Q1 2020 Earnings Call
Now for a brief overview the first quarter.
Diluted earnings per share excluding special items declined in the first quarter by four cents per share to 43 cents as our powerful momentum through the first 70 or so David the quarter was roughly impacted.
By the ripple effects of the Covis 19 pandemic.
Our comparable funeral revenues for the quarter increased by about $8 million.
This increase was primarily driven by higher core revenue of $9 million.
Our 1.5% increase in core funeral services performed was in.
Pants by 1% growth in our organic funeral sales.
Sorry.
Increased cases from Cobot 19 in the latter days of March for the most part offset the decline in our average revenue per case.
In the final weeks is a month.
As certain customers were limited in accessing our facilities and services due to restrictions and gathering sizes instituted around the U.S. and Canada.
Our cremation mix shift was a modest.
30 basis points for the first few months.
And grew to 260 basis points for March, resulting in a 110 basis point shift for the quarter.
Comparable funeral gross profit decreased about $3 million to $103 million for the quarter.
Comparable cemetery revenues decreased about $7 million for the quarter.
The largest decrease came from recognized preneed property revenue decline of almost $13 million.
Remember that the end of March is usually when we experienced a surge in preneed sales production related to the celebration of Ching Ming.
So our comparable Preneed cemetery sales production declined by almost $23 million for the quarter or just over 10%.
This had the most dampening effect on our earnings per share for the quarter.
At Cemetery Preneed sales production through February was up about 11% and marches production declined by 35%.
Therefore comparable cemetery profits declined by $11 million.
Margins in both segments were impacted by normal inflationary increases in salaries, including higher health insurance premiums.
As well as an increase in doubtful account reserves given the current economic conditions.
In closing I would again like to send my heartfelt appreciation out to our team appearance.
Words cannot described the feeling of pride I have when I think about what we're doing up there.
Every facet of our team is going above and beyond and keeping our teammates our families.
In our community SEC.
From an operating performance perspective, we have been privilege to serve over 5400.
Cobot, 19th the seasons and their families today.
Thankfully the mortality trends seem to be slow.
However, we do believe approximately 20 to 25.
5% of our Koeppen 19 related cases have come from nursing homes in retirement community.
History tells that some of these cases could be a pull forward of the seeds for the back half of the year.
Well, we're experiencing challenging trends in funeral average in Preneed cemetery sales.
I would expect us to begin to migrate back towards free cobot 19 levels in the very near future.
Just know your Sci team will be working hard to protect our most precious assets are people.
We will be working hard to improved financial results and utilizing our fortress balance sheet in liquidity to invest in future value creation opportunities for the benefit of our stakeholders.
Thank you and now I'll turn the call over to Eric.
Thanks, Tom and good morning, everybody.
First I wanted to say that I hope everybody is safe and well during these times that can only be described as where we'd say unprecedented.
And similar to Tom given these unique circumstances my comments today are going to be a little bit different in terms of their order and will be mostly focused on our current and future financial position and how we will navigate successfully through the impact of this pandemic.
I think the most important thing I hope well to leave you with today is that our company has a very strong balance sheet and we are well positioned to weather the storm.
And any crisis, I think adequate liquidity and limited near term debt maturities are kids and as have you heard us say before this lesson was evident during the economic downturn and only no not and since that time, we have deliberately and consistently maintained robust liquidity.
And manage our debt maturity profile to have limbs.
Got it maturities in the near term in short we made significant efforts, which we believe will prepare our company for those storm.
So with that backdrop must talk about the current state.
In more detail and specifically about our current financial position. So as of today, we have liquidity of about $750 million available to US consisted of approximately 175 million of cash on hand, plus 575 million of availability on our long term bank.
City.
We believe this $750 million is sufficient and well above our projections the liquidity needed in 2020, even in this unique environment. Additionally, other than a small series of notes due in November of next year. We're also very well positioned with a clear mid debt maturity schedule.
You'll have a no significant maturities until may of 2024.
