Q3 2020 Service Corporation International Earnings Call
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Good day, ladies and gentlemen, and thank you all for joining this a service Corporation International third quarter 2020 earnings Conference call.
Today's session is being recorded and all lines.
Until the Q&A session at the end of the conference to signal for a question simply practice star and one on your telephone keypad and with that I'm pleased to yield the floor to Sci management.
Thank you and good morning, everyone. This is Debbie <unk> director of industrial relations for Sci. We welcomed me today to our company review of business results for the third quarter of 2020 before the prepared remarks, let me remind you that will be making some forward looking statement today.
Any comments made bar management team that state our planes beliefs vacations or projections for the future are forward looking statements east.
These forward looking statements are subject to risks and uncertainties.
Could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include but are not limited to those factors identified in our earnings release and in our filings with the SEC better available on our website.
During this call. We will also discuss certain non-GAAP financial measures such as suggested EPS adjusted operating cash flow and free cash flow.
Reconciliation of these non-GAAP measures to the appropriate GAAP measures is provided on our website under the investors webcast and events section also in our earnings press release, an 8-K that were issued yesterday.
So without up out of the way, let me pass it on to our chairman and C E O Tom nine.
Thank you.
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Anyone on the line.
This.
Is anyone on the line.
By giving you a little color our business performance during the war.
But I'll provide some commentary on our fourth quarter guidance as well as share some preliminary thoughts on 2021.
Standing that uncertainties running the effects of COVID-19, pandemic could change that guidance significantly.
Before we get started.
Let me first say to our entire Sci family and particularly to our frontline associates.
Thank you so much for your courage and resolve if we're putting the safety of our families.
First.
And a few.
Personal care centers in cemeteries chair.
Care for a client families and our communities during the most difficult of days.
Difficult circumstances.
You provide our families opportunity degrees.
Remember itself.
Hello. This is it an operator I need to collect additional information are you there.
Again this is an operator I need to collect additional information are you currently there.
Wish to develop plans for their future now.
Great job.
It worked for the hard work and dedication are nearly 25000 associates, none of our success would it be possible.
When we last spoke in July.
Crazy elevated desk for COVID-19, which had resulted in significant growth in our funeral volumes Atony cemetery revenues for the month of June.
Additionally, gathering restrictions Rees, we experienced unprecedented growth and our premium cemetery self protection.
Well, we saw those trends continue into July.
The impact is five during the third quarter.
Needless to say we were wrong. These.
These trends continue throughout the entire floor.
<unk>, both operating segments exceeded our expectations.
For the month of October.
Strong year over year growth, albeit a slightly lower levels and what we saw during the third.
[laughter].
It's a bit awkward and very humbling for us to speak to you today about our financial results for the court.
A moment in time that is so sad so challenging.
With so much uncertainty for so many people.
Yesterday, we reported earnings per share 79 steps for the quarter compared to 37 cents for sure and the prior year.
Oh, a funeral and cemetery segments had marching improvement.
700 basis points.
Given by double digits topline percentage growth applied against a leaner cost structure.
Hello, this segments higher general and administrative costs and a higher tax rates were predominantly all set.
Sure counts and lower interesting stuff.
Let's start with an overview of our funeral operations.
Total comparable funeral revenues.
$53 million or nearly 12%.
Those core and not a funeral home channels perform very well and were slightly offset a lower general agency revenues caused by a decline in the insurance funded preneed funeral sales production.
[noise] core revenues grew 54 million.
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Yeah.
We are hearing that the collateral damage effect from restricted mobility, whether it's government mandated or behavior.
Has resulted in differ foregone medical care for life threatening disease screen.
Limited access to mental health care.
Potentially contributing to the excess non covid, yes.
Our discussions with our market leader support this position.
In addition, certain market leaders believe we're gaining market share, particularly in a larger hotspots are scale can differentiate differentiate us from a competition.
The 3.6% decline in the funeral.
She was training positively from the second quarter decline.
Almost 9%.
The information mix shift was a moderate 110 basis points.
It had a minimal impact on a year over year decline.
The drag on our sales average continues to be a desk and a funeral.
Mason cases with the service attached.
Pre covid this percentage was about 63%.
Scroll it dropped to 40% as the restrictions on large gatherings.
This percentage is steadily increase as restrictions have been lifted and has increased to 58% for the month of September.
Preneed funeral sales production for the third quarter was down just under 3% versus the prior year.
