Q3 2019 Earnings Call
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Hi, Good morning, everyone. This study I'm, the director of Investor Relations.
We'd like to thank everyone for joining us today as we discussed our third quarter results I'll quickly go over the Safe Harbor language, and then well start with remarks about the waterfront commentary.
These risks and uncertainties include but are not limited to those factors identified in our earnings press release.
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Or Form 10-K , and other filings I'd be happy.
Payable on the Investor Relations section of our website located at investors not Sci dashboard Dot com.
Any forward looking statements that we make on this call are based on assumptions today, and we do not undertake any obligation to update or revise any forward looking statements made during this call.
Today, we may also present non-GAAP financial measures.
non-GAAP financial measures such as adjusted he yeah, adjusted operating cash high free cash.
A reconciliation of these non-GAAP measures.
To get measures is provided on our website in our presentation titled non-GAAP financial measures and in our earnings press release that was issued yesterday.
She is also available on our website.
Without.
Ill now turn the call that anytime Ryan Sci Chairman and CEO .
Thanks, Debbie and thank you everyone for joining us on the call. This morning.
Today as usual I'll begin my remarks, with a high level over you as a core.
By a more detailed look at our funeral and cemetery operations.
And then finally comment on our outlook for the fourth quarter of 2019.
So let's begin with an overview the core.
He saw our press release yesterday adjusted earnings per share grew by two cents or nearly 6% to 37 cents for sure.
Solid performance in our funeral segment, coupled with lower general and administrative expenses more than offset the decline cemetery profits associated with lower cemetery revenue from completed construction project.
On the cash flow fraud, we were pleased as we generated impressive $209 million of adjusted operating cash flow or 53% increase over the prior year quarter.
In our cemetery segment, you may recall from our last quarterly call that I mentioned, we expect that cemetery revenue and profit pressure in the third quarter due to the these significant amount of revenue recognized from completed cemetery development projects in the prior year quarter.
As anticipated completed construction revenue decline combined with a slight reduction in preneed cemetery sales production resulted in a 12% decline and cemetery operating profit for the quarter.
Operating income was favorably impacted by almost $12 million due to reduction in general and administrative expenses.
Most of this about $8 million was associated with a reduction in our long term incentive compensation plan expense.
Recall in the prior year quarter, we had an unusually large increase in this expense associated with the performance unit plant that is tied to total shareholder return over three year period.
As our stock price significantly outperformed the relative peer group during the third quarter 2018, we were required to adjust the accrual for all three plans to reflect the top quartile performance of our stock.
Below the operating life for the quarter, we were negatively impacted by a slightly higher interest expense as well as a slightly higher tax rate.
Now shifting to some more detail around the funeral operating performance for the quarter.
From a top line perspective, we grew comparable funeral revenue by nearly $6 million or 1.3% compared to the same period last year.
This was primarily related to higher funeral services performed.
Core funeral revenues grew $3.7 million or 1% over the prior year quarter.
We were pleased that core comparable funeral volumes continued to increase growing 1.2% quarter over quarter.
The core funeral sales average was essentially flat.
We look at the sales average before mix change we're pleased to report an organic increase of more than 1% at the customer level.
Our non funeral home channel or Sci direct continues to perform well.
We continue to show solid growth and we're excited about the potential opportunities to continue to expand this channel.
Sci direct or non funeral home revenue grew 7% or almost $1 million with strong increases in both volume and average.
Recognized preneed revenues grew $1.1 billion or three.
Recall this represents products sold on a praneeth basis, primarily by Sci direct that are delivered at the time of sale, resulting in an immediate revenue recognition.
From a profit perspective operating profits grew an impressive $5.7 million or more than 8% and operating margins increased 110 basis points to 16.5%.
Finally on funeral total preneed funeral sales production, which gets deferred into our backlog grew almost 2% for the quarter.
Keep in mind that we were up against a tough comparisons as last year, we reported a 13.6% increase in preneed sales compared to the third quarter 2017.
