Ladies and gentlemen, thank you for standing by. And welcome to the Carriage Services Second Quarter 2020 Earnings Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to hand the conference over to Carriage Services Management. Thank you. You may begin.

Thank you, and good morning everyone. This is Viki Blinderman, Chief Accounting Officer at Carriage Services. Today we will be discussing the company's record second quarter results for 2020. A related earnings release was made public yesterday after the market closed. Carriage Services has posted a press release, including supplemental financial tables and information on the investors page of our website. This audio conference is being recorded and an archive will be made available on our website later today through August 3rd. Replay information for the call can be found in the press release distributed yesterday. On the call today from the management are Melvin Payne, Chairman and Chief Executive Officer; and Benjamin Brink, Chief Financial Officer. Today's call will begin with formal remarks from management followed by a question-and-answer period. Before we begin, I would like to remind everyone that during this call we will make Forward-Looking Statements. Certain statements on this call, including financial estimates, assumptions or statements about our plans, future results, expectations or beliefs, may constitute forward-looking statements under applicable securities laws. We make these statements on the basis of our reviews and assumptions regarding future events, business performance, and other factors at the time we make them and do not undertake any obligation to provide updates or revise any of these forward-looking statements after the date of this call, whether to reflect the occurrence of events, circumstances or changes in expectations except as required by law. These forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from the results expressed or implied in light of a variety of factors, including factors contained in our annual report on Form 10-K, quarterly reports on Form 10-Q and in our other filings with the SEC. Please note that a reconciliation of non-GAAP measures that may be referred to on this call to equivalent GAAP measures can be found in our earnings press release that was issued yesterday and on the company's website. And with that, I would like to turn the call over to Mel.

Thank you, Viki. The great blessing of my life is that I have found my way into the funeral and cemetery business at age 48 when I co-founded Carriage. It has been an incredible life journey, career journey, and indeed a labor of love, a love affair with our wonderful people ever since that has involved my entire family, my wife, my son, and my daughter who are big shareholders. The work our people do is more than meaningful; it is noble and it is necessary beyond description. It is therefore only appropriate, at this earnings release, this call, and this transformative year of high performance, we dedicated to all of our wonderful leaders and employees in the portfolio of businesses of Carriage who have risen to the challenge of two once-in-a-lifetime crises over the last four and counting months. Our managing partners, sales managers, and their teams of employees dealing with the fear and uncertainty of the coronavirus pandemic and the constantly changing mandated behavioral and social restrictions, family-by-family on the front lines of this battle against an invisible enemy, have been, and are continuing to do no less courageous, even heroic work than the frontline army of doctors, nurses, and first responders across America. Speaking for all of us, including our Board who are honored and privileged to serve you, our people, we thank you and salute you. The second quarter earnings release published yesterday after the market was not about a record quarterly and first half performance. The release is full of substantive content about our company and represents no less than a statement about the evolution of a radical idea we call our standards operating model, which when well-led, executed, and supported, which is obvious in the second quarter and the first half, has this capacity to unleash human performance potential beyond what would normally be thought possible. When the current environment normalizes, we welcome all of you who have a curiosity and an interest to learn more about us and this idea. To visit our home office as our special guests, or even better arrange a visit to one or more of our businesses to witness up close and personal the uniqueness and what our company is all about, where it matters most in our local businesses. With that, I will turn it over to Ben.

