Vinci Compass Investments Ltd. Q4 FY2024 earnings call

Key Points

• 2024 was transformational with combination with Compass and acquisitions, expanding platform to be premier alternative investment global solutions provider in Latin America.
• AUM ended at R$327 billion, with strong fundraising momentum (R$3.4 billion capital subscriptions in 2024, including R$1.4 billion in Q4).
• Strong first closing for SPS IV opportunistic credit solutions (R$900M commitments), final closing of VCP IV private equity fund (R$3.1B commitments).
• Deployment activity included acquisition of Outback Steakhouse Brazil stake, VIR IV investing in 9 companies, and progress on climate change infrastructure fund VICC, real estate products, and Lacan's fourth vintage fund.
• Macroeconomic conditions favorable for alternative investments, with Brazil expected to enter monetary easing cycle boosting demand for Vinci Compass's solutions.

Vinci Compass had fee-related revenues of R$218 million in the fourth quarter, up 84% y-o-y. Management fees were R$170 million, up 70% y-o-y, with Private Equity contributing 27% of total management fees. Advisory fees were R$40 million, with corporate advisory contributing R$19 million in the quarter and R$43 million full year. Third-party distribution for alternative products in Global IP&S contributed R$18 million in the last two months of the year. Fee-related earnings in Q4 were R$79 million, up 38% y-o-y. Performance-related earnings (PRE) in Q4 were R$16.5 million, up 478% y-o-y. Adjusted distributable earnings in Q4 were R$73.9 million or R$1.15 per share, up 16% y-o-y but affected by FX depreciation.

Forward-Looking

• 2025 outlook includes strong fundraising pipeline with multiple products in market, focus on credit expansion, development of UCITS platform, new structured products, and continuing fundraising of flagship funds.
• Expect continued growth in AUM, fundraising, and margin improvement through synergies and new product launches.

Risks

• FX impact: Brazilian real depreciation affected adjusted distributable earnings in Q4, but expected to offset in coming quarters as real appreciates.
• Non-operational expenses: Expenses related to Compass combination and Lacan acquisition are non-recurring but impact results in the quarter.
• Seasonality in fees: Advisory fees, especially from corporate advisory and third-party distribution, may have seasonality due to timing of deal closings and fund launches.

Q: Thoughts on FRE margin evolution and dividend payout?

A: FRE margin expected to improve via cost efficiencies and complementary product expansion; dividend payout target remains around 80% of distributable earnings.

Q: FX impact on debt and performance fees recurrence?

A: Convertible preferred debt exposure unhedged, with FX impact expected to offset over quarters; performance fees from segments like Argentina not expected to be recurring but diversified across funds.

Q: Seasonality in advisory fees?

A: Advisory fees, especially corporate advisory and third-party distribution, have seasonality due to timing of deal and fund closings.

Q: Recurring vs one-time advisory fees and management fee percentage?

A: Advisory fees from third-party distribution are recurring, with non-recurring fees from M&A; management fee percentage expected to stabilize post-compass integration.