Q1 2021 Carriage Services Inc Earnings Call
Okay.
Okay.
Good day and thank you for standing by welcome to the carriage services first quarter 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you'll need the press star one on your telephone please be advised that today's conference is being re.
I would now like turn the conference over to your Speaker of the day, Steve Metsker Senior Vice President and General Counsel. Please go ahead.
Thank you operator, and good morning, everyone. Today, we'll be discussing our first quarter results of related earnings release was made public yesterday. After the market closed and we have posted this release, including supplemental financial information on the investors page of our website.
The audio conference is being recorded and an archive will be made available on the website later today.
In addition to myself on the call. This morning from management are Mel Payne, Chairman and Chief Executive Officer.
Ben Brink, senior Vice President and Chief Financial Officer, Shawn Phillips, Senior Vice President and regional partner, Peggy should Poe, Vice President of operations and acquisitions analysis, Paul Elliott Senior Vice President and regional partner, Chris Manso, Senior Vice President and regional partner and Carlos Casado, Senior Vice President of sales and marketing today.
The call will begin with formal remarks from management, followed by a question and answer period before we begin I'd like to remind everyone that during this call. We will make some forward looking statements and he comments made by our management team the state our plans beliefs expectations or projections for the future of forward looking these forward looking statements are subject to risks and uncertainties.
It could cause actual results to differ materially from those contemplated and such statements.
These risks and uncertainties include but are not limited to both factors identified in our earnings release and those 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. Thank you for joining US This morning, and now I'd like to turn the call over to Mel and.
Thank you Steve.
This is the first time and the history of the carriage.
That we've ever had all eight.
Executive team members and our.
And the room.
<unk> for questions.
It's been almost 30 years of 30 year anniversary of the June one.
Since I Cofounded carriage.
And if you have not.
<unk> taken the time to read.
And my shareholder letter from 2020, titled the tail of high performance transformation.
And I highly recommend that you do so.
It's a long shareholder letter, but it's not all of the fluff.
It's full of content.
And it's total of substance substitute substantive data history.
And if you don't get a sense.
By the end of it and after reading of our first quarter.
And why I constantly say at.
78.
And my kids and I on 10% of the company and I wish it on more and I don't on anything else.
If you're interested in and investment and our company whether in the bonds.
And the equity.
You should read the share of a letter.
It'll lead you to ask you a lot better questions. When you talk to US the next time.
And if you ask the better questions you can get more informed and build greater knowledge about why this is of great investment and.
And it will be on the next five or 10 years.
Today, we will have a formal remarks by Ben.
First.
All of my Shawn Phillips.
Sean.
And I mentioned on the shareholder letter I cover the entire organizational structure all the way down from the board the executive team Regional partners. The director of support operations and sales manager partner sales managers take his team of brilliant soaps and everything is covered and Theyre all of our performed on all of.
Of our Houston support center, So you get a real good sense of how carriage is organized.
So Sean.
As regional partner for the central but he's also the point person for any new candidates that are thinking about succession planning and joining carriage. So if you have questions about the acquisitions today those questions. We will first go to him and then maybe I'll elaborate on something additional.
And then Shawn will turn it over to Carlos Theres, a lot of and hear about momentum and our cemetery sales Theres a whole lot in the share hold all of that are about debt and particular the board two acquisitions. We made the end of 19, so theres just a lot of substance.
There are a whole lot more done up a funeral home and cemetery company with 300, and almost 350 and sales over the last 12 months.
If you want to understand and why I referred to is of high performance filter company that just happens to be and not industry.
There is a lot of reading of material for you to get to that point of understanding and we look forward to discussing that with them.
So I'll just from this point turn it over to Ben.
Thank you Mel and thank you for everyone for joining us on the call today, our first quarter operating and financial results were simply phenomenal and demonstrate that our teams across carriers are accelerating the high performance flywheel consistent with our 2021 annual theme. We view these results as proof of concept for the high performance idea.
As we have here at carriage and are indicative of the incredible earnings power potential of our business the <unk>.
Continued performance by our managing partners and their teams validates our strong belief and the concept of first who then what for every role here at carriage.
And the rest of our leadership team and thanking them for all of their tremendous work and dedication to their businesses and their communities over the course of the past year and I remain incredibly excited to see them accelerate our high performance flywheel, even faster in the years to come.
Now onto the record setting first quarter results.
For the first quarter on total revenue increased 24, 7% to $96.6 million total field EBITDA increased 52, 1% to $45 $8 million and field EBITDA margin increased 860 basis points to 47, 4%.
Adjusted consolidated EBITDA margin increased 51, 7% to $34 $7 million adjusted consolidated EBITDA margin increased 640% to and industry, leading 35, 9% the margin for the quarter and our adjusted diluted earnings per share increase.
And incredible hundred and 31, 4% to 81 per share.
Our results for the quarter were driven by higher funeral home volumes in January and February continued increases and our average revenue per contract and a few.
Homes segment.
Like Bill mentioned, the strong momentum and our cemetery preneed sales programs margin management by our managing partners and their teams across all of our businesses. The continued successful integration of the four acquisitions. We made at the end of 2019, and 2020 and an increase and financial revenue from our Trust fund and <unk>.
And for the same strategy executed almost a year ago.
I will let Sean and Carlos expand on the individual drivers of high performance and their respective funeral home and cemetery segments and their comments.
Beginning with our 2023rd quarter earnings release, we have published a detailed five quarter operating and financial trend reports to provide greater transparency into the transformative of high performance dynamics happening in real time across our entire company and subsequent press releases and and metals shareholder letter we've included additional.
