Encore Capital Group Inc Q2 FY2021 Earnings Call

Good day, and thank you for being here. Welcome to the Encore Capital Group's second quarter 2021 earnings conference call. I will now turn the conference over to Mr. Bruce Thomas, Vice President of Investor Relations for Encore. Please go ahead, sir.

Thank you, operator. Good afternoon, and welcome to Encore Capital Group's Second Quarter 2021 Earnings Call. Joining me on the call today are Ashish Masih, our President and Chief Executive Officer; Jonathan Clark, Executive Vice President and Chief Financial Officer; Ryan Bell, President of Midland and Credit Management; and Craig Buick, CEO of Cabot Credit Management. Ashish and Jon will make prepared remarks today, and then we will be happy to take your questions. Unless otherwise noted, comparisons made on this conference call will be between the second quarter of 2021 and the second quarter of 2020. In addition, today's discussion will include forward-looking statements subject to risks and uncertainties. Actual results could differ materially from these forward-looking statements. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our earnings presentation, which was filed on Form 8-K earlier today. As a reminder, this conference call will also be made available for replay on the Investors section of our website, where we will also post our prepared remarks following the conclusion of this call. With that, let me turn the call over to Ashish Masih, our President and Chief Executive Officer.

Thanks, Bruce, and good afternoon, everyone. Thank you for joining our earnings call. Encore delivered another strong performance in the second quarter as we continued to execute our strategy, improve our balance sheet and focus on our capital allocation priorities. To better understand our results, let's begin with some important highlights from the quarter. The primary driver of our financial performance in Q2 was the record collections for both our MCM and Cabot businesses. We continue to see consumers focus on resolving their debts, which led to a high volume of inbound calls and online engagement. We also started seeing an increase in legal collections in the second quarter. On a global basis, our portfolio purchases were $143 million in Q2, which was lower than last year due to lower market supply. Although issuers continue to sell, volumes are lower because of fewer charge-offs. As these conditions persist, we have maintained discipline and continue to purchase at attractive returns. In addition, our success over the past several years in improving our collections effectiveness and cost efficiency has allowed us to mitigate the impact of higher market pricing on our returns. Our global financing structure continues to provide benefits. In June, we refinanced the last of the legacy Cabot bonds with a significantly reduced coupon, saving 325 basis points, which will further reduce our interest expense in the future. Our business continues to generate significant excess capital, driving a further reduction in our leverage ratio, which is now at the low end of our target range of two times to three times. In line with our capital allocation priorities, we repurchased $27 million of Encore shares during the second quarter. As a result, through the first two quarters of 2021, we have spent a total of $47 million repurchasing shares. We will continue to allocate capital according to our stated priorities. Any future share repurchases are subject to maintaining our strong balance sheet, liquidity and the continuation of a strong financial performance. To further describe our results for the quarter, I would like to anchor the conversation to our previously outlined strategy. We deliver best-in-class financial performance as the result of our consistent strategy and execution. We look to purchase portfolios of nonperforming loans at attractive cash-on-cash returns, using funding with the lowest cost available to us. For each portfolio that we own, we strive to exceed our collection expectations while both maintaining an efficient cost structure and ensuring the highest level of compliance and consumer focus. We achieve these objectives through our three-pillar strategy. This strategy enables us to consistently deliver outstanding financial performance, positions us well to capitalize on future opportunities and is instrumental in building long-term shareholder value. The first pillar of our strategy, market focus, leads us to concentrate our efforts on the markets where we can achieve the highest risk-adjusted returns. Consistent with this strategy, we recently entered into an agreement to sell our portfolios in Colombia and Peru. The sale is expected to close in the third quarter. Our largest and most valuable market is in the U.S. In Q2, MCM delivered another quarter of record collections in an environment characterized by two meaningful dynamics. First, consumers continue to reach out to us through our cost-efficient call center and digital channel to resolve their debts. Second, collections through our legal channel grew 31% due to increased legal activity as courts and legal services have reopened. We do not expect this to be a long-term shift in collection mix. MCM deployed $90 million during Q2 as the impacts of the pandemic tempered supply in the U.S. We continue to deploy capital at attractive returns. As announced by the CFPB last week, the industry rules will become effective on November 30, 2021. We are pleased to see the completion of this multiyear process, which will resolve uncertainty and finally level the playing field for participants in our industry. In addition, the new rules will modernize communications with consumers and allow us to engage using methods consumers prefer. We have prepared to fully implement the new rules by the confirmed effective date. Turning to our business in the U.K. and Europe. Our collections performance continues its return to normal levels after several quarters of COVID-related volatility. Collections in the second quarter grew 45% compared to Q2 last year, a period when the effects of the pandemic were most impactful. Collections for the first half of 2021 for Cabot portfolios owned at year-end 2020 exceeded our expectations by 7%. Second quarter collections on the legal channel increased 36% compared to Q2 last year, which drove costs to collect higher. Deployments in Q2 of $53 million were higher compared to the second quarter of last year, and Cabot's portfolio purchases of $131 million in the first half of 2021 have already exceeded the total for all of 2020. Despite the fact that delinquencies remain low, supply has increased in the U.K. and Europe as sellers are now coming back to market. Portfolio pricing has become more competitive across our European footprint and constrained our investments in the second quarter as we maintained our return-focused discipline in purchasing. The second pillar of our strategy focuses on enhancing our competitive advantages. Our competitive platform enables us to consistently generate significant cash flow. Our cash generation for the 12 months ending in June increased 16%, reflecting the steady improvement in our business, the efficiency of our operations and the resilience of our portfolios. Our consistent growth in cash generation has contributed to our reduced borrowings and the deleveraging of our balance sheet. Our strong cash generation also provides us with additional flexibility when we consider our capital allocation priorities, which include portfolio purchases at attractive returns, strategic and disciplined M&A, and share repurchases. Our competitive advantages also allow us to deliver differentiated returns. We emphasize ROIC as an important measure of our business because it takes into account both the performance of our collections operation as well as our ability to appropriately price risk when investing our capital. We believe it's important to demonstrate that our underlying business delivers strong long-term returns that we can maintain through the credit cycle. Our ROIC performance in the second quarter and our performance over time are solid indicators of the improvements in our business during a period that was characterized by uncertainty and volatility in global financial markets. We continue to believe it is difficult to find such attractive returns at other companies in or around our industry. The third pillar of our strategy makes strengthening our balance sheet a constant priority. We believe that a strong balance sheet is critical to being successful in our sector. Our continued focus on strengthening our balance sheet has enabled us to reduce a debt-to-equity ratio to 2.2 times and reduce our leverage ratio to 1.9 times, which is now at the low end of a targeted range of two times to three times and is near the lowest in the industry. A strong operating performance and focused capital deployment have driven higher levels of cash flow, which in turn has led to leverage reduction. As a result of our financing accomplishments over the last year, including the refinancing we completed in Q2, we have significantly lowered our cost of funds. And we believe we have established a best-in-class capital structure that will allow us to capitalize on future opportunities. I'd now like to hand over the call to Jon for a more detailed look at our financial results.

