First Bancorp
NYSE:FBP
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First Bancorp
Earnings Call Analysis
Q2-2024 Analysis
First Bancorp
First BanCorp reported a solid quarter, showcasing a net income of $76 million, equating to $0.46 per share, which marks an increase from $73.5 million or $0.44 per share in the prior quarter. The company achieved a robust return on assets (ROA) of 1.61%, reflecting the effectiveness of their profitability strategies.
Total loans showed positive momentum, growing by 2.4% on an annualized basis. This uptick was supported by stable economic conditions in their operational regions, particularly across commercial construction activities. Looking ahead, the management maintains a mid-single-digit growth guidance for loans throughout the year. Core deposits also illustrated healthy growth, increasing by $132 million, with noninterest-bearing accounts now representing 34% of total deposits.
In line with their commitment to shareholder value, First BanCorp returned 100% of earnings via buybacks and dividends during the quarter, totaling $76 million. The company's capital position is strong, with a Common Equity Tier 1 (CET1) ratio of 15.8%. A new board approval permits up to $250 million for either repurchasing shares or redeeming securities, with an additional $50 million remaining from prior authorization.
The economic landscape in Puerto Rico appears stable and improving, notably with record levels of passenger activity and robust consumer confidence indicated by increased sales tax collections. The distribution of arterial funds has also surged by 35% year-over-year, positively impacting economic activity.
Nonperforming assets (NPAs) decreased to $127 million, suggesting improved asset quality. The company attributes this to a favorable credit environment, with early delinquency trends maintaining their expected levels. The reserve for loan losses saw a modest 9.1 million decline, a result of improved performance in the mortgage and commercial real estate portfolios.
Expenses were controlled effectively, coming to $118.7 million, slightly lower than the previous quarter's $121 million. The efficiency ratio stood at 51.2%, consistent with the company's target of around 52% for the upcoming year. This efficiency is poised to maintain due to expected margin expansion.
Looking forward, the company anticipates increasing net interest margins due to favorable cash flows and stability in deposit costs. Specifically, they expected the net interest margin to continue improving in the coming quarters, driven mainly by the reinvestment of bond cash flows yielding better returns.
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Good morning, everyone. My name is Kiki, and I will be your conference operator today. I would like to welcome everyone to the First BanCorp. 2Q 2024 financial results. During the presentation, you will have the opportunity to ask a question by pressing star followed by 1 on your telephone keepers. I will now hand you over to your host, Ramon Rodriguez, Corporate Strategy and Investor Relations for First BanCorp. to begin. Ramon, please go ahead.
Thank you, operator. Good morning, everyone, and thank you for joining First BanCorp's conference call and webcast to discuss the company's financial results for the second quarter of 2024. Joining you today from first-time Corp are Aurelio Aleman, President and Chief Executive Officer; and Orlando Berges, Executive Vice President and Chief Financial Officer.
Before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements such as projections of revenue, earnings and capital structure as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from the forward-looking statements made due to the important factors described in the company's latest SEC filings.
The company assumes no obligation to update any forward-looking statements made during the call. If anyone does not already have a copy of the webcast presentation or press release, you can access them at our website at fbpinvestor.com. At this time, I'd like to turn the call over to our CEO, Aurelio Aleman.
Thank you, Ramon. Good morning to everyone, and thank you for joining today. Let's turn to Page 4 to go over the highlights of the quarter. We posted another solid quarter for the franchise from profitability and positive operating leverage, earnings $76 million in net income and delivering a strong return on assets of 1.61%. Adjusted pretax preprovision income moved upward, reaching 13 million, up 2.4% versus the prior quarter, mostly driven by net interest income and lower expenses.
In terms of the balance sheet, total loans grew by 2.4% in quarter annualized, driven by growth actually across all business segments. We've seen a slight delay in some of the construction funding during the year -- in the first half of the year, and we do expect to grow this gap during the back end of the year. Loan pipeline remains healthy. and are mostly supported by the stable environment that we continue to experience in our operating regions. And we do continue to sustain our mid-single-digit loan growth guidance for the year. primarily to the commercial construction on prolong activity that we continue to experience.