An improvement from the 27% decrease versus the prior year, we experienced in the second.
Two of our top Lee sources for funeral sales production in person preplanning seminars.
Person follow up visits continued to be down contributing to the relative decline preneed funeral sales versus our cemetery sales production efforts.
From a profit perfect.
Funeral gross profit increased $47 million and the gross profit percentage increased 750 basis points 24 person.
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More than offset slight decline in our lower margin revenue streams.
We also continue to benefit by the efficient management of labor hours as well as reductions and non customer facing cost is certain marketing and promotional expenses.
Now shifted the cemetery.
Cemetery revenue increased almost $91 million or nearly 30% in the third quarter.
The increase was primarily attributable decor revenue growth $93 million.
Hey Cemetery revenue accounted for $24 million of this growth driven.
Driven by the higher volume from the effects of COVID-19.
Recognize pre revenues accounted for the other $69 million.
New growth, mainly due to higher Greenie cemetery sales production.
Pretty cemetery sales production Grove was even more pronounced growing $95 million, 47% of the third quarter.
Remember, we recognize 69 million in the core therefore.
About $26 million of our premium cemetery sales production growth from the third quarter.
Into the backlog to be recognized as revenues infusion of course.
While we're pleased to deliver $20 million of the sales production growth from Barksdale.
The preponderance of the growth about 60 of the $95 million with an increase in core contract velocity of about 35%.
This increase sales velocity is being driven by them what.
Protect yourself.
Higher athlete activity is generated were highly effective leaves.
More easily converted just.
Additionally, we are seeing a more assertive consumer in general meeting, we're seeing more of an openness and willingness as the consumer.
Hoping environment to have the pretty disgusting.
We also believe Covid is continue.
Has conditioned our sales force to more aggressively embrace our customer relationship management system like never before.
Which has resulted in higher levels of sales counselor efficiency and productivity.
Finally, we also believe customer and counselor incentives designs Differentially drive cemetery production versus funeral have had a favorable effect.
Cemetery sales philosophy.
Cemetery gross profits by approximately $55 million and the gross profit percentage increased 740 basis to 35%.
Growth in revenues, a strategic cost reductions were somewhat offset by higher selling costs associated with a significant increase itself.
As you saw a press release, we provided updated guidance for the total year 2023, adjusted earnings per share cash flow and capital expenditure.
The ranges are wider than what we typically.
This close to the end of the year due to the uncertainty surrounding to go forward it back from COVID-19.
We base our assumptions on our October results today as well as models provided by the Institute for health metrics and evaluation worthy Jamie.
Project future mortality from cope.
Therefore, we would expect to see funeral volume growth at the cemetery revenue growth trends in the high single digit percentage range for the fourth quarter.
Assuming that widespread restrictions on gatherings or not reimposed, we would anticipate the funeral average to continue to migrate closer to the prior year Avenue.
Probably down when at 3%.
We would expect preening cemetery sales to continue to grow over the prior year, but lesser.
Lesser levels, then we saw the third quarter, probably in the high single digit percentage growth.
Is any company begins to think about 2021.
One thing we know for sure is that we don't know.
There's never been a less predictable year lease do my business.
We've run a variety of scenarios ranging from a minimal impact from covid starting at the beginning of 2021.
Scenario, which says November 21.
Looks a lot like November 20th.
These models proof correct the range for adjusted earnings would be $2.25.
Hi, as $3 per share for the year 2021.
And a scenario, where covid has little to no impact on 2021.
Would anticipate funeral volumes to decline in the 12% to 15% range from 2020 levels.
2% to 5% decline from 2019 levels.
We would anticipate that the funeral sales average would be a very favorable comparison for the year.
Especially in the second one is we are already experiencing a bounce back towards pre covid spending levels.
We would expect to premium cemetery sales production decline in the low to mid single digit percentages as we would be comparing it's a pretty difficult cough.
Even under this scenario.
Earnings per share.
Prove it we made in our capital structure debt refinancing and share buybacks combined with our leaner operating structure.
Produced and adjusted earnings per share result.
That would meet or exceed our long term, 8% to 12% growth framework on a competitive basis from our 2019 earnings per share base.
Nine.
Are most likely scenario for now is that we might see a continued impact from covid into the first quarter of 2021.
With a lessening effect during the second quarter.
Trendy to a more normalised environment by the end of the year.
