Q1 2020 Earnings Call

Ladies and gentlemen, thank you for Sandy buying today's conference is scheduled to begin momentarily until that time your lines again it will be placed on these cold. Thank you for your patience.

[music].

After the she gets presentation there will be a question and answer session to ask a question. During the session you would need to press star one well your telephone. Please be advised that today's conference is being recorded I when I like to have the conference over to carriage services management. Please go ahead.

Thank you and good morning, everyone. This is to keep letterman Chief accounting officer carriage services.

They will be discussing the company's first quarter results for 2020, a related earnings release with made public yesterday after market closed.

Care services had supposed to the rehearsed press release, including supplemental financial tables and information on the investors page of our website <unk> audio conference is being recorded an archived will be made available on our website. Later today through May 20 cents replay information for the call. It can be found in the press release distributed yesterday.

On the call today for management, or Mel Payne, Chairman and Chief Executive Officer.

Got the President and Chief operating Officer, and Ben Brink, Chief Financial Officer.

Today's call will begin with formal remarks from management, followed by question and answer Perry.

Before we begin I'd like to remind everyone that during this call. We will make forward looking statements certain statements on this call, including financial estimates assumptions or statements about our plans future results expectations or beliefs may constitute forward looking statements under applicable securities laws.

We make these statements on the basis of Barbara views and assumptions regarding future events business performance and other factors at the time, we make.

We make them and does not undertake any obligation to provide updates to revise any of these forward looking statements. After the date of this call whether to reflect our current events circumstances or changes in expectations, except as required by law.

Forward looking statements are subject to a number of risks and uncertainties and actual results may differ materially from the results expressed or implied in light of variety of factors, including factors contained in our annual report on form 10-K quarterly reports on form 10-Q and in our other filings with the FCC.

Please note that a reconciliation of non-GAAP measures that may be referred to on this call to equivalent GAAP measures can be found in our earnings press release that was issued yesterday and on the company's website.

And with that I'd like to turn out of color, but amount.

Thank you Becky.

Jim Collins and is famous best seller good to great.

Offered a simple, but profound truth about leadership.

Taking a company from good to great.

Which was first to then what.

Meaning.

At the right people on your enterprise was wrong people off your enterprise bus.

Right people in the right seats on your enterprise boss.

Before you begin the journey a driving your enterprise bus.

To a sustained great performance destination.

Coming into 2020, and after two full months of performance and integration.

Bill gets.

Into our 10 member executive team.

I was feeling highly confident that on finally.

At the right senior leadership team in place for the future.

And then the grown a virus pandemic crisis suddenly shows up.

And I'm order to stay at home for two months.

What happened during that two months period.

Culminated in April performance.

That is nothing short of shockingly fantastic [noise].

And the best news of always that I had absolutely nothing to do.

I was stuck in my home Library, working on our Trust fund capital deployment strategy.

In collaboration with Ben Brink, and burner Bernadette Pompano.

Well I'll build gets and the other eight members over executive team, let our company on a daily basis through the peak of the granola bars pandemic crisis in spectacular fashion.

I would like to share the names of these high performance leader owner heroes.

That are on our executive team.

These are the leaders.

We will now drive the courage bus.

So the sustained high performance destination.

Over the next five years.

And I'm personally county, known I'm sure a price following their upward trajectory of performance like night follows a day.

They are three regional partners, Sean Phillips and the central follow Elliot in the West Horace Mann. So in the east. Thank you suppose operations in equity acquisitions analysis.

Ben Brink, CFO Picky, Blinderman principal financial officer, and accounting reporting Dave Metzger General Counsel and my Global resources now, we'll turn it over to our journalists leader Bill.

Great. Thank you Bill good morning, everyone. We appreciate your interest in carriage services and I Hope, we find you and your family's safe and healthy before we outline our business results I want to pass along or thoughts and prayers to all the families that have been directly impacted by the cobot 19 pandemic.

Also I know we have many members of the carriage team on the call I want to thank each of them for their heroic work. They have done over the last 10 weeks to serve their communities and each other while prioritizing everyone's health and safety what the carriage team has done is truly amazing and I'm. So proud to be a part of this organization.

As we prepared for the cold today, we thought long and hard about what information would be most helpful to you as investors with that in mind, we will spend less time going through our first quarter results. We believe the more pertinent information is our performance in April which was the first full month of operating under the new social distance.

<unk> restrictions.

I know many companies have withdrawn guidance, but we're taking a different approach based on the confidence that we have in our business. We will take you through our updated three year roughly right scenario will share with you capital allocation Trust fund performance and our five year shareholder value creation plan.

I'm going to start with some context surrounding the timeline of when the pandemic struck our business the immediate impact we felt in our business as the country began to shut down and most importantly, the actions that we took that had been delivering superior financial results. During the co bid 19 crisis.

