Q2 2020 Carriage Services Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the carriage services second quarter 2020 earnings webcast.
At this time, all participants lights in the listen only mode.
Neither silicon back a question and answer session and instructions will follow with Uh Huh.
If anyone should require assistance during the conference. Please press star is around one of your on your touched on television.
As a reminder, this conference is being recorded.
I'd now like to have the conference over to the carriage services management I think you may begin.
Thank you and good morning, everyone. This is viki blinderman, the chief accounting officer carriage services.
Today, we'll be discussing the company's record second quarter results for our 2020 a related earnings release was made public yesterday after the market close.
Parents surfaces has posted the press release, including supplemental financial tables and information on the investors page of our website.
It's audio conference is being recorded an archive will be made available on our website later today through August Threerd replay information for the call can be found in the press release distributed yesterday.
On the call today for management, or Mel Payne, Chairman, and Chief Executive Officer, and Ben Brink, Chief Financial Officer.
Today's call will begin with formal remarks for management and followed by a question and answer period.
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 our views and assumptions regarding future events business performance and other factors at the time, we make them and do not undertake any obligation to provide updates or revise any of these forward looking statements. After the date of this call whether to reflect the occurrence of events circumstances or changes in expectations, except as required by law.
These 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 a 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 the call over to now thank you Becky.
The great blessing of my life is that I've said on my way into the funeral and cemetery business.
At age 48, when I Cofounded carriage [noise].
It has been in credible a life journey rear journey.
And indeed, a labor of love.
I Love affair.
Oh with our wonderful people ever sense that has involved my entire family.
My wife, My son in my daughter, who are big shareholders.
The work our people do is more than meaningful it is noble and it is necessary beyond description.
It is therefore only appropriate.
But this earnings release this call.
And this transformative year of high performance be dedicated.
To all of our wonderful leaders and employees in the portfolio businesses.
Of care age, who have risen to the challenge to once in a lifetime crises over the last four in counting much.
Our managing partners sales managers and their teams of employees.
Dealing with the fear and uncertainty other grown rebars pandemic.
And the constantly changing mandated behavioral and social restrictions family by family on the front lines of this battle against an invisible enemy.
Ben and our Kid continually to do no less courageous even heroic work.
Then the frontline army of doctors nurses and first responders across America.
Speaking for all of us.
Including our board, who were honored and privileged to serve you.
Our people.
We thank you and salute <unk>.
The second quarter earnings release published yesterday after the market.
Well, it's not about a record quarterly in first half performance.
The release is full of substantive content about our company.
And represents no less than a statement about the evolution of a radical idea we call our standards operating model.
Which one well led executed and supported.
Which is obvious in the second quarter in the first half.
Has the capacity to unleash human performance potential.
Beyond what would normally be thought possible.
When the current environment normalizes, we welcome all of you.
Have a curiosity on an interest to learn more about us and this idea.
To visit our home office as our special guest.
Our even better arrange a visit to one or more of our businesses.
A witness up close and personal the uniqueness and what our company is all about where it matters, most and our local businesses.
With that I'll turn it over to Ben.
Thank you mill.
Thank you everyone for joining us on the call today today, we'll discuss a record setting performance for carriage in the midst of an unprecedented operating conditions brought on by the cleaner virus crisis in the stay at home and other social distancing measures put in place to curb the spread.
Over the past four months our teams across the company I've moved quickly to creatively adapt and embraced change in order to continue to serve their families and their communities no matter the circumstances, they remain vigilant and putting the safety of our employees and claims families first while providing the high value personal service that they have always been known for to deliver the type of operator.
Additional and financial results in the face of these challenges is a testament to the leadership and professionalism, we have across our company and demonstrates the commitment from everyone here at carriage to make 2020, a year of transformative high performance.
Well, we hope we take you take away from our comprehensive press release and this call is that our results in the second quarter are not a onetime occurrence in the middle of a pandemic, but rather they are indicative of the growing earnings and cash flow generation potential of our portfolio a funeral homes and cemeteries.
