Full Year 2020 Carriage Services Inc Earnings Call

[music].

[laughter].

Welcome to ladies and gentlemen.

Welcome to the fourth quarter and year end.

2020 results conference call.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone.

Minder. This conference call is being recorded I would now like to turn the call over to your host today, Mr. Steve met sure. Some day management Sir. Please go ahead.

Thank you operator, and good morning, everyone. This is Dave Metzger Senior Vice President and General Counsel for the company today, we'll be discussing our fourth quarter and year end results for 2020, our related earnings release was made public yesterday. After the market closed we have posted the press release, including supplemental financial tables and information on the investors page of our website.

The conference is being recorded and an archive will be made available on our website later today through February 23rd.

In addition to myself on the call. This morning from the management team are Mel Payne, Chairman and Chief Executive Officer, Ben Brink, Senior Vice President and Chief Financial Officer, Carlos Cassata, Senior Vice President of sales and marketing Peggy Chapeau, Vice President of operations and acquisitions analysis, and Jason Buchbinder director of town acquisition.

Today's call will begin with formal remarks from management, followed by a question and answer period before we begin I would like to remind everyone that during this call. We'll make some forward looking statements any comments made by our management team that state our plans beliefs expectations or projections for the future are forward looking.

These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include but are not limited to both factors identified in our earnings release and in our filings with the SEC both of which are available on our website.

During this call. We'll also discuss certain non-GAAP financial measures a reconciliation of these non-GAAP measures to the appropriate GAAP measures can also be found in our earnings press release as well as on our website now I'd like to turn the call over to Mel.

Thank you Steve.

It's hard to describe.

And words, what this last year.

Is it meant.

When the world is in crisis with a once in a lifetime hopefully pandemic.

All COVID-19.

When new variance around the world popping up.

For now.

And yet.

The shock of that hit the world didn't hit the U S.

State by state area by area, then it hit our industry and our company and our people.

A year of great tragedy for for many individuals companies.

Families.

Hum.

And yet.

We are in the in the business of debt.

And death has been around essentially the human species has been around.

And so we we have a mission and vision of our company of being the best.

At serving families. When they are most in need.

And there are many more of them in 2020 than ever before and need.

For that reason this earnings release of the fourth quarter and year was not really just on earnings release.

It was a story about our people.

It was a story about courageous.

He ROIC service overcoming adversity and obstacles both.

Nature made and manmade with government restrictions and mandates.

And our people rose to the occasion.

After initial shock on Adaptational period, and innovation period and entrepreneurial period.

And it is impossible to put in words.

What are people achieved business by business community by community throughout 2020.

And the process.

They absolutely were what I call a proof of concept.

Of how we operate and consolidate the highly fragmented industry called the funeral and cemetery industry.

I wrote about this at the end of the 16 shareholder letter it's at the end of this one.

So this this release is more like a shareholder letter.

It's a story of love toward our people.

And their love toward their client families and communities.

It's a story of support.

[noise] of here of us in the Houston office and across the country.

I had the privilege and honor of supporting such courageous service by so many high performance heroes.

I've waited for this kind of moment.

Uh huh.

As a cofounder almost 30 years ago.

To use this description that I'm about to redo.

I'm, a big fan I'm, a big fan of investing.

After losing everything in October 19th 1987, I committed to become a great investor.

Studied all the masters.

Available then in sense.

And I wound up studying the very simple, but wonderful investment ideas and philosophies about human nature.

From Warren Buffett and Charlie Munger.

So I'm going to read you a page.

From a snowball.

That's good.

It could really be a page about about me.

And about this company.

So this is a quote.

From Warren Buffett.

I feel like I'm on my back.

And they're sustained chappell.

I was talking about Berkshire Hathaway.

And then painting away.

I like it when people say Gee.

That's a pretty good looking painting.

But it's my painting and when somebody says why don't you use red instead of Blue <unk>.

Goodbye My painting.

I don't care, what they sell it for you're talking about the share price Berkshire Hathaway.

The painting.

Itself will never be finished that's one of the great things about it.

Okay.

A big question about how people behave is whether they've got an inner scorecard or an outer scorecard.

It helps if you can be satisfied with an inner scorecard.

Yeah.

I always pose it this way I say look at would you rather be the world's greatest lever.

But have everyone. Thank you the world's worst lever.

Or would you rather be the world's worst lover, but have everyone. Thank you the worlds greatest lover.

Now that's an interesting question.

Here's another one.

If the world couldn't see your results would.

Would you rather be thought of as the world's greatest investor.

But in reality in reality, you have the world's worst record.

Our be thought of as the world's worst investor when you actually were the best.

And teaching your kids I think the lesson they are learning at a very very early age.

Is what their parents put the emphasis on.

If all the emphasis is on what the world's going to think about you.

We're getting about how you really behave you'll wind up with an outer scorecard.

Yeah My dad, he was 100% enter scorecard guy.

He was really a maverick.

But he wasn't a maverick the sake of being a maverick he just didnt care what other people thought.

My Dad taught me how life should be lived.

I've never seen anybody quite like it.

That's the end of my quote.

But I editorialized I use us a lot inside our company.

And where he's talking about assisting chapel, and somebody coming along and saying Oh you should use this we use that to make it better.

I put that is a founders' view of the world and it captures my thinking perfectly.

And when it comes to finding people, who have an inner versus outer scorecard I have editorialize. The following how do we measure on a quantified this behavioral characteristics because.

Because we need more people that have an inter scorecard.

And are not looking at the.

Scorecard, rather than being on the playing field, making plays to win the game.

And then at the bottom I say I finally arrived for you're talking about his dad didn't care what other people thought.

Rather late in life and I'm, a better person in leader because of this confidence in myself identity.

So that's how I would do an analogy of carriage today.

For those who don't do enough studying about how we actually are and how we actually behave.

You would not want to buy our shares for.

For those who do and Theres a lot of meat on the bone in this release and in every release we've made.

There was a lot of meat on the bone into 16 shareholder letter and the 17 shareholder letter and the 18th shareholder letter if you want to see what it looks like for a company to go through a transformation.

In a short amount of time put side by side the 18th shareholder letter in this release.

And you will be shocked really 18, one first and then read does release.

You will find the Jim Collins had it right first.

First who then what.

All of the companies, who subsequently failed failed.

Two to sustain greatness and they're all 11 of them and it made the cut did it because they picked the wrong, who either the board or the CEO sometimes both.

First two then what.

You got to get the who right most of the time.

To really have the what be the kind of performance. This company showed in 2020 in the middle of a pandemic.

Now there are those out there and I've heard these theories did think this was a COVID-19 lift only you.

Could not be further from wrong.

And to prove it I'm going to introduce one of the right first tubes, and we've never had our first two like this in our company Carlos was off.

Thank you Mel and thank you all for being with us today.

When I came on board with carriage I was leaving behind a very successful almost 11 years career, an outstanding record of accomplishment with Sci.

We're true TBD innovation and cultural transformation.

It's able to exceed expectations constantly of repos.

Also in operations.

When I met with Mel for the first time during my interview process I was able to conclude very quickly wait carriage would be a perfect fit for me.

Concepts like good a great flywheel effect the right people in the right seat of outperformance pause it.

They focused on people and their development or where the same leadership concepts and ideas that I had been implementing doing my whole career and in great measure of the main reason for my successor.

I joined carriage from June 26, 2020, and I spent some time understanding the dynamics of the cemetery sales teams across the portfolio.

Well nothing is broken.

Not yet maximizing our true high performance potential and I can see the past blue Sky that carriage has to offer.

Mel said it perfectly when he wrote on day, 2022nd quarter earnings release and I quote.