I'm going to end my comments by also sharing or plan to continue our good to great transformative journey as restrictions are lifted.

We believe that our reaction to this crisis clearly demonstrates the carriage is the right choice for investors, who are looking for strong margins and a solid growth platform in the stable and predictable funeral and cemetery industry.

First the timeline.

Our performance through mid March was on track to deliver a traditionally strong quarter. Despite just getting initial momentum in March from our four recent acquisitions.

But as you will recall most of us realize that the world was quickly changing the week of March nine as California became the first state to take state wide action to mitigate the spread of the virus.

I just happened to be in northern California that week visiting some of our cemetery businesses.

<unk> in retrospect, it was beneficial for me and the executives that I was with to experience that change, which would quickly move across the country over the next two weeks, we began to monitor the effects on our businesses in California and develop the process to communicate other state orders. We also established a weekly operations call.

On March 20th and a daily Executive Cobot 19 call on March 23rd to assess the impact our businesses as stay at home orders and social distance seen restrictions expanded the other states. The last two weeks of March worries sudden shock to our operations as we dealt with mandated shut downs and stay at home or.

Okay, that's spread across the country. The result was lower funeral revenue averages and pre need cemetery sales that initially were not offset by higher volumes or cost reductions. This led to lower year over year field EBITDA margins and consolidated EBITDA margins not only for March but for the entire first quarter.

From that point on the story changes the story becomes one of an incredible team producing phenomenal results during one of the most challenging times in our country's history.

It is also a testament to our high performance leaders and their teams and our de centralized standards operating model.

This d. this differentiated model of hiring great talent, giving those leaders the autonomy to run their business, while providing tools and support is the right model for this industry and this crisis has only reaffirmed that point, we have driven superior results in a difficult environment, because our talented leaders did not wait for a director.

From a corporate headquarters they use their unique understanding of their own business and market to quickly adapt and innovate while leveraging new technology platforms in resources that were developed and implemented from the functional support teams in Houston.

From an operational standpoint, we price we prioritize three areas as we met the challenges of these unprecedented times. The first area of focus was to protect our people, especially our local teams who are on the frontline serving families. Many of our local leaders based on their specific needs began to implement revised work schedules.

Well there associates designed to minimize exposure in the event one employee contracted the virus.

Also they doubled down on a on existing infectious disease control procedures when handling Tobin 19 cases.

Finally, one of our executive leader, Sean Phillips use carriage is diverse network of P.P. suppliers. The team the to obtain the proper supplies for our field teams. Thanks to Sean's leadership, we have always had a sufficient supply a pea and we have not experienced any business interruptions.

The second area focus for our businesses was to continue to safely and responsibly serve families. While complying with the new social distancing guidelines. This is where our local teams have been and continue to be very creative not trying to use a one size fits all approach, but instead developing the right innovative ideas.

To help each family through the grieving process. These creative approaches included.

Dried fruit visitations that allowed family and friends the pay their respects, while remaining safely inside their vehicle.

Placing paper hearts on the chairs and chapel's with personal messages from loved ones, who cannot attend a service due to the restrictions.

Many of our businesses utilized live video streaming to broadcast services the family and friends. We even had one for you know who's live streaming was viewed more than 1300 times.

Additionally, in the month of April our live video streams were viewed in over 22 countries.

Also many of our funeral directors leveraged zoo and online arrangement tools to guide families through funeral arrangements and merchandise selections, while finalizing agreements using docusign. This provided for a completely remote experience.

Finally, we also adjusted our website messaging and our search engine optimization strategy to highlight our capabilities and competitive advantages within hours of government announcements.

Our third and final area focus during the Cobot 19 crisis was to minimize the possible negative financial impact our business by growing market share in tightly managing our expenses.

First and foremost our local teams reacted quickly to identify market share opportunities while tightly managing their expenses in this new environment.

Some of our best performing businesses actually increase their marketing and promotional activities. When they saw competitors do the opposite while at the same time, they reduced other variable expenses to pay for this investment.

From the Houston support Center, we supported these activities by providing additional attractive incentives in our pre need cemetery business and under the leadership Apollo Harris, one of our leaders and our cemetery business, we executed both pre need cemetery direct mail campaigns and digital techs campaigns that produce.

His response rates more than two times the industry average. These efforts have led to a robust pipeline a pre need property opportunities.

We also focused on corporate expense categories at the Houston support Center.

We temporarily postpone some discretionary capital expenditures and aggressively manage all variable costs.

We also received support from some of our key suppliers, who offered additional discounts on crucial products finally, our executive team and the board felt it was only right to reduce our compensation for short period of time as we assess the impact of the pandemic on our business.

