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spk01: Good morning, ladies and gentlemen, and welcome to the Parklawn Corporation second quarter 2022 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jennifer Hay, General Counsel.
spk04: Thank you, Ali, and good morning. Thank you for joining us on today's second quarter 2022 earnings call. Today's call is being recorded and a replay will be available after the call is completed. Please be aware that certain information discussed today is forward-looking in nature. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please see our public filings for more information regarding forward-looking statements. During the call, we will reference non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see our public filings for additional information regarding our non-IFRS financial measures, including for reconciliations to the nearest IFRS measures. I will now hand the call over to Park Lawn CEO Brad Green to open our discussion today.
spk06: Thank you, Jennifer, and good morning, everyone. In addition to Jennifer, with me on the call today is our CFO Dan Millett. During the second quarter of this year, there was a decline in year-over-year mortality, which contributed to a difficult comparison to last year's COVID-impacted second quarter. From a high level, while our funeral homes were not as heavily impacted, we did see some challenges in our cemetery businesses. Specifically, our revenue for the second quarter increased 5.4% to $75.9 million, but was negatively impacted as a result of the decrease in high-margin property sales at certain of our legacy cemetery businesses. Breaking this down a bit more, in our funeral businesses, we were pleased to see an increase in our market share in many of the communities we serve and a strong demand in our average revenue per call. Our call volumes from comparable operations decreased approximately 3% year over year due to the drop in the death rate, and we experienced an increase in the cremation rate of 163 basis points. Despite these circumstances, as a partial offset, we were able to deliver an increase of approximately 2% in average revenue per call for our comparable funeral operations year over year. We believe that this increase in average revenue per coal can be attributed to a few different factors, including the fact that we are still seeing families with a strong desire to memorialize and celebrate their loved ones with enhanced services and merchandise. Also throughout the quarter, we work to implement pricing adjustments where appropriate to help combat some of these impacts of inflation, such as increased labor and fuel expenses. Looking to our cemeteries, our comparable cemetery property sales decreased approximately 4.3 million year-over-year. The majority of this decrease was isolated in a couple of our legacy businesses, and to be more specific, a few properties within those businesses. While some of this decrease is directly attributable to the fact that larger cemetery sales are highly variable from quarter to quarter, we recognize that we could have done a better job in working to close more of these sales during the quarter especially when dealing with a more distracted consumer than we saw during the pandemic. Finally, while our at-need internments were more in line with the national mortality decreases, this decrease in at-need customers also had an impact on our cemetery sales as well. While there was some catch-up in merchandise sales in Q2 2022, as previously ordered merchandise made its way to our cemeteries and was delivered and installed, we continue to experience delays in post-sale supply chain and, in some instances, a further lengthening of lead times. As we continue to grow our company, the impact of any one business will continue to become more muted. Our acquired operations continue to perform at a high level and meaningfully improve the overall quality and caliber of our portfolio. And as we continue our operational focus in the acquisition process, even during these downturns, we've been able to maintain strong momentum and a robust pipeline. And we fully expect to execute within our publicly stated range of $75 to $125 million for acquisitions this year. In line with these expectations, during the second quarter, we closed the previously announced Chancellor acquisition in Mississippi and the Hudson Funeral Home acquisition in North Carolina, both of which are premier firms and strategic to our footprint in each of these two respective markets. Subsequent to the quarter, we also entered a new high-growth market in Virginia with the closing of Ferris Funeral Service, which has over 70 years of dedicated and compassionate service to its community. This business, consisting of a standalone funeral home and on-site funeral home and crematory combination, operationally fits together well with our existing Tennessee and North Carolina businesses. Last week, we also announced that we have entered into a definitive agreement to acquire Shackleford Funeral Directors. Shackleford is a large group of businesses in western Tennessee consisting of eight standalone funeral homes, two standalone cemeteries, and an onsite funeral home and cemetery location. Shackleford, like many of our other acquisitions, is a highly sought after business, not only for its size, but its excellent reputation and history in the community it serves. Finally, on the organic growth front, last week we also announced that the Westminster Funeral Visitation and reception center in Toronto has now been completed and is open to serve families in the greater Toronto area. I'd now like to turn the call over to Dan, who will review our Q2 financial results in more detail.
