Bancorp Inc (TBBK) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2013 The Bancorp, Inc.

earnings conference call.

My name is Aisha, and I will be your coordinator for today's call.

At this time, all participants are in listen-only mode.

Later we will conduct a question-and-answer session.

(Operator Instructions).

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr.Andres Viroslav.

You may proceed.

Thank you, Aisha.

Good morning and thank you for joining us today to review The Bancorp's second-quarter 2013 financial results.

On the call with me today are Betsy Cohen, Chief Executive Officer; Frank Mastrangelo, President; and Paul Frenkiel, our Chief Financial Officer.

This morning's call is being webcast on our website at www.TheBancorp.com.

There will be a replay of the call beginning at approximately 10 a.m.

Eastern time today.

The dial-in for the replay is 888-286-8010, with a confirmation code of 66571819.

Before I turn the call over to Betsy, I would like to remind everyone that when used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated or suggested by such statements.

For further discussion of these risks and uncertainties, please see The Bancorp's filings with the SEC.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

The Bancorp undertakes no obligation to publicly release the results of any revisions to forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Now I would like to turn the call over to Betsy Cohen.

Betsy?

Thank you very much, Andres, and thank you all for joining us.

The second quarter of 2013 is one which we think reflects the strength of our core businesses.

In the prepaid area, there was an increase in card fees of 63%.

Operating leverage, which is often a focus of this conversation, grew by 72% for operating earnings as a result of operating leverage.

Our revenues, which is a sign often of the health of the business, grew by 41% on an annual basis, and our efforts to diversify our noninterest income sources are reflected in this quarter in which total noninterest income grew by 107%.

But we also experienced an increase on an annual basis of 13% in net interest income, in part due to the increase in the securities portfolio and in part due on an annualized basis to our focusing on a variety of targeted lending verticals, about which we have spoken in previous calls of which had significant growth.

SBA loans grew by 111%, security-backed lines of credit by 22%, and fleet leasing by 23%.

But growth is never completely linear on a quarter-to-quarter basis, and so by way of example, the SBA portfolio on the linked-quarter December 31, 2012 to March 31, 2013 grew by 25%.

And this quarter it was flat.

But (technical difficulty), which did not (technical difficulty) linked quarter this quarter grew significantly.

So we think that the best way to look at this is over the course of an annual period rather than only on a linked-quarter basis.

We experienced during this quarter an increase in earnings per share of some 25%, but that really masks the growth of 45% in net income because as a result of our issuance of additional shares in December of 2012, we had 4 million shares or approximately 12% more shares outstanding, so that the increase in earnings per share, being at 25%, was really a significant achievement.

In the loan portfolio, there was an increase this quarter -- a significant increase in nonaccrual loans as a result of a single relationship, not a single credit, which we consider to be secured.

We have decided, as you can see from the decrease in loans in the 90-day plus still accruing category, that we are tending to put loans directly into nonaccrual instead of even if it were to be our conclusion that they were well secured and could continue to pay interest -- excuse me, accrued interest on a reasonable basis.

We are tending to put them into nonaccrual as a result of our desire to get through those issues that we have spoken about before, which are expense drags on earnings in the Community Bank portfolio.

But even that said, our increase year to year in net interest income is, in fact -- was, in fact, 13%, and we are seeing significant increases in pipeline, which is not always visible in the statement in our targeted areas.

For example, in security-backed lines of credit, which just take a bit of time to come onto the balance sheet.

Expenses increased as a result of what we think of as investment in the production of income.

And Paul, would you like to talk a bit about expenses?

Sure.

In connection with the significant increase in loan sales income, there are direct production expenses.

So you saw an uptick specifically for those expenses, and we will have those expenses to the extent we have the income.

But I think it's important to note that they are not structural increases and won't increase quarter over quarter over quarter.

Except to the extent that income does increase, and then we think that that's okay.

Frank, would you like to talk about the lines of business and their individual growth?

Yes, of course, Betsy.

Thank you.

As Betsy noted, many aspects of the core businesses continue to perform very well and are very healthy.

Year-over-year growth of deposits was just about 24%.

That is inclusive of exiting from $100 million-plus block of deposits in our healthcare business in the third quarter of last year.

And if you recall, we exited those deposits because of the higher-rate nature of that particular relationship.

Wealth management year over year has increased deposits just about 45%, and the prepaid business, 24%.