The performance data in order to provide investors greater insight into the drivers of our record operating and financial results.
And our most recent release the five quarter trend.
<unk> included additional granularity into the incredible performance and momentum we are experiencing with our entire cemetery segment by highlighting the actual number of preneed property contracts sold and the amount of pre need revenue.
As evidenced in the and the five quarter trend transformative high performance is accelerating and all areas here of carriage. We hope this additional level of transparency not normally seen from of publicly traded company will help investors not only better understand the drivers of our recent performance, but more importantly recognize the true earning power of carriage and share.
And our excitement about the feeling of future earnings potential that we have.
And the first quarter of total overhead increased $5 7 million to $13 6 million compared to last year total overhead included approximately $2 5 million of severance and retirement expenses and expenses related to supporting our businesses during the coronavirus pandemic the law.
A large increase and overhead in the quarter is entirely attributable to an increase and incentive compensation with the uncertainties a year ago brought on by the emerging pandemic. We made the decision to significantly reduce incentive compensation accruals and the first quarter and the following three quarters in 2020, we had to increasingly.
We had the increasingly increase vs incentive accruals, particularly for field good to great annual incentive awards as the performance within our businesses continued to improve rapidly our incentives for our managing partners and their teams are the best and our industry and we believe strongly in the concept of pay for high performance and 2020, we pay.
Out of approximately $5 million and additional incentive compensation compared to 2019 with $3 8 million or 75 per cent of that increase being paid or managing partners and their teams and the increase and the first quarter of incentive compensation accruals mirror of the increases we saw in 2020 with the majority of additional incentive compensation being of crude.
Through our field businesses, you put it in another way of the increase and incentive compensation accruals equaled approximately 16 cents for the for the first quarter with 12 of those sense being accrued for our field compensation and yet EPS still grew a 131, 4% that is the kind of high performance we're happy.
The two increased accruals for.
Our discretionary Preneed Trust funds had a total return of eight 3% and the first quarter compared to $6 two per cent for the S&P $502 four per cent for 70 30 high yield bond S&P 500 benchmark the.
And the investment outperformance of our Trust fund portfolio and the first quarter is the continuation of a very long term trend and has translated into a 14.4% annual return since the beginning of 2009.
And the performance of our trust funds over the past 12 months is directly correlated to the execution of our trust fund the repositioning strategy that began almost 14 months ago.
As a result of our strategy of the annual income and our discretionary Trust fund portfolio has increased 112% to $16 $3 million and has generated significant realized yet primarily on.
And they realize yet primarily unrealized capital gains within our trust fund portfolio.
The benefit of the increases and reoccurring annual income and long term capital gains and our trust funds are recognized through our reported financial revenue and EBITDA from the increase and earned income through our cemetery perpetual care Trust and the current period and from higher values. The maturing preneed funeral and cemetery merchandise and service contracts that we recognized at the time of day.
And the first quarter, our financial revenue increased 34, 1% of $5 7 million.
While our financial EBITDA increased 38, 2% to $5 3 million, primarily driven by the increase in earnings recognized from our cemetery perpetual care Trust. These results per were consistent with our state of the expectation for financial revenue to be between 22 and $23 million for the year and financial EBITDA.
Of the profit margin of approximately 94%.
And important for investors to recognize is the trust fund performance and correlated increases and financial revenue and EBITDA are not one time occurrences, but rather they are part of the 12 and a half year track record of successful management of our pre need Trust fund <expletive>ets net.
This higher plateau of financial revenue and EBITDA is sustainable for the foreseeable future.
Our adjusted free cash flow and the quarter increase of 115, 3% to $27 $1 million and our adjusted free cash flow margin increase and incredible 1180 basis points of $28 one per cent for the last 12 months, our adjusted free cash flow, a total of $84 5 million and our adjusted free cash.
So margin expanded 22 24, 2%.
Last year, we introduced the adjusted free cash flow margin metric in order to demonstrate the amount of cash produced for every dollar of revenue that's available for shareholder value creation capital allocation.
The strong operating performance, we have experienced over the past 15 months has allowed us to pay down approximately $94 million of debt of total debt and reduce our total debt to adjusted consolidated leverage ratio by 2.2 times to three eight times from a peak of six times post the acquisition of Oakmont on January three.
The 2020.
This incredible and rapid improvement and our credit profile demonstrates the tremendous cash, earning power of our business and position us carriers to have the necessary financial flexibility to pursue all capital allocation opportunities. After the refinancing of our current senior notes at a lower interest rate.
The majority of our future capital allocation will be self financed through our growing and recurring free cash flow, which will allow us to maintain a normalized leverage ratio of four times or below as a matter of policy moving forward.
Yeah.
We are excited to once again provide an updated roughly right two year scenario for 2021, and 2022 with increased range as the financial performance across all metrics. We use the term roughly right here at carriage because like all good forecast. They are sure to be 100 per cent wrong at some point importantly, though our continued operating performance.
And the momentum we see across the portfolio gives us the confidence to increase our 2021 ranges for adjusted consolidate EBITDA of 212 of $218 million.
The increase our expectation for adjusted consolidate EBITDA margin to approximately $32 five per cent and increase the range of adjusted diluted earnings per share to $2 45 to $2 of 55 cents for 2022, we have increased the performance ranges for adjusted consolidated EBITDA to $116 million of $122 million.
And because of all of the EBITDA margin of approximately 32% and adjusted diluting earnings per share of between $2 60, and $2.80 a share.
