Q3 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please come to name a standby. Thank you for your patience.
I'd now like your turn the conference a richer speaker today, they keep wunderman.
Please go ahead ma'am.
Thank you and good morning, everyone. Today, we will be discussing the company's third quarter results for 2019 I related earnings release was made public yesterday after the market close.
Care surfaces has posted the press release, including supplemental financial tables and information on the investors page of our website.
No conference is being recorded an archive will be made available on our website later today through November Threerd replay information for the call can be found in the press release distributed yesterday.
On the call today for management, our Mel Payne, Chairman and Chief Executive Officer, Ben Brink, Chief Financial Officer, and myself and our special guests today blanking founder rest cadence going to home and cemetery.
Today's call will begin with formal remarks for management, followed by question and answer period.
Please note that during the call we will make forward looking statements in accordance with a safe Harbor provision other private Securities Litigation Reform Act of 1995.
I'd like to call your attention to the risk associated with these segments, which are more fully describing the company's report filed on Form 10-K , and other filings with the Securities and Exchange Commission.
Forward looking statements assumptions or factors stated or referred to on this conference call are based on information available to carriage services as of today.
Fair surfaces expressly disclaims any duty to provide updates to these forward looking statements assumptions or other factors. After the date of this call to reflect the occurrence of events circumstances or change as an expectation.
Furthermore, during the course of the mornings call, we will reference certain non-GAAP financial performance measures.
Management's opinion regarding the usefulness of such measures together with a reconciliation of such measures to the most directly comparable GAAP measures or Darko periods are included in the press release and the company's filings with the FCC.
Now I'd like to turn the call over to now thank you Vicki.
After a four year on dramatic operational changes.
So they have renewed revitalized and re energized started company at all levels.
Mostly in our wonderful funeral home and cemetery businesses.
We have returned to execution of our 10 year growth strategy and vision.
Really adding with only the best remaining independent businesses and the best remaining strategic markets in the country.
On October nine we partnered with Lombardo funeral homes in Buffalo New York.
Founding my Joseph Lombardo senior dates to 19 Osama.
Under the visionary leadership of Joe's repeat Lombardo since 1984.
Bartow funeral homes has grown from a single funeral home.
Serving about 40 families annually to four funeral tramples, serving approximately 2000 families. This year.
And is currently the largest funeral service provider in Western New York.
Joe.
Welcome to the carriage family of elite funeral and cemetery businesses.
Institutional investors those of you on this call.
Often ask us about the competitive dynamics in our industry.
Related to why the very best independent family business owners would choose carriage other than other consolidation companies with deep financial pockets.
I'm not sure that our answers to investors.
Are often any better than 50 50.
It cleaning up this mystifying matter.
So today.
Well this earnings call and a historical first for our company.
I am extremely honored to introduce Twain King.
Founder and visionary leader of Resthaven funeral, and cemetery and Rotwo, Texas.
Which is drawn into a premier funeral home.
And cemetery combination business.
Serving the Dallas Fort worth met Metroplex.
From its primary Rockwall location.
Rushed tell you went over the years.
Expanded to full service funeral homes, a nearby Rolla and gross city.
It includes its own onsite North East, Texas Cemetery flower box that memories and care Center.
The entire portfolio oppressed tape and businesses.
Currently provide the same attentive personal service to over 3000 family statewide each year.
We closed our partnership affiliation with the weighing on Resthaven yesterday.
And last night, my wife, Karen and I.
And a large continue the courage senior leadership team.
Hosted Dwayne and here's why fan.
And as Resthaven leadership and advisory team.
Celebrate Tory closing dinner.
[noise] Dwayne comedy recently to let me know.
But he wanted to help our company grow.
By explaining to other high quality funeral and cemetery business owners.
Why you chose carriage.
As a succession plan solution over.
Over the large number of other consolidation companies that wanted to acquire rest Teva.
I immediately excepted duenas offer.
And suggested he could could he could begin this important new ROE for our company.
Explaining his reasons for choosing carriage to all of you listening on this call.
Duane My friend the new partner the floor is yours. Thank you very much mr. pain I first met Mel Payne in my office is several years ago and it was during that time that I learned for this philosophy was for acquiring funeral homes and improving the performance those funeral homes.
And I can tell you much pain that I was impressed then I am still impressed now.
Approximately 12 months ago, when I've decided that it was time for my wife, and I have to consider a successor.
