Q3 2021 Carriage Services Inc Earnings Call

Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.

[music].

Good day, and thank you for standing by and welcome to the carriage services third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised.

Today's conference is being recorded I would now like turn the conference or to your speaker today, Steve That's correct Executive Vice President Chief administrative Officer and General Counsel. Please go ahead.

Thank you Catherine and good morning, everyone today, we'll be discussing our third quarter results. Our related earnings release was made public yesterday. After the market closed we posted the release, including supplemental financial information on the investors page of our website. This audio conference is being recorded and an archive will be made available on our website later today.

In addition to myself on the call. This morning from management are Mel Payne, Chairman and Chief Executive Officer, Ben Brink, Executive Vice President and Chief Financial Officer, and Carlos Casado, Executive Vice President and Chief operating Officer.

Today's call will begin with formal remarks from Dan Carlos and myself, who together with Mel comprise carriage his strategic vision and principles group a team whose members and purpose smell wrote about in our June 2nd press release.

Formal remarks will be followed by a question and answer period during which time they will join us to address any questions.

Before we begin I'd like to remind everyone that during this call. We'll make some forward looking statements any comments made by our management team that state our plans beliefs expectations or projections for the future are forward looking these forward.

Forward looking statements are subject to risks and uncertainties that 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 both of which are available on our website.

During this call. We'll also discuss certain non-GAAP financial measures a reconciliation of these non-GAAP measures to the appropriate GAAP measures can also be found in our earnings release as well as on our website.

Thank you all for joining us this morning, and now I'd like to turn the call over to Carlos.

Thank you, Steve and good morning, everyone.

Thank you for joining article as we share our excitement and amazing news on our record third quarter performance with all of you.

What is spectacular tends to be with carriage, but before I start I'd like to recognize all of the carriage services team for continuing helping families day in and day out with compassion determination and commitment to excellence under such difficult conditions consequences of this pandemic.

On behalf of executive team and board of Directors. We thank you all you illustrate our being the best mission and vision and our five guiding principles in all that you do any of the consistent driver for these record high performance.

Have the owner representing all of you on this call is a privilege that we take with humility and gratitude.

Over the past 12 months I have been visiting many fewer homes in cemeteries and spending quality time building relationships with our amazing managing partners and their phenomenal teams well get into another communities and unique opportunities for each business.

During these visits I have witness the carriage high performance cultural framework in full force and the reason why we're gaining market share or remaining independent firms as well as some consolidators, regardless of COVID-19 restrictions.

At carriage is about people and it starts with what we call the right tool, let me share some examples.

Courtney Charvet managing partner at North Bevard funeral home in Titusville, Florida continues to be a shiny star having his competitor shut their doors permanently.

September year to date, 2021 accordingly sub 40% and funeral volume compare against pre COVID-19 volumes over the same period in 2019, and 25% of that growth easily on COVID-19 cases.

Tripp Carter managing partner of Russia, Carter Memorial services in Houston, Texas.

They're partnering with courage and getting the support he needed by eliminating his time on back office items. He has not already directed his focus to what he loves growing his business for September year to date 2021.

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<unk>, 2% compared to the same period in 2019, and 37, 9% of that growth is beyond COVID-19 cases.

Geneva TD.

Managing partner of Darling Fischer guiding chapel in San Jose, California.

Geneva became the new leader at the end of 2019, she's a highly driven managing partner, who has grown her business by 59% September year to date when compared against the same period in 2019, and 45% of that growth is beyond COVID-19 cases.

The correlated characteristics in all of these amount of new partners is that they are hungry competitive and they want to win and this is just a very small sample of the REIT, who high performance managing partners that are gaining market share across our portfolio of businesses and evidenced by the following results.

Our fuel segment third quarter 2021 field operational results are as follows.

Total fuel contracts of 12403, an increase of 1342 contracts or 12, 1%.

Funeral average revenue per contract of 5372, an increase of 129 or two 5%.

Total funeral operating revenue of $64 9 million, an increase of $8 8 million or 15, 7%.

Hello funeral EBITDA of $28 9 million, an increase of $6 1 million or 26% and total funeral field EBITDA margin of 44, 6% an increase of 390 basis points.

These outstanding results reflect the operating leverage in each business in alignment with or I know in diverse high performance standards, which were updated in November 2018 by your standards Council members made up high performance managing partners the.

The changes made to the fuel standards, which are fully explained in our 2018 shareholder letter were the catalyst of these higher performance.

It seems by the time of COVID-19 pandemic. The nation in February 2020, the team was well prepared and ready to maximize every opportunity. They have continued to do so driven by the passion of our teams and the nature of our managing partner being divest one year and good to great five year incentive programs, which Steve will speak to in more detail today.

Now, let's go over our high performance Cemetery third quarter 2021 results.

We continue to deploy capital and grow cemetery development projects, we creative and innovative products as our supercharged high performance cemetery sales teams keep accelerating sales velocity with our preneed property program.

The inception of the plan for the creation of sustainable high performance dreams across the portfolio of cemeteries. Our sales growth has been exponential.

Our third quarter 2021, total Preneed cemetery sales performance was $16 5 million, an increase of $4 1 million or 33, 3% higher than last year.

And an increase of seven 4 million.

Or 81, 4% higher than the first quarter of 2020, which was the preceding quarter to the beginning over cemetery transformational high peripheral months journey.

The intrinsic nature of cemeteries allow for significant growth opportunities.

Starting with our at need sales professionals, who are tend to those families with immediate needs Wilde presenting them with all of their options of products and services. They can choose from regardless of burial or cremation as her final disposition. However.

However, the big opportunity is with advanced planning teams, which were just in the early stages of development.

Since we rebound this program and that was 2020 into 2020. One we have enabled to find the right School high performance 40 leaders at Rolling Hills in Richmond, California, where naidoo Stackhouse is having tremendous success at a rate of 213, 4% to <unk> target for the nine months ending September 2021.

We have also created advanced planning teams at Oakland Memorial Park in Lafayette, California residents Cemetery in Oklahoma City, Oklahoma.

<unk> has long cemetery in Panama City, Florida, and Bunker Cemetery in Las Vegas, Nevada.

These newer teams are building up their sales force and featuring the skills and are using all of the tools that generate higher performance cells Mauro.

Moreover, we have order cemeteries, where we will be adding advanced planning teams like Fairfax Memorial Park in Fairfax, Virginia, and rest Haven Rockwell in Rockwall, Texas just to name a few.

Did you hear the following cemetery third quarter 2021 field operation Amazing Heart performance, you will know that the best is still yet to come.

Total cemetery operating revenue of $22 7 million, an increase of $3 1 million or 15, 8%.

Total cemetery field EBITDA of $10 million, an increase of $1 5 million or 17, 8% and total cemetery field EBITDA margin of 44, 1% an increase of 80 basis points.

And for the nine months ending September 2021, total cemetery operating revenue of $69 4 million, an increase of $20 4 million or 41, 6%.

Total cemetery field EBITDA of $32 5 million, an increase of 14 9 million or 84, 5% and total cemetery field EBITDA margin of 46, 8% an increase of 1090 basis points.

We have completed the implementation process of Microsoft dynamics, 365, CRM and the results.

He is a real Boston dynamic sales and marketing system, which we have named sales edge and will accelerate hybrid four months LC move further than ever before we have launched the program at five pilot cemeteries with more to join in early 2022.

This new system will give the edge to our four E sales leaders to communicate interact and stay connected with families. While growing our teams so right, whose sales managers and sales professionals to educate the community and the value of pre planning their final goodbyes, we expect sales edge, our new high performance sales tool to be fueled by.

Savi investments in lead generation programs and deliver significant organic growth and continuous our strengths over the foreseeable future.

Our seminars program tests during the second quarter of 2021 was extremely successful and is now in full force and we have conducted seminars in Oklahoma, California, and Texas and some we'll reschedule in Florida, Virginia, and Louisiana before the end of this year.

These program have resulted in a number of attendees of all of our own expectations and the new generated leads are no part of our pre need sales funnel, which will start reflecting our fourth quarter Preneed cemetery results performance.

Our third quarter was an amazing quarter in both funeral and cemetery segments and is truly a great time to be with carriage and the best is yet to come as we continue to grow organically. We're looking for those right acquisition partners that we are highly selective and strategic with urea to which Steve will speak to in more detail today.

In closing I can say that we have enter upper ownership share value creation sweet spot and in addition to our savvy, but flexible capital allocation discipline, we will continue to close the gap between our current stock price and our intrinsic value per share while accelerating momentum on our carriage services high performance flywheel. Thank you.

And I will turn it over to Stephen Thank you Carlos.

All of the outstanding performance you just described has positioned us well to execute on several of the capital allocation opportunities, we've discussed and written about throughout the year.

Then we'll talk more about our view of the intrinsic value of our stock based on key valuation metrics and how that drives our current approach to share repurchases.

<unk> significant share repurchase activity. This year, we finished the quarter with a net debt to EBITDA ratio in line with our previously articulated target of four times, which allows us to continue to focus on a number of exciting capital deployment opportunities. For example in addition to the share repurchase activity. We also spent much of the third quarter continuing to meet and talk with a number of <unk>.

Select funeral home and cemetery owners, who we believe will make great additions to the carriage family.

As we've learned more about these owners and their businesses and they have gotten to know more about carriage. We believe now more than ever we're entering a great time for growth.

Right all owners interested in learning about our company to reach out to the former owners and hear about their personal succession and transition experiences with carriage we share. Many of these stories via video testimonials on our website and invite all of you to check those out when you have some time.

We also encourage owners to come and visit the talented team here at our support center.

Their business to help ensure a transition in legacy what she's owners can be proud.

We recently hosted just such a visit and it was exciting to hear the feedback from one particular owner about his impressions of our team and how they can help this business.

The timetable for the owners who were currently talking with to learn more about carriage and how we can provide the best succession planning solution for their business is different each case and we're working closely with them to ensure they are comfortable and have all the information necessary to make the best decision with that said we're excited about these conversations and look forward to providing more updates next quarter and throughout 2022.

Sure.

You'll note that we don't create quarterly or annual acquisition investment targets and that decision is driven by a couple of key reasons first it's impossible to predict when the select high quality businesses that fit our strategic acquisition criteria will be ready to talk about their succession plans, but when they are we'll be ready. Additionally.

Additionally, not all capital allocation opportunities are created equal at a given time before making a decision on how best to invest our capital we compare that opportunity to other capital deployment options to ensure the strongest long term return for our shareholders. Currently at a very high bar as Ben will discuss in more detail here shortly and it requires us to exercise.

Discipline and truly focus on only the best remaining independent businesses and that's a great position to be in.

It's also worth noting that our pause on acquisitions for the past year and a half is a strong example of our deliberate and careful approach to capital allocation.

As those of you who follow <unk> know, we made several significant acquisitions at the end of 2019 and 2020, we proceeded to then dedicate our focus to successfully integrating those large businesses. While also paying down our debt throughout 2020, we are now well positioned with our new low cost balance sheet to get back to growth through acquisition, while continuing to take advantage of.

