Good morning, and welcome to the SCI Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to SCI Management. Please go ahead. Thank you and good morning. This is Debbie Young. Today, we'll be providing an overview of business results for the third quarter, as well as some thoughts about our outlook for the fourth quarter and for next year as well. As usual, let me quickly go over the safe harbor language before we begin with prepared remarks. 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. Today, we will also discuss certain non-GAAP financial measures, and a reconciliation of these measures to the appropriate GAAP measures can be found in the tables at the end of our earnings release and also on our website under the Investors Webcasts & Events section. With that out of the way, I'll now hand it over to Thomas Ryan, Chairman and CEO, for opening remarks. Hello, everyone, and thank you for joining us on the call today. First of all, I wanna express my heartfelt thanks to our entire SCI team. It is your continued commitment, dedication, and execution that positioned us for the results we posted this quarter. You have continued to stay relentlessly focused on what we do best, helping our at-need client families gain closure and healing through the process of grieving, remembrance, and celebration, and helping our pre-need clients gain peace of mind by securing their final arrangements. This morning, I'm gonna begin my remarks with a high-level overview of the quarter, followed by some further color on our business performance for the quarter, including some detail around our solid funeral and cemetery results. I will provide some year-to-date observations on 2022 that establish a baseline for our preliminary thoughts about 2023. For the third quarter, we generated adjusted earnings per share of $0.68, which outperformed both our internal forecast as well as analyst consensus, compared to $1.16 in the prior year quarter, which benefited from a significant pandemic impact. Most of the anticipated decline in earnings can be attributable to lower operating results on a reduced impact from COVID-19, as well as the decrease in trust fund income from declines in the global equity and fixed income markets. Higher inflationary fixed costs also impacted the quarter's performance. Below the line, the favorable impact of a lower share count offset higher interest expense and a slightly higher tax rate. For a better perspective of this quarter's performance, we delivered earnings per share growth of 84% above a pre-pandemic 2019 third quarter, resulting in an impressive 22% compounded annual growth rate in earnings per share over the 3-year period. While down from the prior year, funeral results were well ahead of our expectations on continued elevated levels of funeral services. On the cemetery side, overall cemetery profits were in line with our expectations. Our pre-need sales production results were very strong and ahead of our expectations. However, those strong results were tempered by lower recognition rates and lower trust fund income. Now, let's take a deeper look into the funeral results for the quarter. As anticipated, total comparable funeral revenues declined against a prior year quarter that benefited from a significant pandemic impact. This decline of $48 million or about 8% over the prior year quarter, includes a $41 million reduction in comparable core funeral revenues. Although comparable core funeral volume declined about 10% compared to the prior year quarter, the 2022 third quarter volume is still over 15% higher than the pre-COVID-19 2019 third quarter, resulting in an impressive 5% compounded annual growth rate over the three-year period. We're continuing to serve elevated levels of client families above and beyond COVID-19 deaths, which is consistent with our commentary around this topic during our Investor Day presentation in May. Our core average revenue per service continued to grow over the prior year quarter by 1.8%. Organic growth for the quarter was an impressive 4.7%. However, it was negatively impacted by a 190 basis point increase in the core cremation rate, a decline in trust fund income, and to a lesser extent, from currency translation in our Canadian operations. From a profit perspective, funeral gross profit decreased $67 million, while the gross profit percentage declined to 19% from 29% in the prior year quarter. The revenue decline due to lower volumes versus 2021 accounted for the preponderance of the profit decline. We also experienced higher than historical increases in employee-related costs, as well as in utilities and fuel due to current inflationary pressures compared to the prior year. Additionally, we're seeing slightly higher technology costs, both from depreciation and maintenance of the highly impactful systems we've developed around our sales and marketing functions over the last several years. Pre-need funeral sales production grew over $6 million or 2% over the third quarter of 2021. Our SCI Direct production was particularly strong, posting an increase of almost 10% over the prior year quarter. Increased contract velocity was generated from leads driven by new targeting strategies for our direct mail and community seminar programs, as well as a shift in focus on digital leads. Now shifting to cemetery. As expected, cemetery revenue also decreased against the COVID-19-affected prior year quarter. However, pre-need cemetery sales production exceeded our expectations. Comparable cemetery revenue decreased $21 million or about 5% in the third quarter. In terms of a breakdown, core revenues were down by $17 million compared to the prior year. At-need revenues accounted for $15 million of this decline, and recognized pre-need accounted for $2 million. Recognized pre-need revenue actually was higher by $6 million before accounting for an $8 million decline in merchandise and service trust income. Other revenue decreased by about $3 million over the prior year quarter as endowment care trust fund income was negatively impacted by changes in capital gains and losses. Pre-need cemetery sales production grew a solid $16 million or 5% in the third quarter. Even more impressive is when you consider we are 67% higher than the third quarter of 2019. Growing pre-need sales production at a 19% compounded annual growth rate over the 3-year period. As we referenced in our Investor Day presentation, we believe we have enhanced our sales and marketing productivity and effectiveness in cemetery sales from learnings achieved during the pandemic. We saw a slight decline in sales velocity that was more than offset by inflationary increases in the core sales average. Large sales have remained robust, growing $10 million over the