Park Lawn Corporation

Thank you, Lindsey, and good morning, everybody. Thank you for joining us on our call today.

Today's call is being recorded, and a replay will be available after the call is completed. Please be aware that certain information discussed today is forward-looking in nature.

Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please see our public filings for more information regarding forward-looking statements.

During the call, we will reference non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS.

Please see our public filings for additional information regarding our non-IFRS financial measures, including for reconciliations to the nearest IFRS measures. I will now hand the call over to Park Lawn's CEO, Brad Green, to open our discussion today.

Thank you, Jennifer, and good morning, everyone. In addition to Jennifer, with me on the call today is our CFO, Dan Millett.

I'll begin with a discussion of our business highlights in the quarter, and Dan will follow with a more detailed review of our financial results. I will then provide a brief outlook of what we expect from our businesses going forward.

After our prepared remarks, we will, of course, take your questions. In another challenging quarter, Park Lawn demonstrated exceptional results.

We achieved revenue of $93.3 million with comparable growth in revenue at our businesses of approximately 21% for the quarter and earned adjusted EBITDA of $24.2 million. Our adjusted EBITDA margin increased 6.6% to 26.1% for the fourth quarter and increased 2.1% to 24.1% year-over-year.

While the U.S. and Canada experienced an increase in COVID mortality during the fourth quarter, our team was prepared to meet this increased demand and the need for our services and support.

The integration of our operations over the past year allowed us to more effectively support our client families in this very difficult period as we were able to provide services were others either couldn't or wouldn’t. As a result, in addition to the increase in the death rate, we believe we have also experienced an increase in market share in multiple markets.

In addition to our strong operating performance for the fourth quarter, we are excited to announce significant activity on the M&A front. Prior to the end of Q4, we purchased a bolt-on funeral home strategically located in Benbrook, Texas, which will tuck-in nicely with our Dallas/Fort Worth operations.

More recently, we executed a series of purchase agreements in three existing core markets for Park Lawn, North Carolina, Tennessee and Wisconsin. In Asheville and Weaverville, North Carolina, we will be acquiring one funeral home in three cemeteries.

In Tennessee, we will be adding two funeral homes, three cemeteries, and one cremation business located in the Greater Columbia area. Finally, in Wisconsin, the business is consist of five funeral homes and one cremation business and in surrounding Appleton.

Each of these businesses complement and expand existing Park Lawn operations. These four transactions represent approximately 1,659 calls and 456 interments annually and once fully integrated are expected to add approximately US$3.6 million in adjusted EBITDA.

The three executed deals are all expected to close by May 1, subject to regulatory approval. I’d now like to turn the call over to Dan to review our financial results in more detail.

Thanks, Brad and good morning, everyone. You'll find a detailed breakdown of our fourth quarter and annual results in our financial statements and MD&A, which are available on our website and on SEDAR.

My comments this morning will focus on our fourth quarter operating results. During the fourth quarter, we saw increases in at-need call volume and correspondingly our total revenue was $93.3 million compared to $69 million for the same three-month period in 2019.

This represents an increase of $24.3 million or 35% over the same period in 2019. Excluding the impact of currency fluctuations, revenue growth from comparable business units in Q4 2020 was 20.9% over Q4 2019.

The increase in revenue from comparable business units was seen in both our cemetery and funeral businesses primarily due to increases in at-need services and is likely correlated to the increased COVID-19-related mortality in the fourth quarter. However, it is also important to note that many of the acquisitions made during 2019 are now fully integrated and as a result has seen significant improvements in their operating capabilities.

For example, acquisitions made in 2019, such as Baue, Horan and the Journey Group, as well as recent acquisitions, such as Family Legacy, Harpeth Hills and Floyd have experienced sales increases over the comparable quarter and internal expectations making a meaningful contribution to our results. The company's operating expenses, including general and administrative, advertising and selling and maintenance expenses increased approximately $10.3 million for the three-month period ended December 31, 2020 over the same period in 2019.

