Park Lawn Corporation (PRRWF) CEO Bradley Green on Q2 2022 Results - Earnings Call Transcript

Park Lawn Corporation (OTCPK:PRRWF) Q2 2022 Results Conference Call August 12, 2022 9:30 AM ET

Company Participants

Jennifer Hay - General Counsel

Bradley Green - Chief Executive Officer

Daniel Millett - Chief Financial Officer

Conference Call Participants

Irene Nattel - RBC Capital Markets

George Doumet - Scotiabank

Scott Fromson - CIBC

Maggie MacDougall - Stifel

Kyle McPhee - Cormark Securities

Zachary Evershed - National Bank Financial

Daryl Young - TD Securities

Operator

Good morning, ladies and gentlemen and welcome to the Park Lawn Corporation Second Quarter 2022 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Jennifer Hay, General Counsel.

Jennifer Hay

Thank you [Ali] and good morning. Thank you for joining us on today’s second quarter 2022 earnings call. Today’s call is being recorded and a replay will be available after the call is completed. Please be aware that certain information discussed today is Forward-Looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please see our public filings for more information regarding Forward-Looking Statements.

During the call, we will reference non-IFRS financial measures. Although, we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see our public filing for additional information regarding our non-IFRS financial measures, including for reconciliations to the nearest IFRS measures.

I will now hand the call over to Park Lawn’s CEO, Brad Green, to open our discussion today.

Bradley Green

Thank you, Jennifer, and good morning, everyone. In addition to Jennifer, with me on the call today is our CFO, Dan Millet. During the second quarter of this year, there was a decline in year-over-year mortality which contributed to a difficult comparison to last year’s COVID impacted second quarter. From a high level, while our funeral homes were not as heavily impacted, we did see some challenges in our cemetery businesses.

Specifically, our revenue for the second quarter increased 5.4% to $75.9 million, but was negatively impacted as a result of the decrease in high margin property sales at certain of our legacy cemetery businesses.

Breaking this down a bit more in our funeral businesses, we were pleased to see an increase in our market share and many of the communities we serve, and a strong demand and our average revenue per call.

Our call volumes from comparable operations decreased approximately 3% year-over-year due to the drop in the death rate and we experienced an increase in a cremation rate of 163 basis points.

Despite these circumstances as a partial offset, we were able to deliver an increase of approximately 2% in average revenue per call for our comparable funeral operations year-over-year.

We believe that this increase in average revenue per call can be attributed to a few different factors including the fact that we are still seeing families with a strong desire to memorialize and celebrate their loved ones with enhanced services and merchandise.

Also throughout the quarter, we work to implement pricing adjustments where appropriate to help combat some of these impacts of inflation, such as increased labor and fuel expenses. Looking to our cemeteries are comparable cemetery property sales decreased approximately 4.3 million year-over-year.

The majority of this decrease was isolated in a couple of our legacy businesses and to be more specific, a few properties within those businesses. While some of this decrease is directly attributable to the fact that larger cemetery sales are highly variable from quarter-to-quarter.

We recognize that we could have done a better job in working to close more of these sales during the quarter, especially when dealing with a more distracted consumer than we saw during the pandemic. Finally, while our at-need in term were more in-line with the national mortality decreases, this decrease in at need customers also had an impact on our cemetery sales as well.

While there was some catch-up in merchandise sales in Q2 2022 as previously ordered merchandise made its way to our cemeteries and was delivered and installed. We continue to experience delays in post sales supply chain and in some instances a further lengthening of lead times.

As we continue to grow our Company, the impact of any one business will continue to become more muted. Our acquired operations continue to perform at a high level and meaningfully improve the overall quality and caliber of our portfolio.

And as we continue our operational focus in the acquisition process even during these downturns, we have been able to maintain strong momentum and a robust pipeline. And we fully expect to execute within our publicly-stated range of $75 million to $125 million for acquisitions this year.

In-line with these expectations during the second quarter, we closed the previously announced Chancellor acquisition in Mississippi and the Hudson Funeral Home acquisition in North Carolina, both of which are premier firms and strategic to our footprint in each of these two respective markets.

Subsequent to the quarter, we also entered a new high growth market in Virginia, with the closing of Ferris Funeral Service, which has over 70-years of dedicated and compassionate service to its community.

This business consisting of a standalone funeral home and on-site funeral home and crematory combination, operationally fits together well with our existing Tennessee and North Carolina businesses.

