Park Lawn Corporation

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0:31 Thank you, Holley and good morning, everybody. This is Jennifer Hay and I'm General Counsel at Park Lawn.

Thank you for joining upon today’s fourth quarter 2021 earnings call. Today’s call is being recorded and a replay will be available after the call.

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. 1:06 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.

1:34 I will now hand the call over to Park Lawn’s CEO, Brad Green, to open our discussion today.

1:41 Thank you, Jennifer and good morning everyone. In addition to Jennifer, with me on the call today is our CFO, Dan Millett.

We had a solid fourth quarter that capped get another strong financial year of financial performance and growth. During Q4, we experienced revenue growth of 10% to roughly $99.5 million, over a tough comparable quarter from 2020 and for the full year saw revenue growth over 2020, a 14% to approximately $369.5 million despite significant foreign exchange headwinds year-over-year.

2:17 As we continue to see a lessening effect of COVID-19 in the communities we serve. revenue growth from our comparable businesses during the quarter grew modestly by 0.7% and resulted in a 10.4% increase from the prior year when excluding the foreign exchange headwinds.

Also for the quarter Park Lawn achieved a 4% increase year-over-year and adjusted EBITDA to $25.1 million and an approximate 25.3% margin. 2:46 For the fiscal year 2021, we saw a 20% increase in adjusted EBITDA to $95.6 million and a 25.9% margin.

As we expected we saw a decrease in comparable business call volume in the quarter, relative to the COVID impacted Q4 2020. However, we continue to see the average revenue per call increase as our client families have continued to be very interested in celebrating and memorializing their loved ones after being told that they could not do so during the pandemic restrictions.

Year-over-year in our comparable businesses, the average revenue per call grew by approximately 9%. From the cemetery perspective, the pandemic continued to act as a significant triggering event supporting strong pre-need sales activity and as we've mentioned previously, we expect that the triggering effect will continue to positively impact pre-need sale, as the pandemic will not be forgotten anytime soon.

3:46 Turning to acquisitions to put it broadly, we had both a very successful quarter and year and executing our growth strategy. During the fourth quarter, we closed on 5 businesses, which added 9 funeral homes, 3 cemeteries and one onsite to our existing portfolio.

Significantly, the Ingram business that we closed in December, provides us entry into another new high growth market in Georgia. Throughout the year, we complete a total of 10 acquisitions, deploying approximately $125.7 million.

The combined transactions representative online transactions represent a total of 6,306 calls, 1,229 interments, coming from 26 stand-alone funeral homes, 7-stand-alone cemeteries, and 4 on-sites. All of these acquisitions were added within our range of previously stated multiples.

4:36 I'd now like to turn the call over to Dan, who will review our Q4 financial results in more details.

4:43 Thank you, Brad. And good morning, everyone.

You'll find a detailed breakdown of our fourth quarter results in our financial statements and MD&A, which are available on our website and on SEDAR. My comments this morning will focus on the operating results for the fourth quarter.

As Brad mentioned, Q4 of 2020, was anticipated to be and was a tough comparable for Q4 2021. Despite this, we were still able to achieve total net revenue growth of approximately 10.1% over the quarter from $90.4 million to $99.5 million.

While continuing to experience a foreign exchange headwind of approximately 3%, due to the appreciation of the Canadian dollar. 5:32 As we previously shared, approximately 90% of our revenue is generated from our US businesses.

So this headwind can have a meaningful effect on our results. However, beginning in 2022, we are transitioning to a US dollar reporting currency, which will help reduce the volatility experienced from foreign exchange differences.

Revenue growth from our comparable businesses grew modestly at 0.7% year-over-year, excluding the foreign exchange headwind, but decreased by 2.5% when accounting for the foreign exchange, impacting this growth was 3 mausoleums (ph) delivered in Q4 2020, providing approximately $3.6 million of revenue at a very high margin, and no mausoleums were delivered in Q4 2021. 6:16 However, looking forward, as we see the death rate continue to be less impacted by COVID and COVID related deaths.