In terms of deposit franchise, we had a positive quarter. We were very pleased to see improvement in the core deposit flows during the quarter, particularly in the noninterest-bearing account now represent 34% of our total deposits. Core deposits, other than brokered and government deposits, were up $132 million based on the growth of core of all [ decisions ]. We are highly encouraged by the accretive nature of our balance sheet position for the remainder of the year. definitely, it will benefit from the sizable bond book repricing opportunities, coupled with the expected gradual easing in deposit costs.
The credit environment continued to play out as expected even though NPAs decreased to $127 million, we continue to see early delinquency and charge-off trends within our consumer book returning to its [indiscernible] levels consistent with our expectations actually. On the capital front, we sustained our commitment to receptor value during the quarter by returning 100% of earnings in the form of buybacks and dividends. while continue to executing our organic loan growth strategy, we did maintain a very strong CET1 ratio of 15.8%.
Once again, really great quarter, another great quarter of strong financial results. We thank our teams for making this possible. They are the backbone of the organization, and we're extremely proud of what we have accomplished over the past few years.
Let's go to Slide 5 to some additional highlights of the macro. Definitely, our team has a proven track record on delivering consistent performance and adapting to changing market conditions, particularly in our main market. In Puerto Rico, the macro backdrop continues to reflect stabilization across most economic fronts, with labor market trend sustaining their over trajectory, passenger activity in the main airport reaching record levels and strong consumer confidence evidence by year-to-date sales collection -- sales tax collections actually.
As we said in the past, the present level of support continue to drive economic activity in the island. This year, close to $2.5 billion of the arterial funds have been distributed actually during the first 5 months, and this represents a 35% increase compared to prior year. In terms of our franchise build, our teams continue to manage multiple capital projects aimed at advancing the evolution of the IT infrastructure and additional enhancement of digital capabilities. In particular, we're excited to deploy our new commercial lending platform in the coming months, which should provide a more seamless interaction with commercial clients and will support additional growth in the business.
Finally, important, I want to provide an update on the capital strategy. You our approach to manage capital, as we know, with southland center or making capital decisions that serve the long-term interest of the franchise and shareholders. With this in mind and given our strong capital position, as we announced yesterday, our board approved an authorization of up to $250 million in capital that can be used either to repurchase our common stock or redeem existing the securities. This is in addition to the $50 million remaining from the prior approval.
Over the next few quarters, we will focus our efforts on redeeming our astounding product deferred debentures, which, at this moment, that will represent an immediate EPS accretion opportunity and will result in a simplified capital structure our 100% capital return goal remaining impact for 2024. Really, the strategy has not changed. We will continue to capitalize as a priority on organic growth opportunities in our markets. and deploy capital into the opportunistic buybacks or in this case, we're going to focus initially on the redeeming our outstanding [indiscernible].
Now I will turn over to Orlando to go over more detail on the financial results. Thanks very much.
Good morning to everyone. As Aurelio mentioned, we reported net income of $75.8 million for the second quarter. That's $0.46 a share, which compares with $73.5 million last quarter or $0.44 per share. We're extremely pleased with what we saw as we have continued to generate strong return on assets, which reached 1.61% this quarter.
The result for this quarter have been very consistent with the discussions with many of the discussions we've had with the market. NIM for the quarter expanded 6 basis points and net interest income grew $3 million and expenses have been within the guidelines that we have provided. Provision for the quarter was similar to last quarter, was $11.6 million, which compares to $12.2 million.
The provision for this quarter reflects benefits from the lower recent historical loss levels on the residential mortgage portfolio as well as lower projected losses on the commercial real estate portfolios. These ones have been driven by macroeconomic variables being a macroeconomic variables being better than they have been previously forecasted. The 2 combined have offset the impact of the level of -- the higher level of [ charge shops ] we've had on the consumer portfolio, which has affected the provision for those portfolios.
Effective tax rate for the quarter was 24.1%, very similar to last quarter. And we have continued to work on the tax position. As I mentioned, net interest income for the quarter improved $3 million was $199.6 million for the quarter. Total interest income grew $3.7 million, which includes $2.8 million interest income growth and the loan portfolios, while interest expense only grew $600,000. The yield on total earning assets grew 7 basis points in the quarter, which is a combination of 5 basis points growth in the loan portfolio yields and higher level of interest bearing cash balances at the Fed when combined with the investment portfolio and higher cash balances resulted in approximately 7 basis points higher yields on the portfolio.