prior year quarter. Cemetery gross profits in the quarter declined about $41 million, and the gross profit percentage declined to 31% from 38% in the prior year quarter. The profit decline from revenues was further impacted as $12 million of the decline was from trust income, which falls straight to the bottom line. Inflationary pressures drove higher than historical increases in employee and cemetery maintenance costs. We also experienced slightly higher costs associated with technology, such as systems amortization and maintenance costs. As you saw in our earnings release, we increased our 2022 adjusted earnings per share range by $0.20 to $3.60-$3.80, or a midpoint of $3.70. This implies a range of $0.73-$0.93 in the fourth quarter compared to a COVID-19-impacted fourth quarter 2021 of $1.17. You know, a once predictable, very predictable business model was turned upside down beginning in 2020 with the uncertainty around COVID-19, mandatory and voluntary lockdowns, changes in consumer wallets and sentiment. At our Investor Day in May, we made our best attempt to outline for you where we thought we were from an operating platform, what COVID-19 impacts might be, and what to expect going forward. We described a new earnings per share base, which had been established through accelerated learnings and actions taken during the pandemic. The new base was $3.18 per share for 2022, and we communicated that we anticipated an incremental $0.32 of non-recurring impact from COVID-19, for a total guidance midpoint of $3.50 for 2022. Our base assumptions anticipated a pronounced decline in funeral volumes and at-need cemetery revenues as compared to 2021, particularly in the second half of 2022. We projected that these levels would normalize back towards 2019 pre-COVID-19 levels. We also assumed that pre-need cemetery sales levels would be relatively flat to slightly up versus 2021 levels. We anticipated that the Fed would raise rates pretty aggressively, increasing the interest expense on the variable rate debt from our balance sheet. Based on what we've seen over the last five or six months, for 2022, we now believe with higher than we anticipated levels of non-COVID-19 funeral services and at-need cemetery revenues that our original base assumption of $3.18 would be more like $3.50. We believe these excess services are more permanent in nature and are a combination of aging demographics, higher risk, less healthy lifestyles developed during the pandemic, as well as certain geographic market share gains. Pre-need cemetery sales are strong in tracking with what we originally assumed back in May. Unfortunately, we did not anticipate back in May the combined historic downturn in both the equity and fixed income markets that will reduce trust fund income for 2022 by about $0.20 per share. This would result in an earnings per share base of $3.30 for 2022. When you add the non-recurring COVID-19 impact, which increased to $0.40 from the original $0.32 we discussed in May, it results in a 2022 revised midpoint of $3.70. In determining our preliminary guidance for 2023, we utilized the $3.30 earnings per share base, applied our historical earnings per share growth assumptions, factoring in slightly higher interest expense as well as slightly lower trust fund income results in determining our 2023 earnings per share guidance range of $3.45-$3.75 per share. I wanna say thanks to all of my more than 24,000 teammates for all that you do every day for our families. You are what makes this company great. With that, operator, I'll now turn the call over to Eric Tanzberger, our Chief Financial Officer. Thanks, Thomas. Good morning, everybody. Thanks for joining us again. Now, kind of how Thomas just left it off before I really address the quarter, I really wanna first just say thank you to all of our 24,000-plus funeral homes, cemetery, crematory, personal care center associates. You know, these are the associates who make this company go and continue to work tirelessly to take care of what's most important, our client families and our communities. In turn, these are the people that have produced these impressive financial results. We truly appreciate all of your hard work and efforts. Please hear that very clearly. With that said, and getting to the business at hand, kicking off my comments this morning, I'm gonna discuss our cash flow results and capital investments for the quarter and the financial market effects on our trust funds. I'll then provide some comments on our increased cash flow outlook for the balance of this year, 2022, and also give you some preliminary thoughts for 2023 in terms of cash flows. Starting with the quarter, we generated adjusted operating cash flow of $183 million in the third quarter. This was higher than our expectations, but it was about $49 million lower than the prior year, which as we've discussed and know, was heavily impacted in a positive way by the pandemic activity. The decline in cash flow quarter-over-quarter aligned with the $107 million decline in operating income, which excludes gains on divestitures and was somewhat offset by $22 million of lower cash taxes as a result of the lower earnings, as well as about $41 million of favorable working capital in the quarter. This net source of working capital is first related to the timing of preneed cemetery cash receipts from strong sales production during the quarter as compared to the corresponding revenue recognition. Secondly, working capital was favorably impacted by the payment of roughly $21 million in the third quarter of the prior year of deferred payroll taxes as allowed under the CARES Act. Just to refresh your memory, remember that we're able to defer quarterly payroll taxes under this CARES Act, totaling approximately $42 million for the full year of 2020. We repaid the first half of this amount, the $21 million, in the third quarter of last year, and we'll be paying the second remaining $21 million next quarter, the fourth quarter of this year, 2022. Finally, cash interest payments were on target, increasing an expected $5 million due to increases in the balance and interest rate of our floating rate debt. Now shifting to our trust funds. Now, I made some comments about our trust funds last quarter, but I think it bears repeating to make sure everyone understands the impact of the financial markets on our near-term and longer-term cash flows. As we've discussed in the past, the volatility of financial markets influences the market value of our trust funds, but again, has a muted effect on our near-term earnings and cash flows. Given the 10- to 14-year average life of the underlying customer contracts, only about 8% of those contracts in the trust backlog really mature in any