Thank you, Ashish. In the second quarter, very strong collections in both the call center channel and the legal channel drove higher revenue, net income and returns. Importantly, the resulting strong cash generation combined with lower purchase volume led to a further reduction in our leverage ratio and slightly lower ERC. The true quality of our strong underlying second quarter results is not readily apparent when comparing to the second quarter of 2020. This was a period during the emerging stages of the pandemic when we observed significant volatility in our business. Our continued strong financial performance becomes more clear when viewed as a comparison of the first half of 2021 to the first half of 2020. Through this lens, it is clear that our growth in collections drove higher revenues and earnings. It also shows that our operating expenses remain well managed. In fact, we've maintained an expense level within a tight relative range for the past several quarters, except for the second quarter of 2020, a period during which legal channel spending was significantly reduced due to the impact of the pandemic. Collections were a record $612 million in the second quarter, up 21% compared to Q2 last year. MCM collections grew 13% in the second quarter to a record $437 million. Within that total, MCM's legal channel collections grew 31% compared to Q2 last year when the pandemic impact in the legal channel was most prevalent. Cabot's collections through our debt purchasing business in Europe in the second quarter were a record $168 million, up 45% compared to Q2 last year. Q2 of last year was a period during the early days of the pandemic when Cabot collections were impacted severely. Encore's global collections in the second quarter for portfolios owned at year-end 2020 achieved 119% of our ERC. Revenues in the second quarter were $428 million compared to $426 million in Q2 last year. Recall that in early 2020, the uncertainty surrounding the coronavirus pandemic caused us to push our collections forecast in Q1 2020 and subsequently pull most of it back in during the Q2 and Q3 of 2020. This dynamic essentially suppressed our revenues in the first quarter last year and reversed the process in the second and third quarters of 2020. Our estimated remaining collections at the end of Q2 was $8.1 billion, down 3% compared to the end of Q2 last year, primarily as a result of very strong collections performance during the past year as well as lower portfolio purchasing during the same period. Our global funding structure provides many benefits to Encore, including lower funding costs and extended maturities. In June, we refinanced the last of our legacy Cabot bonds with GBP250 million of new senior secured notes with a 325 basis point lower coupon while also extending the maturity from 2023 to 2028. We also expect the interest savings from these new notes will pay back the call premium from the redemption of our previous notes by the end of 2021. Available capacity under our global RCF was $720 million at the end of the second quarter, and we concluded Q2 with $175 million of nonclient cash on the balance sheet. With our strong balance sheet, our financial flexibility and access to a variety of capital sources, we are well prepared for the opportunities that lie ahead. With that, I'd like to turn it back over to Ashish.

