© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, ladies and gentlemen, and welcome to the Park Lawn Corporation fourth quarter year-end 2021 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 at Park Lawn. Ma'am, the floor is yours.
Thank you, Holly, and good morning, everybody. This is Jennifer Hay and I am the General Counsel at Park Lawn. Thank you for joining us on today's fourth quarter 2021 earnings 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 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 reconciliation to the nearest IFRS measures.
I will now hand the call over to Park Lawn CEO, Brad Green, to open our discussion today.
Thank you, Jennifer, and good morning, everyone. In addition to Jennifer, with me on our call today is our CFO, Dan Millett. We had a solid fourth quarter that capped yet another strong financial year of financial performance and growth. During Q4, we experienced revenue growth of 10% to roughly CAD 99.5 million over a tough comparable quarter from 2020. And for the full year, saw revenue growth over 2020, a 14% to approximately $369.5million despite significant foreign exchange headwinds year-over-year.
As we continue to see a lasting effect of COVID-19 in the communities we serve, revenue growth from our comparable businesses during the quarter grew modestly by 0.7% and resulted in a 10.4% increase from the prior year when excluding the foreign exchange headwinds. Also for the quarter, Park Lawn achieved a 4% increase year-over-year in adjusted EBITDA to CAD 25.1 million and an approximate 23% margin.
For the fiscal year 2021, we saw a 20% increase in adjusted EBITDA to CAD 95.6 million and a 25.9% margin. As we expected, we saw a decrease in comparable business call volume in the quarter relative to the COVID impacted Q4 2020. However, we continued to see average revenue per call increase as our client families have continued to be very interested in celebrating and memorializing their loved ones after being told that they could not do so during the pandemic restrictions.
Year-over-year in our comparable businesses, the average revenue per call grew by approximately 9%. From the cemetery perspective, the pandemic continued to act as a significant triggering event, supporting strong pre-need sales activity and as we mentioned previously, we expect that the triggering effect will continue to positively impact pre-need sales as the pandemic will not be forgotten any time soon.
Turning to acquisitions, to put it bluntly, we had both a very successful quarter and year in executing our growth strategy. During the fourth quarter, we closed on five businesses, which added nine funeral homes, three cemeteries and one on-site to our existing portfolio. Significantly, the Ingram business that we closed in December provides us entry into another new high growth market in Georgia. Throughout the year, we completed a total of 10 acquisitions, deploying approximately $125.7 million. The combined transactions represent a total of 6,306 calls, 1,229 internments, coming from 26 stand-alone funeral homes, 7 stand-alone cemeteries and 4 on-sites. All of these acquisitions were added within our range of previously stated multiples.
I'd now like to turn the call over to Dan, who will review our Q4 financial results in more detail.
Thank you, Brad, and good morning, everyone. You'll find a detailed breakdown of our fourth quarter results in our financial statements and MD&A, which are available on our website and on SEDAR. My comments this morning will focus on the operating results for the fourth quarter.
As Brad mentioned, Q4 of 2020 was anticipated to be and was a tough comparable for Q4 2021. Despite this, we were still able to achieve total net revenue growth of approximately 10.1% over the quarter from CAD 90.4 million to CAD 99.5 million, while continuing to experience a foreign exchange headwind of approximately 3% due to the appreciation of the Canadian dollar. As we previously shared, approximately 90% of our revenue is generated from our US businesses. So this headwind can have a meaningful effect on our results. However, beginning in 2022, we are transitioning to a US dollar reporting currency, which will help reduce the volatility experienced from foreign exchange differences.
Revenue growth from our comparable businesses grew modestly at 0.7% year-over-year excluding the foreign exchange headwind, but decreased by 2.5% when accounting for the foreign exchange. Impacting this growth was three mausoleums delivered in Q4 2020 providing approximately CAD 3.6 million of revenue at a very high margin and no mausoleums were delivered in Q4 2021. However, looking forward, as we see the death rate continue to be less impacted by COVID and COVID related deaths, we expect the growth in our comparable businesses to normalize further into 2022.