We expect the growth in our comparable businesses to normalize further into 2022. Also, during the quarter, the company's operating expenses including General and Administrative advertising and selling, and maintenance expenses increased by approximately $5.6 million for the three month period ended December 31, 2021, over the same period in 2020.

This increase is primarily the result of acquired operations partly offset by the impact of foreign exchange. 6:53 As a result of another quarter of exceptional sales and a commitment to operations are net earnings attributable to PLC shareholders for Q4 2021 was approximately $8.96 million at $0.26 per share, compared to $6.26 million, or $0.21 per share for Q4 2020, representing 43% increase in the aggregate.

Furthermore, the adjusted net earnings attributable to PLC shareholders for the fourth quarter of this year, was approximately $12.8 million or $0.37 per share, compared to $10.5 million, or $0.35 per share in Q4 2020. This represents an increase of approximately 22% and adjusted net earnings.

7:37 The net earnings and adjusted net earnings on a per share basis were impacted by the equity raise completed in September of the year, as approximately $4.5 million more shares were outstanding on a diluted basis year-over-year. As Park Lawn continues to deploy its equity into accretive acquisitions, we expect to see further growth in our per share metrics.

8:00 Turning now to the balance sheet, we ended the year with approximately $110 million drawn on our revolving credit facility. Other debt of approximately $17 million, finance leases of approximately $6 million, and cash on hand of approximately $26 million.

Excluding our debentures our net debt was approximately $107 million at December 31, 2021. At the end of December, our leverage ratio was approximately 0.98x based on the terms of our credit facility and approximately 1.78x including our outstanding debentures.

As previously indicated, as we move through the upcoming quarters and continue to expand our business through acquisition activity, we expect the leverage ratio to gradually increase. 8:45 We estimate our current liquidity is in excess of $200 million, which is readily available to be deployed in ongoing and future organic and acquisition growth initiatives.

Finally, as we close out 2021, I want to highlight again, that beginning January 1, 2022, we have transitioned to a US dollar financial presentation currency to minimize some of the impacts that our businesses sustained from foreign exchange risk. So starting with our next quarter, Q1 2022, we will be reporting in USD.

I will now turn the call back to Brad for some closing comments regarding what you can expect as we move into 2022 and beyond.

9:28 Thanks, Dan. As you know, in 2018, we announced that long-term aspirational goal of achieving CAD100 million, which equates to about US$79 million and pro forma adjusted EBITDA by the end of 2022.

Although we have just started 2022, before we considered any impact of potential acquisitions this year, we expect this number will be exceeded. We began to anticipate this will be the case in early 2021, as it many of you listing on the phone.

As a result, we began an extensive internal strategic process in the early part of 2021 that focused on our goals beyond 2022. And I'm certainly glad that we did because we started getting more and more questions on that subject is 2021 due to a close.

As a result of this strategic process, we have a new long-term aspirational target to achieve by the end of 2026, which is as follows. 10:25 Park Lawn expect that it will achieve a total of US$150 million, pro forma performance adjusted EBITDA translating into adjusted net earnings $2 per share.

Before I go through how we plan to get there, I think it's important to again emphasize that we are changing our currency presentation for 2022 as Dan just mentioned. We are announcing this aspirational target in US dollars, not Canadian dollars, which is different than our 2018 goal.

So, in US dollars, we plan to go from US$79 million US$150 million in pro forma adjusted EBITDA by the end of 2026. 11:03 Now, how do we plan to reach this new 5-year aspirational goal?

We know where we came from. We know how we got here, so we know what it will take to return the goal.

First, as a premier operating company, a funeral and cemetery businesses, we will continue to capitalize on our ongoing operational improvements in both our existing and acquired businesses to continue revenue growth and margin expansion. 11:28 Second, we expect operational and financial efficiencies through the full implementation, deployment and integration of our proprietary industry software system.

Third, our organic growth opportunities will continue to play a part in these goals such as continuing to identify onsite opportunities at existing cemeteries, like you can see with our completed onsite in Houston are almost completed Westminster project in Toronto, or what we've just begun at Waco Memorial Park, one of our Texas properties. 11:58 Fourth, the expansion and addition of new inventory at our existing cemeteries, which would include things like new mausoleums, new permanent placement offerings for cremated remains and further development and expansion of gardens for traditional burials or private estate.

