Q4 2020 StoneMor Partners LP Earnings Call
Okay.
Greetings and welcome to the.
Our fourth quarter and full year of call drove of presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.
At that time, if you have a question. Please press the one followed by the four on your telephone.
At any type of a turn the call of French nutrition of operator, Please press star zero that's.
As a reminder of this conference is being recorded Tuesday March 'twenty.
Are you still at 1021, and now I'd like to turn the conference over to Keith Trust. Please go ahead.
Thank you good afternoon, everyone and thank you again for joining us on a Standalone, Inc conference call to discuss our 2024th quarter and full year financial results.
You should all of a copy of the press release, we issued earlier today, if anyone does not.
Have a copy you can find the full release on our website at Www Dot has done more of dot com. Additionally, a copy of the presentation can also be found on our website.
With us on the call. This afternoon are Joe Red Link President and Chief Executive Officer, and Jeffrey D. Giovanni Senior Vice President and Chief Financial Officer.
Before we begin as usual I would like to remind everyone that this conference call will include certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, all statements that address operating performance events or developments that we expect or anticipate to occur in the future are forward looking statements.
These forward.
Looking statements are based on management's good faith beliefs and assumptions.
Our management believes that these forward looking statements are reasonable however, you should not place undue reliance on any such forward looking statements because such statements speak only as of today's date we.
We do not undertake any obligation to publicly update or revise any forward looking statements whether as a result.
<unk> of new information future events or otherwise, except as required by law.
In addition forward looking statements are subject to certain risks and uncertainties that could cause actual results events and developments to differ materially from our historical experience and our present expectations or projections.
These risks and uncertainties.
These include but are not limited to those described in the reports, which we follow which we file with the SEC.
During the call, we will reference certain non-GAAP financial measures such as adjusted operating income.
EBITDA adjusted EBITDA field, EBITDA Unlevered cash from operations and.
Unlevered free cash flow a reconciliation of these measurements to the most directly comparable measures calculated in accordance with GAAP is provided in the press release and presentation.
With that I'll now turn the call over to Joe <unk>, who will take it from here.
Thank you Keith.
And thank you everyone for joining us this afternoon for our fourth quarter.
And from your earnings call.
It's now been just over a year since the COVID-19 pandemic disrupted our lives our businesses and our communities each quarter over this past year has presented new challenges as we navigated through unprecedented times and at <unk>.
GAAP at to an ever changing world.
One year.
Year ago, we were just beginning to learn about the threat and the expansive impact of the pandemic would have on our lives and the uncertainty quickly gateway of Lockdown business closures remote working and a change in everyone's daily behaviors at store.
One more as the initial severity of dependent.
Pandemic became clear we quickly adapted to the new normal and initiated immediate responses and procedures.
As all our locations across the country remained open to serve our families and our communities.
Instituted new safety protocol setting up of dedicated procurement team for PPE to.
To keep our employees safe.
We launched new virtual sales training modules and launched new meeting software to service, our customers virtually and safely at.
Our corporate team began working remotely while targeting and quickly implementing cost saving initiatives in the event that the pandemic negatively impacted.
At our operations.
As the second quarter began.
The lockdown extended indefinitely in most of our markets.
Might that uncertainty our teams responded well.
We remained open and continue to faithfully serve our families.
After an initial low at the onset of the pandemic that continued.
And into early April last year, we saw our sales production rebound as family stopped selling services.
Net lead generating of 5% year over year increase over the second quarter of 2019 on of continuing operations basis.
We were bolstered by 17% growth.
And at need production as unfortunately, many of our locations, we're overburdened with Covid cases.
The third quarter, so of surges in the number cases, particularly later in the quarter.
As became the norm our teams around the country continue to push through the issues of the pandemic and delivered for our community.
Our sales production during the third quarter was up 33% versus the third quarter of 2019 on of continuing operations basis.
Most of this growth was attributed to strong preneed production, which grew 32% over the prior year period.
Fortunately the changes we made across the sales organization throughout 2019 to greatly improve our sales leadership productivity and culture, we are paying off.