We expect normalized pro forma adjusted free cash flow to be $75 million in 2020, two and grow from there.
While there remains much uncertainty regarding the coronavirus and the ongoing vaccination campaign and the impacts of will have on the death rate and in particular, our funeral home volumes. We believe we have a number of drivers within our control to achieve the ranges outlined and the updated scenario. These drivers include the increased preneed cemetery pre.
<unk> sales that will lead to higher cemetery revenue growth rates at higher sustained cemetery field EBITDA margins.
A continuation of local market share gains across our funeral home and cemetery portfolio.
Growth and the average revenue per funeral contract as we continue to offer more value to our families choosing cremation.
And a sustained plateau of sustained higher plateau of financial revenue and EBITDA.
Our increased two year performance scenario does not include any potential capital allocation and the form of acquisitions or share repurchases and therefore, an additional driver of future earnings growth will come from higher returns on invested capital from continued disciplined capital allocation that is not included in these performance ranges coupled with our anticipated.
Lower cost of capital.
Again I, thank everybody for joining us on the call today and to reiterate what Bill said and we publish a lot of information is available on our Investor Relations website, Mel shareholder letter and our recent 2020 and our most recent earnings release tell them incredible story of transformative high performance here at carriage.
The <unk> and lays out a clear vision for our future I encourage everybody is interested and our company to take the time to review read understand those documents.
And with that I will turn the call over to Sean. Thanks. Thank you Ben as we look back on our 2020 and first quarter 2020, and what performance.
And I reflect on all of the leadership changes that occurred to ensure we had the right who managing partners to drive our high performance bus.
Since September of 2018, we've made 29 leadership changes and our businesses with our managing partners, which transformed the performance of the entire company. It moves several underperforming businesses from Paris, low performance to London and high performance.
And the first quarter of 2021, our funeral same store revenue was up $10 million or 21, 4% versus first quarter 2020.
The primary driver of our huge increase in same store funeral revenue of January and February was from the spike in Covid deaths and some of the volume increase during this period and last year has been market share market share gains throughout our funeral portfolio.
In March we started to see volume subtle down to more normal levels, while our averages of continued to increase with a favorable variance of $259 or five 2% increase in March this year versus last year.
With this favorable variance, we see a shift and a revenue increase and March coming from improved averages.
This trend has continued into April which will yield of more favorable variance compared to last year as we experienced our lowest averages and April and may of 2020.
Funeral acquisition revenue was up $1.3 million or 14, 1% and the first quarter 2021 versus first quarter 2020.
While funeral acquisition EBITDA was up $1 2 million or <unk>, 37, 6%, which reflects an impressive conversion rate of 92% of the revenue growth and the field EBITDA.
This performance is a reflection of our tremendous progress and successfully integrating these businesses and our portfolio, which includes our four newest large strategic acquisitions.
As to <unk> earlier comments regarding growth and field incentive compensation and what makes the carriage unique is how we reward outstanding performance and ensuring the success of the business with the managing partner and their teams.
Is it achieve above 50% of standards are eligible to participate and the annual being the bus incentive program.
As businesses achieve higher levels of performance there generously rewarded with this and annual incentive and.
2019, 36% of our businesses were below 50% standards achievement.
And 2020 with improved business performance only 18% of our funeral homes, we're below 50% standards achievement.
We saw similar trends continuing into the first quarter of 2021.
Managing partners also have the opportunity to earn a five year good the great long term and Senate.
The first good the great journey cl<expletive> started in 2012 at 12 managing partners that earned this incentive.
With the high performance and 2020 and into 2021, we have 30, plus managing partners that are on track to achieve a good the great incentive at the end of this year.
In addition to these generous incentive programs managing partners also have the opportunity to earn Pinnacle of service award by achieving an average of 70% of standards over a three year period, whereby achieving 100% of standards and a single year, which neither is easy to accomplish on.
Page 50 of the 2020 shareholder letter, you'll see a list of 41 businesses that earn their 2020 Pinnacle of service Award. What you don't see are all of the other businesses that stepped up their performance big time and accelerate their good to great journey, which has contributed to the flywheel momentum and a huge.
Wei.
The 22 businesses that whatever and pinnacle, but lack the three year tenure as managing partner because of all of the leadership changes that were made across the portfolio and all three regions since September of 2018.
I can personally of test after almost 14 years with carriage for the right person and the right seed on the high performance bus. This culture will change your life, both personally and professionally it takes time to understand the uniqueness of carriage of what.
<unk> seen over the last several quarters as the high performance culture in action at its best during some of the worst of times.
On the pandemic started we had no idea of what to expect but we did know was we worked hard and the months prior to COVID-19, ensuring we have the right entrepreneurial leaders in place to drive this unique culture company. The just happens to be and the funeral and cemetery business.
In order to understand how unique carriage is you have to be curious.
You have the wanted to discover more have the ability to listen learn and just as important and have the ability and willingness to unlearn observed and as thoughtful questions only after the proper time theres been divested and doing the research at carriage, we call it and getting to the other side.
The worst thing anyone can do is to think we are just like everyone else the.
The recent 50 page letter of loved the metal wrote truly outlines of the dynamics of our people and our businesses.
It's truly a proof of concept when leadership and high performance transformation dynamics are married together and create the flywheel effect.
Now I'll turn it over to Carlos.
Thank you Sean and thank you all for being with us today.
And I introduce our transformational high performance plan and our six sales drivers on February 17th when we had our 2020 earnings release today I'm excited to present to you our cemetery portfolio performance update.