Finally, and probably the most important, we fully expect to continue to pursue acquisition opportunities in high-growth markets in both the US and Canada. 12:23 As you've seen in the past few years, our focus has transitioned to high performing businesses and strategic markets, as these businesses tend to not only integrate more quickly but are generally more creative.

You've also seen us focus on strategic tucking opportunities where the addition of a new rooftop offers considerable benefits. We expect to continue with the pace of US$75 million to US$125 million acquisitions per year, depending on the opportunity.

We're excited about what's to come as we look into 2022 and beyond. 12:23 Finally, I want to finish our call today by commending our teams for their extraordinary performance in all respects, especially during the last two years in the most unusual and challenging of time.

Through their hard work dedication and achievement, we have a company have been able to deliver to our shareholders tremendous growth and continued opportunity since the end of June 2018. Since that time, we've delivered an increase of over 300% and adjusted EBITDA, and an increase in adjusted net earnings per share of 119%.

13:24 As we have repeatedly stated, We are not a consolidator. But an operator of funeral homes and cemetery businesses that grows through acquisitions.

It is this vision which is shared by our entire team that makes us different, makes us successful and will continue to make us successful as we look towards 2026. That concludes our prepared remarks, and I will now turn it over to the operator for any question.

14:20 Yes, guys. Good morning, I just wanted to ask you a little bit about your long-term aspirational, EBITDA guidance of US$150, looks like it implies about 50% CAGR, should we assume that a third of that maybe Brad is organic, and two-thirds of it is M&A kind of, in line what we've been doing.

14:41 Yes, Georgia, truth be told, I think a little bit more right now would be on the acquisition side. As we've gotten a lot of our existing businesses, made improvements to those businesses.

And as we, in the near term, feel a little bit of effect from COVID. I think that's going to be a little bit more weighted to the acquisitions.

But kind of as we get further along, in our -- in our goal, I think that we'll -- we'll start to flip maybe a little bit closer to what you're seeing, as we see, some of the COVID stuff, eliminate. And we get into some of that boomer generation.

15:26 Yes. That's probably a good segue for, I guess my next question, maybe look at it specifically for 2022.

Do you guys think you can actually maybe grow organically at all? I asked that because your US competitors seem to have gotten for quite a bit of revenue decline in ’22.

So I'm just wondering what you guys are thinking, organically speaking?

15:48 Yes, George, I think our kind of guidance would be the same as we did, as we suggested in the end of Q4 last year, and that is we came into this year expecting pretty much that with the constant we had, we would have pretty much flat organic growth. We knew that we would grow by acquisition or thought we would grow by acquisition.

So we basically said that compared to our the other books that are publicly traded out there, that we felt that we would grow no matter what the impact of COVID was. And I guess you're referring to SEI (ph) came out at that same time last year, and they had a much different opinion on what they saw the market was going to do, they were modeling funeral volume going down -- they were modeling funeral averages going down.

They thought people would be reluctant to gather in large groups, these were all things that they said during their conference call this time last year. And we just took a different approach.

16:49 I said during our conference call at this exact time last year, in response to a question from Scott Fromson, that we respect those guys and understand that they have modeling and they're smart. But we took a different approach.

We're doing it again this year, the same way. They're seeing a significant pullback, because they believe that the deaths that occurred during the pandemic will all be pulled forward into 2022.

We just don't believe that's the case, we believe it will be spread out more than that. So we'll say the same thing that we did last year, we expect modest organic growth, because some of our tougher comparables, you just saw one, we'll have another one in Q1 of 2022 and then it feels like things are getting back to normal for us.

So we'll see some organic growth, but certainly not a pullback. So we got it right this year.

Maybe our competitors will get it right this year, but we feel pretty strong about that answer.

17:49 Okay. Appreciate your comments.

Thank you, Brad.

18:02 Good morning, everyone. RBC Capital Markets.