We made that are aware to the market and we had approximately five firms that showed an interest.
And submitted a bid.
After much thought and consideration in prayer.
We chose carriage to be the company that wouldn't build upon the reputation.
We had spent 50 years.
Establishing.
In concluding I would like to say something sincerely from my heart.
And that is that I feel blessed.
And honored.
The half Mel Payne as my friend.
And carried as my partner.
[laughter].
Thank you Duane.
Yes.
Those words made a lot to us.
Personally and as a company.
And they were clearly from the hard.
Last but not least and my formal comments.
I would like.
Twoish.
My Dream Girl Wise.
And dream business partner.
Karen.
Happy 36 year anniversary.
Another carriage historical first.
Karen literally did the heavy lifting of raising our son and daughter for the first 15 years of carriage, while I was under feel.
Learning the business from our best.
All home and cemetery operators.
We were the gift just keeps on giving.
Thank you suite a girl.
For being my partner.
And for bid in the mother of our children.
I could not be there.
Hello.
Thank you.
All right right to continue on a high note I really honored right now to pronounce the high performance here on managing partners for the third quarter 2019.
Ben Friberg Heritage funeral home and Crematory Fort Oglethorpe, Georgia.
David Derivates, and Coty White funeral home and built for Connecticut.
Courtney Shark Bay, North for Bart funeral home and Titusville, Florida.
John Apple Garden of memory Cemetery, and met our Louisiana.
Brian Bendamustine funeral homes Ashland, Kentucky.
Kelly Haven Bucks funeral home Norman Oklahoma.
Brian CIFIN, Jay Chapel funeral Directors Madera, California.
Any Chen Bradtmiller Chapel, Oakland, California.
One Carrick taken funeral chapel Caldwell Idaho.
Brett Nielsen, Tennessee Valley funeral home in Crematorium, Spokane, Washington.
Nicholas Welzenbach for two businesses Darling and Fisher funeral homes, and Los Gatos, California, and Los Gatos Memorial Park in San Jose, California, Congratulations to you all.
Let's turn the call over to that.
Alright. Thank you Michelle Thank you Duane I think you Vicki.
Our third quarter operating and financial results demonstrated tremendous progress and gathering momentum as we finished carriage services 2019 back to the future a new beginning part to.
At the beginning of the year, we communicate to investors at the following milestones will be the most important keys and determining whether the rapid and evolutionary changes made in the fourth quarter of last year or being executed across our entire company.
They were returned to organic revenue growth significant progress in field and consolidated EBITDA margins towards what we achieved in the 2015 in 2016 timeframe and a return to our growth strategy by partnering with the best remaining independent businesses in large strategic markets. Our results in the third quarter and our recent acquisition announcements.
Demonstrates incredible progress we've made in all of those areas in just one year.
Consistent with how we presented our previous quarterly results in our press release, and then my remarks for our third quarter and year to date performance, we refer to both our trend reporting and pro forma results normalized for the restructuring expenses that began in the fourth quarter of 2018, the loss of a large cemetery contract with the ended the third quarter last year.
The increase in interest costs from our balance sheet recapitalization completed last may and.
And the effects of two smaller divestitures that occurred during the most recent quarter I will primarily referred to the pro forma results as we believe it provides investors with the most accurate picture of the significant operational and financial improvements that have taken place in the first nine months of the year and is the most accurate reflection of the true earning power of carriage.
Third quarter total revenue increased 5.5% 66 million total field EBITDA increased 12.8% to 25.7 million total field EBITDA margin improved 260 basis points to 39%.
Adjusted consolidated EBITDA increased 13.3% to 17.3 million adjusted consolidated EBITDA margin improved 180 basis points to 26.2% and our adjusted diluted earnings per share improved 92.3% to 25 cents.
The primary difference between the normalized 25 cents and our reported adjusted diluting earnings per share of 28 cents for the quarter is it related to the tax effects caused by a 4.1 million GAAP loss related to the divestiture of two businesses in the quarter.
There are couple items I want to highlight regarding our total field EBITDA performance from the third quarter in reviewing our results from 2018 to 2019, our 2017 to 2018 time period and in previous calls we've acknowledged that we lost approximately 300 basis points in our total field EBITDA margin performance and our and our goal through.
Our year renewal in 2019 would be to recapture the majority of that margin performance as we head into 2020.
The 260 basis point increase in the total field EBITDA margin, we achieved in the third quarter versus last year demonstrates that we've made good progress on that goal.