The foundation for these results and for our transformative high performance expectations has been laid over the course of last 21 months through a series of difficult leadership decisions and evolutionary update to our funeral home in cemetery standards operating model that prioritize compound revenue growth improved alignment of our incentive.
And structure throughout the entire company and the successful acquisition integration of for high quality funeral home in cemetery operations late last year that allowed carriage to reach an important stage of critical mass.
We view, our second quarter and year to date results as the start of our good degrade journey part two and we remain extremely excited for the future carriage.
Now onto the results.
For the second quarter Carrots reported the following record setting performance metrics total revenue increased 14.4% to 77.5 million total field EBITDA increased 22.6% to 33.2 million, while total field EBITDA margin improved 290 basis points to 42.9%.
Adjusted consolidated EBITDA was 25.4 million, an increase of 32% and adjusted consolidated EBITDA margin expanded 440 basis points to 32.8%.
Adjusted diluted earnings per share was 45 cents, which was an increase of 45.2% compared to the second quarter of last year.
Our year to date results included the following record setting six month performance metrics total revenue of 155 million an increase of 13.3%, while total field EBITDA increased 14.2% to $63.3 million.
Adjusted consolidated EBITDA of 48.3% an increase of 20.3%.
While adjusted consolidated EBITDA margin improved 190 basis points to 31.2%.
Well not quite a record our adjusted diluted earnings per share for the first six months of the year increased 14.5% 79 cents.
And our same store funeral segment revenue increased 2.3% in the second quarter well the expense control we experienced in April continued for the rest of the quarter, which led to same store funeral field, EBITDA, increasing 2.5 million or 15.9% and funeral field EBITDA margin, increasing 500 basis points to.
42.3%.
The increase in revenue was driven by an IND by 12% increase the number of families. We served in the quarter early in the quarter. The volume increase was primarily related to cobot debts and hot spots in the northeast and in New Orleans for the balance of the quarter. The increase in same store funeral volumes were related to a long term trend of local market.
Share gains we believe we have made since the beginning of 2019 in conjunction with the changes to our standards operating model to focus on three year compound revenue growth through local market share gains.
Volume increases in our same store funeral segment were offset by almost $400 decline in our average revenue per funeral contract to approximately $5200. The worst the decline in average revenue per contract occurred in April and we saw improvement in averages as move through the quarter and they continue to be about 4% to 5% lower here in July.
The decline in average revenue per funeral contract was due to reduced service opportunities related to co bid social just seeing restrictions.
And it almost 300 basis point increase in our cremation rate for the year.
The increase in cremation rate can be tied to the increase in kobin related deaths, we experienced early in the quarter, which were mostly direct cremations and our focus on increasing market share are serving more families. In our communities. We do not believe the long term trend of 1% increase in our annual cremation rate has changed due to the CRO to virus crisis and believe we.
Like an opportunity to improve our average revenue per cremation contract through our continued focus on cremation conversion.
The ability to leverage a 2.3% increased in same store funeral revenue into a 15.9% increase in same store funeral field EBITDA was remarkable as indicative of the operating leverage as inherent in our funeral home businesses.
On a deeper review of our portfolio the margin improvement in our funeral home businesses was broad based as we experienced a high degree of expense management no matter if their business within a co bid hotspot at a normal level of quarterly revenue or if they were negatively impacted from the Corona virus restrictions. This broad base of transformative high performer.
As can be directly correlated to the challenge we issued all of our managing partners early this year to improve margin performance and the announce change to reduce the being the best annual incentive for any managing partner, whose business did not achieve the EBITDA minimum standard.
Based on our analysis of our portfolio and witnessing the rapid change that has occurred in our local businesses. We believe the focus on expense management and the change in behavior is we've experienced in second quarter are sustainable into the future.
In the second quarter, our same store cemetery segment revenue declined 11.6% to 11.7 million same store cemetery field EBITDA declined 23.6% to 3.7 million and cemetery field EBITDA margin declined 490 basis points to 31.7%.
Year to date same store cemetery revenue declined 7.7% same store cemetery field EBITDA declined 19.4% to 6.8 million and cemetery field EBITDA margin declined 440 basis points to 30.1%.