Our focus response to the pandemic that I just outlined has allowed us to achieve outstanding results over this very difficult period to put this statement in perspective in April the likely bottom point for our economy. We grew total revenues by 3.6% we grew our adjusted consolidated EBITDA.

By 7.2% and increased adjusted cash flow by 41%. This performance was driven by increased volumes that more than offset what we believe will be temporary reduction in contract averages. This performance will also serve as a springboard to produce the longer term results that Ben.

Outline and just a minute.

Finally, I want to quickly cover our operational priorities for the remainder of the year that we'll continue to drive our performance momentum as we move to a more normalized business environment. We will continue to operate the business and a nimble fashion and react quickly as states counties and cities gradually reopen Steve.

Metzger in his legal team have established a process that provides immediate direction to our businesses as restrictions continue to change.

Also Paul Elliot, our senior executive who runs the Western region has developed a list of best practices that are businesses can leverage to accelerate engagement with families and communities as restrictions are lifted.

Talent, we will continue to focus on the who as Mel mentioned.

Hi, relentlessly recruiting and developing the best talent in the industry in fact in the middle of this crisis, we were able to bring three new leaders onboard that will immediately impact key businesses.

The third area of focus is acquisition integration at the end of last year, we closed for transformative acquisitions I'm happy to report that the integration of these businesses are on schedule and each of these businesses are positively impacting our overall results, while showing improving revenue trends each month.

A great example, this immediate impact is Fairfax Memorial Park, one of our top integration priorities was to add a world class Cemetery sales leader to fair to Fairfax, and we found that leader and Jerry Brown.

This is the first dedicated sales leader at this property and Sherry and her team are producing world class results.

There are still work to do an upside to be realized but all four of these investments are producing the results we anticipated.

Lastly, we will resume our work on the four transformative areas I spoke about on our last earnings call. We believe these areas will be the catalyst for transformative earnings growth over the next three years I want to quickly remind you of these key drivers.

The first transformative area is cremation conversion.

One of our key executives, Chris Manzo is leading this focus and you'll see these you will see these efforts positively impact our cremation averages this year and beyond this effort centers around building out the approach tools and training the share customized ideas on how families can honor and memorialize their loved ones.

When choosing cremation as the final disposition. The second tranche formative focus is technology innovation, we have made significant progress implementing technology solutions. During this crisis, but we will continue to develop and source technology that enhances our ability to market too and serve families.

While providing us a competitive advantage.

Here again, we're going to use our ability to be nimble to move quickly on these opportunities. The third transformative area is cemetery sales. We have recently made some great investments in our cemetery business and they're producing positive result, but we believe the upside for us in cemetery, especially pre need sales is.

Enormous we will hire a national sales leader for cemetery sales in the near future and then build out a comprehensive marketing and sales model to take our growing cemetery business to the next level.

Finally, we will continue our work on better defining measuring and building both the service and guest experience carriage has been built on a decentralized local leadership model that drives the best consumer experience in the industry.

This work is not an overhaul, but rather an enhancement to what we already believe is a collection of best in class operators and businesses. We will take some of the best practices from across our portfolio and create a platform to share those best practices will better measure their impact and provide our local leaders with new tools to help further enhance.

Services that drive greater results again, we will resume our work on these transformative areas starting in June.

One final comment before I hand, it off to Ben.

Typically each year in each earnings release, we highlight our high performance heroes.

Based on the last two months, we cannot single out even a large group for this recognition.

That's because each and every one of our managing partners and their teams along with our Houston support team have truly been heroes during knees unprecedented times.

I'm in all of what these heroes have been able to accomplish for both their communities and cared shareholders and I want to thank each of them for their incredible dedication and passion.

Now I'll turn it over to Ben.

Thank you Bill.

Thanks to all of you for joining our call. This morning, we hope that everyone is staying safe and healthy out there.

With the advent of the corner buyer crisis in mid March and the subsequent stay at home and other gathering restrictions that were implemented states and other jurisdictions across the country, our business and our industry had constraints placed upon us that were unprecedented in our history. The response from the entire carrots family over these past 10 weeks has been remarkable from them.

Passions skill and innovation or managing partners and their high performance teams demonstrated and caring for their clients families to the work of our Houston support Center. During these times I have never been more proud to be a part of the carriers team.

Carriage, we have a passing the conviction that are high performance culture begins and ends with having the best entrepreneurial leadership talent in every position at our company.

Like any other time in the history of carriage has our belief in the power of people through individual initiative and teamwork been more evident and I joined the rest of the executive team and thanking everyone for the dedication and passion for their work over these past 10 weeks now onto the results.