Given this improvement in margin performance, we were able to leverage a 5.5% increasing total revenue into faster growth rate of 12.3% and total field EBITDA.
What was even more encouraging was that our total field EBITDA margin performance improved each month throughout the quarter and what is typically our weakest quarter from a seasonality perspective.
Again this shows the diligent work our operating teams have undertaken to drive continuous improvement throughout our portfolio and to make the tough decisions necessary to ensure we have a strong finish to 2019 and increasing momentum at all of our businesses as we head into 2020.
For the first nine months of 2019, our total revenue has increased 3.2% to 202.5 million total field EBITDA increased 5.9% to 81.5 million total fuel EBITDA margin has improved 110 basis points to 40.3% adjusted consolidated EBITDA increased 10.4% to 50.
7.3 million adjusted consolidated EBITDA margin improved 190 basis points to 28.3% and our adjusted diluted earnings per share has increased 31.9% to 95 cents.
Pro forma net leverage including cash on hand at the end of the quarter fell to 4.8 times from five times of the end of the second quarter and 5.2 times at the end of the first quarter. We continue to believe that we will be close the four point times leverage within the next 12 months.
On our Investor Relations website, we published a five year trend report that includes a column representing our performance over the trailing trailing 12 months.
In another sign of continued progress we've made so far in 2019, our reported trailing 12 month adjusted consolidated EBITDA of 74.2 million as an all time record for carriage not bad for a year renewal and an important milestone when you put into context, where we were we had this call at this time last year.
Our third quarter results in our funeral home segment continued to demonstrate that the evolutionary changes made to our standards operating model at the end of last year have taken hold as our managing partners and their teams focus on driving compound annual revenue growth versus a rigid standard of average revenue per contract growth and to continue focus on our.
Service and guest experience with each opportunity we have to serve our client families. Our expectations with the changes made to the standards operating model where that they would that we would serve more families at a slightly lower contract average.
Similarly, as it relates to client families choosing cremation that would lead to higher growth rates in year over year revenue versus prior years anywhere faster growth rates in funeral field EBITDA as a powerful dynamic of operating leverage inherent in our funeral home businesses kicks in.
All of these expectations proved true in the third quarter performance of our funeral homes.
For the third quarter, our same store funeral homes served 490 more families than last year, an increase of 6.6%, which led to an increase of 3.2% in revenue to 41.5 million at an 8.7% increase in same store funeral field EBITDA field EBITDA margin improved 190 basis points to 36.2% on.
A year to date basis, our same store funeral revenue was down 800000, or 0.6% and field EBITDA was essentially flat at 48.2 million our year to date same store Puna results are impressive considering after the first quarter, we were down 3.6 million or 7.4% in revenue and down 2.4 million or 11.6% and field.
EBITDA compared to the prior year.
We also continue to make progress and the performance of our acquired funeral home businesses in the third quarter, we leverage 4.5% growth and acquired funeral home revenue into 8.5% increase in field EBITDA, while field EBITDA margins improved 100 basis 20 basis points to 35.3%.
On a year to date basis acquired funeral field EBITDA margins have improved 280 basis points to 37.2%.
Consistent with our expectations on a consolidated basis year to date, our average revenue per funeral contract has declined slightly less than $100 to approximately 5400 and the cremation rate has increased 110 basis points to 53.3%.
And my second quarter comments, I stated that our cemetery performance that while we won't sit here and guarantee 11% year over year revenue growth. We do believe that we have set the stage for a long term sustainable revenue growth and consistent margin performance in our cemeteries happy to report that a high performance cemetery sales and operating teams per me both.
The wrong and very right with another exceptional performance in the third quarter.
For the quarter revenue in our cemetery segment grew 15.6% field EBITDA grew 47.6% and field EBITDA margin expanded 750 basis points to 34.6% versus the prior year.
Performance was broad based with the majority of our cemeteries achieving year over year improvement in both revenue and operating margin performance.
The 750 basis point improvement meant that we converted 83% of the 1.7 million increase in cemetery revenue in the quarter into field level EBITDA, which is another great example, the operating leverage in our business and the tremendous progress carriage has made over the past year.
On a year to date basis cemetery revenues increased 9.1%, while field EBITDA has increased 20.1% and cemetery field EBITDA margins have increased 320 basis points to 34.6%, which is within striking distance of an all time high margin performance, our cemeteries of 34.9% back in 2015.