Also during the quarter, the company's operating expenses, including general and administrative, advertising and selling and maintenance expenses, increased by approximately CAD 5.6 million for the three-month period ended December 31, 2021, over the same period in 2020. This increase is primarily the result of acquired operations, partly offset by the impact of foreign exchange.
As a result of another quarter of exceptional sales and a commitment to operations, our net earnings attributable to PLC shareholders for Q4 2021 was approximately CAD 8.96 million, or CAD 0.26 per share, compared to CAD 6.26 million, or CAD 0.21 per share, for Q4 2020, representing a 43% increase in the aggregate. Furthermore, the adjusted net earnings attributable to PLC shareholders for the fourth quarter of this year was approximately CAD 12.8 million, or CAD 0.37 per share, compared to CAD 10.5 million, or CAD 0.35 per share, in Q4 2020. This represents an increase of approximately 22% in adjusted net earnings.
The net earnings and adjusted net earnings on a per share basis were impacted by the equity raise completed in September of the year, as approximately CAD 4.5 million more shares were outstanding on a diluted basis year-over-year. As Parkland continues to deploy its equity into accretive acquisitions, we expect to see further growth in our per share metrics.
Turning now to the balance sheet. We ended the year with approximately a $110 million drawn on our revolving credit facility. Other debt of approximately CAD 17 million, finance leases of approximately CAD 6 million, and cash on hand of approximately $26 million. Excluding our debentures, our net debt was approximately a CAD 107 million at December 31, 2021.
At the end of December, our leverage ratio was approximately 0.98 times based on the terms of our credit facility and approximately 1.78 times including outstanding debentures. As previously indicated, as we move through the upcoming quarters and continue to expand our business through acquisition activity, we expect the leverage ratio to gradually increase. We estimate our current liquidity is in excess of CAD 200 million, which is readily available to be deployed in ongoing in future organic and acquisition growth initiatives.
Finally, as we close out 2021, I want to highlight again that beginning January 1, 2022, we have transitioned to a US dollar financial presentation currency to minimize some of the impact that our businesses sustained from foreign exchange risk. So, starting with our next quarter, Q1 2022, we'll be reporting in USD.
I will now turn the call back to Brad for some closing comments regarding what you can expect as we move into 2022 and beyond.
Thanks, Dan. As you know, in 2018, we announced a long-term aspirational goal of achieving CAD 100 million, which equates to about $79 million – US – and pro forma adjusted EBITDA by the end of 2022. Although we have just started 2022, before we consider any impact of potential acquisitions this year, we expect this number will be exceeded. We began to anticipate this would be the case in early 2021 as does many of you listing on the phone. As a result, we began an extensive internal strategic process in the early part of 2021 that focused on our goals beyond 2022. And I'm certainly glad that we did, because we started getting more and more questions on that subject as 2021 drew to a close. As a result of this strategic process, we have a new long-term aspirational target to achieve by the end of 2026 which is as follows.
Park Lawn expects that it will achieve a total of $150 million, a pro forma adjusted EBITDA, translating into adjusted net earnings of $2.00 per share. Before I go through how we plan to get there, I think it's important to again emphasize that we are changing our currency presentation for 2022 that Dan just mentioned. We're announcing this aspirational target in US dollars, not Canadian dollars, which is different than our 2018 goal. So in US dollars, we plan to go from $79 million to $150 million in pro forma adjusted EBITDA by the end of 2026.
Now, how do we plan to reach this new five year aspirational goal? We know where we came from and we know how we got here, so we know what it will take to return to goal. First, as a premier operating company in funeral and cemetery businesses, we will continue to capitalize on our ongoing operational improvements in both our existing and acquired businesses to continue revenue growth and margin expansion.
Second, we expect operational and financial efficiencies through the full implementation, deployment and integration of our proprietary industry software system. Third, our organic growth opportunities will continue to play a part in these goals, such as continue to identify on-site opportunities at existing cemeteries, like you can see with our completed on-site in Houston, our almost completed Westminster project in Toronto, or what we've just begun at Waco Memorial Park, one of our Texas properties. Fourth, this expansion and addition of new inventory at our existing cemeteries, which will include things like new mausoleums, new permanent placement offerings for cremated remains and further development and expansion of gardens for traditional burials for private estates.