The majority of the increase is due to the acquisitions of the Journey Group in Q4 2019, Harpeth Hills, Family Legacy in Q1 2020, and the Bowers and Floyd transactions in Q4 2020. Other increases in operating costs were experienced in line with increased sales, but also as a result of changes completed within our corporate infrastructure in Q4 2019.

These corporate changes were by and large normalized at the end of Q4 2020 and we expect these improvements to support the current composition of the business with some expected future growth. As a result of exceptional sales within the quarter, strategic acquisitions made over the past 24 months and an effective use of capital, I am pleased to report that our quarterly earnings were up significantly over the same period in 2019.

Our net earnings attributable to PLC shareholders in Q4 2020 was $6.3 million or $0.209 per share compared to $0.5 million or $0.018 per share in 2019. Furthermore, adjusted net earnings attributable to PLC shareholders for the fourth quarter of this year was $10.5 million or $0.35 per share compared to $4.8 million or $0.16 per share in Q4 of 2019.

This represents an increase of almost 120% in adjusted earnings per share. Our adjusted EBITDA attributable to PLC shareholders for the current quarter was $24.2 million or $0.81 per share compared to $13.4 million or $0.45 per share for the same period in 2019.

This represents an increase in the adjusted EBITDA per share of 79% over the same period in 2019. Next, let me say a few words about our balance sheet.

We ended the fourth quarter with approximately $144.8 million drawn on our revolving credit facility, other debt of approximately $12.3 million and cash on hand of $31.5 million. Excluding our hybrid debentures, our net debt was approximately $125.5 million at the end of December.

Also, our leverage ratio was approximately 1.55x based on the terms of our credit facility and approximately 2.61x, including our standing debentures. With our balance sheet currently well-positioned for anticipated growth, we believe our liquidity of approximately $105 million after the recently announced acquisition subsequent to year-end will provide us the ability to take advantage of the M&A opportunities we are currently pursuing and allow us to further drive earnings per share growth.

Finally, as expected with another strong quarter, our pre-need backlog has continued to expand. As at December 31, 2020, our pre-need backlog consisting of deferred revenue and pre-need trust funds totaled $469 million compared to $409 million as of December 31, 2019.

Additionally, our pre-need insurance backlog while not recorded on our balance sheet was $369 million as at December 31, 2020 versus $288 million as at December 31, 2019. Financially, it was a very successful year for Park Lawn, but it came with unique challenges, opportunities, and developments that won't soon be forgotten.

Our ability to maintain and improve operations, integrate several large acquisitions and provide exceptional service to our client families are a true testament to our focus on being North America's premier funeral, cremation and cemetery provider, and the indisputable choice for funeral and cemetery services in the communities we serve. I will now turn the call back to Brad for some comments regarding 2021 and closing remarks.

Thanks, Dan. 2020 has been an unprecedented year where the need for our services has been like no other time in recent history.

Our frontline team members have experienced the impact of the pandemic firsthand through the client families we have served as well as their own personal challenges and experiences. Throughout the year, our frontline team serve with professionalism and courage and their commitment and dedication to the business has been unwavering, driving successful results that we present today.

I am certainly thankful for all their help support and hard work, which they consistently provide whether without a pandemic and as our investors, I hope you guys appreciate it as well. Looking forward, while we don't expect and certainly do not want to see the volumes we recently experienced in Q4 persist through 2021, there is an expectation of financial growth over our 2020 results, driven primarily through acquisitions, pre-need sales and continued improvements in our operating performance.

As Dan mentioned, the strength of our balance sheet will allow us to continue to grow in the near-term through both M&A and organic opportunities. We were excited to announce the four transactions yesterday Winscott, West, Wichmann and Williams, which are all fantastic additions to our existing operations in Texas, North Carolina, Wisconsin and Tennessee.