At March 31st our leverage was 3.88 times slightly higher than the 3.78 times, where we stood at the end of 29 team, but also well within our targeted range of net debt to EBITDA of three and a half to four tops.
Let's shift now forward looking in terms of our expectations. So currently our financial performance for 2020 is difficult to predict with a lot of precision.
We recognize the temporary impact to covert 19.
And how will continue to pressure, both our funeral and cemetery segments in the near term.
We believe that we will also have the ability to temporarily reduce costs and other expenses to alleviate some of this revenue pressure.
And as we just mentioned, our resulting earnings and EBITDA will be reduced to some degree from our original 2020 expectations, but from a cash.
Oh per chip perspective, our current expectations are much more offer to optimistic did they exited the expected impact on our EBITDA, especially as it relates to our free cash flow.
So.
Let me give you some color on our assumption surrounding these cash flows.
First the majority of the revenue headwinds, we anticipate in the near term relates to Preneed Cemetery property sales from a cash flow perspective, though.
As about 70% of these contracts are installment sales paid over a three to five year term, we expect a significant amount of cash inflows from sales that were recognized as revenue in previous periods. In other words are working capital will be positively impacted.
During this period in 2020 as these cash receipts continued to be collected.
Secondly, our expectations for cash taxes will be lower in 2020, then originally anticipate as provided.
By the carriers that are 2020 cash flow benefit from the deferral of certain payroll taxes to future years.
Furthermore, our expectations for federal and state income taxes will also be lower now and 20 twond.
All of these facts along with the underlying stability of our cash flows in the funeral and cemetery business give us the confidence and flexibility to be opportunistic and deploying capital for the remainder of the year, we now anticipate spending about $180 million on maintenance and cemetery develop.
I think Capex. This includes 75 million on cemetery development projects to ensure there is ample cemetery property inventory for our Salesforce to continue making preneed cemetery sales. We also expect to spend the remaining 105 million on field maintenance capital expenditures as well as can.
Continued investments in technology.
These technology investments allow us to continue innovating, both our customer and non customer facing support functions to further leverage our scale by improving how we interact with our customers through the use of technology.
We recognize that this unprecedented crisis could be adversely impacted many independent owners right now in our industry with that backdrop, we will continue to seek acquisition opportunities during 2020, which have traditionally been the highest and best use of our capital.
We also expect to continue deploying capital towards new funeral homes and expansion opportunities to increase our footprint into desirable markets and lastly, and perhaps most importantly to some of our shareholders. The confidence we have described here today and our cash flow strain confirms our expectation that we.
We'll maintain our current dividend policy for the foreseeable future.
So I also want to shift the impacts of some of the trust sponsorship spent a lot of questions we've been receiving.
So financial market volatility will undoubtedly put pressure on the market value of our approximately four and a half billion dollars of trust funds that support our future revenues ultimately as the underlying contracts mature the market value of the trust funds will negatively affect our funeral sales average.
And our cemetery merchandise and service revenues both of these effects could can put pressure on future cash flows and revenue growth rates, which we experienced in the last economic downturn again and Oviedo not however, it is important to reiterate that this financial market impact is not.
I have a significant effect on our EBITDA our cash flows in the near term. So let me explain this muted impact to our cash flows given the 10 to 12 year average life of the customer contracts only about 8% of the contracts and the trust backlog mature in any given year so because of this.
The impact on the reduction in market value, which is allocated to each individual contract is reflected in our cash flows over a 12 year period or about 8% per year.
Now I'd also like to shift and talk about the first quarter.
So for the quarter, we reported operating cash flow of $180 million, which was a 5 million dollar decline from the prior year and below our expectations. Our cash flows trended similar to our operating performance was strong cash flows in the first two months of the quarter that ultimately softened and more.
Arch.
Positives for the corner, where a reduction of $15 million and cash interest payments due to the timing of strategic financing transactions, we did last year and the stability and growth in our atneed and pre need cash receipts. Both of these helped offset the declines in cash earnings that occurred.
In the month of March increases and incentive compensation that were paid quarter over quarter and other working capital uses.