We have been able to sustain preneed cemetery sales growth of all of the highest quarter and carriage history with West Inc. Q2 2019.
This sustainable we need sales high performance is consistent in both same store and acquisitions. For example, during the period ending Q1, 2020 one our same store Preneed Cemetery sales performance was 34% over Q1, and 2020 and our combined growth in same store and acquisitions of 58% over the.
The same period.
The sales success comes from both a focus on higher and the inventory sales and an activity based approach that led to riding on additional 513 contract or 52% more than we did in Q1 and 2020.
And while cemetery and need revenues are starting to normalize our preneed sales performance is contributing to our very impressive total cemetery field EBITDA margin of 45, 3%, which he said on all time high.
Our total cemetery operating revenue growth trend over the past five periods, starting the first quarter of 2020 are as follows.
Q1, $13 7 million Q2, $15 6 million Q3, $19 6 million Q4, $20 2 million and Q1, 2020, one 'twenty $1 6 million, which represents a compounded growth of 12% over these last five quarters.
This amazing growth combined with our unique operational leverage advantage allowed us to convert and 68, 5% of cemetery same store revenue growth into same store cemetery field, EBITDA and 78, 3% of cemetery acquisition revenue growth into acquisition Cemetery field EBITDA.
Our total cemetery revenue growth to total cemetery, if you will leave you the conversion rate of 73, 7%.
Moreover, while these numbers are quite impressive our transformational high performance journey has just begun and we are at the early stages of our plan.
And having traveling and visiting more locations, where have made amazing partners and found tremendous opportunity for our sales program and sales growth.
Therefore to give you a vision of the future and the reason why we know we're creating sustainable high performance that is above anything else than we ever had before all we go over our main seeks sales drivers followed by an update on the execution of our transformational high performance plan.
Our sales drivers are number one and leveraged technologists as the neighbor of acceleration.
Number two introduction of performance based rewards and incentives number three strategic capital allocation to high yield cemetery products and offerings.
The number for sales growth through advanced planning strategies and robust marketing.
Number five the deployment of lead generation programs and improving conversion ratios and number six based on the recession of cemetery sales processes policies and systems.
This is the progress on ourselves drivers are.
Our CRM is now underway and we have a tentative pilot program launching through early adopters and Argos 'twenty 'twenty. One we have come to an agreement with Microsoft to provide tablet store sales call centers that will accelerate sales success with fast simple and readily available information.
We have implemented our new performance based compensation planning April 1st across the cemetery portfolio aligning compensation with performance the target and the feedback from the field as well as our sales trend has been very positive.
We have the same new reports that highlight the performance expectations out of line store and use of compensation program and provide sales cost of <unk> and sales leaders and where they stand to their target at any given day during the month.
We have started the deployment of capital of the projects that have been reviewed and approved by the executive team, where the return on investment accelerates, while creating beautiful inventory that is appealing to the local community and the target audience at each of our cemeteries.
We saw market starting to soft and COVID-19 restrictions we of launch of our advanced planning strategy with the full focus in selling preneed cemetery through five new teams. We created during the first quarter of this year and with five more teams coming before year end.
This will result in additional sales production above the growth we will achieve from our legacy teams in some of these services, which are both included in our updated two year roughly right scenario.
We developed the process through a third party to deploy the remaining campaigns in a fast simple and effective way generating new opportunities store sales teams, we launched our gr<expletive>roots events program and created standardized toolkit that enables sales leaders and sales counselors to attend community events and have a professional look that a bill to the consumer and engage with them.
While creating value and the significance of free planning.
We have of standardized selling compensation sales policies incentive methodology and we're in the process of sand the rising park tours and giving families of different experience focused on service when they are looking at buying of one of our premier locations.
We have launched carriage of Academy, which includes slight cl<expletive>es. This is a full week eight hour day program for new sales call centers, where they learned the foundation of cemetery preneed sales and leave the cl<expletive> with tools and resources and will help them achieve their goals and dreams from these program. We have successfully graduated their second cl<expletive> with a third one starting this.
Monday.
Carriage Academy also offers a corporate on for existing sales customers, where we focused in the culture and the skills that lead to sales success at carriage services.
We have created and used sales presentation as well as our new version of our planning guidance, which we now call carrying decisions planner and all of the training that supports the success. We believe these new professional and systematic approach to sales will allow carriage sales call centers to engage families and a way that generates interest build trust and mutual.
<unk>.
And we continue on our transformational high performance journey.
And goal of creating sustainable Preneed cemetery sales over time, we have achieved so much in just nine months and there its much more to come but for now I can say that the sky is blue <unk> future is brighter than ever before and there has never been a better time to be with carriage and the best is yet to come.
And I will now p<expletive> it to Mel.
Thank you Carlos.
And then the former remarks just for going over.
A few things and the.
The.
The shareholder letter.
And in Ben's earlier remarks, we are planning of refinancing whenever that is done.
And it will be done.
I think our cost of capital creating defense recent.
Work.
We'll get down to as low as about six 5% and MRI.
And the six 5% cost of capital.
So.
I have been teaching.
The 47 people now 50, we put more three more into the good to great too.
Five year.
Shareholder value of incentive plan I have been teaching them.
As Ben has been doing.
And how to think about their jobs.
Individually and and teams as.
As we execute our three core models and standards operating for the.
The leadership and strategic acquisition.
And I have been teaching them.
How the how to calculate <unk>.
<unk> price ranges of our shares based on performance metrics.
And as we've explained.
You should expect to trend up over time.
Notwithstanding the external environment.