Well in the past, we have had spurts of broad high property sales performance in our 10 largest cemeteries.

We have never been able to sustain such performers over the long term on their other centralized decision, making business model. This thing regionally for a standalone funeral business portfolio Carla.

Carlos will have the primary responsibility for building high performance sales teams and our standard ICL systems across our portfolio of cemeteries.

We believe that his leadership in past successes are building high performance winning teams will finally, unleash the broad and sustainable performance power within our cemetery portfolio end of quote.

With that mission in mind, I went to work and introduce to the executive team. The plan for the creation of high performance sales teams across our cemetery portfolio.

The plan, while ambitious and aggressive in respect to goals and timelines inspired the excitement possibility and full support towards its execution.

In summary, the plan is made of six main high performance sales drivers.

Number one leverage technology as an enabler of simple celebration.

Number two introduction of performance based rewards and incentives.

Number three a strategic capital allocation to high yield cemetery products and offerings.

Number for <unk>.

Sales growth for advanced blending of strategies and robust marketing.

Number five deployment of lead generation programs, while improving conversion ratios.

And number six.

And a recession of cemetery sales processes policies and systems.

Over the past seven months, we have experienced incredible progress through the execution of our transformational high performance plan.

Traveling we're permitted to visit the cemetery portfolio meet the team build new relationships and understand and identify possibilities.

Moreover, while it was difficult to do in a challenging pandemic environment, we're able to get things done for example.

We recruited two new sales leaders that now complete our sales leadership team made of three top talented high performance director of sales support.

So Oliver Tayloe, shamed, Prudence and polar Harris.

We're also able to bring on board a cell development partner every memory Ebony.

<unk> is now the leader owner of our new learning platform, which he will focused on instilling the sales skills conducive of a top sales team across our sales organization.

We have also selected a new customer relationship management system and we're in the process of customization through our implementation partner.

We created our compensation Committee to review and evaluate our current do we watch and incentive programs and transform it into our performance space high reward compensation program.

We deploy day communication management system that displays multiple types of content in the forefront of our sales teams instantly, enabling quick direct and effective communication across the portfolio.

We developed an internal campaign promoting our core values and what it means to be part of high Harper for months sales organization, we call it care edge and it means that when you joined carriage youre joining more than a member and a member of our sales team you're part of my heart performance culture, driven by people, who truly care for our client families.

Will it be an inspired and energized by incredible passion for sales success and excellence.

Gary edge that finds a trip pillars of our sales DNA, who we are what we do and how we do it.

We also had record breaking months from total preneed property sales are in Q4 for 2020 and this past January 'twenty 'twenty. One we had an exceptional total sales performance of 152, 2% over January of last year.

Sure.

As I share all of the progress made thus far I realize how much we have achieved in such little time in all because of the amazing partnership and support from everyone here at carriage.

Our good sales to great till journey has begun Moreover, our updated two year roughly right scenario set high expectations from preneed property sales that we plan on meeting and exceeding.

We are a high performance team that is highly inspired totally driven very passionate and fully committed to success.

This is just the beginning on our quest to being the best at sales and reach our true potential and there is a lot more to come but for now I can say that carriage is services future is very bright and will become even brighter as we capitalized on every blue sky opportunity and continue to build up an effective igl and very successful Harper for myself.

Organization across our portfolio of businesses.

In closing I want to highlight that this company sprained for remarkable success and as we accelerate execution and continued to gain momentum on a flywheel effect will become a predictable and sustainable hyper for months also organization.

There has never been a better time to be with carriage and the best is yet to come.

Everyone and then pass it to Ben.

Thank you Carlos I appreciate your comments and I'm excited for the opportunities that we have for our cemetery performance going forward before I dive into an explanation of our record operating and financial results for the year I would like to make the following two points.

For any current or curious investor prospective acquisition candidates someone linky thinking about joining our high performance teams or any other deeply interested party I would highly recommend you take the requisite time to read our yearend 2020 earnings press release as it we'll certainly do a much better job at encapsulating.

Our record setting results in our clear vision for the future success of carriage than I could in my remarks.

Combined with the previous.

2020 quarterly earnings releases. These documents tell in striking detail and clarity. The story of carriage is remarkable transformation over the course of the past 12 months and should be required reading for all that are truly interested.

Secondly, the results I will discuss are a direct result of the incredible dedication passion and professionalism of every member of carriage as high performance teams across the country.

As the coronavirus pandemic has persisted and measures to limit the spread have become a way of life. Our funeral and cemetery professionals have overcome previously unimaginable obstacles to answer the Bell every single day to provide a high value personal service to every family who has lost a loved one that we have the privilege opportunity to serve their supported 20.

For seven by another Amazing group of dedicated professionals here in our Houston support center to all of our employees here at carriage is with tremendous pride in admiration for I simply say, thank you for all of your incredible efforts over the course of the past year.

Now onto our results.

For the full year 2020, our total total revenue increased 22%.

$329 $4 million.

Our total field EBITDA increased 29, 3% to $141 $9 million.

Total field EBITDA margin increased 310 basis points to 43, 1%.

Adjusted consolidated EBITDA increased 36, 1% to $104 $3 million.

Adjusted consolidated EBITDA margin increased an incredible 370 basis points to 31, 6%.

And our adjusted earnings diluted earnings per share increased 48, 8% to $1.86 all of which were records.

In the fourth quarter. Our record results are resulted in total revenue, increasing 26, 6% to $90 $1 million total field, EBITDA, increasing 44, 4% to $41 $3 million.

Total field EBITDA margin, increasing 570 basis points to 45, 9%.

Adjusted consolidated EBITDA, increasing 47, 5% to $28 $3 million and our adjusted consolidated EBITDA margin, increasing 440 basis points to $31 $4 million.

Our record adjusted diluted EPS for the quarter increased 103, 6% to 57 per share.

In our year end press release, we included our preliminary unaudited January operating and financial results in order to present, the most up to date information regarding our business much as we did with our first quarter 2020 results. When we include the full month of April performance the performance.

We experienced in the latter weeks for the fourth quarter persisted into January with revenue, increasing 34% to 30, $34 7 million adjusted consolidate EBITDA, increasing 99, 1% to $13 $6 million adjusted consolidated EBITDA margin increasing Inc.

An incredible 1350 basis points to 39, 2% and adjusted diluted EPS accelerating 288, 9% to 35 cents per share equaling our total adjusted diluted EPS for the entire first quarter in 2020.

For the full year 2020, our same store funeral home revenue grew six 5% to $179 8 million same store funeral field EBITDA grew 14, 9% to $74 $8 million, while the field EBITDA margin expanded 300 basis points to 41, 6% we experienced an.

Really strong finish to the year as the elevated death rate caused by the coronavirus pandemic combined with our continued ability to grow market share broadly across our portfolio led to our fourth quarter same store funeral revenue, increasing 22, 6% to 14 $8 $8 million same store field, EBITDA, increasing 32% to <unk>.

$21 8 million.

And field EBITDA margins, expanding 500 basis points to 44%.

The ability of our funeral home managing partners and their teams to be able to continue to safely serve their communities. Throughout this past year has been nothing short of remarkable they've worked tirelessly to leverage new technology reconfigure their fitness physical space and provide unique and creative creative service in celebration of life's moments to our client families. We know we have gained more.

Share broadly across our portfolio because of all of these efforts and we believe this increased market share in 2020 will lead to even more opportunities to serve those families again for many years to come.

While there remains uncertainty about the impact of the coronavirus pandemic and the pace of the vaccination programs that will have on the death rate. This year I know our funeral home managing partners and their teams are intently focused on maintaining the momentum and high performance results experienced in 2020 throughout the rest of this year and beyond.