Thank you, Mel, and thank you to everyone for joining us on the call today. Today, we will discuss a record-setting performance for Carriage in the midst of unprecedented operating conditions brought on by the coronavirus crisis and the stay-at-home and other social distancing measures put in place to curb the spread. Over the past four months, our teams across the company have moved quickly to creatively adapt and embrace change in order to continue to serve their families and their communities, no matter the circumstances. We have remained vigilant in putting the safety of our employees and clients, families first while providing the high-value personal service that they have always been known for. To deliver the type of operational and financial results in the face of these challenges is a testament to the leadership and professionalism we have across our company and demonstrates the commitment from everyone here at Carriage to make 2020 a year of transformative high performance. While we hope you take away from our comprehensive press release and this call is that our results in the second quarter are not a one-time occurrence in the middle of a pandemic, but rather they are indicative of the growing earnings and cash flow generation potential of our portfolio of funeral homes and cemeteries. The foundation for these results and for our transformative high-performance expectations have been laid over the course of the last 21 months through a series of difficult leadership decisions and evolutionary updates to our funeral home and cemetery standards operating model that prioritize compound revenue growth, improved alignment of our incentive compensation structure throughout the entire company, and the successful acquisition and integration of four high-quality funeral home and cemetery operations late last year that allowed Carriage to reach an important stage of critical mass. We view our second quarter and year-to-date results as the start of our good degrade journey, part two, and we remain extremely excited for the future of Carriage. Now onto the results. For the second quarter, Carriage reported the following record-setting performance metrics. Total revenue increased 14.4% to $77.5 million. Total field EBITDA increased 22.6% to $33.2 million, while total field EBITDA margin improved 290 basis points to 42.9%. Adjusted consolidated EBITDA was $25.4 million, an increase of 32% and adjusted consolidated EBITDA margin expanded 440 basis points to 32.8%. Adjusted diluted earnings per share was $0.45, which was an increase of 45.2% compared to the second quarter of last year. Our year-to-date results included the following record-setting six-month performance metrics. Total revenue of $155 million, an increase of 13.3%. While total field EBITDA increased 14.2% to $63.3 million. Adjusted consolidated EBITDA of 48.3%, an increase of 20.3%, while adjusted consolidated EBITDA margin improved 190 basis points to 31.2%. And while now quite a record, our adjusted diluted earnings per share for the first six months of the year increased 14.5% to $0.79. In our same-store funeral segment, revenue increased 2.3% in the second quarter, while the expense control we experienced in April continued for the rest of the quarter, which led to same-store funeral field EBITDA increasing 2.5 million or 15.9%. And funeral field EBITDA margin increased 500 basis points to 42.3%. The increase in revenue was driven by a 12% increase in the number of families we served in the quarter. Early in the quarter, the volume increase was primarily related to COVID deaths in hotspots in the northeast and in New Orleans. For the balance of the quarter, the increase in same-store funeral volumes were related to the long-term trends of local market share gains we believe we have made since the beginning of 2019, in conjunction with the changes to our standards operating model to focus on three-year compound revenue growth through local and market share gains. Volume increases in our same-store funeral segments were offset by a decline in our average revenue per funeral contract. The worst of the decline in average revenue per contract occurred in April, and we saw improvement in averages as we moved through the quarter. We do not believe the long-term trend of an increase in our annual cremation rate has changed due to the coronavirus crisis, and believe we have significant opportunity to improve our average revenue per cremation contract through our continued focus on cremation convergence. The ability to leverage an increase in same-store funeral revenue into an increase in same-store funeral field EBITDA was remarkable, as indicative of the operating leverage inherent in our funeral home businesses. We believe that focus on expense management and the change in behaviors we have experienced in the second quarter are sustainable into the future. In the second quarter, our same-store cemetery segment revenue declined 11.6% to 11.7 million. Same-store cemetery field EBITDA declined 23.6% to 3.7 million and cemetery field EBITDA margin declined 490 basis points to 31.7%. Year-to-date, same-store cemetery revenue declined 7.7%, same-store cemetery field EBITDA declined 19.4% to 6.8 million and cemetery field EBITDA margin declined 440 basis points to 30.1%. Our cemetery performance was negatively impacted due to the decline in pre-need property sales from the stay-at-home and other social distancing orders put in place during the early stages of the coronavirus crisis. We expect these businesses to be significant contributors to Carriage’s improved organic growth rates at higher adjusted consolidated EBITDA and adjusted free cash flow margins in the years ahead. Our discretionary trust fund had a return of 22.3% in the second quarter, which brought our year-to-date performance to negative 5%. Since Carriage began actively managing the majority of our pre-need trust assets in the fall of 2008, our compound annual return is 12.8%. Over the course of our 12 years of managing these assets, we have always taken a long-term and patient view of our investment portfolio and have been most active in times of significant market dislocation. We have used periods such as the 2008–2009 financial crisis, the downgrade of the U.S. credit rating in August of 2011, and the energy crash in late 2015 to make significant reallocations within our portfolio that have led to higher long-term capital appreciation and higher recurring annual interest and dividend income. In each of these periods, the successful repositioning of our trust fund portfolio translated into corresponding increases in reported financial revenue and EBITDA here at Carriage. The execution of our most recent repositioning strategy in the midst of the coronavirus crisis, market crash, has positioned our pre-need trust portfolio to be more resilient in the short term and produce higher capital gains and significantly higher amounts of recurring annual income over the long term.