Under this scenario.
Lee case expectation would be significant growth during the first quarter and funeral volumes as well as premium cemetery sales.
Followed by a leveling off in the second quarter as favorable comparisons in April transition to a challenging comparisons Jean.
Where we experienced excess funeral volume is significant preneed cemetery sales growth in 2020.
The third quarter will be the toughest comparison.
Five more subdued decline in the fourth quarter.
So in summary.
Extremely optimistic about our future.
Our team has proved with their maida during this extraordinary time and I believe our culture as strong as it was before even stronger today.
I believe our actions taken in response to the Covid crisis, and our presence both physically and digitally is afforded this selective market share game.
I believe the accelerated use of new technology required to successfully meet customer needs. During covid is provided many advantages.
It will benefit our brand perception and customer well.
In addition, the adoption of new technology is producing a more effective and efficient sales model as well as a more nimble service delivery platform.
We have improved our fortress balance sheet physician.
With our most recent refinance.
Further lowering interest costs, as well as extending and improving our debt maturity profile.
Once again I'll close with a sincere thanks to our team.
Not only terrific court.
The positive difference that you continue to make it so many loss during the most trying times.
Now I'll turn it over here.
Thanks.
Good morning, everybody.
First and most importantly, we hope that everyone is Saint Saint in these trying times, our thoughts remain with the families and communities still faced and the toughest challenges created by this.
I would also like to begin my remarks. This morning, recognizing are almost 25000 associates.
Work tirelessly to support our communities as we have navigated this pain.
The results that we are presenting today.
<unk> reflect how our frontline associates at.
Taking on and bravely overcome the obstacles.
To Dan into all of our associate supporting those on the front line. We are deeply grateful for the professionalism employees you have shown during these extremely trying time.
So with that now I'd like to transition to providing some additional color on the financial results first I'm going to provide an update on the strength of our financial position, that's allowing us to succeed and also be opportunistic and as challenging environment.
Followed by our cash flow results for the corner and now I'm and like Tom There was some forward looking thoughts for the remainder of both 2020.
And 2021.
So, let's start with financial position and as you know we're fortunate to have a resilient business model with reliable cashflows, allowing us to weather the uncertainty created by COVID-19.
While we entered the pandemic bolstered by a strong financial position.
Favorable that maturity profile, we continue to be very well positioned with a significant amount of liquidity to first invest in our businesses and then secondly invest in growth opportunities.
Specifically.
To remain robust at roughly $740 million, consisting of $220 million of cash on hand.
$520 million available on our long term bank credit facility.
On a much higher EBITDA generated this quarter.
We were able to reduce our leverage from 379 times in June 30th 2344 times at the end of September as it relates to our trailing 12 months calculation.
As we look beyond the impacts of this pandemic into the future, we still intend to manage leverage in the range three and.
And a half to four times.
So, let's talk about cash flow and capital deployment during the quarter.
In the face of this pandemic our businesses perform much better in the quarter and our expectations, which are much slower for many other reasons Tom mentioned earlier.
Ultimately, we were able to generate adjusted operating cash flow results of $195 million during the quarter.
When compared to the prior year adjusted operating cash flow decreased $14 million.
As cash earnings from the 42 cents, a adjusted EPS growth in the corner was more than offset by $89 million or higher cash tax payments, most of which was timing related as well as a net use a pretty working cap. So let me walk you through some of these components a little bit more.
<unk>.
Decreasing cash tax payment just mention of 89 million was partially earnings driven but also have some time in aspects as we had deferred $47 million.
And state income tax payments as allowed by the IRS.
The second quarter into this the third quarter.
We also have experienced a net use of working capital primarily related to the substantial growth and cemetery pretty property sales during the quarter, which grew by 56%.
I recall.
Premium property sales generally have immediate revenue recognition as we were able to deliver this property at the time. However, about 70% of these sales are paid to us on an installment basis, primarily over three to five year period, and that's what creates this working capital of us.
So shifted capital deployment.
During the quarter, we deployed a total of $225 million of capital to reinvest and and grow our businesses as well as returning value to our shareholders.
Regarding the breakdown.
Vested 41 million in the business through maintenance and cemetery development capital spat.
This is lower than the prior year quarter, we have refocused our efforts around these capital projects and expect to spend to ramp up in the fourth quarter.
We have deployed another 32 million itchy growth through acquisitions, and new bill opportunities.
