Park Lawn Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 10, 2023

There are 9 speakers on the call.

Operator

Welcome to the Parklawn Corporation Q3 2023 Earnings Call. Please note that this conference is being recorded. I will now turn the conference over to your host, are Chief Strategy Officer and General Counsel, Jennifer Hay. You may begin.

Speaker 1

Thank you, Kelly, and good morning. Thank you for joining us on today's 2023 Third Quarter Earnings Call. Before we begin our prepared commentary on the quarter, are ready to

Speaker 2

take questions. Please note that you can find a detailed

Speaker 1

breakdown of our 2023 Q3 results in our financial statements and MD and A, which are available on our website are in the line of the call. Today's call is being recorded and a replay will be available after the call. Please be aware that certain information discussed today is forward looking in nature. Any such information is subject to risks, uncertainties and assumptions, which could cause actual results are subject to differ materially. Please see our public filings for more information regarding forward looking statements.

Speaker 1

Are well prepared to report that we will conduct non IFRS financial measures. Although we believe these measures provide useful supplemental information about our are not recognized measures and do not have standardized meanings under IFRS. Are in the call for questions.

Speaker 2

Please see

Speaker 1

our public filings for additional information regarding our non IFRS financial measures, including for reconciliations to the nearest are in the range of IFRS measures. I will now hand the call over to Parkland's CEO, Brad Green, to open our discussion today.

Speaker 2

Are ready to begin. Thank you, Jennifer, and good morning, everyone.

Speaker 3

In addition to Jennifer, with me on the call today is our CFO, Dan Millen. I would like to start this morning by providing an overview of our performance in the quarter, then Dan will provide some additional detail and color around that performance. And finally, I will wrap the call up with some closing remarks. Our 3rd quarter results continue to display solid operational improvement in what continues to be a challenging environment. Are experiencing the future expectations of the economy and consumer behaviors.

Speaker 3

Despite this, we were successful in bettering our performance year over year. Are ready to take questions. For the 3 month

Speaker 2

period ended September 30,

Speaker 3

2023, our revenue increased 8.2%, are ready to take questions. Our adjusted EBITDA increased 3.6% and our adjusted diluted EBITDA margin increased are currently experiencing a record record

Speaker 2

of 90 basis points despite some extremely difficult comps.

Speaker 3

Our funeral businesses performed very well with call volumes from are in line with our expectations and our expectations are in line with our expectations. Further, our average revenue per call increased approximately 6.7% are in line with us as we continue to focus on operational execution while call volume normalizes. As I mentioned last quarter, we don't expect this type of growth to persist at this rate. Are in the range of 2.5 times. However, this has been a focus for us as a company as we move away from the impacts of the COVID environment and have entered into a period of high inflation.

Speaker 3

The overall operation of our cemetery business also improved year over year. While the decrease in mortality and will discuss irregularity of large group sales decreased cemetery revenue year over year. Our preneed property sales increased 2 point are at 4% year over year when excluding a canceled contract from a cemetery project that operationally no longer fit are within Parkbond's long term growth plan. While we do expect some headwinds from consumer pressures, our sales team is focused on regularly evaluating and implementing new programs are in a position to serve our customer families in this new economic environment. On the transactional front, this year have been another significant year for Parkland.

Speaker 3

We have announced over $120,000,000 of transactions, acquiring 16 funeral homes and 2 cemeteries are in the range of $1,000,000 and recently announcing the divestiture of 72 cemeteries and 11 funeral homes in Michigan, Kentucky, North Carolina and South Carolina. Are ready to take questions. The decision to divest these businesses was not an easy one as the team's operating businesses were not only aligned with our vision and mission, are also outstanding professionals in our industry and I believe their professionalism, skill and operating acumen will be a benefit to EverStory. Are ready

Speaker 2

to take questions. These businesses,

Speaker 3

however, did not fit with Parkland's long term growth strategy, and we believe the capital generated from this divestiture will ultimately be accretive to are ready to discuss these earnings per share and cash flow. With that, I'll turn the call over to Dan, who will provide some additional detail regarding our Q2 results.