given year. Therefore, the effect on the reduction in trust fund market value allocated to each individual contract is reflected in our earnings and cash flows really over a 12-year period or about 8% per year. With that said, let's talk about the balances. We began the year with about $6.5 billion in total trust assets, and currently today, that balance is about $5.6 billion, slightly higher than the $5.3 billion at the end of this quarter that we reported to you. You know, the deposits on the new sales and the withdrawals from the maturities generally have offset each other during the first 9 months of this year. The $900 million change is primarily associated with the change in market value of those trust assets. Again, this reflects the 17.5% decline in trust performance year to date, which has been impacted by historical inflation, the speed of the central bank tightening, and uncertainty in the geopolitical space. This has led to somewhat of a what we call a black swan event, where we have seen 15%-20% declines in both the equity and fixed income markets, which is something we have not seen in at least the last 30 years. This decline in our trust fund asset balances is expected to result in about a $35 million-$40 million cash flow headwind for the full year of 2022, all of which is considered in our increase in our 2022 earnings and cash flow guidance that we talked about this morning and in the press release. With that, next, I'd like to shift gears and touch on corporate G&A expenses, which were $42 million in the current quarter and slightly higher than our expectations due to inflationary salary and wage pressures, as well as some workers' compensation and general liability insurance cost increases. Looking forward to 2023, we expect corporate G&A to trend a little bit higher due to these inflationary labor pressures and be in the ballpark of $38 million-$40 million per quarter. Now I'd like to touch upon our capital investment activity. During the quarter, we invested $382 million into our funeral homes, our cemeteries, new build opportunities, and accretive acquisitions, and we also returned capital to shareholders. Let's talk about the breakdown. First, as it relates to these investments in our businesses. We had $59 million of maintenance capital, which was higher than both our expectations and prior year. During the third quarter, we accelerated our investments in our funeral home and cemetery technology infrastructure, and this really prepares our locations for the utilization of both cusThomaser and non-cusThomaser-facing technology that is currently being developed to create a more contemporary experience for all involved. These costs were also higher due to inflationary cost pressures and supply chain constraints, with the associated hardware being installed at all of these locations. Additionally, we invested $34 million into cemetery development projects during the quarter. This was higher than the prior year, primarily due to the pandemic-related delays experienced last year. It has also trended slightly above our expectations as we continue to replenish inventory to meet the consumer demand following elevated pre-need selling activity as well as future cusThomaser opportunities. Consider the increased investments in technology infrastructure and cemetery development we just discussed. I believe our recurring CapEx will be about $10 million higher for 2022, which was reflected in the updated guidance range that we gave you in the press release. Now shifting to growth capital. We invested $12 million towards the purchase of real estate, construction of new facilities, and expansion of existing funeral home and cemeteries across our footprint. On the acquisition front, we closed two funeral home transactions on the East and West Coasts totaling about $12 million. Subsequent to the quarter, we purchased multiple funeral home and cemetery locations on the West Coast for about $40 million. Our year-to-date spend for acquisitions, including this recently closed transactions, is about $55 million, all of which were done at our usual targeted IRRs. We again remain optimistic about the acquisition pipeline and believe we'll end the year well into our range of $75 million-$125 million. Finally, we continue returning capital to shareholders with nearly $265 million being returned this quarter, which is really about $40 million of dividends and about $225 million towards share repurchases. You know, and on that topic, year-to-date, we have invested close to $590 million. These investments in share repurchases in the first nine months of the year has already exceeded the full-year spend we did in each of the last two full years. These opportunistic investments demonstrate our confidence that we have in this business, in our strategy, and our commitment to returning value to shareholders. Shifting quickly to our financial position. We continue to have a strong balance sheet with a favorable debt maturity profile, robust liquidity of approximately $720 million, which was at the end of the quarter, which consisted of $170 million of cash on hand, plus almost $550 million available on our long-term bank credit facility. Our leverage at the end of the quarter was just above 3x net debt to EBITDA. We will continue over the coming quarters to invest capital in high-return opportunities such as acquisitions, new builds, and the share repurchase program. In addition, our EBITDA is currently normalizing from the prior year that was impacted by the pandemic activity. We expect our leverage ratio at the end of 2022 to be at the low end of our targeted leverage range of 3.5-4x, and we expect to enter that low end of that range in 2023. Now let's just shift to an outlook and talk about the remainder of 2022 and into 2023. In our press release, we increased our guidance for adjusted operating cash flow for the full year by $40 million to a range of $795 million-$835 million or the midpoint of $815 million. This implies a range of $140 million-$180 million in the fourth quarter. We also anticipated continued pressure from rising interest costs on our floating rate debt, which could be $10 million-$12 million cash flow headwind in the fourth quarter, which has also been considered in this updating cash flow guidance. Looking ahead to 2023, we are currently working through our cash flow, our cash taxes, and our working capital models, and we'll give you better guidance more specifically in February, which is what we normally do. I did want to mention a few items this morning to give some direction as it relates to this 2023 cash flow expectations. First, when we think about the adjusted EPS guidance of 2023, which was $3.60 at the midpoint of the range that