Our M&A pipeline and growth opportunity is a strategic advantage for us and we pride ourselves on our relationships with our former owners as well as our current understanding of their businesses. Our pipeline is robust and we will continue to grow through acquisitions.

In addition, while we saw increased at-need services during Q4, our pre-need business has also been a positive driver of topline growth throughout the year. As the pandemic has created a trigger event, this has allowed for additional conversations around the uncomfortable topic of death and supported our pre-need sales counselors.

We don't believe this is something that will soon be forgotten for several years. Finally, as we saw in several of our markets where COVID-related restrictions were relaxed, our average revenue per call rebounded to pre-pandemic levels.

We have seen our client families desire to remember their loved ones with a service, whether their choice is burial or cremation, and our sales teams continue to support permanent placement in their discussion with client families. It is because of these trends that we expect to see our average revenue per call show growth over our 2020 averages, which were obviously impacted by jurisdictional restrictions.

So again, even though 2021 will be a challenging comparison to 2020 comparable store volumes, we do have an expectation of financial growth over our 2020 results. That concludes my prepared remarks, and I will now turn it over to Lindsey for any questions.

Hey. Good morning, guys, and congrats on a very strong quarter.

Good morning, George. Thank you.

I just wanted to double click on that 21% comp that you guys experienced. It looks like the at-need jolt a lot of that, but do you have maybe organic growth number for the pre-need?

And we're at the end of Q1, just kind of wondering how the pre-need business trended in a quarter?

So the pre-need business, as I mentioned in my prepared remarks is continuing to be strong for us through the first quarter. As Jay has pointed out many times to people who've asked the question, the pandemic has caused a trigger event and it makes it a lot easier for people to talk about this and it's on the front of their mind.

And pre-need planning, planning for funerals and cemetery for parents and loved ones, I mean, that's something that's going to be again on the front of people's minds going forward long after the pandemic, we would think two to three years. So to answer the question specifically, we still see a strong pre-need growth through the first quarter.

Okay. And maybe shifting over to margins, it looks like we hit our 26% goal very early compared to kind of what you guys were looking at timeline wise.

I understand there's some seasonality that maybe how should we think of the sustainability of those margins going forward?

So I would love to tell you that we're going to hit 26% margins every quarter through 2021, but I don't think that that is necessarily realistic. I mean, it's our goal.

We've been marching towards that 26% margin for the end of 2022 for a while. It would be foolish to think that we hit that without the pandemic being a driver.

But at the same time, we started a year ago, actually a year ago to this day, pretty much, rebuilding, integrating and doing what we needed to do to get to those margins. So while I’m not surprised that we would get there more quicker than the 2022, you also have to basically recognize that part of what was driving that with the pandemic.

But I do expect to continue that margin march, and I still expect that we will be at 26% and maintain 26% and higher by the end of 2022.

It’s helpful. Thanks for that.

And just one last one, if I may, obviously with respect to – it seems like the stream of the acquisition that you have been doing seems smaller more accretive funds. I'm just wondering, are there any chunkier targets that you're looking at out there and are there any geographies that you'd like to get into that we're not currently in?

Yes. That's a good question.

And there's no doubt that 2019 saw very large acquisitions on behalf of Park Lawn. I know that because I was sourcing them and having them up personally at the time that that went down, and I would say that was a unique year where we saw that many large acquisitions.

So yes, George, we're still looking at big ones, but the expectation of growing a company that's gotten to our size is that you will see us do smaller acquisitions and more of them. And that's not necessarily bad news, right?

And bluntly, they're easier to integrate and they're highly accretive and they're in markets that we already know, and we have managers in place to run them. So you will see us do unlike 2019 where you'll see four or five large acquisitions in a year, I would think that you would see one or two in a given year with a smaller acquisition surrounding that.

And bluntly, I think my team, George, might kill me if I went through 2019 again with the [indiscernible]. So this is a little bit more measured and a little bit more to be suspected.