And finally, we returned just over $150 million to shareholders in the form of a dividend and share repurchases during the quarter.
Now, let's shift to foreign looking out and let's first start to about 2020.
And in the first nine months of 2020, adjusted cash flow from operations as strong $81 million or 70%. So almost $560 million now recall that we had benefited from about 30 million indifferent payroll taxes as allowed under the current cares at.
So I am submitting this deferral, we've grown $51 million or 11% over the prior year.
When you look to the remainder of 2020 and as you saw in the press release, we're providing updated adjusted operating cash flow guidance, a 740 to 790 million for the full year of 2020.
This is going to grow with a higher adjusted earnings per share range is given and lower cash interest expected as a result of the recent refinancing activities, which are being offset by anticipated higher cash taxes.
So now movement beyond 2020, I'm beginning to think about 2021.
We first acknowledge there are many unknowns and the pandemic continues to be an ever evolving situation.
We have performed extremely well in 2020 and it'll be a tough year to repeat however, we are encouraged by the.
A positive momentum we're currently seeing with pretty sales expected improvements in a funeral sales average is covid eventually gets behind us and our lean our cost structure.
With all this being said based on the range of outcomes for adjusted EPS Tom mentioned.
We expect our cash flow in 2021 could similarly range from $550 million to $700 million.
There are a few known I've known items impact in 2021 cash flow and I would also work.
First we will be required to pay half of the 2020 different payroll taxes or $20 million in 2021, and the remainder of that in 2022.
Digitally will incur three quarters of regular payroll taxes in 2021, which were able to differ in 2020, which totals about $40 million.
These items together collectively create a $60 million headwind cash flow and 21, when compared to 2020 for payroll taxes.
We also expect some cash interest benefits looking into 2021 associated with the third quarter refinance and activities that we just completed.
And lastly, we recognize the importance of reinvested in our business and expect our maintenance capital spending to return closer to pre covid levels as we look to the fourth quarter and into 21.
I would also anticipate higher cemetery development spending a 21 as we complete some high return projects that were purposely deferred earlier from 2020.
Suddenly named closet.
I am humbled by the passion and heart of our team members and I'm extremely proud and thankful to all of them, who have continued to prioritize the needs of our clients families or.
All while while performing these services and a very safe manner.
It's truly is amazing how much we've accomplished this year and such a challenging environment and I can think of are almost 25000 associates for these tremendous efforts.
So with that operator that concludes our prepared remarks now I'd like to go ahead and turn it over for questions. Certainly thank you, ladies and gentlemen, if you'd like to ask a question live over your telephone line simply press star and one on your telephone keypad pressing star and one more place your line into the queue and I will open your lines Wintertime also a.
Friendly reminder, that if you're joining us today on a speakerphone. Please return to your handset prior to pressing star and wanted to be certain that your signal does reach our equipment once.
Once again, ladies and gentlemen that is star and one if you would like to ask a question will hear first from a J rice at credit Suisse.
Yes, thanks for all the information there.
Maybe first off when you think about the the military production you're seeing obviously it sounds like a fair amount of that is spillover from covid related sales that people are buying multiple plots as they have adapted their family, but can you sort of get back to where you think traditional production is is.
We're still a ways to go and seeing that rebound.
I'm, assuming you're assuming a more normalised year next year when you get back to next year's that would as part of the strike did the guidance is all about.
<unk>.
Hey, I think Thats correct.
We mentioned I think I mentioned for different things that we believe are kind of impacting sales and while you're right at need activity is part of it I would say, it's it's clearly not near a majority of it a lot.
What we believe we're saying is this openness of the consumer to have the discussion around Brady and the importance around it and there are some other things that are driving it like I said I believe we're managing.
The process a lot better with our customer relationship management system.
We were precluded from traveling right. So we're sitting there with with Salesforce driving activity.
Through the management process.
It has been more effective so I think if we think about becoming years clearly at some point hopefully soon is that any traffic's going to slow down and that's going to have a year over year issue for probably particularly June the third quarter.
But I also believe that this focus as the consumer may last beyond that I don't think this is something that everyone's going to forget right away and I think the attention of the consumer could continue so we're pretty.
Cited about the opportunity to have a conversation to provide that peace of mind to our family's so they take care of that and some of it's truly important I think what's going on now it just reinforces to everybody.
And this is so so we feel good about obviously 2020 is going to be a tough call but.