Maintenance and cemetery development Capex totaled $44 million for the quarter, which is generally in line with the prior year, but a little lower than our original expectations. All of this above resulted in free cash flow for the quarter of about $135 million, which compares to 146 million in the first quarter.
Of last year.
So then finally I'd like to conclude my remarks by reiterating that we take very seriously the responsibilities that we have as management to all of our stakeholders I believe we're taking the appropriate and necessary actions assist to sustain our financial health and as ever changing and by.
Hmm.
Because of the foundation that we have built strong balance sheet adequate liquidity, a favorable debt maturity schedule, we will whether this storm and we will be okay. We will continue to be prudent with our capital deployment. We will continue to invest so that we are not just opened for business now but.
It will invest with the future and bought so that we may emerge from this crisis stronger and ready to grow again.
Lastly, and again, certainly not least I want to say I'm very proud I am of the extraordinary efforts underway across our company to serve our client families and the way our teams have supported each other I, especially want to convey a very special thank you to our frontline associates.
For their countless hours and dedication who are sacrifice in so much to help families. During this extremely difficult time, you are truly heroes to us and to the communities that you Sir.
So with that operator that concludes our prepared remarks, and we'd now like to go ahead and turn the call back over to you.
For questions.
We will now begin the question answer session to answer. Your question you May Press Star then one on your toes Tencent seriousness speakerphone, please pick up your handset before personalities.
The majority your question. Please press Star then to at this time, we will pause momentarily momentarily to assemble roster.
Your first question comes from the Scott Neuberger of Oppenheimer. Please proceed.
Excuse me Scott Your line is now live.
Okay can you hear me.
Now again that we can Scott exits.
Button good morning, guys. Thanks for taking the questions.
The.
I guess I wanted to start off on the.
On on.
Start to the to the quarter was very strong now.
Just to just back in 19, there had been issues with with pre selling so could you address perhaps some of the west coast markets and I assume those improved in what you were seeing and then more importantly kind of fast forwarding. Once we can can come out in this current environment can you get back.
Back to the strength you were seeing in January and February with with pre need sales and how so thanks.
Scott This is Tom thanks for the question.
Thank you as you talk about the West Coast. If you look at the performance through the first two months, we were extremely proud of the turnaround there and saw really fabulous results in those markets. We're excited about seeing Maine.
We are really happened and again you can give california from credit for this is they were one of the first days to shut down and so as you got to March we saw real decline as you and anticipate in the ability to sell and particularly around Ching Ming It became very challenging end of the same thing in Vancouver.
Mover.
So I would tell you this the pre co. Good trends were very good we felt like.
We were really excited about Ching Ming and we had a lot of great momentum. So I truly believe that we will get back to that level.
I think the things we just have to keep in mind is.
We are currently impacted by this let's call it social distancing drop everything into it.
As.
Economies begin to open back up we've got Texas Open up Tomorrow, you've got Georgia already opened South Carolina.
I think that is going to be a real impetus to begin to see our.
Our sales jumped back up towards those normalized levels I think there. So then when we get to that point you have right now have a recession and again we've lived through recessions, we know how it works and based on our experience people tend to still spend on funerals.
They don't really buy down into its an emotional spend they tend to not shop.
Price.
People tend to get back to bind preneed property and the harder sales are kind of the highest sale if we got about economy or the markets not good.
People are this confidence to buy the high end. So I think those are the the things that will watch and monitor the we'll get back because social distancing will begin to relax and also again I mentioned this in my prepared remarks I'm excited about this virtual interactions we're up to 40 person sales force today.
And we just get better every day as we think about it we understand that uptrend people. The consumers are more educated I mean, how I'm, assuming webex expert now.
Jeremy you'd be impressed.
Okay.
Sure I would be.
Yes.
The.
So would do and as soon talent sure.
The I guess, if we can pivot over its kind of similar question, but cremation.
I think you said 30 basis point average in January February that's a very low versus the trend we saw in.
In 2018, and then of course I think you had said that that spike to 260 basis points in March.
The average 110 for the quarter, just just curious what we should expect.