Our cemetery performance was negatively impacted due to the decline in preneed property sales from the stay at home and other social discussing orders put in place during the early stages of the krona buyers crisis, a large portion of our decline in premium property sales was due to our inability to host families and celebrate the Ching Ming holiday at our Rolling Hills Memorial Park in Richmond, California.
In early April we were encouraged to see the performance in our cemeteries improved throughout the month of April and that momentum has continued through the ended the quarter, where June cemetery revenue and field EBITDA were up year over year.
Even as we.
Even as we have begun to see new restrictions put in place in many jurisdictions, where we have large cemetery operations. Our teams continue to find new and creative ways, including leveraging new technologies to serve our cemetery families. We remain encouraged by the current.
Cemetery Preneed property sales trends this quarter.
We believe the reduction in premium property sales in the quarter, our deferred rather than lost sales and we look forward to serving those cemetery customers in the near future.
We're also excited to welcome Carlos Kizomba to our leadership team, we look forward to working with Carlos to take our cemetery sales performance. The next level with higher growth rates at higher and sustainable field EBITDA margins versus our historical performance.
With our most recent acquisitions of three large funeral and cemetery combination businesses. We believe this is the right time for this leadership position at carriage as we see significant opportunity for improved performance across our entire cemetery portfolio.
At the beginning of the year, we outlined a three year milestone scenario and stated that the first six months of 2020 will be focused on integration of the four large acquisitions. We made at the end of last year and the first part of January.
Given the size and scale of our acquisition activity in such a short amount of time, we knew was critically important to successfully integrate these businesses early this year.
While we could never predicted the unprecedented operational challenges brought on by the current a buyer's crisis. We are proud of the results of these businesses and as a whole their head of our expectations for the first six months of the year.
In each of these businesses, we have seen positive momentum and performance improvement almost on a monthly basis, particularly in the areas of cemetery preneed property sales and field EBITDA margins, which was evidenced by the 500 basis point improvement in acquisition funeral field EBITDA margin to 41.2% and the 590 basis.
Point.
The improvement in acquisition Cemetery field EBITDA margin to 35.4% in the second quarter compared to the first quarter.
We remain excited for this for the future opportunities for these acquisitions and we will continue to focus for the remainder of the year on integrating each of them onto the cares platform, which will lead to improved organic growth rates and higher and sustainable field EBITDA margins. We expect these businesses to be significant contributors to carriage is improved organic growth rates at higher levels.
As of adjusted consolidated EBITDA adjusted free cash flow margins in the years ahead.
Our discretionary Trust fund had a return of 22.3% in the second quarter, which brought our year to date performance through negative 5% since cares began to actively manage the majority of our pre trust assets in the fall 2008, our compound annual return is 12.8%.
Over the course of our 12 years of managing these assets, we've always taken a long term and patient view of our investment portfolio have been most active in times of significant market dislocation. We have used periods such as the 2008 2009 financial crisis. The downgraded the U.S. credit rating in August 2011, and the energy crash.
In late 2015 to make significant reallocations within our portfolio that have led to higher long term capital appreciation and higher recurring annual interest and dividend income.
In each of these periods the successful repositioning of our trust fund portfolio translated into corresponding increases in reported financial revenue and EBITDA up here at carriage.
The execution of our most recent repositioning strategy in the midst of the current virus crisis market crash has positioned our pre need trust portfolio to be more resilient in the short term and produce higher capital gains and sing nipigon lead higher amounts of recurring annual income over the long term.
Over the course of the past four months, we've invested over 62 million of capital in our Trust fund portfolio and grew our recurring annual income by 68% to $14 million annually a record high amount.
This 5.7 million increase in recurring annual Trust fund income will lead to sustainable annual increase of $3 million in reported financial revenue an increase in financial EBITDA margins in 95% and contribute an additional 10 cents of earnings per share annually to carriage.
We began to see the increase is reflected in our reported second quarter Cemetery Trust earnings, which increased 45.8% compared to last year, primarily from the significant increase in earned income from our cemetery perpetual care Trust. This type of increase will be consistent throughout the rest of the year and into 2021.
