Earnings Call Transcript
CARRIAGE SERVICES INC (CSV)
Earnings Call Transcript - CSV Q4 2021
Operator, Operator
Good day, and welcome to the Carriage Services Fourth Quarter and Full Year 2021 Earnings Call and Shareholder Letter. As a reminder, this call is being recorded. I would now like to turn the call over to Steve Metzger; Executive Vice President, Chief Administrative Officer and General Counsel. You may begin.
Steve Metzger, Executive Vice President, Chief Administrative Officer and General Counsel
Thank you, Michelle, and good morning, everyone. Today, we'll be discussing our fourth quarter and full year results for 2021. Our related earnings release was made public yesterday after the market closed, and we have 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, both 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 Mel.
Mel Payne, Chairman and Chief Executive Officer
Thank you, Steve. Thank you everyone who is on this call today, on a day that Russia has invaded Ukraine, and markets worldwide are crashing. This unusual day stands in stark contrast to all the great news about our company, which is on our 2021 shareholder letter. It went out yesterday afternoon, masquerading as our fourth quarter and full year 2021 earnings release. The shareholder letter was co-written proudly by the other three members of our strategic vision and Principles Group. We will present on this call all the great news about our past, present and future performance. And I'd like to congratulate Carlos Quezada, who was promoted to President effective yesterday. As Chief Operating Officer, I talked about Carlos in this release and what he's done, and he's going to have a lot to say about what he's done since he's been here, but especially what he's doing now, that will have legs and performance into the future. And Ben Brink, who's been here since '09, does a great write-up about our investment portfolio. I think investors would be very intrigued by Ben's personalization of this section. And then, Steve came as our General Counsel and he's learned so much about the business and about our people, about our incentives, about performance and how it all aligns. And so his sections are written in a way that describes the DNA of our company, probably better than I could. And so with that introduction of what I call this dream team, I'd like to turn it over to Carlos.
Carlos Quezada, President and Chief Operating Officer
Thank you, Mel, and good morning, everyone. It's an honor and privilege to be here today and represent all of our team of Carriage employees, across our portfolio of businesses and in our Houston Support Center. I feel humbled by the Carriage family's overwhelming support since I joined the company on June 26, 2020. I will correspond in kind with my added responsibilities. Carriage is a unique and exceptional company that has offered me a platform where creativity and innovation are not just embraced, but encouraged. And when paired with a one-of-a-kind mentor in Mel Payne, it allows for incredible things to happen. Thank you so much for your support, and I will work very hard every day to earn this fantastic opportunity. And speaking of fantastic things, I hope you had a chance to read our earnings release as it tells our 2021 success story in a very compelling way. For today's call, I will share a little bit about the past with our 2021 operational highlights, followed by a quick stop into the present with what is currently happening at Carriage, and I will speak much more about our vision of the future and what is yet to come. Let's start with the tour of the past, where we had a record year in 2021. The following highlights for each segment are the combined results for funeral same-store and acquisition, and separately our combined results for cemetery same-store and acquisition portfolios. I will mention our total operating results. For the entire year of 2021 performance compared to 2020, funeral operating revenue of $253.1 million, an increase of $25.8 million or 11.3%; funeral field EBITDA of $109 million, an increase of $15.5 million or 16.6%; and funeral field EBITDA margin of 43.1%, an increase of 200 basis points. Cemetery operating revenue of $92 million, which reflects an increase of $22.7 million or 32.6%; cemetery field EBITDA of $42.5 million, an increase of $15.9 million or 59.7%; and cemetery field EBITDA margin of 46.2%, an increase of 780 basis points. Financial revenue of $22.9 million, an increase of $3 million or 15.2%; financial field EBITDA of $21.4 million, an increase of $2.8 million or 15.1%, and financial field EBITDA margin of 93.2%, a decrease of 10 basis points. All of that adds up to a total revenue of $375.9 million, an increase of $46.4 million or 14.1%, total field EBITDA of $174.6 million, an increase of $32.7 million or 23%; and total field EBITDA margin of 46.5%, an increase of 340 basis points. Our cemetery results show our 5-year cemetery same-store trend report on our 2021 earnings release, which reflects the inflection point of the high performance transformation, which began with a 5-year plan in 2020, and will continue through 2024. The plan included a new performance-based compensation plan, launched at the beginning of January 2021, at pilot locations, followed by the full integration to our entire Cemetery portfolio throughout 2021. Below are some highlights coming from these cemetery high-performance reformation. For the full year of 2021, our cemetery high performance preneed sales production finished at $52.4 million or 38.5% greater than the entire year of 2020; same-store cemetery preneed property of $35.1 million or 30.9% greater than the year before; total At-need sales of 36.3% or 26.4% over the prior year; total preneed sales of $65 million or $36.4 million over the prior year; and total cemetery sales of $101.3 million or 32.6% over 2020. Our preneed high-performance sales teams had a spectacular year after an already stellar 2020, and did a fantastic job protecting families to preneed property, with a wide range of options for all families, from traditional lots to high-end private memorials. We