We were on pace to deliver a solid first quarter results until the middle of March when the first stay at home and other social distancing restrictions begin to be implemented in the Bay area in California, where we have a significant operational presence and spread to most states across the country.

The negative impact to our business came in the form of lower funeral contract averages as we were restricted from hosting large funerals and from a reduction of pre need cemetery sales activity as Bill mentioned, our local operating teams across the country moved quickly to adjust to these conditions and to continue to serve their clients families and their communities. During these unprecedented.

The decline in performance in the latter part of March negatively impacted all of our operating margins as we were unable to adjust our costs and that short amount of time.

For the first quarter revenue increased 12.2% to 77.5 million total field EBITDA increased 6.3% to 30.1 million total field EBITDA margin decreased 220 basis points to 38.8%.

Adjusted consolidated EBITDA increased 9.5% to 22.8 million.

Adjusted consolidated EBITDA margin fell 70 basis points to 29.5% and adjusted earnings per share declined 7.9% to 35 cents.

Done now the way.

In April or operating in finance performance was tremendous and demonstrated the strength of carriage and its operating model when faced with the challenges presented across our entire portfolio as a result of the current of our crisis.

The leadership and innovation of our managing partners and their high performance teams and continue to serve their communities is a testament to our commitment and the right to win needs local business and our belief in the power of the decentralized decision making.

<unk>, if you know revenue declined 2.3% as a 14% decrease an average revenue per funeral contract driven by the restrictions on gatherings was offset by similar increase in funeral home contracts in April the increase in funeral contract volume was primarily attributed to businesses located in areas of the country that experienced the grace impacts from.

The current a virus crisis, such as New York, New Jersey, Connecticut, Massachusetts, and New Orleans.

Same store funeral field margin increase 350 basis points to 43.5% April as our teams demonstrated discipline extent expense management at each local business.

Same store cemetery revenue declined 2.1 million or 37.7%, primarily due to the decline and preening property sales as local stay at home orders and so other social justice thing orders could tailed some of our normal sales activity, our sales managers and counselors across our businesses found new and innovative ways to interact with our cemetery printing.

Customers, which led to improve sales performance throughout the month.

Additionally of the inability to celebrate the traditional ching being holiday at Rolling Hills Memorial Park in Richmond, California. In early April was the cause for 66% of the decline and our pre need property sales as compared to last April.

We've either decline and printing property sale revenue in April as deferred rather than loss as we see significant opportunities to recapture those sales as we continue to welcome client families back into our cemeteries to the rest of the year.

He 7.2% growth in adjusting consolidated <unk> and the hundred and 20 basis point improvement and just consolidated even on a margin for the month of March versus last year.

The result of improve performance of our same store funeral and acquisition portfolio margins and a reduction in overhead expenses overhead expense reductions were driven lower by lower corporate incentive compensation lower non essential corporate expenses and previously announced reductions in salaries for our executive leadership team and art.

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Continue to review the corporate overhead expense items as a year progressive.

[noise] during the first quarter or acquisition funeral feel even saw was up 1.5 million or 55% driven by the inclusion of the for acquisitions. We made at the end of 2019, while our funeral acquisition <unk> margin declined 320 basis points of 36 point.

2% as we continue to integrate those for businesses.

Acquisition Cemetery, Eva Die for the first quarter was 827000 and ours acquisition Cemetery field margin was 29.5%.

We had no cemeteries and are required portfolio as of last year.

In April we continue to see a great momentum and improvements in our acquisition portfolio are funeral home field acquisition margin improved 3.9%, while our acquisition acquired cemetery feel even though margin improved to 40.7% and feel <unk> with 606000 for.

One month compared to the 827000 that we saw it for the first three months of the year.

As Bill said, we are pleased with the pace of integration of these acquisitions and the leadership, we haven't place at each of these four new acquisitions.

We and we also excited about a rapidly improving performance of our cemetery sales.

In the first quarter adjusted free cash flow increase Dirty 0.7 per cent of 12.6 million in April are estimated free cash flow was 8.2 million an increase of 41.1%.

Growth and free cash flow over the first four months to the year is an indication of the early innings of care is becoming a free cash flow generating machine. Accordingly, we have introduced a new shareholder value creation metric adjusted free cash flow margin, which will grow materially over the next three years and will be an important metric for festers to track over the coming years.

We expect are adjusted free cash flow for 2020 to be between 43 in 45 million a small increase from our previous estimate are free cash flow benefited from our decision to reduce capital expenditures to approximately 10 million for the year.

We will continue to invest in needed and maintenance cap x., along with selected growth projects focused on cemetery inventory development throughout the rest of the 2020.

Free cash flow will additionally benefit from changes to tax laws due to the recently passed cares Act.

