Earnings Call Transcript - CSV Q1 2022

Operator, Operator

Good morning, and welcome to the Carriage Services First Quarter 2022 Earnings Call. My name is Anera, and I'll be the operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to Mr. Steve Metzger, Executive Vice President, Chief Administration Officer and General Counsel. Steve, you may begin.

Steve Metzger, Executive Vice President, Chief Administration Officer and General Counsel

Thank you, Anera, and good morning, everyone. Today, we'll be discussing our first quarter results. Our related earnings release was made public yesterday after the market closed. And we've posted the release, including supplemental financial information on the Investors page of our website. This audio conference is being recorded, and an archive will be made available on our website later today. In addition to myself, on the call this morning from management are Mel Payne, Chairman and Chief Executive Officer; Carlos Quezada, President and Chief Operating Officer; and Ben Brink, Executive Vice President and Chief Financial Officer. Today's call will begin with formal remarks from Mel, Carlos, Ben and myself and will be followed by a question-and-answer period. Before we begin, I'd like to remind everyone that during this call, we'll make some forward-looking statements. Any comments made by our management team that state our plans, beliefs, expectations or projections for the future are forward-looking. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include, but are not limited to, all factors identified in our earnings release and in our filings with the SEC, both of which are available on our website. During this call, we'll also discuss certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the appropriate GAAP measures can also be found in our earnings release as well as on our website. Thank you all for joining us this morning. And now I'd like to turn the call over to Carlos.