thank every sales leader and their teams, the very successful sales counselors for their hard work and contributions to our company's success. The good and great news is that our high-performance cemetery plan is not yet complete, and there is much more to come. This record performance was due to the incredible consistency in every revenue segment of our portfolio businesses, and the commitment and consistency of our managing partners, which delivered amazing 2021 results. In our earnings release, Steve covers in detail our Being the Best 1-year and Good to Great 5-year profit-sharing program. However, for many years, we have named every Being the Best and Good to Great winners. While the list for this year is so long that it will take a very long time to name them all. We have 68 businesses and 58 managing partners achieving funeral home standards, which led to an all-time record of 78.5% standards achievement for all of our funeral portfolio, and 86.2% for cemetery portfolio standards achievement, which is also an all-time record. Moreover, our Good to Great 5-year winners consist of 35 businesses and 33 managing partners, an all-time record as well. We'd like to thank our amazing best-of-the-best managing partners and their teams of employees for this incredible high-performance encouraged milestone. Okay. Now let's talk a little about the present. I'm honored to announce that Shane Pudenz is now our new Vice President of Sales & Marketing. Shane has contributed significantly to our self-success, especially in the growth of cemetery preneed sales, having led our CRM across our cemetery portfolio, which we now call SalesEdge. He will focus on building sustainable cemetery preneed sales throughout our portfolio businesses and the Right Who sales leaders, increasing our sales force headcount, deciding cemetery inventory that is appealing to the families that we serve, and developing the skill set of our sales teams. We look forward to seeing Shane's continued success. We have created our first-ever marketing department to support Shane in our entire portfolio of businesses. Alfred White, who joined Carriage on January 3, is our new Director of Marketing. He will be leading our marketing transformation and help our managing partners position their brands to increase market reach, grow customer loyalty, expand social media presence, gain market share, and deliver higher operating and financial performance than ever before. We welcome Alfred to the Carriage Services family. Now, by the vision of the future of Carriage, we will have our first annual managing partner meeting since 2019, as we had to postpone 2020 and 2021 due to the COVID-19 pandemic. This annual meeting, which we're calling CAREdge Forum, will focus on transforming service and guest experience. All of our managing partners across all businesses, high-potential leaders, operational and sales Houston Support Center teams, and special guests, will gather to breathe and be challenged to think differently about service excellence. And while we had a record performance in 2021, we believe that there is a significant opportunity to gain additional market share through highly personalized services and detail-oriented experiences for both our Funeral Home and Cemetery portfolios. Our CAREdge Forum will be a catalyst for further growth, the beginning of a new service and guest experience for all our families, and another step on our Good to Great Journey that never ends. To support this vision even further, we're creating our first-ever Carriage Innovation and Creativity Committee comprised of the best of the best and most creative managing partners in our portfolio of businesses. This talented group will come together to design innovative and creative tools for a thoughtful service chain that other managing partners can use to grow their businesses, creating value for the families they serve, their employees, and Carriage shareholders. We're also very excited to announce that we have recruited our new Chief Information Officer, who will start in April, and whose primary responsibility will be to create a 10-year vision, 5-year strategy and 1-year plan for the complete digital transformation of all of our IT systems. We believe that Carriage can create value by designing, creating and implementing a customer-centric platform that seamlessly integrates with each business customer journey. This innovative and digital transformation will include, but not be limited to, improved digital in situ experience, integration of celebrations of life through technology, a seamless chain of custody, full integration of the back and front office systems, and our first-in-class cybersecurity systems and policies. These technology innovations will automate current redundancies and other processes, optimizing our operations and enabling our teams of passionate field employees to focus their time on what they do best, which is to serve families. We're looking forward to accelerating the successful implementation of this complete digital transformation plan. There is so much going on at Carriage that it is impossible not to be excited about our future. And with so many opportunities ahead of us here with a 2022 theme of higher performance value creation culture, which is in complete alignment with our Being the Best mission and vision, we will always strive to be a little bit better every day, capture every opportunity, and continue our Good to Great Journey, so that we can become the best operator, best consolidator, and best value creator company in the Deathcare industry. In closing, our optimistic view of Carriage and the blue skies ahead is because from the beginning of our transformation at the end of 2018, we have been preparing and becoming better, even under some of the most challenging circumstances over the past two years. Carriage has become a value creation platform for years to come. And for this reason and everything else that we have covered in our 2021 earnings release, I continue to say that this is the best time to be with Carriage, and the best is yet to come. Thank you, and I will turn it over to Steve.