Speaker 4

Are ready. Thank you, Brad, and good morning, everyone. My comments this morning will focus primarily on our operating results from the Q3 2023 are in the range of $2,000,000 relative to Q3 2022. For the Q3, we saw revenue increase approximately $6,600,000 as acquired operations continued to contribute to Parkland's positive growth. However, with mortality again decreasing year over year are in the range of $1,000,000,000.

Speaker 4

Revenue from our comparable operations was down 4% year over year, are in line with the continued focus on operations outside of the COVID environment, our field margins improved and increased 90 basis points. Are in the range of $1,000,000,000 in the range of $1,000,000,000 in the range of $1,000,000,000 in the range of $1,000,000,000 in the range of $1,000,000 in the range of $1,000,000 in

Speaker 2

the range of $1,000,000 in the

Speaker 4

range of $1,000,000 in the range of $1,000,000 in the range of $1,000,000,000 in are in the range of $0.20 per share. Our operating expenses, including our direct cost of sales, general and administrative, advertising and selling and maintenance expenses increased by approximately $4,900,000 over the same period in 2022. While increases are primarily due to acquired operations, and other expenses, decreases year over year were due to various labor costs, including field level bonuses and benefits, management of repairs and maintenance costs, as well as changes in structuring and reporting relationships. As Brad mentioned, our funeral businesses performed well during the quarter. Are well positioned to be in line with our continued focus on providing our families with the highest level of service, the average revenue per call on funeral contracts increased 6.7% are helping to offset inflationary pressures.

Speaker 4

This increase along with continued cost management helped offset are experiencing the decrease in mortality year over year. On the cemetery side, the irregularity of certain transactions as well are well as decreased net need revenue affected the adjusted EBITDA margins year over year. However, they are right in line with our expectations for these businesses. As mentioned, are in the range of $1,000,000. Our earnings calls for the 3rd Q4 of last year in the back half of twenty twenty two saw significant large group sales occur in the Northeast region.

Speaker 4

These businesses continue to have strong group and park sales. However, year over year for the quarter saw a decrease in group sales of approximately of almost will be in the range of 31% to 35%. Additionally, during the quarter, we decided to cease continued development of a cemetery project in the region, are in the range of $1,000,000 which we believe no longer fits within Parkland's long term growth strategy. This resulted in the cancellation of an approximate $1,000,000 group contract impacting recognized revenue are ready for the Q3. When considering the impact of these transactions, pre need property sales continued to see growth year over year, are displaying the strength of our cemetery operations and sales teams.

Speaker 4

From a corporate perspective, we continue to make investments in our corporate infrastructure, are creating more fully integrated platform. As we have communicated in the past, we expected to see an increase in corporate, general and administrative costs during the year. And during the quarter, we saw several projects were undertaken to improve the back office support of our operations. Are ready to take questions. We expect that over the next 4 quarters before considering the impact of any dispositions, we should see these costs gradually decrease and believe in the long term we should be able to operate at approximately 8% of revenue.

Speaker 4

However, this ratio may experience further volatility as we will address the aforementioned disposition of 83 Businesses. At September 30, 2023, are ready to take questions. We had approximately $197,000,000 outstanding on our credit facility, other debt of $16,700,000 finance leases of approximately $14,000,000 have cash on hand of $27,600,000 Excluding our debentures, our net debt was approximately $200,000,000 as of September 30, 2023.

Speaker 2

Are ready to discuss our financial results.

Speaker 4

As of September 30, our leverage ratio was approximately 2.38 times based on the terms of our credit facility and approximately 3.15 are at the time, including our outstanding debentures. Following the anticipated disposition of businesses in Michigan, Kentucky, North Carolina and South Carolina, are ready to take questions. We expect to utilize the cash proceeds from the transaction to reduce the outstanding balance on our credit facility, which as of September 30, would reduce our leverage ratio to approximately 2 times based on the terms of our credit facility and 2.8 times including our outstanding debentures. Are ready to take questions. Although there were many puts and takes in the quarter, net earnings for Q3 2023 decreased relative to Q3 2022.

Speaker 4

Are in the range of $3,300,000 or $0.094 per share compared to $5,300,000 or $0.153 per share in Q3 2022.

Speaker 2

Are ready to take questions.

Speaker 4

Furthermore, adjusted net earnings for the Q3 decreased year over year and was approximately $5,400,000 or $0.153 per share compared to $7,800,000 or $0.224 per share in Q3 2022. Are well positioned

Speaker 2

to be in the range of $1,000,000,000.