I just want to continue the discussion around the 2026 guidance. I'm trying to kind of triangulate the $75 to $125 million in M&A with the $2 in EPS, okay and the $150 million in EBITDA and it kind of seems to us that at sort of the lower end, you can get to the $150 million, but it kind of looks like maybe at the higher end, you're anticipating funding some from incremental equity.

Could you walk us through how you're thinking about all of that?

18:45 Yes, I'll start the answer. And then Dan could probably add some color when it comes to what the capital stack might look like.

This is about as honest as we and transparent as we can be Irene, which we do frequently. We don't know who's going to be for sale in which year, and we don't know exactly where that will fall.

So it's very possible that you could see a year where we would have $50 million in acquisitions and follow it up by a year that we would have $250 in acquisitions, or we can hit somewhere in that middle range or somewhere between that $75 million to $150 million -- $125 million, we could kind of hit that range every year for 5 years. Because I'm not sure who's going to come up when.

19:34 Dan can add a little bit more color to this. But if it's spread out over the time, we believe that we can reach this goal without raising any additional equity.

Obviously, if something happens more quickly, that might change that theory, or we might go and raise the money in some different manner. But right now, we believe that if it comes to us in a steady state, kind of like what you saw in 2021, we can finance this without raising additional equity.

20:03 Yes, Irene, I concur with Brad, it all depends on what comes when and as I've always said, we're constantly looking at our capital stack. We know we have the ability to use more debt right now.

So it's all a function of what's out there at any given point in time.

20:30 That is incredibly helpful. Thank you.

I just want to ask about something else, which is, I noticed there's no return metrics, that are included in these financial targets. As you in the board we're thinking this through.

Can you talk about your view on ROIC and improving ROIC on a go forward basis?

20:53 Yes, Irene, it’s Dan again. ROIC is something we are continuing to think about, we are continuing to look at the Simply put, it's primarily a function of organic growth.

Our return on equity is going to be more of a function on how we can grow, as we just kind of talked about, we think we can use a lot more debt from where we are today and fund a lot of this growth through the use of debt, in one way, shape, or form. 21:23 We could have put out 5, 6, 7, 8 different metrics, but I think it's just a lot to digest and really want to -- we want to be true to who we are and kind of how we talk about things.

Ultimately, we want to display our growth capability through the use of EBITDA, which is something that we in -- indirectly or even a margin, which is something we -- we have a little bit more control as -- of as the company, but also wanted to be true to our capital stack and that's why we have kind of the EPS metric out there as well. So that's kind of how we looked at it.

And we wanted to keep it simple and straightforward, and how we kind of look at it as a management team and as a company.

22:06 That's really helpful. Thank you.

One final one for me. Sorry, Brad, you alluded in your remarks or maybe, again, to the -- to the software platform, can you remind us of where you stand with that and when it'll be fully, fully rolled out and operational?

22:23 Sure. And I really, when I put that comment in there, I actually said to Jay (ph), and this will cause Irene to ask me were faxes, so at least I predicted that appropriately.

So I think we would have rolled out back faster had it not been during the pandemic, but we don't allow that to be an excuse around here. So if I don't allow that, I can't really use it as one.

So I will just say that I was rolling out backs took longer, because the project was probably bigger than we anticipated, it is going quite well. All of our funeral homes are up and running on facts right now -- that I'm sorry I'll just say it backwards -- all of our cemeteries are up and running on facts right now and that's what bluntly, that's what's creating the financials that we just report it.

So it is --it's working and working quite well. We plan on having all of our funeral homes online by the end of this year, in the same manner, and that will mean that at least the foundational aspect of this software is fully in place.

And so just anticipate the next question it’s yes, it's going well enough that I've finally allowed an initial conversation on what do we do with this great product for the rest of the people in our industry that may or may not need it. But we're not even close to understanding what that looks like yet.

But at least we open the door to allow those discussions to start.

23:47 That is great. Thank you.

23:49 Thank you.

23:59 Thank you, CIBC and Good Morning, gentlemen.

24:03 Hi Scott

24:05 Just question on labor inflation. Last conference call, you mentioned that you were seeing some labor inflation, but it was nothing compared to other industries.

Can you update us on the labor situation in terms of wage inflation and worker shortages?