Believe these changes made it possible for our sales team to overcome the challenges posed by the pandemic and still itself.
Shell and deliver record results.
These changes will also allow for continued growth as.
As the country moves past the pandemic.
And in the fourth quarter those surges continue at.
As the country reached new highs in debt counts from the COVID-19 pandemic.
That surge contributed two of <unk>.
An increase in at meat production on a comparable location basis during the fourth quarter compared to the prior year period.
It should be noted that in most states that we operate the increase in our at need production is outpacing the growth in death rates as reported by the CDC.
C, indicating that we're also growing our market share.
I was also very encouraged at even with the sharp rise in at need activity.
We also experienced a 20% increase in preneed sales production in the fourth quarter versus prior year.
As we sit here today almost threw.
Through another quarter we've.
We've continued to see very strong sales production results from our teams.
At need sales production during January and February rose by nearly 35% as we continued to see of high volume of Covid related deaths around the country, coupled with still more as market share gains.
Yeah.
We supplemented that growth with an additional double digit growth in preneed production.
Which is actually quite remarkable.
As so much of our attention has been turned to the rising at need activity.
Throughout March we have begun to see our at need volumes begin to moderate somewhat and Conversely, preneed sales production.
Reduction is accelerating.
We expect at this will.
This positive momentum in sales.
Coupled with our improved operating efficiency.
Result in a very strong financial quarter in Q1 generating positive unlevered free cash flow was at.
Third consecutive quarter.
As I reflect back on the last 12 months I'm continually impressed by the team and the culture that we've developed its own more.
Even in the face of an unprecedented global pandemic.
It's a testament to the work that our team put into the turnaround and transformation of the company.
Had we been faced with this pandemic 12.
18 months earlier before our initiatives have taken hold.
We wouldn't be seeing the level of success, we've experienced to date.
I want to once again, thank all store more employees, especially those on the frontline, who never wavered and their dedication despite potential personal risk.
They are true.
One of our Healey courageous and a real heroes and I continue to be in spite of passion and commitment.
We're also pleased at the National funeral Directors Association has issued a letter to the states urging that cemetery and funeral home workers be included in the one eight phase of vaccines and we're hopeful that every.
In two of our employees will get the vaccine as soon as they can.
As a company. We are also preparing for the vaccines to rich create critical mass by early summer and.
And we expect at this rate will return to pre pandemic levels during the second half of the year.
As I mentioned, we expect of very strong Q1 performance.
One of book on the topline and Bottomline.
As we have experienced excellent sales production results in the quarter and our cost reductions are truly taking effect.
Our growth outlook on Q2 is also very positive is April of last year was a low point due to the pandemic while.
While we do expect to begin to.
<unk>, both need volume begin to moderate I'm confident that our sales team of once again rise to the challenge and deliver preneed production that will offset the declines in at need.
In order to support the work of those teams are implementing a number of initiatives to aid sales, including expanding sales training for all team members.
We are constantly reviewing our pricing strategies to drive revenue growth opportunities that includes both price increases and decreases to meet market demand.
There's a tremendous data and analytics opportunity and our pricing process.
We're only first starting to access and will be a key focus in the coming quarters.
We're also launching new inventory projects and products, most notably significant increases in the cremation garden offerings in our signature properties.
Lastly, we've also launched new initiatives and strategies focused on targeting large sale.
Which is a place that we've really struggled over the last year amidst the pandemic.
Speaking of men at about our full year outlook and provide some guidance on our expectations for 2021.
We made significant strides in 2020 and accomplished a great deal.
During the year, even in light of the pandemic as a reminder, in early January 2020, we completed the first asset sale.
Jeff will sit in our divestiture initiatives as we completed the sale of Oakmont in California for $33 million.
That was followed by a $25 million sale of all of that in California in March and the full exit of the remaining properties in California in October for another $7 million.
All told we've completed.
$65 million in asset sales and pay down our debt by $60 million.
We are under agreement to sell our remaining west coast properties in Oregon, and Washington for $6 million, which we expect to close by the end of Q2 and generated an additional $5 $5 million.
Of debt repayment.