Speaker 4

Net earnings and adjusted net earnings were impacted during the quarter, primarily by the increase in interest rates. Over the past year, our borrowing cost have increased over 300 basis points, affecting net earnings per share by approximately $0.04 are currently experiencing a significant amount of interest in the quarter as a result of certain items such as the delivery of a mausoleum in Kentucky and additional depreciation related finance leases entered into in conjunction with the Ward acquisition, those two have impacted earnings per share together by $0.03 I will now turn the call back to Brad for closing comments.

Speaker 3

Are ready. Thanks, Dan. Although the near term outlook suggests mortality will continue to decline year over year and consumers will face increasing pressures on their discretionary spending, We believe our current portfolio of businesses still provides tremendous growth potential. To put things in perspective, excluding the 83 businesses that we expect to be divested by the end of the year. Over 60% of our businesses have joined Parklawn in the past 5 years, and during 2 of those years, we were operating in a global pandemic.

Speaker 3

Are ready to take questions. We've always been thoughtful operators of our businesses and given more time and the ability to focus on these high growth potential businesses, we believe that significant improvements will be are pleased in the near term. Our operations team remains highly focused on operating our businesses within are in a very strong operating model, which includes managing the business' T Actual death rate. We believe 2023 has seen the most normal operating are in the past 3 years, even though death rates are still declining year over year, and we expect to see some additional low single digit decreases in mortality during 2024. Are ready to take questions.

Speaker 3

That being said, we still expect to see our adjusted EBITDA margin improve as we focus on providing high quality service to our client families, are managing operating costs to our expectation of long term mortality, streamlining our back office functions to provide better support and information to our operators are in the range of $1,000,000 and continuing integration efforts of our recent acquisitions to achieve our forecasted underwriting. We have a very strong company and we firmly believe that our share price does not reflect our future trajectory. We look forward to the opportunity to prove the current market valuation of our company to be wrong. Are ready to take

Operator

questions. Certainly. Are ready to pick up your handset before pressing the star keys. Please hold just a moment while we pull for questions. Will be

Speaker 2

ready for questions. Your first question

Operator

is coming from Martin Landry with Stifel.

Speaker 5

I would like to touch on the growth in your revenue per service. It's up 6.7%. I did ask the same question last time, Grazo. Apologies, but are ready to take questions there. So, is it fair to say that inflation are maybe a couple more quarters before we get a little bit, what's driving that nice uptick.

Speaker 3

Right. Are And I do remember, Martin, you asked the same question last quarter and it was the first question. So we'll just keep it in line with that. Look, part of what you in last quarter, I said don't expect to see this type of increase consistently and here we are with it being even more this quarter. But I think the answer remains the same.

Speaker 3

Are you obviously have us focusing on what we should be focusing on, which is serving our client families consistently and better. And when we do that, we see an increase in our averages anyway because they are presented with all of the options and when we do that, provide good service, you see those averages go up. You're also certainly seeing price increases in there. We've been very transparent about looking at those are on a monthly basis, on a rooftop basis to make sure that we're keeping up with inflationary costs. And of course, the are in the same period last year.

Speaker 3

Great. Thank you. Great. Thank you. Thank you.

Speaker 3

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 3

Thank you. Our next question comes from the line of Chris McFarland. Please go ahead. Thank you. Thank you.

Speaker 3

Thank you. Thank you. Our next question comes from the line of Chris McFarland. Your line is open. Thank you.

Speaker 3

Thank you. Are ready to take questions. I hope it's because of our focus on the client families and obviously us paying attention to the prices, but I would not expect this to continue. I mean, at some point, it would have to level off to a more normal average increase, which would obviously be lower than the 5% to 6% range. Martin, I might

Speaker 4

add a little bit to that, noting that we did talk about last year adjusting prices, being focused are in the range of $1,000,000 and we saw a lot more of that impact happen in Q4 of last year. So just by relative are comparative, you're not going to see the same percentage increase year over year.

Speaker 5

Okay, that's helpful. And maybe more of a higher level question on the industry. You are gaining share as your is declining to a lesser extent than the mortality rate. And it does look like your publicly traded peers are have seen the pattern as well gaining a bit of share. So wondering who are the share donors in all this?