Last week, we also announced that we have entered into a definitive agreement to acquire Shackleford Directors. Shackleford is a large group of businesses in Western Tennessee consisting of eight standalone funeral homes, two stand alone cemetery and an on-site funeral home and cemetery location. Shackleford, like many of our other acquisitions, is a highly sought after business not only for its size, but its excellent reputation in history and the community it serves.

Finally, on the organic growth front, last week we also announced that the Westminster Funeral Visitation and Reception Centre in Toronto has now been completed and is open to serve families in the Greater Toronto area.

I would now like to turn the call over to Dan, who will review our Q2 financial results in more detail.

Daniel Millett

Thank you, Brad, and good morning, everyone. You will find a detailed breakdown of our second quarter results in our financial statements and MD&A, which are available on our website and on SEDAR.

Today my comments this morning will focus on the operating results from the second quarter 2022 relative to Q2 2021. This year remains a difficult year in comparison to 2021 as last year continued to experience the effects of the COVID pandemic.

While our revenue increased from $72 million dollars to $75.9 million, our call volumes fell as the mortality rate decreased. Revenue growth from high-quality acquisitions was offset by slight revenue decreases in our funeral home businesses from the aforementioned decrease in call volumes, but decreases in high margin at-need and pre-need property sales had a larger impact.

In addition, the Company’s operating expenses including general and administrative, advertising and selling and maintenance expenses increased by approximately $5.8 million dollars for the 3 month period ended June 30, 2022 over the same period in 2021. While this increase was primarily the result of acquired operations, other cost increases and the timing of certain costs impacted margins.

As the spring is a very busy time at our cemetery properties, due to maintenance and several well attended holidays, the inflationary cost of labor was experienced and related additional contract labor was needed due to the availability of staff.

Other inflationary costs also impacted the business, but to a lesser degree. Increases in costs such as fuel, utility and travel costs we are experiencing as well as the timing of circuit costs also decreased margins for the quarter.

Ultimately, these items and other income kept net earnings flat for Q2 2022 achieving approximately $5.81 million compared to $5.81 million last year. The net earnings per share decreased from $0.19.2 per share to $0.16.7 per share for Q2 2022.

Furthermore, the adjusted net earnings attributable to PLC shareholders for the second quarter of this year was approximately $6.6 million or $0.19 per share, compared to $8.8 million dollars or $0.29.1 per share in Q2 2021.

Turning to the balance sheet, at June 30^th, we had approximately $90 million drawn on our revolving credit facility, other debt of approximately $12.1 million, finance leases of approximately $5.8 million and cash on hand of approximately $21 million.

Excluding our debentures our net debt was approximately $86.9 million as at June 30, 2022. We continue to be conservatively levered, and at the end of June, our leverage ratio was approximately 1.09 times based on the terms of our credit facility, and approximately 1.95 times including our outstanding debentures.

As previously indicated, as we move through the upcoming quarters and continue to expand our business through the acquisition activity and organic growth opportunities we expect the leverage ratio to gradually increase.

After acquisition that closed and were announced subsequent to quarter end, we estimate our current liquidity is in excess of $125 million, which is readily available to be deployed and ongoing in future organic and acquisition growth opportunities.

Finally, as we announced yesterday, we have received approval from the TSX, establishing a normal course issuer. Over the next 12-months, Park Lawn can acquire up to 3.4 million common shares.

This NCIB will allow us to take advantage of any dislocation in our share price and our expectation of fair value, provide EPS accretion, and generate positive returns for Park Lawn over time. We believe it is important to be flexible and generate higher returns for multiple areas of investment and believe the initiation of an NCIB at this time is prudent capital management.

Before I turn it back to Brad for some closing comments, back in July, we announced that we are hosting an Investor Day on September 29^th, in Nashville, Tennessee. Over the past three-years, we have experienced exceptional growth in Tennessee and think it is the perfect venue to share further insight into our business and operations, as well as allow stakeholders to meet various members of the Park Lawn team, including former owners who we are proud to have had partner with us. To register to join us in person, please go to our website and look for the Investor Day link.

Please note that we have reserved a limited number of hotel rooms subject to preferred pricing. And this block is only available until August 26^th. We are very excited to be putting on this insightful and fun event and we hope we can see you all there.

I will now turn it back to Brad for those closing comments.

Bradley Green

Thanks, Dan. While this second quarter was a difficult comparison, it was further complicated by our current economic environment. Our year-over-year results were driven in large part by the inconsistent nature of the cemetery business as our property sales from a few legacy businesses decrease.