Going forward I imagine a pretty elevated level based on the current dynamic for the second quarter, but how would you envision that progressing and just kind of speak also to that that the low January February number. Thanks.
Sure.
If you recall last year, we talked about the fact that we had accelerated for lack of a better way of saying it the cremation percentage in our business and and that really has a lot to do with some pricing changes that we had made and we're going to have either be Anna.
Bursary to out as we came into this period. So we expected kind of at the end of last year in the beginning of this year than we would see more normalize favorable year over year comparisons because we feel like we can turn more cremation share based upon some of those price changes remember they were kind of.
Entry point.
Pricing on the cremation customers specifically so we've told you guys look for normalization and normalization probably looks somewhere in the <unk> hundred 20 to 150 basis points. So 30 basis points was surprising to me I will say.
To 60 in March is not surprising some of that quite honestly is just being forced upon the consumer I would is the way to put it.
Because of some of these emergency situation because of concerns around the spread to cope with 19, I think you've seen a temporary spike we saw a spike kind of continue into April.
Okay.
Essentially the same type of rate my expectation is as social distancing norms change back as people go back to an ability to have celebrations to have ability to have gathering that that rates should normalize back into what we believe is a normalized rate of 120.
150 basis.
Great. Thanks, and just one more quick key to wrap up for me and I'll pass. It alone could you just give an update on the fuel and your perspective of where that process is thanks.
Hey, Scott, it's Eric how are you.
Very well thanks, Eric good.
So not much has happened related to the funeral rule other than the fact that because of this.
Prices the FCC has extended the comment period and so it was originally mid April or you had to respond related to your comments now it's going to be mid June.
I assume that enough is going on lower coming out of this pandemic a little bit to some degree that I don't really anticipate it going beyond.
June 15th in terms of our our response.
You know our response will again be kit be consistent with what I have.
Described before.
And that relates to really lay in the facts on the table in terms of the high high levels of customer satisfaction that exists in the industry. We take the funeral role is a good thing.
But in terms of expansion more.
It's hard to see the linear connect the dots to that obviously what people are asking us about is the online presence and as we've described to you before that's part of our strategy to continue to move online.
We've seen some of our locations with the starting at prices were now into the several hundreds of those locations that have that.
It's interesting because you know as you tier the market based on our funeral homes being tiered.
Our client families have different priorities and different things and so.
Kevin to strategize and figure that out tactically as one of the processes that were going through in terms of being methodical and trying to understand.
But thats a place that we will go to and we'll continue to.
Go too, but we think we need to do it aligned with how the customer wants to receive that that information and all of those comments again will be put out there in writing for the public to see because his comments will be public.
For everybody not just us, but you know in terms of when we submit ours probably sometime in June.
Great. Thanks, I'll turn it over good luck with everything.
Your frontline workers.
Thanks Scott.
Our next question comes from AJ Rice of kind of credit Suisse AJ. Please proceed.
I think everyone glad to hear everyone's.
Stayed say just real quick on that cremation Spike first.
It ended the quarter.
We attribute some of that maybe to the fact that a pickup in debts has been in the northeast and on the West Coast, where you already have pretty high cremation rate.
That's really is there any chance that that's accounting for some of them.
I think definitely could be a portion AJ some of the New York markets, where we are actually pretty high variable rate you'd be correct in California, and other places happened, but I think the bigger the bigger issue is.
Like I said before.
Even in the markets, where you don't have a big cobot outbreak. It's the social distancing rules is the application of 10 people I can't have service.
And I think.
That is having an impact on the rate as well, but we have every again, we get feedback from.
People, all the time and consumers and I got to tell you the customers have been incredibly con and polite, but theres a lot of people that are frustrated that they can't have that closure and again it's.
We've got 1200 people that have booked memorial services just over the last four weeks or so to be done in the future date. So says a lot about let's think.
For the families mandar.
I mean, what are the things in the latter part of the quarter.
For the quarter those are somewhat surprising was the.
Negative leverage decremental margin I guess, if I look at cemeteries revenues down 7 million year to year, but your gross profit was down 11 billion.