So to answer your question, again, specifically, yes, we're looking at some larger acquisitions, but I think the ones that you're seeing right now which I would – I’d say that there are two on this list that are medium and two are small. That's to be expected on a go-forward basis.

Okay. Thanks for the answers.

I’ll pass the line.

Good morning, everyone. Just to follow-up, if I may, on the margin question.

I'd like to comment a little bit differently, presumably with that strong same-store sales growth, you have some operating leverage. So how much of the gains do you think were operating leverage and how much were the other factors that you mentioned that could be more sustainable at lower levels of operating – and lower levels of same-store sales?

Yes. That's a good question, Irene, and I would answer this way.

Pre-pandemic, we had a plan that we were integrating the legacy acquisitions, and we had a plan on what we were going to do to increase the margins at the company because we had some bluntly businesses that were underperforming. So as we engaged in improving those businesses, the pandemic hit.

So the question you're asking me is how much of it was as a result of us integrating the legacy businesses and truly becoming 1 Park Lawn and breaking down the barriers between the countries, and then what's pandemic-related. I don't really have any answer for that question because I can't define it.

If I were forced to give a percentage of it, I would say it was almost half and half. And that's not taking the easy way out.

But internally when we talk about it, it would be foolish to think that we were – that this was all as a result of us operating the company better. But it's also foolish to think is all the pandemic.

So I would literally say 50-50, and I think you can then apply that to where you think our margins maybe by the end of 2021.

That's really helpful. Thanks, Brad.

And on this plan to get these underperforming assets up to where the belief was they should be, are you all over the way there? Are you part of the way there?

How would you kind of describe it?

I would say 80%. I'd say we're 80% to having the – I believe that from a management team, right, and that's where the battle starts.

From a management team all the way down to frontline employees, the 1 Park Lawn and being part of Park Lawn, that culture has been driven all the way through the organization. And I'm pretty excited about that.

And I think people are pretty excited to work here. That's a big part of the battle.

Now we're just basically doing some cleanup on the operation stuff and we've got one or two businesses that have been a little bit more of a challenge to bring up and not being able to travel a little bit at the beginning of the pandemic made that a little more difficult. So I would say we're 80% of the way there.

And by the end of June, if those businesses aren't where they need to be, then I'm going to start asking tough questions to my own team.

Yes. I don't think we like it when that happens.

Coming back to the M&A piece of that, the four W's as it were, what was it in particular about those individual acquisitions that really attracted you and what can we learn from that in terms of where you might be going next?

So if they fit, and let me explain what that means because there are different sizes. I mean, some of them are – one of them is particularly small and one of them is bigger than the others.

And it's kind of what we look at with all of our acquisitions. The first thing we look at is former owner motivation while they were former owners when we're talking to them.

But we look at the owner motivation, why are they exiting the business and who are they? Because I was just asked last week, if I could give a perspective acquisition candidate a list of people to talk to.

And I said, who do you want to talk to? You can call any of our former owners you want because they all going to tell you the same thing.

So I don't have the five I want you to talk to and the five I hope you don't talk to. So when we look at the Board – we look at our owners, are they a fit?

Why are they leaving? And when we get past that point, what is the business look like, right?

And how do they fit into our organization? Every business that we bought this past quarter fits into our organization well.

We already have a management structure in place there. We already have an infrastructure in that state.

We basically know who they are. And so whether they're small up to the larger ones, they kind of fit.

It's difficult to do four at once. Irene, we're not really staffed for that because we have three people in our acquisitions department plus me and those same people are responsible for it after the acquisition into the operation, and the operations people come to the acquisitions as well.

We’re never going to change that, or at least not why I'm sitting in this chair because I believe that that's very important to make sure the transition works well. So why did we pick those four?

They were a very good fit. We could do them all simultaneously and what is still a challenging environment to do an acquisition, and I’d be lucky to find four good businesses like that again, to close this quarter and we're working on that.

