Service Corp International (SCI) Q3 2020 Earnings Call Transcript

Good day, ladies and gentlemen, and thank you all for joining this Service Corporation International's Third Quarter 2020 Earnings Conference Call. As a reminder, today's session is being recorded. And with that, I'm pleased to yield the floor to SCI management.

Thank you, and good morning, everyone. This is Debbie Young, Director of Investor Relations for SCI. We welcome you today to our company's review of business results for the third quarter of 2020. Before the prepared remarks, let me remind you that we'll be making some forward-looking statements today. Any comments made by our management team that state our plans, beliefs, expectations or projections for the future are forward-looking statements. 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, those factors identified in our earnings release and in our filings with the SEC that are available on our website. During this call, we will also discuss certain non-GAAP financial measures, such as adjusted EPS, adjusted operating cash flow and free cash flow. A reconciliation of these non-GAAP measures to the appropriate GAAP measures is provided on our website under the Investors' Webcast and Events section, also in our earnings press release and 8-K that were issued yesterday. So with that out of the way, let me pass it on to our Chairman and CEO, Tom Ryan.

Thanks, Debbie, and hello, everyone, and thank you for joining us on the call this morning. On behalf of our entire SCI team, I hope that you and your families are staying safe and healthy and finding ways to make the most of these challenging times. This morning, I'm going to start by giving a little color on our business performance during the quarter. Then I'll provide some commentary on our fourth quarter guidance as well as share some preliminary thoughts on 2021, with the understanding that uncertainty surrounding the effects of the COVID-19 pandemic could change that guidance significantly. Before we get started, let me first say to our entire SCI family and particularly to our front-line associates, thank you so much for your courage and resolve, and for putting the safety of our client families and teammates first. In our funeral homes, personal care centers and cemeteries, you care for our client families and our communities during the most difficult of days through the most difficult of circumstances. You provide our families the opportunity to grieve, remember and celebrate, starting them on the path to healing and closure, which is so important to what we do. So thank you. Our preneed sales counselors have adapted at a record pace to the use of new technologies and social distancing. You made it possible for us to deliver peace of mind to our family who wish to develop plans for their future now. Great job team. If it weren't for the hard work and dedication of our nearly 25,000 associates, none of our success would be possible. When we last spoke in July, we were experiencing elevated deaths from COVID-19, which had resulted in significant growth in our funeral volumes and atneed cemetery revenues for the month of June. Additionally, as gathering restrictions were eased, we experienced unprecedented growth in our preneed cemetery sales production. While we saw those trends continue into July, we expected the impact to subside during the third quarter. Needless to say, we were wrong. These trends continued throughout the entire quarter. Results in both operating segments exceeded our expectations. For the month of October, we continue to see strong year-over-year growth, albeit at slightly lower levels than what we saw during the third quarter. It's a bit awkward and very humbling for us to speak to you today about our financial results for the quarter at a moment in time that has been so sad, so challenging, and filled with so much uncertainty for so many people. Yesterday, we reported earnings per share of $0.79 for the quarter compared to $0.37 per share in the prior year. Both funeral and cemetery segments had margin improvement of over 700 basis points, driven by double-digit top line percentage growth applied against a leaner cost structure. Below the segments, higher general and administrative costs and a higher tax rate were predominantly offset by lower share count and lower interest expense. Let's start with an overview of our funeral operations. Total comparable funeral revenues grew approximately $53 million or nearly 12% during the quarter. Both core and nonfuneral home channels performed very well and were slightly offset by lower general agency revenues caused by a decline in insurance-funded preneed funeral sales production. Core revenues grew $54 million, driven by an 18.5% increase in the number of cases, partially offset by a 3.6% decline in the funeral sales average. While we believe most of the increase in cases is due to the direct impact of COVID-19, the CDC has identified approaching 100,000 excess non-COVID-19 deaths associated with cardiovascular events, diabetes, cancer, suicide, and drug overdoses. We are hearing that the collateral damage effect from restricted mobility, whether government-mandated or behaviorally induced has resulted in deferred or foregone medical care for life-threatening disease screening and limited access to mental health care, potentially contributing to these excess non-COVID deaths. Our discussions with our market leaders support this position. In addition, certain market leaders believe we are gaining market share, particularly in the larger hotspots where our scale can differentiate us from our competition. The 3.6% decline in the funeral sales average was trending positively from the second quarter decline of almost 9%. The cremation mix shift was a moderate 110 basis points and had a minimal impact on the year-over-year decline. The drag on our sales average continues to be a dip in the funeral and cremation cases with a service attached. Pre-COVID, this percentage was about 63%. In April, it dropped to 40% as the restrictions on large gatherings were implemented. This percentage has steadily increased as restrictions have been lifted and has increased to 58% for the month of September. Preneed funeral sales production for the third quarter was down just under 3% versus the prior year, an improvement from the 27% decrease versus the prior year we experienced in the second quarter. Two of our top lead sources for funeral sales production, in-person pre-planning seminars and in-person follow-up visits continue to be down, contributing to the relative decline in preneed funeral sales versus our cemetery sales production efforts. From a profit perspective, funeral gross profit increased $47 million and the gross profit percentage increased 750 basis