Thomas just mentioned, this $0.10 difference from 2022 levels is expected to result in about a $20 million net decrease in cash flows for 2023. Included in this $20 million net change is higher EBITDA expected from growth in our cemetery operations that will be more than offset by about $50 million of higher interest costs associated with higher interest rates on our floating rate debt. Additionally, we expect to have a couple of working capital items that could pressure 2023 cash flow really related to strong incentive compensation cash payments, as well as the timing of preneed cemetery cash receipts as compared to the corresponding revenue recognition year-over-year. Remember, these working capital items should be considered temporary for 2023. It would not be expected to affect cash flows in 2024 and beyond on a more normalized level. In closing, thanks for joining us this morning. We're proud of this performance year to date. Our expectations are to now finish 2022 with a very strong fourth quarter. With that, operator, that concludes Thomas and I's prepared remarks, and I'll shift it back to you and open the call up to questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. The first question comes from A.J. Rice of Credit Suisse. Please go ahead. Hi, everybody. Maybe a couple questions, if I could ask, just following up on your final comments there, Eric. You called out some items like incentive comp and the other items that are impacting cash flow, and I know you want to refine those further in the working capital, but can you give us a flavor as to order of magnitude, and why would you consider those to be one time and then revert back in 2024? What's unusual about them in 2023? Yeah, it's a good question, A.J. You know, again, directionally, we'll have to, you know, sharpen the models and such to get you exact numbers in February like we always do. Ultimately, what is occurring is, you know, we've obviously had some very strong performance in 2022. That's gonna revert to cash outflows related to ICP payments across the entire company in February, that would be, you know, close to 2x even the targeted ranges. If you think of working capital, you know, we'll probably be accruing during 2023 on the income statement, you know, at 1x and paying in February an unusually, you know, kind of large payment. That's gonna create that working capital drag, you know, during February. That could then flip again in 2024 to be more normalized. It just depends on the timing of, you know, how we're doing during 2023 and what the accrual looks like on the income statement versus the actual cash flow payment that's gonna be, you know, pretty strong, you know, that's paid in February. You know, the other thing that's really happening is you saw, you know, I mentioned, you know, kind of a $40 million, you know, think of a tailwind or a positive working capital, during this year, and $20 million of that is the CARES Act, which I talked about as payroll. The other $20 million really relates to preneed cemetery. It really has to do with some of the things that Steve Tidwell and Jerry Heard and their teams really did to drive sales at the lower end portion of the spectrum, kind of the entry-level price point and the entry-level cusThomaser that we talked about last quarter. Some of that had to do with cusThomaser incentives. Some of that had to do with lowering down payments. If you don't get 10% down, you're not gonna recognize that revenue. Essentially what I'm saying is we're receiving cash this back half of this year, and the revenue recognition may come next year. There's like this one-time timing difference, where we're gonna have a little bit of a source of working capital at the end of this year, and that will flip to use of working capital as the revenue recognition comes, you know, where a lot of the cash may have come late this year as well. More to come on that. I think that the bonus could be as much as that cash flow working capital could be as much as maybe $30 million, $40 million. I think the working capital flip could be $10 million-$20 million. I'm just kinda directionally giving you know, somewhere in that $50 million ballpark of some working capital that, you know, I think will pop right back up in 2024 and should be considered temporary in nature. Okay, great. Also, just maybe I'll ask, Thomas, you had mentioned this excess death issue, and you don't think it's related to COVID-19 anymore. You know, we're obviously looking at a period where the baby boomers start to hit 80 in 2026. I'm assuming that the step-up in deaths will be a bell curve. It won't be all in one year. There's a big stairstep. Is that what you think you're seeing? Is there something else going on? Is it maybe we just haven't fully normalized? Do you think this is a normalized rate that we can sort of see normal at-need growth from here? Yeah, A.J., the three things that I kind of identified in my comments, the first one was exactly what you said, call it the baby boomers. I do believe we're beginning to see lift as it relates to that demographic, is a component of what's happening. You're right, I think it's more like a bell curve, and we would anticipate that to kind of continue to steadily climb. The second one is probably the trickiest of all, and I mentioned it. I think I called it a, and I get a lot of, you know, pushback on the way we describe this, but I'm gonna call it lifestyle. What I mean by that is we're seeing people being impacted in almost every category of death. We're seeing more deaths from car accidents, more drug overdoses, more suicides, more murders, more cancer deaths. I guess I would say it was the pandemic disruption. What we're kind of coming to conclusion now is, and when does that go away? It's my belief that at some point, you know, society heals itself, and we get better. I don't think that's gonna happen for some time. I think when people are impacted by their mental health or physical health, these trends are hard to reverse quickly. I think we're seeing some of that. To your point, you know, I hope three, four, five years from now will subside a bit, but I don't think it's anytime soon. The last piece that I mentioned that impacts us, we believe, is market share. Again, we try to track that. It's not perfect, but we're seeing in, you know, a variety of markets and probably, you know, particularly where we've got big combo facilities, an increase in our share as we measure it over time. So really three things impacting that I don't think go away over the next couple of years. The only one that at some point, I think, you know, diminishes, is that unhealthy America comment that I've talked about. Okay. Maybe one final question. Obviously, your