In 2020, our same store cemetery revenue increased 5% to $51 7 million, while our same store field EBITDA increased 13, 7% to $19 $5 million.

And cemetery same store cemetery field EBITDA margins expanded 290 basis points to 37, 7% similar to our funeral home segment, we had a strong finish to the year in our cemeteries with fourth quarter revenue, increasing 22, 6% to $14 8 million.

Field, EBITDA, increasing 55, 6% to $6 5 million and same store cemetery field EBITDA margins, expanding 930 basis points to 43, 8%. This.

This performance by our cemetery sales managers and counselors as extraordinary as a testament to the their ability throughout the year to adapt to the challenging restrictions brought on by the coronavirus pandemic in order to continue to serve both existing and many new families within our cemeteries additional momentum.

Mentum was experienced in the second half of the year at the very early stages of the implementation of our enhanced Preneed Cemetery property program led by Carlos and his team took hold.

He outlined is comp comments Carlos and his team have an incredible plan to drive our cemetery preneed property sales to levels never experienced here before at carriage. We're all incredibly excited about the future performance of our cemetery businesses and view the performance in the second half of the year as an indicative of great things to come.

Yeah.

Our acquired funeral home and cemetery portfolio as evidenced in our press release, where we outlined.

Our five quarter trend reports you can see in there in 2020 are sustained.

Quarter over quarter improvement in both field revenue field, EBITDA and field EBITDA margins of our acquired funeral home and cemetery portfolio.

This is due to the work incredible work done by all in those portfolios, especially as we integrated into for large strategic acquisitions. We made at the end of 2019 all for have made tremendous progress in their integration plans, even as we had to adjust with the effects of Covid and are well ahead of our expectations for their performance.

In the first year under carriages ownership and on our high performance platform. We're excited about the opportunities we have within those for acquisitions to continue improvements going forward and expect great things to come.

Our 2020 financial revenue increased $24 five per cent to $19 $7 million financial EBITDA increased 29, 3% to $4 2 million and financially EBITDA margin increased 340 basis points to 93, 3%. The majority of the increase we experienced in our 2020 financial revenue in.

EBITDA occurred in the second half of the year and was a direct result of our trust fund repositioning strategy executed at the depths of the Corona virus market crisis.

For a more in depth explanation of the execution of our strategy. Please refer to the for 2020 earnings press releases for more detail.

In total we deployed approximately $90 million of new capital under our repositioning strategy. The majority of which was deployed at the depths of the coronavirus market crisis within four weeks in late March and early April.

As a result of the strategic decisions that $90 million of newly deploy capital has resulted in new 18, $8 3 million of recurring annual income an increase of 108% to a total of $16 million of annual reoccurring income and our trust fund portfolio.

It also resulted in $36 $3 million of capital gains the majority of which remains unrealized we view the recurring income in our trust fund portfolio is locked in for the next five years, while the portfolio remains positioned for further upside capital appreciation.

The significant increases in financial revenue and EBITDA in 2020 was driven by the increases in earned income through our cemetery perpetual care Trust accounts as a result of a higher amount of recurring annual income in 2000, 2021, and 2022, we expect financial revenue to be between 22 and $23 million at a 90 495.

Per cent financial EBITDA margin, all of which will add an additional 10 cents of earnings per share in 2021 compared to full year 2020.

The current unrealized capital appreciation in overfunded status and our Trust fund portfolio provides upside potential to our future financial revenue EBITDA.

Overhead for the year.

Grew seven 9% to $45 million.

While our overhead as a percentage of revenue the metric we use to judge the effectiveness of our overhead platform fell to 12, 3%.

This included approximately $2 $8 million of non reoccurring non-GAAP add backs in our performance overhead for the fourth quarter was higher than the rest of the year as we were and we were forced to accrue more for variable field compensation as a result of improved performance as we went through the <unk>.

Fourth quarter.

Here at carriage, we believe in paying for performance and those are accruals were happy to put on our books.

Our record operating performance in 2020 led to a record adjusted free cash flow of $70 million and adjusted free cash flow margin of 21, 2% incredible increases of 83% and 700 basis points respectively.

We introduced the free cash flow margin metric in the first quarter as yet another transparent data point for investors to gauge our success at converting an ever increasing percentage of revenue into cash capital available to allocate to increase the intrinsic value of carriage cash.

Capital expenditures totaled $15 $2 million in 2020 spin split approximately $9 million in maintenance, Capex and $6 million and growth Capex. We expect to have total capital expenditures between 18 and $20 million in 2021, which will be evenly split between growth and maintenance capex the increase of our.

Gross capital expenditures will be in support of our increased development of high quality differentiated cemetery inventory.

Our cemetery portfolio.

Over over over the foreseeable future our growth capital will be targeted towards cemetery inventory development, along with evolutionary funeral home Remodels and Newbuild funeral homes in select high growth markets. We remain excited about the opportunities to invest in our businesses across our portfolio in complete alignment with our commitment to being.

The best owners and operators of funeral homes and cemeteries, while being disciplined stewards of our precious capital.

Our 2020 adjusted free cash flow benefited from tax relief pass as part of the cares Act as well as tax methodology changes, we instituted over the past year to enable carriage to deferred cash taxes in 2020.

Given our strong 2020 operating performance, we expect to be a full cash taxpayer in 2021 at approximately 70% of our GAAP effective tax rate.

We expect adjusted free cash flow to be lower in 2021 between 63 and $67 million compared to 2020 almost entirely due to the increase in cash taxes to be paid this year.

When we made the decision to deploy $172 million of capital in for high quality large cheesy acquisitions at the end of 2019 and early 2020, we made the commitment to allocate the majority of our capital to paying down debt and reducing our total debt to adjusted consolidate EBITDA ratio from a high of six times over the course of two.

'twenty two.

Our strong free cash flow generation combined with a tremendous operating performance allowed carriage to pay down with our total debt by $72 9 million or 13, 7% from our peak debt of $534 million. After the closing of Oakmont on January three 2028.

And allowed us to reduce our total debt to EBITDA leverage ratio and outstanding one six times to just under four four times at year end. We currently expect our debt to EBITDA ratio to fall to approximately four times by the end of the first quarter ahead of our expected refinancing transaction in the second quarter of this year.

Our ability to quickly pay down debt was aided by $8 5 million and divestitures. We closed in 2020, we are working diligently to divest or have under contract to sell another $10 million to $11 million in divestitures by the end of the second quarter year over year total revenue growth will be lower in 'twenty 'twenty, one due to the divested revenue declining.

As we execute these transactions, while long term organic growth rates and overall field EBITDA margin will benefit from these divestitures.

Our continued intention is to execute a refinancing transaction of our 400 million $6 65 unsecured senior notes when they become callable at just under one O five on June <unk>.

Given the continued low interest rate environment and attractiveness of the high yield bond market. We are currently in position to refinance the $400 million of notes with a new eight to 10 year unsecured senior notes with a coupon of approximately 250 basis points lower than our current rate.

Based on our targeted reduction in our on our coupon rate. This transaction will be accretive to annual earnings per share by 34 to 38 cents and annual adjusted free cash flow by reducing cash interest expense by $9 million to $10 million.

We will leave carriage will have the necessary financial flexibility to allocate capital in a disciplined and strategic manner to grow the intrinsic value per share of carriage. Moreover, this reduction in our interest rate on our senior notes will lead to an almost 100 basis point reduction in carriage as overall cost of capital to approximately six 5%.

As such we view this transaction as the final piece of our capital structure renewal that will set up carriage to be in a value creation sweet spot over the next five to 10 years we've.