We've exceeded all our internal targets on our cost reduction and transformation initiatives.
We publicly discussed cost savings initiatives that would generate more than $30 million net savings.
With the initiatives that we've completed we can now discuss savings at our north of $50 million.
But an annual run rate basis, and we expect at those savings will continue to show up in our income statement going forward.
In prior calls I've talked about how we've achieved those savings we've seen of major reduction in our corporate overhead expense driven in part by a number of reductions in force that.
Of that I've seen our corporate head count.
Yearly enhanced.
Despite those reductions we've upgraded our team across the board, allowing us to decrease it's at historical Overreliance on expense of third party consultants and professional.
Further we moved our corporate office downsize in the amount of square footage and reducing the rent expense by one.
$1 million annually.
We are excited to move into our new space a few weeks.
The office has been specifically designed for 'twenty one's new work environment.
From a field perspective, we reduced our costs across all of our category.
We've been able to reduce our selling expenses despite revenue growth.
Cut you seen improved efficiency in marketing and advertising expenses.
We've refocused our marketing spend of more effective digital channels, reducing costs, while generating a greater percentage of leads.
In the latter part of 2019 and early 2020, we reorganized our sales force creating of compensation structure.
We've at rewards our best performers for over achieving.
While overall, reducing our sales compensation as a percentage of revenue.
All in all of our very successful transformation of our entire sales and marketing approach.
We've also reduced our cemetery G&A through the number of initial through a number of initiatives.
<unk> closely tied to the rollout of the general manager program in late 2019.
With those Gms haven't been firmly entrenched for over a year now we saw reductions in admin positions in other cost categories through tighter controls and accountability.
I'm pleased with the strides that we've made on these savings.
Which is reflected in the growth in field, EBITDA, which increased to a positive $4 $6 million for 2020 from a loss of nearly $16 million for 2019 of more than $20 million of improvement just from field operations that doesn't consider the $15 million reduction in corporate overhead.
Initiative or the $7 million increase in investment and other income.
However, we're not resting on the success of there remains additional material opportunities for us to further reduce our costs and strengthen our cash flow.
We have targeted a number of initiatives that are currently underway.
We still have a lot of work to do to become a best in class.
Operator.
This team is up to the task.
Earlier, I talked about our plans to achieve organic growth.
That is continued same store sales growth.
2020 was the first year in quite some time at the company has been able to talk about same store growth.
For 2020.
Beyond that needs to be a continuing trend I believe with our continued support our sales team and make that of reality.
We also intend to grow our company with strategic acquisition.
Our acquisition strategy is going to be focused on bolt on opportunity at our existing markets.
Advantage.
One of the synergies from our current organization and general manager structure.
I'm excited to share that we have now entered into an asset purchase agreement related to force cemeteries on the east coast of fit nicely at where our current geographic footprint.
We decided to complete the process and close on these properties all of this is a small.
I think of the staff does represent a very important strategic moment as we shift from a focus of divesting assets to acquiring new locations at our strategic fits for our portfolio.
While we intend to complete this first transit this first acquisition from cash on hand.
Execution.
<unk> of our longer term acquisition pipeline will require additional capital.
Our intention is to obtain that infusion of capital through a refinancing of our current debt facility as market conditions allow and the coming quarters.
Started that process its early stage.
We are active.
Small exploring various opportunities while being mindful that we still have over three years left from the existing facility. So of near term refinancing must be compelling.
Aside from bringing additional capital to drive strategic growth, our expectation would be a significant decrease in the interest rate that we're paying.
On the on the debt.
All of us increased flexibility through the elimination of certain financial covenants and freeing up our strict cash by allowing for letters of credit.
On that note I will turn the call over to Jeff D. Giovanni.
Of walk you through more detail on our financial performance.
Thank you Joe and thank you all for joining us today.
Net of the financial performance from so more team delivered from the fourth quarter and full year.
In addition to the delivery of solid financial results I want to thank our team for the significant progress we made against us of T. Chek priorities during the year end.
Unwavering commitments to take the steps necessary for us to continue our transformation as a company.