Speaker 5

And is it the solo operators that are maybe a little bit are experiencing some of that lower volume. Just trying to understand a little bit the puts and takes here.

Speaker 3

Yes. I can't really I can't speak to the other companies because I don't work there, but I believe one of them doesn't break out their same store sales anymore. So it's hard to figure are it's hard to actually look at that and compare that directly to ours. But just talking about our company and how we look at it, I think during COVID, are there was a fair number of single and double rooftop funeral homes out there that had a hard time keeping up are with the traffic that was coming in and some of them actually client families or couldn't keep up or maybe people got sick in their business and they had to close down for a week or 2. And I think if you had larger operations, it doesn't have to be the big consolidators.

Speaker 3

It could have just been are in the market. They can move their families around from one location to another. So I think if I were to And this is a guess, if I were to guess why the consolidators were able to probably keep market share. It was just having the businesses remain open, having the resources to move are people around from one location to another and just being able to react more quickly. That would be my guess.

Speaker 3

Are

Speaker 5

Okay. That makes sense. And then last question for me. It's on your asset divestitures. Are just trying to understand a little bit how that translates into your strategy for next year.

Speaker 5

Does that Are those proceeds, will they accelerate the pace of M and A for you guys? Or are going to be more used towards reducing your financial leverage?

Speaker 3

Yes, are That's a good question. And I would just say I can't really answer that right now because I'd like to remind everyone that mink isn't closed. So those I'm sorry, that's our internal way that we're referring to those properties. But those divestitures haven't happened yet. So just yesterday in our Board meeting, for example, Martin, we're sitting around talking about that exact subject matter.

Speaker 3

Are with the capital markets the way they are, interest rates the way they are, acquisition opportunities the way they are, are what we're going to do going forward assuming these businesses close will be a significant are in a point of conversation in December January, and I look forward to telling you exactly what we're going to do at year end when we talk again in February.

Operator

Question is coming from George Doumet with Scotia Capital. Please proceed with your question. Your line is live.

Speaker 6

Yes. Good morning, guys. I just want to get a little bit more color on the deliberate action to cancel the large group contract in the preneed sale side. Bart, can you talk a little bit about that? Yes.

Speaker 3

So when we Parkland purchased a group of business in New Jersey in 2018, there was a cemetery project that was already there, agreement that existed, it's pretty significant project in terms of complexity, are in the range of $1,000,000 and those have been some of our best performing businesses that Mark But when we started looking at this particular project and what was going to have to go into it, over time the sales of the property just didn't justify the expense of continuing that development. So we knew what it was going to look like. We knew it was going to be painful to do it, are in the range of $1,000,000 but the long term decision on capital would dictate and I think everyone would agree that we walk away from this particular project. Are in the range of $1,000,000. It's unfortunate because even as I was reading some of the early reports last night, I think it appeared on the surface are seeing that somehow our preneed sales faltered last quarter and that's actually not true.

Speaker 3

Even with a significant decrease in the group sales, Our traditional preneed property sales made up that gap. So without us intentionally terminating the contract and knowing this is going to happen, our preneed property sales would have actually increased. But that decision needed to be made and I think we consistently tell our investors that we make decisions based on the long term are in the

Speaker 2

range of $1,000,000 and

Speaker 3

that decision was made a couple of months ago, and we knew we were going to have that cancellation this quarter.

Speaker 6

Are That's helpful. And given your outlook on mortality for next year, just wondering about our ability to grow the business, I guess from an organic growth standpoint.

Speaker 3

Yes. So look, we know that we have the headwinds that are still going to well, we think we do. I think across the profession, everyone consistently believes that you're going to see that low to mid single digit decrease are in mortality for 2024. And I think at that point, everyone consistently agrees are the effect of COVID will be muted. I still believe that we can grow organically, at least on are on an adjusted EBITDA basis, but I think there are things that are going on with this organization are ready to continue to improve our acquisitions, as we continue to focus on we have a cremation strategy that we're really focusing on now as we continue to rely on facts more.

Speaker 3

I just don't see that it's going to be a problem, maybe more flat to mid are to low single digit type growth in 2024. I'm not going to say we're going to blow it out of the water, but I don't see it being negative.