points to 24%, realizing an 88% incremental margin on our revenue growth. Growth in our high incremental margin core business more than offset a slight decline in our lower-margin revenue streams. We also continue to benefit from the efficient management of labor hours as well as reductions in noncustomer-facing costs in certain marketing and promotional expenses. Now shifting to cemetery. Comparable cemetery revenue increased almost $91 million or nearly 30% in the third quarter. The increase was primarily attributable to core revenue growth of $93 million. At need cemetery revenue accounted for $24 million of this growth, driven by the higher volume from the effects of COVID-19. Recognized preneed revenues accounted for the other $69 million of core revenue growth, mainly due to higher preneed cemetery sales production during the quarter. Preneed cemetery sales production growth was even more pronounced, growing $95 million or 47% in the third quarter. Remember, we recognized $69 million in the quarter. Therefore, we've deferred about $26 million of our preneed cemetery sales production growth from the third quarter into the backlog to be recognized as revenues in future quarters. While we're pleased to deliver $20 million of the sales production growth from large sales, the preponderance of the growth, about $60 million of the $95 million was an increase in core contract velocity of about 35%. This increased sales velocity is driven by a more productive sales force. Higher atneed activity has generated more highly effective leads, which are more easily converted to a sale. Additionally, we are seeing a more receptive consumer in general, meaning we are seeing more of an openness or willingness of the consumer in this COVID environment to have the preneed discussion. We also believe COVID has conditioned our sales force to more aggressively embrace our customer relationship management system like never before, which has resulted in higher levels of sales counselor efficiency and productivity. Finally, we also believe customer and counselor incentives designed to differentially drive cemetery production versus funeral have had a favorable effect on cemetery sales velocity. Cemetery gross profits grew by approximately $55 million and the gross profit percentage increased 740 basis points to 35%. Growth in revenues and strategic cost reductions were somewhat offset by higher selling costs associated with the significant increase in sales production. As you saw in our press release, we provided updated guidance for the total year 2020 for adjusted earnings per share, cash flow and capital expenditure. The ranges are wider than what we typically would give this close to the end of the year due to the uncertainty surrounding the go-forward impact from COVID-19. We base our assumptions on our October results to date as well as models provided by the Institute for Health Metrics and Evaluation that projects future mortality from COVID. Therefore, we would expect to see funeral volume growth and atneed cemetery revenue growth trend in the high single-digit percentage range for the fourth quarter. Assuming that widespread restrictions on gatherings are not reimposed, we would anticipate the funeral average to continue to migrate closer to the prior year average, probably down 1% to 3%. We would expect preneed cemetery sales to continue to grow over the prior year, but at lesser levels than we saw in the third quarter, probably in the high single-digit percentage growth range. As any company begins to think about 2021, the one thing we know for sure is that we don't know. There's never been a less predictable year, at least in my business career. We've run a variety of scenarios, ranging from a minimal impact from COVID, starting at the beginning of 2021 to a scenario which says November '21 looks a lot like November '20. If these models prove correct, the range for adjusted earnings would be $2.25 to a high as $3 per share for the year of 2021. In a scenario where COVID has little to no impact on 2021, we would anticipate funeral volumes to decline in the 12% to 15% range from 2020 levels or a 2% to 5% decline from 2019 levels. We would anticipate that the funeral sales average would be a very favorable comparison for the year, especially in the second quarter as we are already experiencing a bounce back towards pre-COVID spending levels. We would expect the preneed cemetery sales production decline in the low to mid-single-digit percentages as we would be comparing to some pretty difficult comps. Even under this scenario, the effect on our earnings per share from improvements we made in our capital structure, through debt refinancing and share buybacks, combined with our leaner operating structure, would produce an adjusted earnings per share result that would meet or exceed our long-term 8% to 12% growth framework on a compounded basis from our 2019 earnings per share base of $1.90. Our most likely scenario for now is that we might see a continued impact from COVID into the first quarter of 2021, with a lessening effect during the second quarter, trending to a more normalized environment by the end of the year. Under this scenario, the quarterly cadence expectation would be significant growth during the first quarter in funeral volumes as well as preneed cemetery sales, followed by a leveling off in the second quarter as favorable comparisons in April transitioned to a challenging comparison in June, where we experienced excess funeral volume and significant preneed cemetery sales growth in 2020. The third quarter will be the toughest comparison, followed by a more subdued decline in the fourth quarter. So in summary, I am extremely optimistic about our future. Our team has proved their resilience during this extraordinary time. I believe our culture, which was strong before, is even stronger today. I believe our actions taken in response to the COVID crisis and our presence, both physically and digitally, have afforded this selective market share gain. I believe the accelerated use of new technology required to successfully meet customer needs during COVID has provided many advantages. It will benefit our brand perception and customer loyalty. In addition, the adoption of new technology is producing a more effective and efficient sales model as well as a more nimble service delivery platform. We have improved our fortress balance sheet position with our most recent refinancing, further lowering interest costs as well as extending and improving our debt maturity profile. Once again, I'll close with a sincere thanks to our team, not only for a terrific quarter, but for the positive difference that you continue to make in so many lives during the most trying of times. Now I'll turn it over to Eric.