Preneed sales at our core locations increased 1% over the prior year quarter.
We believe that we can deliver a solid growth rate in the coming fourth quarter.
Now turning to cemetery operations.
As mentioned last quarter, we knew the topline cemetery growth was going to be challenging given the significant amount of revenue recognized from completed cemetery development projects in the prior year quarter.
First the positive.
We saw a $2 million or 2.5% increase in Atneed cemetery revenue as this revenue stream with correlate more closely with a funeral volume growth in the quarter with the additional benefit of favorable inflationary price.
Additionally, we saw more than $3 million or 5% increase in recognized preneed merchandise and service revenue.
Volume is based on deliveries so again correlated with funeral volumes with the additional benefit of Trust fund income growth.
From a headwinds perspective for the quarter. The biggest contributor to the revenue decline was lower recognized preneed property revenue of $21 million or about 14%.
Additionally, we saw lower perpetual care Trust fund income of $3 million due to the timing of distributable capital gains.
We stick to previous quarter sales production that was not recognized was sold but recognized in the current period as it was constructively delivered.
The most disappointing aspect of the quarter for US was the 2.3% decline in cemetery preneed sales production.
Clearly individual markets will ebb and flow from quarter to quarter based upon large sales timing sales manager with significant counsellor turnover sales comp plan changes rig in the weather.
These can cause temporary disruptions.
Not to make light at the situation but.
This is just part of the business, we've chosen to use an all time and our offline from godfather too.
That is why im not going to make an excuse only an observation and a commitment to get back to our 4% to 6% growth targets.
On a year to date basis, just in these three cemeteries our pre need cemetery sales production is lower by about $18 million over 20% of the segment.
Very close to our target range.
These are the facts.
Based on feedback from our customers they arent counting challenge encountering challenges.
From more restrictive policies implemented by the Chinese government that have impacted movements of cash out of China.
This combined with a variety of ongoing political uncertainties. We believe has caused a pause in certain of the large sale consumers as near term access to their assets remains uncertain.
We believe this uncertainty will subside, we just don't know when.
In 2019, we've absorbed in $18 million decline.
If we can stabilize here this alone should afford us the opportunity to get back to the 4% to 6% growth in 2020.
In the meantime, we're not sitting still our talented sales and operational management teams are focused on growing sales in our best in class properties with an abundance of tiered property available utilizing our contemporary tool by continuing to grow our powerful sales team.
We do expect preneed sales production growth for the fourth quarter.
This should deliver low single digit growth for the year 2019 that is going to be short of our growth target.
But it's our belief that we can return to 4% to 6% growth in 2020.
Following the cemetery revenue decline I've described comparable cemetery operating profits decreased about $12 million in the quarter and margins dropped 210 basis points to 28%.
This is better than you would expect on the revenue decline and similar to the funeral segment was helped by effective management of our fixed costs.
Shifting to our outlook for the remainder of the year, we remain comfortable with our annual earnings guidance of $1.90 $2 that we maybe on the lower end. If we continued to experience headwinds with the Chinese consumer segment.
We would expect continued growth in funeral profits on higher volumes as well as better sales average and cremation mix trends.
We would expect higher growth rates in preneed funeral sales versus the nine months of 2009.
We would expect growth in both Preneed cemetery sales production as well as improved cemetery profitability.
We should continue to see the trend of lower corporate general and administrative expenses, especially as the prior year fourth quarter had some onetime costs associated with legal matters.
This growth should be slightly muted by higher tax rate as compared to prior year quarter.
With that I'll turn it over to Eric for his remarks.
Thanks, Tom and good morning, everybody.
Im going to not give you some color on our strong cash flow results, we have for the quarter and also talk about capital deployment during the quarter and now I'm going to touch on our financial position and outlook for the remainder of the year.
So first let me give an overview of cash flow, which was a significant highlight for the quarter. As you saw in the press Sean press release, we generated adjusted operating cash flow $209 million, which compared to the prior year quarter was an increase of just over $70 million lower cash tax payments lower cash interest from recent debt.