Mel Payne, Chairman and Chief Executive Officer

Good morning, everyone. We're glad to be here this morning sharing our exciting first quarter performance of 2022. Before we get into it, I would like to express my gratitude to our Carriage family in the field and in our Houston Support Center for their passion and continued pursuit of our Being the Best mission and vision. For today's call, I will start with a summary of our financial performance and will provide an update on operations, sales, marketing and IT. Following my remarks, Steve will give an update on acquisitions. Then Ben will follow with financial updates and I will wrap it up with closing remarks. If you have not read our 2021 shareholder letter and proxy statement, we encourage you to do so. It covers the entrepreneurial spirit of Carriage and our high-performance culture framework in excellent detail. Now the highlights for our record first quarter of 2022. Funeral operating revenue of $70.2 million, an increase of $3.3 million or 4.9%. Funeral field EBITDA of $31.3 million, an increase of $0.96 million or 3.2%. Funeral field EBITDA margin of 44.5%, a decrease of 70 basis points. Cemetery operating revenue of $20.5 million, a decrease of $1 million or 4.9%. Cemetery field EBITDA of $8.6 million, a decrease of $1.2 million or 12.3%. Cemetery field EBITDA margin of 41.8%, a decrease of 360 basis points. For total revenue, we ended up at $98.2 million, an increase of $1.5 million or 1.6%. Total field EBITDA of $45.5 million, a decrease of $0.3 million or 0.07%. And total field EBITDA margin of 46.3%, a decrease of 110 basis points. We believe this stellar performance when compared to the previous record in the first quarter of 2021, which was driven by the spike in the COVID-19 pandemic, reflects the nature of the entrepreneurial spirit of Carriage and the commitment and passion of our managing partners and their teams to win the trust of their guest families and provide a solution to all their needs, which, as a result, increased volumes and market share gains. Achieving what they have accomplished with a significant decrease in COVID-19 in Q1 of this year is nothing short of extraordinary. On the preneed cemetery sales, while we have experienced a lower sales rate in the first quarter of 2022, we're confident that after my promotion to President and CEO, and since the promotion of Shane Pudenz to Vice President of Sales and Marketing on February 12 of this year, Shane has successfully transitioned to his new responsibilities of leading our preneed cemetery sales teams across the portfolio of cemeteries. We will continue to focus on the top four drivers of the high-performance sales plan. Number one, to grow our sales force headcount at both family service and advanced planning by selecting the right partners that can have a seat at the Carriage high-performance culture bus. Number two, develop the skills conceptually through our Knowledge Academy learning platform and hands-on through local sales leadership. Number three, to generate engagement, which means creating opportunities for our sales partners to engage with new families and share the story of the importance and value of preplanning. And number four, to continue to grow sales to our CRM self-edge platform. Currently, we're at an 85% completion rate for implementation and it's becoming how we do sales moving forward, enabling us to manage, track and close new sales opportunities. We're also very excited to welcome Elizabeth Perez-Montes, who joined Carriage as Director of Sales Support, and she is now fully integrated with our portfolio of businesses. Elizabeth comes with years of experience in the death care industry, building, developing and growing sales. She will fill the position left open by Shane's promotion. We welcome Elizabeth to the Carriage team and wish her incredible success. We are very confident that Shane and his team, including Director of Sales Support Elizabeth, Tulio and Greg, will continue executing the high-performance sales plan while instilling the sales behaviors that will lead to sustainable and consistent cemetery preneed sales over time. Moreover, we're ramping up our marketing strategy efforts towards generating new leads which have delivered very positive results. Now moving on to marketing, Alfred White joined Carriage on January 2 of this year. Within four months, he has built a complete marketing department that is now collaborating with managing partners as they work on brand positioning, online presence, social media, content creation, advertisement and much more. Due to the decentralized nature, we know that no one knows better than the local managing partner who knows the community and the families they serve. Alfred's focus will be on creating the tools and making them available on our new content management system so that managing partners can choose which tools will work best for them. The organic growth of marketing requests from the field has exceeded our expectations. He and his team can definitely support managing partners and provide exceptional assistance in developing marketing campaigns and programs that are already delivering increased volume due to customized marketing strategies. We are very excited for Alfred and all of his team, and we know that this journey is just the beginning for the marketing high-performance team. We're also very excited to share that on April 1, Rob Franch joined Carriage as Chief Information Officer. As a new company, we know that technology is an accelerator of high performance. Rob is now leading a complete digital transformation that will indeed accelerate a high-performance flywheel. Rob has hit the ground running and is now on a discovery and learning journey. The details of his digital transformation plan are shown on Page 22 of our 2021 shareholder letter. We wish Rob fantastic success in his new role at Carriage. As most of you know, I have a background in hospitality, and I am very passionate about service excellence and experiences delivered through high-quality services that leave a lasting memorable impression. With this in mind, the last update that I'd like to share with you this morning is related to the enormous opportunity to capture additional market share through the transformation of our service and guest experience standards, which, when combined with the revenue and volume standards, make up 60% of our standard operating model. With this goal in mind, we held our first-ever CAREdge Forum, where we had over 150 of our managing partners and influencers learn and experience service excellence through their five senses. We designed and curated an experience that would inspire our teams with ideas of excellence in service and become creative and innovative in a way that will wow guest families moving forward. To kick off the forum, we partnered with John 'Gucci' Foley, a former solo pilot for the Blue Angels and a top-graded keynote speaker. John's message on living a life of gratitude through his Glad To Be Here Attitude presentation captured everyone's attention and has become how every meeting starts in many of our businesses. He also shared the structure of the high-performance model used by the Blue Angels, which inspired the whole audience to create a culture of commitment, dedication, the pursuit of excellence and high trust. We also collaborated with the Ritz-Carlton Leadership Center to learn about creating a culture of excellence, the art of service, brand service and leadership, all of which align perfectly with Carriage's high-performance culture, our Being The Best mission and vision. The CAREdge Forum was not just an event; it was a transformational experience and a pivotal moment toward the vision of the future of funeral and cemetery services of Carriage. Stay tuned as we work with the Standards Council on our follow-through program on service and guest experience that will create memorable moments for all of our guest families. These are some of the reasons why we're so excited for the future of Carriage, and there is much more to come for both preneed cemetery and funeral homes. But when you combine Carriage's solid financial profile and our acquisition prospects, it is easy for us to say that it's a great time to be at Carriage and the best is yet to come. Thank you, and I will now pass it on to Steve.

Steve Metzger, Executive Vice President, Chief Administration Officer and General Counsel