Steve Metzger, Executive Vice President, Chief Administrative Officer and General Counsel
Thank you, Carlos. As it relates to the performance that you just described, a couple of questions that have understandably come up time and again during the past 2 years, have been, first, how do we know the growth in call volume and revenue isn't just related to COVID; and second, how can we be sure that, as deaths related to COVID begin to decrease and normalize, performance won't follow suit. The reality is, nobody in the industry was equipped to answer those questions at the beginning of this pandemic. However, we're now 2 years into living with COVID, and have the benefit of data from which we can begin to make some reasonable, roughly right inferences, surrounding its impact on our business. For example, beginning in December of 2020, we began to capture COVID-related deaths supported by death certificates on our contracts. When we look at total calls from 2019, the last full year prior to the pandemic to 2021, the first full year when reported COVID deaths were captured on our contracts, the data supports a clear story of market share growth. Specifically, among all of our funeral homes and our same-store portfolio, we've seen growth in total call volume of 20.9% from year-end 2019 to year-end 2021. Of that 20.9%, approximately 13.2% is related to reported COVID deaths, meaning, approximately 7.7% of that total growth is not related to COVID. Furthermore, roughly 75% of our businesses in our same-store funeral portfolio have achieved growth beyond COVID of greater than 10%. That's a broad and compelling story of growth beyond COVID, and supports what we've been hearing from our leaders in the field about market share gains over the past several years. And more recently, when we look at our same-store funeral contracts for just last month and compare it to the same month last year, we see an almost identical number of total contracts but an increase of more than 14% in non-COVID related contracts. As further support for this market share growth story, we turned to data published by the CDC related to COVID deaths in the U.S. As reported by the CDC, there were approximately 37,000 fewer COVID-related deaths in the fourth quarter of 2021 as opposed to the fourth quarter of 2020. That's 25% fewer total COVID deaths in the U.S. quarter-over-quarter. During that same comparable timeframe, our total funeral same-store call volume actually increased by more than 300 contracts. So again, despite COVID deaths broadly and substantially decreasing, we continue to see growth in our same-store funeral portfolio. We then looked at our preneed maturity trends to gain some additional insight. Preneed maturity captures when a preneed contract goes At-need and is served. So when our preneed maturity rate goes down, that means we're serving more pure walk-in At-need families than we are preneed families. If the preneed maturity rate goes down and our total contracts go up, it's highly likely we're gaining market share as there are more At-need cases that are being served. Over the past several years, we've seen a steady decrease in our preneed maturity rate, including a significant decrease just last year, despite total calls continuing to increase. This is just additional support that the steady growth we're seeing is likely being impacted by broad market share gains. Now there's no question that COVID has tragically and materially contributed to a number of additional deaths in the past 2 years, and we've been honored to have the privilege to serve many of these families during these challenging times. With that said, we've identified 3 separate and significant data-driven trends that all support market share growth beyond COVID. Any one of these trends is persuasive. But when you look at all 3 together, it becomes a compelling story of the work by our leaders in the field to continue to compete for every call and grow market share. So what's driving this growth over the past few years? At a high level, since September 2018, we've made significant and aggressive changes to talent and leadership. We modified our Standards Operating Model to focus on compounded net revenue growth, and serving cremation families, and we've revamped our unique approach to 1 and 5-year incentive compensation, placing a strong emphasis on margins. These critical changes have combined to help create the high-performance alignment that is now seen in the financial performance Carlos just referenced, and which Ben will cover in more detail shortly. We strongly encourage everyone to read our press release for a deeper explanation of this high-performance alignment, specifically as it relates to what we believe is driving market share growth and performance broadly throughout Carriage, including a discussion surrounding what we are confident is the best pay-for-performance incentive plans in the industry. Our unique operating model, which allows our managing partners to truly lead their businesses as owner operators, combined with those best-in-class 1 and 5-year incentive plans, which we discussed in our release, are just 2 of the key differentiators that we highlight for acquisition candidates who are exploring possible succession plans. As we look forward to the remainder of 2022 and beyond, we continue to be encouraged by the prospects for growth through acquisition. While we don't currently have any transactions to announce, we continue to have advanced discussions with a number of fantastic businesses, and we look forward to welcoming new partners to the Carriage family in 2022. As we've stated before, we remain highly selective in our approach to growth through acquisition, as we continue to build relationships with potential candidates who are looking for a one-of-a-kind customized succession planning option. We are well positioned with our capital structure, performance and available capital allocation opportunities outside of acquisitions, to remain patient and disciplined with our acquisition strategy.