Financing transactions as well as higher and strong cash receipts were the key drivers for this increase.
Let me give you a little more color and all three of those variables I just mentioned first recurring cash tax payments decreased $20 million quarter over quarter, but through the first nine months a year recurring cash tax payments are basically flat to the prior year at $57 million. We have also refined our 2019 estimate.
It's partly from lower pre tax income associated with the losses on early extinguishment of debt during the quarter as well as some tax planning.
We now believe cash taxes for the full year will be approximately $75 million compared to the $90 million that I. Previously stated this reduction to the 15 million year over year is the primary driver of the increased cash flow guidance that you saw in the press release.
Also related to taxes, the adjusted effective tax rate for the quarter was 18.5%, which was higher than the 17.6% prior year, but certainly lower than what we had expected. This is primarily due to higher stock option exercise activity that occurred during the quarter and what we had expected.
But despite this headwind which is about three to four cents a share we anticipate healthy earnings growth in the fourth quarter as Tom highlighted in his remarks.
Secondly, as it relates to cash flow in the quarter cash interest payments decreased a little bit more than $8 million primarily related to the refinancing transactions that we did in may of this year. That's created a cash timing difference over the 2019 quarters. In addition to this timing issue keep in mind when look.
In a head to the fourth quarter, we have executed certain financing transactions that should result in lower expected interest rates on our floating rate debt.
First as we continue to work to de leverage we made open market debt repurchases in the third quarter of our 7.5% notes due in 2027 that were purchased at favorable spreads over treasuries also during this quarter, we refinanced used in our bank credit facility, our 200 million.
In dollar notes that are due in 2020, which effectively replaces 4.5% debt with variable rate debt. We expect effect to continue reducing rates further which in turn will reduce the rates were paying now on our floating rate debt.
Additionally, our ongoing efforts working with our preneed customers yielded strong results as we saw significant increases in our pre need installment collections over the prior year quarter.
Year to date, our free cash flow calculates to nearly 330 million or a nice healthy increase of 9% over the prior year.
Now, let's shift to capital deployment.
We deployed just over 130 million during the quarter to grow the company and return value to our shareholders as well as makes some opportunistic open market debt repurchase that I just mentioned.
This is a 20% increase from the 108 million deployed in the prior quarter. So in terms of breaking down the components first I'll mention that we did not close on any business acquisitions during the third quarter, but we anticipate a solid fourth quarter of activity with good visibility into the acquisition pipeline.
We remain confident in our guidance of 50 to 100 million of acquisition capital via deployed for the year with about 32 billion already invested year to date.
During the quarter, we did have an investment of 35 million in land for new cemeteries, and we mentioned that on our last quarter call call that this represents the unique acquisition of some land in California that is adjacent to or even near three of our large cemetery in the Los Angeles market. This revenue.
Is that it's an exciting investment in our future and this market that has already at great producer for us and ensures that we continue to create cemetery offerings that appeal to the very preferences in that market for many years to costs.
And the corner, we also invested an additional $10 million a new build projects, which included new funeral homes, and Florida, Colorado, California, Georgia, and North Carolina.
In addition to the great returns that we normally get on these investments we're excited to expand and these desirable markets.
Next we returned $23 million of capital to investors in the form of open market share repurchases, which are approximately 485000 shares at an average cost of $46.73 per share. Our current number of shares outstanding is approximately 183 million shares at core.
After Ed and today, we about 385 million of share repurchase authorization that is available to us.
We also as I said repurchased almost 31 million of our 7.5% notes due in 2027 in the open market during the quarter recall, we completed about $16 million of these are purchases in the second quarter, which resulted about $47 million of these notes being repurchase year to.
Today.
We view. These particular note thats very attractive from a valuation perspective, when evaluating their spread over the associated treasuries, but it's important to note that we used cash to retire this debt, which to further our efforts to decrease our leverage.