Our quarterly and year to date results in our cemetery portfolio is a direct correlation to the hard and diligent work. Our operating teams have done over the past 12 to 18 months to upgrade local sales leadership, leading to higher performing sales teams across the company.
Couple of this top sales talent with smart capital investments and differentiated cemetery inventory and incremental improvements in our cemetery sales infrastructure and these are the type of those types. The results that can be achieved we remain excited about our cemetery performance and we believe we've only scratched the surface of building a consistent and first class Cemetery sales organization.
For the quarter overhead expenses grew $1.3 million or 17.2% versus the third quarter of last year year to date overhead expenses when normalized for severance and litigation expenses has increased 1.5% and represents 12.5% of revenue.
The large increase in overhead expenses for the third quarter compared to last year are due to lower performance based compensation accruals. We had last year based on declining operating trends and lower corporate expenses, we booked in the third quarter of last year due to the decisions. We made during the initial phase of our renewed renewal program that took place at the end of last year.
We expect these year over year variances to normalize in the fourth quarter and were expected based on the evolutionary changes we made here carriage in the back half of 2018.
I'd like to Echo Mel statements regarding acquisitions, we'd like to take this opportunity to welcome Joe Lombardo and his entire team at Lombardo funeral homes, and Buffalo, New York to the carriage family you meeting Joe and reviewing this business. He has built we couldn't have been more impressed with the passion and dedication that was Joe has shown is and growing his business into the leading funeral service company and a greater Buffalo era.
Since our acquisition, we have an equally impressed with the entire team lumbar, though and I sincerely appreciated their excitement injuring carriage and for all their work in making this transition as seamless as possible.
We also proud and excited to announce the acquisition of receiving funeral home and cemetery and Rockwell, Texas that closed yesterday over the past it two years to maintain his wonderful life and as great team have grown and created amazing collection of businesses that today represent the Premier funeral home and cemetery business in the Dallas Fort Worth Metroplex, we couldn't be more excited at rest Teva.
And our partnership with Duane is our first entrance in the Dallas Fort worth market, a strategic market for carriage, we look forward to working with his teams over the coming weeks and months to ensure a great integration process.
It's important for investors to put both these acquisitions in the context of what has occurred at carriage over the past year and for our overall growth strategy. We have made clear that we intended to restore our operating results to a level performance, we feel confident and allocating capital towards best in class acquisitions, like Joe and Duane businesses carriage is first and foremost not.
Operating company.
We believe that being that the best at operating funeral homes and cemeteries will lead to us having the opportunity to partner with the best remaining independently owned businesses in the country. We believe that when owners of these great businesses are considering assessment planning solution and take the necessary time to learn about all of their options. They will find and care as a strong and well defined corporate culture credit.
Stated on the belief in the value of funeral and cemetery service on the belief that local decentralized decision, making is the right model for consolidation our industry and in the belief that these transactions are just the beginning but truly long lasting partnerships versus just acquisitions.
These are both great businesses and large teasing markets for carriage and we have as much to learn from Joe Dwayne and their teams as they do from US we can think them enough for interesting their businesses to us we look forward to our long lasting partnerships with both.
Given our conviction in the continued improvement in operating performance. The announcement of these two most recent acquisitions and a pending acquisition. We currently have under letter of intent we are raising our rolling four quarter outlook to a range of 85 to 88 million of adjusted consolidated EBITDA and a range of $1.55 to $1.65.
And adjusted diluted earnings per share, we anticipate closing the acquisition currently under letter of intent in the first part of January So only three quarters of performance for that business is reflected in this outlook.
This outlook does not include any potential divestitures, but we do expect to announce more in the next two three quarters, we expect any divestitures to be de Minimis to overall operating results.
Our outlook for adjusted free cash flow of 30 to 41 million over the next 12 months is a much lower growth rate versus the rest of the outlook.
Due to our expectation that will return to being a full cash taxpayer in 2020 at a rate of 70% of our GAAP normalized effective tax rate of approximately 28.5 present.
And before I finish I want to leave with one more example of the incredible progress carriages made over the past year.
At the end of first quarter, we reported a trailing 12 month adjusted consolidated EBITDA of $68.6 million and now just two quarters. Later, we are announcing a rolling four quarter outlook of 85 to 88 million. This kind of performance turnaround does not happen without the tremendous dedication of our managing partners to high performance teams and our home office support teams.