I'm proud of what we've accomplished in 2020 and I'm excited for what we can achieve going forward.
First before we dive into the GAAP results. Please note that when we look at of performance for both the fourth quarter.
They're at full year 2020, I want to point out that portions of the presentation in our consolidated financial statements and.
And during this conversation today is based upon a continuing operations basis.
That is those through the financial performance of our West coast operations that have been or shortly will.
<unk> adjusted.
In the fourth quarter 2020, we drove total revenues from continuing operations of $74 9 million, representing a $16 6 million four of 29% increase over the $58 3 million in the fourth quarter of 2019.
B debt range was driven largely by the growth in our cemetery segment, which comprised 86% of our four key revenue and contributed $15 1 million to the increase in revenue.
Within the cemetery segment, we experienced a $4 4 million dollar increase in at me.
This is driven by the increased debt rates. We also experienced a $7 4 million dollar increase of revenue recognized on preneed driven by increases in preneed turned at Needham terabytes and increased servicing on preneed merchandise.
Additionally, we experienced.
<unk> dollars $1 million increase in our investment income driven largely by strong investment returns on our perpetual care Trust.
At our homes that comprised the remaining 14%.
Of our fourth quarter revenues grew modestly driven by increased Gulf volumes offset by lower average pricing.
Looking at the full year 'twenty 'twenty, we experienced a $22 3 million dollar or at 9% increase in total revenues of $279 5 million.
And at what the fourth quarter much of this performance was driven by the tremendous growth.
In the cemetery segment, which drove <unk>.
One $3 million of the growth.
Again, we experienced growth in both at need revenue and revenue recognized on preneed contracts.
For the year, we experienced a $10 6 million dollar in.
In growth attributed to at need revenue driven largely by the Covid impact of COVID-19, but it's true.
Joe mentioned, we're also seeing the evidence of market share and pricing increases.
Revenue recognized on a pre need contracts was up $3 9 million for the year driven by the fourth quarter performance offset by lower servicing rates.
Earlier in the year as our field teams have adapted to the rising at me.
<unk> activity.
Peter at homes grew $1 million versus 2019, again, but the impact being driven by higher call volume and merchandise sales offset by lower average pricing on services at those will limit at through the COVID-19 pandemic.
As a reminder, when we talk about GAAP revenues that is at.
Largely a function of the revenue recognition standards, particularly when talking about the revenue recognition on preneed that relies heavily on the timing of pre need training at meat and servicing on preneed merchandise. The non-GAAP sales production metrics that Joe referenced is a measure of our current period sales production.
It does not reflect our GAAP revenue results.
Reported operating income of $3 3 million as per the fourth quarter 2020, representing a 16 point of $3 million improvement over the $13 million operating loss, we recorded in the fourth quarter of 2019.
The full year.
We reported operating income of $3 2 million and that represents a $43 1 million improvement over the prior period.
The remarkable turnaround was driven by the increase in sales, but also by the reduction of our cost structure that stem from our successful turnaround initiatives.
Looking at our total expenses were flat.
Versus the fourth quarter 2019, despite the $16 $6 million increase of revenues for the full year, we saw at $29 million decrease in our total expenses.
With the $22 3 million dollar increase of revenues.
We saw an uptick in cemetery cost of goods, so driven by the increased sales for the full year, our cost of goods sold as a percent of 700 of revenue was flat.
Cemetery expense, which includes expenses related to maintenance and landscaping as well of certain facility charges, including non capitalized repairs and maintenance.
Increased by $2 3 million during the fourth quarter of 2020, when compared to the fourth quarter of 2019.
That increase was largely driven by additional expense related to be determined volume increases that we experienced late in the fourth quarter.
The fourth quarter 2019 was was possibly.
Goodbye here of $6 million.
Recoveries from insurance.
For the full year, we experienced a $1 $2 million reduction cemetery expenses.
Looking at selling expenses, we actually saw a $1 million decrease in expenses for the fourth quarter, even with a $15 $9 million increase in cemetery.
Interest at.
As a percent of cemetery revenue, we saw that rate decreased to $19 one per cent for the fourth quarter 2020 versus 27, 5% for the fourth quarter of 2019.