Thank you, Carlos. So certainly, there's a lot to be excited about as we look at the consistently strong performance we're now seeing broadly throughout our portfolio, how we're positioned with our capital structure and the numerous opportunities for us to continue to improve in a number of areas. Among the opportunities that we're most excited about is growth through acquisition. We highlighted a quote in our earnings release from Warren Buffett's longtime partner, Charlie Munger, regarding Berkshire Hathaway's approach to acquisitions. Charlie pointed out that 'two-thirds of acquisitions don't work. Ours work because we don't try to do acquisitions. We wait for no-brainers.' Well, we can certainly improve our description of Carriage's approach to acquiring businesses by simply pointing to Charlie's and Berkshire's philosophy. While there are always a number of businesses available for acquisition in our industry, we're particularly focused on identifying those no-brainers that represent the best remaining independent funeral homes and cemeteries in the best markets. What has us particularly excited right now is the number of those no-brainers that appear to be ready for a succession plan. The current acquisition pipeline is as active as we've seen in the past couple of years, and we expect that trend to continue. We've never been better positioned for growth, and our team here at Carriage is focused and excited about that future growth, especially as we think about pairing it with the strong performance already occurring throughout the company. We're spending a lot of time on the road, sitting down with owners, learning more about their history, their teams and what is important to them as they look toward the next chapter for their businesses. We then have the opportunity to share with these owners what makes Carriage such a unique succession planning option. We focus on our people, our culture, our 30-year history and our owner-operator model, where the team running the business locally truly gets to run the business. Our support center is just that—a team of talented professionals available to support them and ease their burden. Whether we're announcing new acquisitions or remaining silent for a period of time, you can rest assured that we're continuously working, meeting with candidates, building relationships and looking for those no-brainers before crafting a customized offer and post-acquisition plan based on what is important to that particular owner. It's an approach and a process that requires patience and discipline, one that we know pays off, resulting in a selective portfolio of high-performing businesses in growing markets, as opposed to one made up of strong businesses subsidizing weaker ones. We previously indicated we would be able to share details during the second half of the year surrounding the deals we're currently working on. We're pleased to announce in our earnings release yesterday that we've recently signed a letter of intent with a fantastic business in a high-growth area of Florida. We're also working on several other deals in new strategic markets across the country with businesses that possess great history, a unique owner vision and exciting upside for the years to come. We're truly excited about our future growth prospects and look forward to sharing more details regarding additions to the Carriage family in the upcoming months. With that, I'll turn it over to Ben to provide some more color on our first quarter performance.