Finally, we ended the third quarter with leverage reduced about 3.83 times and substantial liquidity of 925 million consisted of 195 million of cash on hand, and about 730 million available on our new bank credit facility.
So in closing cash flow results continued to be strong through the first nine months adjusted operating cash flow has increased more than 7% and free cash flow by nearly 9%, we expect to finish the year with a solid fourth quarter performance as well.
We are increasing the midpoint of our cash flow guidance range by approximately 15 million for the full year of 2019 and that again is on the expected lower cash taxes that I discussed earlier. So the previous guidance range of 550 to two at 610 million becomes $575 million to $615 million.
Of cash flow this robust in steady cash flow. In addition to the liquidity over $900 million I, just mentioned sets us up nicely to deploy capital into the fourth quarter. We have a number of good acquisition prospects in the pipeline as well as continued new build projects all while funds.
In the dividend and returning capital to our shareholders and a form of share repurchases. So with that operator that concludes our prepared remarks, we'll now turn it back to you for question.
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And our first question comes from 80 Rice from credit Suisse.
Hi, everybody a couple of questions if I could ask so in the cemetery business you seem optimistic they run to see a bit of a rebound.
The fourth quarter.
You're highlighting it sounds like to me if I got it right two issues one being the.
Chinese intensive markets Vancouver lay that you've experienced pressure and one being the recognition factor I'm just trying to understand our those related to one another is it your view that the recognition factor.
Headwind will moderate in the fourth quarter, but.
You're not assuming that the Chinese buyer issues will will change is that the way to think about it.
Yes, A.J. this Tom.
Exactly right.
The construction piece of it really the timing element and we do the third quarter was going to be a tough comparison as we look at the fourth quarter that construction impact, we would anticipate to be pretty equivalent or maybe slightly above the prior year fourth quarter and in our assumptions right. Now we're just assuming that we continue to see some.
Challenges around that Chinese consumer segment.
If that were not the case and we will do better than probably where our head is right. Now. So we believe is temporary and we know it will vote will fix itself. One day, it's just hard to predict when that day is.
I think deposit.
The positive thing edge and remember is we've taken the body below.
Team million, if a project the fourth quarter, it's probably over 20 million of a decline and if you're going to stabilize that 2020 looks pretty good and if you can grow it even better.
Okay. Okay.
I guess I would I also ask on the capital deployment second quarter row, where you've been pretty active.
And buying debt on the public market I guess, you're at 3.83 times debt to EBITDA, So you're in that 3.5% to 4% range that you've traditionally talked about one I guess, if you moved.
The range down for any reason and so you're trying to get to a lower than that level of debt and second if you think interest rates are going down I guess I'm wondering why not wait and.
And by maybe that debt.
Okay.
Or is that driving your decision I guess to.
To buy the dead as opposed to the equity.
Hey, Jay this is Eric so we're buying those notes really from a deleveraging play although there is some savings obviously from an interest perspective.
Ultimately there is a pattern if you remember last year late in the year, we did a very large acquisition during the year, which is about $135 million spent which that coupled with other factors was kind of increase our leverage towards the very high end to that three and a half four times range and we wanted.
To get it back kind of towards the middle and I do anticipate that this three athree will probably be back in the middle of the range of three seven to 375 in that area by the end of the year.
We have not changed our opinion of three and a half two to four times.
But we were purposely buying those notes, which appeared to us from a valuation perspective on a spread to treasuries to be the most appealing notes that are out there from that valuation to try to go ahead and pick off from a deliberate deleveraging perspective.
In addition to that you're right that we did for example, instead it taken the November 2020 notes and refinance them in the high yield market from fixed rate to fixed rate, we did make a play to take those onto the revolver, which we had significant capacity.
That's about a 4.5% to call it three 3% to 3.5% interest rate play, but that moves you to more of a floating rate debt as we continue to see things point in the direction of decrease in rates. So that the open market purchases with the deleverage in play we're comfortable for three and.