We feel good about 2021 and beyond.
Right.
So.
Sales per cage decline in the third quarter was down briefly take sounds like you think it will.
Improve a bit in the fourth quarter is it still primarily.
Bifurcation that Youre, Canada operations, and maybe California are.
A little worse than that given the lockdown situations and the rest of the countries closer to.
Even then what do you think.
How are you thinking about bag.
Next year, you think that you'll see some further easing the restrictions in Canada in California or are you more optimistic about the the rest of the country just picking up more.
Yeah, we saw actually both Canada, California prove particularly in the back half of the third quarter.
So we didn't see that big differential changes still slightly different but not that big so.
So.
Really across the whole network, we're seeing a normalization that clearly people are not having a large gathering and as we shared with you nor attachment ready for service to be 63% of dropped a 40 now back to 58.
If you're bifurcate that the variable consumers pretty close to par kind of back to the same level and we're seeing a little bit of a stubbornness.
Even though we've seen improvement on the Croatian side, where.
A lower percentage of people are choosing service with permission and we to think that will improve so we feel bad the other things that are impacting it or clearly people are not buying as much catering.
A lot of these sillery things that they traditionally with eyes.
As we begin to open up more we would expect those categories to be selected and C. C. A return to the revenue growth.
Okay. Maybe one last question you mentioned that they're prepared remarks calm but.
You think you may be picking up sure be to be local competitors.
Just wondering what do you think is driving that is.
You are better able to handle that.
The covid situation is that what's driving that or what what do you think is.
Driving that do you have any sense of how much of a share ship, we might be talking about.
Sure.
A follow up but.
I'd like to share J wearing our chief operating officers here and he's had a lot more discussions I think with some of our marketed J you want a general insights and then I'll follow up on.
The last part of this question.
Thing, we're seeing about that promise a tremendous focus on safety trying to focus on quality.
PBE with fine that we actually out of the question to our television power Survey April.
At least that use us at at did.
Did you feel safe and clean it location when you visit our location.
19, 95% of families that yet.
So normally we were in Los Angeles, a couple of weeks ago and the tomorrow sales.
We believe we are gaining sure because we have a reputation in our community.
<unk>.
They feel comfortable coming here for gathering in for services as to the clerk.
And I just sat on AJ from a from a digital perspective, we rolled out our every detail remembered campaign and we have a much higher digital presence. There is a lot more people floated through the website. There's a lot more people on social media. So they begin with the scale that we have with the expertise.
In that area that we have in the company.
We're getting our message out more and more more effectively so I think from Ah for a physical interaction with the consumer with a digital interaction with the consumer awareness is.
And we feel like we're seeing numbers that are.
Our expectations.
Again, both in the I'd say the spot markets and throughout the network.
Okay. Thanks, a lot.
Okay.
Our next question will come from John Ransom at Raymond James.
Hey, good morning.
This may be a hard question, but how should we think about.
Let's just imagine a world where.
Yeah volumes next year and volumes this year sort of a mistake. So we're we're stripping out the variable costs, how should we think about that.
Permanent cost structure on kind of a like for like basis and at what cost you've been able to take out.
They're on this year.
Sure John and I would only expect that type of course.
Good one.
So there's a lot there's a lot of learning that said John on the on the cost side and the first one touch upon.
Because you go through the crisis you know this is a question.
This for 15 years joining.
Do you have flexibility in your network in order to handle.
What we found out and I was told yes, and I guess I didn't really know the answer.
The.
The truth is we did a tremendous job our teams are so talented and the tools that we have to do it.
Due to the learning process, what we found is it would probably weren't utilizing the clustering concept too.
The maximum benefit because we got it in positions, where we said we really don't have enough part time labor or they are not available.
We probably did a much better job.
Sharing resources and the company has ever done partially out of necessity, but partially out of it.
Local management and just being smart about it so I think we learned better how to utilize our labor force through this process more effectively.
The other thing is we have a lot I missed the corporate America issue a lot of travel and entertainment goes into almost 25000 employees I think what we learned is when we didn't have it we did pretty pretty good.
It doesn't mean, we won't have to go for it but I would say the level as we think about.
Those types of things from travel and entertainment.
Seminars.
The way that we leverage marketing yearly.
We learned a lot of that peace and and I think.
<unk> testified earlier.
You'll probably see we've really driven down the cost per Lee and we're utilizing dismally much more effectively which are a lot cheaper than our traditional lead method. So I think we just found.