Other attractive capital allocation opportunities and maintaining our target leverage ratio.

As we look down the road at 2022 and beyond our outlook for growth through acquisition is bright our performance balance sheet and allocation framework allows us to remain highly selective in our efforts to partner with the very best businesses as more and more of those owners become ready to transition to the next chapter of their lives.

When we visit with these owners who are considering carriage as a succession plan option. They often want to know what will happen with their employees.

This provides us with a great opportunity to talk about not only our focus on the people in the business, but also what we believe is the best incentive compensation approach in our industry, our one and five year incentive compensation plans directly aligned performance with PE and provide significant upside for top performers.

A good example of this pay for performance approach and how it benefits our employees and shareholders can be found by simply looking at our adjusted diluted earnings per share for 2020, which was $1 86.

Our field and corporate incentive compensation paid in 2020 totaled in the mouth that equaled approximately 38 per share at the time.

If you add that 38 per share paid to our employees to the EPS of $1 86, Youll note that the team directly responsible for driving the outstanding 2020 was rewarded with approximately 17% of the total earnings upside while our shareholders receive the remaining 83% now that's great math for both groups and it's this alignment that we believe.

Not only helps motivate talented people and for high performance, but also helps us attract and retain top talent, while shareholders benefit from that incentivize incremental higher performance.

Relatedly total overhead margin as a percentage of total revenue has been elevated this year due to the large increase incentive compensation accruals as performance continues to accelerate and nonrecurring items such as prior separation related expenses and pandemic related costs.

We expect the nonrecurring items to normalize over the course of 2022 with the overhead margin as a percentage of revenue settling within our target range of 11% to 12%.

This forecast contemplates continued elevated performance and associated incentive compensation accruals to continue to motivate and reward the men and women directly responsible for these impressive results.

As Carlo said, we all believe that the best is in front of US here at carriage and with the current team in place along with new members, who we look forward to welcoming into the carriage family through acquisitions. There is much to be excited about as we finished 2021 strong and look forward to an exciting 2022 with that I will turn it over to Ben.

Thank you, Steve I'll Echo yours, and Carlos his comments on our record third quarter performance that showed the incredible transformation that has occurred here at carriage over the past two years, the broad companywide high performance execution by our managing partners and their teams across the country gives myself and our entire leadership team a tremendous amount of <unk>.

And is that the carriage high performance flywheel will only continue to accelerate.

Now onto the results.

For the third quarter revenue increased 12, 6% to $95 million adjusted consolidated EBITDA increased 17, 1% to $32 $4 million adjusted consolidate EBITDA margin.

Increased 130 basis points to 34, 1% and adjusted diluted earnings per share increased 68% to 82.

Year to date revenue has increased 17% to $280 million adjusted consolidated EBITDA has grown 26, 1% to $95 $8 million adjusted consolidated EBITDA margin has expanded 250 basis points to 34, 2% and adjusted diluted earnings per share has increased 74.

6% to $2 27.

For the first nine months adjusted free cash flow has increased 12, 5% to $65 4 million, while adjusted free cash flow margin has decreased by 90 basis points to 23, 4% <unk>.

The 23, 4% of adjusted free cash flow margin demonstrates our ability to turn 23.4 cents of every dollar of revenue into cash available to grow the intrinsic value per share of carriage this ability to generate a high amount of reoccurring and growing free cash flow will enable carriers to fund the majority of our <unk>.

<unk> creation capital allocation through internally generated free cash flow equity, while maintaining a more modest total debt to adjusted consolidated EBITDA ratio.

Post the completion of our senior note refinancing in May we believe we have positioned carriage with the necessary financial flexibility to wisely allocate capital to more shareholder value creation opportunities in the third quarter, we repurchased approximately one 2 million shares at an average purchase price of $44 24.

For a total purchase amount of $53 2 million. This brought our year to date share repurchases to approximately $1 5 million shares for an average purchase price of $42 89.

And the total amount invested of $65 5 million to $1 5 million shares repurchased represent approximately eight 5% of the shares outstanding prior to the resumption of our repurchase activity in the segment.

The full impact of our share repurchases will be reflected in our reported GAAP basic and diluted shares outstanding in the first quarter of 2022.

On a pro forma basis, our diluted shares outstanding as of the end of the third quarter was $16 885 million consisting of $16 5 million actual basic shares outstanding plus 235000 up in the money vested option equity grants.

Pro forma diluted shares outstanding excludes 511000 of vested shares related to our long term shareholder aligned good degrade to value creation incentive plan, where the shares are only available to those 50 participants at the end of 2000.

Yes.

In order to fully recognize the incredible high performance transformation that has occurred here carriage over the past 24 months. We believe it is appropriate to use the pro forma share count and include a lower annual interest cost of $9 5 million from our recent senior note refinancing.

Therefore on a pro forma basis, our third quarter adjusted diluted EPS was <unk> 89.

Versus the reported 80 274, 5% year over year increase our year to date adjusted diluted EPS was $2 64 compared to the reported $2 27.

Which equals 103, 4% increase versus the first nine months of last year and our last 12 months pro forma adjusted diluted earnings per share was $3 36.

Compared to $2 84 as reported.

We are excited to announce the approval by our board of directors for an additional $75 million authorization to our current share repurchase program. This brings the current available to approximately $85 million equal to 11% of our current equity market capitalization.

Based on our updated intrinsic value per share range of $65 to $75. We believe the repurchase of our own shares as the highest and best use of our capital at this time and we intend to continue to actively repurchase our shares if they remain highly discounted to that range.

We're also pleased to announce the approval of our board of a <unk> annual increase to our annual dividend beginning with the next dividend payment on December one.

This represents only an additional 825000 in cash dividends paid per year and is in line with our stated goal to maintain a dividend at a 1% dividend equity yield.

Year to date, we've invested $15 $3 million back into our businesses through $9 million of maintenance capital expenditures and $6 $3 million of growth capital expenditures are growth Capex has and will continue to be primarily focused on development of high quality and differentiated cemetery inventory across our portfolio. We will also.

Continue to spend the necessary maintenance capex to keep our facilities fresh and inviting.

Excited about the opportunities to wisely and with discipline and allocate capital within our existing businesses and supported the accelerating carriage high performance flywheel and generating growing returns on that invested capital.

Our total debt to adjusted consolidated EBITDA leverage ratio as defined by our bank credit agreement remained essentially flat at 398 times at the end of the third quarter, we were able to maintain our leverage around our stated goal of four times, even as we invested $53 $2 million in share repurchases due to the continued strong operator.

Performance in free cash flow generation in the quarter.

Additionally, we are working with our banking partners on an amendment to increase the size of our current credit facility by $50 million to a total of $200 million and we expect to complete that process in the coming days.

Given the accelerating operating and financial performance, coupled with our lower outstanding share count. We are once again excited to raise are roughly right two year scenario and rolling four quarter outlook.

The roughly right ranges are realistic estimates of our future performance and takes into account known factors that are within our control.

The only capital allocation. We have included in this updated roughly right scenario is an allocation of approximately 75% of our adjusted free cash flow towards accretive share repurchases, while maintaining our total debt to adjusted consolidate EBITDA ratio at around four times.

For 2022, we currently expect total revenue to be in the range of $370 million to $375 million adjusted consolidated EBITDA to be in a range of $124 million to $127 million.

Adjusted consolidated EBITDA margin roughly right range of 33, 5% to 34%.

Diluted earnings per share as reported $3 to three to $3 eight.

On a pro forma basis again, using lower share count and lower interest expense for the full year, we expect adjusted pro forma diluted earnings per share to be between $3 45, and $3 55.

While adjusted free cash flow range expectations of $77 million to $82 million.

For next year 2022.

Total revenue range of $380 to $390 million adjusted consolidated EBITDA growing range of $120 million to $134 million.

Adjusted consolidated EBITDA margin of 33, 5% to 34 and a half industry leading adjusted.

Adjusted diluted earnings per share of $3 50 to $3 60.

Adjusted pro forma diluted EPS for a full impact of continued share repurchases of $3 75 to $3 85.

Adjusted free cash flow range of $82 million to $87 million and adjusted free cash flow margin for next year, 21% to 22% truly remarkable growth over just a short amount of time.

In our press release for the closing of our senior note refinancing dated may 13th we introducing a new methodology for how we view the intrinsic value per share of carriage to illustrate the significant gap in our bond pricing at $4, two 5% unsecured over eight years.

Tom Brady compared to our equity free cash flow yield of almost 11% at the time.

A rodney Dangerfield getting no respect.

It was also intended to provide investors with a framework for how we would allocate capital towards share repurchases versus other opportunities moving forward.

Our current weighted average cost of capital of six 4% a reduction of 100 basis points from seven 4% due to the decrease in the interest rate on our new senior notes from 665% to 4.25% annually, given our ability to produce and sustain a high amount of free cash flow. We believe it is appropriate to.

Calculate a roughly right intrinsic value per share range, using our free cash flow equity yield range of six 4% to seven 4%.

By using the midpoint of our roughly right range of adjusted free cash flow for next year of $84 5 million and the pro forma diluted shares outstanding as of September 30th of $16 $8 5 million equal to roughly right expectation of $5 per share of free cash flow in 2022.

Our free cash flow equity yield range would equal intrinsic value per share range of $67 57.

$78 13.

Which we considerably round down to an updated roughly right intrinsic value per share range of <unk> 65 to $75.

This range represents a $10 or 16, 7% increase from the second quarter press release, and a $15 or 27, 3% increase since we first introduced this methodology a little over five months ago.

We intend to provide investors with an update to our roughly right intrinsic value per share methodology on a regular basis.

I want to thank everybody, who joined US on this call. This morning journey to carriage or story I would highly encourage any serious long term investor to visit our Investor Relations website read metals shareholder letters, beginning with 2016 and all of our recent press releases, which provide an incredible amount of depth and insight.

Into our vision for carriage and the incredible high performance transformation that has occurred over the past two years.

Then give us a call and we'll be more than happy to answer any great great questions you might have.

And with that I'll open up the call for even more great questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to try your question press the pound key.

Again, if you would like to ask a question press star one.

And our first question comes from Alex Paris with Barrington Research. Your line is open.

Good morning, guys. Thanks for taking my call this morning and.

Congrats on another beat and raise.

You covered a lot in the press release and your prepared comments so rather than.

Get into remember, Greg I'll ask a couple of bigger picture or qualitative sort of questions.

Starting with market share gains.

As you said in the press release.

From both independence.

Some consolidators.

We've been unable or unwilling to adapt to new ways to serve families.

I was just wondering if you can give us a little bit more color or some examples of these new ways that you're serving families.

In 2021 and 2022.

Absolutely. Thank you Alex this is Carlos so yes, absolutely what's going on is not just that some funeral homes are not willing or able to serve other families who is also how our amazing managing partners go above and beyond offering incredible services and options to those families that are in need.