Outstanding. And then just one final one, if I may.

Where are we on the testing and the rolling out of the new IT platform?

Yes. So FaCTS is rolling out quite well actually.

We do beta testing through the fourth quarter into the first quarter of this year and we go live tomorrow in one of our markets kind of FaCTS standing alone. I would have liked it to rollout faster.

I don't know that it's an excuse to say COVID slowed this down, but it's actually the truth. And I fully still expect that FaCTS will be live and used by the company by the end of this year.

Excellent. Thank you, and good luck with that tomorrow.

Thank you.

On revenues, is the U.S. number being better expected to mostly the market share gains or do you see some effect – some pull-forward effect of COVID-19?

Hey Scott, I apologize. But first off, good morning.

I apologize, I missed the first part of your question. I don't know if it was on my end or yours, but do you mind repeating that for me?

Sure. Just wondering if the better than expected U.S.

revenue number is due mostly the market share gains, or would you think there's also some kind of pull forward effect of COVID-19? In other words, do we see some sort of natural recession in revenue growth as the year progresses?

So that's a good question. Pull forward, I've been asked that question several times over the past quarter or two quarters by investors as well as people within the industry.

SCI obviously has come out with different modeling they have, and they've expressed what they think about that. And those guys are pretty smart.

So I think that – I think it would be rational to believe that COVID and COVID-related deaths did cause a pull forward, if you will, deaths into 2020. I just don't like getting the business of trying to predict what that was or what the number of it was because I think we can all agree on this phone.

Everybody's prediction and model of what COVID did and what would happen with COVID, it's pretty much been wrong. So I know there's a pull forward effect.

I just can't put a percentage on it. What's different about us, I believe is that while we might see some – it might be a tough comparison for same stores at 2021 to 2020 by Park Lawn.

Our growth is not there as it is in some of the other companies. Our growth is in acquisitions and continuing to improve our operational performance.

So if you're asking me if the pull forward deaths are going to result and that’s having a decrease in our revenue or a decrease in our growth or earnings, I don't think that's the case. Because as I said in my prepared remarks, I think that you're going to see us continue to grow through acquisitions and other things.

So you will continue to see us improve our financial performance year-over-year as we have in the recent past.

Okay. Thanks.

That's good. Just also on the revenue side, are you seeing any changes in average revenue per call trends since Q4?

Yes. I was ready for that question and the answer is yes.

And it's interesting to us because we've been keeping an eye on this as you know because when we first came into the pandemic, we saw a drop. I think we reported around 8% in the second quarter compared to the first quarter.

And then we saw it improved in the third quarter to about 3.5%-ish as the lockdowns and the jurisdictional restrictions started to ease. Interestingly, as we went into the fourth quarter, when we saw what's been referred to as the second wave, at least here in the U.S., you saw those – we basically picked up again to just a little bit north of 4%.

Now where does that store in? Well, now that we're seeing the jurisdictional restrictions ease in most of our major markets through the first quarter, we've seen a full recovery in that average.

So what does that say to me? It says what we have been saying all along, and that is, it was the jurisdictional restrictions that was putting pressure on our average, not a change in consumer preferences.

As a matter of fact, we actually saw when you tell people no in certain of our markets, especially in the Southern part of the U.S. when the government tells them there's something they can't do, they tend to react negatively to that and they want to do it.

So again, to summarize the answer, while we did see some pressure on the averages in 2020, what we're seeing in 2021 is exactly what we expected and that is the moment that the jurisdictional restrictions were relieved. Consumer preferences went back to doing what they wanted to do.

Where do you see that trend going? You mentioned the people doing what they are told they can't do, and that's for the American.

Do you see that the average revenue per call actually increasing over pre-pandemic levels?

I would be guessing, we've all lived through this. I think we've all heard and talked about and seeing death in turns that has never happened in anyone's last lifetime, whether you're nine or 90.