Is that just because you couldn't do any.
Any mitigating cost self said and that short period of time, I know you wrappers fixed cost growth and higher bad debt reserves, but as we think about.
Second quarter, where you potentially have a full impact of this.
How do we think about with the decremental margin should be I know some degree of that also in the funeral side as well.
Yeah, I think the what you're thinking about it right. There really was it's harder would be hard to seeing the numbers any actions that we took on the cost side in March you definitely would see some of those actions showing up and the April results. There was also just some really kind of quarter over quarter weird stuff like I think Eric mentioned, we had some ins.
Then if comp accruals are a little bit higher than last year's first quarter. The year may be very similar is just kind of timing of accrual so nothing to be concerned with and the cost structure and in no real impact you can see yet probably see a little bit of cost creep from our ability to procure things to protect.
At our people and we spent a lot of time and effort and money in obtaining at 95 math you know in obtaining body passes and gloves.
Attaining refrigeration units this ship over so you've got a little bit of that probably showing up in March and April but for the most for the cost savings initiatives should begin to show up in the in the second quarter.
Okay is there anyway to quantify those cost savings initiatives. What you think you might be able to take out of the cost structure.
I mean.
All of these are really kind of the way to think about it we're not we have not to date at any layoffs.
Or anything of the sorts, we've done some things around.
You know hiring freezes salaries, weve, obviously stop traveling and entertaining during this period, so its stuff like that and just being smart about the way, we think about our cemeteries and maybe some things we can do to to manage the maintenance a little more effectively during these lower traffic time, so it's more on the.
The edge, Hey, Jay I wouldn't think of it is a big cut and the cost structure, because we really want to have come out of the gates with this thing.
In a in a powerful way so were posture to do so.
Okay.
On the pre need cemetery sales drop I understand why it's happening and we obviously had the President's 2008, 2009, where you had a couple of quarters, where it was depressed and then rebounded back then it rebounded very quickly.
Really sort of made it up in a couple of quarters.
Of excess sales it sounds like this time I don't know if it's a I'm wondering is because of the lingering effects of social business using it sounds like you expected to come back, but maybe in a more gradual pace.
Just to get some thoughts about about how to think about the rebound in those pre need sales as you come out the other in I guess, there's also the economic outlook could be a question a bit although a blood sensitive population. That's fine that's part of the population, but anyway any thoughts on a on how how you make.
Come out of that the pacing up versus something we saw in 2008 2009.
Yeah, I think you're hitting on the right factors Ajay. The first one is social distancing, it's hard to define the timeline on I think we're seeing again the economy is beginning to ramp back up.
You're seeing some of the rules being.
You know relax and I think it's our belief that you know over the coming months, that's going to begin to normalize with a lot better kind of social hygiene practices and in place, but that people will want and desire to gather again people want to interact and transact. So we feel pretty good.
Thank you, we'll take a little bit of time for people to get more comfortable we should be back in place. There's I think about the economic and again I'm, though.
But if you think about Oh wait in a nine there we're such a lingering effect because it was the financial system itself that it just it went on for quite some period of time I'm a little more hopeful on this one of the well the unemployment is unprecedented that were about the reemployed a significant portion of those people over the.
Coming month, and I realize everybody's in a little bit of a pause, but my hope is that maybe people come out of it a little quicker if if.
We're reemployed, we didnt see reemployment happen that quickly and in a way to nine so again, just my opinion, but but I'm a little more hopeful on that front.
Okay, maybe just one last question what do you think about 2021 coming out of this.
Lastly, depressed first have a this year, maybe a little bit elevated hopefully.
Your turn into back half of the year.
Do you think or how should we think about 2021 relative to this year or do we havent new base that we grow the age 12% all above do you think there's an ability I mean, certainly the first half I think you'd probably.
After normalize that somehow but any any way to think about how quickly we get back to normal growth rate or or normal base on.
I think you know first of all its obviously impacted by what happens with co. Good right I mean, I can't predict that I think if he told me cobas becomes less of a factor later in the year My personal opinion is we should rebound.