No longer be required to pay federal cash income taxes, and 2020, a savings of approximately $7 million compared to our original expectations cash flow <unk>. Additionally benefit from provision then the cares act to the first social security payroll tax payments for one year and from the receipt of a tax refund, we previously filed and <unk> amended return.

We expect these additional benefits to equal about $4 million and cash savings and we provide updates on the final amount throughout the rest of the year.

We also continue to make progress on our previously announced Divesture program. We currently have seven properties under a letter intend to sell with approximate proceeds of $7 million. The first of which will close in the coming weeks, we expect to complete additional to us your transactions throughout the year with total proceeds approximate 11 million.

The impact these that's yours is minimal to our overall operating and financial results.

Taken together are strong and improving operating performance reduction in capital expenditures benefits when the cares x. and execution of small amount of Divestures will lead to an over 20% increase and adjusted free cash flow versus 2019, even in the mid so this challenging operating environment. The castle generation abilities of our business over the course of <unk>.

<unk> Walsall allow us to continue our debt repayment schedule and levers reduction as we are previously announced.

At the end of March we made the decision to hold additional cash balance sheet given the uncertain conditions. During those early weeks affirmative virus crisis, just cause or gross debt to even our ratio as defined in our credit agreement to be 5.9 times in the quarter higher than our maximum leverage compliance ratio 5.7 times on a net debt basis.

Are leverage ratio is right at 5.75 times.

After seeing our strong April performance and with a clear view of the effects of the current <unk> crisis I sat on carriage. We have worked with our bank group to attain a waiver for the first quarter leverage ratio breach with a small increase in our pricing on our facility. We expect our borrowing costs are credit facility to be 3.75% for the remainder of the year.

We expect to remain under our maximum leverage ratio per our credit agreement throughout the remainder of the year.

Are leverage ratio to end the year below 5.4 times and expect to reduce our debt under 490 million by year end.

Are growing free cash flow provide us multiple shareholder value creation capital allocation opportunities over the next five few years, our focus over the next 12 months will continue to be on operational improvements integration of recently completed acquisitions and repayment of debt using free cash flow.

Improve credit profile over the next 12 months, we'll put us in position to refinance or 6.6% to 5% senior unsecured notes at a lower interest rate given our belief that interest rates will continue to stay low and credit markets will continue to be healthy when we have the opportunity to color notes in June of next year.

This near term refinancing opportunity will be a significant driver for accelerated earnings per share and adjusted free castle growth in the second half a 2021 as we expect this right refinancing to generate a minimum of $8 million and cash interest savings.

This would be the final piece of our improve capital structure strategy. We began and may have 2018 and will create a truly built to last balance sheet here carriage.

I carriage, we've always believed in a balanced capital allocation programs supported by or high margin, hi, free cash flow business.

We're pleased to announce the decision by our board of directors to increase our dividend to five cents to 35 cents annually, which will be effective for our next dividend declaration in August.

Represents a current 2.5 dividend yield to four or 5% dividend yield and so the confidence we have and are growing free cash flow earnings power.

As we detail than our press release since the beginning of the year and accelerating over the past three months, we have execute a significant trust fund portfolio repositioning strategy focused on growing our annual recurring income and establishing positions and core equity positions at prices, we believe to be at a substantial discount to their intrinsic value in a normal life.

Economic environment.

We began to aggressively raise cash in our portfolio in February which only selling it in early March as we saw interest rates fall to historic levels and oil prices collapse in the face of production disagreements between Saudi Arabia in Russia or.

<unk> and also benefited from the liquidation of trust funds, we acquired as part of the acquisitions completed in the fourth quarter of last year.

But at the time the markets became highly volatile in March 9th we had moved over 25% of our portfolio and over $50 million into cash we deploy the majority of that cash over the next two weeks as both the volatility index and credit <unk> spreads were blown out and prices across multiple asset classes became dislocated. We've continued actively in selectively.

Making relative value rotations within our portfolio throughout April and into early ma'am.

So this repositioning strategy is a trust fund portfolio, there's even better prepared to whether any near term economic downturns provide more upside potential as a company and economy returned to a more normal state over the next year or two as well as generate significantly more recurring income.

For years to come.

Our ability to increase recurring annual income from the portfolio too from $4.5 million or 50% to just over $13 million annually.

Will provide a media lift to our financial revenue and <unk> through increased earnings in our cemetery perpetual care Trust accounts over the longer term this higher amount of recurring income plus the potential for significantly increased capital gains will lead to hire matured pretend funeral and cemetery contract values and provide a tail wind for financial revenue.

<unk>.

Through the end of the day on Monday or discretionary trust upon for Trust fund portfolio is down approximately 10% on a year today basis.