As we continue our significant, but steady growth, these acquisitions will continue to diversify our risk and minimize these types of impacts overtime. Those of you who have had a chance to meet with us over the past couple of years understand that Park Lawn is a long-term growth story.

We have the operating acumen to manage our businesses and improve them and a structure and culture that allows us to be not only the fastest growing company in the death care industry, but also ultimately the most successful.

As I have said before, this is not a business that should be looked at quarter-to-quarter, but it is more appropriately evaluated on an annual basis. And as we continue our focus of adding high quality and creative businesses to our portfolio, not only will we see incremental improvements, our investment thesis remains intact. We still remain poised to display EBITDA and earnings growth for 2022 and expected our operating environment will normalize into the fall and winter.

Lastly, as Dan mentioned, we have initiated and NCIB which is simply preparing for an opportunity than an impatient market may provide us. We still maintain that based on our robust acquisition pipeline as well as the nature and quality of those businesses.

Our capital is best deployed by continuing to make a steady drumbeat of acquisitions is that is the best way for us to continue executing on our 2026 aspirational goals of EBITDA growth and adjusted earnings per share. However, and Dan also noted, our goal is to drive the best overall returns for shareholders and if the public markets provide us with that opportunity, we intend on executing through the NCIB.

Let me be clear, the announcement of the NCIB is not a reflection of our ability to deploy capital and highly creative acquisitions. Rather, we are simply preparing for potential opportunity that can benefit our loyal shareholders and allow Park Lawn to be flexible in a more turbulent economic environment.

That concludes our prepared remarks. And I will now turn it over to Ali for any question.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from Irene Nattel with RBC Capital Markets. Please go ahead.

Irene Nattel

Thanks and good morning gentlemen. Just a follow-up question to your last remarks, please. So during your prepared remarks, you mentioned that you remain confident that you can execute on the M&A dollar target for this year. But you have also adopted NCIB to be opportunistic. So how should we think about the M&A pipeline versus the probability of you buying back shares as we move through late Q3 and into Q4?

Bradley Green

Good morning Irene. The way I would look at the two is we remain highly focused on making sure that we execute on our M&A strategy. During the last earnings call, we were specifically asked whether or not the company had been looking at the possibility of a share buyback. And I answered at the time, that that was a matter of open discussion.

Given our second quarter and our second quarter results, and the belief of some people that it will have a significantly negative impact on our stock, it would be prudent to have this mechanism in place, if the market started to treat us in a manner that was unnecessarily brutal, for lack of a better way to put it.

So as far as I’m concerned, and I’m only one voice on the board, but I think I speak for everyone. Our main focus, if not our total focus is on making acquisitions. But again, I think it would be prudent to have this in place. If the market presents an opportunity for us by basically pushing our stock down to the point that it makes sense to do something under the NCIB.

Irene Nattel

That makes perfect sense, thank you. And now coming back to the business, very interested in the commentary around the shortfall in the cemetery sales being really focused in a few specific properties. What is it about those specific properties that kind of led to this situation for lack of a better way of framing it?

Bradley Green

So there is two distinct issues going on here in the cemetery’s. One is at-need, and one is pre-need and we experienced the drop in both. We expected to drop on the at-need side, because by definition, the death rates dropping. So you would expect that and since our portfolio is made up of a bunch of smaller cemeteries, you would expect those smaller cemeteries to feel that death rate drop, just as a matter of percentage.

What we didn’t expect, however, is that the larger ones would have that big of an impact on the at-need this time. And I will put it in perspective, just in two groups, over 60% of our at-need dropped in just those few cemeteries.

So it was unfortunate that it happened in the second quarter, it is certainly been trying. But we knew this was occurring by the middle of May, the first of May, we knew what April look like. And certainly by the end of May, we knew what April and May look like.

So we dug in pretty hard as you would expect the leadership to do to make sure that there wasn’t something structurally wrong or fundamentally wrong with the way we were operating these businesses or the businesses themselves.

And I was very comfortable by the middle of June that that was not the case. We had a very difficult April and May, so much so that April and May, if you combine their EBITDA was about equivalent to what June was. So that was a very challenging April and May. That is on the at-need side.

The pre-need side, that is a little tougher, and more of a problem that we are going to have to address. I mean, we have - the pre-need sales can be chunking, chunky at times, given our larger sales in some of those cemeteries that we are talking about. And one of them are pre-need drops accounted for about 66% of that total pre-need drop. That is a big drop. But again, it is due to large group sales, and those come in from quarter-to-quarter.