spk10: Thank you, Brad, and good morning, everyone. You'll find a detailed breakdown of our second quarter results in our financial statements in MD&A, which are available on our website and on CDAR. Today, my comments this morning will focus on the operating results from the second quarter 2022 relative to Q2 2021. This year remains a difficult year in comparison to 2021 as last year continued to experience the effects of the COVID pandemic. While our revenue increased from $72 million to $75.9 million, our call volume fell as the mortality rate decreased. Revenue growth from high-quality acquisitions was offset by slight revenue decreases in our funeral home businesses from the aforementioned decrease in call volumes, but decreases in high-margin, at-need and pre-need property sales had a larger impact. In addition, the company's operating expenses, including general and administrative, advertising and selling, and maintenance expenses, increased by approximately $5.8 million for the three-month period ended June 30, 2022, over the same period in 2021. While this increase was primarily the result of acquired operations, other cost increases and the timing of certain costs impacted margins. As the spring is a very busy time at our cemetery properties due to maintenance and several well-attended holidays, the inflationary cost of labor was experienced. and related, additional contract labor was needed due to the availability of staff. Other inflationary costs also impacted the business, but to a lesser degree. Increases in costs such as fuel, utilities, and travel costs were experienced, as well as the timing of certain costs also decreased margins for the quarter. Ultimately, these items and other income kept net earnings flat for Q2 2022, achieving approximately $5.81 million compared to $5.81 million last year. But net earnings per share decreased from 19.2 cents per share to 16.7 cents per share for Q2 2022. Furthermore, the adjusted net earnings attributable to PLC shareholders for the second quarter of this year was approximately $6.6 million or 19 cents per share compared to $8.8 million, or 29.1 cents per share in Q2 2021. Turning to the balance sheet, at June 30th, we had approximately $90 million drawn on our revolving credit facility, other debt of approximately $12.1 million, finance leases of approximately $5.8 million, and cash on hand of approximately $21 million. Excluding our debentures, our net debt was approximately $86.9 million as of June 30, 2022. We continue to be conservatively levered, and at the end of June, our leverage ratio was approximately 1.09 times based on the terms of our credit facility, and approximately 1.95 times including our outstanding debentures. As previously indicated, as we move through the upcoming quarters and continue to expand our business through the acquisition activity and organic growth opportunities, we expect the leverage ratio to gradually increase. After acquisitions that closed and were announced subsequent to quarter end, we estimate our current liquidity is in excess of $125 million, which is readily available to be deployed and ongoing in future organic and acquisition growth opportunities. Finally, as we announced yesterday, we have received approval from the TSX establishing a normal course issuer bid. Over the next 12 months, Parkland can acquire up to 3.4 million common shares. This NCIB will allow us to take advantage of any dislocation in our share price and our expectation of fair value, provide EPS accretion, and generate positive returns for Parkland over time. We believe it is important to be flexible and generate high returns from multiple areas of investment and believe the initiation of an NCIB at this time is prudent capital management. Before I turn it back to Brad for some closing comments, back in July, we announced that we are hosting an Investor Day on September 29th in Nashville, Tennessee. Over the past three years, we've experienced exceptional growth in Tennessee and think it is the perfect venue to share further insight into our business and operations, as well as allow stakeholders to meet various members of the Parklawn team, including former owners who we are proud to have had partner with us. To register to join us in person, please go to our website and look for the Investor Day link. Please note that we have reserved a limited number of hotel rooms subject to preferred pricing, and this block is only available until August 26th. We are very excited to be putting on this insightful and fun event, and we hope we can see you all there. I'll now turn it back to Brad for those closing comments.