From a noninterest income growth standpoint, as Betsy mentioned, stored value increased 63% year over year.

The total gains were 107%.

The loan sale income coming from a couple of business units were very, very strong this particular quarter and added significant revenue, about $4.9 million in noninterest income.

Very strong quarter for that business.

The dynamics of stored value this particular quarter were interesting.

The year-over-year gains in gross dollar volume were just about 19%, but the obviously noninterest income up 63% year over year -- a couple of things there.

New relationships, organic growth of current relationships, a tax season that was stronger on the back end than the front end versus calendar year 2012.

That is something you might've heard from others you follow, like H&R Block or Walmart or other folks who benefit from tax refund processing, and also, added income from the layering of other third-party services across these relationships -- so revenue not specifically tied to GDV.

One of the things that we have been working on to drive more value out of the portfolio, and that is, of course, bearing fruit.

Thanks, Frank.

I think that the only other thing I'd like to draw attention to is the improvement in many of our ratios return on assets, return on capital.

And we think those grew on a quarter-to-quarter basis, and they grew on an annual basis.

The net interest margin remained healthy, and that's a result in part of our being able to better control or use the excess deposit flow which we have.

The efficiency ratio was flat on a quarter and a 6-month basis, but down significantly about 700 basis points on an annual basis.

Book value is up significantly, and I think that all of those performance measures are good news on a future booking basis.

With that, I would like to, Aisha, open up for questions.

(Operator Instructions).

Matthew Kelley, Sterne, Agee.

Frank, I was just wondering if you can give a little bit more detail on pricing and talk about the stored value income relationship to GDV and how that is tracking on new relationships, and where we stand relative to the, I guess, 13 to 14 basis point trend the last couple of quarters?

That is the first question.

Yes, I would say I think the new trend, the up trend in noninterest income to GDV -- as I mentioned, Matt, we are driving more revenue that's really not a function of GDV, but rather other services we can overlay, provide to PMs, that are necessary to facilitate their business.

And I think that's a trend that will continue and a revenue line item that will continue to grow.

So the net effect of that should be continued increases of that relationship income to income to GDV.

Okay.

And GDV was about $7.7 billion?

GDV was --

It was 19% over the last year?

Or was that --

Sorry, yes.

GDV was $7.6 billion, 17.9% year over year.

Okay, all right.

So that relationship is now 15 basis points.

Is that a good run rate to go with going forward?

Q3 could be slightly weaker, primarily because of the strength of the tax business in Q2.

Okay.

Got you.

Yes.

I think, Matt, as always, we caution that the results are partially due to the mix in the portfolio, as Frank is alluding to.

And so it's hard to be totally predictive.

Got you.

So second question is on credit.

So the big provision, $9.5 million -- you did see NPAs up.

Is the idea here that you have taken kind of a one-time, more sizable provision to prepare for some NPA sales and resolutions and get credit behind you?

Talk about the plan and what you are setting up for here.

Well, I think we are setting -- we are eager to put behind us those components of the Community Bank portfolio or those loans within the Community Bank portfolio that have weakness.

And that is our effort.

We are eager to do that during the course of this year and to focus 2014 on simply the increase in income, which we see as a result of the growth in our core businesses.

Okay.

So are you going to do some NPA sales to get those numbers down so you can get to more normalized provision levels?

Is that what we should expect in the back half of the year, or --?

We don't -- at this moment, we do not have NPA sales on the horizon.

We are looking for NPA resolutions.

Okay.

Got you.

And then the securities to asset ratio continues to tick up nicely, obviously, as you are deploying the deposit inflows.

What are you getting for investment yields currently, and what do you think of the buying, and where should we expect that ratio to track over the next year from 30%, currently?

Paul, would you like to respond?

Sure.

I think the ratio of securities to assets will continue to increase, although perhaps not as much as we have increased.

In terms of the yields, as you know, Matt, we have a peculiarly low cost of funds.

And in studying our prepaid contracts and studying what the reaction will be to significant increases in rates, we will still have a relatively low cost of funds.

So because of the uptick in rates, the 100 basis point uptick, and even wider in municipal bonds, we see those as having a lot of value.

So we have been going a little bit longer in those, to the 10-year range, so we can get 4%.

So that could have a very positive effect and should have a very positive effect, not only on interest income, but also on our margin.

Okay.

Got it.