We can I think you enough for all of your hard work. So far this year and for the momentum there has been generally as we close out 2019 and head into 2020.
Look forward to reporting those results to all early next year and with that we will open it up for questions.
As a reminder to ask the question you need to press Star one on your telephone, which all your question press the pound key please standby alvi compiled acuity roster.
And our first question comes from Alex Paris with Barrington Research. Your line is open.
Good morning, everyone.
Congratulations on a great quarter, a great rolling four quarter outlook.
I wanted to say welcome aboard the Dwayne thanks for being on the call and happy anniversary to to Mel and Karen.
Thank you Alex and thank you for all of your support.
Thank you so also.
I'm very happy to see the activity on the M&A front.
For a couple of reasons first.
It signals that what you've done operationally is largely complete or.
At a point at which you are comfortable on restarting M&A and then with the M&A specifically focusing on these best remaining businesses that are large and the best remaining markets with the potential to grow and I wanted to dig a little bit more into Duane This business Resthaven, if you don't mind.
I see that.
Resthaven through its three funeral homes cemetery and ancillary businesses served 3000 families last year. My question is just to get sort of an idea in terms of size what is.
Pricing.
Versus the corporate average at carriage services price revenue per call is what I'm asking.
I'll answer that.
Joining is one of the great innovators in our industry.
He is in a couple of lines of business that we.
Or not end.
A bit intrigued by these lines of businesses and I guess Dwayne follows.
When it gets some trade by something Jeep. He goes in experiments and tries it out and studies it and does a lot of trial and error until he gets it right.
So he's in the pet memories business.
We've looked at that around the country. We haven't found many people who have successfully figured out the emotional connection between a pet.
That is dearly love by family and the family itself when they.
Have a family member Die Wayne has figured out and he's put in place large pet memories business that has been growing very rapidly and the Dallas Fort worth area beyond the rock Raul area.
He also has an innovator in software.
He's teza into.
The create it is our proprietary software for online Cremations.
And has a spread that business.
Two three or four locations, if we get going is it three or four.
Now and that's quite a that's quite a.
A growing business. The averages there are as you would imagine smaller.
And so we decided on a reporting.
Methodology.
Which I haven't seen any example, but we've all talked about it because these are two new lines of business for carriage.
The overall revenue right now and those two lines of business or not the greater share of revenue.
And the average revenue per per unit volume is small so we're going to break that out in our normal reporting so it doesnt get co mingled.
With our normal funeral and cemetery business, including normal cremation business, which join has a great crematory business and the rockwall area that as separate and distinct.
And so.
We will be putting more.
Clarity.
On the various businesses, Alex as we report and integrate and you will get to see that in probably could ask us questions. When we have more clarity on our answers and one or two quarters.
But the great majority of the revenue here is core funeral and cemetery combination business and the two funeral homes and the.
And the cremation business that he's got in the local area.
Good well. Thank you I appreciate that additional color and I'll be patient for the rest of the detail.
Next question in related I've already had conversations with with then Lombardo, which is also.
And on some acquisition in my opinion I wanted to ask you a little bit about the law yeah.
Is this a big one as well in keeping with.
Recent activity lumbar Doe and Resthaven.
Yes. This is a big one it's a it's a primo.
Combination business.
In the midst of.
Our best portfolio.
Cemeteries in Northern California, we've known about this business.
For 25 years.
When we first one into California and in 97, Mark Wilson.
Who owned our largest cemetery and then later acquired our second largest cemetery in San Jose.
These are two biggest invest cemeteries.
This one is right there in the middle of that assist prime when I ask our people about it.
And to check it out.
We have some people who were there.
It's it's.
I guess I can say this it's part of the Stonemor portfolio and their divesting and under under the control of a new a chairman and executive chairman and he's restructuring that companies shrinking. It we think he's doing a great job. So we went through the possible divestiture.
Peers and out of everything and that company. This was the pretty premier business.
And our people are just gaga over having it in our portfolio and that will close in very early January to large cemetery first class funeral home operation then it will fit into our northern California portfolio It won't Miss a beat.
Great. Thank you for that.
So last question I think right now.
For Ben I guess, Ben you were providing the year over year comps, because it's more relevant and a pro forma basis.
Are you, making available the pro forma quarters from last year. In this year is is it available on the website or anything just for forecasting.
It's a question related to the acquisitions no no no we're not yet.
Pro forma look backs.