Thanks, Tom. Good morning, everybody. First and most importantly, we hope that everyone is staying safe in these trying times. Our thoughts remain with the families and communities still facing the toughest challenges created by this pandemic. I'd also like to begin my remarks this morning by recognizing our almost 25,000 associates who have worked tirelessly to support our communities as we have navigated this pandemic. The results that we are presenting today directly reflect how our frontline associates have taken on and bravely overcome the obstacles that they face. To them and to all of our associates supporting those on the front line, we are deeply grateful for the professionalism and poise you have shown during these extremely trying times. So with that, I'd now like to transition to providing some additional color on the financial results. First, I'm going to provide an update on the strength of our financial position that is allowing us to succeed and also be opportunistic in this challenging environment, followed by our cash flow results for the quarter, and then I'm going to end like Tom did with some forward-looking thoughts for the remainder of both 2020 and 2021. So let's start with financial position. And as you know, we are fortunate to have a resilient business model with reliable cash flows that are allowing us to weather the uncertainty created by COVID-19. While we entered the pandemic bolstered by a strong financial position and a favorable debt maturity profile, we continue to be very well positioned with a significant amount of liquidity to first invest in our businesses and then to secondly, invest in growth opportunities. Specifically, our liquidity has remained robust at roughly $740 million, consisting of $220 million of cash on hand, plus $520 million available on our long-term bank credit facility. On the much higher EBITDA generated this quarter, we're able to reduce our leverage from 3.79x at June 30 to 3.44x at the end of September as it relates to our trailing 12-month calculation. Now as we look beyond the impacts of this pandemic into the future, we still intend to manage leverage in the range of 3.5 to 4x. So let's talk about cash flow and capital deployment during the quarter. In the face of this pandemic, our businesses performed much better in the quarter than our expectations, which were much lower for many of the reasons Tom mentioned earlier. Ultimately, we're able to generate adjusted operating cash flow results of $195 million during the quarter. When compared to the prior year, adjusted operating cash flow decreased $14 million as cash earnings from the $0.42 of adjusted EPS growth in the quarter was more than offset by $89 million of higher cash tax payments, most of which was timing related, as well as a net use of preneed working capital. So let me walk you through some of these components in a little bit more detail. The increase in cash tax payment I just mentioned of $89 million was partially earnings driven, but also had some timing aspects as we had deferred $47 million of federal and state income tax payments as allowed by the IRS from the second quarter into this the third quarter. We also experienced a net use of working capital, primarily related to the substantial growth in cemetery preneed property sales during the quarter, which grew by 56%. Now recall that preneed property sales generally have immediate revenue recognition as we are able to deliver this property at the time of sale. However, about 70% of these sales are paid to us on an installment basis, primarily over a 3- to 5-year period, and that's what creates this working capital use. So shifting to capital deployment. During the quarter, we deployed a total of $225 million of capital to reinvest in and grow our businesses as well as returning value to our shareholders. Regarding the breakdown, we invested $41 million in the business through maintenance and cemetery development capital spend. While this is lower than the prior year quarter, we have refocused our efforts around these capital projects and expect this spend to ramp up in the fourth quarter. We have deployed another $32 million into growth through acquisitions and new build opportunities. And finally, we returned just over $150 million to shareholders in the form of a dividend and share repurchases during the quarter. So now let's shift to the forward-looking outlook, and let's first talk about 2020. In the first 9 months of 2020, adjusted cash flow from operations has grown $81 million or 17% to almost $560 million. Now recall that we had benefited from about $30 million in deferred payroll taxes as allowed under the current CARES Act. So excluding this deferral, we've grown $51 million or 11% over the prior year. When you look to the remainder of 2020, and as you saw in the press release, we're providing updated adjusted operating cash flow guidance of $740 million to $790 million for the full year of 2020. This is in congruence with the higher adjusted earnings per share ranges given and lower cash interest expected as a result of the recent refinancing activities, which are being offset by anticipated higher cash taxes. So now moving beyond 2020 and beginning to think about 2021. We first acknowledge there are many unknowns and the pandemic continues to be an ever-evolving situation. We have performed extremely well in 2020, and it will be a tough year to repeat. However, we are encouraged by the positive momentum we are currently seeing with preneed sales, expected improvements in the funeral sales average as COVID eventually gets behind us and our leaner cost structure. With all this being said, based on the range of outcomes for adjusted EPS that Tom mentioned, we expect our cash flow in 2021 could similarly range from $550 million to $700 million. There are a few known items impacting 2021 cash flow that are also worth noting. First, we will be required to pay half of the 2020 deferred payroll taxes or $20 million in 2021 and the remainder of that in 2022. Additionally, we'll incur 3 quarters of regular payroll taxes in 2021, which we were able to defer in 2020, which totals about $40 million. These items together collectively create a $60 million headwind to cash flow in '21 when compared to 2020 for payroll taxes. We also expect some cash interest benefits looking into 2021 associated with the third quarter refinancing activities that we just completed. And lastly, we recognize the importance of reinvesting in our business and expect our maintenance capital spending to return closer to pre-COVID levels as we look to the fourth quarter and into '21. I would also anticipate higher cemetery development spending in '21 as we complete some high-return projects that were purposefully deferred earlier from 2020. So then in closing, I'm humbled by the passion and heart of our team members, and I'm extremely proud and thankful to all of them who have continued to prioritize the needs of our client families all while performing these services in a very safe manner. It truly is amazing how much we've accomplished this year in such a challenging environment, and I again thank all of our almost 25,000 associates for these tremendous efforts. So with that, operator, that concludes our prepared remarks. I'd now like to go ahead and turn it over for questions.