On a pro forma basis, including non-GAAP add backs for acquisition costs severance expenses and co bid related natural disaster costs overhead for the first six months of the year was flat at 15.7 million overhead as a percentage of revenue continued to fall on was 10.1% through June the strong operating performance in second quarter allowed us to fully accrued for both.
Field and corporate incentive compensation through the first six months.
An important component of our decision to partner with the four large acquisitions made at the end of the year was the ability to support these businesses without a large increase in our overhead platform our ability to leverage our over to platform in the future will be a key driver of growth in our adjusted consolidated EBITDA margin.
We're blessed to have an amazing team here at our Houston support Center, who have been able to provide first class support to our businesses drive legit digital transformation and produce a timely set of financial statements pretty much from the comfort of their homes. We will continue to make the necessary investments in this team and infrastructure to support our growth and accelerating competitive advantage for many years.
Mhm.
Our strong operational performance and second quarter translated into a 90.1% growth in adjusted free cash flow to a record of 17.9 million and adjusted free cash flow margin improved 920 basis points to 23.1% in the quarter for the first six months adjusted free cash flow grew 60% to 35.
530.5 million and adjusted free cash flow margin improved 580 basis points in 19.7% both of which were also records. This exceptional free cash flow performance is indicative of our ability to generate high in sustainable amounts of recurring cash flow that provides care as a significant amount of financial flexibility.
We expect our free cash flow growth and expansion of our free cash flow margin to only accelerate once we execute a senior note refinancing transaction in the second quarter next year dependent on market conditions. We are confident in our ability to execute this transaction given the continued momentum in our operational performance over the next year are rapidly improving credit profile.
Current credit market conditions, and the trading performance of our current 6.6% to 5% senior note since issuance. We expect this right refinancing to translate into a minimum of $8 million annual cash interest savings to carriage.
Our strong free cash flow performance in second quarter also allowed us to continue with our deleveraging program as we pay down a total of $24.4 million debt in the quarter, including cash we held on our balance sheet at the end of the first quarter.
Total debt outstanding was 508.5 million at the end of the quarter and I will total debt to pro forma adjusted consolidated EBITDA leverage ratio was approximately 5.5 times.
Current total debt outstanding is approximately 498 million, which brings our pro forma leverage ratio closer to 5.4 million as we sit here today.
We will pay down debt at a faster pace over the over the second half of the year as we execute on our previously announced divestiture program. We expect to sell 14 to 16 businesses or properties for approximately $15 million of proceeds the bulk of these transactions will occur before year end, we have already divested three businesses in the corner and have purchase agreements or letters of intent.
On forward. This additional properties that will close in the third quarter.
We have increased our adjusted free cash flow and adjusted free cash flow margin ranges and our updated 2020 post cobot outlook to $46 million to $50 million and 14.7% 15.7% respectively.
We expect that to be approximately 475 million and our total debt to adjusted consolidated EBITDA ratio to fall below 5% by year end over the next 12 months, we expect to generate over $50 million at adjusted free cash flow and have leverage ratio fall close to 4.5 times by the end of June of next year.
We introduced our adjusted free cash flow margin metric and our previous release as we believe it is the most important metric to illustrate carriage is transformation into a superior shareholder value creation platform over the course of the next two and half years using 2019 as our base year, we expect adjusted free cash flow to grow by 71.
Percent, our adjusted free cash flow margin to increase by approximately 540 basis points.
The growing amount of free cash flow and improved free cash flow margin will give us the necessary financial flexibility to allocate the to allocate capital to grow the intrinsic value per share value of carriage our focus over the next 12 months will lead to continued to pay down debt and improve our credit profile ahead of the senior note refinancing next year.
We also continue to make select investments in high return on invested capital internal growth projects, primarily focused on cemetery inventory development and funeral home Remodels, given our improved free cash flow performance. So second quarter, we expect to spend 13 to 14 million and capital expenditures this year split evenly between maintenance and growth.
Which will be slightly higher than our previous expectation.