spk06: Thanks, Dan. While this second quarter was a difficult comparison and was further complicated by our current economic environment, our year-over-year results were driven in large part by the inconsistent nature of the cemetery business as our property sales from a few legacy businesses decreased. As we continue our significant but steady growth, these acquisitions will continue to diversify our risk and minimize these types of impacts over time. Those of you who've had a chance to meet with us over the past couple of years understand that Park Lawn is a long-term growth story. We have the operating acumen to manage our businesses and improve them, and a structure and culture that allows us to be not only the fastest growing company in the death care industry, but also ultimately the most successful. As I've said before, this is not a business that should be looked at quarter to quarter, but is more appropriately evaluated on an annual basis. As we continue our focus of adding high-quality and accretive businesses to our portfolio, not only will we see incremental improvements, our investment thesis remains intact. We still remain poised to display EBITDA and earnings growth for 2022 and expect that our operating environment will normalize into the fall and winter. Lastly, as Dan mentioned, we have initiated an NCIB, which is simply preparing for an opportunity that an inpatient market may provide us. We still maintain that based on our robust acquisition pipeline, as well as the nature and quality of those businesses, our capital is best deployed by continuing to make a steady drumbeat of acquisitions, as that is the best way for us to continue executing on our 2026 aspirational goals of EBITDA growth and adjusted earnings per share. However, as Dan also noted, our goal is to drive the best overall returns for shareholders and if the public markets provide us with that opportunity we intend on executing through the NCIB. Let me be clear, the announcement of the NCIB is not a reflection of our ability to deploy capital and highly accretive acquisitions. Rather, we are simply preparing for a potential opportunity that can benefit our loyal shareholders and allow Parkland to be flexible in a more turbulent economic environment. That concludes our prepared remarks, and I will now turn it over to Ali for any questions.
spk01: Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Irene Nitzel with RBC Capital Markets. Please go ahead.
spk03: Thanks, and good morning, gentlemen. Just a follow-up question to your last remarks, please. So during your prepared remarks, you mentioned that you remain confident that you can execute on the M&A dollar target for this year, but you've also adopted a sense that it would be opportunistic. So how should we think about the M&A pipeline versus the probability of you buying back shares? as we move through late Q3 and into Q4.
spk06: Good morning, Irene. The way I would look at the two is we remain highly focused on making sure that we execute on our M&A strategy. During the last earnings call, we were specifically asked whether or not the company had been looking at the possibility of a share buyback, and I answered at the time that that was a matter of open discussion. given our second quarter results and the belief of some people that it will have a significantly negative impact on our stock, it would be prudent to have this mechanism in place if the market started to treat us in a manner that was unnecessarily brutal, for lack of a better way to put it. So as far as I'm concerned, and I'm only one voice on the board, but I think I speak for everyone, Our main focus, if not our total focus, is on making acquisitions. But again, I think it would be prudent to have this in place if the market presents an opportunity for us by basically pushing our stock down to the point that it makes sense to do something under the NCIB.
spk03: That makes perfect sense. Thank you. And now coming back to the business, very interested in the commentary around the shortfall in the cemetery sales being really focused in a few specific properties. What is it about those specific properties that kind of led to this situation? So that's a better way of framing it.
spk06: Yeah, so there's two distinct issues going on here in the cemeteries. One is at-need and one is pre-need sales, and we experienced a drop in both. We expected a drop on the at-need side, because by definition the death rate's dropping, so you would expect that. And since our portfolio is made up of a bunch of smaller cemeteries, you would expect those smaller cemeteries to feel that death rate drop, just as a matter of percentage. What we didn't expect, however, is that the larger ones would have that big of an impact on the at-need this time. And I'll put it in perspective. Just in two groups, over 60% of our acne dropped in just those few cemeteries. So it was unfortunate that it happened in the second quarter. It's certainly been trying. But we knew this was occurring by the middle of May, the first of May. We knew what April looked like. And certainly by the end of May, we knew what April and May looked like. So we dug in pretty hard, as you would expect the leadership to do, to make sure that there wasn't something structurally wrong or fundamentally wrong with the way we were operating these businesses or the businesses themselves. And I was very comfortable by the middle of June that that was not the case. We had a very difficult April and May, so much so that April and May, if you combine their EBITDA, was about equivalent to what June was. So that was a very challenging April and May. That's on the ATNI side. The pre-need side, that's a little tougher and more of a problem that we're going to have to address. I mean, we have the pre-need sales can be chunky at times, given our larger sales and some of those cemeteries that we're talking about. And one of them, our pre-need drops accounted for about 66% of that total pre-need drop. That's a big drop. But again, it's due to large group sales and those come in from quarter to quarter. Having said that, We also have to accept blame where blame lies. And then I would say after two years, we probably got caught taking a breath a little bit on focusing on our pre-need. I think customer fatigue or consumer fatigue is also important. A factor there, people distracted, vacations over COVID. You know, I think going into this quarter, we should have probably been a little more focused on the fact that pre-need was going to be a little harder. And I think our other competitors that publicly talk about these things saw similar challenges. And, look, I take responsibility for that. It's my job to keep everyone focused on that, and I can assure you they're focused on it now. So to go back to your specific question, while yes, there were a couple of our cemetery groups that were responsible for a larger percentage of this problem, it was across the company and we're focused on that. It's just unfortunate that the larger ones had a difficult quarter at the same time everyone else was, if that makes sense.