Having said that, we also have to accept blame where blame lies. And then I would say after two years, we probably got caught taking a breath. A little bit on focusing on our pre-need, I think customer fatigue or consumer fatigue is also a factor there. People distracted vacations over COVID.

I think going into this quarter we should have probably been a little more focused on the back. That pre-need was going to be a little harder and I think our other competitors that publicly talk about these things saw similar challenges. And look, I take responsibility for that. It is my job to keep everyone focused on that and I can assure you they are focused on it now.

So to go back to your specific question, while yes, there were a couple of our cemetery groups that were responsible for larger percentage of this problem, it was across the company. And we are focused on that. It is just unfortunate that the larger ones had a difficult quarter at the same time everyone else was, if that makes sense.

Irene Nattel

Yes, absolutely. And just one more question for me and then I will get back into the queue. It sounds as though June was better, can you share anything with us on Q3 to-date, I guess -.

Bradley Green

Yes, I would say that you might met our expectations. So I think that is about as far as we are probably willing to go with that. Otherwise, you all would be hearing a different tune for me right now. So yes, I mean July was not April or May by any stretch.

Irene Nattel

Understand and thank you.

Operator

Thank you. Our next question is coming from George Doumet with Scotiabank. Please go ahead.

George Doumet

Yes. Hi. Good morning, guys. Brad, I just wanted to dive in a little bit on 3D, I guess, focus your kind of the strategies that we are looking at there. Can you maybe talk a little bit about how we can maybe get those numbers up and what strategy is for the back half of the year?

Bradley Green

Yes. So clearly, that is where the focus is going to be. It has been honestly, since the first of July. And that is just blocking and tackling. So the larger businesses that are responsible for the bulk sales.

I mean, they should not feel responsible nor am I trying to make them feel responsible for the fact that, above bulk sales did not come into the second quarter. I think we have tried many times to convey that, given the size of our company and the size of the cemetery impact that these bulk sale make a difference from quarter-to-quarter.

So when we have them, we point them out to you guys so that you understand that that particular quarter looked that way because the bulk sale came in. We didn’t have that type of thing this quarter. And we are hoping that, we will have them in the third and fourth quarter and one would anticipate that, that would occur. That is one thing, and those folks are always focusing on that.

I think what you are really asking me is what we are doing to go back to the blocking and tackling, which is the everyday pre-need sales that we saw definitely take a hit across the company.

And the short answer to that because I don’t think you want more detail is that, we have our VP of Operations. They price themselves and we constantly talk about being operators first that grow by acquisitions.

And they very quickly towards, let’s say, by the middle of the late part of June, they know where the problem is. And they are focused on making sure that, that sales function and the salespeople who work for us are focused in the right spot.

So the long - the shorter answer to that, George, would be our VPs of ops and our operators and Jay, who prides themselves on being operators, okay, will show me. Because we are coming into the third quarter and that is where our focus needs to be.

George Doumet

Okay, that is helpful. And 2% average revenue per call in a quarter that seems a little bit lower than what we are trending at. I think in your prepared remarks, you mentioned some pricing adjustments. So just wondering is there a room to get that number or is there a focus to get that number back into maybe the mid single-digits in the next couple of quarters?

Bradley Green

So that actually begs a different question and I want to be clear that we are talking about the same thing. It is up 2% quarter-over-quarter. And we had seen increase is in the average every quarter, since the dip during the pandemic.

And I think we had been clear that, we didn’t expect to see 7%, 8%, 9% increases quarter-over-quarter in the average. We expected it to get kind of back where it was pre-COVID and then be able to do some incremental improvements on that.

So yes, I would hope our average and would expect our average to improve quarter-over-quarter. But I wouldn’t expect to see those 7%, 8%, 9% quarter-over-quarter. That is not even our internal expectations, but certainly to see it grow.

To expand on that question though, we basically expected what happened in the funeral homes, meaning, the funeral homes acted to our expectations. We expected the coal volumes to be down slightly.

We expected our average to be up slightly and we knew that, our acquisitions would cover the gap and all of that effectively occurred. So truly, George, in my opinion, the problem in the second quarter rests solely in our cemeteries.

George Doumet

Okay, that is helpful. And just maybe one last one, I think your comments during the past has been that you expect organic growth to be flattish for 2022, obviously, there has been some changes. Can you maybe give us a little bit of an updated flavor in terms of where do you think organic growth maybe land for the year, maybe for the back half of the year, at least?

Bradley Green

Yes, so we obviously have a hole that we have dug ourselves in the second quarter here, I’m not prepared to say that it is not going to end up flat by the time we get through the third and fourth quarter.