Finally and probably the most important, we fully expect to continue to pursue acquisition opportunities in high growth markets in both the US and Canada. As you've seen in the past few years, our focus has transitioned to high-performing businesses in strategic markets as these businesses tend to not only integrate more quickly, but are generally more accretive. You've also seen us focus on strategic tuck-in opportunities, where the addition of a new rooftop offers considerable benefit. We expect to continue with the pace of $75 million to $125 million US in acquisitions per year, depending on the opportunities. We are excited of what's to come as we look into 2022 and beyond.
Finally, I want to finish our call today by commending our teams for their extraordinary performance in all respects, especially during the last two years in the most unusual and challenging of times. Through their hard work, dedication and achievement, we as a company have been able to deliver to our shareholders tremendous growth and continued opportunity since the end of June 2018. Since that time, we've delivered an increase of over 300% in adjusted EBITDA and an increase in adjusted net earnings per share of 119%.
As we have repeatedly stated, we are not a consolidator but an operator of funeral homes and cemetery businesses that grows through acquisitions. It is this vision, which is shared by our entire team that makes us different, makes us successful and will continue to make us successful as we look towards 2026.
That concludes our prepared remarks and I will now turn it over to the operator for any question.
Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Your first question for today is coming from George Doumet. Please announce your affiliation, then pose your question.
Hi, guys. Good morning. I just wanted to ask you a little bit about your long-term aspirational EBITDA guidance of $150 million – US, it looks like it implies about 50% CAGR. Should we assume that a third of that maybe, Brad, is organic and two-thirds of it is M&A, kind of in line what we've been doing?
Yeah, George. Truth be told, I think a little bit more right now would be on the acquisition side, as we've gotten a lot of our existing businesses and made improvements to those businesses. And as we in the near-term feel a little bit of effect from COVID, I think that's going to be a little bit more weighted to the acquisitions. But kind of as we get further along in our goal, I think that will start to flip maybe a little bit closer to what you're seeing as we see some of the COVID stuff eliminate and we get into some of that boomer generation.
Okay. That's [ph] for a (15:27) good segue for I guess, my next question. Maybe look at it specifically for 2022, do you guys think you can actually maybe grow organically at all? I ask that because to your US competitors, seem to have guided for quite a bit of revenue decline in 2022. So, I'm just wondering what you guys are thinking organically speaking?
Yeah. George, I think, our kind of guidance would be the same as we did, as we suggested and at the end of the Q4 last year. And that is we came into this year expecting pretty much that with the comps that we had, we would have pretty much flat organic growth. We knew that we would grow by acquisition or thought we will grow by acquisition, so we basically said that compared to the other folks that are publicly traded out there, that we felt that we would grow no matter what the impact of COVID was. And I guess you're referring to SCI came out at that same time last year and they had a much different opinion on what they saw the market was going to do. They were modeling fewer volume going down. They were modeling funeral averages going down. They thought people would be reluctant to gather in large groups. These were all things that they said during their conference call this time last year. And we just took a different approach.
I said during our conference call at this exact time last year in response to a question from Scott Fromson that we respect those guys and understand that they have modeling and they're smart. But we took a different approach. We're doing it again this year, the same way. They're seeing a significant pullback because they believe that the deaths that occurred during the pandemic will all be pulled forward into 2022. We just don't believe that's the case. We believe it will be spread out more than that. So, we'll say the same thing that we did last year. We expect modest organic growth, because some of our tougher comparables, you just saw one, we'll have another one in Q1 of 2022, and then it feels like things are getting back to normal for us. So, we'll see some organic growth, but certainly not a pullback. So, we got it right this year, maybe our competitors will get it right this year is the best, but we feel pretty strong about that answer.
All right. Appreciate your comments. Thank you, Brad.