We'll hear first from A.J. Rice at Credit Suisse.

When considering the cemetery production trends, it seems much of it can be attributed to ongoing COVID-related sales, as families are purchasing multiple plots due to losses. Can you provide insight on where traditional production might stand? Is there still room for recovery? I assume you're expecting a more typical year next year, which could be a factor in the strength of your guidance.

I believe you are correct. I mentioned several factors that we think are affecting sales. While atneed activity is one aspect, it is certainly not the majority. We see a willingness from consumers to discuss preneed and its importance. Other factors are also influencing this trend; for instance, we are managing the process better with our customer relationship management system. We had restrictions on traveling, which resulted in our sales force driving activity through management processes, proving to be more effective. Looking ahead, we expect that atneed traffic will eventually decrease, which may present year-over-year challenges, particularly from June into the third quarter. However, I believe the consumer's focus on preneed will not disappear quickly; their intention may persist. We are excited about the opportunity to provide peace of mind to families, which is important. The current situation emphasizes that significance. While 2020 will be a tough comparison, we are optimistic about 2021 and the years to come.

The sales per case decline in the third quarter was 3.6%. It seems you believe there will be some improvement in the fourth quarter. Is the situation still mainly due to your operations in Canada and possibly California being worse, given the lockdown conditions compared to other regions? How do you view this as you look toward next year? Do you anticipate any further easing of restrictions in Canada and California, or are you more hopeful about a general improvement across the rest of the country?

We noted improvements in both Canada and California, especially during the latter part of the third quarter. While there are still some differences, they are not significant. Overall, we are observing a normalization across our entire network. People are not hosting larger gatherings as they previously did. Our service attachment rate has changed from 63% to 40% and has now risen back to 58%. When we separate the data, the variable consumer segment is nearly back to its previous level. Although we have seen some improvement in cremation services, a smaller percentage of customers are opting for services alongside cremation, which we believe will also get better. We remain optimistic. However, other factors like decreased catering purchases and fewer ancillary items being bought are apparent. As more areas open up, we anticipate an uptick in those categories and a return to revenue growth.