We view, our future, where we will have more attractive investment opportunities that have higher rates of return on invested capital than ever before in our history. This capital allocation will primarily be funded.

By our own internally generated recurring and growing free cash flow that will allow us to maintain a more moderate total debt to adjusted consolidate EBITDA leverage profile than we have in our recent past what investors should be excited about is the continued high performance execution of our core models combined with savvy capital allocation will lead to a.

Significant improvement in our overall return on invested capital beginning this year.

Over the past three weeks, we released two 8-K detailing our cyber security incident, we experienced here at carriage are ITE team has worked diligently and with the help of outside experts to quickly restore our systems and greatly enhance our cyber security posture.

All costs associated with this incident will be covered under an insurance policy and any investments we make to continue to improve our network environment will not impact any of our published roughly right forecast performance ranges, we take seriously the security of our client family and employee data, we have and will continue to take necessary steps to mitigate the risk.

It was similar events occurring in the future.

And now finally, I will turn our attention to our future. We are excited to announce an updated what is now a roughly right two year performance scenario given the uncertain nature of the impact for the continued coronavirus pandemic, we have presented slightly wider ranges for our performance, particularly in 2021 compared to previous versions, we do view.

These ranges are achievable targets with numerous areas for upside potential that are well within our control over the next two years. These roughly right range is do not include any potential acquisition activity and includes conservative estimates, particularly in our <unk>.

Given the strong performance, we have witnessed in the second half of 2020 and it is the first part of this year.

We expect our 2021 and future earnings per share growth, we driven by a combination of the following factors continuation of local market share gains in both our at need funeral home and I need cemetery businesses as our amazing teams continue to provide high value personal service to their client families.

Accelerated growth of our cemetery preneed property sales revenue at sustainably higher field EBITDA margins as we demonstrate a more consistent operating leverage within our cemetery portfolio.

Continued integration and performance improvements of our for recent strategic acquisitions.

A full year impact for the financial revenue and financial EBITDA performance from the higher amount of recurring investment income generated in our preneed funeral and cemetery trusts.

Successful execution of our plan senior note refinancing.

On June 1st by lowering our interest expense and improving our cost of capital.

Growth in our funeral cremation average revenue per contract as we continue to focus on cremation conversions and offerings of differentiated personal unique service opportunities.

And increased growth capital investments across our portfolio with more of a focus in velocity on cemetery inventory development.

Okay.

We expect 2021, adjusted consolidate EBITDA to grow to a midpoint of $107 million and adjusted diluted earnings per share to grow to a midpoint of $2 30.

For 2022, we forecast adjusted consolidate EBITDA growing to a midpoint of $111 million and adjusted diluted EPS growing to approximately $2 55.

Or higher.

I. Thank you all for participating our call today. Please continue to reach out if you have any questions regarding carriage and with that I'll turn the call back over to Mel. Thank you Ben.

Starting in 2001.

After Jim Collins published is great book good to great.

We did we did an analysis of what it would take to take carriage from a good company.

To a great company the conclusion was.

We were not yet good.

Sometime in 2001.

It was another 10 years before we revisited the book good to great.

And October November of 2011.

And I had everybody read the book everybody.

That was still left in the company, we're going to do a major reorganization back then.

And I ask them, what they thought and so the consensus unanimous consensus.

We are good and we want to go towards the direction of great.

We launched our first good to great journey, starting January one 2012.

Over the next five years, and we think in terms of five year Timeframes.

Our performance.

<unk> went up.

Our share price compounded from beginning price of $5 60 at the end of 11.

28, 64 at the end of 16.

That was our 25th year IRA.

Our rote for 2016 shareholder letter, which was.

Already some pages long.

And we focused on first two then what is being the primary reason.

We were able to have a good to great journey that successful over an entire five years.

I made a decision that at the end of 2016 to back out of operations.

And I made some first who then what mistakes.

Our cost the company morale constant.

<unk> the company.

At a later point of declining performance in all of our areas and trends.

And so I had to step back in two operations in September of 18.

And we began to make a lot of transfer.

Lot of changes to get the company back on that journey.

And so I began to replace a lot of people who no longer had the followship across the portfolio whether it was in support teams, our operating teams and businesses or whatnot.

A lot of change came very fast and continued all the way through.

First quarter of 2020.

And turning.

For help where are we going to find a players to take the seats on the bus. These are important seats on the carriage bus.

I was told Jason Buck Binder.

Hey.

Jason The day he started carriage I couldn't believe that six months later I was turning to him to be.

My biggest savior for my mistake.

And.

Once I had Jason and the team that I put together back then and I said look I don't know where you're going to find this talent goes I mean, we need quite a few of these day players in these spots.

And you do it and how much time will it take six months to a year.

So that said I can do it I have a pipeline with Todd and I will do it.

What you're seeing today.

Is to a very large degree our performance in 2020 and continuing.

Function of Jason Buck Binder.

Quickly figuring out what carriage was all about and then finding the talent that fit the company.

Culturally and skill wise.

And if you ever wanted to say first who then what.

You get it right it's magical.

Now turn it over to the real magician when it comes to a player talent Jason Butler.

Thank you Mel and good morning.

There's a tremendous owner to help this opportunity to be on the call today.

An investor for carriage services 210 partner businesses I had the distinct privilege of share in the carriage services story, the talented men and women across the country.

I'd like to begin this morning with a brief quote from our very own CEO Mel Payne from the 2016 shareholder letter apply named the evolution of our learning journey.

Well.

Yes carriage is unique and an orthodox otherwise black and white predictable conservative industry.

I would certainly agree however, I would argue that there is a word missing from this statement.

Word is special and.

Unique unorthodox and.

And special.

You can as I did learn to understand and appreciate the foundation of this unique and unorthodox business model with its five guiding principles decentralized content high performance culture framework and good to great methodology by looking no further into 2016 shareholder letter.

This 43 page missive born out of Horton goal body and mind and brutal honesty much.

Much more like a love letter and does a shareholder document.

Carriage services has filled thoughtfully designed and crop itself to be a sustainable.

<unk> business model is firmly rooted in being a people based people focused partnership.

As we have learned from the Jim Collins book Good to Great first who then what is that the very core of any business and the good to great journey.

Executing now at the highest level with a collaborative support of our partners across the country and placing the right people and the right thing.

We are just the beginning stage of our newfound success shattering the norm and delivering an amazing result.

The first two then what concept allow us here at carriage services, because that our prospective candidates, both heart and head and determined their true expectations, while aligning them with the perfect environment for success.

In doing so we've learned was important to them, both professionally and personally and as we bring them into the carriage family we to learn about their own we.

We see and make the real connection.

In fact, its first two then what that drives our people focused success here at carriage services and across the country with the amazing men and women in the funeral homes and cemeteries that we here in Houston are fortunate enough to KOL partner.

We've moved away from the traditional interviewing and hiring practices and them engage entirely into our first two then what methodology coupled.

Coupled with the concept exercise from Jack Welch's for me for leadership, our leaders across the country are seeing greater results and they're hiring and team dynamic for us.

<unk> and high value personal for GAAP.

Experience.

Further results are higher success can be seen by the reduction of additional hiring and attrition rate lower than 10% and greater tenure in all employment categories across the portfolio.

<unk>.

Alright, who's in the right philosophy has allowed carriage services to hire better people and achieve greater results.

The first who then what concept and execution thereof is a value creator that can and will continue to pay dividend as you've heard today and we will do so in further earnings release call.

In a tight labor market specific to our industry were strong talent is scarce.

<unk> services continue to attract and onboard the most talented professionals in our industry.

