially impact your AUC? Like, if the market falls 10% how sensitive will your AUC be to that? And I understand it's not just equities but other products you have under AUC; so you can maybe help us to understand a little bit from that perspective? And then my second question, Bruno, you mentioned that -- you did think the take rates could remain? We don't expect material changes in the take rate, I understand that, quarterly basis and given the current market scenario it's very difficult to predict. But during the IPO, you were saying that the take rates could fall, maybe closer to 1%. So do you think it phase out in longer term perspective, this 1.2 that we saw this quarter? And you do think that's sustainable now, did something change? Earlier you were saying that it could be closer to 1%. And just understand how you think about that from a longer term perspective, you know, we're moving from the short-term vows [ph]? Thank you.

Okay, Tito. Thanks for the questions. So going to question number one, the AUC; as we said during the IPO, basically, we have three main parts of breakdown the AUC, equities, fixed income and funds, and in fund we have all kinds of funds in that third-part. And I mean, they -- it varies from time to time but you can assume that those three are the main the main parts. Of course, with the market drop down, the equity part and a less smaller parts of the funds, they tend to go down as well in terms of AUC. But as I said in the call, in the presentation, not necessarily these dropdown will have an impact in revenue especially, if we are talking about a portion of the equity AUC that does not contribute in a relevant way to repay residents [ph]. We do have -- we are one of the main players in the stock loan market, so we do have a large portion of equity in the market and debts large portion does not necessarily bring retail revenue. So that's why it's hard to forecast the take rate going to your second question, because it's a function of repay revenues divided by, of course, the AUC; and maybe, if the AC goes down, losing part of the custody that does not contribute to the revenue, then the take rate should go up by this fact isolated, as I said in the presentation. Going to the 1.2 going down to 1% or higher than 1.2, it's the same thing that we told you during the IPO. It's hard to forecast, we believe that there is not a price pressure in terms of the funds and everything else in the market considering that we already have I said, for example, a zero brokerage fee for equities at Clear [ph], one of our brands. So we don't see that, it's going to be more a function of the type of revenue that comes in and how the AUC behaves regarding the market prices of the securities that we have in our AUC, so that's basically it. So I don't know if I answered your question, but it's really hard to forecast those two variables but I wouldn't expect the retail revenue and put in a different way, I wouldn't expect the retail revenue being impacted in a strong way because of a reduction of AUC, because of market prices.

Thanks, Guilherme. I mean that is very helpful in understanding the difficulty of forecasting it. And maybe just one follow-up though. Moving on since within the institutional revenues, we also saw a big increase there. Maybe you can help us put those into perspective also in terms of market movements, right. Like how sensitive will that be to the movements in the market and we saw like BRL300 million this quarter, up from BRL172 million last quarter, so how much of that benefited from the market? And conversely, how much could it be impacted in a negative scenario?

Okay. Yes, basically it was the market appreciation that we had in fourth quarter represented roughly more than 40% of the AUC growth, so it's not that you take the BRL409 billion of assets under custody as of December, and you take out the BRL350 million as on September 19, and it's not BRL22 billion per month. As I said, the pace is closer to BRL10 billion to BRL11 billion of net new money per month, and the rest is market appreciation. What I can tell you is the following, up to now we don't know how it's going to be going forward because of the crisis but up to now we haven't seen any major impact in the net new money coming in. So, so far our platform has been healthy, just as last year in terms of net new money. Having said that, we might have some -- as I said, some equity custody withdraw but not necessarily with an impact in retail revenues.

Thanks, Guilherme. Sorry, I don't think that was my exact question, though. I was asking more on the institutional revenues, like we saw a big increase there was over BRL300 million this quarter compared to when BRL173 million last quarters. So I just wanted to understand the institutional revenue in the current market movement. Thanks.

Okay, sorry about that. I missed the beginning of the question.

No problem.

Yes. The institutional part, it's basically a function of volume in the market. So, as you know, we are -- as I said, we are investing outside Brazil. I mentioned the hiring of another partner [indiscernible] came to join us. Also in the Brazilian market, we have our institutional sales; services, we are one of the main players in the market as well, so the increasing volume helped that. We have basically, a little bit more than 60% of institutional revenue coming from Brazil, a little bit less than 40% from outside, but both markets performed really well in 2019, it's a function of volume basically.

Okay. Thanks, Guilherme.

Our next question is from Mariana Todeto [ph], UBS. Please proceed with your question.

Hi, thank you for the…

Marianna, your line is now live. If your line is muted on your end, you will need to unmute it. Our next question is from Marcelo Telles, Credit Suisse. Please proceed with your question.

Hello, everyone. Thanks for the disclosure regarding the coronavirus, in fact, that's very helpful in your presentation. I have a couple of questions. The first one, can you tell us -- I mean, how much of your revenues were related to performance fees on your asset management platform, including both, your own and third-party funds. And how do you think that should playout this -- into 2020? Could that be a detractor to your revenue -- to revenue yield? And my other question is, regarding the growth now you see -- I know you touched those points in your presentation; the markets is down close to 40% in year-to-date, and it looks like your equity participation in terms of revenues is close to 30% of to retail revenues at least. So, do you think -- I know you mentioned there is a big portion for equity, a part doesn't really generate a lot of revenue but how do we reconcile that -- the fact that the -- your brokerage side represents close to 30% of your retail revenues? And given the decline that we've seen, the market -- I mean, should we expect, perhaps a bigger, a bigger impact on your revenue stream, not only AUC but on the revenues as well? Thank you.