By doing so they do it in such creative and innovative ways that family feel attracted.

Many times not even <unk>.

Related to price they end up even paying a higher price with those and other competitors just because who we are and how we go about doing things. Some of the examples that I made in my prepared remarks today are just a few of many that we have across carriage on Thursday, we have an operations call where all of our directors of operations here. Some of these amazing stories, where.

We have been able to gain market share over other weather.

Individual firms or competitors like consolidators.

These stories are just incredible to hear because they're going to the detail of what many parts are willing to do to customized services in ways that maybe some other people can't.

And so that's why we've been able to gain significant market share broadly across your portfolio of funeral homes and cemeteries.

Great I appreciate that that's good color.

Next question.

Death rates.

Obviously, they've been elevated.

For sure due to Covid.

But also due to the aging of America.

And market share gains I guess for for carriage you said that in Q3.

60% of the volume was related to Covid related deaths.

Just on the balance.

Two other things market share, perhaps ageing of America.

What has been the annual death rate historically.

I have always recall that it's 50 to 100 basis points per year.

Obviously elevated during COVID-19 in the process of normalizing now what's your expectation for death rates.

Going forward are we going to be are we going to remain at a new normal higher elevated death rate due to the aging of America.

This is mel.

Alex.

No.

And Carlos covered.

The press release and in his comments.

Even the Covid deaths.

In many cases where market share gains.

Just because it was COVID-19 didn't mean it was a family we have served before.

Lots of cases it wasn't.

But we're not.

That family has a choice of non co.

You have won their hearts and minds, but what you were able to do that somebody else told them they could do or would do.

And so a lot of the Covid deaths were in fact also market share gains.

When I started the company 30 years ago, the death rate was about 1% per 100000 or something like that.

And the concept was over time.

There would be a change in mix.

Nation list traditional so you'd lose revenue, but the death rate.

We start to increase when the baby boomers started to die, which hours convinced back then from a lot of sources would be tomorrow.

The next day.

Didn't happen.

And instead, the death rate ticked down to about <unk> eight.

<unk>, 8% for 100000 over 30 years.

And so I quit even thinking about.

Death rate going up and started focusing entirely on how do we get to be the best at what we do so we can grow market share whatever the death, where it is we want more of it.

And so all.

All this time the.

The industry of nursing homes assisted living grew much bigger.

And the older people didn't necessarily grow much healthier there was advances in medicine and science.

We werent necessarily more healthy living better lives filled or they've got and I think covered unfortunately it was this perfect virus.

XI and almost bizarrely too.

To attack that vulnerable groups.

And it did with a vengeance.

And now you've had a lot of people not get the maintenance medicine checkups.

Seizures that will keep them.

If not healthy.

Being able to live their life, so I do think.

First of all Covid will be endemic.

I think thats, becoming a consensus around the world.

And that will also depending on the year and the degree.

And the variant would lead to a higher normalized death rate.

Covid.

And I think the baby boomers without even COVID-19 will begin to die at a higher rate as well. So I think I think looking forward.

As opposed to looking at the last 30 years will have a higher normalized death rate from various for various reasons.

And yet the main reason for us what we focus on is not what we can't control. It is getting better. So we can get more whatever whatever the death rate is we want more share.

100% of the time.

And thats, what what drives that.

That's what drives everything about carriage.

Great well. Thank you for that yes, I remember 20 years ago aging of America was the investment theme for the industry and people living longer access to medicine and that sort of thing I would just note that the oldest of the baby boomers are now 75 years old so.

Unfortunately, we cannot live forever, but I would agree with that but we should start seeing a higher annualized growth rate.

Sure.

So my last question.

As repurchase versus M&A I appreciate your comments in the press release and in your prepared comments it sounds like you'll be more aggressive.

Share repurchases in the fourth quarter.

The 22 2022 might be a mix of more share repurchases as well as potential M&A.

First of all what are your thoughts on that.

Idea and secondly.

Could you maybe give us a little color additional color on that pipeline. He said well, there's a number of <unk>.

Players there.

That are considering succession planning.

I'm, assuming they're larger.

Players in high growth markets.

That sort of thing.

Yeah. Alex This is Steve I'll cover the pipeline, a little bit and let Ben comment on the share repurchase approach.

We're having several conversations with a number of businesses quite frankly, we have developed relationships with over the years.

And so it was mentioned in the remarks timing is important for them and they need to make sure that they are ready and we're seeing more and more of them who are ready. So in terms of geographic footprint, they're spread out throughout the country.

These are bigger better businesses as we like to describe so you're seeing fewer rooftops and more calls which is a more efficient business.

In our model that we look at.

Yes, we think Q1 there'll be more to talk about there right now those conversations have progressed.

Over the past quarter to a point, where we want to share that with everybody in terms of how we look at that versus repurchases.

I mentioned this a little bit my remarks, it forces us because it has been mentioned right. The repurchase opportunity is significant based on our own intrinsic value. It forces us to be really selective and only focus on these businesses that we think are real standouts.

And that's the kind of discipline that we appreciate and are following right now and with that I'll turn it over to Ben if he can comment a little bit on the share repurchase piece, yes, Alex I mean, it's I think it's pretty simple right. The discount where we believe our shares trade compared to intrinsic value is wide and so there is a high bar for acquisition activity to kind of get through.

From a capital allocation standpoint, but I think with what we've been saying here's where the flexibility that we have there is not like an either or decision. We believe that we can partner and acquire high quality acquisitions in growth markets, and where we want to be while maintaining an aggressive and active share repurchase program and have the flexibility as we go.

All along versus.

How we're doing from an operational perspective, how cash flows coming in were leverages, what that opportunity is compared to our.

Intrinsic value and then weighing what those acquisition opportunities are it's it's a very different time here carriers than we've ever been before and Thats flexibility gives us those opportunities.

It's incredibly exciting.

So Alex.

Sure.

Ben had it in his written remarks, but.

What's going to be really interesting.

Not just for investors outside carrier.

But for the 49 participants in the good to great five year shareholder value creation plan and everybody else who's really.

Got it.

The investment.

Our stake in carriage and how well it does.

And that's throughout the company.

We're going to put out at the beginning of the year.

Our new three year scenario ending 2004.

That's the timeframe of the second five year good to great journey. It's also the five year compounded share returns for the 49 participants in the incentive plan, what we will do.

As we will put out I think what everyone is seeing now very high priority, we will not shut off.

<unk> product development.

We want more large sales we have the talent Carlos has built US you build it and they will get they will sell at very high margin. So thats one thing we will not cut back on.

I mean those returns on invested capital are simple.

And I always look forward to doing something that was central but legal.

I will get to see it in action.

And so we're going to put out a three year scenario.

Three different capital allocation severity.

For the full three years and it will be something like this.

Just off the top of the head we will have some amount for internal growth projects call. It 20%.

And then the other 80%.

We will put that into three different scenarios, maybe it's 25% acquisitions, 75% share repurchases for the full three years 50, 50, and then 70 525.

And then on top of that we will put those roughly right ranges up performance.

And each of those years or put a valuation range using our methodology for.

And it was EPS enterprise value to EBITDA, but especially free cash flow equity yield and we will see the range of possible shareholder value using each of those capital scenarios and this is very sophisticated stuff.

It's not for the people, who don't want to go back and learn why are we able to do this now.

And why is I should take it seriously.

This will be a serious thing.

And.

And the other company wouldn't do it.

The lawyers won't let us.

That's how good the company has become and how predictable it has become.

Now are all becoming great investors of our free cash flow to create the optimum intrinsic value per share. This is always where I wanted to get the company and I will say something about that in my last remarks.

Great. Thanks Nelson.

The team and again, a hearty congratulations on the strong third quarter results.

Thanks, Alex.

Thank you. Our next question comes from George Kelly with Roth Capital Partners. Your line is open.

Hi, everybody thanks for taking my questions.

Just to start with to make sure I understand your <unk>.

2022.

Targets you have in.

And you talked about this a bit in your prepared remarks, but you have that growing a bit next year.

And so is that just to give yourself more flexibility towards all these different capital usage, but you are not including any M&A in your.

In your income statement projections are you.

No there's no M&A in there, it's being conservative on kind of where that might land right with the really just thinking about in this scenario share repurchases, our CRE purchases and then internal growth capex of the capital allocation scenarios are in there no M&A like Mel said, we're going to as we get towards as we.

Report year end in February we will provide more of those different capital allocation scenarios.

M&A, just like Steve covered had been covered but.

But we decided as a team to <unk>.

Wait until the beginning of the year, we will have more news on the M&A front, we will have more news on Mr market price getting closer to our intrinsic value opinion, so there'll be a lot more news to talk about and we will have those three scenarios and.

You will.

Antibody will be able to judge whether we should be bias towards one or the other.

Okay. Okay, Great and then next question for me sticking with your 2022 targets can.

Can you share anything just about how you're forecasting price versus volume.

I mean, theres been such a nice growth in both.

I'm curious.

Especially in this most recent quarter on the variable side that the pricing growth is.

Materials. So are we at kind of a new level and pricing or is there additional opportunity going forward.

George it's not looking at pricing and volume rate. We believe there is continued opportunity for our managing partners and their teams to grow the average revenue per contract both on the burial and the cremation side.

By serving families better, but providing more families.

More value to the families that we have the opportunity to serve that is really the opportunity cremation in particular, how we're able to engage with families plan a meaningful memorial service celebration of life for that loved one that families oftentimes don't even know that they are able to have.

During those times Thats really the focus now as we look forward as we kind of project or put these ranges and theyre being very conservative.

What the expectations are for next year right in terms of.

Volume growth on a same store basis.

And as we bring down from a margin perspective. So that's how we're looking at it really the really the focus is growing that average revenue per contract. So George it's Mel.

This may come as a shock, but we do know pricing here on the funeral side.

There is no pricing so I wouldn't have any idea.

Of what individual Ma.

Managing partners price their products and services.

They are incentivized to do is grow the compounded revenue over three years.

At very high margins, so they know that.

And Thats, a layered incentive program anywhere from zero, if you can't grow a compounded revenue growth two to anything over 4%.

Over 30%, 35%, so it's zero to 35% a 100% of your standards are compounded growth in revenue.

And.

That includes pricing, but they have to know.

We also have us through your volume.

Compound.

50% is related to volume and top added revenue however, they get it.

We don't care as long as they get it because we know what the operating leverage we will do it will begin to look simple.

And we will convert 80% of the incremental revenue over three years and the EBITDA. So.

We don't get into all the Nitty gritty of pricing, we got rid of that process. When we got rid of budgets.

Okay.

Okay. Okay. That's helpful.

And then last question for me just about this new Tech platform I think it's called sales edge.

Curious if you could talk more just about.

If I missed this but what are some of the features of that you're most excited about and how long is it going to take to fully implement it just any more background on that would be helpful.

That's all I had thank you.

Absolutely George this is Carlos so sell said she's a CRM right.