We have found that there is a plethora of industry based individuals seeking their opportunity to join the carriage services network only time will tell where the next seat on the bus will become available.

In 2020 prior to the COVID-19 outbreak to hit the Newswires carriage services was aggressively focused on successful recruitment effort picking talent to top rate in several key market.

Momentum coming out of 2019 did not stop once the pandemic was fully recognized.

Other firm took a watch and learn approach subsequently, reducing their requisition activity sidelining, the internal talent department and seeking ways to reduce expenses carriage.

Carriage services soldier Dawn double down and produced higher result, not seen in years prior.

For 2020 year success cannot be highlighted without dimension of the eight plus leader who joined this past year and made significant impact alongside their peers.

I'd like to thank a few of those amazing leaders now who've come to join the carriage family in 2020.

Salvatore Rasco, and Oakmont mortuary and Memorial Park.

Bridget Ulster Daedally funeral home Chris.

Chris Corn Carlson and Kirby Morris.

Russell Marshall and memory Garden Cemetery, and Blackburn for grown Shaw funeral.

For Thompson and also in person.

Michelle Callahan for.

Beautiful.

These day per DAU at Allison funeral services Amanda.

Amanda Gilman and a whole European.

Terrorists Deininger Becker Bradshaw funeral home Courtney Maureen Baker Stevens Paramor.

John Winstead, Etsy site getting them home and Memorial Park, and Kevin suitable at White School.

This is just a short list for the newly aligned leaders, we were fortunate to bring into the carriage fold in 2020.

I would certainly be remiss.

If I did not make a very special mentioned to our new senior Vice President of sales and marketing Mr. Carlos Casado, who joined carriage in June of 2020 during the day of the.

Pandemic getting right to work, placing the building blocks for very new and exciting high performance sales organization.

Carlos certainly cannot do this alone joining Paul Harris already onboard I'm pleased again to welcome Mr. Tulio per tallow and Mr. Shane prudent to tenured sales mentors in our industry, who have joined the carriage family. In addition to Aaron Embry sales development partner, who will support our training platform nationwide.

As stated before.

<unk> is yet to come.

Carriage services, both our managing partners and sales Andrew do not require a handbook can lead their local business as it is in their internal DNA, they're entrepreneurial competitive mindset and people first focus that drives at the very heart of their respective businesses. We here in Houston with partner support.

They are trying to fix that.

Carriage services partners has successfully built relationships through true collaboration and partnership we've eliminated the layers of management removed a hierarchy and half through first who then what successfully onboarding the best talent in the industry.

We have removed the bulky talent acquisition technology, extracting unnecessary policy spending less time mulling over questionable statistics and brought back the human.

Human resources.

Conference calls in a full email inbox or non existent that we may focus entirely on peer to peer connection innovation and family services here.

Here at carriage services doors remain open for learning growth and demand.

Character versus those partners continue to move the goalposts and pushback boundary unselfishly supporting social causes in their respective communities and have been for years.

Whether it's supporting the local food bank sponsoring a pancake breakfast for the local girls and boys Scout a toy drive our food drive for the collection of back to school items for children in the community. Our team has been there for them and when Covid came where more than revenue.

Those business partners, who have come to join the carriage services network over the past 29 years enjoy your special connection and back office support services, while employing the same hometown independent.

Local business relationships with the community that has made them the goto funeral home for family time and time again.

In my capacity I'm, often asked what is the carriage differently.

Truly there are many.

Alright simply respond with this comment.

Comment.

For 29 years and county carriage services had one mission to be the best people based operating organization in the funeral and cemetery industry. Our goal is never be has never been to be the biggest but to be the best.

Our core principles and values have never wavered, we stay true to the families. We serve and continue to be a local family run market operation with an entrepreneurial spirit, who just happens to be a publicly traded company.

I'm profoundly thankful for the have the honor every day to align myself with 2007.

727 for the most unbelievable hard working.

Caring compassionate group of eight plus leader in my chosen industry.

I know I speak for all of US here in Houston, when I say, thank you each and every one of you for serving our community families.

Your heroes before Covid.

B.

Mel has been the theme letters dating back to 2012 signed off with this thought coming from author Jim Collins.

Great news is that a function of circumstance.

It turns out is largely a matter of conscious choice.

Great.

Mel I would add we are truly unique unorthodox and special.

I too have chosen green.

Thank you.

Operator, I will now return the call back to you. So you may open the call for Q&A.

Thank you and ladies and gentlemen question sorry.

I think I will have a few closing remarks I just want to thank Jason.

For that wonderful presentation on first who then what and the importance.

It has to carriage.

And in his section.

In the release I think it's on page 12.

High performance talent acquisition program first two then what and.

In the second paragraph I reference the most recent example.

Just how valid and powerful the first two concept first who then what concept is in.

In relation to Tom Brady, leaving.

New England Patriots and joining the Tampa Bay Buccaneers.

Anybody who knows me well.

Knows that they can compare co.

Coach Inc, whether it's baseball Tony La Russa, whether it's bill Belichick.

The new England Patriots and all the players that make up winning teams and winning legacies.

That's how I view, our company as a public holding company full of winning teams supported by all the people at the holding company level being the best that day.

They can be in the world at supporting the best in every community locally.

It's a simple concept, it's a very difficult concept to to pull off and sustained you got to get the first two them right at every seat on that bus.

So.

What's interesting about this.

Is that I mentioned in the second paragraph.

Tampa Bay had a losing.

Team they had a losing franchise had a losing mindset had a losing culture.

It was acceptable to lose.

But when time came it was unacceptable alright.

Didn't have come there if he thought they were going to continue to have that mindset of losing being acceptable.

And I heard during the Super Bowl many times.

By the various people that when he came took a while.

But he changed the culture.

Change the mindset of the players who already had the talent.

They had the Kochi they had the talent.

Added some okay brought came out of retirement.

Antonio Brown, but I mean, they had the talent.

But they didn't have was the culture and the mindset of winning.

Being the only option.

And I can promise you I know I've gotten a bad reputation over the years of turnover.

You can't win Super Bowls.

And when every year unless you have the talent.

And that's the way it will always be at carriage, that's our competitive advantage.

As.

As I wrote in the last section.

And I do want to mention this Jason mentioned great.

Tom Brady is known as the greatest of all time.

Maybe Patrick Mahomes will one day get they're not yet.

Still got it he doesn't want to be anything less than great at 43 years old.

At 78 years old I don't want to be anything less than great. Great is the only option when he has the only option.

And to have a winning company.

That wins and the performance locally.

And you have all of that performance.

Being shared.

With the people who create it.

And so much leftover for the rest of us and shareholders.

I mean this is fine this is so much fun.

And that's got to continue to be fun. After COVID-19 is diminished.

And so I want.

Uh huh.

So simply say.

It is a true blessing.

To be here at this company.

Having reached a point.

After almost 30 years.

And right in front of US we have the refinancing.

We're carriage will be in a position we've never been in before.

Which is to allocate a lot of free cash flow more than any other company for every dollar of revenue has been pointed out.

Two to maximize and optimize over long periods of time.

The intrinsic value per share.

And to have 47 of our great people and.

Involved in the good to great to shareholder.

Value creation incentive plan.

Is such an exciting thing.

That means we have to compound our shares.

At a minimum of 20% to 40% through 2024.

Now I've told everyone of them are educated.

<unk> My heart out with passion and energy that look 20, and 25% is nothing that was a gift Mr market gave us during the pandemic crash.

50, 30% only gets us to 53 and change that's that's kind of a ridiculous low hanging fruit.

Let's go for the 40%, 35% would be second second place that's not super bullish.

Let's go for the 40% compounding category.

That gives us the $77 and change.