For the full year, we saw a $4 million reduction in selling expenses expenditures.
That's at the percent of cemetery revenue decreasing to 29%.
For 2020 compared to 24, 8% from 2019.
This savings was largely driven by a decrease in marketing and advertising spend as we improved the efficiency of that spend through our digital.
Digital marketing channels.
We also have been able to drive considerable savings on our fixed payrolls by improving our retention rates on new hires and investing more heavily in our strongest sales performers.
The less cemetery expense category is our G&A expense, which was largely focused on our regional.
Anil support administration functions during the fourth quarter.
Drove savings of <unk> 5 million and that create a created a $2 $9 million savings for the full year.
Keep in mind that these savings are net of approximately 600000 and increased spending for PPE at our locations dealt with at.
Covid pandemic.
Peter at home expenses showed slight increases year on year over year for both the quarter end of full year largely.
Driven by the uptick in revenue.
And finally, we reduced our corporate over at by $4 million for the fourth quarter of 2020 compared to.
For the fourth quarter 2019.
For the full year, we've reduced these expenses by $15 $1 million or 29, 6%. This savings was driven by a number of our transformation initiatives, notably the decrease reliance upon third party consultants for green reduce that assumes.
Direct cost by $2 $6 million for the fourth quarter and $8 4 million for the full year. We also reduced our payroll related expenditures through planned corporate reductions in force by $1 4 million for the fourth quarter at $3 2 million per the full year.
Associate at Lilly, that's $4 million for the quarter, and 11 6 million per the year debt.
At our team has accomplished at the successful turnaround while reducing these costs is truly a testament to the team that we've built as.
As we look at our current structure, we believe.
There remains opportunities and efficiencies.
That we reduce.
Further our expenses, both terrible things, but at this point, we have exceeded our best case.
An area of internal targets for cost savings I do want to note debt with the exception exception of pay reduction taken by our corporate leadership team. During the early days of COVID-19, there haven't been.
Any one time cost savings directly attributable to COVID-19 as at essentially a central operation. We remained open at all of our locations we.
We did not furlough any employees or have any temporary layoffs restructure that we established largely be the cost structure going forward.
The positive strides.
<unk> made with our income statement had been equal by the strides we've made with our cash flows and balance sheet.
Starting with the cash flow, we generate operating cash flow for the 12 months and at December 31, 2020 of $3 2 million.
That is compared to a use of cash of $40 7 million of.
The weak month end.
December 31, 2019, and this improvement was generated while reducing our AP and other liabilities by $7 $1 million that turnaround was driven by sales per performance coupled with the intense focus on cost savings and transformation.
Of the 12 initiatives.
Our Unlevered free cash flows for 2020 were 26.0 of million dollars, we define unlevered free cash flows as cash flow from operations plus interest payments, which were $29 2 million per 2020 less capital.
Asian in futures, which were $6 4 million for 2020.
This compares with an unlevered free cash flow of $14 9 million in 2019.
This improvement is largely driven by our share performance, coupled with strong trust performance and of cost saving initiatives that had been implemented.
Implemented.
As well as the cost of implementing the cost savings coming down significantly.
During the fourth quarter, we had unlevered free cash flow of $6 $7 million, which included $1 6 million of capital expenditures and $8 9 million of cash interest.
Expense.
Note that the company did not elect to pick up at.
<unk> option on the notes in the fourth quarter, which reduced the total interest expense, but added at approximately $2 million and additional cash interest during the quarter accident debt increased cash interest still moving to have achieved another quarter.
Sustained positive operating cash flow.
As we look at HUD to 2020, one we expect to see continued improvements in our Unlevered free cash flow, specifically, we're targeting positive $40 million, which represents more than 50% improvement over our 2020 at unlevered.
Cash flow.
At that targeting includes of committed effort to increase our capital expenditures to support our locations with need of gross inventory net of capitalized with terrorism agents, there's a tremendous number of high.
Hi return of capital improvement opportunities across the portfolio.
Free cash, but we will continue to be very disciplined and of projects that we select.
Additionally.