Funded upon Microsoft dynamics, 365, CRM and basically as you know when you get on one of these software is you have to customize it to your needs those are very broad.

Packages that then you have to really cut.

<unk> to the specific needs of our processing sales in this case, we have done that process through a third party implementation company already and we have launched the pilot program of our end product in five different cemeteries well will do for our business is that now all of our cells consumers, whether they are advanced planning team.

<unk> or you probably service constant or is that sort of add need we will be able to have basically a personal assistant into the system, where they can track absolutely all activity that is going on creative funnel understand their presentation ratios closing ratios appointment ratios, but also reminder, some families reminders.

Anniversaries of death or birth date, or even reminders for follow ups. They will also we will be able to launch.

<unk>.

Marketing campaigns that are designed based on our customer journey that will accelerate through technology, whether it's take direct mailing website.

Inquiries and things of that nature. So it is something that we never had before broadly at carriage, even though some managing partners had some sort of system. Prior this will definitely accelerate I'll tell the velocity over time as we continue to launch in every other cemetery, but we have other than these five Siloed cemetery.

By the beginning of 2022.

Does that answer your question George.

Oh, yes, yes.

That was great and congrats on the quarter and.

Thanks for taking my questions.

Thank you George.

Thank you. Our next question comes from Liam Burke with B Riley. Your line is open yes, Thank you and good morning.

Uh huh.

<unk>.

Burial contracts increased year over year.

It seems to be going against the general overall trend burials as a percent of mortality rates.

Is it all market share gains that are driving your contract growth there.

So thank you Liam great Great question, So think about it this way when the family goes in mid season now need family. They may be asking cremation burial, but the process the process of educating that family by your family service customer team of explaining all of their options may change there.

Our initial idea because they don't really know what they want they may think they want information that meeting went very well, but that process of presenting all of the different options products and services that we have and really become very creative with ideas on how to celebrate the life that lib for that specific family makes a tremendous difference. So we believe that that process is actually driving.

Some of that barrel rate. In addition to now after Colby families are willing to have that serve as theyre doing colby mid perhaps leading $1 five.

Okay fair enough.

Carlos you touched on actually the course of your prepared comments about the cemetery sales force in the development and the use of software.

Sales are.

Double digits, where are you in terms of.

The revamping of the sales force.

With the right size or do you still have more work to do there.

A lot more work to do.

Mainly because we started with our family service team, adding right and so it was under vocational process to find the right who is with we already have and change compensation program that will enable accelerated sales broadly across the cemetery portfolio and then we're moving to our advanced planning team, which is just on the early stages.

So.

The element, that's where we have the most opportunity moving forward, even though we will continue to grow our family series teams on the cemeteries broadly, but advanced planning teams is where we see the most opportunity for 2022 in the foreseeable future.

So I mean just.

Sorry go ahead bill.

I just wanted to add something there.

Im going to put Carlos on the spot like do everybody.

Yeah.

So if you think about.

Houston is in the oral series again, the Houston Astros. They won last night I'm going to go going back to Atlanta, but if you think about a baseball game being nine innings.

Where are we with our sales team.

In terms of high and sustainable performance in all of those areas, where we weren't before.

That would include Master plan, so to all the bigger parts. It would include.

Build out.

Product for the various demographic groups.

Alignment with Master plans and then it would include not only what Carlos is talking about advanced planning, which we never really had but also <unk>.

Large sales.

On a more frequent basis, which we used to have them like.

Oh, we have one.

What was the last time, we had one.

Okay.

Yes.

Yes.

That's still in front of us and Carlos can say, which inning does he think were in a nine inning game absolutely. Thank you mill I would say, we're probably at the bottom of the floor with a full house in every single base with big hitters already line to keep homeruns automotive fourth.

Sounds good for the rest of the game.

Fair enough. Thank you ma'am, thank you Carlos.

Thank you and as a reminder, if you would like to ask a question press. The Star then the one key on your Touchtone telephone.

And we have a question from Chris Mcginnis with Sidoti Your line is open.

Hey, good morning, Thanks for taking my questions and congrats on obviously, yes.

Really strong all round earnings release.

Just in terms of the M&A can you just talk about maybe how how you maybe refocus that in the sense that if you look back five years ago, you may have looked at.

Opportunities a lot differently than you look today can you just talk about how how you've maybe.

Transform that M&A team to look at the opportunities going forward.

That's a great question, Chris This is Steve.

I think where we start as we look back at the end of <unk> 19 in 2000, and we referenced it a lot because it really was part of our transformation, particularly on the acquisition approach those were bigger businesses for us.

All came at one time.

Doug into them, we really focused on them and the integration went really well and when we stepped away from it we realize that's the type of model that we want to bring into carriage that really accelerates our performance. So we highlighted this in mills annual shareholder letter this year and actually broke down performance of those acquisitions. So encourage folks to take a look at that.

It set the model for us so we kind of went back to the drawing board as a team and executive team to say what do we want our strategic acquisition criteria to look like based on the performance of those businesses. So in short what we took away from that was.

Obviously strategic markets, what's redefine that what does that look like for us.

Bigger businesses.

And when I say bigger businesses, not just call volume, but also again the efficiencies with fewer rooftops.

And obviously cemeteries. So Carlos has spoken to this quite a bit we are we're really getting our sea legs. When it comes to the cemetery World and so cemetery has become more attractive for us.

And then in terms of your question about the team that works on this it is truly a team so we have.

Folks across the executive team who are weighing in on this we have multiple folks that go out on these trips.

And I mentioned this in my remarks, we invite folks to come here. Unfortunately, they take us up on the offer to meet with leaders in different support functions. So our goal is to get out there and have them meet more people on the carriage team.

I'll give you one anecdotal story from a recent visit.

We were talking.

With an owner who base.

Basically halfway through the dinner sit where this all sounds great.

How am I to know that this is actually what it looks like in practice everybody when they sit in front of us gives us a great pitch right and.

And we've given them a name of an owner.

Who we had recently partnered with a few years ago into the call. This person asking them about their story.

Take it from us and when we left but with was look our goal. If you partner with US is in a few years for us to be able to provide your name to somebody and the only way that we know that that conversation will go well because if we honor everything we've just told you and that's absolutely. Our practice, we are patient with it to find the right owners and we've now got a larger.

Team focused on it so not sure if that answers your question, but that's a little insight into the change in the progress.

That was Dwayne chain.

Owner.

Right Yep two years today as anniversary joining carriage in two years today.

We had our earnings call at this place.

And at him.

First time, we had an owner.

On our call.

Just joined carriage and he spoke about why he joined carriage then.

And now he's able to speak much more.

Comprehensively and in detail about whatever he said than being just a downpayment.

And so he has become not only a wonderful partner.

Duane cane in hand.

Great business, a lot of upside over many many years has become one of our biggest.

The cuts in terms of other owners, having any doubts about about carriage.

Great No I.

I appreciate that remember that call.

One one question for you looking back over the last year plus now.

Significant change in the business.

What was most surprising to you when you look back at this point I know, you've obviously written a lot about it but.

I don't think I've heard you say that anything caught you off guard if anything.

Well.

I have been surprised.

I've always had a vision.

Of the future that might've been a little bit more aggressive.

Optimistic about what can be achieved.

My worst nightmare.

Nightmare of peers would be.

Having a vision of the future.

That you actually achieved.

It was too easy.

So I've always set very high visionary.

And missions that were.

And most People's mind, let alone the crazy side of what is possible.

And I would say the biggest surprise here is that if I had imagined.

Which I did stepping back into the operating side of the business in September 2018.

To turn it around most of the funeral portfolio at the time.

There was no way I could have imagined then even in my most optimistic.

Way, what has actually turned out.

And it was if it wasn't <unk>.

One thing it was a lot of different things and.

And all of those have been listed.

Top grading of talent updating the model of the standards model.

Carlos joining the company.

A lot of talent coming into the company better than anything we've ever had before.

Growth of the existing executive team the acquisitions just being.

Crazy I mean, I knew they were fantastic, but they've achieved what I thought might be five or eight years ago.

There within the first two years and now the upside is.

Beyond what I could have imagined and so all of these things coming together the crash in the market.

We want to put a lot of money to work.

At the very bottom of the Corona virus market crash now we got all this recurring income and gains. So you just got everything in the balance sheet Oh My gosh.

I always wanted to get a balance sheet like this.

And now we've got the balance sheet and we got the operations leadership.

Just like our own and the 'twenty shareholder letter.

London.

Versus Paris.

In the <unk> $75 1992 period.

These are truly the best of times Thats, what you talked about here every day, if you walk around the halls, it's all over the walls.

These are the best of times with everything before us and I told the team. The other day, the only thing that can messes up.

As a person who would look at it in the mirror.

So we can't let that person mess it up individually or as teams.

And I really encourage people to come here.

I mean this team has we extended the lease we got we got.

All renovated.

Floors, but if you come and look at the walls, just everything thats around.

You could be here for three or four days and not know what business story.

Other than talent.

Exceeding expectations individually and through collaboration with other talent you would never even know what business. We're in other than whatever we're in we're damn good at.

So that's been the surprise part to see how it's all come together all parts and it will never go back.

Great well. Thanks, Thanks again for answering my questions and good luck in Q4.

Thanks, Chris.

Thank you and I am showing no further questions in the.

Q I would like to turn the call back to Mr. Mel Payne for closing remarks.

I co founded carriage on June 1st 1991 at 48 years of age with no history.

And no knowledge of the funeral and cemetery business and industry.

I only had a mission and vision of being the best at what we do.

Guided by five guiding principles.

Over the last 30 years.

We first had to get.

Really good.

As an operating company.

So with that the budget and control model and <unk>.

And we innovated a radical business model and devote III called a standards operating model.

Which over the last 18 years has evolved into a portfolio of framework.

Produces performance operating and financial performance at each business.

In alignment with our mission of being the best at operating our businesses.

Then we use this advanced operating business model to develop our strategic acquisition criteria.

Six.

And the model that.

We used to.

<unk> acquisition candidates.

Over the last 14 years.

So we believe we have achieved our being the best mission as a consolidator of the best remaining independent businesses in the best large strategic markets.

So we believe strongly and we believe this.

This performance this year this quarter and in future years.

It's obvious that we achieve those too.

Upon reflection.

About this evolutionary learning journey in history.

It becomes clear.

Not only over the last two to three years.

Of high performance transformation in every aspect of the company, which I mentioned a few minutes ago.

<unk> finally matured into a being the best shareholder value creation platform.

Our operating and consolidated into still highly fragmented funeral and cemetery industries.

I could never.

Have achieved this last and critically important mission.

Our shareholders are being the best company in our industry.

<unk> long term superior compounded shareholder returns.

Without the friendship and support of three people.

<unk> fundamentally change the way I think.

About capital allocation and value creation.

So with great Gratefulness and honor.

I would like to personally dedicate this third quarter performance and release to Alan Weber, Tom chart for Us and <unk>.

Thank you all for calling in and.

And being interested in our company.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a good day.

Okay.