Over the course of the past four months, we have invested over $62 million of capital in our Trust Fund portfolio and grew our recurring annual income by 68% to $14 million annually, a record high amount. This increase in recurring annual Trust Fund income will lead to a sustainable annual increase of $3 million in reported financial revenue and an increase in financial EBITDA margin to 95% and contribute an additional $0.10 of earnings per share annually to Carriage. We began to see the increases reflected in our reported second quarter cemetery trust earnings, which increased 45.8%, compared to last year, primarily from the significant increase in earned income from our cemetery perpetual care trust. This type of increase will be consistent throughout the rest of the year and into 2021. On a pro forma basis, including non-GAAP add backs for acquisition costs, severance expenses, and COVID-related natural disaster costs, overhead for the first six months of the year was flat at $15.7 million. Overhead as a percentage of revenue continued to fall and it was 10.1% through June. The strong operating performance in the second quarter allowed us to fully accrue for both field and corporate incentive compensation through the first six months. Our ability to leverage our overhead platform in the future will be a key driver of growth in our adjusted consolidated EBITDA margin. Our strong operational performance in the second quarter translated into a 90.1% growth in adjusted free cash flow to a record of $17.9 million and adjusted free cash flow margin improved 920 basis points to 23.1% in the quarter. For the first six months, adjusted free cash flow grew 60%, to $30.5 million and adjusted free cash flow margin improved 580 basis points to 19.7%, both of which were also records. This exceptional free cash flow performance is indicative of our ability to generate high and sustainable amounts of recurring cash flow that provides Carriage with a significant amount of financial flexibility. We expect our free flow growth and expansion of our free cash flow margin to only accelerate once we execute a senior note refinancing transaction in the second quarter of next year, depending on market conditions. We are confident in our ability to execute this transaction, given the continued momentum in our operational performance over the next year, our rapidly improving credit profile, current credit market conditions and the trading performance of our current senior note since issuance. We expect this refinancing to translate into a minimum of $8 million annual cash interest savings to Carriage. Our strong free cash flow performance in the second quarter also allowed us to continue with our deleveraging program as we pay down a total of $24.4 million of debt in the quarter, including cash we held on our balance sheet at the end of the first quarter. Our total debt outstanding was $508.5 million at the end of the quarter and our total debt to pro forma adjusted consolidated EBITDA leverage ratio was approximately 5.5 times. Current total debt outstanding is approximately $498 million, which brings our pro forma leverage ratio closer to 5.4 times as we sit here today. We will pay down debt at a faster pace over the second half of the year as we execute on our previously announced divestiture program. We expect to sell 14 to 15 businesses or properties for approximately $15 million of proceeds. The bulk of these transactions will occur before year-end. We have already divested three businesses in the corona, and our purchase agreements or letters of intent on four additional properties were closed in the third quarter. We have increased our adjusted free cash flow and adjusted free cash flow margin ranges as our updated 2020 post-COVID outlook to $46 to $50 million and 15.7% respectively. We expect to achieve approximately $475 million in total debt to consolidated EBITDA ratio by year-end. Over the next 12 months, we expect to generate over $50 million in adjusted free cash flow and a leverage ratio close to 4.5 times by the end of next June. We reduced our adjusted free cash flow margin metrics in our previous release as we believe it is the most important metric to illustrate Carriage's transformation into a superior shareholder value creation platform. Over the course of the next 2.5 years, using 2019 as our base year, we expect adjusted free cash flow to grow by 71%. Our adjusted free cash flow margin to increase by approximately 540 basis points. The growing amount of free cash flow and improved free capital margin will give us the necessary financial flexibility to allocate capital to grow the intrinsic per-share value of Carriage. Our focus over the next 12 months will be to continue to pay down debt and improve our credit profile ahead of the senior note refinancing next year. We also continue to make select investments and high return on invested capital internal growth projects primarily focused on cemetery inventory developments and funeral home remodels. Given our improved free cash flow performance in the second quarter, we expect to spend $13 to $14 million in capital expenditures this year, split evenly between maintenance and growth, which will be slightly higher than our previous expectations. Additionally, this high amount of free cash flow coupled with our lowest cost of capital balance sheet post a refinancing transaction will provide Carriage with the maximum amount of financial flexibility and allow us to pursue additional value creation capital allocation opportunities. The acquisition landscape remains highly favorable to Carriage, and once this period of uncertainty caused by the coronavirus crisis is over, we believe there will be a number of owners of high-quality funeral homes and cemeteries that will be looking to find the right succession planning solution for their local business. The additional financial flexibility will also allow us to resume making opportunistic share repurchases, should our shares continue to trade at what we believe is currently a significant discount to their intrinsic value. We are also pleased to announce the decision by our Board of Directors to increase our annual dividend by $0.05 to $0.35 beginning with the next payment in September. We will continue to have a strong and growing dividend as part of our shareholder value creation capital allocation strategy. In our press release, we provided an update on our three-year milestone scenario and introduced an updated rolling four-quarter outlook. Based on our strong performance in the second quarter and expectations for continued high performance for the rest of the year, we increase our 2020 post-COVID outlook to $91 million to $95 million of adjusted consolidated EBITDA, 30% to 31% adjusted consolidated EBITDA margin, $1.50 to $1.60 in adjusted diluted earnings per share, and $46 million to $50 million of adjusted free cash flow. We expect to reach the important milestone of 30% adjusted consolidated EBITDA margins here in 2020, which would be a record for Carriage, a threshold that has never been achieved by another publicly traded death care consolidator. The increases in the ranges for 2021 and 2022, roughly align with our outlooks and are entirely due to the increased amount of recurring cemetery perpetual care income that will drive higher financial revenue and EBITDA over those years. We have reintroduced our rolling four-quarter outlook as it syncs perfectly with our goal over the next year to show the true earning power of Carriage for a full four quarters and improve our credit profile, leading up to an expected refinancing transaction next June. Our second quarter performance was nothing short of amazing and was entirely driven by the execution of our managing partners and their teams. We believe the success of Carriage is predicated on strong local leadership and the power to make the best decisions for their business. Our belief has been vindicated by the extraordinary results our teams produced in the second quarter. The transformative high-performance good grade flywheel effect is in full motion here at Carriage, and we look forward to reporting our progress to you going forward. And finally, I will leave you with this. Our amazing teams across the country care for families dealing with the most tragic effects of the coronavirus. So when it comes to COVID, I encourage you to stay vigilant, practice social distancing, and wash your hands. And with that, I will open up for questions.