And only because it is I’m not being overly optimistic, but if we just take a step back, because I have said this before, but this is the first time it is happened. This can happen in our industry. And you can attempt to hide it by claiming that your corporate costs went through the ceiling, or something of that nature.

But really, what ultimately happened was we just had a quarter where the cemeteries didn’t perform. I expect that we will have another quarter where the cemeteries out our expectations. I’m no more going to stand up and say that we figured out the secret sauce, or the formula for coke, when we happen to have a quarter that exceeds the expectations.

I believe that over time, over, four or five quarters, or certainly over a year, this thing normalizes. It is unfortunate for us that we had a couple of events that hit in the same quarter, because it would be a lot better to be on this phone call right now and telling you how we have exceeded were our competitors. And we didn’t do that this time. And we know why. And we are focused on it.

So I’m not willing to give up and say that we are going to have some bad 2022 organic growth based on what I’m seeing right now, but certainly after the end of the third quarter, we will be able to give you a lot finer point on that. It is just to be expected.

If I had a found a problem, that would have been more concern. And that is I just don’t see that George. It is just the funeral and cemetery industry at times. And rather than trying to hide it, we are just being completely transparent and telling you where our problems are.

George Doumet

Okay, I appreciate the answers. Thank you.

Operator

Thank you. Our next question is coming from Scott Fromson with CIBC. Please go ahead.

Scott Fromson

Thanks and good morning gentlemen. Can you talk a bit about how acquisition multiples are trending? So without having any specific metrics, senses that multiples of reasons? This was the case or is that particular to individual transactions?

Bradley Green

So that is a good question. We have certainly seen higher activity coming through the brokers, and as a result of that, we have been involved in some deals, because they have been bringing some good deals up lately. And in those situations, you can see yourself getting into where people start bidding money that are putting multiples on businesses that don’t fit within our comfort zone.

When that happens, we stay within our comfort zone. And most of the time, we are not the highest bidder on these properties that we are getting anyway. So yes, I see some multiple pressure, but so far, it hasn’t affected us.

If you are referring to us, saying that we paid outside of a normal multiple range for Shackelford, that was us doing that, because that business was justified that. But I will also point out to you that it was non brokered, and there wasn’t anybody else involved in that business.

But we still pay Dyer multiple, because we tell folks, whether it is brokered, whether there is competition, or whether you just come to us individually, we are going to pay you the same amount of money no matter what. We are not going to see if you are dumb enough to leave money on the table. That is not the way we like to start the relationship.

So summarizing that we paid a higher multiple for Shackelford because we chose to, and the other businesses we are buying our remaining in the multiples that we are comfortable paying. But I do recognize that there are people out there that are making different decisions like that in our industry, and those folks don’t tend to stay around too long.

Scott Fromson

On that that topic are you seeing are you seeing new betters or similar but biters getting more aggressive? You think that with interest rates rising that they would they would maybe be a little bit more prudent?

Bradley Green

So that is again a good question. I see, basically see the same people in a competitive bid situation, especially in the larger deals over and over again. Because first you have to have access to that amount of capital.

And second, you have to have at least a reputation or an operational team that is large enough that these people would even consider you. So for any larger acquisitions, you see the same people over and over again. And but you do see new visitors from time to time that are private equity backed. And that is normally where you see the multiples that you scratch your head on.

Ferris is a good example of that, there was a private equity backed group that came in and offered substantially more than we did. And they were sophisticated and educated enough to know what that meant at the backside.

So I have seen it, I don’t, I haven’t seen it be really successful. The only thing that I would say, that I have seen is some of the people that we compete against. If they want it, I have seen them paid multiples up for it lately. And they might not necessarily disclose that like we do.

But for our investors and our analysts, if I pay something north of six, eight times, I’m going to tell you, but there is going to be a good reason for that. And if it works out, like the other businesses that we paid north of that for. Give us a couple years of running it, and we are back in that that multiple range anyway.

Scott Fromson

Thanks Brad. That is helpful and just one more question on expenses. I understand from your disclosure, that you have built a operations infrastructure in advance of growth or in advance, or, assuming higher revenues than you achieved this, this quarter. Are you able to cut back on G&A expenses to get the EBITDA margins back into the mid-20s or do you expect acquisitions and perhaps cemetery sales production to bring expenses back in-line with your higher target margin levels?

Daniel Millett

Hey Scott it is Dan here. Yes, look, I think Brad said it earlier, kind of on the funeral home side, there is some opportunity with our labor to manage our expenses a little bit better. But by and large, those funeral homes performed generally in-line with our expectations.