[music].

Okay.

[music].

Okay.

Okay.

Yeah.

[music].

[music].

[music].

Good day, and thank you for standing by and welcome to the carriage services third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone please be advised that today's conference is.

Being recorded I would now.

I'd like to hand, the conference or to your speaker today, Steve Metzger Executive Vice President Chief administrative Officer and General Counsel. Please go ahead.

Thank you Catherine and good morning, everyone today, we'll be discussing our third quarter results. Our related earnings release was made public yesterday. After the market closed we posted the release, including supplemental financial information on the investors page of our website.

The audio conference is being recorded an archive will be made available on our website. Later today. In addition to myself on the call. This morning from management are Mel Payne, Chairman and Chief Executive Officer, Ben Brake Executive Vice President and Chief Financial Officer, and Carlos Casado, Executive Vice President and Chief operating Officer.

Today's call will begin with formal remarks from Dan Carlos and myself, who together with Mel comprise carriage his strategic vision and principles group a team whose members and purpose smell wrote about in our June 2nd press release.

Formal remarks will be followed by a question and answer period during which time they will join us to address any questions.

Before we begin I'd like to remind everyone that during this call we'll make some forward looking statements.

Comments made by our management team that state, our plans beliefs expectations or projections for the future are forward. Looking these forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements.

These risks and uncertainties include but are not limited to both factors identified in our earnings release and in our filings with the SEC both of which are available on our website.

During this call. We'll also discuss certain non-GAAP financial measures a reconciliation of these non-GAAP measures to the appropriate GAAP measures can also be found in our earnings release as well as on our website. Thank.

Thank you all for joining us this morning, and now I'd like to turn the call over to Carlos.

Thank you, Steve and good morning, everyone. Thank.

Thank you for joining our call as we share our excitement and amazing news on our record third quarter performance with all of you.

Spectacular tends to be with carriage, but before I start I'd like to recognize all of the carriage services team for continuing helping families day in and day out with compassion determination and commitment to excellence under such difficult conditions consequences of this pandemic.

On behalf of our executive team and board of Directors. We thank you as you demonstrate our being the best mission and vision and our five guiding principles in all that you do any of the consistent driver for these record high performance.

Have the owner representing all of you on this call is a privilege that we take with humility and gratitude.

Over the past 12 months I have been visiting many funeral homes and cemeteries and spending quality time building relationships with our amazing managing partners and their phenomenal teams, while gaining to another communities and unique opportunities for each business.

During these visits I have witness the carriage high performance cultural framework in full force and the reason why we're gaining market share or remaining independent firms as well as some consolidators, regardless of COVID-19 restrictions.

Carriage is about people and it starts with what we call the rightful let me share some examples.

Core needs survey managing partner at North <unk> funeral home in Titusville, Florida continues to be a shiny star having his competitors shut their doors permanently.

For September year to date 2021 coordinates up 40% in funeral volume compare against pre COVID-19 volumes over the same period in 2019 and 25% of that growth is beyond COVID-19 cases.

Tripp Carter managing partner of Russia, Cotter Memorial funeral services in Houston, Texas.

After partnering with courage and getting the support he needed by eliminating his time on back office items. He has not already directed his focus to what he loves growing his business for September year to date 2021 group is up 52% compared to the same period in 2019, and 37, 9% of that growth.

Beyond COVID-19 cases.

Geneva, TD <unk> managing partner of the Helene Fisher guiding Chaplin in San Jose, California.

Geneva became the new leader at the end of 2019 Chiefs are highly driven managing partner, who has grown her business by 59% September year to date when compared against the same period in 2019, and 45% of that growth is beyond COVID-19 cases.

The correlated characteristics in all of these many new partners is that they are hungry competitive and they want to win and this is just a very small sample of the REIT, who high performance managing partners that are gaining market share across our portfolio of businesses and evidenced by the following results.

Our fuel segment third quarter 2021 field operational results are as follows.

Total field contracts of 12403, an increase of one 342 contracts or 12, 1%.

Funeral average revenue per contract of 5372, an increase of 129 or two 5%.

Total funeral operating revenue of $64 9 million, an increase of $8 8 million or 15, 7%.

Funeral EBITDA of $28 9 million, an increase of $6 1 million or 26% and total funeral field EBITDA margin of 44, 6% an increase of 390 basis points.

These outstanding results reflect the operating leverage in each business in alignment with our Idaho being diverse high performance standards, which were updated in November 2018 by your standards Council members made of high performance managing partners.

The changes made to the fuel standards, which are fully explained in our 2018 shareholder letter while the catalyst of these higher performance.

Since by the time of COVID-19 pandemic the nation in February 2020, the team was well prepared and ready to maximize every opportunity. They have continued to do so driven by the passion of our teams and the nature of our managing partners mean, divest one year and good to great five year incentive programs, which Steve will speak to in more detail today.

Now, let's go over our high performance Cemetery third quarter 2021 results.

We continue to deploy capital and grow cemetery development projects, we creative and innovative products as our supercharged high performance cemetery sales teams keep accelerating sales velocity with our preneed property program sales.

Since the inception of the plan for the creation of sustainable high performance dreams across the portfolio of cemeteries. Our sales growth has been exponential.

Our third quarter 2021, total Preneed cemetery sales performance was $16 5 million, an increase of $4 1 million or 33, 3% higher than last year.

And an increase of seven 4 million.

Or 81, 4% higher than the first quarter of 2020, which was the preceding quarter to the beginning of our cemetery transformational high performance journey.

The intrinsic nature of cemeteries allow for significant growth opportunities.

Starting with our added sales professionals, who are tend to those families with immediate needs Wilde presenting them with all of their options of products and services. They can choose from regardless of burial automation is our final disposition. However.

However, the Eagle Ford Unity is with advanced planning teams, which were just in the early stages of development.

Since we rebound this program in August 2020, and through 2021, we have enabled to find the right <unk> High performance 40 leaders at Rolling Hills in Richmond, California, where naidoo Stackhouse is having tremendous success at a rate of 213, 4% to <unk> target for the nine months ending September 2021.

We have also created advanced planning teams at Oakland Memorial Park in Lafayette, California risk.

<unk> and cemetery in Oklahoma City, Oklahoma, Kansas.

<unk> loans cemetery in Panama City, Florida, and Bunker Cemetery in Las Vegas, Nevada.

These newer teams are building up their sales force and featuring the skills and are using all of the tools that generate high performance sales.

Moreover, we have order cemeteries, where we will be adding advanced planning teams like Fairfax Memorial Park in Fairfax, Virginia, and rest Haven Rockwell in Rockwall, Texas just to name a few.

As you hear the following cemetery third quarter 2021 field operation Amazing Heart performance, you will know the divest is still yet to come.

Total cemetery operating revenue of $22 7 million, an increase of $3 1 million or 15, 8%.

Total cemetery field EBITDA of $10 million, an increase of $1 5 million or 17, 8% and total cemetery field EBITDA margin of 44, 1% an increase of 80 basis points.

And for the nine months ending September 2021, total cemetery operating revenue of $69 4 million, an increase of $24 million or <unk> 41, 6%.

Total cemetery field EBITDA of $32 5 million, an increase of $14 9 million or 84, 5% and total cemetery field EBITDA margin of 46, 8% an increase of 1090 basis points.

We have completed the implementation process of Microsoft dynamics, 365, CRM and the results.

He is a robust and dynamic sales and marketing system, which we have named sales edge and will accelerate high performance sales even further than ever before we have launched the program at five pilot cemeteries with more two joined in early 2022.

This new system will give the edge to our four E sales leaders to communicate interact and stay connected with families. While growing our teams are rightful sales managers and sales professionals to educate the community and the value of pre planning their final goodbyes, we expect sales edge, our new high performance sales tool to be fueled by.

<unk> investments in lead generation programs and deliver significant organic growth and continuous our strengths over the foreseeable future.

Our seminars program test during the second quarter of 2021 was extremely successful and is now in full force and we have conducted seminars in Oklahoma, California, and Texas, and some more reschedule in Florida, Virginia, and Louisiana before the end of this year.

This program has resulted in a number of attendees of our own expectations and the new generated leads are now part of our preneed sales funnel, which will start to reflect in our fourth quarter Preneed Cemetery results performance.

Our third quarter was an amazing quarter in both funeral and cemetery segments and is truly a great time to be with carriage and the best is yet to come as we continue to grow organically. We're looking for those right acquisition partners that we are highly selective and strategic material through which Steve will speak to in more detail today.

In closing I can say that we have enter upper ownership share value creation sweet spot and in addition to our savvy, but flexible capital allocation discipline, we will continue to close the gap between our current stock price and our intrinsic value per share while accelerating momentum on our carriage services high performance flywheel. Thank you.

And I will turn it over to Stephen Thank you Carlos.

All of the outstanding performance, you've just described has positioned us well to execute on several of the capital allocation opportunities, we've discussed and written about throughout the year.

Then we'll talk more about our view of the intrinsic value of our stock based on key valuation metrics and how that drives our current approach to share repurchases. Despite significant share repurchase activity. This year. We finished the quarter with a net debt to EBITDA ratio in line with our previously articulated target of four times, which allows us to continue to focus on a number of exciting capital deployment.

<unk> for example in addition to the share repurchase activity. We also spent much of the third quarter continuing to meet and talk with a number of select funeral home and cemetery owners, who we believe will make great additions to the carriage family.

As we've learned more about these owners and their businesses and they have gotten to know more about carriage. We believe now more than ever we're entering a great time for growth.

We invite all owners interested in learning about our company to reach out to former owners and hear about their personal succession and transition experiences with carriage we share. Many of these stories via video testimonials on our website and invite all of you to check those out when you have some time.

We also encourage owners to come and visit the talented team here at our support center.

Their business to help ensure a transition in legacy which is owners can be proud.

We recently hosted just such a visit and it was exciting to hear the feedback from one particular owner about his impressions of our team and how they can help this business.

The timetable for the owners who were currently talking with to learn more about carriage and how we can provide the best succession planning solution for their business is different in each case and we're working closely with them to ensure they are comfortable and have all the information necessary to make the best decision with that said we're excited about these conversations and look forward to providing more updates next quarter and throughout 2022.

Hi.

Youll note that we don't create quarterly or annual acquisition investment targets and that decision is driven by a couple of key reasons first it is impossible to predict when the select high quality businesses that fit our strategic acquisition criteria will be ready to talk about their succession plans, but when they are we'll be ready adil.

Additionally, not all capital allocation opportunities are created equal at a given time before making a decision on how best to invest our capital we compare that opportunity to other capital deployment options to ensure the strongest long term return for our shareholders. Currently that's a very high bar as Ben will discuss in more detail here shortly and it requires us to exercise.

Discipline and truly focus on only the best remaining independent businesses and that's a great position to be in.

It's also worth noting that our pause on acquisitions for the past year and a half is a strong example of our deliberate and careful approach to capital allocation.