And we did dispose of a block -- a small block of securities in which we saw some extension risk.

And we did that, fortunately, ahead of the movement in interest rates, and so it did generate a small profit, although that was not the focus of the sale.

Got you.

I'll hop out.

Thank you.

Frank Schiraldi, Sandler O'Neill.

Good morning.

Just a couple of questions.

First, on the lack of linked quarter loan growth, I know about CMS, that it can be volatile quarter over quarter, but is anything else going on there in terms of -- that you can point to -- in terms of perhaps significant paydowns in the quarter, or is this -- (multiple speakers)?

No.

I really think it's a matter that it is lumpy and bumpy -- one might call it that -- that, as I pointed out on the SBAs, they grew 25% December 31, 2012 to March 31, 2013, and so one would expect a more or less flat quarter after a growth like that.

So I think it is just a continued -- we have said to you that we intend to keep the Community Bank portfolio flat while we are growing the other components, but, again, there are small differences that might wash out, but there really isn't anything that is happening.

And something you can't see, which I did, I think, mention, if, for example, in the area of security-backed lines of credit, commitments grow ahead of the balance sheet growth.

So we had strong commitment growth this quarter.

That is not a sure-fire -- the sure-fire result may not be that there is balance sheet growth in that area, but that has been the pattern.

Also, can you talk a little bit about your loan sale business?

I mean, this has to go -- some of this production has to go to feed that, correct, or am I thinking about that wrong?

I'm sorry.

What has to go to feed that?

Oh, you mean some of our growth?

Right.

Yes.

Some of it.

In fact, as we grow in the SBA portfolio, one of the things we would like to test, and I think you are absolutely right, Frank, is the value of that portfolio.

And we are just now getting to the point where that portfolio is mature enough to do some -- as we think of them -- test sales that we won't sell every quarter, but we will sell when the market is appropriate, and we will sell when we have aggregated a bit more by way of the portfolios.

So it is a trade-off between balance sheet growth and income growth, and some quarters it will balance off to -- our balance will be in favor of balance sheet growth.

And this quarter we chose to test the market for the first time.

I think what it does show about this portfolio is its real value.

Okay.

Given that part of the strong year-over-year growth in prepaid for 2Q was, as you mentioned, Frank, the tax business, kind of at least in my mind cloudies a little bit in terms of trying to figure out model year-over-year prepaid growth going forward.

So I don't know if it's possible to give any sort of guidance on GDV in the back half of the year or expectations for year-over-year growth?

Well, first of all, Frank, the tax business, while it was a contributor to the strong growth in Q2, that was probably only 10% to 12%.

Got you.

Okay.

So there were -- the other categories I noted also were major contributors, too.

So it's not quite as much as you might think, number one.

But number two, I think as we described last quarter in Q4, it's going to be a very spiky year for GDV growth, and it's much harder to predict than it was last year.

So I'm confident in saying that we'll continue to outpace the growth of the industry, but at the same time, I don't think that we can -- we are comfortable pegging a number right now as to where that will end.

I mean, is it fair to assume, given there was greater -- and again, you said it was only 10% -- so somewhat greater tax-related revenues in this Q2 than last year's Q2, Is it a good assumption, maybe, to expect that the year-over-year prepaid fee growth declines from this number, at least from the 63% we saw in the second quarter?

I would say probably.

I don't know that we will produce 63% in Q3.

Right.

Okay.

And then --.

They're not even going to focus on it.

Pardon me?

I'm not sure who that -- well, that wasn't me.

(Laughter).

The increase in the provision and -- can you tell us how much of that was related to this single relationship that increased NPAs linked quarter?

Virtually -- well, a significant portion.

I don't have the exact percentage.

A significant percentage.

I can find the actual percentage and give it to you off-line.

I just don't have it in front of me.

Okay.

Is there any sort of issue -- well, I'm just kind of curious where these things are held at now.

It seems like NPA has increased, I think, by around $10 million, and at least the quarter-over-quarter increase in provision was about $5 million.

So is it fair to assume that you've got reserves of about 50% against this relationship?

I will give you those numbers off-line, Frank.

I just don't have them in front of me.

Okay.

And then is there anyway you can sort of -- just looking out over the next couple of quarters, what would be your best expectation that we return to sort of a $5 million a quarter provision?

Is there any sort of guidance or expectation you can give on the credit front for the back half of the year?