On the G&A side, again, we talked about - or sorry, on the corporate cost side, we talked about some of the labor inflation pressures. And we have been talking about this a bit for quarters now, and how that is kind of affected our head office in Houston and our corporate office in Toronto.

But what, it is kind of in-line with what we have expected as well. We have seen in the past our corporate expenses, it has been about 7%, 8% of our revenue. We are probably at the low end of that right now. So it is in-line with our growth and what we expect is there is some savings there.

Yes. We are going to continue to look at our ability to operate and make improvements and cut costs. But as Brad mentioned, we don’t see anything that is incredibly broken here. So we are not going to quickly make drastic changes and especially with high fixed cost business.

Bradley Green

Can I add something to that if you don’t mind Dan?

Daniel Millett

Go for it.

Bradley Green

Scott, that a little bit off the question, but something I wanted to say anyway, because I think it does go to the expenses. We have said for years, that we can’t sacrifice our long-term growth and stability to maximize the short-term performance.

And when we talk about these businesses around here, we don’t manage them from quarter-to-quarter. And that is not just to take the pressure off, because this isn’t a great quarter. We don’t think about that.

So it may be frustrating in the short-term. It certainly was for me, and it certainly is right now. But it is still the right thing to do. So to be completely transparent, when you see this start trending that way and April and May, my mind goes right there along with yours.

What can we do quickly, to rectify this? But what you are really talking about, and what you are really saying is what can I do right now, that takes the pressure off of me and puts it on my businesses?

Meaning the people who have nothing to do with this, where can I cut? Where can I do things in the short-term to make it better for me. So I don’t have to sit on this phone call and say we are going to stick to stick to our long-term strategy.

I think there is some things we can do and if we continue to see revenue like this, then we are going to make some difficult decisions and our people are going to understand and so our Vice President of Operations and everyone else because they will know that this isn’t sustainable like this. But I don’t think it is, because we started looking in April and May and we didn’t find a problem.

So I believe it is going to get back to where it is. So what you do is, you hold the line, you deal with this quarter, you are honest with your investors and analysts, and you perform in the third and fourth quarter. And that is what we are going to do.

So, yes, we could probably touch the expenses, but that is to the detriment of our business. It is contrary to what we say to our acquisition, families and customers and so we will deal with this quarter and we will improve in the third and fourth.

Scott Fromson

That is great. Thanks, Brad and Dennis. That is helpful. I will turn it back. Thanks.

Operator

Thank you. Our next question is coming from Maggie MacDougall with Stifel. Please go ahead.

Maggie MacDougall

Thanks very much. Good morning, everybody. I was wondering if you could give us a bit of detail around the degree of margin erosion due to operating leverage or I guess missed or not present sales of high margin cemetery properties versus if you are looking at things like higher fuel costs, higher labor costs. In other words, what percentage of the margin erosion could you attribute to actual inflation and what part was kind of like just, you didn’t have some high margin cemetery sales in the quarter?

Daniel Millett

Yes. Maybe first off, the last part of that question, very, very difficult to fight for Kate exactly what is in inflation versus other costs. What I can tell you is, we see because of our property sales somewhere around a 3% erosion of our margin from those property sales. On the labor side, like I said, we have seen some slight increases but it hasn’t been that tremendous. We are talking in the range of 25 to 65 basis points, I would suspect.

Maggie MacDougall

Okay. Thanks, Dan. That is helpful. And then I’m wondering if you could just comment on the changes that you have made to the Board in terms of the new additions and the resignations that occurred during the quarter?

Bradley Green

Yes. Maggie, I will take that. First off, the changes to the Board were in place long before the quarter started. So I would just wanted to make sure that, no one felt that Paul or Amy leaving the Board had anything to do with the results in the second quarter.

Paul had been on the Board for some time. There has been a huge growth in the company. He stewarded us through a management change. I did not fault him one bit for thinking it was a good time for him to focus something else. And he was gracious enough to give us time to find two solid Board members to join the company.

And I have absolutely no problem. And I don’t think anyone else that Parkland does with either Paul or Amy and their decisions to leave. It just happened to happen during the quarter that we didn’t put our best foot forward.

Maggie MacDougall

Okay. That is helpful. Thanks very much, Brad. That is all for me today.

Bradley Green

Thanks Maggie.

Operator

Thank you. Our next question is coming from Kyle McPhee with Cormark Securities. Please go ahead.

