Carriage Services Inc. Q1 2023 Earnings Call

Clear path to delivering high performance through market share gains delivering exceptional resource to a seamless acquisition integrations driving growth in our preneed cemetery sales and optimizing financial performance in each of our portfolio of businesses.

Andre particular demographic.

Funeral services and cemetery sides going forward and to what extent are they rolled out I believe.

Trinity is nearly rolled out so just an update there on those two technology platforms.

Yes, So I think we're still in the process of the rollout itself will.

It will be somewhere around the first quarter of 2024 right now we are in the process of.

So I think what our processes are here compare those to the ERP that we called Trinity and then closing that gap.

Programming and actually the development.

So.

Very broad in terms of its capacity, but as you know.

And today, we really believe Trinity will.

How we serve as families in this round of analysis.

With that as well as being able to be more efficient and productive on our reporting accounting processes.

Overall, how we work and we start families in general terms we.

We will be able to do cemetery contracts digitally which right now it's still at an annual basis.

There will be a huge driver because then we will be able to post preneed cemetery sales on this on site at the moment, whether thats on the AUM and advanced and things of that nature.

From a reporting perspective, it will enable us to have.

Reporting within anything lie because right now we work based on batches.

Maybe there's some guests information from the field.

And we certainly are going to get some benefits from that.

Productivity perspective.

It would be very breath, but we're not.

As to our pilot.

Pilot <unk> program sometime around the last quarter of this year.

Appointment in 2024.

Great. Thank you for that and then my last question and I'll direct this one at Kian.

Okay.

And in.

Understanding fully that you've only been in the seat for six weeks, but given the outperformance of the first quarter.

You reaffirmed guidance for the full year and again that could be related to your tenure in the seat as well as some element of conservatism.

But just wondering what sort of color you can give me there and.

Is it safe or is it aggressive is it safe or aggressive to say that even more likely be at the higher end of full year guidance ranges.

Thanks, Alex really appreciate that.

Thank you.

What answer to your question. Your question with your question, Yes, the Conservative also.

<unk> been kind of due to the C. I mentioned six weeks here.

And for Us.

We have a little more visibility and kind of how we're performing in the second quarter.

How the forecast looks for the rest of the year before we tightened up guidance.

So look for us to as we get more visibility for us to either tighten up guidance or update guidance.

Now for Us to guide today whether were.

We're tracking towards the high end of the range.

We have.

Full visibility on or.

I just wanted to make sure that we have.

Thanks.

Confidence level of meeting that guidance range. So right now, we're just not comfortable providing.

An update.

That's fair enough I appreciate the extra color. Thank you very much and Thats all my questions for now.

One moment for our next question.

Our next question comes from Liam Burke from B Riley financial Liam Your line of lives.

Thank you, Matt that's great hearing you back on the call.

Great to be here.

First question I had was on the funeral home business could you give some sense as to how cremation sales were either on a year over year a percent of revenue basis.

How that contributed in terms of relative margin.

Yes, absolutely.

No.

Information mix continues to change somewhat consistently over the last few years and for this quarter was a little update on their commission.

Around 2%.

The positive side.

And a lot of that due to the 100 or better.

Our increase in our average one 5% improvement year over year. This is comparing Q1 to Q1.

That's what total as it relates to same store to two 2% Commission mix went up.

Our average when you were.

89% to 5% upstate South average perspective.

We're not really concerned.

Have a very good strategy as it relates to cremation conversion that means.

Is that going to.

One you have.

Reclamation.

We present them with all of the options. They can choose the commission with surveys or a different type of celebration.

Slide allow us to then make up some of that cremation mix change.

But are you pretty much where we thought they would.

And.

Have a good strategy to continue to tackle them.

So I just wanted to make sure I Havent straight you saw year over year growth information sales and then higher.

For sale.

Realization.

Thanks, Greg.

Okay now how about on the on the EBITDA margin side.

They've been better than traditional burials are the same or has that contributed to the EBITDA margin.

So we don't really look at.

The EBITDA contribution by business in each category.

EBITDA EBITDA or.

Let me turn base EBITDA.

We just look at EBITDA in general terms.

I can tell you that the margins there are really really strong right so ending up.

Where we ended out.