Your next question is coming from Irene Nattel, please announce your affiliation, then pose your question.
Good morning, everyone. RBC Capital Markets. I just want to continue the discussion around the 2026 guidance, I'm trying to kind of triangulate the $75 million to $125 million in M&A with the $2 in EPS, okay, and $150 million in EBITDA. And it kind of seems to us that at sort of the lower end, you can get to the $150 million, but it kind of looks like maybe at the higher end you're anticipating funding some from incremental equity. Could you walk us through how you're thinking about all of that?
Yeah. I'll start the answer and then Dan can probably add some color when it comes to what the capital stack might look like. This is about as honest as we – and transparent as we can be, Irene, which we do frequently. We don't know who's going to be for sale in which year, and we don't know exactly where that will fall. So it's very possible that you could see a year when we would have $50 million in acquisitions and follow it up by a year that we would have $250 million in acquisitions, or we could hit somewhere in that middle range or somewhere between that $75 million to $150 million we could – or $125 million, we could kind of get that range every year for five years, because I'm not sure who's going to come up, when.
Dan can add a little bit more color to this, but it's spread out over the time, we believe that we can reach this goal without raising any additional equity. Obviously, if something happens more quickly that might change that theory, or we might go and raise the money in some different manner. But right now, we believe that if it comes to in a steady state, kind of like what you saw in 2021, we can finance this without raising additional equity.
Yeah. Irene, I concur with Brad. It all depends on what comes when and as I've always said, we're constantly looking at our capital stack. We know we have the ability to use more debt right now, so it's all a function of what's out there at any given point in time.
That is incredibly helpful. Thank you. I just want to ask about something else, which is, I noted there's no return metrics that are included in these financial targets as you and the board were thinking this through. Can you talk about your view on ROIC and improving ROIC on a go forward basis?
Yeah. Irene, it's Dan, again. ROIC is something we are continuing to think about, we are continuing to look at. Simply put, it's primarily a function of organic growth. Our return on equity is going to be more of a function on how we can grow as we just kind of talked about, we think we can use a lot more debt from where we are today and fund a lot of this growth through the use of debt in one way, shape or form. We could have put out five, six, seven, eight different metrics, but I think it's just a lot to digest and really what we wanted to be true to who we are and kind of how we talk about things. Ultimately, we want to display our growth capability through the use of EBITDA, which is something that we – and indirectly our EBITDA margin, which is something we have a little bit more control as of that – the company. But also want to be true to our capital stack. And that's why we have kind of the EPS metric out there as well. So, that's kind of how we looked at it and we wanted to keep it simple and straightforward in how we kind of look at it as a management team and as a company.
That's really helpful. Thanks. One final one from me, sorry. Brad, you alluded in your remarks or maybe Dan, to the software platform. Can you remind us of where you stand with that and when it'll be fully rolled out and operational?
Sure. And Irene when I put that comment in there, I actually said to Jay, and this will cause Irene to ask me where FaCTS is. So at least I predicted that appropriately. So, I think we would have rolled out FaCTS faster had it not been during the pandemic, but we don't allow that to be an excuse around here. So if I don't allow that, I can't really use it as one. So, I will just say that just rolling out FaCTS took longer, because the project was probably bigger than we anticipated. It is going quite well. All of our funeral homes are up and running on FaCTS right now. I'm sorry – I'll just said it backwards, all of our cemeteries are up and running on FaCTS right now and that's what's bluntly, that's what's creating the financials that we just reported. So, it's working and working quite well.
We plan on having all of our funeral homes online by the end of this year, in the same manner and that will mean that at least the foundational aspect of this software is fully in place. And so, just to anticipate the next question, it is yes, it's going well enough that I've finally allowed an initial conversation on what do we do with this great product for the rest of the people in our industry that may or may not need it, but we're not even close to understanding what that looks like yet. But at least we open the door to allow those discussions to start.
That is great, thank you.
Thank you.
Your next question for today is coming from Scott Fromson. Please announce your affiliation, then pose your question.
Thank you. CIBC. And good morning, gentlemen.