And if you look at the the two year scenario.
19, and actual 'twenty actual.
12 months ending March 31, the <unk>.
12 months going forward to the March 22, all of 21 all of 22.
A lot of hard to see the transformation and these numbers.
At the end of 'twenty, one and I don't know, what the COVID-19 environment and will be or not be but at the beginning of 'twenty two.
We will put out another scenario, even though we haven't finished the 22 year, but on <unk>.
Total transformation.
We will put out of five year of scenario.
And the scenario.
We will now be allocating our capital and different ways to create more intrinsic value per share.
We'll put several scenarios and there more acquisitions less acquisitions buying in shares more dividend keeping our debt right there at four or less and.
And we'll have the free cash flow to do it and so the fun part of my job and Ben's job now is.
As to just educate our own people.
Now that's been in the process somebody out there and your world gets educated to the.
That's great.
And that's not my primary motive my motive is to get our own people educated about how they create value.
I figured somebody out there we'll figure it out sooner or later by reading the material has been been pointed too because it's real and it's only going to get better from here.
But even if you just look right now and.
And what Ben just said.
You know, we got $70 million and therefore.
Free cash flow after the refinancing, but I'll just turn of size 70 to 75.
And let's just take the midpoint of $72 five and divided by $18 2 million shares.
That's free cash flow per share of $4 one of the reasons on la.
The same story.
And started this company of 48 years old and this is what I knew I know about all that stuff for us starting carriage and $4.
And free cash flow per share.
With the share price of $37.
I can do it and I can do the math of my brain.
That's the 10, 8% free cash flow of equity yield.
Compare that to what we will have as of six 5% cost of capital.
Now and a normal valuation of free cash flow equity yield.
You would divide the free cash flow per share.
All of your cost of capital or somewhere close to it that.
And that would get you the current price or maybe the price a year from now of about 60 or 61.
If you put of 20 times multiple on the EPS to come up with 50.
So some of our somewhere between 50 and 60 is where I think we will get to know, but this is what this is what I'm teaching our own people and why should I hope that by telling you the same.
It goes they all believe it and they all of note, we can execute and that's without even have done anything new.
With the capital we will have post refinancing.
And and we're going to do new things.
I will add even more value. So the team here and we've had very little input I've had some.
On the good to great two five year of shareholder value of incentive plan, that's what everybody should be focused on.
And you should be focused a lot and everybody here is excited about it.
And as Ben said read the material and get out of the come to see us.
The <unk>.
And you'll see our places.
And you wanted to go find out goes to the place run by our standards Council members, there and on the plan.
<unk>.
One of the 10 and the 50.
<unk>.
You will learn so much about this company, we're an open book, there and nothing to hide because it's real and it's only going to get better.
And then.
By telling you of funny story.
I was I was almost late for this call.
And they were call it anywhere.
Or are you.
Well.
If you read the shareholder letter you get to the yen and.
And knowledge of my life for the first time.
And our kids were home of hump rate for Easter.
And our sons 35 of our daughters 27.
And all the debt.
And keeping the young and believe me.
And my daughter at it first.
And to get to the part about a mother and she said Oh debt that's wonderful.
And then she said something else.
So you know debt.
If I had been you back then and I spent three weeks and Paris restructuring of <unk>.
Company's debt with a government French bank.
Wow I would've flown home on Saturday.
Got dressed and gone to that same club and just sat there all night myself.
That's what I would've done.
And and.
I know she is right.
She has really brought alright, so as is buy side of the communist more data you ready for the call are you ready for the call.
And all of them more than ready.
And there was when he got a company like this you don't have to prepare a whole lot.
And so my daughter Texted me.
I was not even in the shower yet.
And we got debt I read the release.
It is so powerful is unbelievable I don't know why anyone would want on this whole company or at least a lot of shares and Thats why im not selling any of 927000.
Six shares you told me not to I get it I'm never sell and in fact on my bias of more.
Now that's my kids.
I don't think they are biased I think theyre, just getting savvy about what is the good investment and with that I'll open it up for questions.
And.
Thank you as a reminder to ask a question you'll need the press star one on your telephone.
Draw your question press the pound key.
Our first question comes from Alex Paris, with Barrington Research. Your line is open.
Okay.
Good morning, everyone. Thanks for taking my questions and making time this morning, and congratulations on another great quarter.
Thank you.
Whats the I think it's the fourth consecutive quarter of beat and raise.
And carriage services performance is now becoming.
And certain as the desk.
On something that investors have been looking for for a long time and carriage services.
And so called the Desert Island stack the.
Financial results of carriage services match, the certainty that we all know.
The death has in life. So congratulations again and have a few questions.
For the team if I may.
Okay.
Sure starting on the funeral.
Side of the business.
And as you alluded to on the call and industry.
Not just funeral and also a place to at need cemetery.
And as volume growth moderates or normalizes.
Due to the pandemic subsiding.
We have seen.
The average revenue per contract increased both in the months of March and April and get.
Given the more the more significant transparency that you've put it in the quarterly reports.
And this is the first time and over a year.
To what do you attribute the improvement and averages and obviously the comps are easy because they were impacted at the onset of Covid.
But you.
And what are you doing to increase funeral averages both burial and cremation.
Hi, Alex that the PE.
I'll answer that question.
On the theater home perspective, we actually starting to see and the Mark.
Average improvements really after may.
More because our managing partners were getting very creative and their teams and holding outdoor services and.
Volume and more growth of our averages really and October November so a little bit of a debt as the Covid cases went up in December January and February, but what we're really seeing in March and the comparison there.