Additionally, this high amount of free cash flow, coupled with our lowest cost of capital balance sheet post a refinancing transaction will provide carries the maximum amount of financial flexibility and allow us to pursue additional value creation capital allocation opportunities. The acquisition landscape remains highly favorable to carriage and once this period of uncertainty caused by the crew.
On a virus crisis is over we will believe there will be a number of owners of high quality funeral homes and cemeteries that will be looking to find the rights assessing paint succession planning solution for their local business.
The additional financial flexibility will also allow us to resume making opportunistic share repurchases says should our shares continue trade at what we believe is currently a significant discount to their intrinsic value.
We're also pleased to announce the decision by our board of directors to increase our annual dividend by five cents to 35 cents beginning with the next payment in September we will continue to have a strong and growing dividend as part of our shareholder value creation capital allocation strategy.
In our press release, we provided an updated three year milestones scenario and introduce an updated rolling four quarter outlook based on our strong performance in the second quarter and expectations for continued high performance for the rest of the year, we increase our.
2020 post cobot outlook to $91 million to $95 million of adjusted consolidated EBITDA, 30% to 31% of adjusted consolidated EBITDA margin, a $1.50 to $1.16 adjusted diluted earnings per share and $46 million to $50 million of adjusted free cash flow, we expect to reach the important milestone of 30% adjusted.
Adjusted EBITDA margin here in 2020, which would be a record for carriage threshold has never been achieved by another publicly traded death care consolidator.
The increases in ranges for our 2021 in 2022, roughly right outlooks are entirely due to the increase amount of recurring cemetery perpetual care income that will drive higher financial revenue and EBITDA over those years.
We have reintroduced our rolling four quarter outlook as it sinks perfectly with our goal over the next year to show the true, earning power of carriage for a full four quarters and improve our credit profile, leading up to an expected seen in no refinancing transaction next June.
Over the next 12 months, we expect total revenue between 312, and 320 million adjusted consolidated EBITDA of 95 to 100 million adjusted consolidated EBITDA margin sustainably between 30 and 31%.
Adjusted diluted EPS of $1.60 $5 75, adjusted free cash flow growing to 50 to 54 million adjusted free cash flow margin continuing to expand to between 15.8 and 16.8 and total debt to EBITDA leverage ratio following close to 4.5 times as a reminder know these outlooks include any acquisition.
Tivity, we firmly believe all these milestone ranges are achievable over the next two to three years as we control our own high performance Destiny.
Our second quarter performance was nothing short of amazing and was entirely driven by the execution of our managing partners and their teams. We believe the success of carriers is predicated on strong local leadership empowered to make the best decisions for their business our belief as vindicated by the extraordinary results. Our teams produced in the second quarter the transformative high performance good to grow.
Great flywheel effect is in full motion here at carriage and we look forward to reporting our progress to you going forward.
And finally I'll leave you with this are amazing teams across the country care for families are dealing with the most tragic affects the current of Iris. So when it comes to covert I encourage you to stay vigilant stay healthy practice fill so distancing or washer hands and with that will open up for questions.
Ladies and gentlemen, if you have a question that this time. Please press star then the number one Nicholas.
Telephone again star of the number one.
Jennifer.
Your question that's been answered.
Steve or move yourself from the Q.
Please press the pound cake.
Your first question cost of the line Alex Paris from Barrington Research. Your line is now.
Hey, guys. Congratulations on the Q2 beat and raise what a difference three months mix.
Thank you Alex.
And the big difference.
I want to dive a little deeper into the two metrics that have seem to be most influenced by co that recently funeral averages and preneed cemetery sales.
There's a lot of information in your prepared comments, but I believe you said funeral averages on same store basis were down 7% in quarter improved throughout the quarter, but we're still down 4% to 5% in July.
Is that.
Did I hear that correctly.
Yes, Alex that was correct okay.
The.
And I'm wondering what impact coded had on that.
And maybe it starts with coated volumes have you disclosed or will disclose orders of magnitude how many cobot cases, you handle at carriage services and what there.
It sounds like their choice of disposition was direct cremation, obviously that it in of itself would have an impact on the averages but.