Pretty strongly I mean, I don't see any reason other than the lingering effects of economics that you would trend back towards to where you work.
It.
The funeral average that people are going to start doing services again, it gets back to normal place. So the only two negative things I can think of when I try to apply my free cobot.
Screen to this is clearly we may have accelerated since death.
In 2020 that May not show up in 2021, so I could definitely paint a picture that volumes in 2021 arc is quite a strong but you're not talking about a significant amount and then I think the question is preneed cemetery sales and probably more acutely high end pre need.
Cemetery sales is that customer coming back in a robust way and again I think that's more a function of quite honestly the stock market.
And things like that because those consumers as long as they're feeling good are going to step up and pay and if they're not feeling good that alone. So you know.
Im very optimistic about 2021 and believe that we're not growing off of a normalized growth rate off 2020, we should bounce back substantially I don't know you get back to levels, the 19 right away, but but.
Good enough there anyway.
Okay, all right. Thanks, a lot.
Our next question comes from John Ransom of Raymond James John. Please proceed.
So for the record I've never had a hole in one. It's finally go [laughter] I guess, a bad information [laughter].
It's just.
Got a disappointing that I haven't but.
That's all right. So it's like it's a goal to look for.
My question is.
You know their stories in other industries, where this perverse incentive not to work is having an effect on labor supply are you seeing any of that.
Really not Johnson's, but it's surprising, but I guess not surprising and sense of.
It's such a calling for people that are in this business that I think you know our folks when they feel like they're needed most they really step up so yeah has there been a little fear absolutely.
That has happened.
And that's normal, but I think as we talk to it and were identified as essential employees and you have or just referred to his first responders I've heard as referred to as last responders, but we couldn't be more browser so really not.
But not anything like that.
And are you I know, there's some some strains in New York with you know the industry are you seeing any of anything to call out in New York from just kinda the capacity, but going or just not being able to handle what's being thrown out your there.
Well, Joe it's been really nice about our team and again. This has been coordinated obviously by our Chief operating officer, Jay and his team and build Brian in New York.
We've been in constant communications and so our teams there you know gone above and beyond but there are points, where we were really starting to stretch and the good news is we had a team headed up by Jay that kind of anticipated the potential impact and so we've had.
Refrigeration units available there to ensure that.
Our families are taking care of as a system is kind of backed up we've had over 100 people brought in from across the country from I think 25 state there volunteered to help out our teams in New York, New Jersey that have been there. So we have actually.
Been able to handle the capacity as a company I will say, what we've seen and again, it's just another sign of the advantage of scale. We've had some competitors, which you know we've tried to help with that they're at capacity and they couldn't take calls anymore and we were there to help them out and help us families out we've had.
Stories of people I.
I think we got a call for somebody who is two and a half hours away from one of our locations that can you. Please help me I can get anybody to help my mom and we took care of so incredible stories couldn't be more proud of our team and I think this is an example of where scale as a true advantage and our teams in New York, New Jersey, It's just been.
Incredible.
Congrats on getting on wartime flooding, so expeditiously, it's not not easy to move all that.
Mass I'm so congrats on that.
And then just the last one for me and this is really an impossible question I realized but.
If you had to put your Ah swagger on it the cremation mix how much of that is just out of necessity or either a lot count order I just can't pull this together its new York and I can't pull a I can't even think about playing them together and how much of this you think will linger in terms of just concern.
Or less city and a weak economy.
No I don't think very much on I think again to think about a rate that's a call. It 150 basis points and if we're running to 60. During this crisis I really think you know 80 to 100 basis points is this and I don't know that it's going to have that much of a lingering effect.
I almost think it goes the other way and I hear this from our sales team and from our from our locations. This gets people to kind of ponder you know what's important and life. It's I think this is a maybe a positive impact where people say somebody told me I couldn't Warner gather I damn I'm in a morning gather.
And.
So so I just don't think that's going to have a big lingering effect that obviously it will impact the second quarter, because we're pretty busy in April and May, but I think as we get to the back half of your I wouldn't anticipate much of that.