Morning, Scott, [indiscernible]
(24:05) a question on labor inflation. Last conference call you mentioned that you were seeing some labor inflation, but it was nothing compared to other industries. Can you update us on the labor situation, in terms of wage inflation and worker shortages?
Yeah, so it's effectively the same. And by that, it's always been a struggle to find really good funeral directors and really good managers in certain markets and that hasn't changed. And so, I'm really referring to our licensed personnel in that regard. When you have the two corporate offices, we have one sitting in Houston and one sitting in Toronto, you obviously have a competitive market there for people who want the same type of employees that are sitting in those buildings, accountants and IT professionals and administrative folks and things like that. So we see some of that pressure here in Houston and in Toronto, for example.
But when you're really talking about the bulk of our employees, the answer is it doesn't change and it's really not going to change, because those folks want to work for us, they probably worked at the same place for years and years and years, and they're not really interested in picking up and moving to the funeral home across the street or the competitor because they want to stay in the industry and work with us. And I don't see that changing, so you'll see us having to deal with what I would call the base inflation like everyone else has to deal with and we will, as we need to on a business-by-business basis, if we start seeing wage pressure through pricing. But I just don't see it impacting us or at least it hasn't yet, knock on wood. So that would be my update to that question.
And what about merchandise, how do you deal with inflation on the merchandise, pre-need contracts as revenue is realized? And how is the Merchandise and Service Trust Fund set up to deal with this inflation?
Well, I don't know that you would necessarily say, it's set up to deal with this type of inflation. But I'll break the question down into two. Most of our merchandise that we're providing when it comes to the big dollar amounts, are through our casket suppliers and we have a good relationship with them and we manage that, the two of them. And where they've had price increases or struggles, we've gone back to them and explained to them how that would or would not work for us, and we've been very successful in that regard. So we're not seeing pressure in some of our larger merchandise.
We're seeing delivery problems, which is really not what you're asking. But I'll just say that we'll sell a monument and where it used to take three to six weeks to get that in and be able to deliver it and then recognize the revenue, we have a lot of sales on our books right now that we've sold it, but we can't get it in. If we can't get it in, we can't recognize it, different problem. But that's going on.
And the Merchandise or Trust Funds are set up, obviously you know how that works. There's a gain in the trust, it spreads out across the contracts and those contracts are recognized. We get that that's partially offset the inflation – it partially offsets the inflation, but there's no – if the inflation starts at 7% or 10% or 12% or it goes out of control, there's trust funds aren't set up or designed to handle that. Dan wants to add something, he's waving at me on the television.
.
Yeah. Scott, I'll just say, those trust funds too are set up like any other fund, right? And we deal with our advisors on a regular basis, looking at the allocations in our fund, where we're investing, who we're investing with. And as circumstances change within the global market, we have the ability to pivot, change our investments, as well. So that's one thing we do. It's just a very close relationship between our investment advisers and our management team.
Okay, thanks, that's helpful. Just a final question, can you put a percentage figure on average revenue per call increase and if you can, broken-down, between funeral home and cemetery?
The average revenue per call was 9% this quarter, that's on the funeral home side. And so, when you hear us talk about that it's always on the funeral home side. I'm not even sure that the other publicly traded companies attempt to do an average call on the cemetery side. And the reason why, going back to the previous answer, what's recognized or not recognized in a particular quarter, may or may not have any relation to the call volume. So it just gets to be kind of a wonky thing to look at. So when you've heard us talk about the average per call over the last, I don't know, eight quarters, you're talking about funeral homes and that was 9% this quarter.
That sounds good. I'll turn it over. Thank you.
Your next question is coming from Maggie MacDougall. Please announce your affiliation, then pose your question.
Thank you. Stifel. Good morning, guys, thanks for taking my questions.
Good morning, Maggie.
So, first off, on the new five-year target, we talked a little bit about the role M&A versus organic growth will play. One question I did have was around the profitability assumptions that go into that goal. Can you tell us how you thought through the margin profile of the business with regards to setting out those targets, keeping in mind, more recently, the acquisitions you've been doing do seem to be at a quite a favorable margin versus where some of them may have historically been?