Now that is more like what.

A real player and a real team of winning teams can and will do that.

That's what every one of them believe we will do.

And so we look forward.

So that journey hopefully with you on this call.

Because we will not let you down and with that I'd like to open it up for questions.

And ladies and gentlemen, if you have a question at this time, thank you for Arden.

The number one key on your Touchtone telephone.

One moment please for our first question.

And our first question comes from the line of Alex Paris from Barrington Research. Your line is open.

Alex Paris Your line is open.

I'm, sorry, I was on mute.

I wanted to say congratulations on the beat and raise the strong finish to a very strong year and in metals, specifically to you <unk>.

Belated happy birthday, and congratulations on an extension of your employment contract for another seven years.

Yeah.

I think that's a well placed a confidence in your leadership.

Thank you Alex.

Hi, Mike.

Pete technically 78.

But I fell 28.

You cannot be here, where I am right now and not be having fun.

Because of all the talent we have in the company.

It's not like I have a whole lot to do.

Sure sure demand.

Yes.

Well keep doing what you're doing because it's working.

Yeah.

Great.

A number of questions.

The first one related to this is probably for Ben.

Quarterly cadence in 2021.

Obviously, you've raised your guidance for the full year revenue adjusted EBITDA free cash flow and EPS.

And January has started off very very strong how should we think about the quarterly cadence of revenue in 2021.

Yeah, Alex I think you can certainly say that the first half of this year our expectation is for much like the second half of 2020.

Higher higher revenue growth year over year compared to where we were last year and hopefully as we see vaccinations continues to take hold and the coronavirus pandemic.

It becomes less of a part of our lives.

The death rates would come to a higher probably a higher elevated level then quote unquote normal.

As we move into the back half of this year Cemetery performance, we expect to be strong and continuing to build on the momentum throughout the year and really you have the full impact of that financial revenue.

We didn't have last year. So you see a strong year over year comparison first half from a financial revenue side, certainly compared to last year. So that's how we're kind of thinking about the cadence right now.

Right.

Yeah and for that I'll turn it over to Peggy Shapiro with some additional comments.

Just a figure for that.

Alright.

Just to add to that.

We've seen great improvements on our average as well so even at all.

In addition to what Dennis said, we've got average is working in our favor we've got our cremation average cremation average conversion.

Being very strong in the fourth quarter and really leading into January and we're seeing that into February so even as the volume.

Settle down a little bit.

All of our funeral homes are serving families, they're actually getting families thanking them for taking the time to serve their family.

Other funeral homes may not be doing so or may not be having services. So we continue to see improvement in our average and that will also go up as the year goes along.

Alright. Thank you that's helpful.

And I was going to ask about that so you had a spike in the death rate in December and January because of Covid tragic and unfortunate but.

This is the impact on your financials.

Is that settled down in February or halfway through February or we still.

Dealing with the spike in deaths, particularly in places like California.

California has been really busy.

A lot of businesses in Central, California, and Southern California, and they definitely been very busy we do see that continuing into February we may be a slight.

Slow down, but it's been really busy and again, you know with even with some restrictions out there.

They're still able to have those services so.

We think the first quarter just January alone will be better as Ben said earlier better than Q1 of last year. So we expect that to continue.

Yeah, Alex for smell.

We see strong momentum continuing in February.

Which has 28 days this year versus 29 last year.

But it won't be it will.

Probably be R.

Our second highest revenue month after January and the history of the company.

On the margin.

Well continue to be.

This ridiculous it's hard for you.

Got you.

And then Ben you mentioned that Youre going to be a full taxpayer in 2021, what rate what's the GAAP net cash rate, we ought to be using for our models.

Yes.

We're starting off for years at 30%.

As you saw last year, it ended up being a little higher and that's really driven by divestiture activity.

As we sell businesses that potentially have goodwill on the books from write that off as we sell these assets.

That can drive that the effective tax rate higher we will continue to update that as we go through the year. Some of that's obviously really unknown, but for right now we're going to start at 30%.

For the year.

Add a little more color to your first question.

It's out there and we're getting this from some investors.

About Paul.

Pull forward pushed down later performance because of Covid, we don't see that okay. I don't agree with that I don't agree with speculation and prediction that somehow our performance.

In the second half will be lower.

R 22 will be lower we got all these other things going on in this company is good.

Our people know, they're good and we have updates every thursday across the country. So we get to hear whats going out of business by business area by area and we have our standards Council update meeting those a ton of our best.

Two days ago, and I will tell you, California it hasn't.

It has started to slide yet they had a little slow few days, but now it's back to where it was and our people are doing unbelievable things, but there are other markets too.

So it's an unusual thing.

And I think.

I break it out to people, who would probably have the best data for <unk>.

Our sense of what the future might bring in terms of death rates returning to normal and I don't know that antibody actually believes that's going to be the case.

The baby Boomer population had been building up forever.

I won't say they've been living the best lives when they get up into the high Eighty's and Ninety's and that's evident by all of the assisted living and nursing desk and so you really can't say, whether this will turn out to be an endemic problem with COVID-19 that you need booster shots various variants.

Shifting in the medicine trying to keep up with it no one knows the unknowable right now and anybody who says they do that in the opposite direction and you probably have a chance of making some money.

Right now I would say what what is expected is probably.

And elevated death rate compared to the past this is not.

A pandemic that reaches finish in other words, it will be around like the blue forever or for at least years.

And this is not coming for me this is coming from people who have done.

<unk> done a lot more work on this with a lot of different modeling all over the world.

So.

I think it's too early for anybody who is an investor.

Viewing our shares is overpriced or underpriced because of Covid.

You have to look at what the company is and what we're going to be doing in the future. Because we have a lot of drivers you get $70 million of free cash flow here and you go Wow, let's go to work Mr market doesn't think highly of it we're a buyer.

Mr market for seller, whereby we know our company is getting better and we know that the next four years will be better than the last for years.

Otherwise we wouldn't have created this hype.

Good day, great to shareholder value creation incentive plan, which we fully expect.

To execute in a way that gets a higher compounded share returns.

I'll believe that debt.

A free world.

Whatever you want anyway, I wanted to add debt.

I appreciate that.

And then other store.

Finish with one question and this one for Carlos since I had the opportunity to speak to him on today's call.

Yeah.

Carlos Your primary responsibility is to build the high performance sales teams and sales systems across.

The cemeteries as I recall you have.

More than 30 cemeteries in 12 states what is the sales organization looked like before you got there in or are there one or two people in each location out there selling preneed cemetery and then what changes should we expect from you in.

In your prepared comments you touched on some of this but.

Sales for maybe a little more centralized than the funeral services side.

I'm interested to hear your thoughts there.

Let me take that up for you Alex.

I had it wrong.

This day central decentralized decision, making model I've put it out in <unk> seven.

Cemeteries, we did it in <unk>.

Or.

Yes.

And my concept was if you get the right managing partner and then you get the right sales manager that whole function can remain decentralized.

That is wrong.

I proved it over and over.

But I never could find anybody else, who knew how to get it right.

Until I met Carlos So I knew.

That we had an overreliance on a couple of big cemeteries in California, Rolling Hills in Las Gatos.

Northern California, when they've got a.

Cold.

The entire cemetery portfolio performance got a really bad flu.

And it doesn't look like they were going to get over it anytime soon.

Close his first job was to do.

<unk> diagnostics.

What have we been doing wrong that you now can get right. So Carlos teed it up for you.

Thank you Mel and thank you Alex for the for the question. So when it came aboard.

The centralized model the local decision needs made upon the managing partner right and so what happens is that the visibility between sales teams local sales teams.