Thank you, Jon. I'm proud of our accomplishments in the first half of 2021 and excited about the opportunities ahead of us. Reflecting on the past year and a half, marked by constant and unprecedented changes in our personal and professional lives, I feel proud of my more than 7,000 colleagues at Encore, who are spread across many countries globally. Each of them has navigated various COVID-related challenges affecting their families, health, and communities. They have faced these ups and downs admirably. Through it all, they have remained focused on our mission to create pathways to economic freedom for our consumers and our vision of making credit accessible by partnering with consumers to restore their financial health. We recognize that every consumer's situation is unique, and we take pride in understanding each individual’s circumstances to find the best solutions for resolving their debts and enhancing their financial well-being. Our work at Encore is guided by our three core values: we care, which means putting people first; we find a better way, ensuring we deliver our best; and we are inclusive and collaborative, embracing differences so that everyone can thrive. Together, our mission, vision, and values establish the foundation of our organization and the performance that follows. To maintain strong results and plan for a successful future, we are committed to executing our strategy, which is vital for enhancing long-term shareholder value. We clearly understand our financial priorities and their significance in building upon our successes. Our bond refinancing in Q2 reaffirmed the advantages of our global funding structure. We remain focused on achieving our balance sheet goals, which include preserving our financial flexibility, targeting leverage between two and three times, and maintaining a solid BB debt rating. In line with our capital allocation priorities, we adopted a disciplined approach to purchasing portfolios with attractive returns in the second quarter. Additionally, we continued with share repurchases in Q2 after initially starting them and receiving board approval to increase our repurchase authorization earlier this year. Concerning our operating and financial performance, our returns remain very robust, and we are dedicated to providing strong returns on invested capital through the credit cycle. Looking to the future, I am excited about our business for the rest of this year and beyond. We are operating at a high level, backed by a strong liquidity position and a flexible balance sheet, which will enable us to seize future opportunities. Now we are happy to answer any questions you may have. Please open the lines for questions.

Our first question comes from David Scharf from JMP Securities.

Just a couple here. First, regarding Europe, maybe because U.S. obviously may take a while in terms of the credit environment turning, but can you give us your best guess about whether Europe, in your mind, is on the cusp of an inflection point where we'll see a meaningful return of supply at prices that you find conducive? Or it seemed to be a little bit of mixed messaging there on the pricing versus the supply front in the prepared remarks. So I wanted to make sure I didn't misinterpret.

Yes. Well, thanks for your question, David. So let me provide a bit of context on the overall environment, and then I'll let Craig jump in after that with more color. So in general, in both U.S. and Europe, there are similarities, right? So as delinquencies and charge-offs are low, given how the consumers have behaved, the supply is lower. Now in U.S., all the banks who sell regularly have been selling. It's just that the delinquencies and the volumes have been lower. In Europe, particularly in U.K., what we found is banks stepped away last year, middle of last year, from sales a bit. So that compounded the reduction. But now they have come back, and we are seeing that. So the increase from relatively compared to last year is there. But U.S. banks have always continued to sell. So that's the environment. And I'll let Craig chime in with a bit more color on whether supply or pricing in U.K. as you wanted to know.