Kyle McPhee

Yes. Just to follow-up on margin percentage topic. So that three percentage point margin hit because of the lower property sales, earlier you attributed kind of 60% of that to the few troubled properties. So is this implying that you can call back some of this three percentage point margin hit, but probably not all. And maybe we are at kind of a new post COVID revenue mix that is more representative of your business? I guess I’m asking if you can actually get back to kind of the 26%, 27% EBITDA margins?

Daniel Millett

Yes. Hey Kyle. It is Dan again. Yes, I think that is a fair assumption. Again, there is a bit of a post-COVID world here, but we still continue to believe that the pandemic will in the long-term or medium-term whatever you want to call it, actually the trigger event. And continue to support our pre-need sales. So we do look at this as a blip and there is definitely room to cross on that back.

Kyle McPhee

And just to confirm that three percentage points, that is just the pre-need property sales or that is pre-need property?

Daniel Millett

That was the impact of all of our property sales.

Kyle McPhee

Okay. Got it. Okay. Thanks for that color. And then your update called out an acceleration of the shift to cremations in Q2. I mean, what do you attribute that to? Is that simply the macro pressures on consumers right now looking for lower price best care options and are you seeing that trend continue into Q3?

Bradley Green

Yes, so we are not seeing the trend continue and I would say it is literally a blip. It is too short of a period of time to make that significant, I think it actually dropped in Q1, if my memory serves me correctly. And so then we see it up in Q2.

I mean, that is given what happened through COVID and how it kind of stabilized where it did. That is nothing to concern us by. I mean, we are reporting it because y’all want to hear about it and I understand.

But I wouldn’t expect that to be any type of trends because it would be out of the norm if it and we are not seeing that go forward in any way. Anything going to happen in the quarter and I don’t like saying things I don’t know to be true or not, but right now that doesn’t concern us a bit.

Kyle McPhee

Got it. okay, that is it for me. Thank you.

Operator

Thank you. Our next question is coming from Zachary Evershed with National Bank Financial. Please go ahead.

Zachary Evershed

Good morning everyone. Thanks for taking my questions. So on average, how is your market positioning in terms of being the low, mid or high cost option for customers, as we kind of look to offset inflation? Will you be pricing yourself out of the market, or do you have room to run?

Bradley Green

We have room to run. We are basically mid market in the majority of the places we are, I think it is close to 65% or 70%, we are not even at the top. But we are really careful about that too. And if you listen to our other publicly traded company, competitors, there is a few things that you will hear absolute consistency on but this happens to be one of them. And that is everyone’s cautious about their pricing.

You have to look at it market-per-market, you have to really make sure that you are making the right decision. Because it is a lot harder to get market share than it is to just basically, it is a lot harder to get market share than it is to do a lot of other things. So you don’t want to do anything to lose market share.

So we feel like we have plenty of runway, but we are also not going to run out and ask our managers to raise their prices, because of a quarter. So we are doing it and we are and we are looking at it closely. And sometimes we may do it multiple times in a market if there is room to do it, and the inflationary pressures stay there. So we are keeping a close eye on it.

But that is very, very location specific. And then that happens with the managers and the VPs. And then it gets to Jay for approval, and then we all look at it. So we feel like we got plenty of opportunity to do it without hurting ourselves, but we are going to be very deliberate about it.

Zachary Evershed

Good color, thanks. Next, if we think about the IRR on an acquisition at 68 times, what is the Park Lawn share price level at which you view buybacks as an equivalent option?

Daniel Millett

You know, Zachary we are actually not going to comment on that. I don’t think that would be prudent to kind of get into you are effectively asking at what point are you going to buy your shares back, and I just don’t think that is responsible of us to say right now.

Zachary Evershed

Fair enough.

Bradley Green

Zach, I want to, I just can’t resist, I just want to make this clear. I think I have done it in the comments, and I’m going to do it again, okay. It is going to take a significant drop in the share price, for me personally to believe are getting more close to believe that we need to do anything but make acquisitions.

I guess there could be some hybrid in there. But I’m also cognizant of the fact that we went to the market last year and raise stock at a certain price. And it is our job to get that stock price back to where that is or higher.

So we put that in there as a prepared to or a measure something that we might need to do if the markets bluntly start acting very irrationally. And if they do that, then work with that it is in place.

I don’t want the analysts or our larger investors to think that we have pivoted our belief that making these acquisitions is somehow less creative than buying stock, they are not. And our acquisition pipeline and what we plan on doing between now and the end of the year is going to make that crystal clear to everyone.

Zachary Evershed

And then what is the expected impact from the ramp up of Westminster in Q3 and Q4?