Better ways to operate as we move forward and on the back to that John I think what's interesting because these are all things that we did with existing technology. We're now in the midst we.
Color re imagine.
Project, which is taking leveraging technology to the next level. It's really every facet of service delivery. So we've accelerated a lot of that through this crisis to try to get there even quicker and and that's going to allow us I think again to become even more efficient more effective and most importantly, I think more nipples and.
Delivering service to our client failing so so a lot of good news around that.
I think there's a near term benefit benefit 21, and 22 and I think longer term re imagine will allow us to further leverage.
Cost structure.
Does that sound that was the usual a beautifully eloquent answer but it didn't have a single, but not a single number and that answer. So maybe [laughter] is there a number that you can at that.
Yeah. This is a question I bet, you did well an essay questions in high school.
I just put it on all the answers on the map.
I think.
I think it's hard to pin down an exact number but I guess the way I would say this way is I believe that even even today. If you look at it in 2021.
Versus the cost structure, let's call it a 2019 cost structure.
Because 20th.
We've probably identify it somewhere.
Within a range of $10 million to $20 million of savings.
Savings as you think about the way that we're doing okay today and I believe we're just.
Getting into that like I said, I think we have the tools three imagine.
Will be in a position to drive more efficiencies as we begin to think about how we service clients. So.
So I would say, that's probably a fair number to think about today okay.
Somewhere in that neighborhood.
Alright, that's it for me thanks, so much.
Uh-huh.
Once again to our phone audience that is star and one if you would like to ask it live question of the management team will hear next from Scott Schneeberger at Oppenheimer.
Thanksgiving minutes good morning, all.
<unk>.
If we can start with the the guidance for the balance.
Sure.
I believe I heard.
It was with pricing will be get cemetery road in fourth quarter.
46% third quarter.
Just curious what it is.
It seems consumed be based on.
Friends, we here in the marketing major commenting on October so.
Just curious on how that that that that is being looked at and also if you could please give me the answer consideration of.
Recognition and three need sound good.
Sure Scott.
So do you think about cemetery two things to consider.
We're comparing against that probably an easier cough. When you think about third quarter of last year. So when you look at the percentage change and we had a pretty strong fourth quarter. So to start with that comps are different and then the second thing I believe part of this is remember we had.
The second quarter I don't want to use the word standstill.
When you look at the month of April in particular.
Activities were down dramatically, so there's probably a little bit of a catch up factor that rolls into this 47%, it's probably not a number I did you say.
But I don't believe it.
But what we are seeing continue to see is this.
Consumer that is ready to have the conversation so.
You may be right, maybe high single digit ends up being.
A little conservative, but I think it's more in the ballpark of what we anticipate and kind of what we're seeing as we're out of the gates in October.
So so I think that's probably the better way to think about it and that would be my two biggest reasons or catch up from the second quarter and.
Comparable issue as far as recognition goes.
We traditionally the fourth quarter is typically more of a.
Recognition spillover just because of the.
Tim Yokel me the word K the cadence of the project.
The fall of the fourth quarter. So you will see a catch up I would expect and recognizing some of the revenue that we sold in the backlog today. So.
That will be a chain that'll be a change if you think about 2021 of next year.
Anticipating.
Spinning somewhere in the neighborhood of $100 million of cemetery inventory development and so when you think about 2021.
I would expect that that number could be even higher when you think about a recognition.
<unk>.
Okay. Thanks.
Yeah, and then that was gonna be my next question somewhat answer they just how the how the recognition slows and then spills into the and it's certainly the first part is all of 2021 throughout.
I'll move on from that though.
Are you covering seem discussion on using capital.
Just curious what the company stance is with regard to M&A in this environment you talk about differentiating versus peers, we've heard it out in the industry the technology factor.
<unk> surface Corp, certainly easy differentiator in this environment. So it just curious on animal and and also thoughts with regard to using capital.
On stock repurchase that.
I'll take the first part of it.
And in a.
It's all Scott noticed long enough, where we've been very consistent and we're not really deviating from our plan and that is.
You look at the highest relative return opportunity and m&a's going to win in those situations I.
I do agree with you that I think we are.
Starting to break things to the table in terms of really hitting on all cylinders and a category as we've described to investors before an investor days is leveraging our scale and utilizing of technology.
And I think.