Speaker 6

Are Okay. That's helpful. And just one last one, if I may. I know the divestiture hasn't closed, but given that we're able to are in the range of $1,000,000,000 of those lower quality assets for a similar valuation that we're currently trading at. Just wondering if it makes more strategic sense will perhaps deploy capital more capital at least towards buybacks at this point versus M and A, I guess, given that you have the balance sheet to do it.

Speaker 3

Are Look, that is an excellent question. And when our company is trading are at a multiple that is at or less what we just divested those assets for. It definitely begs the question of utilizing are ready to take the next question from the line of David. And as I said, that was a subject of discussion at the Board even yesterday and it will continue to be a subject of discussion, are But it's really premature until we've actually closed those business and have that capital. But I agree with you.

Speaker 3

I think that's something that Parkland is going to look long and hard are in the range of $1,000,000 and we'll execute accordingly.

Operator

Your next question is coming from Irene Nattel with RBC. Please proceed with your question. Your line is live.

Speaker 7

Thanks and good morning, guys. Are I just want to take a step back and look at sort of a couple of are concerned with what we've been talking about. The divestitures of the underperforming assets, the decision to walk away from this cemetery project, it Looks and feels to me as though now that we're coming out of COVID and you guys have been there for longer, there's really a sharper focus are interested in the progress of the year. So I guess my question is, A, is that in fact the case and are ready

Speaker 3

to take questions. That's exactly the case. I think I've said in the past, if people go back and you may be tired of hearing me say it this way, but this management team really took really was put in charge of Parklawn in March of 2020, which was on the front step of COVID. Are in the range of 2,000,000,000. And I think we did a really good job in a difficult environment, getting our arms around what was going on there.

Speaker 3

Are in the range of 2023 is probably the 1st year where we can really see how things are normalizing. The businesses that we're divesting, are when we start saying low quality or not, those are good businesses. And there are good people working there are in the range of $1,000,000 and they have we've taken those businesses as far as we think we probably can. And so they don't really fit are in the range of 2nd quarters.

Speaker 2

And so if you look at if you kind of

Speaker 3

if you were sitting in our I'm trying to figure out a way to say this the right way. If you're sitting in our executive are seeing the assets that the Signature Group would have bought prior to us joining Parkland. And those businesses are going to be higher growth potential, are in the range of higher margin

Speaker 2

businesses, things

Speaker 3

that we can really go in and improve. And that's what we're looking to do. And so when you see us looking canceling projects that don't make sense on a capital basis and things of that nature, that's right. We're looking to make sure that we get to where we're extremely efficient in our operating and then we can return are in more consistent numbers quarter over quarter.

Speaker 7

So taking that sort of one step further, Beth, Should we be expecting more of these types of announcements, maybe not at the same, but sort of at the smaller end, but are how would you categorize sort of the network as it stands today?

Speaker 3

Oh, I I love that question because it gives me the opportunity to be a little arrogant, which we both know I like to do anyway. We're strong, right? I mean, this really takes us a long way, right? We've been looking at these properties for so long. It's been part of what's been going on are with our margin pressure.

Speaker 3

As I look at the company now, these two things that we've done, I'm not going to say that there's not 1 or 2 other things are ready to take questions that we can do as an organization and then we'll be completely done. But you've seen 2 big ones. I mean there could be 1 or 2 more that I would like do, but whether or not we even do those is a question mark. So I think right now when we get into 2024, you're going to see a completely different organization that can operate. Again, I think the larger Parkland can operate are in the range of what this management team was used to doing before joining Parkland and there are a number of reasons for that.

Speaker 3

I mean, the legal structure, the HR structure, facts, are in sales now with our new Senior VP of Sales, our Senior VP of Ops is strong. I mean, all of those things are coming together, so we can actually do what we are ready for a living. So that was me getting excited. But yes, I think you're right on.

Speaker 7

Are ready. That's great. Thank you. And probably for any of us not to give you an opportunity to say what you want to say. Can we just will turn for a second to M and A and what you're seeing out there now and as the whole industry is now kind of able to take a breath are experiencing lower mortality rates.

Speaker 7

How would you describe the M and A pipeline in terms of Number of opportunities, quality of opportunities and expectations around valuation.