Yes. Thanks, Ashish. David, I think Ashish has summarized it well. I think you've got to think about it, David, from a demand and a supply side here in terms of the European market. When I talk about Europe, I'm going to focus probably more in the U.K., which is our largest market. If you think about what's happening within our clients right now, credit card balances remain down compared to what they were previously. We are seeing that decrease start to slow at this time. They are still decreasing, but the rate of decrease has slowed at this point. So we may be approaching an inflection in terms of consumer credit balances. Delinquencies do remain low at this particular point. The consumers still appear to be in quite a strong position, and we see that with low delinquencies across many of our clients at this stage. We have seen supply start to come back to market, as Ashish mentioned. Many of the players stopped selling last year. They are coming back. They are bringing paper back to the market. On the demand side, we then see we have a number of well-funded experienced industrial players in this market. And we're all looking at this paper at this particular point in time. I would say pricing is back to, at times, maybe a little above where it was at pre-COVID levels. And we continue to maintain that capital deployment rigor at this particular point. Hope that helps.

Yes. No, no. It does. I mean, it certainly sounds like that market might see credit and selling behavior normalize quicker than the U.S. So just a follow-up to that, just a math question. I know I could plug in some assumptions and try to back into this, but you're equipped to provide it probably more quickly. Could you give us a sense generally how much you would have to deploy in the second half of the year to close out the year with ERC flat from where it was at June 30?

This is Ashish, David. So let me just provide one more color to your comment that you had at the end of Craig. So I would say in terms of market normalization that you were looking at, so U.S. has been more normal. So sellers never stepped away.

Oh, I apologize. I was using the term the way the card issuers and their earnings calls have been using it in terms of loss rates rising to more normalized levels.

Yes, I wanted to clarify the sales environment. Delinquencies and charge-offs are low in both markets, while spending is increasing. New card activations in the U.S. have returned to normal based on recent reports. Many factors are starting to shift, and we will see how government programs affect consumer behavior. Eventually, I believe lending levels and charge-off rates will normalize. Regarding your second question about ERC, that depends on our collection performance. We have been collecting effectively and currently hold $8 billion in ERC. Our focus is on returns rather than hitting a specific ERC target, so we maintain that discipline. The collections will influence the period-end ERC, but it's important to note that the overall ERC size is substantial at $8 billion.

Your next question comes from the line of Mike Grondahl from Northland Capital Markets.

Can you talk a little bit about how you're thinking about collections? Maybe if you could comment on July and then how you're kind of thinking generally about the second half of the year. And I'm asking that question in light of that $600 million in 1Q, $600 million in 2Q, how you're thinking about it.

Thank you for your question, Mike. Our focus is on maximizing long-term value from our portfolios. Collections depend on both our efforts and consumer behavior. As we’ve discussed in the context of consumer financial services, there was an acceleration in payment rates and debt resolution in Q1, which continued into Q2. Many consumers, whether due to being at home or having higher savings, chose to manage their financial obligations. This trend is ongoing, but it is difficult to predict future rates, especially for the second half of the year. We are committed to long-term collections, providing suitable payment arrangements, discounts, and terms that help consumers while maintaining value. Consumer behavior in the latter half of the year may be influenced by the unusual circumstances of the past 18 months, making predictions challenging. Reflecting on a year ago, there were significant discrepancies between expectations and the actual outcomes. We are well-prepared with sufficient call center capacity as we have received increased consumer inquiries. Our digital capabilities are robust, and many consumers prefer engaging with us through those channels. We have also enhanced other collection channels. Our aim is to maximize value from our existing portfolios while also continuing to acquire new accounts with favorable returns, which will contribute to collections in the latter half of the year and beyond. We will see where we end up by the end of the quarter.

Sure. That's fair. Any thoughts on July? Can you comment on that month?

I will not comment on that, Mike. A year ago, I think we provided some color for the first month into the quarter. We've not done that typically, and we're not going to get into that at this point, how July is going.

Got it, got it. And then the buyback, the $27 million that was in 2Q after the $20 million that was in 1Q. Is that about a rate that we should think of going forward? Or is it going to be more mechanical based on purchase levels and leverage, it could be higher than $27 million. It could be lower. How do you want people to think about the buyback going forward?