Ben Brink, Executive Vice President and Chief Financial Officer

Thank you, Steve, and thank you all for joining us on the call this morning. As we review our first quarter results, I would encourage all current and prospective shareholders to review both the earnings release from yesterday and our recently released 2021 shareholder letter for a much more comprehensive and in-depth look at the transformation that has occurred over the past two years and our vision for the exciting future we have here at Carriage. Now let's dive into the results. For the first quarter, total revenue increased 1.6% to $98.2 million. Adjusted consolidated EBITDA decreased $2.2 million or 6.3% to $32.5 million. Adjusted consolidated EBITDA margin declined 280 basis points to 33.1%, and adjusted diluted earnings per share increased 13.6% to $0.92. Our reported adjusted diluted earnings per share benefited from a year-over-year reduction in our diluted shares outstanding to approximately 16.4 million and the continued decline of our effective GAAP tax rate to 26.5%. Our adjusted free cash flow declined $14.7 million in the first quarter compared to last year, primarily due to a $9 million increase in cash, short-term and long-term incentive payments, a $1.5 million increase in maintenance capital expenditures and a $1 million increase in additional cash taxes paid during the quarter. In our third quarter earnings release and our 2021 shareholder letter, Steve provided comprehensive insight into the increase in the performance incentives that were accrued for in 2021 and paid out in the first quarter of this year. $3 million of this increase was related to our five-year Good to Great incentive award that had been accrued for over the last five years. In 2021, we had 34 managing partners achieve this award by growing their businesses consistently in that five-year period. In the first quarter, they were paid half in cash and half in appreciated Carriage shares. This is certainly the type of high performance that we are happy to continue to reward. Our total debt to adjusted consolidated EBITDA leverage ratio increased to 4.7x compared to 4.5x at year-end due to lower adjusted consolidated EBITDA in the quarter and higher debt balances as a result of executing our share repurchase program. We intend to fund the remaining capital allocation for 2022 primarily through strategic acquisitions with internally generated free cash flow, which will allow us to reduce our leverage ratio to approximately 4.5x by year-end. Additionally, we are working with our banking partners on an amendment to increase the size of our credit facility by $50 million to a total of $250 million, which we will complete within the next two weeks. Our discretionary preneed trust funds had a total positive return of 4.3% in the first quarter compared to a total negative return of 4.6% with the S&P 500 and a negative return of 8.9% for the NASDAQ Composite Index. Our outperformance in the quarter was driven by the performance of our equity portfolio that had a total return of 11.2% in the quarter, which is a 1,580 basis point outperformance compared to the S&P 500. For anyone curious about the current performance of our discretionary trust fund portfolio, I highly encourage you to read our recently released 2021 Shareholder Letter. It provides a tremendous amount of detail about our investing philosophy, our long-term stewardship of these assets, and how we have built the portfolio during and since the depth of the coronavirus market crisis. I would also encourage you to read our earnings press release from yesterday, where we provide more granularity and detail than usual about our current positioning and individual securities that performed well in what has become a very challenging market environment. Since the successful execution of our trust fund repositioning during the depths of the coronavirus market crisis, we have approximately doubled our recurring annual income on the portfolio to $17.7 million while recognizing almost $34 million in long-term capital gains. Over the course of the year, we expect to increase the annual income in the portfolio to over $18 million and realize additional long-term capital gains that will increase the overall total to $40 million. This performance in our trust funds will be incrementally accretive to our reported financial revenue and EBITDA through higher recurring income earned through our cemetery perpetual care trust and higher earnings on our matured preneed funeral and cemetery contracts. During the quarter, we repurchased 490,000 of Carriage shares at an average purchase price of $53.08 for a total spend of approximately $26 million. Since we restarted our share repurchase program in the second quarter of last year, we repurchased approximately 3.4 million shares for an aggregate investment amount of $162.5 million at an average purchase price of $49.60. The 3.4 million shares we repurchased represent approximately a 19% reduction in shares outstanding since May of last year. The $49.60 purchase price represents a nearly 30% discount to the low end of our estimated intrinsic value of Carriage shares at approximately $70. When we take into account the full impact of the 3.4 million shares we repurchased in less than 12 months, our projected year-end GAAP shares outstanding basic is 14.9 million, and our estimated year-end diluted shares outstanding is 16 million. As we outlined in the updated three-year roughly right scenarios in our 2021 Shareholder Letter, we intend to focus the majority of our capital allocation towards selective acquisitions and strategic growth markets. We believe we are only just getting started with the high-performance execution of our strategic acquisition model. We also intend to allocate capital towards internal growth capital projects as we find great opportunities to reinvest in our businesses at high returns on invested capital. For the full year, we expect capital expenditures to be between $20 million and $24 million, split evenly between maintenance and growth CapEx. In our earnings press release from yesterday, we included a three-year roughly right range for operating and financial performance for this year, 2023, and 2024. As a reminder, this is not intended to be a precise forecast of future performance but rather how we view our performance based on 100% allocation of our projected adjusted free cash flow to grow the intrinsic value of Carriage, plus reasonable expectations of continued growth of our current portfolio. The only changes we made to these ranges are a decrease in our expected adjusted free cash flow for this year and a decrease in our projected year-end GAAP diluted shares outstanding to 16 million. Additionally, we are providing an updated rolling four-quarter outlook. The intention of this is to provide current and prospective investors with our best view of our performance over the next 12 months based on our portfolio as it currently stands today, plus any potential acquisitions that we have under letter of intent and expect to close within the next 90 days. We have, therefore, included projected operating and financial performance of one pending acquisition in the following ranges of our rolling four-quarter outlook: Revenue from $380 million to $390 million; adjusted consolidated EBITDA from $128 million to $134 million; adjusted consolidated EBITDA margin from 33.5% to 34.5%; adjusted diluted earnings per share from $3.57 to $3.67; adjusted free cash flow from $82 million to $86 million; and adjusted free cash flow margin from 21.5% to 22.5%. Additionally, we are reaffirming our roughly right range of intrinsic value for Carriage shares of $70 to $80 using the following methodology. The midpoint of our rolling four-quarter outlook of adjusted free cash flow of $84 million is approximately $5.25 per share of free cash flow. If we use the historical free cash flow equity yield range of 7.4% to 6.4%, this would equal a per share range of $71 to $82. Conservatively rounded down, we believe the intrinsic value of Carriage per share is between $70 and $80. With that, I will turn the call over to Mel.