24:22 Yes. So it's effectively the same and by that, it's always been a struggle to find really good panel directors and really good managers in certain markets and that hasn't changed.

And so I'm really referring to our licensed personnel in that regard. When you have the 2 corporate offices, we have one sitting in Houston and one sitting in Toronto, you obviously have a competitive market there, for people who want the same type of employees that are sitting in those buildings, accountants and, and IT professionals and administrative folks and things like that.

So we see some of that pressure here in Houston and in Toronto, for example. 25:02 But when you're really talking about the bulk of our employees, the answer is doesn't change, it's really not going to change.

Because those folks want to work for us, they probably worked at the same place for years and years and years. And they're not really interested in picking up and moving to the funeral home across the street or their competitor, because they want to stay in the industry and work with us.

And I don't see that changing. So you'll see us having to deal with what I would call the base inflation like everyone else has to deal with.

And we will as we need to on a business by business basis, if we start seeing wage pressure through pricing, but it's -- I just don't see it impacting us, or at least it hasn't yet knock on wood. So that would be my update to that -- to that question.

25:47 And what about merchandise? How do how do you deal with inflation on the merchandise for preneed contracts, as revenue is realized, and how is the merchandise and service trust fund set up to deal with this inflation?

26:02 Well, I don't know that you would necessarily say set up to deal with this type of inflation. But I'll break the question down into 2, most of our merchandise that we're providing and when it comes to big dollar amounts, our do our casket suppliers and we have a good relationship with them.

And we manage that the 2 of them and, and where they've had price increases or struggles, we've gone back to them and explain to them how that would or would not work for us and we've been very successful in that regard. So we're not seeing pressure and in some of our larger merchandise, we're seeing deliver -- delivery problems, which is really not what you're asking, but I'll just say that we'll sell a monument and where it used to take three to six weeks to get that in and be able to deliver it and then recognize the revenue.

We have a lot of sales on our books right now that you know, we sold it, but we can't get it in -- if we can't get it in, we can't recognize a different problem. But that's going on and the merchandise of the trust funds are set up, obviously, how that works.

There's a gain in the trust, it spreads out across the contracts and those contracts are recognized, we get that -- that's partially offsets the inflation -- that partially offsets the inflation. But there's no -- if the inflation starts at 7% or 10% or 12%, or it goes out of control, those trust funds aren't set up or designed to handle that.

27:31 Dan wants to add something he's waving at me on the television.

27:34 Yes, Scott, I just say, those trust funds too, are set up like any other fund, right and we deal with our advisors on a regular basis, looking at the allocations in our fund where we're investing who we're investing with and as circumstances change within the global market, we have the ability to pivot and change our investments as well. So that's -- that's one thing we do.

It's just a very close relationship between our investment advisors and our management team.

28:09 Okay, thanks. So it's helpful.

Just a final question. He put a percentage figure on average revenue per call increase, and if you can broken down between funeral home and cemetery.

28:25 The average revenue per call was 9% this quarter that's on the funeral home side. And so when you hear us talk about that, it's always on the funeral home side, I'm not even sure that the other publicly traded companies attempt to do an average per call on the cemetery side.

And the reason why going back to the previous answer, what's recognized or not recognized in a particular quarter may or may not have any relation to the call volume, so it just gets to be kind of a wonky thing to look at. So when you've heard us talk about the average for call over the last, I don't know, 8 quarters, you're talking about funeral homes, and that was 9% this quarter.

29:07 That sounds good. I'll turn it over.

Thank you.

29:21 Thank you. Stifel.

Good morning, guys. Thanks for taking my questions.

29:28 Good morning, Maggie.

29:31 So first off on the new 5-year target, we talked a little bit about the role M&A versus organic growth we'll play. One question I did have was around the profitability assumptions that go into that goal.

Can you tell us how you thought through the margin profile of the business with regards to setting out those targets? Keeping in mind, more recently, the acquisitions you've been doing do seem to be at a quite a favorable margin versus where some of them may have historically been?