Great because we saw that did p<expletive> and March of last year, and really we hit the bottom and April of last year, but it's a combination of the creativity that our managing partners had starting in May and June but then now as people are becoming more people are becoming vaccinated more states are opening up restrictions are being led.
And people can have small gathering and we're comfortable with it and then also we continue to have a focus on our cremation conversion and.
Educating families on what's possible with information and we don't run away from it.
We work on and just educated and the families on what's possible for them and how they can celebrate the life of their loved one.
Alex just to add and what Peg you said.
Earlier on.
And I mentioned this on the shareholder letter of the.
And the Forbes article.
Implied debt.
This would be of catalysts for permanent and behavioral change.
The people choosing directory medicines fewer services all around on free mentioned barrels and so on.
And though the bunch of malarkey.
It got a little clever headline for the second or two.
But it was it was total.
Ms Li.
So what we're saying is low.
People, who were told what the it can't do.
And by by government mandate.
And so on fear.
Now that they are saying is loosening up even though COVID-19 hasn't gone away.
Fear is subsiding and.
And.
The thing to all of the debt that you alluded to has been drawn out of thousands of years, it's inevitable.
And and and Theres a lot of research on on how do you how do you how do you kickstart grief.
Well you don't kick start growth by being told you can't do anything and you have state by yourself just get out.
And.
And so now people are wanting more of than ever.
And so the.
Covid environment over the last year has been a catalyst for people to want more and more services more creativity.
More value more France more family of great celebrate and.
And our people and saw that now they've been unleashed and they're making it happen and broadly we're seeing some amazing and average increases.
And California, we're just hammer.
The average is now are back and the volumes are still up there.
That's the one place of the country, where the volume is still up on the averages of way up. So you know even on a normalized you saw the April it's pretty extraordinary what's going on in April and it's broad and.
And so what we're saying is the initial outbreaks and long island and M<expletive>achusetts.
On a good New Jersey, Pennsylvania, and New Orleans, because of modern grow back then.
The volumes are down but more broadly we think this thing has gone on a normalized with higher revenues.
The carriage and then we're off to the races, because we just got better.
Better than we were before we're not going and get worse again and we are.
Already are so this is the nature of and adaptive company. That's why we call of the company and just happens to be and the funeral and necessary.
And you can start talking about those things and you get lost and the willingness.
Got you too close to the tree you don't recognize the nature of the actual company.
And this is the difference.
Well. Thank you for that that makes perfect sense as volume spikes due to COVID-19 and averages came down as COVID-19 recedes and volumes normalize the averages go back couple of Dennis kind of the.
And the offsetting function and then you have all of these other levers to grow the company like cemetery and parallel to the good job outlining that shall I don't have any further questions for Carlos at this point, except to say I remember last year. The change the holiday was severely impacted and the early days of Covid.
I was just wondering anecdotally how did the chimney and festivities.
Go this year versus last year, and particularly in California.
Good morning, Alex This is Paul of.
Very successful and it wasn't the same turn out as 2019, However, we were able to have.
The event and some good success and our trends in April.
We're looking very favorable.
I would tell you Alex showed that who is well.
I don't want to almost total I can't do that.
Because of the talent, we got and this company is like.
A players everywhere and I don't want somebody to come and after a players but.
The other driver and this is another thing on here all the time on sick of it.
Cremations of pretty motions, Cremations, cremations, well, where are the backbone I started the company with permission for less than 20% non of $56 57, and we're growing revenue like crazy so on.
Did want to to be able of proactive and say thanks for asking me that question, Chris why don't you answer it.
Yes, so we've been working very hard and.
The exploration families.
Who.
Initially our choosing no service and we're sitting down and having conversations and learning about the the life lift.
Journey through life all of the accomplishments.
And then continuing of the conversation while providing the options based on what we've learned from the family and the accomplishments of the family.
And putting it together with the service options.
All of the participants through the.
And through line too.
And so come in and celebrate with the family and share their stories.
Of the loved one.
And whether it's a small gathering and large gathering and what we're seeing and or slowing down and having these conversations with families and I haven't really thought about it. So we're.
And we're having our take up rate is starting to improve each each period of our families and instead of choosing those services and are starting to.
Have small gatherings or celebrations.
Yes.
Cory mention.
Value.
And I explained this in the shareholder letter of most families don't choose formation of those price.
Because of the method of disposition.
And that secular change will continue but.
In spite of the cremation.
Going from the teens.
I started the company 30 years ago.
Seven percentage of 6% now and one of the greatest upsides as higher average is on all of the cremation and we're taking a lot of market share and the provision area.
And that's a huge opportunity over the next five or 10 years as opposed to a huge negative so huge positive.
Great. Thank you and then the last question for me for now.
And it's probably for Sean since he leads the point on <unk>.
M&A, while our guidance does not include any future M&A.
The activity.
What are your plans for <unk>.
For M&A post refi going going forward.
You Havent done you Havent closed one since January 30 of 2020, obviously, there was a record number of acquisitions I think of $170 million and cash outlay.
You've been integrating those integrating those successfully.
And I'm presuming that you're going to get back and the MAA.
Consolidation game post refi, what should we expect there and what are you looking so.
So Alex I've had a lot of conversations even during this time with.
A lot of our acquisition candidates and we targeted that we would like to be partners with so we've never stopped that communication with them.
The start picking that back up what I'm currently doing and sending the shareholder letter out.
With the personal communication for myself of Mel above the share her letter and getting back and front of it but the I can tell you of the activity has picked up.