Okay, Marcelo. Thank you. The first question about the performance fee; yes, it plays an important role in the fourth quarter of '19. We do not disclose exactly in the number but as you know, there is this seasonality in our business regarding the performance fee that are charged on the middle of the year in June and on in December. And because of the market appreciation we had last year, the performance fee was relevant in that chance. Going forward, of course, looking at the markets right now with the picture that we have; the performance fee would diminish significantly. We don't know how it's going to be in June, neither in December. But having said that, I mean, the business has other ways to compensate itself, that's the beauty of our self-reinforcing ecosystem in our business. They are all interconnected somehow, and because we are focused on investments, the important thing to bear in mind is; people will have to invest in something, right. So either a government bond or equity funds or directly in equities or fixed income securities or REITs, but they will have to invest in something and it's a function of the price of the security and the frequency of the trading and the investments made in our platform. So up to now, this year, when the crisis started, what we notice is the following; the price of course, you know, it's now -- as we said, the stock markets are around 30% down from last year, but the frequency has been very high compared to last year, so it's early to tell how it's going to behave. Looking forward, we could have a short-term impact of course, we are not immune to crisis, I think nobody -- or almost nobody is but what we try to give a sense here is more a long-term view. We, we believe -- I mean, as any crisis this one is going to pass, we cannot predict it, how long it's going to last but it's going to pass and not necessarily, the impact is going to be as hard as some might think looking at the drop in the stock markets because as I said, this ecosystem that we have in our business model can compensate itself somehow. And your second question about the AUC and the impact -- the impact of the equity, that's -- I mean, I think I kind of answered that. Because of the equity as I said, the equity going down, the AUC of equity going down, if this part that goes down or leaves the platform is not related to the revenue, then the take rates will go up and not necessarily we're going to lose revenue because of that. But of course, at a lower price in the market for too long without frequency of tradings and so forth, in the equity part you can have an impact there, but then you compensate in other parts of the business, because people again, will have to invest in something, right.

That's very helpful. If you allow me just want one extra question, regarding your technology, your IT systems during this time of volatility in the markets, it seems that XP -- according to the press had experienced in a lot of -- or several issues in terms of speed that people will not be able to trade or maybe things taking slower in the platform; we've heard that from some -- IF [ph] phase as well. Do you -- how they feel about the current state of [indiscernible]? Do you think you may have to invest more to be able to solve some of these bottlenecks down the road or we -- just to hear your thoughts there? Thank you.

Okay, great. So, yes, the platform -- what I can tell you is that the platform is working just fine. We have IT team all over it but just bear in mind that XP is by far the leader of the market, right. So if we talk about retail investment in equities, we have around 50% of market share. If we go to futures, that number goes up to 60%, so we have the volume of the market. Now, imagine that increasing by a number of five, for example, people trying to log in at the same time. Of course, you can have one or other problem in terms of interest [ph] in the platform, but all of that that we had on the Wednesday, when Brazil's stayed closed for two and a half days, and the market was melting down outside Brazil, and when it opened, everybody just jumped in at the same time; so it's normal, in anyplace you're going to have some kind of -- some people will have a problem but we kept, our market share is stable through all times. And nowadays, I mean, the platform is working just fine, we don't have a problem in terms of the platform. And you can check, I mean, the best way that I recommend you to check that is just go and look at the market share in all kinds of markets that we trade in Brazil.

Thank you very much.

As a reminder, we are now conducting a question-answer-session. [Operator Instructions] Our next question is from Mariana [ph], UBS. Please proceed with your question.

Hi, good night. Sorry, I lost the connection before. I have a question; you mentioned earlier that [indiscernible] we are not seeing major impacts from coronavirus. I want to understand a little bit better in terms of product mix, if you're right, seemed some changes and in case of redemptions, not only from the mutual fund but also from maybe the patient product. Thank you.

Okay, thank you, Mariana. Yes, the inflows as a said; I mean, so far it's been business as usual. We have in our DNA, the education business, right, the financial education business. And in times like this, this is more important than ever for all the Brazilians. One other point to make here is that it's different than other prizes that we have; in each crises is somehow unique in itself and this one is a different one for everybody all over the world but one thing in Brazil that is different than other crises is the level of interest rates that we have. So Brazil, we're going to know tomorrow but probably interest rates are going to be below 4%; we never had that in 2008 when we had the subprime crisis, I believe the interest rates were above 14% or like that. So it's a no-brain decision to go to fixed income and buy government bonds. Now it is a different situation, of course there is a lot of volatility in the market that can impact net inflows and decisions season from investors on how to invest. But one thing we are very confident about that our platform keeps providing a better value propositions for the clients. And as I said, in the presentation, in times like these we step in, we go after our clients, we expose ourselves with our financial education DNA, exactly to -- in times of uncertainty what people need is information. And we have that to provide them, so I believe that looking in a short-term view, and most importantly, in our long-term view, will you position XP as a player in the market that really is there to help the client for the long-term, and that of course, helps the net inflow as well. So it's hard to tell looking forward because again, nobody knows what's going to happen with this crises but so far what I can tell you is based on what we have seen on the daily basis; so far then the netting flows -- they've been keeping the same pace, except for some large equity custodies. And I made this point, just so everybody can be aware that we might have a drop in assets under custody, because of these, some small clients, few clients, I mean, with large equity custodies but that does not mean that will impact our revenue because those large custody, they not necessarily contribute to the revenue as other equities and fixed income and other custodies that we have in our platform.

Thank you.

As a reminder, we are now conducting a question-and-answer session. [Operator Instructions] There are no further questions at this time, and I would like to pass the call back over to Carlos Lazar for closing comments.

Well, once more, I would like to thank you all for participating in this conference call. For additional questions, please contact our Investor Relations department; our email address is ir@xpi.com.br. Have faith [ph] and have a good night. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.