Ben Brink, Executive Vice President and Chief Financial Officer
Thank you, Steve, and thanks to everyone who joined us on the call this morning. Yesterday, we released our fourth quarter and year-end 2021 earnings press release, which turned into a thorough shareholder letter for 2021. It was a collaborative effort involving Mel, Carlos, Steve, myself, and others to not only review our excellent 2021 performance but also to outline our vision for the future. I encourage anyone interested in Carriage to read the shareholder letter to grasp the factors that drove our record performance in 2021 and why we believe our high-performance journey has just begun. For the fourth quarter, total revenue grew by 6.5% to $95.9 million. Adjusted consolidated EBITDA rose by 7.4% to $30.4 million, and the adjusted EBITDA margin increased by 30 basis points to 31.7%. Our adjusted diluted earnings per share climbed by 36.8% to $0.78 per share. For the entire year of 2021, total revenue increased by 14.1% to $335.9 million, with adjusted consolidated EBITDA growing by 21% to $126.2 million. The adjusted EBITDA margin expanded by 200 basis points to 33.6%, and adjusted diluted earnings per share surged by 62.4% to $3.02 per share. In 2021, our adjusted free cash flow rose by 8.1% to $75.7 million, resulting in an adjusted free cash flow margin of 20.1%, down from 21.2% in 2020. Our pro forma adjusted free cash flow, after accounting for the full-year impact of lower interest costs from our senior note refinancing in May 2021, was $79.7 million, maintaining a flat margin at 21.2%. Our total debt to adjusted consolidated EBITDA ratio at year-end stood at 4.5x, compared to 4x at the end of the third quarter and 4.4x at the close of 2020. As of now, our debt to EBITDA ratio is 4.38x. This increase from the third quarter results from executing our share repurchase program in the fourth quarter, during which we repurchased 1.46 million shares for $80.7 million, totaling approximately 2.9 million shares for $142.3 million throughout 2021 at an average price of $49.01. This is 34.7% lower than the $75 per share midpoint of our updated opinion of intrinsic value per Carriage share. The repurchased shares represent a 16% reduction in our outstanding shares since the start of the repurchase program, mainly in the year's second half. This reduction in shares will be accurately reflected in our first quarter results, projecting basic shares of approximately 15.3 million and diluted shares of around 16.5 million, factoring in a $4 million decrease in interest expense and estimated diluted shares of 16.5 million. Our pro forma diluted earnings per share for 2021 is $3.53, which is 17% higher than our reported diluted EPS of $3.02 and signifies an 89% increase compared to 2020. Yesterday, our Board of Directors authorized an additional $75 million for our share repurchase program, raising our total availability to approximately $83 million, or 10% of our current equity market cap. We plan to continue repurchasing shares while balancing this with our other capital allocation priorities, which include strategic acquisitions and high return on invested capital projects. We aim to maintain our total debt to adjusted consolidated EBITDA leverage ratio within a long-term range of 3.6x to 4.4x. Our ongoing growing free cash flow, coupled with our low-cost capital structure, offers us the financial flexibility to invest capital smartly, enhancing Carriage's intrinsic value. The overall return on our discretionary trust fund portfolio in 2021 was 19.3%, compared to 28.7% for the S&P 500 and 12.3% for our high-yield bond benchmark. Our discretionary trust fund portfolio performance continues our history of successful investment since we began managing our preneed trust assets in October 2008. Over the past 13 years, our discretionary preneed trust portfolio has achieved a total annual compound return of 14.3%, against 16% for the S&P 500, a remarkable achievement considering that 60% to 70% of our assets have typically been in fixed income, particularly high-yield bonds. Given recent market conditions, we are confident that our trust fund repositioning strategy has set us up to withstand higher interest rates and inflation, maintaining resilience amid market volatility. Year-to-date, our discretionary trust fund portfolio has declined approximately 2.5%, while the S&P 500 and NASDAQ have dropped by 11.3% and 16.7%, respectively. We anticipate ongoing market volatility from geopolitical tensions, rising interest rates, and inflation. Currently, we hold nearly 8% of our portfolio in cash and remain cautious and strategic with our capital deployment, as we've consistently done with our preneed trust assets. We are pleased to present updated performance ranges for 2022 through 2024. These ranges are not intended as precise forecasts but rather as conceptual guides for our performance under a base capital allocation scenario of 100% of our annual free cash flow. We recognize that attempting to provide exact future projections can often lead to inaccuracies. The base case reflects realistic expectations for organic revenue and EBITDA growth, and we include potential internal growth projects and strategic acquisitions along with share repurchases in 2022 and our current dividend rate. We estimate acquisition activity based on our favorable view of the current landscape for acquisitions and expect to find opportunities for strategic growth in 2022. We have detailed three-year performance scenarios in our shareholder letter. We project total revenue to rise from $375.9 million in 2021 to between $450 million and $460 million in 2024, with adjusted consolidated EBITDA expected to grow from $126.2 million to between $155 million and $160 million. The adjusted EBITDA margin is anticipated to increase from 33.6% to between 34% and 35%, while adjusted diluted EPS is projected to rise from $3.02 in 2021 to between $4.40 and $4.50 in 2024. We aim for adjusted free cash flow to increase from $75.7 million to between $94 million and $100 million by 2024, with a free cash flow margin estimated between 21% and 22%. We expect our debt to EBITDA leverage ratio to remain stable in our targeted range of 3.6x to 4.4x, while overall debt is anticipated to hold steady. Furthermore, our shareholder letter includes potential Carriage share price ranges derived from three valuation methodologies: enterprise value to EBITDA multiple, price to earnings multiple, and our preferred free cash flow equity yield. These methodologies provide insight into potential share prices based on our updated performance scenarios. The midpoint of our 2022 free cash flow range of $84 million corresponds to about $5.09 of free cash flow per share and a current free cash flow equity yield of 10.3%. The high-performance transformation we've witnessed has turned Carriage into a resilient entity capable of generating significant free cash flow, allowing for wise capital investments that enhance our intrinsic value over time. Thus, we find it fitting to determine our intrinsic value with a free cash flow equity yield of 6.4% to 7.4% applied to our 2022 free cash flow midpoint, leading to an equity market cap range of $1.1 billion to $1.3 billion and an intrinsic value estimate of $70 to $80 per Carriage share. To conclude, I'd like to share a few final thoughts from our shareholder letter. The substantial transformation we've undergone at Carriage over the past two years has not only led to heightened organic growth but also improved cemetery sales, profitability, and our financial structure. For any investors interested, I encourage you to review our shareholder letter and explore our Investor Relations website, followed by a visit to our Houston office to better understand the value creation processes at Carriage. You will discover a company that has experienced remarkable transformation and rising performance, driven by a dedicated team committed to our vision and relentless journey towards greatness. Because of this transformation, we are confident that the best is still ahead for Carriage. I will now turn the call over for questions.