The last probably 45 days I've had probably 12 15 calls.
But again our acquisition model.
It's very strategic and what we look at.
And we'll continue that.
That path as well, but the activity has picked up and.
And one other point on.
On the.
And you said.
Such Carlos and joined US on June 26, and the broad as a player team in and has done everything he has outlined.
And then a huge difference on how we view.
The acquisition candidates.
And we want more cemeteries that are high quality cemeteries combination businesses, but there is another way to think about it.
We acquired our own existing cemetery portfolio of 32 cemeteries.
Sitting right here and we own them all.
We bought 32 of them and now we have acquired all of the performance out of those loans cemetery that we never could get before browser.
It's the way to think about debt.
That's great. Thanks, and then one more sneaking question Ben you Didnt say anything about Capex plans for the year I think last quarter, you said $18 million to $20 million is that still a good number.
Yes, Alex I would probably say, we're probably around the $20 million range for the full year, we were just over.
$4 million and total capex for the quarter split almost evenly between maintenance and growth Capex really big focus throughout the year in cemetery inventory development, we will be making more investments in that than we have historically, so very excited about that and the projects that we.
Were evaluating and getting started right now.
And then for the full year 50, 50 growth Capex.
And that's what I'm, saying.
And on incentives is gonna be the number. Thank you great. Thanks, So much I'll go back on the queue.
Thanks Al.
Thank you. Our next question comes from Chris Mcginnis with Sidoti and company. Your line is open.
Yes. Good morning, Thanks for taking my questions and the nice quarter.
And also I'm, just reading and reading the each one of the letter.
You know I thought reading prior ones, you've learned a lot about the business, but obviously a ton of information and insight.
And thanks for sharing that.
And congrats again on the numbers.
I Wonder just ask a quick question I guess, just around that kind of the landscape you've taken a lot of share.
Can you just talk about what's happening with the more fragmented component of the market or are they starting to come back and are you seeing them, maybe open up or are they still having a harder time operating and the environment.
And then how does that play into the M&A strategy is that opening up more opportunities for you and you just commented a little bit about M&A.
And I guess the toys.
Just that fragmented market operating and the the opportunity that presents for you. Thank you.
Yeah. This is Sean I can tell you the.
With our it strategy, we were able to get out to our business is quickly we're able to do things that a lot of our competitors were not.
The other interesting Chris is a lot of competitors were not doing services. They were only offering direct barrels of direct formations, where our managing partners are like.
Let's let's bring it in and celebrate the life lips. So.
I don't know, if thats really going to translate into M&A activity, but again as people hear our story they see what we're doing out in the market.
I do see it ramping up over the next probably six to 12 months.
Sean.
Explain the gross.
This is Mike.
Spread in terms of how carriage if you were part of carriage.
Some of the ones, who joined US like of rest Haven and so on.
Oh come on.
Others Fairfax.
You heard them tell you the thank goodness, we joined carriage before this happened and.
And how do you how do we get debt out there and the MTA.
And so it was a lot of.
I've heard a lot from directly part of energy partners, especially a couple of our businesses, we partner with and the last four we did I mean, they said that we were and independent we couldnt do that Chris because we were able from here to provide all of the support necessary they needed whether it be PPE refrigerated trailers of whatever it was so wouldn't distract them to have to go to try to.
Final suppliers, so that support the we're able to focus on serving the families. So that resonates out and the community our competitors see that happening of the bigger better businesses see that level of support that we can provide.
Great great.
And I guess just are they starting to get back to normal or are they still operating kind of.
Yeah.
And on top of capacity at this point.
Our businesses.
So I guess that competitive landscape.
On the competitive landscape and I was asking about.
It's hard for us to know here, we are back to the Pentagon.
We don't pay attention to what the competitors are doing against our local managing partners, but our managing partners no.
And Thats why we follow on their data and they are and they're incentivized to grow.
Items and compound and revenues and so based on what we're seeing on our own people do I wouldn't want me to the competition.
And clearly clearly and the.
And I, just a question for Carlos and and go into market with the pre need can you just talk about how your how you're approaching that now and the COVID-19 environment.
And what's different I guess prior to that and do you see that maybe normalizing as well as the economies start to open.
Thank you Chris Great question, So yes, we.
The restriction of starting.
Earlier, less and less here, it's really difficult to be in front of families knock on doors, you know get appointments and family homes, which is the main driver of preneed sales through community Gr<expletive>root efforts.
But there's two pieces to the preneed right you have the family services screening opportunities, which as families that we're seeing on a daily basis, whether the currently owners of opinion contracts that they wouldn't expand for my family members as well as those that.
And may have already p<expletive>ed and we want to reach out to their family members and see if they would be interested to be.
And right there right next to our loved ones and so between these two approaches we were able to still continue the preneed efforts, even and despite of the COVID-19 restrictions as those restrictions are starting to see.
Slowed down and a lot of cities and markets and counties are opening up either allow us and enable us to be more aggressive into that approach.
And some example of that we have been able to secure some.
Grocery stores in California, where we can actually set up a booth of the table, where we can provide information to those shopping and engage on a face to face environment of course.
And respecting social distancing and wearing all of the protection that's needed, but we're still able to get that done.
And as that continues we will be able to then expand on seminars in house appointments and the other type of items of families.
Get vaccinations and field of fee.
Dropped the fear of these.
And then make so always see on has to be after this performance moving forward is more and more opportunity as restrictions.
Open up and the could dropped.
Great and I really appreciate that and say thanks for taking my questions. Congrats on the quarter and good luck and keep.