spk03: Yeah, absolutely. Just one more question from you and then I'll get back into the queue. It sounds as though June was better. Can you share anything with us on Q3 the date?
spk06: Yeah, I would say that July met our expectations. So I think that's about as far as we're probably willing to go with that. Otherwise, y'all would be hearing a different tune from me right now. So, yeah, I mean, July was not April or May by any stretch.
spk08: Outstanding. Thank you.
spk01: Thank you. Our next question is coming from George Donette with Scotiabank. Please go ahead.
spk07: Hi, good morning, guys. Brad, I just wanted to dive in a little bit on the pre-need, I guess, focus of your strategies that we're looking at there. Can you maybe talk a little bit about how we can maybe get those numbers up and what the strategy is for the back half of the year?
spk06: Yeah, so clearly that's where the focus is going to be and has been, honestly, since the 1st of July. And that's just blocking and tackling, right? So the larger businesses that are responsible for the bulk sales, I mean, they should not feel responsible, nor am I trying to make them feel responsible for the fact that a bulk sale did not come into the second quarter. I think we have tried many times to convey that that given the size of our company and the size of the cemetery impact that these bulk sales make a difference from quarter to quarter. So when we have them, we point them out to you guys so that you understand that that particular quarter looked that way because a bulk sale came in. We didn't have that type of thing this quarter and we're hoping that we will have them in the third and fourth quarter and one would anticipate that that would occur. That's one thing and those folks are always focusing on that. I think What you're really asking me is what we're doing to go back to the blocking and tackling, which is the everyday pre-need sales that we saw definitely take a hit across the company. And the short answer to that, because I don't think you want more detail, is that we have our VP of operations. They pride themselves, and we constantly talk about being operators first that grows by acquisitions. And they very quickly towards, I'd say by the middle of the late part of June, they know where the problem is, and they're focused on making sure that that sells function and that sells people who work for us are focused in the right spot. So the shorter answer to that, George, would be our VPs of ops and our operators in J who pride themselves on being operators, okay, well, show me, because we're coming into the third quarter and that's where our focus needs to be.
spk07: Okay, that's helpful. And I don't know, 2% average revenue per call in a quarter, that seems a little bit lower than what we're trending at. I think in your prepared remarks, you mentioned some pricing adjustments. So just wondering, is there room to get that number, or is there a focus to get that number back into maybe the mid-single digits in the next couple of quarters?
spk06: So that actually begs a different question, and I want to be clear that we're talking about the same thing. It's up 2% quarter over quarter, right? And we had seen increases in the average in every quarter since the dip during the pandemic. And I think we had been clear that we didn't expect to see 7%, 8%, 9% increases quarter over quarter in the average. We expected it to get kind of back where it was pre-COVID and then be able to do some incremental improvements on that. So yes, I would hope our average and would expect our average to improve quarter over quarter, but I wouldn't expect to see those seven, eight, nine percent quarter over quarter. That's not even our internal expectation, but certainly to see it grow. To expand on that question though, we basically expected what happened in the funeral homes, meaning the funeral homes acted to our expectations. We expected the call volumes to be down slightly. we expected our average to be up slightly, and we knew that our acquisitions would cover the gap. And all of that effectively occurred. So truly, George, in my opinion, the problem with the second quarter rests solely in our cemeteries.
spk07: Okay, that's helpful. And just maybe one last one. I think your commentary in the past has been that you expect organic growth to be slottish for 22. Obviously, there's been changes. Can you maybe give us a little bit of an updated flavor in terms of where you think organic growth may be lying for the year, maybe for the back half of the year at least.