Operator, Operator
Our first question comes from Alex Paris with Barrington Research.
Alexander Paris, Analyst
I wanted to offer you my congratulations on the strong finish to the year. And specifically, I'd like to congratulate Carlos on his promotion.
Carlos Quezada, President and Chief Operating Officer
Thank you very much, Alex. I appreciate it. Thank you.
Alexander Paris, Analyst
I found it encouraging that you mentioned an acceleration in December and January despite facing challenging year-over-year comparisons, unlike some competitors who refer to a pull forward of deaths and difficult COVID comparisons in 2022. In the annual letter you published last night, many of my questions were addressed, but I have a few follow-ups. Specifically, in the press release, you mentioned headwinds becoming tailwinds. Could you provide more details on that? I believe you're referring to factors like death rates and the increased appreciation for celebrating life, whether through traditional funeral services or cremations. Additional insights on this would be appreciated.
Mel Payne, Chairman and Chief Executive Officer
Over 30 years after I co-founded this company at the age of 48, my colleagues and I have shared our strategic vision and principles. We have matured as a company. When I started, my background in private placements helped me understand the uniqueness of our approach. I became intrigued by what made some companies in our sector stand out, as only a few truly excelled. In those early days, there was a migration to the suburbs, leading to various multi-store operations like drug stores and department stores. I had the opportunity to analyze loan submissions from private loan production offices nationwide, which taught me a lot about breaking down data by profit division, product line, and gross margins per store. This experience transitioned to Texas Commerce Bank when I moved to Houston, as I wanted a different career path than what Newark offered. Texas Commerce Bank became one of just two AAA banks in five years, alongside JPMorgan, which is now part of JPMorgan Chase. I learned from Ben how to cultivate curiosity and utilize data to build a successful company. Although I was told I could run the bank in five years, I was more interested in turning companies around, a skill I developed over a decade without feeling fulfilled. It wasn't until someone offered me a loan to start my own company, under the condition I entered the funeral home business, that my career truly began. It took me three years to accept that I wanted to dedicate my life to this industry, which has proven challenging to master. Despite facing resistance to high-performance ideas and programs, I found that our strong financial position gives us a competitive edge. The company you see today is rooted in a culture of high performance, operating within the funeral and cemetery industry. That has always been my aspiration – to be the best. We are transparent about our operations, a rarity in our industry, and that commitment pushes us to continually improve. As Carlos and Steve mentioned, we still have more to accomplish. We may not be a large company, but our focus is on excelling in all aspects of our business, including investments and acquisitions. Despite skepticism about trends like cremation, we have thrived for over 30 years, understanding that relying solely on death rates is not enough. The recent pandemic has seemingly increased death rates, creating a long-term shift in demographics. We are now experiencing a reality that many find hard to accept. The focus should be on improving our operations and trusting our teams. Our organic revenue from funerals has remained strong; we have seen increases as noted by Steve. While the media talks about declines, our case counts indicate otherwise. We're optimistic about our future, and I believe we're well-positioned despite any geopolitical issues. It's an exciting time for us.
Alexander Paris, Analyst
It's what I was thinking, but you said it much better coming from you. You did well in the face of headwinds, and it appears that those headwinds are abating and may become a tailwind. So it will help those better performers do even better going forward. So going back to the letter from last night. You've signaled a resumption of acquisition activity. You did 4 big ones in late 2019, early 2020. You've been integrating those acquisitions, you've been restructuring the balance sheet, you've been reducing debt, but you're signaling a return to growth through acquisition, and you're encouraged by the number of acquisition opportunities, and you're in advanced discussions with some. If you look at the allocation of free cash flow using the base case, it looks like the plan for 2022 is split pretty evenly between share repurchases and selected acquisition activity. Am I right in assuming that share repurchases would be more front-end loaded, while acquisition activity will be more back-end loaded in 2022, first off?
