Business context and reporting period
Vinci Partners Investments Ltd. filed an audited Form 20-F for the fiscal year ended December 31, 2021; this is an annual report, not a standalone fourth-quarter filing. The Cayman Islands holding company operates primarily through Brazilian subsidiaries as an alternative asset manager and financial adviser. Financial statements are prepared under IFRS and presented in Brazilian reais (R$). The IPO and corporate reorganization occurred in early 2021, so the year also reflects the transition to public-company operations.
Key financial and operating metrics
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Net revenue from services | R$465.5 million | R$339.9 million | +36.9% |
| Operating profit | R$242.5 million | R$215.6 million | +12.4% |
| Profit for the year | R$208.6 million | R$169.2 million | +23.3% |
| Net profit margin | 44.8% | 49.8% | Down 5.0 percentage points |
| Operating cash flow | R$288.7 million | R$195.3 million | +47.8% |
| Cash and cash equivalents at year-end | R$102.6 million | R$83.4 million | +R$19.1 million |
| Lease liabilities at year-end | R$85.5 million | R$106.2 million | Down R$20.7 million |
| Assets under management (AUM) | R$57.2 billion | R$49.8 billion | +14.9% |
Revenue comprised R$361.1 million of net fund-management fees, R$37.6 million of net performance fees and R$66.8 million of net advisory fees. Management fees were 77.6% of revenue. By segment, net revenue was R$205.1 million in Private Markets, R$102.1 million in Investment Products and Solutions, R$97.2 million in Liquid Strategies and R$61.0 million in Financial Advisory.
Non-GAAP measures: fee-related earnings (FRE) were R$222.5 million, with a 52.0% margin; performance-related earnings (PRE) were R$23.6 million; distributable earnings were R$232.2 million; and adjusted profit was R$208.6 million. The company cautions that these measures are not IFRS measures and may not be comparable with other firms. Management changed certain calculations, including adding stock-based compensation to FRE and distributable earnings from 2021.
Operating cash flow was positive, while investing activities used R$1.32 billion, primarily reflecting investments of IPO proceeds; financing activities provided R$1.05 billion, principally from the IPO. Management said available cash and expected operating cash flows should cover ordinary working-capital and capital-expenditure needs for 12 months. Capital expenditure was R$3.1 million.
Material changes versus the prior period
- AUM rose 14.9% to R$57.2 billion, supported by R$5.3 billion of net inflows and R$2.5 billion of capital subscriptions, partly offset by R$1.3 billion of Liquid Strategies outflows and R$1.4 billion of depreciation in that segment.
- Net revenue increased 36.9%, driven by management fees, new mandates and stronger advisory activity. Advisory revenue rose 131.5%; net performance fees declined 5.4%.
- General and administrative expenses increased 79.5% to R$223.0 million, mainly because of higher personnel and profit-sharing costs, IPO-related public-company costs, hiring and stock-option expense. The company notes that 2021 partner compensation was recorded as personnel expense rather than partner dividends, limiting direct year-over-year comparability.
- Investment income increased to R$28.0 million from R$9.1 million, aided by investment of IPO proceeds and returns on liquid-fund and proprietary investments. Net finance result improved to a R$15.4 million profit from a R$3.0 million loss.
- The company consolidated its prior eight reporting segments into four in 2021, affecting segment comparisons.
Outlook, risks and unusual items
Management expects AUM growth trends to remain favorable, citing product development, investor relationships and potential migration toward alternative investments. It views higher Brazilian rates as a near-term challenge, especially for liquid strategies, but expected rates to peak and decline significantly from early 2023. The filing provides no earnings guidance and states that earnings and performance-fee cash flows can be volatile and unpredictable.
- Brazilian macroeconomic, political, inflation, interest-rate and currency volatility may affect AUM, fund returns, fundraising and fee income. The SELIC rate was 9.75% at year-end 2021; Brazilian IPCA inflation was 10.1%.
- COVID-19 disrupted some portfolio companies and real-estate assets, including shopping malls and offices. The company reported no COVID-related impairment in 2021, but future effects remained uncertain.
- Material weaknesses in internal control over financial reporting remained outstanding at year-end, and management judged disclosure controls and internal controls ineffective. Remediation efforts included an external consultant, employee training, and new internal-controls and internal-audit functions. The audit opinion on the IFRS statements was unqualified; the auditor did not provide an internal-control attestation.
- The company disclosed R$6.7 billion of remaining unfunded commitments to its investment funds as a significant future liquidity requirement. It warned that funding these commitments may require asset sales or new capital if cash flows prove insufficient.
- Possible-loss legal matters totaled R$20.6 million at year-end, including R$18.8 million of tax and social-security matters and R$1.8 million of labor matters; no provision was recorded because management did not consider losses probable.
- Dividends paid in 2021 totaled R$256.0 million. The company stated an intended quarterly distribution target of at least 75% of distributable earnings or 100% of period profit, whichever is lower, subject to board discretion and legal and liquidity constraints. A fourth-quarter 2021 dividend of US$0.20 per share, totaling approximately US$11.2 million, was declared and paid in March 2022.
- In 2021 the company repurchased 758,011 Class A shares for R$52.6 million. At year-end it had R$32.4 million of remaining authorization under its repurchase programs.
Important facts for investors to verify
- Review the audited IFRS statements and reconcile reported operating expenses and profit growth with the shift from partner dividends to personnel compensation, IPO expenses and profit sharing.
- Assess the quality and persistence of AUM growth, especially the Liquid Strategies outflows and depreciation, and the concentration and redemption terms of major investor groups and mandates.
- Examine the R$6.7 billion unfunded commitment disclosure, expected timing of capital calls, and liquidity available after investments of IPO proceeds and dividends.
- Track remediation and independent testing of the disclosed material weaknesses; the filing says the deficiencies did not cause a material misstatement, but controls were still ineffective at year-end.
- Confirm future dividend decisions, cash generation and share repurchases against the stated distribution policy and the company’s capital needs.
- Consider control and governance risks: the founder held 77.6% of voting power through ten-vote Class B shares, and the company relied on certain Nasdaq governance exemptions.