And finally, we are pleased to provide enough data three your scenario with an updated roughly right rains for our 2020 results and reaffirmation of our roughly right performance metrics for 2021 and 2022.

Recognize the number of companies have withdrawn guidelines for this year, but we felt that it was important to push back her earnings release, a couple of weeks in order not only provide a greater insight to our current operating results and the impact of the current of ours crisis, but also the provide investors are best and most up to date view of our performance over the next two and a half years.

Are updated 2020, roughly right rains, a 300, a three and a 6 million and total revenue 87 to 91 million and adjusted consolidated <unk>, 29% to 30% adjust to consolidate even margin close to our all time high adjusted quality, but our margins and $1.36 to dollar 35, and adjusted dilute E.P.S.

Assumes a gradual normalization of our funeral and cemetery operations over the rest of the year. We are encouraged by our results in April and early May and the feedback from anything partners that families want to return to the ritual ceremony of of gathering to remember and celebrate life a loved one.

Is important to know that even though the impact the current of hours crisis will be negative to revenue <unk> ER adjusted consolidated eat it and adjust the consolidated ebbed at E.P.S. compared to our earlier expectations. We expect an increase in adjusted free cash flow and adjusted free cash flow margin, which demonstrates the cash flow, earning power of carriers and the resilience.

Yeah, that's industry.

We are also pleased to reaffirm our previously announced roughly right ranges for 2021 and 2022.

Performance of our operating teams over the past few months has only increased our confidence in our school easy would achieve the important annual company milestones of $325 million, an annual revenue $100 million, an annual adjusted consolidated <unk> and over $202.25 and adjusted Delude D.P.S. in 2020.

One and 2022.

As you can see these are some very exciting times here a carriage even as we all navigate through challenging and unprecedented circumstances again. Thank you for taking the time to join US today, and we look forward to recording our second quarter results soon and without altering the color for questions.

Oh I might in fact the question. Please press are wanting your telephone keypad once again, that's our wine.

[noise], Okay first question <unk>.

<unk>.

<unk>.

Wanting everyone. Thank you for taking my question her one of the first congratulate you on the outperformance versus expectations in Q. on in the strong April and.

I.

Published especially pleased to see that you kept guidance, while many others have not and Rhea for 21 22.

There's a lot of information that you gave in to prepare comments I just wanted to.

Dive down into a couple of the issues that you had been faced with like a lower funeral averages and lower <unk> cemetery shells again, not uncommon not a surprise you know given what others have reported in the space.

What role did <unk> have a funeral averages from the first quarter.

[noise] you know Alice there was you know in the first order in early April we didn't see a tremendous difference in the pace of change in our you know cremation rates you know, we've we typically see that changing about 1% annually and it was about there maybe a little bit higher during that time, we did see his his people choose.

There to not have a service to defer service or to have a smaller service.

Had an impact on you know the averages of our you know home contracts during that time.

<unk>.

Yeah.

Oh, it's the only thing I can add yeah. That's a general statement, obviously you know in some areas right, we're probably harder hit.

You you did see some of that they exchange, but overall expensive.

It wasn't a big driver.

All right.

In it it's still your expectation that the cremation next shift will stay in like kind of with fish historical experience or 100 basis points sort of thing.

Yeah, you know I think as we as we went through April right. We saw the performance of the entire company continue to improve and that has moved into into May. We've seen average funeral home averages you know approach about 100% of where they were for the first part of May even last year. So we've seen.

I would call you know normalized happen pretty quickly here recently.

Alex This is still just add want that one thing I mentioned this in my comments you know big Big focus is cremation conversion and and because of family chooses cremation is the final display <unk> disposition that doesn't mean that they don't want to honor celebrate memorial lies that that family member so.

We're doing a good job of that now we believe there's upside to improve those discussions with families.

To make sure we're providing the right service without cremation decision.

Right and then then I think you start that same store funeral rather than is you have a bunch of April we're down to 0.3% well cemetery same store was down 37.1% that I hear that right driven primarily by pretty neat sales.

Yeah, you know April.

To put in contexts April of last year was our best and our best ever and record month for pre need property sales.

Perform incredibly well in the second quarter of last year and throughout the rest of the year for that matter. So the tough comparison to begin with certainly the restrictions you know right. There in in Northern California that was put in place fairly early on your restricting people's ability to them to meet face to face to come to the park to to meet with Us and.

Your ability to have a large gathering and ceremony and service like we normally have for that holiday, which has traditionally a big driver sales for us. So like I said our remarks, we don't we don't view that as as lost sales that these are these opportunities to recapture those sales here. The next six to 12 months.

Alex it's below the other thing I I mentioned at my comments you know, we we knew.

That that face to face interaction and pre need property sales was going to be impacted and so that's why we decided to.