Great. Thanks, a lot.
Hey, John to try try not to work so hard to get out there and maybe you can get all in one way.
[laughter].
[laughter]. Thanks, other words to live by.
Got it.
And our next question last question comes from Duncan Brown of Wells Fargo Duncan. Please proceed.
Hi, good morning, Thanks for taking my questions and all the color on the call I'm, hoping it back to funeral SP sounds like you said it was down 11% in April is that inclusive of cremation mix changes or is that just sort of a apples to apples comparison.
Yes that would be inclusive of cremation insight.
Okay, Great and then on the 100 1200 services that has done and its future date I.
I guess I was curious are those.
Hey, husky levels that would have been sort of pre Kobe sea levels or have any.
Impacts on the price inside.
Yeah, they would be pre and they're not recognized yet obviously, because we can't write a coordinated until services our perform.
I guess from kind of get is that the look the go forward pricing there still seems the ability to drive pricing in the in the current contracts that are coming down it down the pipe is that right. When you think about it.
That's correct, yes, so people are or pet, we've not altered our pricing.
And so they're paying what they're paying freak out.
Great.
That's probably able to do the math on this but are you willing to give a trust fund dollar impact in the quarter.
I think the way that works is it's a it's a 30 day deferral because it gets allocated the most before so there really isn't much of an impact for the month of March we anticipate and in fact in April or do you ever.
Speculation on how that would well what I'd say is first of all some good news in the press release, you know the trust funds were disclosed at the end of quarter be down about 16% there now down about 10% to 11% as we close the month at April. So that's that's significantly different now we started the year.
You know any M.S.T. funds Dunkin' at about a 300 million dollar unrealized gain and that 10% type decrease would give us somewhere in the ballpark and again I'll use round round numbers about a $150 million law. So about a 450 million dollar swing so yes.
Do the math, what I put in my conference call remarks, multiply that by 8% or somewhere in the Thirtys in terms of and part of that 30 million 35 million.
A port.
Part of that would be funeral.
And affect the 20% to 20% of the contracts that are mature trust contracts had effect that ASP.
And the other part of it will affect merchandise and services on that cemetery side as as well, but again, that's kind of though that it kind of assumes no recovery right that 30 $35 million never would've been a bigger number at March 31st and as we get through this pandemic.
The markets rebound further again I'm going to point you to Oyo nine to see this effect you know, we don't anticipate that type of revenue.
Headwind over the course of a year everything I. Just described you by the way it would be an annual number.
As well, but it shouldn't be much better than that and think of that you know absent any recovery all else being equal would be kind of the worst case scenario, which with Oh Ito nine being a proxy for that that's not going to happen it will be better better than that Duncan.
Perfect I appreciate that and then last question could mean.
Think about preneed contracts it gets realized let's say that that contracts.
Quite a.
Logistical possession, especially in session and none of the 200 people in the field room et cetera, and that can't be done now how does that how's that been realized are you able to still.
Collect all the money that was in backlog there or do you have to have a payback for so that's not the full amount of services were able to provide be able to be provided.
Second I think all those are kind of managed on a local basis because you know.
When you're signing up for a funeral service a lot of times it isn't necessarily the capacity or how many people. It's for funeral service. So if we're able to perform a more limited service I'd say most of the time.
That's going to meet the expectations of the consumer we also have some things we called graveside services. So that would be a transition. So if you had a full service and we want to transition to let's say graveside service with family only that would be a lower price point that we would work with a customer.
Again to refund money, that's appropriate or if we could provide a servers that obviously, we would refine those monies and and so we're seeing some of that but again I think it's really kind of worked out the local level.
The expectations with the family.
Okay, great. Thank you.
Thank you.
This concludes that question answer session on knowledge to turn the conference back over Sci management for any closing remarks.
I want to thank everybody for you on the call today. Thank you everybody.
This on from Sci. We appreciate you all that you're doing and we'll speak to everybody again in July.
Take care.
We.
Includes the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].