30:11 Yes, Maggie. And part of the reason we actually didn't put a target out there for margin is because I think it starts to become just a little bit more of a math game, we are buying higher quality and better businesses and as we talk about, you know, near term organic growth being a little bit muted and growing, it gets a little bit more difficult.

So when we think about our margins, we're looking at the market share opportunities that we have, pricing opportunities, development opportunities and we see -- we do you see organic growth happening over that 5-year period, but again, more weighted towards the end. And that -- that flow through that incremental growth flowing through to the bottom line at a little bit higher margin than kind of what we've seen actually in the past.

So that's how we're thinking about.

31:08 Yes, Maggie. I'm gonna add something to that which will make -- which will make Dan [Indiscernible] I don't know if you noticed, when Scott asked me the financial question, he was dying to get involved, because they don't mind me running funeral homes and cemeteries or making acquisitions.

But when I start talking about financial stuff too much, the team gets nervous. But the reason why, the reason why we, in my opinion, we really wanted to move away from that focus on the margin is when that goal was put in place, it was really built around taking the legacy acquisitions, or you get the legacy acquisitions that Park Lawn had, fully integrating them with what we were doing was layering on some acquisitions.

And we said, okay, if we do this, right, we should be about 26% by the end of 2022. Okay, so we did that, right and we're at 26% before the end of 2022.

32:01 What Dan just said, I would say, a little differently from my standpoint, what's going to drive that margin now is, I mean, small incremental improvement on those current operations, because you certainly can't expect it to do what it came from, to where it is now. But it's really going to be driven by the acquisitions we make.

And I can't tell you what the mix of those acquisitions is going to be, I can't tell you what state they're going to be in at the time we buy them. And until we know what the businesses are, I can't tell you where we can improve them.

So we didn't want to put a goal out there that we knew that we couldn't control. Or I mean, maybe we blow it out of water, maybe we don't.

But either way, we're still gonna buy the good businesses. So it just didn't make sense does.

So that's my non-financial answer to that question.

32:47 Thank you, makes sense. Next question I had was around your M&A pipeline and price expectations in the market.

Coming off of 2 years of a pandemic, it has been a robust set of operating conditions for your particular industry, although unclear to me that -- that's actually been the case all the way from small operator to large. However, that being said, I would appreciate your comments around how you deal with valuation or price expectations.

Given that, it has been quite a strong market the last couple of years.

33:34 Yeah, so good question. And the pandemic definitely changed things up, there's no doubt.

Before any of this happen, depending on the business, we would pull 5 to 10 years of data from them and our valuation and due diligence process, but certainly on the valuation side. And in that 5 to 10 years of data, you would always general see a really good year and a really bad year.

But it's kind of interesting how it kind of all goes to the average or mean right? So obviously everyone, season and impact of what happened to their business in 2020 and 2021.

Most people don't try with a straight face to say that they believe that that it's sustainable going forward, unless they're one of the brokers in the industry and I know them well enough, rotate nearly three. And I know them well enough to say, really.

And then it kind of goes back to okay, let's talk about what this business is me at with this business average is really going to look like. 34:29 So the pandemic has had an impact, we have to kind of sort through whether or not their growth that everyone is seeing is sustainable and if not, we have to make a decision as to how much we pull that back.

Everyone that we've talked to that we -- that -- that joined our company in 2021, and the ones that we're talking to 2022. Understand that, and as a result of that, I have not seen any pressure on price.

People are not bringing in 2021 numbers. And asking, you have to apply multiple to that without paying attention to the surrounding circumstances.

I think that's the question you were asking me? If not

35:04 Yes.

35:05 Okay.

35:04 No, that's a great, great, great information to have it, it sounds like you take a long-term view and on the on the cash flow profile, when you're looking at pricing deals, so makes a lot of sense. One final one for me.

You're -- you -- you guys are in the fortunate situation of having sort of a domestic North American business with very little geopolitical risk, very little exposure to inflation relative to a lot of other consumer products, businesses. However, we are seeing gasoline prices creep up quite high, commodities are surging, and it does, bear asking how we should think about your ability to pass through even small changes in operating costs that could occur as this sort of inflation picture continues to unfold?