Speaker 3

Yes, another good question. Are Don't take our not doing acquisitions at the same pace as people have seen in the past are in the range of opportunities out there. I would just say that and that's why I said it in my prepared remarks this way, are doing the divestitures was as much as not more work than doing acquisitions, and it's the same team that does both. So our acquisitions this year are on the lower side of where our are in the range that we normally talk about being in or what we've done in the past. And that's literally because we're doing the divestitures.

Speaker 3

It doesn't mean that there isn't are looking at opportunities out there. Now having said that, what I'm seeing is the interest rates have certainly dampened are in the range of what I thought was an overly frothy response to some of the acquisitions that were out there in 2021 2022. Are ready to take questions. So some of those players that you saw being very aggressive back then have all but gone quiet. So now it's back to are what I would consider the normal situation and that means for some of the higher end, whether they're brokered or non brokered, you see this you're going to start seeing are in the same people that were in there in 2018 2019 acting more rationally.

Speaker 3

So yes, there is opportunity out there. I think that the sellers' expectations are probably behind a little bit on what the buyers are willing to pay. I mean, when you start looking at the are multiples that publicly traded companies are trading at right now, it's kind of hard to pay people some of the multiples that they're looking for. Are So yes, I mean, I think that the opportunities are still out there. I think we're going to have plenty of opportunities to make acquisitions if that's are excited.

Speaker 3

We continue to decide to deploy our capital, and I think we're going to have more opportunities to do it because we didn't over lever ourselves are in 2021 and 2022 like a lot of people did. So we have a lot of capital, but we're being very selective now are on the acquisitions that we're going to go forward with because in my mind, they have to be immediately accretive and we have to be able to bring them online faster are in this type of capital environment with our investors' expectations.

Speaker 2

Are

Operator

ready. Your next question is coming from are John Zamparo with CIBC. Please pose your question. Your line is live.

Speaker 8

Thank you. Good morning. I appreciate the thoughts on the mortality rate for next year. I wonder when it comes to the headwinds have excess debt pulled forward during the pandemic. How are you thinking about the duration of that?

Speaker 8

Because it sounds like you and the rest of the industry considers it to be a relevant factor for

Speaker 3

Yes. I just think it's going to be difficult. But I'm almost not the person to ask. If I got it right, ninety are I would say listen to what I have to say. I get comfort in as we see it, as the death rate is normalizing and you start are seeing seasonality come back into our profession on a quarterly basis.

Speaker 3

It kind of makes you think we're getting to the tail end of that. I know that we share the same opinion that other people do in our profession about where this is going. So I would say, yes, I think 2024 is probably going to be the last year that we're talking about this in anything other than are in a minimal form, but far be it for me to get to 2025 and you say, well, what happened? I'm going to say, well, I don't know, but it sure feels like are in 2020 4 is it.

Speaker 8

Okay. That's helpful. On the quality of the network question, I wanted to follow-up on that and granted your existing divestiture plan hasn't closed, but those as planned. Are Are you considering other divestitures? Would it just take an attractive offer to get you to consider doing more on that front?

Speaker 8

I'm wondering how you're thinking about that.

Speaker 3

Yes. If there were divestitures, they would it would not be nearly on the scale of this. So and I'll tell you are kind of the way I would look at it. I think it will make more sense to you. A lot of the businesses we buy and the reason why they join us is they're multi are in the same store as the company's new business.

Speaker 3

And their names are on the side. And they're from individuals that stay in their community and help us grow their businesses going forward. Are in the range of $1,000,000 in order to get those businesses to join you, they're not only looking at me and whether or not I'm going to be here are looking to fulfill the promises made to them. They're looking at who's behind me and the strength of this organization. It would not be easy nor would I think it would be smart to take those businesses like that and divest them out of the company just because Someone wants to pay more for them because often someone wanted to pay more for them when they sold them to us.

Speaker 3

So it would be fairly easy to do. Are leaving our organization. These businesses were different types of businesses. They didn't share. Now I'm not saying that the owners who sold them weren't very important and are reporting to our profession that they were good people and are good people.

Speaker 3

I'm not saying anything about them. It's just a different type of business and not the type of businesses Parkland buys today. So no, I would not expect any significant divestitures out of us. Now if there were 1 or 2 rooftops in some larger thing we bought and that current owner didn't think we needed to keep them open or something like that maybe. But the answer is I think you're seeing divestitures for a specific reason and this is a nuance.