As those of you who follow <unk> know, we made several significant acquisitions at the end of 2019 and 2020, we proceeded to then dedicate our focus to successfully integrating those large businesses. While also paying down our debt throughout 2020, we are now well positioned with our new low cost balance sheet to get back to growth through acquisition, while continuing to take advantage of.

Other attractive capital allocation opportunities and maintaining our target leverage ratio.

As we look down the road at 2022 and beyond our outlook for growth through acquisition is bright our performance balance sheet and allocation framework allow us to remain highly selective in our efforts to partner with the very best businesses as more and more of those owners become ready to transition to the next chapter of their lives.

When we visit with these owners who are considering carriage as a succession plan option. They often want to know what will happen with their employees.

This provides us with a great opportunity to talk about not only our focus on the people in the business, but also what we believe is the best incentive compensation approach in our industry, our one and five year incentive compensation plans directly aligned performance with PE and provides significant upside for top performers.

A good example of this pay for performance approach and how it benefits our employees and shareholders can be found by simply looking at our adjusted diluted earnings per share for 2020, which was $1 86.

Our field and corporate incentive compensation paid in 2020 totaled an amount that equaled approximately <unk> 38 per share at the time.

If you add that 38 per share paid to our employees to the EPS of $1 86, Youll note that the team directly responsible for driving the outstanding performance in 2020 was rewarded with approximately 17% of the total earnings upside while our shareholders receive the remaining 83% now thats great math for both groups and it's this alignment that we believe.

Not only helps motivate talented people and drive performance, but also helps us attract and retain top talent, while shareholders benefit from that incentivize incremental higher performance.

Relatedly total overhead margin as a percentage of total revenue has been elevated this year due to the large increase incentive compensation accruals as performance continues to accelerate and nonrecurring items such as prior separation related expenses and pandemic related costs.

We expect the nonrecurring items to normalize over the course of 2022 with the overhead margin as a percentage of revenue settling within our target range of 11% to 12%.

As Carlo said, we all believe that the best is in front of US here at carriage and with the current team in place along with new members, who we look forward to welcoming into the carriage family through acquisitions. There is much to be excited about as we finished 2021 strong and look forward to an exciting 2022 with that I'll turn it over to Ben.

Thank you, Steve I'll Echo yours, and Carlos will comment on our record third quarter performance that shows the incredible transformation that has occurred here at carriage over the past two years, the broad companywide high performance execution by our managing partners and their teams across the country gives myself and our entire leadership team a tremendous amount of time.

Evidence that the carriage high performance flywheel will only continue to accelerate now onto the results.

For the third quarter revenue increased 12, 6% to $95 million adjusted consolidated EBITDA increased 17, 1% to $32 $4 million adjusted consolidate EBITDA margin.

Increased 130 basis points to 34, 1% and adjusted diluted earnings per share increased 68% to 82.

Year to date revenue has increased 17% to $280 million adjusted consolidated EBITDA has grown 26, 1% to $95 8 million adjusted consolidated EBITDA margin has expanded 250 basis points to 34, 2% and adjusted diluted earnings per share has increased 74.

6% to $2 27.

For the first nine months adjusted free cash flow has increased 12, 5% to $65 4 million, while adjusted free cash flow margin has decreased by 90 basis points to 23, 4% in.

The 23, 4% of adjusted free cash flow margin demonstrates our ability to turn 23 four cents of every dollar of revenue into cash available to grow the intrinsic value per share of carriage this ability to generate a high amount of reoccurring and growing free cash flow will enable carriers to fund the majority of our <unk>.

Value creation capital allocation through internally generated free cash flow equity, while maintaining a more modest total debt to adjusted consolidated EBITDA ratio.

Post the completion of our senior note refinancing in May we believe we have positioned <unk> with the necessary financial flexibility to wisely allocate capital to more shareholder value creation opportunities in the third quarter, we repurchased approximately one 2 million shares at an average purchase price of $44 24.

For a total purchase amount of $53 2 million. This brought our year to date share repurchases to approximately $1 5 million shares for an average purchase price of $42 89.

And a total amount of invested of $65 $5 million, the $1 5 million shares repurchased represent approximately eight 5% of the shares outstanding prior to the resumption of our repurchase activity in the segment.

The full impact of our share repurchases will be reflected in our reported GAAP basic and diluted shares outstanding in the first quarter of 2022.

On a pro forma basis, our diluted shares outstanding as of the end of the third quarter was $16 885 million consisting of $16 5 million actual basic shares outstanding plus 235000 up in the money the vested option equity grants.

Pro forma diluted shares outstanding excludes 511000 of vested shares related to our long term shareholder aligned good degrade to value creation incentive plan, where the shares are only available to those 50 participants at the end of 2000.

Yes.

In order to fully recognize the incredible high performance transformation that has occurred here carriage over the past 24 months. We believe it is appropriate to use a pro forma share count and include a lower annual interest cost of $9 5 million from our recent senior note refinancing.

Therefore on a pro forma basis, our third quarter adjusted diluted EPS was <unk> 89.

Versus the reported 82 or <unk> 74, 5% year over year increase our year to date adjusted diluted EPS was $2 64 compared to the reported $2 27.

Which equals 103, 4% increase versus the first nine months of last year and our last 12 months pro forma adjusted diluted earnings per share was $3 36.

Compared to $2 84 as reported.

We are excited to announce the approval by our board of directors for an additional $75 million authorization to our current share repurchase program. This brings the current available to approximately $85 million equal to 11% of our current equity market capitalization.

Based on our updated intrinsic value per share range of 65 to $75. We believe the repurchase of our own shares as the highest and best use of our capital at this time and we intend to continue to actively repurchase our shares if they remain highly discounted to that range.

We're also pleased to announce the approval of our board of a <unk> annual increase to our annual dividend beginning with the next dividend payment on December one.

This represents only an additional 825000 in cash dividends paid per year and is in line with our stated goal to maintain a dividend at a 1% dividend equity yield.

Year to date, we've invested $15 $3 million back into our businesses through $9 million of maintenance capital expenditures and $6 $3 million of growth capital expenditures are growth Capex has and will continue to be primarily focused on development of high quality and differentiated cemetery inventory across our portfolio. We will also.

Continue to spend the necessary maintenance capex to keep our facilities fresh and inviting we remain excited.

Excited about the opportunities to wisely and with discipline and allocate capital within our existing businesses and supported the accelerating carriage high performance flywheel and generating growing returns on that invested capital.

Our total debt to adjusted consolidated EBITDA leverage ratio as defined by our bank credit agreement remained essentially flat at 398 times at the end of the third quarter, we were able to maintain our leverage around our stated goal of four times, even as we invested $53 $2 million in share repurchases due to the continued strong operating performance.

<unk> and free cash flow generation in the quarter.

Additionally, we are working with our banking partners on an amendment to increase the size of our current credit facility by $50 million to a total of $200 million.

And we expect to complete that process in the coming days.

Given the accelerating operating and financial performance, coupled with our lower outstanding share count. We are once again excited to raise are roughly right two year scenario and rolling four quarter outlook.

The roughly right ranges are realistic estimates of our future performance and takes into account known factors that are within our control.

The only capital allocation. We have included in this updated roughly right scenario is an allocation of approximately 75% of our adjusted free cash flow towards accretive share repurchases, while maintaining our total debt to adjusted consolidate EBITDA ratio at around four times.

Okay.

For 2022.

Currently expect total revenue to be in the range of $370 million to $375 million adjusted consolidated EBITDA to be in the range of $124 million to $127 million adjusted consolidate EBITDA margin roughly right range of 33, 5% to 34%.

Adjusted diluted earnings per share as reported $3 three to $3 eight.

On a pro forma basis again, using lower share count and lower interest expense for the full year, we expect adjusted pro forma diluted earnings per share to be between $3 45, and $3 55.

While adjusted free cash flow range expectations of $77 million to $82 million for.

For next year 2022.

Total revenue range of $380 to $390 million adjusted consolidated EBITDA growing range of $120 million to $134 million in it.

Adjusted consolidated EBITDA margin of 33, 5% to 34 and a half industry leading adjusted.

Adjusted diluted earnings per share of $3 50 to $3 60.

On an adjusted pro forma diluted EPS for a full impact of continued share repurchases of $3 75 to $3 85.

Adjusted free cash flow range of <unk> $82 million to $87 million and adjusted free cash flow margin for next year, 21% to 22% truly remarkable growth over just a short amount of time.

In our press release for the closing of our senior note refinancing dated may 13th we introducing a new methodology for how we view the intrinsic value per share of carriage to illustrate the significant gap in our bond pricing at $4, two 5% unsecured over eight years.

Tom Brady compared to our equity free cash flow yield of almost 11% at the time.

A rodney Dangerfield getting no respect.

It was also intended to provide investors with a framework for how we would allocate capital towards share repurchases versus other opportunities moving forward.

Our current weighted average cost of capital of six 4% a reduction of 100 basis points from seven 4% due to the decrease in the interest rate on our new senior notes from 665% to 4.25% annually, given our ability to produce and sustain a high amount of free cash flow. We believe it is appropriate to.

Calculate a roughly right intrinsic value per share range, using our free cash flow equity yield range of six 4% to seven 4%.

By using the midpoint of our roughly right range of adjusted free cash flow for next year of $84 $5 million and the pro forma diluted shares outstanding as of September 30th of $16 $8 5 million equal to roughly right expectation of $5 per share of free cash flow in 2022.

Flying our free cash flow equity yield range would equal intrinsic value per share range of $67 57.

$78 13.

Which we considerably round down to an updated roughly right in terms of value per share range of <unk> 65 to $75.

This range represents a $10 or 16, 7% increase from the second quarter press release, and a $15 or 27, 3% increase since we first introduced this methodology a little over five months ago.

We intend to provide investors with an update to our roughly right intrinsic value per share methodology on a regular basis.

I want to thank everybody, who joined US on this call. This morning, if you are new to carriage or story I would highly encourage any serious long term investor to visit our Investor Relations website read metals shareholder letters, beginning with 2016 and all of our recent press releases, which provided an incredible amount of depth and insight.

Into our vision for carriage and the incredible high performance transformation that has occurred over the past two years.

Then give us a call and we'll be more than happy to answer any great great questions you might have.

And with that I'll open up the call for even more great questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone so let's draw your question press the pound key.

Again, if you would like to ask a question press star one.

And our first question comes from Alex Paris with Barrington Research. Your line is open.

Good morning, guys. Thanks for taking my call this morning and.

Congrats on another beat and raise.

You covered a lot in the press release and your prepared comments so rather than.

Get into remember, Greg I'll offer a couple of bigger picture or qualitative sort of questions.

Starting with market share gains.

As you said in the press release.

Come from both independence.

And some consolidators.

We've been unable or unwilling to adapt to new ways to serve families.

I was just wondering if you can give us a little bit more color or some examples of these new ways that youre serving families.

In 2021 and 2022.