Mel Payne, Chairman and Chief Executive Officer

Thank you, Ben. Thank you, Steve, and thank you, Carlos. When I got home last night, my son was there. He works in Brooklyn, so does our daughter. He's 35 and she's 28, so I'm an older dad. In the early years of Carriage, I started Carriage when I was 48. Our son was five years old, and we had just moved into a new house that I built while turning around companies and other matters. I told my wife, 'Don't get too comfortable in the house; I have to guarantee the debt.' I have to learn the business, and I've written about all this. But also, 'Look, you like raising Preston. I'll see you in about five years. I have to go out there and learn the business.' Well, she would tell you today that this was the biggest lie I ever told. I was gone for 15 or 20 years, and I loved it. Once you started meeting our people, so did she. Our son has grown up in this building process of Carriage. He has attended many meetings, participated in meetings, and met all of our team along the way, even interning here for two different summers many years ago. So they know Carriage. Early on, after the crash of 1999, I would give them shares. They were single-digit shares; probably started below 5%, once they were still in high school and in college. I kept giving them shares, my wife and I. Last night, I asked my son if he read the shareholder letter. He said, 'No, I didn't, Dad. It's probably in my mailbox. I got locked out of my mailbox in my apartment building in Brooklyn.' I asked, 'You got locked out of your mailbox? How are you going to vote your proxy shares?' He said, 'I do that online.' I thought, 'Alright. Would you like to read the shareholder letter because I have a ton of it here? Read the first two pages and then the last five. Even a better idea would be to start at the back. Start at the back and read those five first, beginning with Kristi AhYou.' He knows Kristi. He knows Tim on Pages 41-43. So he read Christy's email to me first, then Tim's, and then the first two pages. I asked him, 'Preston, what do you think?' He said, 'Dad, this should be taught in some advanced school of business and finance.' I replied, 'Preston, that is already happening every day in our home office.' I then asked, 'What would you think if I told you the company you've just read about, you own 1%, and so does your sister. Your mom and I own 9.9%?' He said, 'Dad, that's crazy. That's incredible.' To which I said, 'That's not the best part. The best is yet to come.' With that, I'd like to open it up for questions.

Operator, Operator

Operator's Instructions. And our first question comes from Alex Paris.

Alex Paris, Analyst

Congratulations on a record first quarter, particularly against a really tough comp versus peak COVID last year. I have a few questions. I'd like to start with Funeral Services. Revenues were up 4.9% year-over-year. Margins were lower. They were down a bit. I was wondering if you could give us a little bit more detail on why. I'm assuming perhaps increased marketing expenses, some of these digital initiatives.

Carlos Quezada, President and Chief Operating Officer

Thank you very much, Alex. Thanks for your question. It's truly amazing that our managing partners were able to maintain market gains and market share as they did. We are investing significantly in talent, marketing, and IT platforms, and those investments, we believe, are not going to lower margins. We see them as temporary investments as we continue to achieve even greater growth than we have before, especially after the CareEdge Forum I mentioned in my remarks and wrote about in the release yesterday. So we're not concerned at all; we believe this is part of what it takes to build a great company that will sustainably grow market share gains and volume over time as we transform funeral services into the funeral services of the next century.

Mel Payne, Chairman and Chief Executive Officer

And Alex, this is Mel. When you look at a quarter versus a quarter, you can mislead yourself. You have to look at the margins as they have trended over the last 10 years. I wrote about that in the 2016 Shareholder Letter. We are about 1,200 basis points higher in our funeral portfolio today than we were when this model was introduced and rolled out at the beginning of 2004. It's easy for someone to say, 'Oh, you were down.' But without understanding the business and the different margins in different sized businesses and various markets historically, one could reach a judgment about a decline that is not entirely accurate. Remarkably, total field EBITDA margins are remaining high above 45%. I wrote about this in the shareholder letter compared to the 1990s, noting that our margins are so much greater than anything anyone was achieving back then. The dilemma is that nobody shows you the transparency we do. That can be both good and bad, as it can lead people to reach incorrect conclusions. The key is to have compounded revenue growth and operating leverage over time, rather than focus on immediate guest perceptions. That is essential.

Alex Paris, Analyst

I totally agree, Mel. The market share gains, the year-over-year growth in funeral services revenue, particularly given the tough maintaining, is impressive. I understand investment in talent, marketing, and IT platforms is necessary for future margin enhancement. So that's a healthy reason for a decline in the interim margin year-over-year.

Mel Payne, Chairman and Chief Executive Officer

Yes. I mean, there's a reason why at the beginning of this earnings release or toward the end of my comments I said, 'I don’t remember anything about the first quarter 10 years ago. I don't remember much of anything about any quarter since then.' They were just quarters. The company has dramatically improved in the last 10 years, just as we will improve over the next five and ten. There will be some noise in quarterly results—remember the November 1 of 2018 quarter. The point is that the overall company performance is what matters, and we've documented this transformation. If someone wants to understand the company thoroughly, they need to look at the records and then reach out to the Standards Council or anyone else. We're an open book. The industry is aware of what’s going on; there is buzz. If an investor wants to know, they can find out easily about Carriage. I promise you.