Your first question comes from Alex Paris from Barrington Research. You may go ahead.

Hey guys, congratulations on the Q2 beat and raise. What a difference three months makes?

Thank you, Alex. It is a big difference.

I want to dive a little deeper into the two metrics that have been seen to be most influenced by COVID recently: funeral averages and pre-need cemetery sales. You have put up a lot of information in your prepared comments, but I believe you said funeral averages in the same-store bases were down 7% in the quarter, improved throughout the quarter, but were still down 4% to 5% in July. Did I hear that correctly?

Yes, Alex, that was correct.

Okay, good. And I'm wondering what impact COVID had on that, and maybe it starts with COVID volumes. Have you disclosed or will disclose orders of magnitude, you know how many COVID cases you handled at Carriage Services. It sounds like their choice of disposition was direct cremation. Obviously that in and of itself would have an impact on the averages, but could you provide a little more color there, please?

Yes, so Alex, I would definitely say the volume increases we saw early in the quarter were really primarily related to the increase in deaths from COVID. Like I said in the hotspots in the Northeast and New Orleans, a lot of that increase in April and the early part of May was due to those COVID-related deaths. While we track that number, we don't feel it is appropriate to release the exact number of COVID families we served. As we went into May and into June, we continued to see that high level of volume increase, contracts volume increase on our same-store portfolio, and I guess that was really driven by local market share gains. So, we believe we have been gaining over these past couple of years.

Alex, it is Mel. We did all kinds of breakdowns of the portfolio. We had 22 businesses in hotspots. Those were in the five states: Massachusetts, Connecticut, New Jersey, New York, and Pennsylvania and they had a big quarter starting in April. That is 22 businesses. But if you looked at how much revenue those businesses increased as a group, it was substantial and they brought 107% of the additional revenue mostly all from additional volume, because their averages were down over a thousand on average per funeral. About all the additional revenue 107% to EBITDA so the margins went way up like a thousand points. But then we had a large group of non-hotspots that had volume increases and their averages were down, but down maybe 20% of the COVID places. They brought 117% of the additional revenue into field EBITDA. And we saw other businesses, large groups that didn't have revenue increases from volumes and some of them had revenue decline. So, it is just a natural thing for a large portfolio. Some places were slow. But we had the expense management. And so, we actually had a group that had a revenue decline, a meaningful amount, and they increased their margin 500 basis points. So what we saw was very broad improvement, and we did see normalization in the total average of close to 98%, 99% at one point. But then COVID is spreading, the taxes and other places and other restrictions, and so now the average is back down as a group. But we don't expect the outcome to be any different. We see volume increases broadly and we don't think it is all - we know it is not all COVID related. We have done a lot of things here to improve our competitive position.