spk06: Yeah, so we obviously have a hole that we have dug ourselves in the second quarter here. I'm not prepared to say that it's not going to end up flat by the time we get through the third and fourth quarter. And only because I'm not being overly optimistic, but if we just take a step back, because I've said this before, but this is the first time it's happened, This can happen in our industry, and you can attempt to hide it by claiming that your corporate costs went through the ceiling or something of that nature. But really what ultimately happened was we just had a quarter where the cemeteries didn't perform. I expect that we will have another quarter where the cemeteries outweigh our expectations. I'm no more going to stand up and say that we figured out the secret sauce or the formula for Coke when we happen to have a quarter that exceeds the expectations. I believe that over time, over four or five quarters, or certainly over a year, this thing normalizes. It's unfortunate for us that we had a couple of events that hit in the same quarter because it would be a lot better to be on this phone call right now and telling you how we've exceeded our competitors, and we didn't do that this time. And we know why, and we're focused on it. So I'm not willing to give up and say that we're going to have some bad 2022 with organic growth based on what I'm seeing right now. But certainly after the end of the third quarter, we'll be able to give you a lot finer point on that. It's just to be expected. If I had found a problem – that would have been more concern, and I just don't see that, George. It's just the funeral and cemetery industry at times, and rather than trying to hide it, we're just being completely transparent and telling you where our problems are.
spk07: I appreciate the answers. Thank you.
spk01: Thank you. Our next question is coming from Scott Fromson with CIBC. Please go ahead.
spk05: Thanks, and good morning, gentlemen. Can you... Can you talk a bit about how acquisition multiples are trending? Without having any specific metrics, it senses that multiples have risen. Is this the case or is that particular to individual transactions?
spk06: That's a good question. You've certainly seen higher activity coming through the brokers. And as a result of that, we've been involved in some deals because they've been bringing some good deals up lately. And in those situations, you can see yourself getting into where people start bidding money or putting multiples on businesses that don't fit within our comfort zone. When that happens, we stay within our comfort zone. And most of the time, we're not the highest bidder on these properties that we're getting anyway. Uh, so yes, I see some, I see some multiple pressure, but so far it hasn't affected us. If you're referring to us saying that we paid outside of a normal multiple range for Shackleford, that was us doing that. Uh, because that business was justified that, but I will also point out to you that it was non-brokered and there wasn't anybody else, uh, involved in that business, but we still paid the higher multiple. Because we tell folks, whether it's brokered, whether there's competition, or whether you just come to us individually, we're going to pay you the same amount of money no matter what. We're not going to see if you're dumb enough to leave money on the table. That's not the way we like to start the relationship. So summarizing that, we paid a higher multiple for Shackleford because we chose to. And the other businesses we're buying are remaining in the multiples that we are comfortable paying. But I do recognize that there are people out there that are making different decisions like that in our industry, and those folks don't tend to stay around too long.
spk05: On that topic, are you seeing new bidders or similar bidders getting more aggressive? You'd think that with interest rates rising that they would maybe be a little bit more prudent, right?
spk06: So that's again a good question. I see you basically see the same people in a competitive situation, especially in the larger deals over and over again because first you have to have access to that amount of capital and second you have to have at least a reputation or an operational team that's large enough that these people would even consider you. So for any larger acquisitions, you see the same people over and over again. But you do see new bidders from time to time that are private equity backed. And that's normally where you see the multiples that you scratch your head on. Ferris is a good example of that. There was a private equity backed group that came in and offered substantially more than we did. And they were sophisticated and educated enough to know what that meant at the backside. So yeah, I've seen it. I haven't seen it be really successful. The only thing that I would say that I have seen is some of the people that we compete against, if they want it, I've seen them pay multiples up for it lately. And, you know, they may not necessarily disclose that like we do. But for our investors and our analysts, if I pay something north of six to eight times, I'm going to tell you. But there's going to be a good reason for that. And if it works out like the other businesses that we paid north of that for, Give us a couple years of running it, and we're back in that multiple range anyway.
spk05: Thanks, Brad. That's helpful. And just one more question on expenses. I understand from your disclosure that you've built out operations infrastructure in advance of growth or in advance of assuming higher revenues than you achieved this quarter. are you able to cut back on G&A expenses to get EBITDA margins back into the mid-20s? Or do you expect acquisitions and perhaps cemetery sales production to bring expenses back in line with your higher target margin levels?