Funding costs increased only 1 basis point for the quarter as we continue to see more stability on deposit pricing. The increase in interest expense was mostly on time deposits where average balances grew $110 million, and we saw a 6 basis points increase in the average cost of these assets. During the quarter, overall deposits grew in the quarter, and we were able to replace some of our higher cost brokered deposits. The average balance of broker deposits increased -- decreased, I'm sorry, $73 million for the quarter. Quarter end to quarter end, it's about $100 million. and the average cost of these deposits is down 9 basis points.
As we have mentioned in prior quarters, assuming current interest rates, the net interest margin reached the inflection point in the first quarter, and we saw an expansion of 6 basis points this quarter reaching for $22 million. Now the composition of our earning assets continue to shift our higher-yielding assets, which more than offset an increase in the cost of deposits.
Similar to what we said before, we continue to benefit from repricing opportunities on the investment portfolio either into loans or ultimately into higher-yielding securities. Most recent estimates of cash flow, it's about $720 million to $730 million for the last 6 months, $250 million of that in the third quarter and $470 million to $480 million in the fourth quarter, Which over the 2 quarters, the combined cash flows coming from agency and treasury papers that have contractual maturities would be $500 million. So the full impact of this repricing will be seen in the first quarter of 2025.
The other income components, noninterest income components were fairly consistent. We did have a reduction of $2 million, which is basically due to the $3.2 million in seasonal contingent insurance commissions that we collected in the first quarter. On the other hand, we had some pickup on mortgage banking activity income for the quarter. In terms of expenses, expenses were $118.7 million, which is $2.2 million lower than last quarter. This reduction includes a $2.3 million gain we realized on the disposition of a large commercial OREO. We also saw a $2.1 million decrease in compensation expenses, mostly payroll taxes and stock-based compensation we had in the first quarter. And we had a $700,000 reduction in the in the accruals for the FDIC special assessment in the quarter.
However, we did have an increase of $1.8 million in credit and debit card processing expenses. Reality last quarter, we received $1.3 million expense reimbursement incentives from the networks, which lower our expense base in the first quarter. If we exclude OREO and the FDIC expenses, Expenses for the quarter were $122.3 million, which compares to $121.5 million last quarter. which is very much in line with the $120 million to $122 million expense range that we have been guiding excluding the OREO benefits. And we continue to maintain this guidance for the next couple of quarters. The efficiency ratio for the quarter was 51.2%, which is also in line with our 52% guidance. And we should continue to see the efficiency ratio at this level based on current interest rates and margins.
In terms of asset quality, nonperforming assets decreased $2.7 million in the quarter to $126.9 million, which is 69 basis points of total assets. Most of the reduction was in the other real estate owned decreased $7.2 million due to the sale of the 5.3 million commercial real estate owned in Puerto Rico. Nonperforming loans, however, did increase $3.2 million, basically commercial and construction during the quarter a commercial relationship in Puerto Rico with a total exposure of $16.5 million migrated to nonperforming. However, we did -- you remember the 10.5 million Florida case went into nonperforming last quarter that was restored to accrual status based on the payment side as of the case and restructuring.
Loans in early delinquency, we registered an increase of $13.7 million. All of it was in consumer. We continue to see some trends broadly moving to at historical levels. The allowance for credit losses was $254.5 million at the end of the quarter, which is $9.1 million lower than prior quarter. Basically, the reduction came from the mortgage and CRE portfolios, as I mentioned before, while the consumer reserves show an increase. The coverage, the allowance coverage on loans decreased to 26% from 2014, still healthy and the allowance, including unfunded loan commitments and debt securities was $261 million versus the $270 million we had last quarter.
Net charge-offs for the quarter were $21.1 million or 69 basis points of average loans. That compares to 37 basis points we had last quarter. But if you remember, last quarter, we included a $9.5 million recovery from the sale of previously charged-off loans. Excluding this recovery, net charge-offs in the first quarter was 68 basis points, which is very much in line with this quarter.
On the capital front, Aurelio made reference to it, but our ratios continue to remain very strong and significantly above well-capitalized levels. We continue to deploy capital through share repurchases and dividend payments and dividend payments. repurchases and dividends for the quarter amounted to $76 million. which is essentially 100% of the earnings we had in the quarter. The tangible book value per share and the tangible common equity ratio increased to $8.81 and 7.7% each, respectively.