That is all. Thanks for that additional color. So, just to be clear, you said you were back up to 98% or 99% said another way, averages were down 1% to 2%. But resurgence in some of the states in the month of July, it was down 4% to 5%.

Yes. It is gone back down, but we don't expect the outcomes to be any different. We will see volume increases broadly and we don't think it is all - we know it is not all COVID related. We have done a lot of things here to improve our competitive position. And our people realize, these standards drive behavior and incentives and disincentives drive behavior. And over the last 21 months, we have got a lot of great behaviors in place, compared to what we had at that time.

And then I would assume, in March, we were all taken by surprise by COVID. Here in June and July, really July, the resurgence of COVID, and some of these states, is that new to these funeral directors, and that they are a little bit better prepared for it. So, I would think intuitively that they should be able to weather that storm of increased social gathering restrictions better this time than they did last time, as the last time worked out pretty well?

You hit the nail on the head. We had a conference call with the Standards Council on Monday to go over the press release, because there's a whole page dedicated to them. And we have four or five in California because they were the first ones to deal with this. And then we get three in Northern California, and one in Southern California. And this is exactly what they said. You could have been articulating their firm conviction that look, we have been here before, we learned a lot now we are more prepared than ever. Let's go back to work and get it done. And so I think you will find that same attitude throughout our portfolio.

That is great. Alright, so that helps me with regard to funeral averages. Same for cemetery was down 12% same-store field EBITDA in cemetery was down to 24%. That just to be clear, did you say June? Same-store revenues in June, same-store field EBITDA was up year-over-year?

Yes, so Alex, all that decline really happened in April, we saw the performance really come back strong in May; it was even with where we were last year. And then June, we were actually up about half a million dollars in revenue and EBITDA in our theme store cemetery.

So, I'm looking at here, Alex, and in April, we were down $2.1 million same store revenue in the cemetery. In May, we were just up a little bit, call it flat. Then in June, we were ahead $600,000, so that is the trend we see.

Got you.

When Carlos gets here, that trend will become our big-time friend.

Yes, absolutely. Carlos, he has an impressive background, having been most recently at service corps in this area?

So, he has got a very impressive background and when you meet him and talk to him, you will see why he is going to be a perfect fit here. And why we are all excited about every single one of us.

Great. I look forward to it. And then within cemetery pre-need cemetery sales, obviously impacted by potential customers' inability to come out to the cemeteries, and this was exacerbated by a really, really tough comp I guess the chimney holiday last year. Is that right?

Yes.

And has that been improving in May and June and July?

Yes, that is what I was explaining. In April we were down $2.1 million in the hole. May was about flat for same-store cemetery revenue. And then in June we were actually up $600,000, which is 15%. So, we don't expect to go back to the April deficit. We expect to dig out of the hole and get ahead by the end of the year.

Alright. And then a couple of my questions were answered in the overview comments. I guess I got one little bookkeeping sort of question for Ben. As roughly right range for 2020 with regard to the gap numbers that are in the back of the press release, does the pre-tax income net income, tax expense include or exclude that $14.7 million impairment on goodwill in the first quarter and its corresponding impact on tax expense in the first quarter, which is actually a tax credit in the first quarter?

I have multiple people motioning. Alex, I will follow up with you on that question.

That is fine. But thank you so much for this information. Thanks for the additional color.

You want to know more about technical accounting you should call me. I'm just kidding.

Alright, guys. Thanks again. Congratulations on the quarter and the guidance choice.

Thank you, Alex.

Thanks, Alex.

Your next question comes from Chris McGinnis from Sidoti and Company. Your line is open.

Good morning. Thanks for taking my questions and echo obviously great results and so congrats on that. Can you guys just talk some about the questions surrounding, you mentioned the market share gains we're seeing that is really driving some changes. Fundamentally what you talk about, what you know maybe the changes in those markets that you made around, the ability to drive those market gains?

Chris, really pointing back to the changes we made. The update we made to the standards operating model in late 2018 and implemented at the beginning of 2019 to focus on three-year compound average revenue growth, eliminating a very rigid standard of average revenue per contract there in 2019, allowed people the freedom and the flexibility to continue to grow their local market share. And again, talking about a long-term change in behaviors that we have witnessed in Carriage, that's certainly one of them.