I have to four will probably ended the year in the middle data 375, but we did move some fixed rate debt to floating rate debt as well.
Yes, Adam let that go ahead, Hey, Joe discussed say to add on works and we as we get to the desired leverage level I think you'll see 2020 via a little more aggressive as it relates to share repurchases compared to this year.
This was a year that ends up pretty light.
And we get back to more normalized.
Activity there okay.
And then just my last question on.
Beacon the initiative there, what's where you add what are you seeing in Asia, a latest update on that.
So the update on funeral is somewhat the same update because if you remember as we've said before we've shifted a lot of the resources to cemetery. So on funeral about 80% of the eligible contracts.
Our being written.
Our 80% of the contracts that are being sold are eligible to be written non began and of those eligible contracts for use in it or utilizing the tool about 80% that's really not new information ha, that's kind of stagnant, which you've seen before because all of the movement in energy has been on developing the cemetery side.
Hi of the Beacon equation and I can we continue to work on that.
Proficiently with our resources. We've described to you in previous calls that Thats, a much tougher integration of that due to the individualistic property at each and every one of those 450 cemeteries coupled with the substantial number of vendors and products that we.
Well.
That are that very among all the different cemeteries as well.
We continue to start the process to test it I think by the ended the quarter. It was in maybe like 40 test sites and about the go into some more.
But thats kind of status, where we are we continue to work very hard and that cemetery, but not much of up more of an update the data on the funeral.
Any any.
Timeframe on rolling it out to cemetery, when you think you might actually formalize the rollout.
At this time, we're going to wait until we roll it out start testing it to really understand it a little bit better before we do.
I do anticipate some of the rollout to commence in 2020.
It's probably easily the back half of that and Im not ready really at this point to give you any type of quantification.
That particular effect.
Okay.
Thanks.
Our frontline question comes from Joanna can you take from Bank of America Merrill Lynch.
Good morning.
Just a follow up clarified some of the comments about.
The 19th.
So you're reaffirming guidance and then you said.
If I guess.
Population now.
Consumer purchases.
Continue at this.
Displaying raffle EBIT to be to like that land on the same debt.
Guidance because you can.
Since stay steady.
Steady I guess situation in those two markets. So can you just clarify exactly what do you how how do you think about those two markets improving or stabilizing.
Especially.
Including your guidance.
In June of this is Tom Thank you.
Yes, I think what we're meeting is we've left to you a pretty wide range for the fourth quarter, obviously by maintaining it. So I think if I do my math right that was down about measure.
60 to 70 cents would be the range I think we're saying is that if we continue to see challenges.
We're anticipating the where we think about it in the markets.
We think it's probably going to land in the lower part of that Ray.
Higher Park.
Course gathered loving and move it back and forth, but thats our assumption if we continue to see challenges in those markets, which were assuming if those challenges were to lift and I think we'd be more excited about getting to the middle or four.
The higher than that our direct.
Okay, that's helpful and down.
Any I guess Reid.
What I guess in going on in these markets after quarter end, meaning but do you have any visit body any changes.
In trends so suffice it is clear.
Well again I think what we're seeing is.
Maybe slight improvements in those markets, but it's really too early to tell would really only got a month under our belt.
And it's really again a quarter is a full three months. So I wouldn't say, we're seeing anything that different but I'd say in those parks in particular.
Our doing pretty good in October and we feel pretty good about.
Matt, but I do think Theres still a cloud if you will have uncertainty hanging over.
So.
Super segment, and I understand why and so I think it'll be a challenge to get some of those to the finish line but.
We believe is temporary and.
As being will change and extending our phase.
Right and if I may so I guess that that gets me today.
Next I guess Todd Ivanka.
Next year outlook I know, it's early to give guidance and let's just pick numbers and whatnot, but can you frame Big picture you know headwinds Tailwinds for next year, we should think about I mean, you made a comment I expect.
Yes.