spk10: Hey, Scott, it's Dan here. Yeah, look, I think Brad said it earlier, kind of on the funeral home side, there's some opportunity with our labor to manage our expenses a little bit better. But by and large, those funeral homes performed generally in line with our expectations. On the G&A side, again, we talked about, or sorry, on the corporate cut side, we talked about some of the labor inflation pressures, and we've been talking about this a bit for quarters now. and how that's kind of affected our head office in Houston and our corporate office in Toronto. But you know what? It's kind of in line with what we've expected as well. We've seen in the past our corporate expenses have been about 7% to 8% of our revenue. We're probably at the low end of that right now. So it's in line with our growth and what we expect. Is there some savings there? Yeah, we're going to continue to look at our ability to operate and make improvements and cut costs. But, you know, as Brad mentioned, we don't see anything that's incredibly broken here. So we're not going to quickly make drastic changes, especially with a high fixed cost business.
spk06: Can I add something to that? Do you mind, Dan? Go for it. Scott, a little bit off the question, but something I wanted to say anyway because I think it does go to the expenses. You know, we've said for years that we can't sacrifice our long-term growth and stability to maximize the short-term performance. And when we talk about these businesses around here, we don't manage them from quarter to quarter. And that's not just to take the pressure off because this isn't a great quarter. We don't think about that. So it may be frustrating in the short term. It certainly was for me, and it certainly is right now. But it's still the right thing to do. So to be completely transparent, when you see this start trending that way in April and May, my mind goes right there along with yours. What can we do? quickly to rectify this. But what you're really talking about and what you're really saying is what can I do right now that takes the pressure off of me and puts it on my businesses, meaning the people who have nothing to do with this. Where can I cut? Where can I do things in the short term to make it better for me so I don't have to sit on this phone call and say we're going to stick to our long-term strategies? So, yeah, I think there's some things we can do, and if we continue to see revenue like this, then we're going to make some difficult decisions, and our people are going to understand, and so will our vice president of operations and everyone else, because they'll know that this isn't sustainable like this. But I don't think it is, because we started looking in April and May, and we didn't find a problem. So I believe it's going to get back to where it is. So what you do is you hold the line. You deal with this quarter. You are honest with your investors and analysts, and you perform in the third and fourth quarter, and that's what we're going to do. So, yeah, we could probably touch the expenses, but that's to the detriment of our business. It's contrary to what we say to our acquisition families and customers, and so we'll deal with this quarter, and we'll improve in the third and fourth.
spk08: That's great. Thanks, Brad and Dan.
spk09: That's helpful. I'll turn it back.
spk08: Thanks.
spk01: Thank you. Our next question is coming from Maggie McDougall with Stiefel. Please go ahead.
spk02: Thanks very much. Good morning, everybody.
spk09: Good morning, Maggie.
spk02: I was wondering if you could give us a bit of detail around the degree of margin erosion due to operating leverage or, I guess, you know, missed or not present sales of high margin cemetery property versus if you were looking at things like higher fuel costs, higher labor costs. In other words, what percentage of the margin erosion could you attribute to actual inflation and what part was kind of like just, you know, you didn't have some high margin cemetery sales in the quarter?
spk10: Yeah, Maggie, first off, the last part of that question, very, very difficult to bifurcate exactly what is inflation versus other costs. What I can tell you is we see, because of our property sales, somewhere around a 3% erosion of our margin from those property sales. On the labor side, um you know like i said we've seen some slight increases but it hasn't been detrimental you know we're talking in the range of 25 to 65 basis points i would suspect okay thanks dan that's helpful and then i'm wondering if you could just comment on the changes that you've made to the board in terms of the new additions and the resignations that occurred during the quarter
spk06: Yeah, Maggie, I'll take that. First off, the changes to the board were in place long before the quarter started, so I just wanted to make sure that no one felt that Paul or Amy leaving the board had anything to do with the results in the second quarter. Paul had been on the board for some time. There's been a huge growth in the company. He stewarded us through a management change. I did not fault him one bit for thinking it was a good time for him to focus on something else. And he was gracious enough to give us time to find two solid board members to join the company. And I have absolutely no problem, and I don't think anyone else at Parkland does, with either Paul or Amy and their decisions to leave. It just happened to happen during a quarter that we didn't put our best foot forward.
spk02: Okay, that's helpful. Thanks very much, Brad. That's all for me today.
spk09: Thanks, Mary.
spk01: Thank you. Our next question is coming from Kyle McPhee with Cormac Securities. Please go ahead.
spk12: Hey, guys, just to follow up on the margin percentage topic. So that 3% point margin hit because of the lower property sales. Earlier you attributed kind of 60% of that to the few trouble properties. So is this implying that you can claw back some of this 3% point margin hit, but probably not all, and maybe we're at kind of a new post-COVID revenue mix that is more representative of your business. I guess I'm asking if you can actually get back to kind of the 26%, 27% EBITDA margins.