I don't think there is, but I think we have had peaks before, or spikes before, and if you went back over a 12-month period, either forward or backward, you would find that we average out.

But we can't be predictive here.

Yes.

I mean, in general, are you seeing credit -- aside from this one relationship, which could be a one-off -- are you generally thinking that credit is improving in the portfolio?

Are you seeing signs of that, or are you seeing signs of deterioration more generally?

I think we have identified a significant percentage of our issues, we believe, and that the Philadelphia market is ranked 84th among 102 markets in terms of growth.

So could there be more loss, or could there be more issues in it?

Of course, there could be.

But we think that we have been very diligent in identifying and identifying early.

Okay.

And then just switching gears, what is the margin there for the loan sale business?

So that if $4.9 million of revenues came in this quarter, what's the expense tax to that?

Well, the number that you were referring to before, 30% of the increase -- I don't have the dollar amount.

Maybe you do?

Right.

The amount of the increase -- linked-quarter increase attributable to expense directly related to those sales was about 30% of the increase, if that's the question you're asking.

Okay.

So expenses were up about $3 million overall linked quarter?

Maybe $1 million roughly.

I mean, these are rough numbers.

Roughly $1 million against the loan sales for production and other costs.

(multiple speakers)

And, Paul, did you say that that was sort of -- is that sort of an idea of a fixed ratio of production costs going forward, so that you would expect off of (multiple speakers)?

No?

No.

I might just answer that, and Paul can correct me.

But I think, Frank, that it's a question of where did the loan sales -- where does the loan sale income emanate from?

Which portfolio?

Some portfolios will require those costs and some don't.

Some are within the structural budget.

Okay.

I guess maybe --

Not paid on a commission basis.

Got you.

And maybe just an easier way to look at this or think about my modeling here is to ask expenses -- should we expect to go back to something along the lines of a 12%, 15% year-over-year growth rate on expenses, or is that going to be generally a much larger growth rate going forward?

Well, if you ex out --.

(multiple speakers)

I think that that's --.

Go ahead.

I think the better way to look at it, Frank, is just linked quarter.

Because I think you will get to a more accurate result.

So if you want to look at our expenses in the second quarter and try to estimate the loan sales growth, and if you estimate it to be fairly equal to what it was this growth, then you can include that expense uptick attributable to those loan sales.

But it's very difficult to be predictive of loan sales income.

Because there are a number of variables that impact it.

Okay.

So that could still be ratcheting up, I'm guessing, then the loan sale income?

It could be ratcheting up or down.

I mean, in some areas, the market determines that by the spread that you get.

In some cases, the bank production determines it by the volume we generate.

As Paul was saying, those are just two of the variables.

Okay.

Just finally, I wanted to ask Paul if you could -- I'm sorry if I missed it, but in terms of the strong securities growth linked quarter, what is going on in the balance sheet?

What sorts of securities?

It is primarily municipal bonds.

We have an intense -- and notwithstanding the Detroit bankruptcy, the vast majority of municipal bonds are the strongest types of credit you can get, regardless of sector.

And we have, in addition to our own credit review, we actually have specialists, and that's all that they do is analyze municipal bonds credits.

So the yields are very attractive right now.

We have been buying in the 10-year range at about 4%, so that is going to be very helpful to net interest margin and net interest income and the efficiency ratio.

And, Frank, if you did miss it, one of the reasons we have chosen this sector, apart from credit, is that our cost of funds and, therefore, the disallowance is so low that the net yield to us is higher than the market would anticipate for banks as a whole.

I don't know if that's a helpful thought or not.

No, it is.

Thanks for that.

I'm trying to just -- looking at my model here, I am wondering, wouldn't we expect to see tax rates go down significantly if all these municipals are being put on the books?

Is that something that down the line or next quarter we could see a bit less of a tax rate?

Well, there's no question, but the issue is that we are producing so much income that as income increases, you have to ratchet up tax-free income just as much to even stay even.

So that is why our tax rate has been going up because our earnings have been going up more rapidly.

But yes, because -- there should be some of that impact because now we are buying more yield-y securities.

Before we were buying very short term.

Before the uptick in rates, we were buying primarily 2014, 2015 and 2016 maturities.

Now we are going about 10 years and earning 4% as opposed to 1% or 1.5%.

Okay.

So it's good, but we are not saying that that will happen next quarter, I think is what Paul is saying.