35:57 That's an excellent question. And the answer that I would give you in March of 2022, could be different in June of 2022.

But as we sit here, right now, any changes that we've experienced, we can handle through pricing power at a location basis as necessary. And I will tell you why that's just not a throwaway statement.

We are as a general rule, not the highest priced in our market, that cannot be said of some of the other publicly traded companies that you follow or listen or talk to. So we have and in some of our markets, we may be number 3 on a pricing perspective.

But we're probably as a general rule number 2 in most places. And that gives us the ability to do that a little bit.

36:42 Now. I obviously read what some of the other companies said, and they're looking at staffing and maintenance, and then I hear energy related expenses.

Now, yeah, just say, look, we have a lot of cars, there's no doubt and a lot of -- a lot of equipment in cemeteries. But we're still a 10th of the size of the largest businesses in the industry.

So gas going out does get our attention, but probably not at that same scale.

37:07 Okay, thanks so much. I pass the line over.

37:10 Thanks, Maggie.

37:23 Good morning, everyone. Calling in from National Bank.

Thanks for taking my question.

37:27 Good morning, Zach.

37:29 So the US$75 million to US$125 million per year that you make reference to for your 2026 goals in acquisition opportunities, is that the amount that you intend to spend annually are the incremental revenue added?

37:47 That's the amount we intend to spend.

37:50 Perfect. Thanks.

And then for my second question, I'll join the gang and ask another one about inflation. We're seeing a big uptick in building materials and labor in that industry.

Have the expected returns on your organic projects been affected?

38:07 Not yet. But what we're really seeing is it takes longer.

Now I will -- I will accept the Westminster project in Toronto that has been kind of an eye opening experience for those of us who are not used to the cost of construction north of the border. But as a general rule, where we are if -- if we see that a project is going to be take too long, or cost too much, we'll just go to another one on the list and wait for that to make more sense.

So right now, we decided to start building the funeral home in Waco, Texas, there's a reason for that we have access to material labor things like that we can move it along. And so that's why we decided to do that, that did play we -- we looked past another on site that we were considering, because their market didn't allow us to do that.

We thought it'd be too much pressure on bringing in what we needed. 39:01 So right now we're not seeing that impact.

But it's a good question. And that could change.

I mean, this continues, all of these answers are going to change. But right now, it just hasn't impacted us that much.

39:13 That's clear. Thank you very much.

I'll turn it over.

39:26 TD securities. Good morning, guys.

First question is just following up on the capital stack and the ability to achieve the 2026 target, if everything were to go just so without raising equity, what kind of a leverage position would that assume? Because I think 3 previous announcement and pre your equity raises a couple months ago that you were talking about potentially taking leverage higher.

So maybe just a bit of an update there?

39:59 Hey, Daryl. It's -- it's Dan.

I'm going to avoid giving you a direct answer. And I'm going to kind my answer as it's been in the past, which is less specific and the reason being for that is because, a lot of this is unknown.

I'm very adamant about, how we use our different sources of capital is very situational and it depends on where everything sits at the time of need. But we sit here at one times leverage, we have a credit facility that allows us at this point up to 3 and 3 quarter times.

Our peers are operating in the 3.5 times to 4.5 times, and we are, we are much more comfortable getting closer to the lower end of our peers than we probably have been in the past and as the management of this company has probably been in the past. 41:11 So that's my very roundabout way of answering your question.

41:14 Okay, perfect. That's -- that's helpful.

And then just one last one, high level question. We've heard from some of the US life [Indiscernible] about the potential for elevated death rates above the 2019 baseline, even with the pullback in COVID.

Is that something you're factoring into your outlook and consideration? Or would that represent upside if we did have an elevated deb rate above 2019?

That’s – that through – that proved to be true?

41:44 Yeah, that's, again, that's a good question. Because we're seeing that, right.

The Omicron, and other variants didn't have nearly the impact of what happened a year ago on the death rate, at least in the communities that we serve. But we definitely see an elevated death rate and we definitely read the same things you do that are coming out from the life insurance companies as well as different governmental agencies.