That's a great question. As we began buybacks this year, it's important to note that for many quarters, we have been generating excess capital, which is one reason we initiated this. Additionally, we are approaching the lower end of our leverage target of two to three times. When you consider these two factors together, it led us to start repurchasing shares, and we bought $47 million in the first half of the year. At the same time, we expanded our authorization to a multiyear program of $300 million, which our board approved, revising it from the original amount of $50 million. This sets the framework and parameters for our operations. We plan to allocate capital based on our priorities, with leverage being one target. However, any future repurchases will depend on our strong balance sheet, ensuring sufficient liquidity, and maintaining continued strong financial performance.

Our next question comes from the line of Mark Hughes from Truist Securities.

Any historical perspective on supply? Do you see a market that's restricted and then opens up? And I don't know if there is any historical precedent, but could you see people coming back in a flurry of activity trying to make up for lost ground and then it evens out? Or any historical perspective would be helpful.

I think historical perspectives are there, Mark, but I'm not sure how to extrapolate or use them for futures. In the great recession time, the charge-off spike was very rapid, and many players who didn't sell also sold in that time. 1.5 years ago or a year and four months ago, banks thought something similar was about to happen. They increased their reserves, but they never materialized into losses. And then the other factor is at times, for example, U.S. is heavily forward flow based. All the banks who sell are selling, they just have lower volumes. And in U.K., we found some banks stepping back and coming back in. And in Continental Europe, there's also a lot of secondary markets, so sales that other buyers have made and a lot of sales are from the stock that's built up over the years. So there's different factors that drive, and the outcome in each market will depend. So I'd be hesitant to try to predict exactly based on past behavior what may happen. I think as the economies are normalizing, they're normalizing in a very steady way. Lending is rising and people are spending more, and cards are getting activated. So it will normalize to a more normal level over time, I think, than some rapid reaction. Please go ahead. Sorry, I think you were trying to jump in. Yes.

Yes. No, and I appreciate your completing your thought there. How about from a buyer perspective? Do you think they may be front-end loading things, and therefore, this spike in competition, so to speak, might not last? Just curious.

We've found buyer approaches are different. There are many sectors in Europe, different kinds of paper. But on U.S. side, let me let Ryan jump in here, what he's seeing on the how the market is behaving and what the supply situation is. Ryan?

Sure. To respond to your question about increased buyer competition, we are not observing that. The market remains rational, with the same buyers continuing to purchase, albeit with a decreased supply due to lower charge-offs from sellers. Therefore, I wouldn't say there has been a significant shift in the competitive landscape in the U.S. Regarding the anticipated supply increase, we believe that, barring any unforeseen events, it will be a gradual rise rather than a sudden spike in the future. We expect to see a consistent increase in supply, likely starting later this year or early next year as we engage with our banking partners.

Jonathan, the $109 million in overperformance in the quarter, what was the comparable number in Q1?

Give me a second.

And while you're contemplating that one, the outlook for legal costs, how should we think about the absolute level of spending in the coming quarters?

Before we go to you, Mark, market was roughly $91 million, was in 2021 Q1.

Is it fair to assume then the collections environment, at least with that measure, was better, more robust in the second quarter? Because you've got the usually seasonally slower quarter, but you had the sequential increase, you had more overperformance. So is that a fair takeaway?

I probably should have Ryan weigh in from his perspective on collections, but I view Q2 as being a very strong collections quarter.

Yes. And then from the U.S. side, I think not much of a difference between Q1 and Q2, both very strong collections quarters. I wouldn't see a material difference between the two on the U.S. side.

Yes. And on the legal cost?

Yes, on the legal cost, Mark, so I'm going to let Ryan and then Craig jump in, but we have seen a pickup in our legal collections as legal activity has normalized. So on the U.S. side, Ryan, and then Craig, if you can just chime in on what that looks like.

Yes. On the legal cost side specifically, we're probably at a run rate number. We feel it was obviously depressed in the middle of last year because of the situation with the courts. But as that's picked back up, I wouldn't expect any material change in legal costs.

Yes. Okay. The same holds true for Europe, Ryan, the same dynamic in terms of last year versus this year and where we are today.

Then, Jonathan, you mentioned 119% performance on collections, 119% of ERC. Was that in the U.S.? That's combined. To clarify, that's a percentage of ERC at year-end. It indicates our performance relative to what we anticipated at the beginning of the year.

At year-end 2020?

Correct. And then you mentioned you were going to be selling portfolios in Colombia and Peru. What would you expect to clear on those sales?