Exactly.

It takes a while.

The issue in the municipal market is that there's not a lot of supply and there's a fair amount of demand.

So it takes a lot of work to accumulate a portfolio.

But that said, we are having -- we are making progress this quarter already in terms of adding those types of bonds.

Okay.

Great.

I have some more questions.

I'll just follow up off-line.

I don't want to hold you guys up -- other callers up as well.

Thank you.

Thank you for your good questions.

Matthew Kelley, Sterne Agee.

Just a follow-up on Frank's question on the margin and just kind of incremental spreads.

If you think about a 4% yield on new money, that's twice your current securities yield.

So is it fair to say that excluding the first quarter, where you get a lot of seasonality and a huge inflow of deposits and liquidity, the 2.46% margin this quarter, when we look out a year, should definitely be higher.

Again, put aside the first quarter --

That is our goal.

Absolutely.

We are doing all of this work in a mix of securities and our targeted areas of lending.

For example, in the leasing business, we might have a yield of -- Paul, help me out -- 7%, roughly?

Yes, correct.

Yes.

So we are trying to target both the high-yielding component of our business, which we have had very good luck with over a 40-year period, together with a lower yield, but much lower expense category in the security-backed loans lines of credit to aggregate partially toward net interest margin and partially toward more efficient operations.

Okay, got it.

And then can you just give us the dollar amount of loans sold in the mortgage banking business, the CMBS business, so we can understand the types of yields, the gain on sale margins that you are experiencing?

Sure.

I will be glad to give that to you off-line.

I just don't have that in front of me.

All right.

Thank you.

Patrick O'Brien, Fox Assets.

Could you tell me some more about what's going on with credit?

A 9.5% provision, I reckon, is 197 basis point provision annualized.

That's a very big number this late in the game.

How long is this going to linger?

If I had the answer to that, I would give it to you.

But as we said before, we are reluctant to be predictive at any time.

We think we've identified our issues within the portfolio and hope to quickly get -- as quickly as possible get them behind us.

But I'm not going to be predictive about that.

Sorry.

What's taking so long?

It sounded like you discovered that the collateral is less than the loan value, but collateral values are going down.

Why has it taken years to uncover this?

I think that these were all loans that were performing, that appeared to be in businesses that were healthy, and the businesses may appear to be less healthy today than they were six months ago.

So we are taking actions that we think are appropriate.

Okay.

Thanks.

Jeff Bernstein, AH Lisanti.

Just wanted to follow up a little bit more on the transaction processing side of the business.

I think you talked about having a couple of large institutions in Europe that would be coming online Q3, Q4.

Just wanted to hear about what the progress was there.

Sure.

Frank?

Yes, absolutely.

I think we are making good progress in Europe -- the business there.

We are lining up a relatively nice pipeline.

Both European program managers and -- have some verbal commitments from some of our US clients to follow us there.

We have a handful of existing portfolios we expect will convert to some time Q4, Q1, which will be very nice at this existing portfolio.

As I think we have talked about on calls previously, you know, they add volume immediately.

That means they add revenue immediately.

So those are very, very attractive relationships and conversions to have in the pipeline.

And those resulting consumer accounts, they will be insured under the European deposit scheme?

It really depends country by country whether or not they qualify for deposit scheme -- for the deposit scheme insurance or not.

Got you.

So there are some that will and some that won't.

Not unlike the US market, quite honestly, where reloadable cards are typically included; non-reloadable cards are now part of the deposit insurance scheme -- not FDIC insured.

Got you.

And then on the healthcare side, what are you sort of anticipating as we move forward on Obamacare or don't?

There's a lot of shifts, it looks like, to plans with pretty high deductibles out there.

I guess one of the solutions people are talking about is a greater use of health savings accounts, etc.

Theres' some volatility, obviously, on the policy side.

So what are your thoughts about all that?

I think that Frank and I don't always agree on this.

So giving both sides of it, as you just did, the population that will increase significantly may be the younger population that doesn't save.

To the extent that employers migrate to higher deductibles and they are with a population that can afford to save, we think the health savings account is a reasonable -- will be a reasonable alternative.

But there are so many variables up in the air, including people's sentiment toward this, that, you know, it's really hard to make a real sound predication.

I would just reiterate that.

With all the delays in implementation and potential policy changes, it's very, very hard to be predictive.