So we're seeing that, some people argue it's the pandemic, folks didn't make it to the doctor, folks that are pressing locked in their homes, the things that are affecting people now are not the way you would like to see people pass away. I mean, it wasn't a good situation, whether or not that that holds or not, it remains to be seen, that is not something that we considered that there would be an elevated death rate over the next 5 years, we didn't take that into our model.

We kind of assumed a normalizing of kind of somewhere between where we are and 2019, kind of going back to what was normal. So the answer your question is we see that out there.

If it stays, that means that we've got some combination of the baby boomers hitting and in some combination of a higher death rate that's starting to occur in the United States for some socioeconomic reasons that are far outside of my paygrade.

43:10 Okay, that's, that's great color. Thanks very much.

That's it for me.

43:12 Thank you.

43:30 Thanks, just want to beat the acquisition words again. So you you're saying you think you can do US$75 million to US$125 million annual deals, but that seems to be a little bit down.

And I know you're conservative guys and you've mentioned in the past and the major constraints are time and the internal resources not so much capital or number of opportunities. Has that changed as the pipeline changed?

Are you just being conservative?

43:58 I don't think either one of them. First off, I made it through your first question.

So I'm not really comfortable. I'm not sure -- I'm not comfortable with you coming back and taking another shot at me he's got, but I'll answer anyway.

44:07 So I was taking a shot at the horse.

44:11 Okay, okay. I noticed that you started that way.

But down here indexes we take suited horses very seriously. I just want to know that are beating them.

Okay, so here's the way I look at that. I don't think it’s conservative and I don't think it's down.

Right. So if you look at Park Lawn bought the signature group, which is basically this management team in 2018, that was a large purchase, I think it's the largest one that Park Lawn has ever done.

So that skews 2018. 44:41 2019, we added [Indiscernible], which together would -- would fall right in the middle of this target.

Right? So excuse 2019.

2020 was the pandemic when we were all trying to figure out what was going on and 2021 is kind of the first time that I would say, okay, let's that was more normal, and more of what I would anticipate on a go-forward basis. Well, if that's the case, and I don't have it right in front of me again, but I think we spent like, like $125 million last year, on those acquisitions.

So I really do think we're not being conservative. I think that, that it's really more indicative of what a normal year looks like.

45:26 Now, I'm gonna add some color on that. So there are two other publicly traded companies that are in the acquisition game, at least here in the US, you have SEI (ph), and you have carriage.

I think carriage just said they're going to spend $100 million on acquisitions over the next 3 years, not in one year, but over 3. And then SEI is 10 times our size, spent $100 million plus last year, basically the same or less than we did and that was in large part due to a large acquisition in the fourth quarter.

And we saw that one too. So I guess my point is, I think that the acquisition target that we put out there, makes us a, you know, I call it the defensive growth stock where we're in the other companies are buying back their stock and deploying capital that way, and we're growing and we're growing the right way and we're going by businesses, I think they would love to get their hands on, but they can't.

46:22 So we're growing at that rate, that's equivalent to an SEI in fastly out growing, the other publicly traded company. So I'll just sum it up, because I've probably said it 3 times.

Now. I don't think it's conservative.

I think it's exactly what our investors would expect us to do in a good year, which is mimicking 2021.

46:42 Okay, thanks, Brad. That's -- that's helpful.

Thanks for clarifying.

46:47 All right, thank you.

46:59 Hi. Cormark Securities.

Guys, you've made it clear, you're going to continue investing in your funeral and cemetery assets to support organic growth. Can you quantify that in terms of the non-maintenance CapEx, we should expect to see, maybe your budgets are just relative to what we've seen and trillionaire?

Hey, Kyle, it's -- it's Dan again. You know, we think that spend is going to be relatively consistent and as we acquire different businesses.

Yeah, we're -- we'll find additional projects and hopefully on sites and things of that nature. I think, historically, our development spend is somewhere between 3% and 4%.

I think of our revenue skews me, and I think you can kind of see that continue going forward.

47:51 Okay, thanks for the color.

48:08 I would like to thank everyone for joining the call today and certainly in the times that we live in, everyone remain safe and look forward to talking to you all next quarter.