Ben Brink, Executive Vice President and Chief Financial Officer
Yes. In our base case projection, we anticipate that 2022 will see more share repurchases in the first part of the year compared to acquisition activity, which we expect to be more concentrated in the latter half. You are correct.
Alexander Paris, Analyst
And then, based on that forecast, 38% of adjusted free cash flow dedicated to acquisitions, $34 million allocated to share repurchases. But with regard to the allocation, what is $32 million by you, in terms of the best remaining independent operators out there? I guess what I'm trying to drive at is, you're going to spend $32 million this year based on that base case; more next year, over $50 million, and closer to $75 million in 2024. I'm just wondering what multiples look like in the group, revenue multiples or EBITDA multiples? What can we hope for in terms of incremental revenue and EBITDA from this acquisition plan?
Steve Metzger, Executive Vice President, Chief Administrative Officer and General Counsel
I think, the way that we view the acquisition strategy, is every business stands on its own in terms of what multiple is applied to it. We have an internal multiple range that we focus on, but we also really get to know the owners and the business, the market, and the potential for growth moving forward. So we often talk about — we're looking for businesses where the best years are in front of them, not behind them. When we find those businesses, we're focused on putting together a customized solution for them. In terms of the $32 million number, it's a placeholder for us. In terms of what it can buy? Obviously, it depends on the size of the business. That really is a placeholder depending on what pops up. We'll be ready, whether that's a little bit less than $32 million or more, to act on the right businesses.
Mel Payne, Chairman and Chief Executive Officer
So Alex, I just wanted to cover your multiple question. A lot of owners have been challenged over the last 2 or 3 years with COVID, of course. The idea of succession planning, just like the notion of death itself, is inevitable, is uppermost on more people's minds today, both in planning for it and dealing with the value of ritual, to celebrate life and much more. You see our average going up because our people are doing a great job; people will pay for it if you deliver the value. The activity should be higher over the next 5 years because of this awareness and succession planning becoming part of a group that makes your company better versus trying to milk it for maximum cash. It's hard to predict quarterly or even semiannually how that activity will ebb and flow, but we do have a strategy, we do have existing relationships and candidates, but they have to be ready. The kinds of businesses that join us now as opposed to the '90s and even some of the periods after that have to be really good franchises. Everybody knows they're good franchises, and the owners know they're good franchises. You don't get to steal any great franchise from an owner; that business is larger and in a great market positioned for a better future than it was over the last 20 years. We'll pay a nice multiple, but over the 5 or 10 years, in the way it's worked is, that multiple will go down because of our ability to grow and integrate into this model. The returns to our shareholders and on the cash we invest will be 15%, and growing after that.
Operator, Operator
Our next question comes from Liam Burke with B. Riley.
Liam Burke, Analyst
In terms of some growth opportunities on a trend basis, how is cremation in terms of contract growth with market penetration and then revenue per contract. Is that still another source of growth for you?
Steve Metzger, Executive Vice President, Chief Administrative Officer and General Counsel
It's a great question. It's something we addressed yesterday. So just at a high level to give you an example. We talk about changing our standards, operating model to really focus on that cremation contract. As the cremation trend increases, we want to get out in front of it and look at it as an opportunity. From year-end 2020 until year-end 2021, the cremation rate increased, right — so from 56.3% to 57.1%. But, even though we saw more cremations during that past year, our average revenue per contract broadly actually went up as well. What that tells us is, our folks in the field are doing a great job at explaining to families, educating families on memorialization options with cremation, and taking advantage of that as an opportunity.
Liam Burke, Analyst
And in terms of underperforming assets, it looks like, Ben, you've sort of run them down. At a macro sense, are you satisfied with your portfolio of assets now? Or are there other candidates that may not meet your return standards?
Ben Brink, Executive Vice President and Chief Financial Officer
We've set out kind of mid-2020 to identify 18 to 20 either businesses or pieces of property that we were looking to divest. To your point, we've done the majority of that. I think we have 2 to 3 more that are still on the list. We expect to get done here this year. Outside of that, I feel really good about where we are with the portfolio, how everybody is performing, and would not look to do any significant divestitures anytime soon. It's a really good, like Mel said, a really good spot to be in.