To to implement a direct mail program, we knew a lotta people were at home.

The response rate on that direct mail program was again two times industry average average is we also did a.

<unk> message campaign for 10 of our cemeteries in made around mother's day. So we feel good now we have this really robust pipeline a pre need opportunities and we've already sold some of those opportunities, but we feel as you know social distancing restrictions are lifted.

Our our sales teams our sales counselors.

The pipeline that there'll be able to quickly activate.

Good Thanks shop, and then a question about code that cases, you know obviously this is this is top of mind for everybody and I don't want to get bored that here, but but.

How many how should we think about coated cases in terms of driving volume, which I don't look at a factor was in material where do these codes that cases come from where they predominantly from the rushing Holmes was there <unk>.

I I guess, just a little bit of color on the code that cases that you Campbell.

Yeah. Thanks for asking you know we were we have the ability to serve over 600 families who lost a loved one due to <unk> you know I think it speaks you know are professionals in the field and how they're able to continue to serve families through this the proper P.P. and precautions, we were able to take to continue to serve those families which is really important.

For us a lot of that volume was certainly in some hot spots have you heard about so long Island, Massachusetts, Northern New Jersey, Connecticut, where we have a large collection of businesses as well as in New Orleans, We saw you know big spikes and volume their end of March and throughout April some of that has returned to normal another.

Places in the other those areas continue to experience some of those higher volumes, even here and to me so.

Okay. Thanks, and then I I question I meant to ask what percentage up cemetery, rather now is preneed sales roughly.

Yeah, it's about it in terms of just pretty property sales about 55% of our cemetery revenue in a current period.

[noise] and you did you know some improvement in in the first couple of weeks of May in terms of breeding separate your sales as a result, so he's marketing campaigns that you much.

Yeah again, Alex I think you know a lot of activity, we feel really good about it in these campaigns. We did and also the technology that we brought into the business that allow for for conversations remotely. So we you know we don't think it's going to be jumpstart.

In May it'll probably take June and July, but we feel good about our ability to hang on to some of those opportunities and then as restrictions are lifted to have those conversations with families face to face taurine. The cemeteries that obviously are going to improve the the clothes ratio.

Great well. Thank you very much I think that's all the questions I have for right now and I'll follow up with than with a few small modeling questions. After the costs.

Things are good here for him.

Your next question comes on line of Chris make him from side on company.

The more interesting my plus unless <unk>. Thanks for all the info.

Just a question on his things start from normalize <unk> extra costs are going to be later.

You know.

Whether it's c. extra safety precautions due to coven.

You just maybe talk about how that plays out as we get maybe back to a more normalized.

<unk>.

Yeah, I think I think the costs related to to go visit our response to it I think we have the majority those whether it be you know the the cost we had for additional P.D. costs. We had for you know Reconfiguring you know space or the costs. We had you know for implementing different technologies that builds talked about.

Those have been they'll dollars and spent we've bifurcated some of those in natural disaster costs on our trend report will have some of those in April as well I think in general the the coffee you may look to come back in that we've taken out so far is around incentive compensation for the field and potentially for corpora.

What kind of address that as we move to the year based on operating and financial performance.

Thanks, and and I guess just are you starting to food mouse fruits are starting to open up a a more normalize environment of what you know.

I I guess, what you're seeing before coven <unk>.

Maybe a regular funeral and and and service versus what you have been seen through the you know the.

Restrictions.

Yeah, I I think the I think it's been pretty universal that as we move through April and things started loosen up here in may that our client families and people are looking to get back to normal I mean, the feedback we've gone from managing partners in their teams is that you know folks want to get back to the rituals of celebrating.

And remembering the life of a loved one.

In areas, where so-so distancing restrictions have been lifted or modified you know and examples here in Texas, you know we've been able to host services 30, and 40 people, while you know adhering to <unk> to just to sing guidelines.

Seeing areas like that we're able to to gather and hosts a more completely.

This is Mel <unk>.

You know America is a big country.

Very diverse country.

And our whole model and strategy here is to let these entrepreneurs locally.

Go to work innovate create.

So you know I know everybody was frightens here across the country. The media was relentless 24, seven or making sure everybody thought they were gonna die the next day.

But our people were fearless.

And it varied case by case across the country so normalization.

Is coming to our portfolio is very different rates and it's the states where they'd been hit the hardest.

Massachusetts, New York, New Jersey of course, Connecticut, Pennsylvania, where you've had these really tough mandated behavioral orders in place and still in a lot of those places.

But you know the rest of our portfolio has been free to create.

And so it is not it it hasn't been one size fits all recovery for our portfolio and it speaks to the diversity and strength of the country itself.

I appreciate I appreciate that and probably being stuck in New York.