In the commentary segment does good markets, you know to me to stabilize and yet you focus on growing endpoint coming back to put to six grill et.
Yes, Footaction cemetery segment, so any kind of comments you can make about how we should think about next year, maybe slight any any headwinds as in any comps anything we should be thinking about for next year. Thank you.
Yes.
I just feel I feel very confident about next year a couple of reasons why you'll recall, we implemented some of the right thing than within our sales force. We did a couple of tough thing.
And second quarter, we raised our bonus targets for the first time and a couple of years based upon where we were within the comp plan.
Weve put them gates around ensuring that we can charge interest on contracts, which.
We had a portion of our contract for people were not charging interest, which is a form of a discount in our mind. So again.
We were going to treated as such if that were the case and we also have.
We pay.
Commissions and bonuses based upon business that on Salesforce Dot com. So we had a couple of things that really need to be done that were tough that can be a bit of a distraction you combine that with the fact that were down 20% in these high sales of production markets. We.
I believe that's going to come back we think we've taken the proponents of the body below and the and then the last thing I think about as we've spent a lot of money on these new development projects high end development projects and so we have the inventory on the ground to get out there so and I have the highest level of confidence in our sales team and our sales.
Management, and so I feel really good about 2020 I think.
We're going to get back on track and you guys are going to be pleased with the performance we can turn out.
Alright, thank you so much but outside the commentary.
Yes.
Our following question comes from Scott Sandberg from Oppenheimer.
Good morning, its Donnie on for Scott.
Switching gears little bit to funeral can you talk about your expectations for average revenue per service and ER volume as we look into the coming quarters here and maybe some perspective on also season this year.
Sure So I.
I think first of all as it relates to the fourth quarter, it's our anticipation that we should see some slight volume growth in the quarter again hard to really predict but.
Based upon what we saw last quarter, where the trends we're seeing in our markets. We expect that to happen. We've seats are favorable trends as it relates to average as far as getting better and better quarter over quarter, we'd expect that to continue in the fourth quarter again, not a significant change, but probably a positive growth as ever.
Relates to that.
And I think as we look into the following year, we have some of the same expectations.
Early feedback on the flu and again, it's really hard to tell you only have.
What you're finding in the southern Hemisphere, which is where all the starts.
We anticipate it could be.
Hey, a vastly season, I mean that that I hope it's not.
I will provide got their shot but.
That could be an impact on the first quarter. Once again, it will get viewed it throughout the year. So it isn't something that.
It is a big factor as year goes on but probably could impact the first quarter next year I think all the average front, we feel pretty good.
We've made some adjustments in markets too.
Entry level cremation prices than our locations, we took that below in 2019.
We're not going to have a similar effect in 2020, so as I think about pricing in 20, I think it's a better trend than what we've experienced in 2019. So we feel good about fourth quarter up unit perspective, and I think we feel good about 2020.
Got it thank you.
Funeral margin could you provide some perspective on that as well.
We look ahead, and maybe elaborate elaborate little bit on on the cost savings initiatives, some how that could impact the longer term funeral margin profile.
Sure so.
As we've said I think on our Investor days and continue to believe.
Funeral margins are going to ebb and flow slightly but theyve been essentially flat for quite some period of time.
I would tell you that I would expect that to continue to be the case as we go forward. There's only so much you can do with with cost when you don't have significant revenue.
If we trend to one or 2% revenue that's going to be the case I do believe one day, we're going to see the impact of increased deaths associated with this demographic.
With that demographic impact occurs and takes 1% to 2% revenue growth to closer to 3%, that's a pretty significant bump and our cash flows and earnings I think it by compute that correctly 200 basis points increase in our revenues dropped about seven or eight cents to earnings per share shrink. So.
Not predicting that don't think it's going to happen in 2020, but I don't think it's that far away either and what can we do in the meantime, we can underwrite businesses, we can capture more share through our preneed program, which is what we're doing we can compete more effectively by honing in our pricing, which is one of the things we anticipated 2009.