Mel Payne, Chairman and Chief Executive Officer
Look, this framework of standards, high-performance standards for the Funeral Home and Cemetery is not like we have to guess who becomes a candidate. They become a candidate because they can achieve 50% and then grow it from there to a higher level of standards achievement. That’s not purely a financial thing. For example, Steve covered it very well — just the amazing history of standards achievement after we updated the model in '18 and the incentives in '19 — we have very few below 50% and many, many businesses well above 50%. I think we averaged as a company close to 80% or something like that. If you would have told me that 5 years ago, I would have said that's impossible. But it is possible and it's being done. We get a standard achievement report every month for every business in every region, and that goes on a lead table company-wide. Every managing partner sees where they stand monthly on the lead table. Everybody knows that Carriage is a self-cleaning oven. If you fall down below 50% as a managing partner and you've got a decent business, it's going to clean; the other one is going to throw you out. But we have very little of that now. It's been a wonderful thing to witness how this concept called Standards Operating Model has evolved. You get the right talent. We had a Board meeting yesterday and regional partners, Sean Phillips, Poly Elliott, Carlos; they’re talking about businesses where we top-graded the managing partner who was underperforming probably under 50%. Now it's turned into like — I don’t think investors really understand. In this framework and model, you get an A player and replace a C+ or a B+. That B+ might have looked pretty good back when we had budgets. You get an A-player grower, and literally, it's like you made a new acquisition. Not a small one; one that really is throwing out performance over time. It only takes $240,000 of field EBITDA, and they all know it equals $0.01 a share. So when we call a meter moving, we're talking about EPS meter moving value creators. This is the language. This is the culture. Everybody understands it. It's not a secret backcourt at the Pentagon. It's a wonderful thing to witness, and that's why we invite all of you to come down here and get a closer look or call our Standards Council member. Don't be shy. They'll tell you exactly what's going on.
Operator, Operator
Our next question comes from George Kelly with ROTH Capital Partners.
George Kelly, Analyst
So I think just 2 for you. First, in your prepared remarks, I believe it was Carlos talking about the digital platform and some of the investments you plan to make over the next 10 years. It sounded like that was mostly kind of back office stuff. I'm curious if I heard that right. Where are there the most opportunities for efficiencies? Is this mostly about cost savings? How significant could this opportunity be to put in a better tech platform?
Carlos Quezada, President and Chief Operating Officer
Absolutely, George. Thank you for your question. So it's really not about processes and cost reduction strategies for our technology transformation. It's really about creating a platform that is customer-centric, designed for the purpose of delivering an elevated service and guest experience, enabling those in the field to then focus more of their time serving families and capturing additional market share rather than focusing on manual processes, all the type of things that are just in the way. It is a way to integrate all of the free systems that we have across Carriage, and really maximize that opportunity through technology. The deathcare industry, as we all call it, has a tremendous opportunity for disruption, and we would rather disrupt ourselves than be disrupted by others. This transformation will be a platform for that disruption broadly across our portfolio of businesses as well as our Houston Support Center, and how we help those in the field dedicate more time to what they do best, which is to serve families.
George Kelly, Analyst
Are there 1 or 2 different functions or key places of investment? Can you help me sort of see what it is you're speaking of? What kind of — just if you could boil it down to one place that we could really make us different.
Ben Brink, Executive Vice President and Chief Financial Officer
Sure. Absolutely. Think about the way it usually works. The family has a death. They go into what we call an arrangement conference, and they're going to spend 2.5 hours, 3 hours, going through a process of selections, caskets, services, merchandise, all kinds of things, service arrangements, the chapel, all different things that they want to do. For the most part, most of those selections are recorded manually, and then go and get recorded into a computer. There’s a significant amount of manual process that goes into the back end of those selections to arrange and to get all the details coordinated throughout all the different team members throughout the Funeral Home. By creating a centric customer journey that tackles through technology and facilitates all of that process, automating most of it, and just make the selections easier going into an automated contract, will dramatically change how we serve families, helping them focus more on the grief rather than on the choices they need to make.
Mel Payne, Chairman and Chief Executive Officer
Look, if you want to do one thing that will help you understand what Carriage is all about rather than cost efficiencies and all that which is normal and intuitive — However, what you'll find is that we are the opposite of normal and intuitive. We're counterintuitive and very unorthodox. It's all about what goes on in the business in a very unique market. Like every life is unique, so is every business. You can't cookie-cutter it and you can't map funeral it. If you want to learn a lot about how this works in the technology part, there are 3 or 4 managing partners that Carlos can give you the names of; they will light up your brain and your neurons, and you'll be able to get it, what this digital transformation is going to do for our market share, our compounded revenue growth, and because of the inherent operating leverage at each business rather than cost efficiencies, expanding field EBITDA margins. You will get it. I promise you. They won't buy it.
George Kelly, Analyst
Appreciate it. I'd love to chat with them. So yes, I'll follow up with you after this call. For sure, one, maybe two questions. The second topic I wanted to cover is just the growth. It looks like kind of a high single-digit growth rate that's baked into your roughly right outlook. I'm curious if you could help — how much of that is organic growth? How much of the organic portion — broadly speaking, what are your expectations for volume and pricing?
Ben Brink, Executive Vice President and Chief Financial Officer
George, again, to not get super granular in the weeds of this, that mid to high single-digit revenue growth rate is what we thought about this business long term, for a long time. We're at this point now where it's very real. I kind of break that up into half and half in terms of acquisitions and growth capital that we do versus our — the organic growth of our businesses that we have here. There is certainly — that Steve talked about. We've seen market share trends, growth in that average revenue per contract that we think can continue even if there is some uncertainty about COVID and the death rate in the very short term. If that helps you there.