Other peers within the company is not really there for the completion of just within the three to $5 10 console or seen the cemetery.

Rather than higher competition.

Also the.

Previous compensation planning, some cases would not incentivize higher performance or would not.

Have.

And expectation to meet a specific targets for specific positions. Some of that is that we're testing right now and also changing some other areas and that will create higher expectations with higher awards that part of the comment that I made regarding the creation of performance based incentives and rewards.

But also training training has been decentralized.

Page 10.

Creation and by creating a sustainable and well.

Robust training program that includes all of the different components for inside sales positions like family services. In addition to advanced planning positions that are more.

Most of that anything generating leads outside the cemetery will create a significant impact which by the way.

There was only one form of team of AP.

Councillors carriage when it came on board.

With a few exceptions with AR and AP constant our reporting to a pharmacy services manager here and there for a couple and so part of the plan is creating.

12% to 14 eight teams in the top 14 cemetery, where we can now of double up our sales force through the means of outside sales.

The communication systems CRM.

All of that is providing an additional platform for sales learning sales progression and of course sales success.

I hope that that's some of the answers that they were looking for colleagues.

Yeah, No that's really Carlos Thank you and Carlos you come from service Corp. What was your role there and then the people that you've recruited since where they come from my day from in the industry of people you've worked with in the past.

Yes, so I spent almost 11 years with ACI started for us.

Leading sales for one of the divisions that ACI sports panel, which are about the size of that.

Carriage, leaving.

Leaving sales from.

South of the United States, and then moving to operations as a managing.

<unk> director for for the same division, leading now operations Inc.

So.

At that time of course, I met a lot of people develop a lot of good relationships and work with some very incredible people that wanted.

I wanted to continue to work with us on one of those two <unk>, who was not a cure.

For the time that he was brought RP went from ACI to another you know funeral and cemetery consolidator and he came on board from that company and then she put into work in fact working for <unk>. When he came on board.

So Alex if you want to ever be inspired by someone's life story.

Spent some one on one time with Carlos.

I look forward to that that sounds great that sounds great and thank you all appreciate it and I'll get back in the queue.

Thank you. Our next question comes from the line of Dan Nelson from Colombia.

Your line is open.

Hi, guys first day I hope, everyone is healthy and doing well I had two.

Two questions and perhaps they may be joined at the hip here. The first one I understand maybe somewhat harder to answer at times, given the highly decentralized nature of the portfolio, but if you guys had to boil it down and perhaps Carlos maybe this question is for you.

What are the one or two most impactful common thread.

That have changed from a customer value proposition that you're now offering customers that you werent before.

And then Mel I know how much you loved Monger my favorite Mongers them is show me the incentives and I'll show you the outcome.

What do you think are the most impactful changes in the incentive structure.

Driven the operating team in such a different way and how does that extend beyond the top managing partners that are highly incentivized and very tangible.

Cash payouts.

Yes.

I mean, Dan. Thank you I mean I can't thank you enough for those two questions.

There is a section here.

I'll start with incentives first but they are linked the answer.

The answers are linked I.

I'll just start with you know.

<unk>.

When we when we've got shocked the last two weeks of March.

And it continued into the first two weeks of April.

We had a we had to debt quickly and in one of the things about carriages.

We are very flat.

We don't have layers.

Management, there really are no layers of management, Inc.

Carriage, that's why we call our we call them, the managing partners or like the owners of each business and.

That's one of the if you go to the fifth bullet point back.

On the observations.

If you go to the fifth bullet point, we've talked about debt and.

I'll just read it to you.

Because it.

Goes to the question to SaaS.

The fifth bullet point is.

I'll get there.

Yeah.

Our high performance culture framework is more cost effective organizationally.

As the corporate organizational overhead does not eat up.

A substantial amount of the incremental financial performance of our field businesses, especially as we leverage our consolidation platform with.

With growth a highly selective acquisitions.

Enabling more of the value creation.

To be shared with both those who create it locally.

And with public shareholders.

Now in the in the prior.

<unk>.

Good to great two five year shareholder value creation incentive plan. There are four paragraphs in the middle of that section that go directly to your question.

About incentives.

And I agree with Charlie.

In order to have.

Our organizational structure.

More effective and efficient to create more EBITDA per dollar of revenue.

Create more free cash flow per dollar of revenue we eliminated <unk>.

Many layers and unnecessary processes and stuff, we wrung out.

What I call all the bureaucratic stupidity.

Perks and privileges and cost and.

And we made the most important jobs in the company those are the managing partners in charge of every business.

And that's where the management occurs.

And it's a pretty simple concept.

If you buy a good franchise.

At a fair price. This is another Charlie Munger Ism.

And then debt that good business becomes better by joining a company like carriage that provides all of the support so that the.

The people in the business can focus only on what makes the business grow.

And compete better than anybody else in the market.

And this this comes to your first question.

You know I've had many people.

Maybe you should do best practices and push it down what you are pushing it down we try that many times it doesn't work.

The best practices are are Bubbling up.

And we make those available now on technology tools.

But when the Corona virus mandates yet.

Our people after getting over a shock and knowing that our support teams or they're in their Fox hole and believe me it was battlefield conditions.

And it still is and especially in California.

Ed.

<unk> had so many of our people tell us, including the standards Council two days ago.

Debt without all the support and the people in the foxhole with them day and night 24 seven day.

It could not have innovate.

They came up with the ideas then that you can put a brain trust together and you couldnt come up with ideas like our people came up with I don't know where they come up with all of these ideas.

All I know is you talk about entrepreneurs and competitors and they want to win when there are competitors are in shock turning down business, saying that we won't do any embalming services or this or that most of it is we can't do this we can't do that and our people are we can do.

This.

And we can do that because what you want to do more.

May have been your best idea of what was best but this is what we can do.

And in almost every case, our people came up with better ideas.

Then the original idea of the family would've had it in the first place and then the families have such incredible.

Appreciation and respect the word of mouth from that is price lists in the community.

I mean, we've had christmases outside.

In July.

Everything decorated families driving buying their cars, we've had I don't know what all I can't even remember them all.

You know what are these days and I'm looking at Peggy now and then we should make access to some of our websites where our people put these ideas on there so.

I mean.

I don't have a problem.

<unk> stealing these ideas because I don't think they're good enough to do it.

But this would this wood, it's hard for an investor day on or anyone else to imagine just how this happens.

And it's kind of magical for shaking our heads here two day and holiday how they come up we hear this every Thursday would get these stories.

And.

It makes us.

Honored and proud to have a company where people are empowered.

To do things.

Do it if it seems right for you.

It's in line with a guiding principle do it it's the right thing to do blip from the power of people through individual initiative and teamwork. When you turn them loose and you have the great people they come up with ideas that win.

Hearts and minds locally and this is what has happened.

The incentives I really tried to lay it out and put a little more meat on the bone and good day to section.

But we.

We had more high performers now what you didn't see and what I Havent made public.

Was the meat of by 2020 same letter that went out on February 18th 2020, just before Covid too.

2019 might have looked like.

A big turnaround year.

That's not how we viewed it.

And so I wrote this theme lender.

I didn't make it public I just showed you the last paragraph in this release.

But the same letter it was about a tale of two companies.

A tale of high performance carriage in 2019.

And a tail of low performance carriage in 2019.

Using the analogy of a tale of two cities of Charles Dickens.

Most popular book every written a lot of people say during the period $70 75 to $17 92.

And it was about the difference between living in London.

At the height of the British Empire.

Primarily because of lots of colonial possessions that were very productive versus living in Paris, which was beginning.

To go into a revolutionary period the range of tariff.

And so ive made that analogy and it was tough I outlined all of the businesses that had low performance.