Speaker 3

Are

Speaker 8

ready. Got it. Okay. Understood. And then one last one in for Dan.

Speaker 8

On the corporate G and A side, I may have missed it, but the 8% target, what's a reasonable timeline to get there? I think previously we talked about are in the range of 12 to 18 months. Is that still the case? And is it a fairly linear improvement to that point? Or is it front end or back end weighted?

Speaker 4

Are Yes. No, I think excuse me, John. I think that's very much the case. I think starting This quarter, we should start to see some gradual improvement there. I think I've said in the past That I thought Q3 was probably going to be the peak, but we're really focused on it, right?

Speaker 4

We're thinking about this company for the next are focused on 10 years in improving our infrastructure to support our operations with the impetus being are in the range of $1,000,000,000 We're focused on our field margins and we want to provide the best information and back office support

Speaker 2

are ready to let our operators

Speaker 4

operate the business to the best of their abilities and meet the goals set out by the operations team in the benchmark model. So that's what we've been focused on, and we're going to continue to focus on that and integrate facts are in automation into our processes and utilize it better within the company to create efficiencies, and I expect that to kind of make its way through the system over the next 12 to 15 months.

Speaker 8

Are Got it. Okay. That's very helpful. Thank you. I'll leave it there.

Speaker 3

Thank you.

Operator

Your next question is coming from Zachary Evershed with National Bank are ready to answer your questions. Your line is live.

Speaker 2

Good morning, everyone.

Speaker 3

Good morning.

Speaker 2

Are ready for questions. If we're looking at seasonality, are you seeing the usual uptick to the degree that you're expecting us for in Q4?

Speaker 3

It's kind of hard to gauge that because you don't know what's happening with the COVID pull forward, are ready to take questions. Great. So it's and especially hard to say that when you've only got. So I know we're going there. Do we see a seasonality uptick in the 1st month?

Speaker 3

Yes, but I am not going to be able to tell you if that's going to look like it normally looks at the end of this quarter, are Because you just can't know right now. It's just too hard to predict that, Zach. I'm sorry.

Speaker 2

No problem. Second question, will the impact from the divested businesses on consolidated EBITDA, Will that impact be much different from the 3 50 basis points you pointed out for the field EBITDA margins?

Speaker 4

Yes. Zach, I'm not sure I completely understand what you're getting at with that question. But are ready to take questions. If you're asking how will other than just the kind of operational financial impact That we've kind of articulated that these businesses will have, will there be a broader impact? My answer would be yes.

Speaker 4

And let me put it this way. We're divesting of 83 locations. And were for $70,000,000 We will take that cash and redeploy it in kind of, let's just say, similar metrics for now

Speaker 3

in, call it,

Speaker 4

16 to 20 different locations, Right. So that not having all those individual locations to manage will definitely have an impact on the corporate back office and the executive team are going forward. Is that what you're getting at Zach?

Speaker 2

Exactly, the proportional drop in the back office?

Speaker 3

Yes. So look, back of the envelope calculations, I think that number you threw out there would have been an increase in our margins are experiencing a disproportionate drop in the corporate expenses. Now don't go expecting that day 1 because it's going are ready to take questions. There are several things that have to come out of the system to make that happen. And believe you me, we're focused on that.

Speaker 3

So yes, you're going to see an immediate increase in the margins. And that number you threw out there is about right, assuming that all the corporate costs flushed immediately with the divestiture, and I think The expectation will be there, that's going to take a minute. I think that's probably more what you were asking.

Speaker 8

That's very clear.

Operator

There are no additional questions in queue at this

Speaker 2

have time. I would now like to turn the

Operator

call back over to Brad Green for closing remarks.

Speaker 3

I'd like to thank everyone for joining us today. Are ready to take questions. We certainly have a long term vision for this organization as an executive team. We're not going to be swayed by a misguided or an irrational market. Are in the range of $1,000,000,000

Speaker 2

We're a strong company.

Speaker 3

We will perform over the long term. For those investors that are going to stick it out with us, you guys are going to be rewarded. So thank you for that. Have a great rest of your weekend.

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Earnings Conference Call
Park Lawn Q3 2023
00:00 / 00:00