We're really readying I would say this platform for that event and when it does is going to expand margins, but in the meantime, I think I would think of funeral is maintaining.
Around the annualized 20% margin as you think about going forward with growth there will be impacted by the demographic.
Got it thank you very much.
Our next question comes from Duncan Brown from Wells Fargo.
Hey, good morning.
I just wanted to go back to the properties that you highlighted that we're driving cemetery side I think you threw out an 18 million number was that just in the quarter or was that a year to date number.
That Duncan Thats, a year to date number.
I think in the quarter, it probably was closer to $7 billion as my recollection.
But it's been consistent we've seen in three separate quarters.
We probably began to see it in the latter half of 2000 and should say the latter half of the quarter fourth quarter 2018, So again.
It doesn't make me feel any better but I think the comp gets better as again in 2020, and if there were a cloud of uncertainty lifted and people felt more confident about accessing.
The money that they have than they get back to thinking about these things. It's just it's it's really more of a psyche is the way we interpret a lot of this is it's kind of like when the stock market went down in 2007 2008 people want to run out by a new for Ari.
You pause and you wait to see what's going to happen and when you feel better you reestablished year, you're buying pattern. So so thats the again I think 2020.
I bet on the upside versus the downside, but but we don't know yet.
That's helpful and.
Not to get to specific but does that 18 does that include just those three wescos properties are also some impact you highlighted last quarter. There are some issues in the Vancouver market.
What does that incorporate.
Yes, it's three cemeteries two in Vancouver, and a very large on in Los Angeles that really are focused on that Chinese consumer segment. It is literally three cemeteries and in two markets.
Okay great.
And then it sounds like to thank you for that sounds like.
Might expect a robust M&A quarter in Q4, just wonder if you could provide.
Any more color on what you're seeing in multiples changing at all and just any commentary on that would be helpful.
Sure I think we are seeing still a pretty robust pipeline of activity again, not large deals, but but good deals and I'd say the pricing.
This is is good I mean, we probably see a little bit of of an increase but not significant one and again, we're going to be selective to buy the places that fit our strategy and we're going to pay the prices that.
Shareholders expect the appropriate returns I think the other thing I would point out and it was in Eric's comments is we're very focused on.
Building, new locations and you're seeing a higher level of activity and I would expect that to continue because again, we can select where that is demographics that are happening within cities.
We can build a.
Contemporary facility is really designed for that consumer so I'd expect to see that trend continue and while the are ours are quite as high as an acquisition because of the first few years, you're really kind of building business. What we're seeing is when you get out two years three four and five are some really nice growth trends so I.
Thank you will continue to see us plant, the seeds and and and.
Have more spend and more locations that will be new facilities and in markets, where we've got a great management team.
Gotcha, Thanks, and last one for me.
Mentioned that 35 Mito antibody in California, just wondering if you could share some early thoughts on.
The plans there how we should think about the rollout.
For for that new properties, those new assets.
Yes, we are beginning plans right now to begin to develop sections of that cemetery in any place you've got permitting issues than initial investments, but as Eric I think mentioned, we've got three other cemeteries around there one of which had an inventory issue we were getting to the point, where we needed more or less.
Land.
So it's really a perfect spot for us probably touch a variety of the cemeteries consumer markets.
One of the cemetery, specifically is focused on Jewish clientele, we've got a.
And our many in.
Population that that we've got a great robust program going with and again. This is going to allow us to develop properties that are conducive to those consumers and what they want and allow us to continue to grow in L.A. for.
Decades to come so we're excited about but they're at the big investment, but it's going to allow us to continue to grow in a very very important market to us.
Great. Thanks.
We have no further questions at this time I'd like to turn the call back over to the FCS management.
Want to thank everybody for being on the call today happy Halloween and it Hurts me to say this but congratulations to them that.
I'm not going to say David Scharf.
See an exit the next year. Thank you.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
Yes.
All.