<unk> 40.

I mean, it looks like you are a 41% those are very strong markets when compared to Q1 of 2022.

140 basis points drop in those margins to say those are sustainable are very very difficult to actually feel very proud of the margin.

As you might have been on our <unk>.

One of the highest in the industry by far.

So we feel pretty strong there are some opportunities. Nevertheless continue to maximize that in both funeral and cemetery businesses to continue to pass down some of those inflationary costs to the families that we serve.

We've given a pretty good track always.

Always explain that.

Is a fine balance right, we never wanted to just push prices.

Managing partner decision and they're really really wise.

Everyone else is volume.

For the sake of improving.

Margins right.

So we keep managing this delicately keeping Australian business units on a monthly basis.

We're pretty satisfied with.

Great and on the cemetery side.

It looks like you are getting great traction on preneed sales.

Our guidance is for double digit growth where are you in terms of.

Building out the marketing or the sales force or the marketing effort. However, you want to couch it.

Yes, we are actually made tremendous progress.

In other calls.

Thanks.

So let me start somewhere around Q3 2022.

The family that will typically go in for the previous three years, who asks about Feeney, we're no longer.

A shift in strategy.

Pushing customers and managers to go out and find business you took alleviate overtime, we align that strategy.

As important the development tools.

Outbid and we start to make progress.

Oh in months.

It came after September .

Very very happy to report that we have it very tight right now.

Very confident to say that we have a full.

Rusty itself.

Let's hope managers a recruiting capacity.

E Com accounts perspective has been very very good as well we have actually new teams.

The year before you can example, without having advanced planning team at Fairfax, We turned their first month, the almost tripled their target.

So very good strategy very happy with the performance achieved.

Victor support.

<unk> team of sales are doing.

And that's why we feel confident that these trends will continue.

Great. Thank you Carlos.

Thank you.

One moment for our next question.

Our next question comes from J P <unk> of Roth.

JP you our lives.

Good morning, guys. Thanks, Thanks for taking the question Mel Great too great to have you back on the call here.

If we can maybe first start with a couple of housekeeping items.

On the last quarter release, you shared the consolidated funeral contracts number.

That was as part of a.

Way to simplify reporting going forward I was just curious if you could share that number for Q1 here and is that something that youre going to be sharing normally going forward or.

Is that just a onetime kind of annual number.

And then the second one is just how you get to the $17 million of adjusted free cash flow if I start at 25 of cash from ops.

That backs out the cash from the trust and then maintenance Capex, but if you could share any color there that would be great.

So if you want.

The first question and then look out to the.

The second one so what it is.

On the last call is that for.

Pretty much.

Many years carriers will have an approach of five years, keeping their acquisition business separately from same store.

And we felt that was the very unfair comparison to other companies where they have it.

Once you have an integration you gave us for five years, you are not really being fair to year over year growth on your portfolio.

We decided to move it to what year.

In purposes, effectively Q4, our last Q4.

For 2022.

The thing that we have right now.

By doing so I believe that you have now three businesses acquisition.

<unk> segment, which will be.

The recent one Bakersfield.

Charlotte, we are and this is our priority.

And then.

And so we wanted to wait or before deciding whether we whether its a same store and acquisition is to see the magnitude of the numbers right because those businesses now.

Given the significant but we just got it on the last week of March we haven't been able to really track all of that we need to in order to consider at that point.

This week.

Significant then we'll probably do that but then think about it next year, which will not be.

Additional businesses based on our.

Amendment to the credit facility.

We will then basically removal those three businesses from that line there will be zero reporting on acquisitions. It will be all just new stores. So we've got you will make things just to keep it in total.

For now until we are able to get back on track aggressively.

Yes.

Okay.

Alright, and Jamie I'll answer the second question is.

Regarding reconciliation to adjusted free cash flow.

We actually Havent tables.

People in.

Our press release post kind of just do a quick overview when we start from cash provided by operating activities cash flow from operations.

We will then youll take out maintenance Capex, which is a little bit just about half of what we spent in the same period last year.

You're correct in identifying that the.

The rest of the adjustment is related to about $7 million that we drew from.

Cemetery Trust investment.

Great. Thank you on that.

Must've missed that that is laid out there so apologies for that.