Declining revenue.

Compounded and low margins.

And and we changed some things too.

To incentivize.

People to get into the margin range and to get their revenue positive.

Or else.

You know when you have an or else it's pretty brutal.

That's also an incentive.

Failure. It is often a highly motivating thing are the are not wanting to fail or are not wanting to be solved.

And so it just happened to be very timely.

That we did all of this for Covid shows up and.

And you can ask Peggy.

If you want a follow up question on this this is one of the better pairs of questions we ever got.

I just can't thank you enough because youre right. Our people are highly incentivize both to be successful and not to fail.

Not to fail.

We have linked tables every month.

If you are below 50% you are failing.

They know what they have to do and they've got a lot of support doing it you don't want to fail in this company because you are being subsidized by winter.

And it's a very Darwinian thing that's why I like the book seeking wisdom from Darwin the bunker.

From Darwin <unk>.

Natural selection, Jason knows how to natural select winners you put the winners in charge of a business you get higher value per event higher revenue per event higher customer satisfaction and grow your market share.

I'm, sorry, I got on my Soapbox here because of the quality of your question.

And.

I hope.

Debt.

That debt you get an answer in there, but we share the profit with no limit.

And there are some big payments went out.

He had to load up the fourth quarter after December.

With incentive comp accruals are we would've had an EBITDA margin I don't know <unk> 35 per cent.

Like we did in January and we will have in February.

Loading it up these numbers are after big accruals for paying our people.

Believe me once they got the payments for.

For 'twenty.

But I don't want to get anything lesson as Peggy she's already telling us all.

They are now.

So anyway, that's an exciting thing Dan.

We appreciate very much.

All your support and all all the skin in the game that you have in our company, we will not let you down.

Terrific. Thanks, now as I said to Ben recently, I think I'd pick the right party and it certainly turned into a really fun one they just arrived a little too early for patients was important here, but.

Happy to be along for the ride and hope you guys thinking it would be well.

And any day, you want to compare me to a Japanese CEO just picture hero Contigo.

And I'll be glad to be understood.

<unk> stood at by the way it was my mentor looking up share hero, Kanagawa, you'll be blown away.

Unfortunately I can't.

Can't make a reunion every year he got to an age still the executive Chair chair.

Chairman of this company, so that sort of chemical and we had a reunion every year a lunch until last year.

But I hope to hope you still around.

I hope to do it again, he is a wonderful man and I learned a lot from him.

Thank you and our next question comes from the line of Chris Gannon from Sidoti and company. Your line is open.

Hey, good morning, Thanks for taking my questions from nice quarter. Thanks for all the details as always.

And again congrats on for them.

Putting up the numbers on a tough year.

Carlos I just had one quick one kind of question I guess just start over.

That's the average.

Average.

How did you approach.

Coming in differently than the way it was operating.

In your prior.

<unk>.

And may be setting that up for us as we go forward.

Thank you very much Chris for your question so.

There is a few steps to that right and everything starts with understanding what the opportunity is and really recognizing.

The possibility for each one of the properties and of course within a very restrictive environment with COVID-19 traveling around for every single property has been quite a challenging task, even though we have been able to visit.

Some of those properties.

The second piece to that is creating a plan that.

You know.

Takes care or sold to each one of those possibilities.

Blue Sky opportunities as I called in my previous comments.

And then the third piece is also making sure that we have the support right. So having senior leadership in bulb in building those relationships.

Having full understanding over the plan entails and the level of commitment that it takes and the collaboration partnership and support needed in order to make that happen and then the final step to that would be building those.

Local.

<unk> partner sales management.

South customers relationships to make things work. It is a complete change of mindset from.

The centralized standardized approach and it is new it is change and change is sometimes difficult, but I got to tell you in the cases that I have been able to visit the cemeteries and meet the team and be involved with the margin partners have received nothing but support and welcome <unk> to the change in adapting what we're trying to achieve.

<unk> so.

A lot of phenomenal things are coming up our way. This is really just the beginning and I feel very strong about the future for Preneed Cemetery sales auto for carriage services.

I appreciate that thank you very much and good luck for Q1.

Thanks, Chris.

Thank you and at this time I would now like to turn the call over back to Mr. Payne for any closing remarks.

Thank you very much it but a great.

Call.

After.

<unk>.

Challenging and wonderful year for our company.

In terms of what our people were able to achieve in the types of.

Adversity that we've never seen before.

And because of the continuing.

Epidemic in the peak period of depth that we're experiencing in our portfolio.

No.

It causes view.

As a human being to be reflective of what what really matters.

And that's the last part of this release I'll put that in there for a reason.

Because we really do.

And dealing with debt.

We also deal with life.

At a high level live.

That matters.

And I reflected on that and went back to Mike for the end of my 17 shareholder letter.

And I do want to end this call.

With a quote.

From that end.

And it starts as follows.

As I was finishing about 2016 shareholder letter.

I tried to remember hi, good to great ended the book.

But drew a blank.

So I would treat my well worn generously highlighted in tab copy for.

My office and turn to the last paragraph on page 10.

Which reads as follows.

When all of these pieces come together not only does your work moving toward greatness.

But so does your life.

And it is very difficult to have a meaningful life without meaningful work.

Perhaps then you might gain that rare tranquility.

That comes from knowing that you have had a hand.

And creating something of intrinsic excellence.

That makes a contribution.

Indeed, you might even gain the deepest of all satisfaction, knowing that Youre short time here on this earth has been well spent and that it mattered.

And that I continue.

On March five 2019 as set our annual theme letter.

For all employees and we will share with you.

The ending which also comes it comes the end of this shareholder letter.

Recently, a new friend of the carriage family sent me the point.

Well Matt.

Bye, Michael Joseph and I will share a few thoughts which are perfectly aligned with how we think about our good to great journey.

And which may provide you with inspiration as well.

What and this is a quote from the point that was sent to me and I will tell you that wasn't a minute.

What will matter is not what you brought back.

But but what you built.

Not what you got but what you gave.

What will matter is not your success, but youre significance.

Living a life of matters doesn't happen by accident.

Not a matter of circumstance but of choice.

<unk> the level of life that matters.

So this guy wrote this in all three Jim Collins wrote.

Greatness is choice conscious choice.

Now.

This point was sent to me.

And I'm going to mention the name for the first time by Prem what's up.

From Wassa.

As the founder of Fairfax financial out of Toronto.

He is known as the Warren Buffett of Canada.

And.

He sent someone.

Two to meet me I met them in New York.

I had dinner with them I'm wondering is this real world water day here.

And I found out quickly that it was real and so I went.

I went to Toronto with my wife.

On that per <unk> and his team they wanted to invest in carriage back when we had an issue with our convertible notes he wanted to be the solution.

We really like what the company had become what it stood for.

And yet for them.

<unk> is a very clever guy like Warren Buffett.

Coordinated convertible piece with no downside risk.

Per home.

I appreciate you wanting to do that.

Got a better idea, let's do a vanilla Chuck for balance sheet, just by a bunch of the common so.

So we agreed to be friends and and we still are.

And that's a real compliment.

To this company because this goes back a couple of three years ago.

Moving down our slide and now we've made this comeback and this come back is going to have legs.

There is no way that what happened in 18 will happen again with this team.

I don't know it.

We all know it.

Our team is talented their inspire they're motivated with the right of sedatives, where all aligned.

And I can only imagine what this company will look like in five years, but I can't imagine what the share price will look like.

I hope you are there to enjoy it with debt.

Thank you and we look forward to reporting our progress in the future.

And ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.

Thanks.

[music] strength.

Yes.

[music].

Okay.