I also it kind of Echo task comments, I really think we're kind of.
Early any of that.
I think some of the stuff that we're doing now and I'm going to put capital behind such as the re magic project.
I think are going to be even more of a differentiator.
That's not moving to emanate needle today, because it hasn't been executed apart, but I think people are starting to notice and I think it will move the needle frankly in the future as more of a differentiator size. So when you think of M&A being a kind of the highest relative return.
From us kind of an after tax IRR perspective, then you look at what snacks and it's probably due bill so both of the first things that we're doing of course, none of this is done without reinvesting in the business. So the first thing we're doing this maintenance capex centered care development.
Excess cash flow after a comfortable that we reinvested appropriately end of the business. We're looking at M&A and new builds Newbuild has a slightly less returned and M&A because it takes a couple of years to get the EBITDA stream up and running but it's very successful into the low double digit percentages.
And we know about as we said we're going to continue to we feel very strongly about having a dividend and we will continue to grow the dividend commensurate with how the company.
Is growing and I think the last resort is probably in the shares and I think one thing that I'll comment on as you see our track record and chairs is that we.
We have taken very seriously the differential return of the shares versus what we believe the true intrinsic value as of this year. So you have seen us at certain points.
Shutdown chairs and you CNS at certain points.
Be very aggressive so not only is it relative to M&A and new bills and frankly doesn't really beat those returns.
It's very relative amount among kind of a spectrum of what we're used to seeing in terms of that return.
With shares at the levels that you saw during the pandemic and specifically.
During the third quarter.
We think it's a very good use and a higher return opportunity relatives passed returns share repurchase program and that's why you seen us X.
Executed on as we have but it's I don't want to be very clear. The first thing we're doing before we do that is reinvesting in the business and go into the higher relative return opportunities first such as emanated do though.
Thanks, So just a quick peck on that and then one morning on an empty.
Mmk.
Sure I didn't write targets or is this an industry. That's just incredibly distracted right now and that's not something that can actually happen right now.
Is it.
Now it's happening.
And I think there's been some disruptions as you know that's out there J kind of alluded to it in terms of us being able to withstand this and leverage our scale and other people probably.
Struggle a bit to maybe do that.
They don't have the scale and the wherewithal.
To get through some of it so with that came what we think is maybe a little bit of market share, especially in hot hot spot markets and.
And.
I would also say that that's kind of brought a little bit more life to the pipeline.
We obviously don't we report quarterly so we reported R Q3 numbers, there, but I would just characterize it as it's coming to life and I think we're kind of excited about what we're seeing in terms of the pipeline.
Scott does add to that.
There is a candidate that's got a 39, 6% right on capital gains out there and if it went that direction.
I do think that's going to motivate a lot of people. So we are poised and ready.
If.
Therefore to occur.
And the rest went down there no problem. Thanks.
And then lastly, just looking for an update on the funeral I'm guessing that's good.
Probably a back burner topic, but I know you check in with that D. C. On occasion, just I'm just curious what the what the status.
Yes S as somewhat Franklin quiet since the last time, we talked and then we concluded the everybody in the industry and everyone who wanted to publicly comment conclude those comments with the SEC mid June was there was there cut off and so I really don't have an update since the last conference call, which is late July.
The process is Scott is you know.
That.
The commissioners or staff, primarily will look at this and digest. All these comments and then they will go and decide internally whether they want to what they want to do and if they choose to move forward.
With something and kind of research the process, whereas.
There is a little bit of an indication of what they want to move forward with our consider and then we have an adequate time period to not only submit in writing, but they're all potentially if past is true of the future and other potentially be some probably some some hearings in in person meetings as well associated with.
With that with that process.
With the election, right here and and everything going on obviously and the world.
Very very surprised that there is something emanate and if there is not aware of it I just think that may delay a process that's already.
Got a lot of meat to it because there's a lot of comments that they're going to have to kind of go through and file and digest along the way.
Okay. Thanks I appreciate it.
And ladies and gentlemen that does conclude our question and answer session I will turn it back to Sci management for any additional are closing remarks.
I want to thank everybody to be able to call today. Please.
Please stay safe take care of yourself and.
And.
Again.
Make something good out of this strange time.
We will talk to you again or fourth quarter earnings call, which will be it.
Early February.
Thank you so much.
This does conclude today's session. We thank you all for your participation you may now disconnect your lines and we hope that you enjoy the rest of your day.
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