What I think I can say is that the process of grieving, remembering our loved one who’s died. Those services have been kind of pulled to the forefront more than ever, and the desire to meet, gather, remember people go through that process to me seems even more appreciated now than it might've been before a pandemic.

So I think people are going to add a minimum, Scott, go back to doing what they were doing before. I wouldn't be surprised, if we didn't see an uptick in services, but that's a guess.

That's a full-blown guess. And I'll make one more analogy.

The moment people open restaurants around here, everyone wanted to go out and eat. So I mean – and so I just think, as people are allowed to do things again, they'll want to do things that they missed.

And I don't see how that wouldn't apply to our industry as well.

Yes. There's a real liberating effect to restrictions being lifted.

Just one more sort of housekeeping item, is the current liquidity position about $120 million after the acquisitions?

Scott, it's Dan here. After the acquisitions, I think I mentioned our current liquidity is more around $105 million in my remarks.

Okay, great. Thanks very much, Brad and Dan.

Thank you.

Good morning.

Good morning, Maggie.

I'm wondering if you guys can give us an update on some of the organic projects that you have doing on. Sitting here in Toronto, we're still pretty restricted.

Don't know if that's been impacting your Westminster project. And I'd also be interested just in a general update on the other things that you guys have going on?

So the restrictions in Toronto definitely slowed down our construction of the Westminster project. I think that we're now looking at a fourth quarter completion and without the pandemic, I think it would probably actually been done by now.

So there was a fairly significant slowdown on the Westminster build. As far as other organic projects, those continue to move forward as you would expect them to be.

We had a Board meeting yesterday. It's not a surprise.

You have Board meetings before you have earnings calls and we just approved a new build of a funeral home here in Texas on one of our cemeteries. So the projects that we have whether they be Mausoleums, Cremation Gardens, new funeral homes and Eternal Sunset at New Jersey is still growing leaps and bounds.

So our organic projects are moving forward with the exception of the Westminster project in Canada. Most of them are moving forward at pre-pandemic levels.

I mean, I've been in probably six or seven states in the last three weeks and things are getting back to much more normal than they were when I was in those same states three months ago.

Okay, great. Thanks for that update.

And just a final question for me, circling back on some of the comments others made. Around the competitive environment with regards to acquisition, it sounds like obviously this has been a very tough operating environment for the mom-and-pop or smaller operator for a number of reasons.

So first part of my question is, do you think that that has driven an uptick in terms of families who maybe looking for succession plans for their smaller funeral home or cemetery businesses? And then secondly, has that sort of doubly impacted the opportunities that you've had from market share gains?

So from the acquisition standpoint, our pipeline has been robust for a while. People are wanting to join our company and knock on wood that continues for a very long time.

Am I seeing an uptick in phone calls to us? Yes.

Is it because the pandemic is letting up or is it because people are tired. Your guess is good as mine on that.

I will tell you that just talking to people in the industry, it's definitely running or having a death care company in the middle of a pandemic has not been easy. And it's certainly not been easy on the people who have a single rooftops or two rooftops.

So yes, Maggie, I think that that's causing people to kind of reflect on what they're doing. I mean, we're worried about our own employees burning out and having difficulty, and Jay and I are addressing that bluntly as we speak just to make sure that people are okay.

So do I think that that's going to push acquisitions forward? Yes.

I think people are going to probably look at their succession plan. As far as growing market share, if you listen to SCI’s phone call, they said something similar to what we've experienced, and that is – and given our size and given their size, when you have multiple locations in a market, you can – if one of them shuts down, you can move business to the other one.

If someone gets sick in one and you have to quarantine the employees, you got other employees around. We definitely saw in many of our markets people at other funeral homes that either couldn't or just flat wooden serve families and we never did that.