Alex Paris, Analyst

I agree. You provide a lot of transparency, and I appreciate that.

Mel Payne, Chairman and Chief Executive Officer

We also have a great reputation in the industry about who we are and what's going on here compared to anytime in the past. This is not a mystery. If I were an investor, which I am, I'd go kick the tires, visit our businesses, and talk to our people—come to the home office. We invite all to visit. We'll roll out the red carpet. We may even take you to dinner.

Carlos Quezada, President and Chief Operating Officer

The margins were lower year-over-year and revenues were lower as noted in the press release. I wanted to dig into it a little bit more regarding a typical group sale impacting larger sales as potentially an explanation for that lower revenue. Were those particularly large sales a year ago? In terms of developing cemetery inventory, should we expect to better capture these group and larger sales going forward? Absolutely. This is related specifically to Fairfax Memorial Park where we had tremendous sales with large sales, big numbers, exceeding $500,000. Sometimes it takes longer to develop cemetery inventory due to permits. We now have all the necessary permits in place for continued development at Fairfax. We have no concerns, as you well know, integrating Fairfax into Carriage. It initially came to us almost as a virgin cemetery, without products or different inventory options for families which we have since developed over the past year. As we're allocating more capital to our cemeteries, I am confident we'll sustain single or larger sales over time.

Alex Paris, Analyst

Got you. And then my final question will involve Ben and Steve as well. Can you elaborate a little bit more on capital allocation? Share repurchases in the first quarter were $25 million or $26 million, with significant share repurchases over the last year. The press release mentioned that capital allocation is shifting towards M&A. I expected to see this happen a little later in the year, so congrats on the LOI that you've already announced and other comments made on acquisitions. Given you expect to produce $80 million in adjusted free cash flow this year, how should we expect share repurchases and M&A to play out across the year in terms of mix or split?

Ben Brink, Executive Vice President and Chief Financial Officer

Alex, acquisition is currently our highest priority. There's a wealth of opportunity—what Steve mentioned—because deploying capital in that manner is crucial. We will pause share repurchases for the time being to help decrease leverage, pursue favorable acquisitions within solid growing strategic markets. It’s an exciting time here at Carriage from that perspective.

Steve Metzger, Executive Vice President, Chief Administration Officer and General Counsel

I believe Ben hit the nail on the head. We're thrilled with what we observe and how the market looks, so that will be our focus this year.

Mel Payne, Chairman and Chief Executive Officer

This is Mel, Alex. At the moment, I'm enjoying life now with Ben, Steve, and Carlos, as they've been doing an excellent job. As a result, I don't have to worry about day-to-day operations and can allocate my time to higher-end tasks. Today, that primarily involves mentoring them. I love how they're beginning to quote Charlie Munger and Warren Buffett—like Ben and Steve did in the release. It amazed me! Carlos and the team are delving into mental models and various ways of thinking. This is their development program; they meet often and work closely together. The other way I spend my time is in trust funds and acquisitions. At almost 80, I may need a left knee replacement eventually, but I'm in great shape. So getting me out for acquisitions isn't that easy right now, but I'm truly excited about the prospects I've seen and what Steve, Ben, and Carlos are doing in that respect. Regarding potential acquisitions, we see a great buzz in the industry. If Mr. Market considers Carriage shares similar to Rodney Dangerfield, we still have room for share repurchases. If the share price drops dramatically, we will be there. However, we also don’t want to miss the current opportunities because we can realize growth over 5 to 10 years, which compounds incredibly well through a smaller share count base. We're going to balance our approach—being responsive without being reckless.

Barry Mendel, Analyst

A question on the marketing performance team you're creating. What is the goal of that group? What is their focus going to be?

Carlos Quezada, President and Chief Operating Officer

Absolutely, Barry. We never really had a formal marketing department at Carriage; the entrepreneurial spirit within Carriage allowed many partners to operate independently. However, we've decided to put together a team that will accelerate the learning journey of marketing while also providing best practices, tools, ideas, and content to give those managing partners an opportunity to aggressively pursue market gains and build brand positioning across our businesses, both cemetery and funeral. This group's objectives are to formalize support for managing partners—rebuilding websites, enhancing SEO, developing content ideas for social media, and more. It will definitely enable and accelerate those marketing efforts.