Okay. Maybe one last question. You mentioned in prepared remarks, Tom, that you think you may be picking up share vis-à-vis local competitors. Just wondering what do you think is driving that as you're better able to handle the COVID situation. Is that what's driving that? Or what do you think is driving that? And do you have any sense of how much of a share shift we might be talking about?

Sure, David. I'll follow up. But I'd like Jay Waring, our Chief Operating Officer is here, and he's had a lot more discussions, I think, with some of our markets. Jay, do you want to share a little insights, and then I'll follow up on the last part of his question.

Yes. One thing we're seeing about this, Tom, is a tremendous focus on safety, tremendous focus on quality, the PPE, with . We actually added a question to our J.D. Power survey, we did that in April, to the families that use us, that ask, 'Did you feel safe and clean at the location when you visit our location?' And over 99.5% of families said yes. So anecdotally, we were in Los Angeles a couple of weeks ago, and the team at Rose Hills said they believe we are gaining share because we have a reputation in our community of safety and cleanliness. They feel comfortable coming here for gatherings and for services as do clergy.

And I'd just add on, A.J., from a digital perspective, we rolled out our Every Detail Remembered campaign, and we're having a much higher digital presence. There's a lot more people flowing through the websites. There's a lot more people on social media. So I think, again, with the scale that we have, with the expertise in that area that we have in the company, we're getting our message out more and more, more effectively. So I think from a physical interaction with the consumer and with a digital interaction with the consumer, our awareness is up, and we feel like we're seeing numbers that are above our expectations, again, both in the hotspot markets and throughout the network.

Our next question will come from John Ransom at Raymond James.

This may be a difficult question, but how should we consider a scenario where next year's volumes are similar to this year's volumes? If we ignore the variable costs, how should we assess the permanent cost structure on a like-for-like basis? Additionally, what costs have you managed to reduce this year?

Certainly, John. I expected that kind of question from you; it's a good one. There’s a lot for us to learn regarding costs. The first point I want to address is the flexibility in our network, which has been a topic you've raised for many years. While I would have said yes before, I now truly understand our capabilities. We've performed exceptionally well, thanks to our talented teams and the tools at our disposal. One insight we've gained is that we weren't optimizing our clustering strategy as well as we could have, leading to situations where we lacked sufficient part-time labor availability. We've actually improved our resource-sharing more than ever, partly out of necessity and partly due to effective local management. This process has taught us to utilize our workforce more efficiently. Additionally, like many organizations, we have a significant travel and entertainment budget for nearly 25,000 employees. We realized that during the absence of these expenses, we managed quite well. While we may still incur these costs in the future, our approach to travel, entertainment, seminars, and marketing has greatly evolved, leading to reduced cost per lead. We have also become more effective in leveraging digital methods, which are less expensive than our traditional lead generation approaches. As we proceed, we have discovered more efficient operational methods. It's worth noting that these improvements were made using existing technology. Currently, we are working on what we call a reimagined project that aims to elevate our use of technology across all service delivery areas. We’ve accelerated our efforts during this crisis to reach our goals more swiftly, which will enhance our efficiency, effectiveness, and agility in serving our clients. There’s a lot of positive news here, and I believe there will be short-term benefits for 2021 and 2022. In the long term, this reimagined initiative will help us optimize our cost structure even further.

So Tom, that was, as usual, a well-crafted answer, but it didn't include any specific numbers. Could you provide a figure to support your response? This is my last question. I bet you excelled at essay questions in high school, but this was a math question.

I just had Jay handle all the math-related answers, but it's difficult to determine an exact figure. However, I believe that if we compare 2021 to the cost structure of 2019, since 2020 is an unusual year, we have identified around $10 million to $20 million in potential savings based on our current operations. I believe we are just starting to explore this area. As I mentioned, once we have the tools with reimagine, we will be able to drive more efficiencies in how we service our clients. So, I think that’s a reasonable estimate to consider at this time.

We'll hear next from Scott Schneeberger at Oppenheimer.

I would like to start by discussing the guidance for the remainder of this year. I understand that it was mentioned there would be high single-digit cemetery premium growth in the fourth quarter, following a 46% increase in the third quarter. This raises some concerns for me, especially considering the market trends you've noted in October. I would appreciate your thoughts on this matter. Additionally, it would be helpful if you could include the recognition trend related to preneed in your response.