So if the history proves itself to be consistent with what we've seen in the past, if you serve a family once and serve them well, they come back or they tell – or they tell other family members and friends. So yes, I think we've earned market share through the pandemic, but it would be foolish to be on the phone call and say record, record, record.

It's all because we're having an awesome operating model. That's not it.

It was definitely a part of that due to the pandemic.

Thanks, Brad. Thanks, Daniel.

Have a great day.

Thank you.

Thanks. Congrats on the quarter guys.

Thank you very much. Good morning.

So looking at the great comparable business growth in the quarter, and maybe digging deeper on the market share gains. If you look at your at-need volumes versus the pace of maturing pre-need, can you guesstimate the magnitude of the market share gains that you think you got from your load balancing and how well you've done so far in 2021?

Yes. So we're continuing to grow through the number of pre-needs that we had.

I don't know that the mix necessarily changed. Dan may have the exact number for you, but it's been pretty consistent for us.

I mean, in other words, as I was looking at all of our numbers, that didn't jump out at me as something, oh, I need to circle this and be prepared to talk about it. So I really think our at-need to pre-need is pretty much the same.

It was not the – that was not the case in the second quarter. Through 2020, it kind of equaled itself out.

So I'm not seeing a big difference there at all. So the at-need – we're replacing the pre-needs that are going at-need, if that was your question.

Great color. Thanks.

And then the completion of the three mausoleums resulted in the recognition of about $3.6 million in deferred sales. Given the other construction projects that you guys have on the go, are there any other windfalls like that associated with construction completion?

Yes. So that should be – that's our normal business, right?

You should see this as we continue to roll through. I mean – so the way the world works and maybe you don't want this level of detail, but these projects are on a list.

And we're looking at them, and the use of our capital and how we spend it is obviously very important to us. But if one project gets completed, another one is going in.

And so you should see this type of activity from us as we continue to go through. Does that answer your question?

Absolutely. Thanks.

I'll turn it over.

Thank you.

Hi. Sorry, I was muted.

Just a quick follow-up question [indiscernible] point. Do you see any change to the dividend policy now that you've got pretty good acquisition and internal growth prospects?

Just thinking about use of capital.

On the dividend policy, is that what you said, Scott?

That's right.

Yes. So we talk about that every Board meeting.

We talked about it yesterday. We didn't – there's no change in what we're doing right now that I can see in the very near future.

I believe that our highest and best use of capital continues to be on acquisitions and growing. Our internal rate of return is pretty good especially on the ones that we started doing since 2019.

And so I don't expect there to be any changes in our dividend policy, but it is something the Board discusses at every…

And yes, I'm just wondering if it could be lowered. You're sitting below – quite a bit below 2%, which is maybe the bogey for inclusion in dividend funds?

Yes. Scott, again, it's something we're looking at, but we're just continuing to grow.

And as Brad said, I think right now, as it stands today, our highest and best use is within the business.

Great. Thanks.

Great to hear.

Thank you.

Hello. I have just one question about your debt metrics.

I was wondering if there is any update on your leverage target. Previously you sort of removed the target – the overall target, not the covenant-related targets.

I was wondering if there is any update on it and to return these targets and what are they? Thanks.

Yes. Edward, it's Dan again.

We are not publishing a leverage target and it's important for us as we kind of grow to be flexible in our use of various capital sources, including debt. We'll look to using the best source of capital based on the situation at the time, the acquisitions in the pipeline and what we need to do.

But I would say with respect to our growth and the size of our organization, as we get larger and our risk profile decreases, we do begin to have more appetite for using debt to further that growth. Currently, we're sitting at 2.67, and I think our peers are kind of in the mid-3s and the mid-5s.

I definitely don't think we'll get up to the mid-5s. But we're definitely going to grow from the 2.6 we're currently at to help support some of the growth initiatives we currently have on the go.

Okay. Thanks, Dan.

I really appreciate everyone joining us today, and I hope you all have a great week. Thank you very much.