Maybe little bit Workover there please.
Yes, no so Alex I would I'd definitely say you have the volume increases we saw early in the quarter, we're really primarily related to the increase in tests from coven like I said in this hot spots in the northeast in New Orleans, a lot of that increase in April and the early part of May was due to those covert.
Deaths, while we track that number we don't feel it's appropriate to release the exact number that of cobot families. We've served as we went into may into June we continue to see that high level of volume increase contracts volume increase in our same store portfolio and like I said that was really driven by.
Local market share gains that we believe we've we've been gaining over these past couple of years.
Alex that mill we.
We did all all kinds of.
Breakdowns of the portfolio.
We had 22 businesses and hot spots.
Those were in the five states, Massachusetts, Connecticut.
New Jersey, New York.
And Pennsylvania.
And they had a big quarter.
Starting in April.
That's 22 businesses, but if you looked at how much revenue.
Those businesses.
Increased as a group it was very substantial.
And they brought 107% of the additional revenue.
Mostly we'll all from additional volume.
Those are averages were down over 1000 on average.
Or funeral.
About all the additional revenue.
107% to food field EBITDA, so their margins went way up 11000 points.
So we had a large group of non hot spots.
That that had volume increases and theyre averages were down but down you know maybe.
20, 20% of the coded places.
And then they brought 117%.
Of the additional.
Revenue and to field EBITDA.
When we saw other businesses.
Large groups that didnt have revenue increases from volumes.
In some of them head revenue declines is a natural thing for a large portfolio.
Some places were slow.
Well, we had we had to expense management did so we actually had.
Group that had an revenue decline.
A meaningful amount.
And they increase their margin 500 basis points. So what we saw was very broad improvement.
And we did see normalization in the total average up close to 90, 899% one point.
But then covert is spreading the taxes and other places and other restrictions and so now the averages back down as a group, but we don't expect the outcome to be any different.
We see broad.
Performance and lots of feedback across the portfolio.
From managing partners, our directors of support.
This is a different kind of company.
Than it was.
18 months ago, 21 months ago, and that will cobot is not the reason.
We are outperforming its all these other things and we're outperforming in spite of code.
As the best way I could describe it.
That's helpful. Thanks, Thanks for that additional color.
So just to be clear you said, you're back up to 98 or 99% said another way your funeral averages were down one shot but because of.
Resurgence in some of the stage in the month of July it was down 4% to 5%.
Yes, just come back down.
You know, we we don't expect the outcomes to being a different.
Controversy volume increases.
Broadly and we don't think it's all we know it's not all coated related.
We've done a lot of things here to improve our competitive position.
And our people realize.
These standards drive.
Behavior.
And the incentives and disincentives drive behavior.
And over the last 21 months, we've got a lot of great behaviors in place compared to what we had at that time and so when you get a lot of great who's in place, where the right incentives and disincentives good things happen.
And then I would assume.
In March were all taken by surprise by co that.
Here in June and July there with July be resurgence of Copel that at some of the stage.
Is that new to the shoes funeral.
Directors and that there were a little bit better prepared for it. So I would think intuitively that they should be able to two whether that store in preached social gathering restrictions.
Better this time than even last time last time worked out pretty well.
You hit the nail on the head we had.
We had a conference call with the standards Council on Monday.
To go over the press release.
Because there's a whole page dedicated to them.
And.
We have four five in California.
For in California, where they were the first ones.
To deal with this and then we get three in Northern California, and one in southern California.
And.
Yeah. This is exactly what they said.
You could you could have been articulating there there from conviction that look we've been here before we learned a lot now we're we're more prepared than ever let's go back to work and get it done and so I think you'll find that same attitude throughout our portfolio.
That's great.
All right. So that helps me with regard to funeral averages.
Same store cemetery was down 12% same store field EBITDA in cemetery was down 24% net just to be clear did you say June same store revenues in June.
Same store field EBITDA was up year over year.