Barry Mendel, Analyst

I noticed that preneed contracts were down versus last year, although they increased from the previous quarter. What led to the decrease in revenue year-over-year related to preneed contracts?

Carlos Quezada, President and Chief Operating Officer

Sometimes, those large sales I mentioned, may show up in group forms. For example, you may have a religious organization that buys a package of, say, 100 spaces. This can result in dramatic fluctuations of revenue and interment count. We believe that with Shane Pudenz’s transition into sales and marketing, the emphasis is being placed on the individual sales—one family at a time—protecting preneed will significantly reduce risk and over time, those sales will boost sustainable growth. To clarify, group sales can cause preneed sales to be lumpy on a quarterly basis.

Unidentified Analyst, Analyst

Congrats on the record revenue this quarter. I was wondering if there were any significant concerns voiced by management partners during the CareEdge Forum due to labor market tightness or inflation?

Carlos Quezada, President and Chief Operating Officer

This is Carlos. Through our investor conferences, we've been receiving inquiries regarding the 'Great Resignation.' However, at Carriage, we choose and select carefully the best talent in the industry or outside it that fits within Carriage's culture. Although it may be perceived as becoming more challenging out there, we have not actually experienced that. We are quite selective in who we bring onto our team.

Mel Payne, Chairman and Chief Executive Officer

That’s an excellent question. What we find at Carriage is that if you want to truly understand our managing partners, you can look at the emails in Pages 41-43 of the shareholder letter. They get to own their businesses and have repeatedly proven they can grow them regardless of circumstances. Some longstanding managing partners registered how difficult the past to consider retirement during the pandemic and have since decided it’s a good time to step down. This has enabled us to recruit younger, hungrier talent eager to grow their businesses. We saw a much younger demographic and more females than ever before at the MP Meeting, all exhibiting great enthusiasm. There's excitement amongst newer partners who realize they can own their own businesses and rise to be recognized as top performers, which they are. We have continued positive results; none of the negativity discussed is reflected in our experience.

Unidentified Analyst, Analyst

That sounds promising for the Carriage team. My second question is about the credit facility. How is the management considering whether to reduce outstanding balance or amending borrowing to handle rising rates?

Steve Metzger, Executive Vice President, Chief Administration Officer and General Counsel

At this point, there is a lot of uncertainty in credit markets and rates. In the meantime, our best approach is to increase the credit facility by $50 million to gain a lower rate on some variable exposure. We still have 4.25% senior notes outstanding. The quality and quantity of acquisitions we consider will largely inform our capital structure in the future. Presently, what we plan to fund will come from internally generated free cash flow, affording us strong flexibility.

Operator, Operator

Thank you. I'm not showing any further questions at this time. I'd like to turn the call back over to Mr. Mel Payne for closing remarks.

Mel Payne, Chairman and Chief Executive Officer

Thank you very much. We value your contribution to the call. I want to highlight the similarities between Carriage and Berkshire Hathaway on Page 2 of my shareholder letter. While they rely on an insurance float, we have a preneed float. It's a significant advantage that enhances our capital investment strategy. We face no funding risk or mark-to-market evaluations during downturns like Berkshire Hathaway does. This offers us a competitive edge, and we've mastered this advantage for value creation at Carriage. However, there's one comparison that stands above all others between Carriage and Berkshire Hathaway. Concerning the work that Warren Buffett has stated, he feels like he’s on his back painting the Sistine Chapel. I like it when people admire my painting or share suggestions. But this is my craft, and your evaluations matter not in the larger picture, as the work is ongoing. I share this sentiment within Carriage; over the last 30 years, it has served us well, which I intend to carry forward with my dedication alongside my colleagues. Together, our leadership team consists of dedicated leaders including Carlos, Steve, and Ben. I truly consider myself fortunate to partner with them and many others on this call. Our team’s commitment to improving our performance daily ensures that our company trajectory will remain positive. Many on this call are passionate about their company, and their involvement is truly inspiring. Their hard work ensures the future is bright and continues to flourish. Thank you very much.

Operator, Operator

Thank you. And thank you, ladies and gentlemen. This concludes your call. Thank you for participating. You may now disconnect.