cemetery production, pre-need production rebounded nicely after a somewhat sluggish second quarter. In the second quarter, you were somewhat cautious about the macro backdrop, maybe affecting some purchasing decisions. Can you say whether that dynamic is still there? Was the increase in production more a function of plots sold, or was it the average price on the plots? Any color on that would be interesting as well. Sure, A.J. as it relates to that, the one area that really was robust and hasn't changed is let's call it the large sale. Large sales are up $10 million year-over-year against a, you know, pretty impacted by pandemic last quarter. That tells us at the high end of the consumer spectrum, it's continuing to shine even with the markets down, which is a little surprising. Again, as you go back to time, I would say high-end sales probably correlate better with housing prices. You know, although we've seen some slowdown, I don't think we're seeing that backtrack yet, so I guess that shouldn't surprise us too much, and we feel really good about it. The thing we were concerned about was for, you know, our other customers, you know, what would happen with selling price and what would happen with velocity. We got some concerns. Eric touched upon this. Our sales leadership team, you know, Steve and Jerry sat down and said, "Our impression from getting feedback was that we have a consumer that when you think about a fixed-income consumer that's you know gonna have to pay over time, what can we do to not have a resistance point as it relates to closing these deals?" They came up with some things about lowering some down payments, some interest price points, and then also identifying inventory that may be a more reasonable transaction for that consumer. We took those three things and said, "We're gonna give you inventory that we can, you know, that we wanna move. Let's finance that for you at a reasonable rate and also give you some relief as it relates to your down payment." By doing that, what we saw is almost flat. It was only slightly down velocity for the third quarter. In the second quarter, we had seen some more disturbing trends. Our belief is that worked really well. What we try to do is we tie those sales to things like, you know, getting automatic payments and things like that again, assure us that we shouldn't see a big dip in cancellations or anything like that. This isn't the first time we've done it. It's just something that I think worked at a moment in time, and we saw it in the third quarter, and I'd say we continue to see it working in the fourth quarter so far. Okay, great. Thanks a lot. The next question comes from Tobey Sommer of Truist. Please go ahead. Thank you. If you could dig into the higher than expected funeral sales and events in the quarter a little bit more. What is the math, if you could refresh us? Because we get questions about the ongoing but lower level of direct COVID-19 deaths and then the other sort of related factors and maybe offshoots of the pandemic that actually drive deaths higher in other categories. Thanks. Sure, Tobey. It kind of builds upon AJ's question, but let me put it in some longer-term perspective on this. If you go back in this industry, and particularly with SCI, year to year, you would see the numbers of deaths probably, you know, in one year, you may be down 1% or 2%, and the next year you're up 1% or 2%. You could predict with pretty good accuracy over a year and over a big footprint like ours, what was probably gonna happen. It's impacted by, you know, seasonal flu. In a heavy flu season with a lot of deaths, you might be up, and then you've got a comparable that's tough, and you might be down slightly. We lived that way forever as an industry. 2020 comes along, COVID-19, you know, game changer, right? We're having to do, at one point, probably 20% more funerals, which is unheard of, you know, in a year versus, let's say, a year or two before. What we're trying to identify is we know what is COVID-19, and we can carve that out, and we believe that's very diminished now and should continue to diminish. What we would have expected is, why wouldn't we go back towards, let's say, a 2019 level? Maybe you get 1% or so growth off 2019. I would expect that. That would be a reasonable level that we think would stabilize. That's kinda, you know, what we anticipated. I guess what I'm telling you to look at the call, that's why we compare back to 2019. What we're telling you is the third quarter this year, we did 15% more calls than we did in the third quarter of 2019. That is not what anybody would have anticipated, and that has just a very de minimis amount of COVID-19 deaths in it. You say, you know, is that sustainable? Well, I don't think 15%, but I guess what I'm telling you is I don't think we're going back to 2019. I think, and the reason for that is there's more baby boomers dying. There's an impact from this, you know, call it unhealthy America concept, which really is the best way to say it is probably we lack access to getting help. That would be, you know, from a, you know, mental health issues as well as physical health issues, going to doctor screenings, you know, diabetes. Many things are dragging. Again, I'd love to believe that we're all gonna get a Jane Fonda tape and go work out tomorrow, and everybody's mentally healthy. But the truth is, it takes time, and these things are long-term issues. That is having an impact. Then finally, you know, I think through this pandemic and because of the way as a company our teams reacted, we gained a lot of favor with our local communities. We gave, you know, identified, made contact with a lot of people. If you think about what we've been doing on the pre-need side as it relates to, you know, leveraging our digital communications with consumers, we're just in a on a higher profile, higher interactive mode that I think has allowed us to gain some share, particularly in certain geographic markets. So I guess what I'm saying is go back to those 2019 levels, we're not going there. We're gonna be, you know, significantly higher, I think trending out from here. That's the big, you know, aha moment that I don't think we anticipated. That was perfect. Thanks. We'll have to go track down a VHS machine to watch that video. Could you kinda double-click on that geographic market share gain? Kind of where is that concentrated, and is there some sustainable sort of momentum behind that in your opinion? I'll generalize, Tobey, because I think, you know, we gain market share in a lot of different places in a lot of different markets. I'd say it's more noticeable in areas we probably saw it more pronounced in the West, more pronounced in places we have combo