And while it doesn't impact the target we do intend to continue not selecting the pick option on our interest for the remainder of the loan again.
That's just an interest rate at 9.8, 75% payable fully.
Julio instead of having.
7.5% cash interest rate, whether it's 4% type of interest rate.
Lastly, we're focused on driving at soft performance in our growth at.
That growth was part of deleveraging our balance sheet and building the future success of the company.
Cash assets represent future revenue and cash flow streams for the company.
As of December 31, 2020, we had 400 of $97 7 million and merchandize trust assets and $312 2 million in perpetual care Trust asset.
That's excluding the trust.
Associated with the upcoming divestitures, and Oregon and Washington.
But the merchandise trust that value has increased with new trust contributions from prudent customer contracts of those cemetery and funeral home sales.
We've received distributions on the principal at surface of the curves depend.
Depending on.
The state of investment income is at a dispersed to operating cash as its parent for it is retained in the trust until surface seemed occurs creating a compound of opportunity on that return.
Sort of perpetual care Trust new contributions are made with each in term of right sold at varying percentages depending.
Of the Pons of requirements of each day, where we operate.
The principle rule of who remain in the trusted perpetuity, while at disbursements are made for the investment income to cover expenses incurred for the care of the cemetery.
During 'twenty is funny, we increased the value of these trust.
Through contributions and retained investment returns.
By $22 million net of permitted cash distributions of both principal and income.
Keep in mind that this growth is being measured based upon GAAP reporting methodology, which includes mark to market adjustments and unrealized losses, which were particularly impacted during the first half of 2020.
Proven of comprehensive investment strategy bolstered by continued growth in preneed sales production, we expect that we will drive growth in the range of 50 million of trust. During 2020 net of cash distributions that support our operating cost of free cash flow.
Collectively between our target.
But at Unlevered free cash flow and the growth in the trust assets that represents a combined $90 million increase in our asset base.
It's been a remarkable year and I'm excited about what the future of holds for store outperformance of successful implementation of the transformation strategy has put.
From a position to thrive going forward.
With that we will open the floor to any questions.
Thank you for like the rest of her question. Please first of all one follow up of the four on your telephone you will hear of three ton prompt took note of your request. If your question has been answered and you would like to withdraw at registration. Please press the one followed by.
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And we do have a question from the line of Jack Kelly with Brooklyn Group. Please go ahead. Your line is open.
Yeah.
Hi, Joe Nice nice quarter from them a good explanation of at all.
I just had a question maybe.
Maybe just to kind of of some assumptions at if we started with the.
Field EBITDA of I think it was $4 6 million in.
In 2020.
You and.
Jeff outlined a number of initiatives.
Whether it's a more.
More you know additional cost savings et cetera, but in broad strokes and where you can throw a number that would be great. You know if we started with 4.6.
At the field level, what should we be thinking about as at.
Incremental to that end.
I'm kind of putting aside volume because that can that can change, but just in terms of cost savings whether of where this landscaping etcetera and then secondly, once we get you know.
Get those factors kind of on the table you know what below the line savings might we see of you know Jeff was talking about interest.
And whether you toggle back and forth between cash or stock, but you know what at what would be the potential savings if you refinanced.
In today's market I don't know, if you're going to do it today or six months from now but if it.
What can we look for possibly and interest savings are an on a refinancing.
Sure Jack.
Expense question, so on the field, but remember field EBITDA does not include any investment income.
At all from the trust.
So any day positive is really strong.
You know as long as our investment income is greater than our corporate overhead where we're in a flow through of lot of.
All of lot of margin at a lot of profitability our focus on the field EBITDA is really around EBITDA margins, we really focused this year on our larger locations are where we were I would say behind our peers in terms of EBITDA margins for our larger property in 2020, we did a very.
Good job of improving that I would say our tier one properties now are equal.
At any of our peers are in the same range of EBITDA margin.
What's remaining for US now you can go down from that second year of property and focus there I think there's opportunity to expand margin there as well and I also believe as I.
I mentioned in the prepared remarks.