Yes, so Alex but all of that decline you really happened in April we saw performance really come back strong in it may it was about even where we were at in last year and than June we were up about half a million dollars in revenue and EBITDA in our same store cemeteries. So im looking at it here Alex.
No.
April we were down 2.1 billion same store revenue in the cemetery.
In May we were.
Just up a little bit just call it flat.
And then in June we were we were ahead $600000, so and Thats the trend we see.
Got you still get $1 last year when Carlos gets here.
That trend will become our big time friend.
Yes, absolutely Carlos and Fergie has an impressive background, having that most recently at service Corp.
In this area.
A very impressive background and when you made them and talk to him.
You will see why he's going to be a perfect fit here.
And while we're all excited about it every single one of us.
Great I look forward to it.
And then.
Within Cemetery Preneed Cemetery sales, obviously impacted by.
Potential customers and ability to come out to the cemetery.
And this was exacerbated by a really really tough competition chigney holiday last year.
Yep.
And.
Ben improving in May and June and July.
Yes, that's what I was thats, what I was commenting on April we were 2.1 million in the whole.
May was about flat same store cemetery revenue and then June were actually up 600000, which is 15%.
So we don't expect.
We don't expect to go back to an April deficit, we expect dig out of the whole and get to the head by the end of the year.
A lot.
Gotcha Okay.
These little thinkers around here right now.
Okay.
Alright.
And then.
Couple of my questions were answered in the overview comments I guess I got one little bookkeeping sort of question for Ben.
Since you're roughly right range for 2020.
With regard to the GAAP numbers that are in the back of the press release pre tax income net income tax expense.
Include or exclude that $14.7 billion impairment on goodwill in the first quarter and its corresponding impact on tax expense in the first works, which is actually a tax credits in the first quarter.
Okay.
I have I have multiple people motioning and yet you don't have to it.
Alex off all over the on on that question. Okay. That's fine, but thank you. So much of this information. Thanks. Thanks for the additional cost do you want to know more about technical accounting you should call me.
I'm just kidding.
Okay, Alright, guys. Thanks, again, congratulations on a quarter and the guidance range.
Thank you Alexander.
If anyone wants to ask a question. Please press star followed by one on your touched on telephone.
Your next question comes from the line of Chris Mcginnis from Sidoti and company. Your line is now open.
Good morning, Thanks for taking my question.
Yes.
Great results.
Yes.
And just talk.
Some of the questions.
You mentioned the markets are again.
And that's really some driver.
Fundamentals.
Talking about what maybe which is in those markets that you made around.
The ability to drive that Mark those markets again.
Okay.
Yes, I think.
Chris really pointing back to the the changes we made the update we made to the standards operating model in late 2018 and implemented at the beginning of 19 to focus on three year compound average revenue growth.
Eliminating a very rigid standard of average revenue per contract.
There in 2019 allow people to the freedom and flexibility.
To continue to grow their local market share.
And again talking about change a long term change in behaviors that we have witness in carriage. That's certainly one of them. Some gross mill, yes, I mean you'd have to go back.
And.
And read the the the 18 shareholder letter.
That talks about the diagnosis of all the low performance and the declining trends.
And what were some of the obstacles.
And how those standards counsel.
When we went through an updating and rebuilding of all the standards.
Well, we did was we eliminated.
A standard call average revenue per contract that was causing a lot of our funeral homes.
Managing partners to to not see.
Our even to take.
Lower average businesslike cremations.
We are they at least had an opportunity to turn it into something better. So they were they were not there were leaving a lot of market share in the market.
When we eliminated that.
And then would change the incentives earlier this year.
About to margin and then in the meantime, we've made a lot of changes in the managing partner ranks over the last 21 months is as well as the.
Directors of support who support them. So you had a lot of talent come into this company that are high performance and lot of changes incentives ends in performance standards. When you combine all that you've got a lot of entrepreneur is out there and figuring out what to do so we don't have to go figure out it what to do because when we.
Figure it out you don't get volume and you don't get the result that you're seeing right now.
Sure. Okay, now that makes a lot of sense and I do remember the 18 letter.
So my daughter with Florida, I think it's the same week so.