facilities. I believe some of that really just has to do with the fact when you think about COVID-19. People didn't wanna go inside again, right? We were inviting people to our cemeteries to have a service, and they got to see our beautiful grounds. A lot of consumers, you know, got a glimpse as to what that is. I believe that triggered some identification to say, "Boy, that was beautiful. I like that place. Those people were good. I think you know, our people were able to pivot and serve client families in unique ways and develop relationships, and again, a lot more people were impacted by death over the last two years that really allowed us to shine. You know, we had situations in regions of the country, both California and New York, where we were so inundated with client families that needed help, we ship people from across the country. I think it's extraordinary things like that you know, build your reputation and brand that allowed us in certain markets. I'd say it's a little bit everywhere, but we surely saw it in you know, places like Arizona, Nevada, California, where you have those great weather and outdoor facilities in Texas. you know, we feel very good about our position as it relates to market share. Thank you. If I could sneak in a third question. How big is the high end within pre-need cemetery sales? Could you expand upon that correlation with housing prices to say sort of historically, when you look at that, is it leading, lagging or sort of coincident with changes in prices? I think it's probably lagging is what we've seen before. You know, I'll give you an example about, you know, because I think people forget, a lot of times they think about our company, they think, oh, you know, you're a consumer staple business. No, we're a consumer discretionary as it relates to pre-need, particularly cemetery pre-need. Go back to 2008, 2009, and what happened? We saw in the third quarter of 2008 our comparable sales go down, and it concerned us. In the first quarter of 2009, they stayed down, and it concerned us. In April of 2009, and you'll remember, Tobey, that was the low point was March, our sales were up 10%. Now they weren't large sales. They were cusThomasers taking care of business. What we learned is, you know, our consumer, we're impacted by, you know, the economy, but we're one of the first things people turn back on. They don't buy the big screen TV, but they take care of their family and insurance and these types of deals. What took a longer bit of time back then was large sales really struggled, I think, in 2009 and even into 2010, because that again correlated with my feeling of wealth. There's a little bit of, you know, if I'm particularly at the high end, I'm gonna spend more than $80,000. Boy, the stock market going down 20% doesn't make me feel all that well. But I guess the bigger correlation is, are people buying high-end houses? Because if they're buying high-end houses, they're probably buying high-end cemetery inventory. That could be regional, could be national. That's the way I'd correlate it, and I think it's a slight lag. Again, that could happen. We'll manage through it. You know, large sales have become a significant component of our sales. Our next question comes from Scott Schneeberger of Oppenheimer. Please go ahead. Thanks very much. Good morning. I just wanna stay on the topic of cemetery pre-need sales growth. Yeah, a strong third quarter after a second quarter that wasn't as strong. You all just touched on AJ's question a bit on what you did with the sales force to invigorate in third quarter, and it sounds like you believe that can persist into fourth. Could you delve into that a little bit more? Is this something that can persist in fourth quarter and through next year? Or are these just measures that you're taking that are really more short-term in effect? Thanks. Yes, Scott. Great question. I do think we view these as more of a, you know, temporary assist for the consumer. You know, I think we're just looking out there and getting feedback from the people that are actually interacting with families. What we found is, you know, there was a growing portion of families that said, "I'm interested, but this is a big ask right now. Gasoline prices are going up. My utility is going up. You know, I don't know that I can afford it yet." I think this is a response to say, "Let's find a way to get you what you want." That's really what this was. I view it as economic conditions get better, you know, these are types of things that we won't need to do, and we'd pull back and go back to more traditional. 'Cause you gotta anticipate as you lower, you know, some of these entry points, you're gonna have a little bit higher of a cancellation rate. It's gonna happen. We don't believe it's gonna be significant. We've modeled it, we don't think it's gonna be significant. But you want, again, a satisfied family that gets what they wanted. You're talking about, you know, in these cases, these are sales that are, you know, less than $15,000. It maybe pays over 48 months, 36 months. Finding a way to accommodate a price point that they feel comfortable with, and, that's the real, you know, the endgame. I would tell you that as the economy improves, those are probably things that we would, you know, turn back. Okay. Thanks. Just along those lines, on cemetery pre-need sales growth production, you had anticipated slightly positive for the full year. By my math, you're trending up mid-single digits, which I guess is there any change to that outlook with this final quarter to go? It looks like you should achieve your guidance easily if you are down, say, mid-single digits. Is that what we should be expecting in fourth quarter with maybe some drop off in large value sales and some more drop off in velocity? Just how should we think about that as we end the year? Any commentary you can share about 2023 along the lines of that question. Thanks. I like the optimistic way you think, Scott. I think you're probably right. We wanna get a little further before we, you know, declare victory at the end of 2022. If trends continue, we could be a little higher than you anticipate. We just don't know what we don't know. I think as we think about 2023, we believe that we now will go back to the kinda growth rates you'd anticipate off this new base. The only quarter that I would say there may be a little tough compare if you go back to the first quarter of last year. We had a really great quarter. Again, that was from a COVID-19 perspective, it was heavily impacted, which can generate more leads, and you're probably not gonna have that same level of lead generation. So I think the first quarter is a tough comp, but as we think about 2023, we're gonna grow