Yeah. Maggie, and part of the reason we actually didn't put a target out there for margin is because I think it starts to become a just a little bit more of a math game. We are buying higher quality and better businesses, and as we talk about near term organic growth being a little bit muted and growing, it gets a little bit more difficult. So when we think about our margins, we're looking at the market share opportunities that we have, pricing opportunities, development opportunities. And we do see organic growth happening over that five-year period, but again more weighted towards the end and that flow through, that incremental growth flowing through to the bottom line at a little bit higher margin than kind of what we've seen actually in the past. So that's how we're thinking about it.
Yeah. Maggie, I'm going to add something to that, which will make Dan nervous. I don't know if you noticed when Scott asked me the financial question, he was dying to get involved, because they don't mind me running funeral homes and cemeteries or making acquisitions, but when I start talking about financial stuff too much, the team gets nervous. But the reason why I – the reason why we – in my opinion, we really wanted to move away from that focus on the margin is, when that goal was put in place, it was really built around taking the legacy acquisition, or is to get the legacy acquisitions that Park Lawn had fully integrating them with what we were doing, with layering on some acquisitions. And we said, okay, if we do this right, we should be about 26% by the end of 2022. Okay. So we did that right and we're at 26% before the end of 2022.
What Dan just said, I would say a little differently from my standpoint, what's going to drive that margin now is, I mean small incremental improvement on those current operations, because you certainly can't expect it to do what it came from to where it is now. But it's really going to be driven by the acquisitions we make. And I can't tell you what the mix of those acquisitions is going to be, I can't tell you what state they're going to be in at the time we buy them. And until we know what the businesses are, I can't tell you where we can improve. So, we didn't want to put a goal out there that we knew that we couldn't control or I mean, maybe we blow it out of the water, maybe we don't. But either way, we're still going to buy the good businesses. So, it just didn't make sense to us. So, that's my non-financial answer to that question.
Thank you. Makes sense. Next question I had was around your M&A pipeline and price expectations in the market. Coming off of two years of pandemic, it has been a robust set of operating conditions for your particular industry, although unclear to me that that's actually been the case all the way from small operator to large. However, that being said, would appreciate your comments around how you deal with valuation or price expectations, given that it has been quite a strong market the last couple of years.
Yeah. So, good question, and the pandemic definitely changed things out, and there's no doubt. Before any of this happened, depending on the business, we would pull 5 to 10 years of data from them and our valuation and due diligence process, but certainly on the valuation side. And in that 5 to 10 years of data, you would always, as a general rule, see a really good year and a really bad year, but it's kind of interesting how it kind of all goes to the average or mean, right. So, obviously, everyone sees an impact of what happened to their business in 2020 and 2021. Most people don't try with a straight face to say, that they believe that that is sustainable going forward unless they're one of the brokers in the industry. And I know them well enough to say, really, and then it kind of goes back to okay, let's talk about what this business is to me, what this business average is really going to look like.
So, the pandemic has had an impact. We have to kind of sort through whether or not their growth that everyone is seeing is sustainable and if not, we have to make a decision as to how much we pull that back. Everyone that we've talked to, that joined our company in 2021 and the ones that we're talking to in 2022, understand that. And as a result of that, I have not seen any pressure on price. People are not bringing in 2021 numbers and asking us to apply multiples of that without paying attention to the surrounding circumstances. I think that's the question you were asking me, if not.
Yeah. No, that's a great information to have. It sounds like you take a long-term view on the cash flow profile when you're looking at pricing deals, so makes a lot of sense. One final one for me, you guys are in the fortunate situation of having sort of a domestic North American business, with very little geopolitical risk, very little exposure to inflation relative to a lot of other consumer products businesses. However, we are seeing gasoline prices creep up quite high, commodities are surging and it does – they're asking how we should think about your ability to pass through even small changes in operating costs that could occur as this sort of inflation picture continues to unfold?