Two.
Thank you again as a reminder, if you would like to ask the question press. The Star then the one key on your Touchtone telephone.
Our next question comes from Andrew <unk>.
The word with Fenimore your line is open.
Hey, good morning, guys.
And Andrew.
And it's great to talk to you guys first thing I just want to say, thank you to everybody carriage of new things, we're going to get better of couple of years ago, but.
And even excluding COVID-19 on.
New things, we're going to get better but this is a lot better you guys are really just done a fantastic job and.
And my only complaint and higher Carlos when he was that coming out of high school. So you've just done great job. Thank you.
Some of that you've got a little slow on the uptick that's the.
And that product.
And I'm going to Spike that won a couple of questions. One is really a follow up.
And maybe this isn't.
Expressing my own ignorance, but I have never planned to funeral, thank God I'm sure I'll get to.
What is what does it really look like when you want to do on a cremation and like what are those services you can cross sell.
And to bring up the average revenue per cremation over time and I'm not worried about the COVID-19 influence on that number but like long term 510 years like what are those services you can cross sell and and how does that really work kind of.
At the ground level.
Yeah, Andrew this is Chris.
It's really.
All about.
Whether it's a religious service of our gathering and just some way to <expletive>emble.
And.
The family and friends to share information of our.
The storage rather than the information.
And when we host of these services, whether it's our at our venue or another.
And it allows us to pick up the revenue.
Yeah.
Right.
And our team.
To guide the family through.
The difficult time of their line most of these families are not thinking.
The service.
<unk> finished the occurs so we help guide them through the.
The profit okay.
So Andrew.
The embellish on that a little bit.
You could call the come in and.
Maam cremated.
And I'll cover this and the sections and all entrepreneur realism innovation and the.
Adaptor as shown in the shareholder letter.
That's posted of them coming in and saying Wow.
And we were going to barrier.
So that's.
And that's a decision about disposition.
And when I was growing up and my mother in law of Hirose.
You know.
I don't want to be burned the thought of being burn is not something how on and so she wanted to be buried.
And then other people will come along and now and say okay.
Body lying and there and you know whatever happens over a years.
And what that thought.
And that's really the choice.
Now, but because of that and the cash cremation is newer than traditional burials.
I would go back to the Egyptian remember.
And so.
They think their rules and protocol.
What you can't do.
There are not as long as it's legal.
And do anything.
You can have any kind of service anywhere.
With the body.
Our without the body.
You can and bond the body and.
And and do other could have of visitation.
Our casket.
The cash and open where people could see the person and blah blah blah, but the final disposition is still going to be cremation and you can create the.
The body, even after the embalming, even after the visitation and all kinds of services with.
With the casket and there are absolutely are no rules.
To what you can and cannot do as long as it's illegal and that means just about anything but the people don't know debt. So unless you engaged zone.
And and start giving them all kinds of options. After you find out about that line and what was unique about it and what was really of.
On the importance to them.
And then you could start recommending various options of services products and all kinds of thing still with the final <unk>.
Disposition being cremation.
And then even then there are lots of options.
And what you do with the <unk> and.
And having a final place for people to come and visit and a beautiful cemetery and all kinds of things you can do with that so it is such a creative prop.
Process.
And if you don't have created people just like what I said, you wind up with.
Something that's more like the commodity.
And Thats why this is the greatest opportunity, we have and the way the do it is to get the people who.
Who interface with the family.
And if that helps.
And that's outstanding I really appreciate it.
And I haven't even thought about some of those variables. So that's great.
The only other question and I.
And.
And there were some great questions before me and I appreciate those but the you mentioned six five percentage of your cost of capital did you mean that is likely the cost of the new debt or are you talking about the higher math black.
The finance MBA type cost of capital.
Yes.
And that's all.
And while we believe our weighted average cost of capital will end up post the refinancing transaction.
Okay, highly accretive and really is going to be meaningful impact of our return on invested capital moving forward and excellent.
Yes, that's great.
We're getting pretty close to the time period, you can call that debt I think was the June 1st maybe and I can't remember I promise I read that letter, but it took the three day. So I may have forgotten the few details but the.
Okay.
And we expect the news on that.
That's the third year anniversary of carriage HEICO as at June <unk>.
And there you go.
[laughter].
Yeah and.
Youre correct as of June 1st as the call date.
And we're focused on refinancing those notes and we will provide details as it comes absolutely.
Okay, and I look forward to that that's great.
Outstanding well the guys. That's really all the questions I had but I do want to say, thank you again to everybody and I really enjoy those letters.
I've read them all so thank you for keeping those come.
Thank you Andrew.
Look.
And I just want to think about sixth grade teacher model on her.
We had a really smart gl<expletive> and.
And to move through the Grandma real fast and said, Okay now I'm going to hit your six vendors with creative writing.
And on Air forget it eroded a road of story about the day and the lives of and hand.
And I didn't say it was on that and you didn't know it until the Hana and my cl<expletive> to this day and remembers that.
How relevant that is to carriage I have no out of it.
Yeah.
Uh huh.
Thank you and I'm showing no further questions at this time I would like to turn the call back to Mel Payne for any closing remarks.
Well you heard from all of our a players on the executive team today and and.
We want to know why I never plan to retire.
The them and everybody else and this company who come to work do you have a lot of fun and you work really hard you really smart.
The work together.
And you take the journey and we hope you take it with us and thank you very much for your support.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
And.
True.
And.
[music].
Yes.
[music] and.
And.
Net.
[music].