it. We're probably gonna grow it at, you know, in the low single digits%. If we're lucky, you know, it might be mid-single digits% is the way we think about that. So we think we've, you know, got to this plateau, and we're gonna grow off of it. Very pleased with our sales and ops teams and what they've done for our families and what they've done for SCI. Thanks. Appreciate that. One more I'm gonna sneak in here. M&A. Sounds like you're pretty active here in the fourth quarter. It sounds like you're not at your annual target spend, but think you'll get there. Eric, maybe just some thoughts, comments. Are there some very ripe things in the pipeline? You know, if not here in fourth quarter, will 2023 be perhaps a higher than expected year for M&A? Thank you. Yeah, I think we feel good about it. You know, Scott, it's the same thing I said last quarter. You know, I mentioned a deal that closed that was about $40 million. That was just after quarter end. I thought that would close prior to quarter end. You know, so there's always timings that get accelerated and timings that get pushed by weeks, is how I'm gonna describe it, and that's fine. It's important for us to, you know, work with the sellers as best as we can in those situations. But to answer your question is we still think it's a robust pipeline. We still believe in the guidance that we've given you out there, that $75 million-$125 million, and we feel that we'll end the year being in it. I'm clearly telegraphing to you a good fourth quarter. Thanks. Anything, policy-wise, regulation-wise that would make 2023 different than 2022 on the buy and sell side approach to M&A? Thanks. No. Nothing, nothing that we know about from a policy perspective. Okay. Thanks. I'll turn it over. Thank you. Yep. The next question comes from John Ransom of Raymond James. Please go ahead. Thomas, what you're saying is you haven't looked at a workout video since 1982? Yes. I guess I got caught on that. You know why? 'Cause I make my own videos. I'll send you a few. I might subscribe. I might subscribe to that. Yeah. I'd pay money. Yeah. $8 a month with Elon, you and Elon. Cheaper than Netflix. I know you're not ready to give full guidance on 2023, the range, but could you kind of help us with kind of the low end versus the high end assumptions? Just what's the trust income swing factor you're contemplating kind of full year 2022 versus 2023? Thanks. Sure. I'll start with, you know, kind of the assumptions. You know, as you think through the volumes of next year, we expect to see volumes down, you know, I'd say probably low- to mid-single digits% as it compares to 2022. That that's predominantly probably gonna happen in, again, the first quarter, maybe even some into the second quarter, where you still have a little bit of that, you know, call it COVID-19-impacted numbers. Overall, slightly down, but again, back to that 2019 comparison, well above 2019 trends. On the sales side, as you would expect, you know, we feel really good. We think we're back to, you know, normal growth levels, which would be, you know, we'll call it, you know, mid-single-digit type of growth if you would expect us to be able to do year-over-year. You know, I'd say the other thing to think about, clearly as every company I know of is seeing some wage inflation. We've seen it this year. Again, the way we've tried to manage that is I'll call it, you know, locally managed and assisted, you know, by us, which is saying, if we have wage pressures, let's fix those and get our people right, and then let's find a way to get it back in pricing. Because, again, we're a service business, and if our services cost more, then we will be able to pass those along to our consumers. We've been very pleased with our ability to do that and feel good about, you know, pricing on both sides. You know, the headwinds Eric's already identified. We've got some variable rate debt. It's not a significant component, but variable rate have gone up pretty aggressively. We got to factor that in. To your point, you know, what's really unique about this, you know, if you look, go back in history, we've seen 20% declines in equity markets before, but never combined with a 20% decline in fixed income markets. It's a very, very unique dip down. Trust income's getting, you know, whacked down, if you will. Now, if you look at any other cycle, we would expect that at some point, it may be 2023, it may be 2024, 2025, we accelerate and get some of that back. I don't think we wanna play guess on the timing, but we do, I think we would anticipate 2023 being a favorable year for our trust returns, and that's the way we'll think about 2023 guidance. What's your estimate best guess for trust fund drag this year and for the? Well, I think. For the full year. I think we said this year is, you know, it impacted us by, you know, call it $0.20-$0.25, is the decline year-over-year. For those of you who haven't been around a long time, trust income as a concept is really difficult because when we describe trust income, it's the cumulative income that was on that contract over 10 years. We're always generating trust income. It's just a lower level because of what happened to the market. That's the way we think about it. What would you anticipate for 2023? Well, I'm starting from that lower base, and I also probably have a little bit of indigestion in the early part of 2023 because I didn't, you know, my early contracts of 2022 didn't get impacted by what happened in the third quarter, right, or the second quarter. You're gonna have that unfavorable impact roll out. Maybe think about another, you know, $0.06-$0.07 that could roll into 2023 that's a little bit of a Gotcha. You know, wind in your face. Thank you. Yep. The next question comes from Joanna Gajuk of Bank of America. Please go ahead. Thank you. Thanks for taking the questions here. I guess one follow-up, I guess actually on this last topic in terms of the lower trust fund returns. Is there a way to think about the headwind to the sales average? Like, is this quarter Same store average was, you know, up only 0.6%, for the funeral segment. Is there a way to quantify the headwind there? Yeah. Thank you, Joanna. In my remarks, I'm doing a little bit of this by estimation, so forgive me. You know, we reported a 1.8% in our funeral average. I think what I pointed out on the comments was our actual year-over-year increase was 4.7%. I mean, a pretty robust big beat. Now, what happens is you have a 190 basis point decline in what I'll call burial funerals, right? It's a cremation rate mix change. So that puts, you know, a hundred or so or 150 basis points of pressure on you. The second thing, the trust income, you identified correctly, it's gonna flow through