Next week, we currently don't have them posted on on the website. We do list them. The results in the press release, we will we will go ahead and post those on the website. Thank you for that suggestion.
This afternoon.
Good that's very helpful. Thank you and then last question.
When can we expect given your progress on the operational restructuring and the restarting of your M&A activity as we had hoped.
When should we expect a new long term roughly right scenario outlook from carriage services that is a great question, Alex and thank you for asking it we've discussed that internally and with all this recent activity and what's to come.
We will put out a roughly right scenario at least through 2023, maybe through 2024.
Either at the beginning year to year after the first quarter he won't be later than the first quarter.
Then when when we have the fourth quarter, because the fourth quarter.
We still we're making a lot of operational moves in the third quarter and everybody in the company is totally focused.
On trying to achieve a normalized sustainable performance.
Even though the third quarter, the second quarter with huge improvements.
It's not good enough for for for a company.
And the people in the businesses and home office, who want to be the best this and want to return to our prior level. The performance of 15 16, we want to try and get real close to that normalized level in the fourth quarter and then if we need to tweak anything we'll do that including some de Minimis divestitures as bill pointed out.
But we want to really go forward in 2020, where the clean very high broadly deeply performing portfolio of funeral homes and cemeteries.
And really make this next five years.
The sweet spot for value creation for this company. After 20 829 years, we want the next five years to be the time, when an investor really.
We'll look back and say I should have a showed about the shares.
And.
And I'm, sorry, I didnt, because they did what they said they would do.
And I think we're very close to being.
Having that vision laid out for you.
That's great. Thank you so much I'll be looking forward to it and.
Thank you.
Q Alex.
Thank you and again, ladies and gentlemen, if you do you have a question at this time. Please press Star then one on your touched on telephone.
Our next question comes from Chris Mcginnis Dodian Company. Your line is now open.
Good morning, Thanks for taking my questions and congratulations on the quarter.
So.
Talked about prior.
I wanted to ask about the guidance or the rolling four quarter.
Uplift how much of that is maybe operational improvement versus the acquired assets over the last.
We terminals.
I think.
I don't I can't really break on a percentage up as Tom ahead, Chris I get back to you on that but.
No. It does it does include some operational improvement from where were you been this year, we do expect momentum to continue.
And I think it's a conservative look at.
Bringing these three acquisitions.
We ended up into the cares family.
Taking into account the integration process that we know we we have to go through with these businesses.
And ensuring that we have we're putting out outlooks that we know we can we can hit.
Now I'll throw out a little bit more on 11 Ben.
I think it if you look through the fourth quarter.
And what's going on and and our portfolio business by business case by case.
And you because we get a lot of would get a lot of feedback on a on a on a real time basis from across the portfolio business by business and their things going on out there are people really want to do better.
They really want to contribute to.
To this idea that carry it can perform at a level that historically has never been achieved in this industry and that would be a 30% consolidated EBITDA margin.
And that's really our goal is in milestone is to get.
To that point and beyond and.
I I think been mentioned net.
At the end of the first quarter of 19 because of the prior flu season and things we couldn't control push the prior year performance way up.
But for the last two quarters, we've made up that deficit.
And then the fourth quarter, we expect to make a lot more of it up. So if you were to look added up its existing portfolio.
That it at the ended the first quarter had a trailing four four quarters of 68 million EBITDA.
And you would have looked at that same portfolio for all of 2020, not not the fourth quarter for all 2020, I think you could probably get up close to 78 million and EBITDA. So thats 10 million increase.
On our on our existing portfolio and then they begin to add on the Fabulous new businesses that have joined our company.
To get right.
What 85 day did or whatever it was been gave you a range and that they've had a wide range is not.
Hi, and this guy we're done with being overly optimistic.
We had some great EBITDA.
During the quarter too so the improvement than it was pretty significant.
Just to touch on the Resthaven acquisition in some of the other.
Services that offers does that open up expansion for you as well I mean, I know look the focus is likely and just traditional funeral, but it sounds like they have some other.
Innovations that maybe you haven't had on your portfolio prior to this.
Does that open up options for you as well.
Absolutely.
So why not talked about that as recently as this morning.
We're going to learn a lot from studying these new lines of business I mean, I had other people a pitch me on this and that over the years, but none of them had the credibility in the track record the weighing cane has.
And so we're going to.
Look a long time ago I had this idea that we couldn't be the biggest.