Getting our hands around pricing and margin and discounting is something that I think has pretty huge implications and positive results for us going forward, we have a big project underway right now.
To automate pricing margin discounts of we have real controls.
<unk> on a market by market basis company never had that before I think that's going to have a big impact on our ability to drive margins higher in those properties I can't really get into specifics about what those numbers will be at this point at some pretty early on the on the refinancing side, obviously the market is.
Pretty hot right now obviously day, Jeff mentioned, we're close to 10% I mean, we would expect you know of 300 400 basis point improvement you know that would be a compelling chase.
Change in our interest rates you know we have to see what the market says to us as we go out there and war.
But you know we think there is a.
A huge opportunity to have a material reduction in our in our interest expense.
Again, we're in no hurry right now of the market will decide that for us as we go out and talk of potential lenders, but we think that's a pretty significant opportunity.
And that would be on all of your debt or just staying at a significant portion of it Joe that had potential reduction.
That's all of the debt.
On all of the good just coming back to the the the tier two and I guess tier one so when you're talking about pricing and you're doing at more on a localized basis that means prices could go up or down depending on the market right. So at or were you implying that this pricing.
Tool is gives you better.
<unk> on pricing or what does it give you better if you drop the price you get more volume. So net net you get more up more absolute profit not necessarily higher profit margin, but maybe could you explain kind of what the without giving us numbers what the what the strategy is.
I think there are three components to it.
When you set.
Let's.
Paul at retail pricing.
There's also a lot of discounting that goes on from US from a sales go to market strategy, if you're not controlling the margins of the discounts you could raise prices all day long and not net any improved.
Margin.
So what we're trying to kind of create ease of model.
Out of where we can test.
Discount levels with pricing at garner the best result in terms of the bottom line. So it's a it's really setting the right price for the market, whether that's up or down controlling discounts and driving improved margins. It's really those three components. So you know that.
That'll be a little.
Bit different.
Depending on the markets we're competing in.
But the first day, Mr. Barry <unk>.
<unk> competitive review of the market and then set the right pricing and control of the type of discounting we're doing so.
So we're not giving that pricing away I think in the past.
The company would set us.
Of certain retail price or have a pricey.
But at any price increases would be discounted away in the market through the sales process. So we're getting a much better control over that whole process at all.
I'll take us a couple of quarters to get it figured out but.
But I think as we get at the end of this year and especially in 2022, that's going to be a big opportunity for us.
And just last question on your selling expense for the quarter. It was down for the year was I guess kind of flattish.
Even though you know volumes were up substantially.
At whatever adjustment you made in terms of head count or compensating of either your top guys more etcetera.
Is that pretty much through the system or do.
Do you still see that kind of leverage meaning you know flattish kind of selling expense for another couple of quarters in the face of you know of higher volumes.
Yeah, we're actually down for the year of about $4 million in selling expense with that pretty significant increase in revenue so our efficiency.
As Jeff pointed out our selling expense.
Down from 25% of revenue to under 20.
That's a remarkable level of efficiency, we expect that'll continue if it goes up it's because we're making investments that we think have better returns on the marketing side and on the comp side, but right.
I think it's kind of exactly where we had planned at today, we're a little bit ahead of our plan right now in terms of the efficiency. We look at net net sales income, which is really gross sales less cards less selling expense and we're kind of hitting all times high on that.
Net sales income margin line, so we'd like.
Of that to continue and if we did spend more we would measure of that and make sure of that getting a good return for it okay. Good. Thank you.
Thanks.
First of all the time line of questions I'll turn the call back to Joe <unk> for closing remarks.
Well I'd like to just thank everyone again for joining us today.
Now, we've clearly established positive momentum throughout 2020 and now into the first quarter.
And are well on our way to building another successful year here in 2021.
This performance is the result of the hard work and dedication of the entire stone more team.
And I greatly appreciate and must.
A non their continued support and their commitment to our mission of reestablishing stone more as a true industry leader.
We look forward to sharing additional updates on our progress on our Q1 earnings call in May and thank you again and have a great evening.
That concludes the.
Recognize we thank you for your participation and ask you. Please disconnect your lines.
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