I I've I'll think about it more and more but to some degree and I guess just longer term you know any changes do you think cobras, maybe presents and you know maybe positive <unk> you know in the sense of.

The competitors you talked about maybe the opportunity to game share well summer pulling back.

It's just how much is that opportunity presents itself right now and.

Just given the recent acquisition, maybe a little bit more lover balance sheet you know.

Does that hold you back on the acquisition strategy, maybe a little bit in terms of maybe there's a lot of Africans distress properties out there you just talk a little bit about how the and she Plano thing.

<unk> I'll take I'll take the first part of that and and Smells point you know our teams locally.

Really had had had done a good job.

I think is we we we come out of this.

You know we're in a great position based on some of the things that we did during the crisis. A good example that is that technology.

We implemented we were very quick R.I.T. team here did a great job we were very quick.

To bring in technology solutions that helped us here in the crisis, but we will benefit by being able to serve families in unique ways and expanded ways and I think that will impact our business moving forward I think the other thing that we heard from our managing partners.

Yeah, we as we worked with him his Mel said they were very in tune to what was going on in their market, they're reacting to that but from a Houston support center, we were close to make sure close to them to make sure. They had the resources that they needed to be successful and what we heard from quite a few of those managing partners. They were thankful that there.

Have ownership.

Running their local business with the support from the centre opposed to being a a independent operator, who who might struggle when somebody's areas to react to a crisis like this so I think that's one of the benefits you see that that our model again local ownership decentralized autonomy, but still resources of.

The company and I think that will continue to benefit us moving forward and then if you want to talk.

On the the acquisition peace give your perspective on that.

Yeah, Yeah, I think you know a couple of things the concerns that people or National media. You may have on some you know shift in consumer preferences are behaviors. When it comes to choosing or cemetery product. I think is is very off base I think people.

Really appreciate you know and value what our magic partners and our teams bring and allow them to celebrate the life a loved one and I think that returns back to normal faster than what people expect I.

I think these distress and the crisis and everything that people have gone through in our industry over these past couple of months has the potential who knows to accelerate people's decisions around succession planning solutions I think we stand ready to partner and affiliated with the best remaining independence in the country will continue to evaluate those as they come about so so Christmas as well.

I tell you I had to you know at home and door.

Relentless reporting I finally, just couldn't watch it anymore.

But you know we got.

Wants to a new normal.

And <unk>.

And then you know me the <unk>.

Declaring desk here.

Being killed grown of ours.

Yeah that went on.

<unk>.

Oh, there's a negative things and we get finally get back here in the office and couldn't wait.

And I'm looking at the early May trends, and I'm, telling bill and and the team here you know a new normal looking a whole lot like the old normal.

And the old Norma was pretty good. So you know this is the story of our company and.

And it's also the strength of our industry rituals around death had been going on for thousands of years.

When you do it right it has high value.

You got to have the right people delivering all the options and executing.

The the plan family My family and when you get the talent they will overcome adversity.

And what we just went through was proof of concept.

<unk>.

Proof of concept if you can't prove the concept works in April it's not proven.

And it's gonna be.

Getting better and it's going to stay that way for years and years. That's why we did this good degrade too incentive plan.

Mentioned it.

But it's real and our people are firing up under 47.

And you've never seen so many people fired up about what we can do what is possible.

And what this team can do is been amazing I've been sitting back watching all this.

There's a big ceremony.

And I've never been happier and I've never done less work.

So to watch them work has been a blessing and building here with his team and me being home I never even listen to into a call I listen to one operational call.

I was so blown away.

I'm going I'm, not gonna, even listen to another call I get too excited.

And and I didn't and so here we are coming out of this is gonna get really good for the next.

Many years.

And as far as the acquisitions look we're not out to buy some broken business <unk> because of Corona virus, we won't <unk> with the best remaining businesses.

Ones are not going to be broken desperate.

Going to come to us because we were hearing from these that we bought recently that they never could have made it.

Through this crisis without the incredible support.

All the heroes here in Houston support center and in the field.

They never could have endured is the way they did and this is what will lead to us.

Affiliated with the best remaining independence, but not now we got to pay down our debt.

We got to get the credit rating, we got to get on a low rate on our balance sheet. Then we're good to go and we're we're going to stay that way that's will be a cash flow.

Value creation platform that always dreamed it would be.

Right around the corner.

No. Thanks, Thanks, very much for the insides today, they safe and good luck inclusive.

Thank you.

Yeah.

I think that's it so.

Just want to think the executive team I Wanna thing all the managing partners in this company in their teams of employees, it's been something to be home.

Never been more honor to be affiliated with a group of people in my life.

<unk> reporting our results.

<unk>. Thank you.

<unk>.

[music].

Uh-huh.