Yeah. I mean, this is not just didnt happen overnight and.
We got to.
We got an incredible group of talented entrepreneurial.
People in charge of these businesses and I think.
Oh, probably wall Street doesn't have a great understand and just how entrepreneurial this business can be it the local level and they are they're coming up with ideas of how to grow market share we couldn't dream up in a million years I.
I mean, we just recently I heard about.
One one business up in Kentucky global either community because.
The family.
Now who died his favorite holiday was Christmas.
So I had Christmas in June.
Oh place was decorated with Christmas decorations blew away the community.
Well you can come up with ideas like does appear in the Pentagon and push it down.
But when they come up with the is like the word gets around.
Sure.
I guess in the same vein just on the expense side.
Obviously.
Very helpful Thats driving the margin improvement can you just talk about maybe some of the things that they are.
Where they're saving the money into local level.
The driver so here's what we've noticed we've noticed.
I mean, we had the business is a very social people business and in a local communities.
And for that reason you have a lot of.
Older people, maybe retired police chief for school principal.
As part timers.
And lot of these mandated restrictions did not allow people over 65, because there were in vulnerable groups for example in California.
And so they were mandated not too to work.
And.
So a lot of our people were able to get.
Yes, the service done beyond expectations without the same amount of SMB.
And also our directors of sport.
To support our analytical group without travel and entertainment.
You had a lot of performance happening without the same degree cost.
And we believe that that will lead to flush it had to all the focus on cost management, we believe that will lead to.
A higher level.
Total portfolio margin performance in the future.
And I guess as those restrictions.
Not everything is going to be brought back online or whatever I guess is kind of with.
Look what youre managing partner owns a business and nicely what they can do.
There are going to do what's best for the business sure sure.
And then just one last question around the acquisition improvement in EBITDA, there and I think it I think you said it was ahead of your expectation.
What's driving the performance of those.
Wired assets.
Maybe performing as well as they are just.
And some change under your kind of guidance with them.
Thanks.
How about everything changes.
We take a great family franchise.
And we we put our framework on it.
And support.
And and a lot of things change and what Doesnt changes the local Pete.
But the performance you know I mean than we have all the support services, we heard from every single business.
I don't know how they would have endured this crisis.
Without being part of carriage and so being part of us turned out to be a blessing and I've heard that over and over from the former owners from the managing partners.
This has been a blessing come in at the same time.
They are turning into great partners, they want to contribute they see what the standards are and they don't want to be a week partner they want to be a strong partners. So it's a win win.
And I think result.
My follow busy we talk we talk about these acquisitions because they'll have been in one of those kind of for combined but really Fairfax stands out in the in the size and scale of of that business and you're starting to we're starting to see end of the first quarter in here into the second quarter really starting to see the emergence of the earning power.
That business and that has a real big effect on the margins in our acquisition portfolio Resthaven and Dallas area is really kicking up Lombardo and Buffalo is kicking in the one that's been the slowest is the one we expected to be because while the restrictions in northern California, but it will come around it.
Well.
Great and I guess this is just.
Given the increase cash generation the ability to kind of reduce your leverage.
I know, it's early so but just.
Expectations about maybe when you step back in the market on the M&A side. Thanks.
I think it's very important whereas that you do what you say you're going to do.
We're going to de lever.
Next year, we're going to pay our debt down fast.
And that's what we said we were going to do you said as we pay that down and refinance we will have moderate leverage.
I have no problem, maintaining moderate leverage, but I don't really see us being back in the market before we we do what we said we're going to do.
Great.
Thanks for taking my question.
Presenters I'm showing no further questions at this time with all like to turn the conference back MLP.
Thank you very much Theres, one last piece of business I would like to tend to.
We want to wish our very best to build yes.
He was here six months he made a difference he made a lot of friends.
Is it Greg Guy.
It was the first one to reach out to me yesterday text to congratulate me and carriage on our quarter.
And.
And I really appreciated that and Texas to him back built whatever you do don't sell your care at shares.
It's actually back don't worry Mel I won't.
With that will.
Let it go and look forward to reporting a third quarter. Thank you.
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