Mel Payne, Chairman and Chief Executive Officer
So George, just to elaborate a little bit on that. The way we put this together is not top down. This is not me and Ben and Carlos and Steve — well, this is what we should do to be really impressive out there. No. We have every business from the bottom up, looking at what they can do over the next year, maybe because of — it’s not like we don't know what's going on in every business here. We're very flat. I used to say that, between me and every business, there was only one layer. Then I got Carlos. He's the second layer. I think that's a really good layer. We understand what's going on in the trends in each business. This is a bottoms-up collaborative, interactive with our managing partners. They know what their incentives are, both 1 year and 5 year, and the standards, what they have to do to compound revenue and what that means to them. So we take every business, and everyone is different, how it might lay out this year and next year, and we add them all up. Then we come up with some roughly right ranges and how they all consolidate up to us. We try to not overpromise and under-deliver. Ben's got that DNA; don't overpromise and under-deliver. What that does to the price, all investor markets can determine. But that's how that has come about.
Operator, Operator
Our next question comes from Chris McGinnis with Sidoti & Company.
Christopher McGinnis, Analyst
Nice quarter. And congrats on such a strong year. Carlos, also congrats on the promotion. I just want to ask around the standards, incentive you're a lot of time on today — Obviously, a big change following 2018 when you changed the standards. How do you keep that relevant going forward? Do you think about any changes to that just to keep it fresh and updated?
Steve Metzger, Executive Vice President, Chief Administrative Officer and General Counsel
Thank you very much, Chris. There’s always an evolution of the Standards Operating Model. There were some changes at the end of 2018 when Mel took over as CEO of the company again, and there were some small changes in 2019. We just had our Standards Council meeting last January, a few weeks back, and we also made some small changes to make those adaptations, if you will, or iterations to whatever standards we need to tweak, as time goes by, as we continue through this evolutionary process of organic growth and also new growth through acquisition on both Funeral and Cemetery. It sometimes needs those little changes and many things. One thing that I want to mention, for example, is the weight on our service and guest experience, which is right now is at 10% out of 100. As I mentioned on the earnings release, after our CAREdge Forum, with all our managing partners from all businesses get together and they experience a different way to look at service and guest experience, the Standards Council will reconvene to evaluate whether the weighting on that standard shooter should not change. It is a continuous process of evaluating where we are, what needs to change, and based on where we're going in adapting to those changes in that environment.
Operator, Operator
There are no further questions. I'd like to turn the call back over to Mel Payne for any closing remarks.
Mel Payne, Chairman and Chief Executive Officer
Thank you very much. I'd like to close with a profound email I got yesterday during our Board meeting from one of our Standards Council members. Her name is Christy Ihu, and she's been on our council since the end of '18, when she reached out and said, how can I help? And has she ever helped! I won't read all of it, but I will read a part of it, because I think it seems a message about who our company is and may clear up some of the confusion about why we are the way we are and why we're getting the high-performance results that we are. And now this is her email to me. I had heard of this quote many times since mostly from you and from reading the book a few times. Greatness is not a matter of circumstance. Greatness, it turns out, is a matter of conscious choice. It is truly a matter of choosing to be more and then willing to go to the edge and jump off. I made that choice when I decided to accept a position as a managing partner of a brand-new acquisition with Carriage Services. Then she stated that I just happened to have worked at while attending mortuary college. You have stated in your last shareholder letter, quote, 'We have learned at Carriage that if you don't focus intensely 100% of the time on getting your people right to enact with families who have just lost a loved one, your client families will never come first.' Then this is her statement about my quote. There is no truer statement. That's because you won't have the right people engaging your client families and learning about the life of their deceased loved one, in order to recommend high-value emotional ideas and options about how best to honor and memorialize the life of their loved one. As you know, Mel, I had my own unique experience serving as the managing partner of my business and as a client family simultaneously. My adult son passed away, and I needed to make funeral arrangements. That is when I knew that my focus of 100% getting the Right Who on board mattered. I trusted everyone on our team at Franklin & Downs to care for my son, our family and me. They all jumped into action by putting their own lives aside to ensure that my family —the client family received every detail of what I needed to pay tribute to my combat veteran son. That is because of you, Mel. You have set a path for all of us to follow. Let me tell you, it matters and has made a difference. I'm continually amazed at the truth in all of this. I read Christi Ihu's email, and I think it gives all of you some idea of what you can learn about our company if you simply go to the people who know at best, our Standards Council members. We have 11. You will not be disappointed in what you find out. What you read in the shareholder letter, all 38 pages of it, will make a whole lot more sense. Thank you for calling in on such a crazy day in the world.
Operator, Operator
This concludes the program. You may now disconnect. Everyone, have a great day.