Second question just on the.

Comment.

The prepared remarks.

Regarding the inflationary costs and I know the comment with something about.

Being able to push some of the pricing onto customers, but just curious kind of where youre seeing.

The biggest the biggest cost pressure and if that has normalized at all in the most recent months or if it's lingering throughout.

Year in your expectations.

Yes, So let me so when you think about the decrease is right. So.

We have continued to do increases there will be a catch up because they keep them throughout the year right. So as they improve.

We increased the rate also equally prices from that because it was so that we have pressure on that side as it relates to Q1.

Just about how can we even doris and insurance.

Increased.

There has been an ongoing benefit.

On G&A.

Sure.

Thats the $1 $7 million increase in that when you lay that when revenue is about one 8% of the margin.

Loss on that.

We continue to keep.

Very close eye on what's going on there is a competition out there in terms of.

Unit fleet.

We want to keep our employees that are loyal to start company you have to enable them to satisfy their needs to close there is pressure on their pockets as well.

We try as much as we can to continue to be.

Asking those.

Additional cost.

As I mentioned earlier, we wanted to that curve for me in.

With some strategy so that we can definitely.

Now recall that loose volume right. I mean, you can increase your prices a little bit, but then you lose a few calls and then Youre westford down.

Oh revenue. So we will continue to keep track we have data.

Very close.

Mark.

And we do feel confident it will continue to progress.

Lastly, I would ask you on that is that our.

Even with the margins where they are.

Right now my total field EBITDA perspective or both.

Cemetery.

Very high margins.

Therefore, the for the industry.

Like I said most of the competition.

We can contribute.

As of the year.

Okay, great great well.

Moving out to 'twenty one.

Right.

Lift from Covid, and the revenues and volumes.

And our industry globally.

The operating leverage is a big deal.

If you have left in the revenues from.

From a pandemic, but market share.

Just to go after your profits grew up.

We suffered.

When the pandemic started.

It is out.

Revenue.

And 'twenty two.

And.

A lot of that.

Volume driven.

And why is that.

Some of it was cost driven.

Questionary translate Carlos mentioned and why.

What we're seeing.

And we laid this out in our hybrid borrower's credit profile respiration.

We saw ourselves.

High value personal services business as it scales.

When you are in that business you are pricing pressure.

Thats better.

And your competition.

Over the last six or seven months.

We're in the field.

I have been raising their prices.

Without losing market share and what we're starting to see in March and April this year over year volumes are good better than expected.

In a post COVID-19 environment.

What's the average revenue per contract has also been going up.

That's across our pricing power.

Unless they were doing before but also with new services.

Being offered and accepted so we began to see.

Year over year positive variances in revenue.

Three of our portfolio and our secretary.

It also.

Yes, absolutely.

The higher margins as well.

That's a really good trend next Monday.

We hope that continues in May June and the rest of the year.

Great. Thank you and best of luck.

Well take luxury shows up.

Sorry, I've never counted on Lora.

A lot of hard work.

<unk> got to work smarter and harder to get good luck.

Alright, I would now like to turn it back over to Mel Payne for today's closing remarks.

As we end todays call.

I am more excited than ever about where.

We are as a company.

Alright, Thats, great journey that never ends.

I guess some sense of why I'm, so excited about where we are.

Okay Carlos touched on it you should refer to the 2022 shareholder letter.

It was a beautiful collaboration between Carlos Steve and me.

And as much.

We're so impressed with the content they laid out and captured the essence of carriers, both past present and future.

The presentation of the shareholder letter.

It was up.

Rouse.

Hey, Jay and his marketing team and I wanted to congratulate Devin Thanks, Kim today.

First glass all the way.

Congrats thanks.

The design and layout first glass in a total credit story or are capable.

And the company sorry, a J. Thank you so much.

And.

I'd like to mention we have outlined our financial goals and our plan to restore our high performance at <unk>.

Credit profile by the end of 2024.

And this plan.

I have been executed.

Excellent Carlos and his outright sales teams.

So for cares for sure the best is yet to come.

And we look forward to keeping you updated as we make progress.

Ernie.

So thanks to all of you for turning in data and I am just so happy to be back.

That concludes our call today.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Okay.

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