So, Chris and Mel, you need to refer back to the 2018 shareholder letter, which discusses the diagnosis of our low performance and declining trends, as well as some of the challenges we faced. We underwent an update and a reboot of all standards. One significant change was eliminating the average revenue per contract standard, which hindered many of our funeral homes and managing partners from pursuing lower average businesses like cremations, despite the potential for improvement. This change helped us reclaim market share. Earlier this year, we also adjusted the incentives related to margin, and over the past 21 months, we have made substantial changes to the managing partner roles and their support teams. We've brought in a lot of high-performing talent and revised our incentives and performance standards. As a result, many entrepreneurs within our company are now exploring new strategies. By allowing them this freedom, we achieve better buy-in and the positive results we are currently seeing.

Sure, sure. Okay. No, that makes a lot of sense. And I do remember the 2018 letter, that is when my daughter was born in. I think it was the same week.

Yes, I mean this is not - this didn’t happen overnight and we got an incredible group of talented entrepreneurial people in charge of these businesses. I think probably Wall Street doesn't have a great understanding of just how entrepreneurial this business can be at the local level. And they are coming up with ideas of how to grow market share that we couldn't dream up in a million years. I mean, I heard about one business up in Kentucky blew away their community because the family - his favorite holiday was Christmas. So, we had Christmas in June. All place was decorated with Christmas decorations and blew away the community. Well, you can't come up with ideas like this up here in the Pentagon and push it down. But when they come up with ideas like that, word gets around.

Sure. And I guess in the same vein, just on the expense side, obviously it is very helpful for driving the margin improvement. Can you just talk about maybe some of the things that they are - where they are saving the money at the local level to drive the setup?

So, here is what we have noticed. We have noticed. I mean, the business is a very social people business in local communities. And for that reason, you have a lot of older people, maybe retired police chief or school principal as part-timers. And a lot of these mandated restrictions did not allow people over 65 because they were in vulnerable groups in California. And so, they were mandated not to work. A lot of our people were able to get the service done beyond expectations without the same amount of SMB and also our directors support; we are able to support our analytical group without travel and entertainment. So, you had a lot of performance happening without the same degree of cost. And we believe that will lead to, plus you had all the focus on cost management. We believe that will lead to a higher level of total portfolio margin performance in the future.

Okay. And I guess those restrictions, not everything is going to be brought back online is what I guess is kind of what?

Well when your managing partner owns a business and actually what they can do, they are going to do what is best for the business.

Sure. And then just one last question around the acquisition improvement needed on there. And I think it is kind of you said it was ahead of your expectations, what is driving the performance of those acquired assets and maybe performing as well as they are just, something changed from your kind of guidance or wisdom?

How about everything changes? We take a great family franchise and we put our framework on it and support it. A lot of things change and what doesn't change is the local people. But the performance, I mean, we have all these support services we heard from every single business. I don't know how they would have endured this crisis without being part of Carriage. Being part of us turned out to be a blessing and I have heard that over and over from the former owners, from the managing partners. This has been a blessing for some and at the same time, they are turning into great partners. They want to contribute. They see what the standards are. And they don't want to be a weak partner, they want to be a strong partner. So it is sort of win, win.

And Chris, my follow-up is when we talk about these acquisitions, the ones that happen to want to combine, but really Fairfax stands out in the size and scale of that business. We are starting to see, end of the first quarter and here into the second quarter, you really start to see the emergence of the earning power of that business. That has a real big effect on the margins in our acquisition portfolio.

Yes, Lombardo in Buffalo is kicking in. The one that has been the slowest is the one we expected to be because of all the restrictions in Northern California. But it will come around as well.

And I guess, just given the increased cash generation, the ability to kind of reduce your leverage. I know it is early still, but just expectations about maybe when you would step back in the market on the M&A side again. Thanks.

I think it is very important that you do what you say you are going to do. We are going to deliver, next year we are going to pay our debt down fast. That is what we said we were going to do. As we pay it down and refinance, we will have moderate leverage. I have no problem maintaining moderate leverage, but I don't really see us being back in the market before we do what we said we were going to do.

Great. Thanks for taking my questions and good luck in Q2.

Presenters, I'm showing no further questions at this time. I would now like to turn the conference back to Melvin Payne.

Thank you very much. There is one last piece of business I would like to attend to. We want to wish our very best to Bill Goetz. He was here six months. He made a difference. He made a lot of friends. He is a great guy. He was the first one that reached out to me yesterday by fax to congratulate me Carriage on our quarter. And, and I really appreciated that. And I texted him back: Bill, whatever you do, don't sell your Carriage shares. He texted me back: Don't worry Mel, I won't. With that, we will let it go and look forward to reporting our third quarter. Thank you.