Sure, Scott. When considering the cemetery business, there are two factors to keep in mind. First, we're comparing against a relatively easier comparison from the third quarter of last year, especially following a strong fourth quarter. Therefore, the comparisons are different. Secondly, remember that in the second quarter, activities declined significantly in April. This likely contributes to a catch-up effect reflected in the 47%. It's a figure I'm not accustomed to, though I'd like to be. What we're seeing is consumers eager to engage in discussions. You might be correct that high single digits could be a bit conservative. However, I believe it's more aligned with our expectations and observations as we enter October. The two main factors, then, are the catch-up from the second quarter and the comparison issue. Regarding revenue recognition, the fourth quarter usually experiences some spillover due to the timing of projects, so we anticipate catching up on recognizing some of the revenue from the current backlog. This will indicate a change compared to 2021. We're planning to invest about $100 million in cemetery inventory development next year, and that recognition percentage may be even higher.

Okay. I appreciate that. Yes. And then that was going to be my next question and you somewhat answered it. Just how the recognition flows and spills into certainly the first part of 2021 and throughout. I'll move on from that though. As you covered some discussion on use of capital, just curious what the company stance is with regard to M&A in this environment? You talked about differentiating versus peers. We've heard it out in the industry, the technology factor of Service Corp. certainly is a differentiator in this environment. So just curious on M&A and also thoughts with regard to using capital on stock repurchase.

I'll address the first part regarding M&A. We've been consistent in our approach, focusing on the highest relative return opportunities, where M&A excels. I believe we are beginning to see results in the areas we've discussed with investors, particularly by leveraging our scale and technology. I echo Tom's sentiments that we are just starting to realize our potential. Initiatives like the reimagine project are not impacting M&A immediately since they haven't been implemented yet, but they are gaining attention and should enhance our position in the future. When considering M&A for the best after-tax internal rate of return, new builds come next. Our initial steps are always to reinvest in the business through maintenance capital expenditures and cemetery development. Once we are satisfied with our reinvestment, we will look at M&A and new builds. New builds typically yield slightly lower returns than M&A, as it usually takes a few years to generate significant earnings, but they are still successful at low double-digit returns. Regarding dividends, we are committed to maintaining and growing them alongside the company's growth. Share repurchase is a last resort for us. Our approach to shares reflects our belief in their intrinsic value, and we have sometimes paused buybacks or been aggressive, depending on our assessment of returns compared to M&A and new builds. During the pandemic, particularly in the third quarter, we saw share repurchase as a strong opportunity relative to past returns, which is why we proceeded with it. However, I want to emphasize that our first priority is always to reinvest in the business and prioritize higher return opportunities like M&A and new builds.

So just a quick follow-up on that and then one there. On M&A, are there right targets? Or is this an industry that's just incredibly distracted right now, and that's not something that can actually happen right now? Or where is it?

No, it's happening. And I think there's been some disruptions. As you know, that's out there. But I would just characterize it as it's coming to life, and I think we're kind of excited about what we're seeing in terms of the pipeline.

Scott, I'd just add to that. There's a candidate that's got a 39.6% right on capital gains out there. If we went that direction, I do think that's going to motivate a lot of people. So we are poised in writing to Tom if that were to occur.

Yes. Interesting dynamic, Tom. And then lastly, just if you can update on the funeral rule. I'm guessing that's been probably a back burner topic, but I know you check in with FTC on occasion. Just curious what the status is there.

The status has been relatively quiet since our last discussion. The publicly voiced comments regarding the FTC wrapped up around mid-June, which was their deadline. Since the last conference call in late July, I don't have any updates. As you know, the commissioners and staff will review these comments and decide internally on the next steps. If they choose to take further action, it will reset the process and give us some indication of their intentions. We will then have time to submit written responses, and historically there might also be some hearings and in-person meetings involved. Given the current election climate and various global issues, I would be quite surprised if anything happens soon. If there is something imminent, I'm not aware of it. I anticipate that this will only prolong a process that already has a lot of substantial feedback to analyze.

And ladies and gentlemen, that does conclude our question-and-answer session. I will turn it back to SCI management for any additional or closing remarks.

I want to thank everybody for being on the call today. Please stay safe and care for yourselves, and again, make something good out of this strange time. We'll talk to you again on our fourth quarter earnings call, which will be in early February. Thank you so much.

This does conclude today's session. We thank you all for your participation. You may now disconnect your lines, and we hope that you enjoy the rest of your day.