spk09: Yes.
spk10: Hey, Corey. It's Dan again. Yes, I think that's a fair assumption. You know, again, there is a bit of a post-COVID world here, but we still continue to believe that the pandemic will, in the long term, medium term, whatever you want to call it, act as a trigger event and continue to support our pre-need sales. So we do look at this as a blip, and there's definitely room to claw some of that back.
spk12: And just to confirm that three percentage points, that's just the pre-need property sales or that's pre-need property?
spk10: That was the impact of all of our property sales.
spk12: Okay. Got it. Okay. Okay. Thanks for that color. And then your update called out an acceleration of the shift to cremations in Q2. I mean, what do you attribute that to? Is that simply the macro pressures on consumers right now looking for lower price best care options? And are you seeing that trend continue into Q3?
spk06: Yeah, so we're not seeing the trend continue. And I would say it's literally a blip, right? It's too short of a period of time to make that significant. I think it actually dropped in Q1, if my memory serves me correctly. And so then we see it up in Q2. I mean, given what happened through COVID and how it kind of stabilize where it did, that's nothing to concern us by. I mean, we're reporting it because you all want to hear about it, and I understand, but I wouldn't expect that to be any type of trend because it would be out of the norm if it were, and we're not seeing that go forward anyway. Now, anything can happen in the quarter, and I don't like saying things I don't know to be true or not, but right now that doesn't concern us a bit.
spk08: Got it. Okay, that's it for me. Thank you.
spk01: Thank you. Our next question is coming from Zachary Evershed with National Bank Financial. Please go ahead.
spk00: Morning, everyone. Thanks for taking my questions. Morning, Zach. So on average, how's your market positioning in terms of being the low, mid, or high-cost option for customers as we kind of look to offset inflation? Will you be pricing yourselves out of the market, or do you have room to run?
spk06: We have room to run. We're basically mid-market in the majority of the places we are. I think it's close to 65% or 70%. We're not even at the top. But we're really careful about that, too. And if you listen to our other publicly traded company competitors, there's a few things that you'll hear absolutely. consistency on, but this happens to be one of them, and that is everyone's cautious about their pricing. I mean, you have to look at it market for market. You have to really make sure that you're making the right decision, because it's a lot harder to get market share than it is to just basically, it's a lot harder to get market share than it is to do a lot of other things. So you don't want to do anything to lose market share. So we feel like we have plenty of runway, but we're also not going to run out and ask our ask our managers to raise their prices because of a quarter. So we're doing it and we're looking at it closely. And sometimes we may do it multiple times in a market if there's room to do it. And the inflationary pressures stay there. So we're keeping a close eye on it. But that is very, very location specific. And then that happens with the managers and the VPs. And then it gets to Jay for approval. And then we all look at it. So we feel like we've got plenty of opportunity to do it. without hurting ourselves, but we're going to be very deliberate about it.
spk00: Good color. Thanks. Next, if we think about the IRR on an acquisition at 68 times, what's the Perklon share price level at which you view buybacks as an equivalent option?
spk10: You know, Zach, we're actually not going to comment on that. I don't think that would be prudent of us to kind of get to. You're effectively asking at what point are you going to buy your shares back, and I just don't think that's responsible of us to say right now.
spk00: Fair enough.
spk06: Zach, I just can't resist. I just want to make this clear. I think I've done it in the comments, and I'm going to do it again, okay? It's going to take a significant drop in the share price. for me personally to believe or get anywhere close to believe that we need to do anything but make acquisitions. I guess there could be some hybrid in there, but I'm also cognizant of the fact that we went to the market last year and raised stock at a certain price. It's our job to get that stock price back to where that is or higher. We put that in there as a as a preparatory measure, something that we might need to do, if the markets bluntly start acting very irrationally. And if they do that, then it's in place. I don't want the analysts or our larger investors to think that we have pivoted our belief that making these acquisitions is somehow less secretive than buying stock. They're not. And our acquisition pipeline is And what we plan on doing between now and the end of the year is going to make that crystal clear to everyone.
spk08: Absolutely clear.
spk09: Thank you, sir.
spk00: And then what's the expected impact from the ramp up of Westminster in Q3 and Q4?