And we just wanted to be the best but had no idea what that meant.
And.
It should have been a surprise to me over time, what it meant was you have to affiliate with the best and learn from them.
And that's where we just did with Duane and as businesses, but we will learn about the pet business, where a lot about the online cremation business, but will also.
This is a big new strategic market for us as as Buffalo and so when you come into a market like that Weve never been end before you assume the reputation of of the business and the owner and the people you affiliated with this truly is a is that kind of industry, where you're now.
Owned by the company you keep.
And if you only keep the best company, that's who you become in that new market.
And we fully expect get this to lead to other opportunities to grow with other businesses and to really lead to some possibilities that we can expand upon duane.
Pet business in the online business as well.
Great and then just one last question it sounds like maybe the rest favorable embargo they've been a little bit more.
No.
For the long term.
To close the deal are you worked for a long time, where the otherwise sounds a little bit different human just talk I don't know if it's too early for you guys talked about just how that.
Tim to came about from the on the lower thank you.
Yes, I would rather.
Delay that.
I will only say that we worked very closely with.
With Andrew Axelrod.
Fair amount of Stonemor.
And we think he's doing a great job to clean up that situation.
And we'll have Tricia and Chris I think we'll just as we as we close of business and announced that acquisition will will speak more to that then.
No. Thank you very much for the time today and you're looking for.
Thank you appreciate it.
Thank you and our next question comes from Duncan Brown of Wells Fargo. Your line is now open.
Hey, good morning, Thanks for taking the question had to hop on a little late so I apologize. If this has already been addressed but it sounds like.
On the back doing more M&A in the pipeline sounds relatively robust. There's one if you could help us think about remind as sort of leverage targets, where you want to be and then also sort of plans for for funding if you get.
Continue to clip.
More deals.
Yes.
Well, we communicated the process of the balance sheet recapitalization was that our targets was to operate the company between 4.5 times leverage I think given our current outlook and the plans we have both in closing. These these great acquisitions and the one we have under LOI I think that 4.5 times is still a realistic target over the next 12 months.
That'll come both through operational improvements and through internally generated free cash flow I didn't give you dunkin. If you look at it just the progress you've made around leverage you know this year.
The first quarter in our pro forma basis, we were at 5.2 time and two quarters. We won't were almost down to have turned we're at 4.8 times I think thats just right. There in encapsulates how how quickly we are able to pay down debt and de lever.
And then that's that's how we look at it so far I think going forward.
Our our primary method of funding acquisitions would be through our revolver in line of credit. The the rates there are fairly attractive, but we're going to balance that depending on what comes our way if anything.
Yes. This is Matt I'll just add to that.
We've had an interesting year been challenging and it's been.
It's been.
Inspirational to see our people respond to all those challenges and we're going to come out of this better than ever.
And then performing higher than than ever and so I think we're going to be highly selective.
We do want to make sure equity investors are very comfortable with what we're doing and.
Our not wary of the leverage that that the company has.
There is there is a point here that.
And I think were 28.3% adjusted consolidated EBITDA margin through nine months.
We expect that to go up between now and year end based on the fourth quarter. Our goal at the beginning of the year, which we did not make public was to the other 29%.
Consolidated EBITDA margin on an adjusted basis, I think will come close to that.
And so when you have the approximate cash.
Generation.
Per dollar revenue 20, 930% at.
You can run the company on a sustainable basis with a little more leverage.
But we don't want to be considered high leverage or high risk. So we want to get back down closer to four.
And yet.
The kinds of businesses that were seeing here don't come along very often.
And in this business these are unique.
One of a kind.
And you just don't find them and so when you do find them and you do have alignment of motivations.
You want to be fine you want to find a way to do it because these are investments.
That will earn.
For decades.
Great returns and I think the returns will increase over time and not diminish.
So these are very unique to find and what is typically a rather than a tour business and so when we find those were going to know who they are and we're going to try to get them on our company.
And then we'll get the leverage down after that through free cash flow.
Okay. Thank you very much.
Thank you and ladies and gentlemen, this does conclude our question and answer session I would now like to turn the conference back over to Mel Payne for any closing remarks.
Thank you these were great questions today, Thank you Duane.
On a rigorous with your presence and comments.
Thank you Karen putting up when they all these years.
I'm surrounded by great team carriage.
Lately, they've been stress tested and they're ready to go so bring it out there.
Ready for game time, and we look forward to reporting our full year early in the year. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.