Absolutely. Thank you Alex this is Carlos so yes, absolutely what's going on is not just that some funeral homes are not willing or able to serve other families. Who's also how our amazing managing partners go above and beyond offer incredible services and options to those families that are in need.

And by doing so they are doing such creative and innovative ways that family feel attracted many times not even related to price they end up even paying a higher price with other than other competitors, just because who we are and how we go about doing things. Some of the examples that I made in my prepared remarks today are just a few of many that we have across.

Carriage on Thursday, we have an operations call, where all of our directors of operations here. Some of these amazing stories, where we have been able to gain market share over other weather.

Individual firms or competitors like consolidators and these stories are just incredible to hear because they are going to the detail of what that employers are willing to do to customized services in ways that maybe other people can't.

And so that's why we've been able to gain significant market share broadly across our portfolio of funeral homes and cemeteries.

Great I appreciate that that's good color.

Next question.

Death rates.

Obviously, they've been elevated.

For sure due to Covid.

But also due to the aging of America.

And market share gains I guess for core carriage you said that in Q3.

60% of the volume was related to Covid related deaths.

Suggesting the balance the two.

Two other things market share, perhaps ageing of America.

What has been the annual loss rate historically.

I have always recall that it's 50 to 100 basis points per year.

Obviously elevated during COVID-19 in the process of normalizing now what's your expectation for death rates.

Going forward are we going to be a real remain at a new normal higher elevated deaths rate due to the aging of America.

This is mel.

Alex.

No.

And Carlos covered.

In the press release and in his comments.

Even the Covid deaths.

In many cases where market share gains.

Just because it was COVID-19 didn't mean it was a family we have served before.

Lots of cases it wasn't.

But when that.

That family has a choice of non core.

You have won their hearts and minds, but what you were able to do that somebody else told them they could do or would do.

So a lot of the Covid deaths were in fact also market share gains.

And.

When I started the company 30 years ago.

The rate was about 1% per 100000 or something like that.

And the concept was over time.

There would be a change in mix.

Coordination list traditional so you'd lose revenue, but the death rate.

Would actually start to increase when the baby Boomers started to die, which I was convinced back then from a lot of sources would be tomorrow.

The next day that doesn't happen.

And instead, the death rate ticked down to about <unk> eight.

8% per 100000 over 30 years.

And so I quit even thinking about.

Death rate going up and started focusing entirely on how do we get to be the best at what we do so we can grow market share whatever the death of where it is we want more of it.

And.

So.

All of this time the.

The industry of nursing homes assisted living grew much bigger.

And the older people didn't necessarily grow much healthier there was advances in medicine and science.

We werent necessarily more healthy living better lives filled or they've got and I think covered unfortunately it was this perfect virus.

Designed almost bizarrely too.

To attack that vulnerable groups and it did with a vengeance.

And now you've had a lot of people not just the maintenance medicine checkups.

Seizures that will keep them.

Not if not healthy then at least being able to live their life. So I do think.

First of all covered will be endemic.

That's becoming a consensus around the world.

And that will also depending on the year and the degree.

And the variant would lead to a higher normalized death rate pre COVID-19.

The baby boomers without even COVID-19 will begin to die at a higher rate as well. So I think I think looking forward.

As opposed to looking at the last 30 years, we will have a higher normalized death rate from various for various reasons.

And yes. The main reason for us while we focus on is not what we can't control. It is getting better. So we can get more whatever whatever the death rate is we want more share.

100% of the time.

And thats, what what drives.

That's what drives everything about carriage.

Great well. Thank you for that yes, I remember 20 years ago aging of America was the investment theme for the industry and people living longer access to medicine and that sort of thing I would just note that the oldest of the baby boomers are now 75 years old so.

Unfortunately, we cannot live forever, but I would agree with that but we should start seeing a higher annualized growth rate.

So my last question.

As repurchase versus M&A I appreciate your comments in the press release and in your prepared comments it sounds like you'll be more aggressive.

Share repurchases in the fourth quarter.

The 22 2022 might be a mix of more share repurchases as well as potential M&A.

First of all what are your thoughts on that.

Idea.

Secondly.

Could you maybe give us a little color additional color on that pipeline. He said well there's a number of.

Players there.

That are considering succession planning.

Im assuming theyre larger players in high growth markets.

That sort of thing.

Yeah. Alex This is Steve I'll cover the pipeline, a little bit and let Barry comment on the share repurchase approach.

We're having several conversations with a number of businesses quite frankly, we have developed relationships with over the years.

So as mentioned in the remarks timing is important for them and they need to make sure that they are ready and we're seeing more and more of them who already.

So in terms of geographic footprint, they're spread out throughout the country. These are bigger better businesses as we like to describe so you're seeing fewer rooftops and more calls which is a more efficient business.

Our model that we look at.

So yes, we think Q1 there'll be more to talk about there right now those conversations have progressed.

Over the past quarter to a point, where we wanted to share that with everybody.

In terms of how we look at that versus repurchases.

I mentioned this a little bit my remarks, it forces us because as Ben mentioned right. The repurchase opportunity is significant based on our own intrinsic value. It forces us to be really selective and only focus on these businesses that we think are real standouts.

That's the kind of discipline that we appreciate and are following right now and with that I'll turn it over to Ben If you can comment a little bit on the share repurchase piece, yes, Alex I mean, it's I think it's pretty simple right. The discount where we believe our shares trade compared to intrinsic value is wide and so there is a high bar for acquisition activity to kind of.

Get through from a capital allocation standpoint, but I think what we've been saying here's where the flexibility that we have there is not like either or decision. We believe that we can partner and acquire high quality acquisitions in growth markets, and where we want to be while maintaining an aggressive and active share repurchase program and have the flexibility.

As we go along versus.

How we're doing from an operational perspective, how cash flows coming in were leverages, what that opportunity is compared to our.

Intrinsic value and then weighing what those acquisition opportunities are it's it's a very different time hair care and where we've ever been before and this flexibility gives us those opportunities.

It's incredibly exciting.

So Alex.

<unk>.

Ben had it in his written remarks, but.

What's going to be really interesting.

Not just for investors outside care.

But for the 49 participants in the good to great five year shareholder value creation plan and everybody else who's really.

Got it.

The investment.

Our stake in carriage and how well it does.

And that's throughout the company.

We're going to put out at the beginning of the year.

Our new three year scenario ending 2004.

That's the timeframe of the second five year good to great journey. It's also the five year compounded share returns for the 49 participants in the incentive plan, what we will do.

As we will put out I think what everyone is seeing now a very high priority, we will not shut off as.

Cemetery product development.

We want more large sales we have the talent Carlos has built US you build it and they will get they will sell at very high margin. So thats one thing we will not cut back on.

I mean those returns on invested capital are simple.

And I always look forward to doing something that was central but legal.

I will get to see it in action.

And so we're going to put out a three year scenario.

With three different capital allocation severity.

For the full three years.

It will be something like this this is just off the top of the head.

We'll have some amount for internal growth projects call it 20%.

And then the other 80%.

We'll put that into three different scenarios.

It's 25%.

Acquisitions, 75% share repurchases for the full three years 50 50.

Then $75 25.

So and then on top of that we will put those roughly right ranges up performance.

In each of those years, where part of valuation range using our methodology for.

Okay.

<unk> enterprise value to EBITDA, but especially free cash flow equity yield and we will see the range of possible shareholder value using each of those capital scenarios and this is very sophisticated stuff.

It's not for the people, who don't want to go back and learn why are we able to do this now.

And why is I should take it seriously.

This will be a serious thing.

And.

And the other company would do it.

The lawyers won't let us.

Thats, how good the company has become and how predictable it has become.

Now are all becoming great investors of our free cash flow to create the optimum and <unk> value per share. This is always where I wanted to get the company and I will say something about that in my last remarks.

Great. Thanks, melting slower team and again, a hearty congratulations on the strong third quarter results.

Thanks, Alex.

Thank you. Our next question comes from George Kelly with Roth Capital Partners. Your line is open.

Hi, everybody thanks for taking my questions.

Just to start with to make sure I understand your.

2022.

It targets you have.

And you talked about this a bit in your prepared remarks, but you have that growing a bit next year and so is that just to give yourself more flexibility towards all these different capital usage, but you are not including any M&A in your.

In your income statement projections are you.

No there's no M&A in there, it's being conservative on kind of where that might land right with the really just thinking about in this scenario share repurchases, our CRE purchases and then internal growth capex of the capital allocation scenarios are in there no M&A like Mel said, we're going to as we get towards as we report.

At year end in February we will provide more of those different capital allocation scenarios.

M&A just like Steve covered had been covered.

We decided as a team to wait until the beginning of the year. We will have more news on the M&A front, we will have more news on Mr market price getting closer to our intrinsic value ottonian. So there'll be a lot more news to talk about and we'll have those three scenarios.

You will.

It will be able to judge whether we should be bias towards one or the year.

Okay. Okay, Great and then next question for me sticking with your 2022 targets.

Can you share anything just about how you are forecasting price versus volume.

I mean, theres been such a nice growth in both.

And then I'm curious are we at especially in this most recent quarter on the variable side that the.

Pricing growth.

Materials. So are we at kind of a new level and pricing or is there additional opportunity going forward.

George it's not looking at pricing and volume rate. We believe there is continued opportunity for our managing partners and their teams to grow the average revenue per contract both on burial and the cremation side.

By serving families better providing more families.

More value to the families that we have the opportunity to serve that is really the opportunity cremation in particular, how we're able to engage with families plan them a meaningful memorial service celebration of life for that loved one that families.

Oftentimes don't even know that they are able to have during those times. So that's really the focus now as we look forward as we kind of project or put these ranges and theyre being very conservative in what the expectations are for next year right in terms of.

Volume growth on a same store basis.

And as we bring down from a margin perspective. So that's how we're looking at it really the really the focus is growing that average revenue per contract. So George it's Mel.

This may come as a shock, but we do know pricing year on the funeral side.

There is no pricing so I wouldn't have any idea.

Of what individual.

Managing partners price their products and services what they are incentivized to do is grow the compounded revenue over three years at.

At very high margins.

So they know that.

And Thats, a layered incentive program anywhere from zero, if you can't grow a compounded revenue growth two to get anything over 4%.

Over 30%, 35%, so a zero to 35% a 100% of your standards are compounded growth in revenue.

And.

That includes pricing, but they have to know.

I also have a three year volume.

Compound.

50% is related to volume and top added revenue however, they get it.

We don't care as long as they get it because we know what the operating leverage we will do it will begin to look simple.

And we will convert 80% of the incremental revenue over three years into EBITDA.

So we don't get into all the Nitty gritty of pricing, we got rid of that process. When we got rid of budgets.

Okay.

Okay. Okay. That's helpful.

And then last question for me just about this new Tech platform I think it's called sales edge.

Im curious if you could talk more just about.

I had missed this but what are some of the features of that that you're most excited about and.

How long is it going to take to fully implemented just any more background on that would be helpful.

That's all I had thank you.

Absolutely George this is Carlos so sales say achieves a CRM right.