Basically, we had an improvement in the fair value of the investment portfolio that improved the ratio since earnings basically well offset by the capital actions. The adjusted or comprehensive loss represents now over $3.89 in tangible book value and over 300 basis points on the TCE ratio. And assuming the stable rates that we are seeing in the market, and we expect we will continue to recover the adjusted other comprehensive loss based on the short duration of the portfolio.
This concludes our remarks. Operator, we would like to now open the call for questions.
[Operator Instructions] We have now received the question from Brett Rabatin from Hovde Group.
Wanted to start with just the macro in Puerto Rico, and it sounded to me like you were kind of intimating that kind of steady state was what you were seeing most recently, but you mentioned the $2.5 billion distribution, and then I saw core 3 had actually distributed $1 billion here so far this year. When I look at the GDB AAI index, it's down actually in April, a little under $124, but that looks to be mostly concrete and gasoline. As you guys think about the back half of the year from an economic perspective, is there anything that you would point out as drivers for either growth or maybe some atrophy in the economy?
Well, we continue to see -- I think the $2.5 billion is the 5 months at the beginning of the year, and that is actually higher than last year. And you can see in that the bulk part of that is actually CDBG construction elements which is primarily there's significant projects in what they call the [ lifeline ], low-income housing. We have some of those in the books. Obviously, they're being approved and initial disbursement, but we expect that to show in the second half of the year as we originally have planned.
We continue to see foreign investors, bringing capital to Puerto Rico buying corporations, more and more deals of those. Some of them are being published in the newspaper. Some of them have required financing. There are more projects in the pipeline regarding the IPG funds. They include additional hotels that include additional housing, which when you look at the middle income segment, there is still high demand for that. Unemployment continues stable and labor participation better. So we do not expect any decrease. We actually see more opportunities for improvement.
Obviously, take into consideration that the excess liquidity that was brought by the pandemic was already utilized. And obviously, there is an impact. But when you look at sales tax, it's not really shown there. is probably in some other type of consumption. So we do expect -- when you look at the fiscal plan that was recently published, there's positive GDP growth in the scenarios. So I think when we had that, really, Ramon, you could comment on the specific analysis of the indicator of the economic indicator, which is volatile and has some quarter evinces historically.
Yes, Brett. Most of the reduction that you mentioned with regards to the economic activity index is related to gas consumption, which has been trending down over the last few quarters. But when you look at the other 3 components, payroll employment in particularly, it's reaching decade highs in April. It was, I believe, 2% year-over-year. So when you look at the other components, we remain pretty encouraged with the economic activity index going forward.
Okay. That's great color on that. And then maybe Orlando on the margin would seem like with what you have coming with the securities portfolio and kind of your stabilization of funding costs in the second quarter that the margin should continue to move higher at servo magnitude? Any thoughts on the pace of the margin from here and just how you see that playing out?
Well, we I mean, we haven't provided a very specific margin number, but clearly, we have said that our margins will continue to go up. Again, if you only think about the $700 million or $720 million of cash flows that are now yielding about 1.5% on a GAAP basis, that number would be replaced something that would be close to loan yields, average loan yields or a worse investment portfolio yield. So we would be picking up 4 to 5 basis points easily on that portfolio. So that should start to translate into a higher margin coming next year.
The funding cost side, the stability, we're starting to see the stability. The increase, as I mentioned, on the time deposits, that's a lot to do with all the things maturing and being renewed at current rates. But the Puerto Rico market is not as high as the U.S. market. We still continue to see some pressure in Florida. We are seeing less pressure in Puerto Rico and exception pricing would be low 4s. But in reality, most of the time deposit numbers are not generated at those rates important.
So that's going to slowly sort of pick up. And again, some of the loan portfolios as we originate new things are also coming in at current rates, which are slightly higher -- that's why we ended up with -- we've got 5 basis points pickup on the yields on the loan portfolio on average. So the expectation in our numbers is continue trend increases on time deposits -- I'm sorry, on net interest margin for the next few quarters.
Okay. Fair enough. And then if I could sneak in one last one, just on the reduction of the commercial real estate reserve due to macro factors. Would that be mostly or entirely just the term structure of interest rates? Or would there be other factors that would have reduced your commercial real estate or improved your commercial real estate outlook?
It's a bit of -- I mean, the CRE price index deterioration that we to some extent, modeling our modeling is based on national information and the reality is Puerto Rico, it's behaving significantly better. So what we are seeing as we adjust for the market on those numbers, the CRE price index, it's not suffering the impact that some markets in the states have suffered. And that is -- has been adjusting the projection going forward for the Puerto Rico market. So that's part of the reason we're seeing those improvements on the macro on the CRE side.