That's an excellent question. And the answer that I would give you in March of 2022 could be different in June of 2022. But as we sit here right now, any changes that we've experienced we can handle through pricing power at a location basis as necessary. And I will tell you why. That's just not a throwaway statement. We are as a general rule, not the highest priced in our market and that cannot be said of some of the other publicly traded companies that you follow or listen or talk to. So we have – and in some of our markets, we may be number three on the pricing perspective, but we're probably, as a general rule number two in most places and that gives us the ability to do that a little bit.
Now I have obviously read what some of the other companies said and they're looking at staffing and maintenance and then I hear energy related expenses. May I just say, look, we have a lot of cars, there's no doubt and a lot of equipment in cemeteries, but we're still a tenth of the size of the largest business that's in this industry. So gas going up does get our attention, but probably not at that same scale.
Okay. Thanks so much. I pass the line over.
Thanks, Maggie.
Your next question for today is coming from Zachary Evershed. Please announce your affiliation, then pose your question.
Good morning, everyone. Calling in from National Bank. Thanks for taking my question.
Morning, Zach.
So the $75 million to $125 million per year that you make reference to for your 2026 goals in acquisition opportunities, is that the amount that you intend to spend annually or the incremental revenue added?
That's the amount we intend to spend.
Perfect, thanks. And then for my second question, I'll join the gang and ask another one about inflation. And we're seeing a big uptick in building materials and labor in that industry, have the expected returns on your organic projects been affected?
Not yet. What we are really seeing is it takes longer. Now, I will accept the Westminster project in Toronto that has been kind of an eye opening experience for those of us who are not used to the cost of construction, north of the border. But as a general rule, where we are, if we see that a project is going to take too long or cost too much, we'll just go to another one on the list and wait for that to make more sense. So right now, we decided to start building the funeral home in Waco, Texas, there's a reason for that. We have access to material, labor and things like that. We can move it along. And so that's why we decided to do that. That did play up. We looked past another on-site that we were considering, because that their market didn't allow us to do that, we thought there'd be too much pressure on bringing in what we needed. So right now, we're not seeing that impact, but it's a good question and that could change. I mean, this continues, all of these answers are going to change, but right now it just hasn't impacted it that much.
That's clear, thank you, very much. I'll turn it over.
Your next question for today is coming from Daryl Young. Please announce your affiliation, then pose your question.
TD Securities. Good morning, guys.
Morning, Daryl.
First question is just following up on the capital stack and the ability to achieve the 2026 target. If everything were to go just so without raising equity, what kind of a leverage position would that assume, because I think pre this announcement and pre your equity raise a couple of months ago that you were talking about potentially taking leverage higher. So maybe just a bit of an update there?
Hey, Daryl, it's Dan.. I'm going to avoid giving you a direct answer, and I'm going to kind of keep my answer as it's been in the past, which is less specific. And the reason being for that is because, a lot of this is unknown. I'm very adamant about how we use our different sources of capital is very situational and it depends on where everything sits at the time of need. But we sit here at one times leverage. We have a credit facility that allows us at this point up to 3.75 times. Our peers are operating in the 3.5 times to 4.5 times, and we are we are much more comfortable getting closer to the lower end of our peers than we probably have been in the past and as the management of this company has probably been in the past. So that's my very roundabout way of answering your question.
Okay, perfect. That's helpful. And then just one last one, high level question We've heard from some of the US life tell us about the potential for elevated death rates above the 2019 baseline, even with the pullback in COVID, is that something you're factoring into your outlook and consideration or would that represent upside if we did have an elevated death rate above 2019, if that proved to be true?
Yeah. Again, that's a good question, because we're seeing that, right, the Omicron and other variants didn't have nearly the impact of what happened a year ago on the death rate, at least in the communities that we serve. But we definitely see an elevated death rate and we definitely read the same things you do that are coming out from the life insurance companies as well as different governmental agencies. So, we're seeing that. Some people argue it's the pandemic, folks didn't make it to the doctor, folks were depressed being locked in their homes. The things that are affecting people now are not the way you would like to see people pass away. I mean it wasn't a good situation.