spk06: We did not even, we didn't even forecast that in our own numbers, to my knowledge, or certainly nothing that's significant. I mean, it's a new build on a very successful cemetery mausoleum property. It is by far our most gorgeous, opulent, use the word you want, technologically advanced funeral home we have in either country, and it's right where it needs to be. But you don't open a new funeral home and expect it to have, you know, greenfields are difficult. We all know that. But we've had a lot of success building funeral homes on top and turning cemeteries into combos. So I think, in all fairness, give us a quarter or two and we'll start telling you what we expect it to do and the impact it will have on 2023. But if we told you something right now, Zach, it would be just a bald guess, and we don't like doing that.
spk00: Gotcha. Thanks. And then one on margins. I'm hearing loud and clear that you're managing for the long term and do believe it will get back to where it was. And then you also say that July was in line with your expectations. So is it fair to say your margins have already bounced back to that level, or is there more work to do?
spk06: Well, I mean, I couldn't really comment on what it's done in a month. I mean, if it was low, I wouldn't want to extrapolate it two more months. And if it was high, I wouldn't want to say that either. I'm going to stick with what we said earlier in that we're laser-focused on this. And also to point out, our acquisition margins, especially on the funeral home side, so much exceed that. our comparable funeral home margins, and it's the same on the cemeteries. And given our growth, just that alone is going to have an impact. But again, we have some very confident VPs of ops, and they know what happened in the second quarter, and they know that they view themselves as operators and people who can run funeral homes and meet with families themselves, and they know what they need to do. So I would expect the improvement to come and come quickly.
spk08: Great, Chloe. Thanks. I'll turn it over.
spk01: Thank you. Our next question is coming from Irene Nettel with RBC Capital Markets.
spk03: Thanks, Brad. You didn't actually think a whole call would go by and I wouldn't ask about facts. So can you give us an update? And also, you know, within the context of all these discussions about margins, presumably over time, that should be helpful.
spk06: For sure, and I'll even be more transparent than that. Most of our cemeteries, I believe maybe as of last week now, all of them are on VACs, and then our funeral homes are ramping up fairly quickly. That will happen a lot quicker. I won't get into this call why, but it's a lot easier to bring the funeral homes on than it was the cemeteries. The color that I've been able to provide this morning and the confidence with which we were able to answer the questions would not have been possible on the cemetery side if FACTS would not have been in place. That's how impactful that was. We were able to very quickly identify where the issues were down to the locations, down to what we think we needed to do and manage from there. I expect FACTS to be in all of our funeral homes minus Canada. by the end of the year. But our IT team is doing a good job getting it there, so they're not in trouble with it. I mean, so we're getting there. And we are super pleased with what we're seeing from an ability to use that from an operational perspective. And that's especially true when we had a difficult time. So we're pretty happy and I think when you asked me that question and when you said you were getting back in the queue I wrote facts down next to your names because I knew that you were going to ask that. But I think that by the time we report Q4 we're going to start being able to say and this is the number that we're getting out of this or this is what we're able to say because our expectation is to be able to do more. So I'm very pleased especially with what it did for us in the second quarter. It allowed us to really to really manage our business better.
spk03: That is fabulous. And I don't know, I think I'm going to have to be, uh, get less predictable or something.
spk09: Thank you.
spk01: Thank you. Our next question is coming from Daryl Young with TD securities. Please go ahead.
spk11: Hey, good morning everyone. Um, Just one question for me around the potential for maybe a ramp-up in sales and marketing costs on the back of this, and should we expect any sort of significant changes to that model as we go forward, maybe more centralization or more checkpoints with the individual locations going forward and how the sales trends are performing?
spk06: No, I don't think that you're going to see any of that. It wasn't a structural issue. It wasn't a lack of focus on marketing or the way that we're doing that now. I don't think you're going to see that at all. That wasn't what the problem was. In my opinion, it's a lack of focus, not a lack of the right tools being in place. Also, just a bit of bad luck. We don't talk about luck because we're responsible around here and we don't lay blame. You're not going to see that. I just can't see that coming.
spk08: Okay, great. That's all from me. Thanks.
spk01: As there are no more questions in queue, I will hand it back to Brad Green for any closing comments.
spk06: As always, I appreciate everyone taking the time to join us today, and I hope you all have a great weekend.
spk09: Thanks.
spk01: Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.
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