that line item. So that decline in trust income is gonna impact the average. The last one, it really doesn't impact profits very much, but it's worth calling out when I was looking at the results. You know, we do have Canadian operations, and the translation of what's happened with the strength of the US dollar, it puts another, you know, call it, I think it's, you know, $50-$80 pressure on the average that when you translate back into it. We had three things that knocked 47 down to 18. Again, I think those trends will go back the other way. You know, I do think the market will improve at some point. I think the US dollar at some point will, you know, stop rallying against everything else. You know, it was an unusually high cremation rate change. You know, Jay's looking at the numbers and says, if you go back to last year, we had a really small. You know, it was less than 100 basis point change. This is gonna ebb and flow. I don't think anything's changed. We still think 100-120 basis point a year is probably a good way to think about the cremation mix change. Okay. Thank you. Yeah. 'Cause that was my actually second follow-up in terms of the cremation. You view it more as a year-over-year kind of dynamic versus just a change in the market dynamics in terms of people choosing cremations over burials. Exactly. It really kinda ebbs and flows. It was unusual. I think if you looked at, you know, really 2020 and 2021, the cremations, we had a couple of quarters where it actually went the other way. That is again, highly unusual. I guess every hundred-year pandemics disrupt tradition. Sure. Yeah, thank you. If I might just squeeze a different topic here. So on the FTC front, where they issued this Advance Notice of Proposed Rulemaking, were they actually seeking additional comments on how to modify the Funeral Rule? Or there was no specific proposals included there. There was only a long list of questions. What is your sense? You know, does it change anything or the public session that they hosted, does it change your views around, you know, what they might actually consider including or the changes that they might be considering in including here? Also any sense of the timing of when we'll hear back from them on the specific proposal? I'll take that, Joanna Gajuk. Good morning. You know, just to refresh everybody's memory because there's a lot of new people on the call, you know, as well. The initial submission was done two years ago, back in June, and that's public information, and you can go look at, you know, what we submitted in terms of some of those questions on whether the Funeral Rule should continue or not continue. We believe it's working, and we believe it should continue. As part of that, what's important to know is we submitted independent J.D. Power cusThomaser comments and feedback. In fact, we submitted five years of 100,000 per year each. So we submitted 500,000 individual cusThomasers responding to J.D. Power on these topics. To refresh everybody's memory, about 91% of the cusThomasers, you know, rank nine out of ten, you know, or higher in clarity of pricing. Our first message at that point in our submission in June was transparency in pricing exists. Secondly, the high point was probably 75% of the cusThomasers believe our prices, you know, met or were lower than expectations. That's just the groundwork that I want to lay for you. Now fast-forward to October, you know, they have issued the advance notice of proposed rulemaking. They want to keep the FTC Funeral Rule in place, which makes sense. That, as part of that ANPR, advance notice of proposed rulemaking, they've asked 40 questions. It was actually published this morning, believe it or not, in the Federal Register. The 60-day comment period starts today and ends January third. You know, you can go online and see what the questions are, but they're very similar. I mean, really where they're going is should GPLs, the price list be online and what format should they be online and such. You know, the one thing that I guess we would say that we're disappointed in is that, you know, to change a rule and to regulate it, you know, under the codification, you think that you need to have some damage to consumers or something happening. It just appears that, you know, our data that we submitted independently from cusThomasers through J.D. Power, you know, is telling a different story than where they're going, and that's a little bit disappointing. We just simply don't believe that it's a one-size-fits-all commodity. In fact, we think it's the opposite. You know, the funeral business is highly cusThomasized. Celebrations of life are getting even more cusThomasized, and that's where the trend is going, you know, and such. You know, does this solve any problem? It doesn't appear that it does, but we'll simply respond accordingly. Like we have before with data. In terms of the effect of SCI, which is a great question, you know, we've kinda our thoughts haven't changed to what we've said before. You know, we do different things online. We tier our cusThomasers. A lot of our funeral homes are tiered as well in terms of spending. You know, I think we have over 450 plus of our funeral homes online that have starting at type prices. We have premium experiences for our more high-end tiers as well. That's probably another 400 of our funeral homes. We have somewhere between 300-400 GPLs online ourselves. We're already going down this path. The most important thing for us is giving clarity, transparency to our consumers, but most importantly, giving it to them in the form that they want based on the tiers of those individual funeral homes and such, which could be different. Of course, we strongly believe that meeting with them to help cusThomasize their celebration of life is very important. The punch line is, in all of this, we just haven't seen any type of effect that we would consider material. If this ANPR went into effect and it went down that path, you know, I think we've been consistent for a couple years, and fast-forward today, we continue to believe that we just don't think that's a material effect to our business, going forward from an EPS or a cash flow or market share, anything along those lines perspective, Joanna Gajuk. No, I appreciate the comment, and thanks for taking the question. This concludes our question and answer session. I would like to turn the conference back over to SCI management for closing remarks. I wanna thank everybody for being here today. Have a great end of the year. Be careful out there, and we look forward to seeing you next year in February to talk about our full year, 2022, and fourth quarter results. Thanks. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.