Funded upon Microsoft dynamics, 365, CRM and basically as you know when you get on one of these software is you have to customize it to your needs those are very broad.

<unk> then you have to really customized to the specific needs of our processing sales. In this case, we have done that process through a third party implementation company already and we have launch the pilot program of our end product in five different cemeteries well will do for our business is that now all.

Our sales counselors, whether they are advanced planning teams or you're probably service concept or is that sort of add need we'll be able to have basically a personal assistant into the system, where they can track absolutely all activity that is going on credit funnel understand their presentation ratios closing ratios appointment ratios, but also.

Reminder, some families reminders on anniversaries of death or birth date, or even reminders for follow ups. There also will be able to launch.

Marketing campaigns that are the same based on a customer journey that we'll accelerate the technology, whether it's tech direct mailing website.

Inquiries and things of that nature. So it is something that we never had before broadly at carriage, even though some managing partners had some sort of system. Prior this will definitely accelerate I'll tell velocity over time as we continue to launch in every other cemetery.

Other than these five I look cemeteries by the beginning of 2022.

Does that answer your question George.

Oh, yes, yes.

That was great.

On the quarter.

Thanks for taking my questions.

Thanks George.

Thank you. Our next question comes from Liam Burke with B Riley. Your line is open yes, Thank you and good morning.

The.

Burial contracts increased year over year.

Seems to be going against the general overall trend.

<unk> as a percent of mortality rates.

Is it all market share gains that are driving your contract growth there.

Sure.

So thank you Liam great great questions. So think about it this way when the family goes in <unk> and now need family. They may be asking cremation burial, but the process the process of educating that family by your family service customer team of explaining all of their options may change their initial idea because.

They don't really know what they want they may think they one information limiting wound barrier, but that process of presenting all of the different options products and services that we have and really become very creative with ibs on how to celebrate the life that lib for that specific family makes a tremendous difference. So we believe that that process is actually driving some of that.

Burial rate. In addition to now after Colby families are willing to have that service that doing Colby mid perhaps leading $1 five.

Okay Fair enough and Carlos you touched on after the course of your prepared comments about the cemetery sales for us in the development and the use of software.

Sales are.

Double digits, where are you in terms of the.

Revamping of the sales force.

At the right size or do you still have more work to do there.

A lot more work to do.

Mainly because we started with our family service team, adding right and so at Wassa navigational process to find the right who is with we already have and change compensation program that will enable accelerated sales broadly across the cemetery portfolio and then we're moving to our advanced planning team, which is just on the early stages.

Of.

Development, that's where we have the most opportunity moving forward, even though we will continue to grow our family series teams on the cemeteries broadly, but the advanced planning teams is where we see the most opportunity for 2022 in the foreseeable future.

I mean, just just im sorry go ahead no no I just wanted to add something there.

I'm going to put Carlos on the spot to everybody.

So if you think about.

Houston is in the oral series again at Houston Astros. They won last night, where to go going back to Atlanta, but if you think about a baseball game being nine innings.

Where are we with our sales team.

In terms of high and sustainable performance in all of those areas, where we weren't before.

That would include master plans at all the bigger parts. It would include.

Build out.

Product for the various demographic groups and alignment with Master plans and then it would include not only what Carlos is talking about advanced planning, which we never really had but also <unk>.

<unk> sales.

On a more frequent basis, which we used to have unlike.

Oh, we have one.

What was the last time, we had one.

Okay.

And I'd say.

That's still in front of us and Carlos can say, which inning does he think were in a nine inning game absolutely. Thank you mill I would say, we're probably at the bottom of the floor with a full house in every single base with big hitters already lying to keep homeruns automotive fourth.

Sounds good for the rest of the game.

Fair enough. Thank you ma'am, thank you Carlos.

Yes.

Thank you and as a reminder, if you would like to ask a question press. The Star then the one key on your Touchtone telephone.

And we have a question from Chris Mcginnis with Sidoti Your line is open.

Good morning, Thanks for taking my questions and congrats on obviously, yes.

Strong all around earnings release.

Just in terms of the M&A can you just talk about maybe how how you maybe refocus that in the sense that if you look back five years ago, you may have looked at it.

Opportunities a lot differently than you are today can you just talk about how how you've maybe.

Transform that M&A team to look at the opportunities going forward.

Yeah, It's a great question, Chris This is Steve.

I think where we start as we look back at the end of <unk> 19 in 'twenty and we referenced it a lot because it really was part of our transformation, particularly on the acquisition approach those were bigger businesses for us.

All came at one time, we dug into them, we really focused on them and the integration went really well and when we stepped away from it we realize that's the type of model that we want to bring into carriage that really accelerates our performance. So we highlighted this in mills annual shareholder letter this year and actually broke down performance of those acquisitions.

So encourage folks to take a look at that it set the model for us. So we kind of went back to the drawing board as a team and executive team to say what do we want our strategic acquisition criteria to look like based on the performance of those businesses. So in short what we took away from that was.

Obviously strategic markets, what's redefine that what does that look like for us.

Bigger businesses.

And when I say bigger businesses, not just call volume, but also again the efficiencies with fewer rooftops.

And obviously cemeteries. So Carlos has spoken to this quite a bit. We are we are really getting our sea legs. When it comes to the cemetery World and so cemetery has become more attractive for us.

Then in terms of your question about the team that works on this it is truly a team so we have.

Folks across the executive team who are weighing in on this we have multiple folks that go out on these trips.

And I mentioned this in my remarks, we invite folks to come here. Unfortunately, they take us up on the offer to meet with leaders in different support functions. So our goal is to get out there and have them meet more people on the carriage team.

I'll give you one anecdotal story from a recent visit.

We were talking.

With an owner, who basically halfway through the dinner sit well this all sounds great.

How am I to know that this is actually what it looks like in practice everybody when they sit in front of us gives us a great pitch right.

And we've given them a name of an owner.

Who we had recently partnered with a few years ago into and you'll call. This person asking them about their story don't don't just take it from us and when we left but with was look our goal. If you partner with US is in a few years for us to be able to provide your name to somebody and the only way that we know that that conversation will go well because if we honor everything we've just told you and.

That's absolutely our practice, we are patient with it to find the right owners.

We've now got a larger team focused on it so I'm not sure if that answers your question, but that's a little insight into the change in the progress.

That was Dwayne chain.

Owner.

Right Yep two years today as anniversary joining carriage in two years today.

We had our earnings call at his place.

And at him.

First time, we had an owner.

On our call.

Just joined carriage and he spoke about why he joined carriage then.

And now he's able to speak much more.

Comprehensively and in detail about whatever he said than being just a downpayment.

And so he has become not only a wonderful partner.

Duane cane in hand.

Great business, a lot of upside over many many years has become one of our biggest.

<unk> in terms of other owners, having any doubts about about carriage.

Great No I appreciate that remember that call.

Just one one question for you looking back over the last year year plus now.

Significant change in the business.

What was most surprising to you when you look back at this point I know, you've obviously written a lot about it but.

I don't think I've heard you say that anything caught you off guard if anything.

Well.

I have been surprised.

I've always had a vision.

Of the future that might've been a little bit more aggressive opt.

Optimistic about what can be achieved.

My worst.

Nightmare of peers would be.

Having a vision of the <unk>.

Future.

That you actually achieved.

It was too easy.

So I've always said very high visionary.

And missions that were.

And most People's mind, let alone the crazy side of what is possible.

And I would say the biggest surprise here is that if I had imagined.

Which I did stepping back into the operating side of the business in September 18.

To turn it around most of the funeral portfolio at the time.

There was no way I could have imagined then even in my most optimistic.

Wei.

What has actually turned out.

And it was if it wasn't <unk>.

One thing it was a lot of different things and.

And all of those have been listed.

Top grading of talent updating the model of the standards model.

Carlos joining the company.

A lot of talent coming into the company better than anything we've ever had before.

Growth of the existing executive team the acquisitions just being.

Crazy I mean, I knew they were fantastic, but they've achieved what I thought might be five or eight year ago.

There within the first two years and now the upside is.

Beyond what I could have imagined and so all of these things coming together the crash in the market.

We want to put a lot of money to work.

At the very bottom of the Corona virus market crash now we've got all this recurring income and gains. So you just got air refinanced the balance sheet Oh My gosh.

I always wanted to get a balance sheet like this.

And now we've got the balance sheet and we got the operations leadership.

Just like our own and the 'twenty shareholder letter.

London.

Versus Paris.

In the <unk> $75 1992 period.

These are truly the best of times.

You talked about here every day, if you walk around the halls, it's all over the walls.

These are the best of times with everything before us and I told the team. The other day, they don't saying that can messes up this person if you look at it in the mirror.

So we can't let that person mess it up individually or as teams.

And I really encourage people to come here.

I mean this team has we extended the lease we got we got.

All renovated.

Floors, but if you come in electric the walls, just everything thats around.

You could be here for three or four days and not know what business right.

Other than talent.

Exceeding expectations individually and through collaboration with other talent you would never even know what business. We're at other than whatever we're in we're damn good at.

So that's been a surprise part to see how it's all come together all parts and it will never go back.

Great well. Thanks, Thanks again for answering my questions and good luck in Q4.

Thanks, Chris.

Thank you and I am showing no further questions in the.

I'd like to turn the call back to Mr. Mel Payne for closing remarks.

I co founded carriage on June 1st 1991 at 48 years of age with no history.

And no knowledge of the funeral and cemetery business and industry.

I only had a mission and vision of being the best at what we do.

Guided by five guiding principles.

Over the last 30 years.

We first had to get.

Really good.

As an operating company.

So with that the budget and control model and <unk>.

And we innovated a radical business model at the end of <unk> called a standards operating model.

Which over the last 18 years has evolved into a portfolio of framework.

Produces performance operating and financial performance at each business.

In alignment with our mission of being the best at operating our businesses.

Then we use this advanced operating business model to develop our strategic acquisition criteria.

Six.

And the model that.

That we use to do that.

<unk> acquisition candidates.

Over the last 14 years.

So we believe we have achieved our being the best mission as a consolidator of the best remaining independent businesses in the best large strategic markets.

So we believe strongly and we believe this.

This performance this year this quarter and in future years.

It's obvious that we achieve those too.

Upon reflection.

About this evolutionary learning journey in history.

It becomes clear.

That already over the last two to three years.

Of high performance transformation in every aspect of the company, which I mentioned a few minutes ago.

<unk> finally matured into a being the best shareholder value creation platform.

Our operating and consolidated into still highly fragmented funeral and cemetery industries.

I could never.

Have achieved this last and critically important mission.

Our shareholders are being the best company in our industry.

<unk> long term superior compounded shareholder returns.

Without the friendship and support of three people.

Who have fundamentally changed the way I think.

About capital allocation and value creation.

So with great Gratefulness and honor.

I would like to personally dedicate this third quarter performance and release to Alan Weber, Tom chart for Us and <unk> Dot.

Thank you all for calling in.

And being interested in our company.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a good day.