What I can tell you is, as we are looking across the state-based exchanges and some of the private exchanges we see developing, high-deductible health policies are on the majority of those exchanges.

We think that that's a good trend for the industry as a whole.

That's kind of the first step in getting to be selected from anyone getting pushed to those exchanges.

It almost seems like the private exchanges are kind of moving ahead of the Obamacare, right?

Corporations -- the genie is kind of out of the bottle, and they want to get out of providing health care.

So they want to move to these.

(multiple speakers)

I think that that's right, but the timing is really up in the air.

For example, one of the reasons that some portion of the healthcare implementation was delayed was that the federal government had not put in place a credit instrument or a debit instrument, which is required to be offered under the -- or relationship, not instrument, but relationship -- which is required to be offered under the regulations.

And so they just had to put it off because people were not able to buy through with debit or credit costs, which reduced the costs.

So there are execution risks -- not risks, but timing issues here that are absolutely unpredictable.

Okay.

And then lastly, you talked about overlay services to program managers not linked to GDV.

Can you just give some examples of that?

Sure.

There's a whole flight of services.

So, for example, Bancorp integrates directly with a series of load networks, bill pay providers, mobile remote deposit providers, a series of other services like that.

So rather than the PMs, essentially the new PM or an existing program looking to add a service onto their program, rather than them sourcing that themselves, we are attempting to channel them through some existing integration we already have, which means speed to market increases for the PM, things like that.

And that effort is beginning to bear fruit.

Okay.

And then lastly, is there any visibility on marketing of the mobile wallet capabilities by your partners, or you just don't know when that's going to happen?

Yes.

I'd say that they all continue to iterate their products and are continuing to enhance consumer value, the consumer value proposition; continue to test various things.

When do they really press the marketing heart?

We really can't predict when that will be.

Great.

Thanks so much.

Andrew Wessel, Sterling Capital Management.

Sorry, I missed the very beginning of the call.

But I was just wondering if you had any kind of outlook for what GDV is going to be for the rest of the year?

I think last year it was a little bit clearer, I guess.

If you can give kind of some numbers on that.

Yes.

Last year we were in a much better position to be predictive as to what a range would look like for the year.

This year we expect it to continue to be -- we expect increases to be very, very spiky, and it's a much harder year to predict when conversions or transfers or those business spikes will occur.

So what we have continued to say is we will outperform the relative growth of the space and industry, but much harder to be predictive about providing a range or number where it will land for the year this year.

(multiple speakers)

But we can tell you, as soon as we know, you'll know.

Okay.

So are you still thinking the industry growth number is still around 30% this year?

Yes, we are.

Okay.

And then as we look out at this longer term, one of your biggest competitors is still sidelined.

Is this something that you are still seeing in your pipeline, where you're the vendor of choice here?

Does your pipeline growth feel -- I guess, can you put any kind of sizing around on it at all?

Just so we can think about this longer-term?

Obviously, your one competitor is probably going to be sidelined forever.

It has been a very, very long time, fortunately, for you all.

But just as you think of the growth of the industry and what you are kind of expecting there and then what your share of it's going to be, if you can help me frame that, at all, just taking a longer-term view of it as we look mid-2014, 2015?

This is a new industry.

It is growing very quickly.

But kind of what your thoughts are as you think about that going forward.

Yes, absolutely.

Look, I think that the industry can continue to grow at that 30% plus clip for the foreseeable future.

There's still lots of pools of cash and paper-based payments, and that is really what's propelling the industry.

Right?

The emergence of cash -- expensive, inefficient cash and paper-based payments shifting to more cost-effective and traceable and trackable electronic payments.

That is a trend, I think, that's going to continue to propel the industry at a very, very healthy growth rate forward.

I think what we certainly are seeing are there are fewer existing portfolio conversions, at least in the US market today.

So more what we are seeing in the pipeline today is new entrants into the space, some of them being large companies moving into payments for the first time -- so not unattractive partners or situations, but relationships that might not have the immediate impact that that portfolio conversion existing business with volume and revenue associated with it has when it converts.

Okay.

Great.

Thanks.

There are no further questions in the queue at this time.

I would now like to turn the call over to Ms. Betsy Cohen for closing remarks.

I would just like to say thank you to all of you for asking excellent questions, as you always do, and we look forward to talking with you again next quarter.

Thank you.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Have a great day.