Whether or not that that holds or not, it remains to be seen. That is not something that we considered that there would be an elevated death rate over the next five years. We didn't take that into our model. We kind of assumed a normalizing of kind of somewhere between where we are and 2019 kind of going back to what was normal. So the answer to your question is we see that out there. If it stays that means that we've got some combination of the baby boomers hitting and then some combination of a higher death rate that's starting to occur in the United States for some socioeconomic reasons that are far outside of my pay grade.
Okay. That's great color. Thanks very much. That's it from me.
Thank you. [Operator Instructions]
We have a follow-up question coming from Scott Fromson. Scott your line is live.
Thanks, just one of the acquisition horse again. So, you're saying you think you can do $75 million to $125 million of annual deals, but that seems to be a little bit down, I know your conservative guys. And you've mentioned in the past that the major constraints are time and the internal resources, not so much capital or number of opportunities. Has that changed, has the pipeline changed or are you just being conservative?
I don't think either one of the – first-off, I made it through your first question, so I'm not really comfortable. I'm not sure I'm not comfortable with you coming back and taking another shot at me, Scott, but I'll answer it anyway...
I was taking a shot at the horse.
Okay. Yeah, I noticed that you started that way. But down here in Texas, we take shooting horses very seriously, I just want you to know that, or beating them. Okay. So, here's the way I would look at that, I don't think it's conservative and I don't think it's down, right? So if you look at – Park Lawn bought the Signature Group, which is basically the best management team in 2018. That was a large purchase, I think it's the largest one that Park Lawn has ever done. So that skews 2018.
2019, we added Horan and Valley, which together would with would fall right in the middle of this target, right? So it skews 2019. 2020 was the pandemic, when we were all trying to figure out what was going on. And 2021 is kind of the first time that I would say, okay, let's – that was a more normal and more of what I would anticipate on a go-forward basis. Well, if that's the case and I don't have it right in front of me again, but I think we spent like $125 million last year on those acquisitions. So I really do think we're not being conservative. I think that it's really more indicative of what a normal year looks like.
Now I'm going to add some color on that. So there are two other publicly traded companies that are in the acquisition game, at least here in the US, you have SCI and you have Carriage. I think Carriage has said they're going to spend $100 million on acquisitions over the next three years, not in one year, but over three. And then SCI is 10 times our size, it's been $100 million plus last year, basically the same or less than we did and that was in large part due to a large acquisition in the fourth quarter. And we saw that one too.
So, I guess my point is, I think that the acquisition target that we put out there makes us say, I call it, [ph] the best-to-grow (46:08) stock, wherein the other companies are buying back their stock and deploying capital that way and we're growing and we're growing the right way, we're growing by businesses I think they would love to get their hands on but they can't. So we're growing at that rate that's equivalent to an SCI and passively outgrowing the other publicly traded company. So I'll just [ph] stub it out (46:31), I think I probably said it three times now. I don't think it's conservative. I think it's exactly what our investors would expect us to do in a good year, which is mimicking 2021.
Okay. Thanks, Brad. That's helpful. Thanks for clarifying.
All right. Thank you.
Your next question is coming from Kyle McPhee. Please announce your affiliation, then pose your question.
Hi. Cormac Securities. Guys, you've made it clear you're going to continue investing in your funeral and cemetery assets to support organic growth. Can you quantify that in terms of the non-maintenance CapEx, we should expect to see and maybe your budgets are just relative to what we've seen in trailing years?
Yeah. Hey, Kyle, it's Dan again. We think that spend is going to be relatively consistent and as we acquire different businesses, we'll find additional projects and hopefully on-sites and things of that nature. I think, historically, our development spend is somewhere between 3% and 4% of our revenue. And I think you can kind of see that continue going forward.
Okay. Thank you for the color.
There appear to be no further questions in queue. I would like to turn the floor back over to Brad Green for any closing comments.
I would like to thank everyone for joining the call today. And certainly in the times that we live in, everyone remain safe and look forward to talking to you all next quarter.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.