Bradley Green

We did not even forecast that in our own numbers to my knowledge and certainly nothing that is significant. I mean, it is a new build on a very successful Cemetery & Mausoleum property. It is, by far, our most gorgeous opulent use the word you want.

Technologically advanced funeral home we have in either country. And it is right where it needs to be. But you don’t open any funeral home and expect it to have a green filter difficult and we all know that. But we have had a lot of success building funeral homes on top and turning funeral homes or cemeteries into condos.

So I think, in all fairness, give us a quarter or two, and we will start telling you what that what we expect it to do, and the impact it will have on 2023. But if we told you something right now Zac it would be just a ball of gas, and we don’t like doing that.

Zachary Evershed

Got you, thanks. And then one on margins, I’m hearing loud and clear that you are managing for the long-term, and do believe it will get back to where it was. And then you also say that July was in-line with your expectations. So is it fair to say your margins have already bounced back to that level? Or is there more work to do?

Bradley Green

Well, I mean, I can’t really comment on what I mean, in a month. I mean, even if it was low, I wouldn’t want to extrapolate it to more lines. And if it was high, I wouldn’t want to say that either. I would just, I’m going to stick with what we said earlier, and that we are laser focused on this.

And also to point out our acquisition margins, especially on the funeral home side, so far, so much exceed our comparable funeral home margins, and it is the same on the cemeteries and given our growth, just that alone is going to have an impact.

But again, we have some very competent VPs of ops, and they know what happened in the second quarter. And they know that they view themselves as operators and people who can run funeral homes and meet with families themselves. And they know what they need to do. So I would expect the improvement to come and come quickly.

Zachary Evershed

Great color. Thanks I will turn it over.

Operator

Thank you. Our next question is coming from Irene Nattel with RBC Capital Markets.

Irene Nattel

Thanks. Brad you did the actual - and I wouldn’t ask about facts. So can you give us an update and, and also within the context of all these discussions about margins, presumably over time? That should be helpful.

Bradley Green

For sure, and I will even be more transparent than that. Most of our cemeteries, I believe, maybe as of last week, not all of them are on fax, and then our funeral homes are ramping up fairly quickly, that will happen a lot quicker. And we will get into this call live, but it is a lot easier to bring the funeral homes on than it was the cemeteries.

The color that I have been able to provide this morning in the competence with which we were able to ask answer, the questions would not have been possible on the cemetery side effects would not have been in place, that is how impactful that was. We were able to very quickly identify where the issues were down to the locations down to what we think we needed to do and manage from there.

So I’m, not only I expect fax to be in all of our funeral homes, minus Canada, by the end of the year, but our IT team is doing a good job getting it there. So they are not in trouble of it. So we are getting there. And we are super pleased with what we are seeing from an ability to use that from an operational perspective. And that is especially true when we had a difficult time.

So we are pretty happy and I think when you asked me that question, when you said you were getting back in the queue, I wrote facts down next to your name, because I knew that you were going to ask that.

But I think that by the time we report Q4, we are going to start being able to say and this is the number that we are getting out of this or this is what we are able to say, because our expectation is to be able to do more. So I’m very pleased, especially with what it did for us in the second quarter. It allowed us to really manage our business better.

Irene Nattel

That is fabulous and I don’t know is they have been - have to be get less predictable or something.

Bradley Green

Thank you.

Operator

Thank you. Our next question is coming from Daryl Young with TD Securities. Please go ahead.

Daryl Young

Hey good morning everyone. Just one question for me around the potential for maybe a ramp-up in sales and marketing costs on the back of this and should we expect any sort of significant changes to that model as we go forward, maybe more centralization or more checkpoints with the individual locations going forward and how the sales trends are performing?

Daniel Millett

No, I don’t think that you are going to see any of that. It is not - it wasn’t a structural issue and it wasn’t a lack of focus on market or the way that we are doing that now. I don’t think you are going to see that at all. That wasn’t what the problem was.

It was a lack - in my opinion, it is a lack of focus, not a lack of the right tools being in place and also just a bit of bad lock. But we don’t talk about luck because we are responsible around here and we don’t lay blank. So you are not going to see that. I just can’t see that coming.

Daryl Young

Okay, great. That is all for me. Thanks.

Operator

As there are no more questions in queue, I will hand it back to Brad Green for any closing comments.

Bradley Green

As always, I appreciate everyone taking the time to join us today and I hope you all have a great weekend. Thanks.

Operator

Thank you, ladies and gentlemen. This does conclude today’s conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.