The next question we've got is Steve Moss from Raymond James.
Maybe just starting with the -- continue with the loan loss reserve. I was just curious here with regard to the decline in the residential mortgage reserve quarter-over-quarter. Was that just kind of a component of historical charge-offs have declined was the primary driver? And could we see a further maybe reduction in that reserve here over time?
It is driven by the updated information on charge-offs on that portfolio. We've seen significantly low trends the mortgage portfolio is longer-lived portfolio. Therefore, we use longer lives in estimating some of the factors. And as you have seen the loss rates on the recent years, have been very low, and that has continued to replace other information on charge-off rates. So we have continued to see some improvements. And assuming we see -- we stay where we are now, I do expect that eventually we'll see some additional improvements. in that reserve, assuming that the current size of the portfolio, obviously, the portfolio for quite a while also was coming down.
It's been more stable recently as the mix of conforming and nonconforming has changed based on market rates. But clearly, the losses on the portfolio has been much lower. We've seen values significantly more consistent in the market. They have stayed high, and that helps in any kind of disposition of property. So that's why we have seen this trend of reduced losses, which is translating into lower reserve requirements.
Okay. Appreciate that. And then just with regard to the loan growth this quarter, I saw in the text that floor plan growth was one of the drivers. Just curious if that -- if there's a seasonal dynamic or just any reasons for that growth? And how to think about do we continue to see this pace of CRE growth as well?
Well, there's a couple of consideration. We did sign new relationships on the floor plan. So the most part of the increase came from a large new relationship that was that was acquired by FirstBank. There's also some seasonality, I would say. Auto sales have contracted from prior year as expected, but they are actually, they're a little better than we actually forecasted. So market continues very active in that sense, yes.
Okay. And then on the commercial real estate side, you guys had another good quarter of growth here. Just kind of curious, do we expect that to continue? I know you guys don't have construction, but that would likely pick up in the second half. Just curious on CRE.
Yes. Actually, on the CRE, some of the increase was conversion from construction. So that's why the timing of reduction in construction is shown in this quarter because some of the cases were compared to the permanent homes. Yes, we -- and yes, we do have another conversion coming through the end of the year, but we also have expected disbursements on the construction loan to pick up with the projects, normal cycle of construction project showing some delays, it's not a surprise.
Okay. I appreciate that. And one last one for me. Just on the nonperforming commercial loan here in the restaurant or food sector. Just curious any color you could give around that credit, whether it's a shared national credit or things along those lines?
No, no. It's our -- it's a relationship that we have. We do expect resolution of that relationship. Some initiatives in the development relationships have delayed, but we do expect that to recover sometime in the future.
And that has 2 components on running construction and the other on the financial side.
Okay. Great. Appreciate all the color and nice quarter.
The next question we've got from Timur Braziler from Wells Fargo.
I'm just wondering on the securities cash flows. It looks like it's accelerating in the back end of the year, just your appetite for either putting that right back into the bond book, waiting to invest that into loans. I guess how quickly are you anticipating those bonds to be reinvested or they bond cash flows to be reinvested?
Well, reinvestment can be different ways. Obviously, we based on the pipelines on the lending portfolio and the liquidity composition of the institution, that's where that drives the decisions. Based on pipelines, we do see some amounts of the Fed account, which, obviously, at this point, it's yielding 540, which is still significantly higher than the portfolio. If we don't foresee that to be the case, we do 2 things, either we let some wholesale funding that mature goal or we go back to the investment portfolio. That would be the order of first, the lending and the lending is going to be the key factor here.
And if we see it longer term, we'll just move back to the market. So it's a mix, Timur. It's going to be based on how we see the different components, mainly pipelines and liquidity that we decide where to move the money to.
The effect would be immediate as it comes in, Obviously, you're just living for a while of the Fed account or you're eliminating some hotel funding while the loans come in. So that's -- some of that pickup will 1 go immediately to loan yields, but clearly would go to kind of a market investment or cash yields.
Okay. That makes sense. And then just looking at the incremental Board authorization at $250 million for the reduction of the press. I guess what does that portend to future buybacks? Is that a hinderance maybe? Or do you kind of use the capital for the redemption and then that puts buybacks on holds? Or can those go on kind of in line with 1 another?