So if I could jump in, Jon there and Mark. So we have not closed this transaction, so I'm a bit limited in what I can provide you, but we expect the FX-related losses of these portfolio sales will be around $15 million or $0.50 impact in Q3.

So is there going to be an EPS loss? Will that be recognized, and will it contribute to collections regardless of your proceeds?

No. It will not.

Okay. Okay. And then, Jonathan, the interest expense on a go-forward basis, you had, what, $44 million this quarter? Does that already reflect this refinancing? Or what will be the incremental impact?

Well, I think you can probably look to our interest expense going forward to be mid- to low 40s. A lot of that's going to be driven, obviously, by how much debt we have outstanding and, to a lesser extent, where rates go.

Our next question comes from the line of Robert Dodd from Raymond James.

Congratulations on the collections performance. Again, a question on leverage, coming back to the leverage and the potential buyback issue, and I appreciate the comments you've already made. I mean, obviously, the 1.9 times leverage, there's a numerator and a denominator effect. Obviously, you've generated a lot of cash, you've deleveraged, but obviously, also cash EBITDA, if I can call it that, has been extremely strong with the collections elevated. Obviously, it's been outperforming your expectations. So if EBITDA were to perform more in line with your expectations, where conceptually would that put you in your leverage target range? And how does that influence how much excess capital, if you will, you have available potentially to fund the buyback program? I realize that's a little tricky to estimate.

Thank you for your question, Robert. I'm not going to speculate on what future leverage numbers might look like. Our approach to buybacks is based on the excess cash or capital we have generated. It's crucial to consider our broader criteria, which is that leverage should be at the lower end of 2% to 3%. This consideration led us to initiate the repurchases. We also evaluate the overall strength of our balance sheet and liquidity, especially in light of our portfolio purchase outlook and strong financial performance. We have maintained these conditions for a period of time, which allowed us to proceed with buying back stock over the last two quarters. To clarify, leverage is considered a range of 2% to 3% rather than a specific number that would dictate the start or stop of buybacks. I hope this gives you a clearer understanding of our approach to repurchases.

Yes, I appreciate that. I have one more question regarding Europe. With the pricing situation worsening compared to pre-COVID levels, can you provide any insights on whether this is primarily due to supply scarcity? Even though some supply is returning, we know that many of your competitors in Europe have acted irrationally in the past. Are we seeing a return to those old habits, or is the current scarcity causing leverage to have less of an impact than it did in 2019 on controlling irrational pricing?

Yes. In the U.S., in both markets, supply and demand clearly influence pricing. When that balance shifts, pricing tends to increase. In the U.S., we observe a rational group of participants and no new entrants. Major buyers have plenty of liquidity. It’s a similar market overall, but with lower volumes. Pricing has remained stable in the U.S., and we notice some portfolios with slightly higher pricing, but generally, it stays consistent. In Europe, some players faced funding constraints prior to the pandemic, which have since eased. Now, there are many well-capitalized participants, as Craig mentioned. This, along with reduced supply, can lead to higher pricing for some portfolios, and we base our bids on our expected returns. Additionally, there are players with varying specializations, allowing them to pursue different types of paper. Overall, you’re correct that the lack of leverage constraints and funding is more typical in Europe now compared to pre-pandemic times. Craig, do you have anything else to add regarding Europe?

No, I think, Ashish, you covered the key elements. Robert, it's really about there's been a bit of a quiet period as it's coming back. In Europe, we've got experienced, well-funded industrial players. And as they're looking at that paper, some people look at it in a different way than we do. And you've got to also think when you're looking at Europe, there's lots of differences in terms of asset classes, what you buy and where. Many of the players in this sector we've each got a slightly different area of specialism, certain portfolios might appeal more to others. When we don't believe the return's there, we'll let it pass, and we'll move on to the next opportunity at that particular point in time. Europe is a big market, and we'll continue to maintain that capital allocation discipline that we've demonstrated in the past that's allowed us to be able to generate the sort of ROIC that Ashish had talked about earlier.

There are no further questions in the queue. I will now turn the call over back to Mr. Masih. Sir, please go ahead.

Thank you. That concludes the call for today. Thanks for taking the time to join us, and we look forward to providing our third quarter 2021 results in November.

This concludes today's conference call. Thank you for participating. You may now disconnect.