Well, right now, this quarter, we will focus on exclusively on the debt securities, within the debt security this quarter. Starting with that, again, we have the same number in mind in terms of the plan, achieving 100% capital return, which it will be probably $50 million per quarter, similar to what we did in the first half of the year. So obviously, that gave us -- that is an immediate accretion and immediate improvement on revenues, no EPS dilution. So we're going to prioritize that activity in this half of the year, but we always have the optionality. We're not -- we're keeping the optionality and I think that is an important thing to do coastal bias anytime too. We're just sharing what is our priority right now.
Got it. So priority near term is on the redemption and then buybacks are still potentially on the table?
That's correct.
[Operator Instructions] We've now got a question from Kelly Motta from KBW.
You've continued to have like a pipeline of OREO gains here that's really to the benefit of expenses. I think you reiterated your guide of $120 million to $122 million ex these gains. But just wondering, based on the activity we've seen so far, what are you seeing in the pipeline in terms of the potential for further OREO gains to reduce that overall expense number?
This quarter, we had a large case that is commercial OREO that we had that was -- we don't have too many of those. That was sold at a good profit for the quarter. But we -- on the commercial side, there is not that many. However, we continue to see residential mortgages being disposed. But market prices have been steady and that has allowed pricing on these OREO on the residential side to continue to be there. At this point, I think we have mentioned this before, it's been longer than we expected, but we'll take it. And our group continues to see better offers regarding -- as compared to appraisals based on what's out there.
Again, some of the things we think it's a higher employment levels than the island need for properties and so for a long time, we didn't have much in terms of construction of residential construction in Puerto Rico. So all of that, that combined. In the near term, we still feel that the numbers won't be as large as what we saw definitely. But we do expect that operating cost would be definitely offset by the sales at least for the next couple of quarters. But it's very difficult to say, Kelly, how long it's going to be. I don't think it's going to last forever, definitely.
Got it. I keep putting in 0 there, and you guys keep beating me. On the deposit side, it is really encouraging to see noninterest-bearing stabilized actually up slightly this quarter. Just wondering, provided we're obviously done with rate hikes like what you guys are seeing on the deposit side and the pipeline for deposits, especially with the release money picking up year-to-date? Fair to say that continued modest growth off this number? How are you guys thinking of that? What are you guys seeing?
Well, it's #1 priority of the franchise to continue any for deposits. So it's a combination of products, digital functionality and I would say commercial activity and the commercial products that we have focused on and made investments over the past year. So it's really only priority to continue growing that. It's very difficult to predict the trends in the market, the market data is flat in terms of the overall market data trends. Obviously, there's a lot of analytics behind how to execute, but our goal is really to continue to grow that number.
Sustaining the 34% is a challenge on noninterest bearing, but continue to be the focus also Government deposit is a different strategy. It's more opportunistic and transactional but we do have a core business, which is providing all type of transaction banking services to the government entities not only the large corporation or municipalities. So with those who stayed at similar levels, we don't expect growth in that area. We do expect to continue making progress on the commercial and retail side.
Got it. That's helpful. Maybe last one for me. Given your outlook for expenses to hold into this level and margin expansion, you've been on the efficiency ratio consistently in the low 50s and kind of below longer-term mid, I think, 50 range. Given that you expect margin expansion. Would it be fair to expect that efficiency could continue to run potentially lower here, at least in the near term based on kind of your outlook for investment in the franchise and kind of NII growth outstripping that? Or could you potentially up your expenses and reinvest some of those gains as you think about it? I realize it's a little early to start talking about 2025 but just from a high level, how you guys are viewing that would be really helpful.
Yes. Investments will continue. Technology is a key component of the investment priorities. Also facilities has been a component that we continue to invest. So it's really -- I think we guided the 52% for 2024. And I think we should stay -- we're going to stay around that. It's very difficult sometimes to go lower, sometimes a little bit like these past 2 quarters, there's opportunities among timers that go in to the equation. But when you look at the overall, I think 52% is probably the best number we can provide at this stage.
Obviously, the margin expansion could help in terms of that relationship and offset any additional investments we might make clearly. But the 52% is where we feel it's going to stand at -- based on the level of investments we're currently doing.
We currently have no further questions. So this concludes today's conference call. You may now disconnect your lines.