Q4 2023 Service Corp International Earnings Call

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Operator: Good day, and welcome to the SCI 4th Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode.

Good day and welcome to the STI fourth quarter 2023 earnings Conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your telephone keypad.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Operator: To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to FBI management. Go ahead. Good morning, this is Debbie Young.

Please note this event is being recorded.

Sci management: I would like I would now like to turn the conference over to Sci management. Please go ahead.

Good morning. This is Debbie young welcome today to our fourth quarter earnings call, we're going to have some prepared remarks about the quarter as well as our outlook for this year in just a moment, but before that let me quickly go over the Safe Harbor language.

Debbie Young: Welcome today to our fourth quarter earnings call. We're going to have some prepared remarks about the quarter, as well as our outlook for this year, in just a moment. But before that, let me quickly go over the Safe Harbor language.

Debbie Young: Any comments made by our management team that state our plans, beliefs, expectations, or projections for the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include, but are not limited to, the risk factors identified in the earnings release and in our filings with the SEC that are available on our website.

Debbie Young: Any comments made by our management team that they are plans beliefs expectations or projections for the future are forward looking statements.

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

Debbie Young: During this call, we will also discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the tables at the end of our earnings release and also on our website. And with that, I'll now turn it over to Tom Ryan, Chairman and CEO. Thank you, Debbie.

During this call. We will also discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the tables at the end of our earnings release and also on our website.

And with that I'll now turn it over to Tom Ryan Chairman and CEO.

Thanks, Debbie Hello, everyone and thank you for joining us on the call today.

Thomas L. Ryan: Hello everyone, and thank you for joining us on the call today. This morning, I'm going to begin my remarks with some high-level color on our business performance and provide some greater detail on our solid funeral and cemetery business. I will then close with some thoughts about our 2024 financial outlook. For the fourth quarter, we generated an adjusted earnings per share of 93%, which compares to 92 cents in the prior year.

Thomas L. Ryan: This morning, I'm going to begin my remarks, with some high level color on our business performance for the quarter.

And provide some greater detail around our solid funeral and cemetery results.

I will then close with some thoughts about our 2024 financial outlook.

For the fourth quarter, we generated adjusted earnings per share of 93.

Which compares to 92 cents in the prior year.

Thomas L. Ryan: We were able to generate growth and earnings per share over the prior year as higher cemetery revenues driven by a 9% increase in pre-need cemeteries and a strong funeral sales average together more than overcame the effects of the anticipated funeral volume decline, resulting in a four-cent increase in earnings per share from operations. Below the line, the 280 basis point rise in interest rates on our variable rate debt and a higher debt balance increased our interest rates. Producing earnings per share by ASIN. This Higher Interest Rate Extent is partially offset by a lower tax rate and the favorable impact of a lower share price.

We were able to generate growth in earnings per share over the prior year as higher cemetery revenues driven by a 9% increase in Preneed cemetery sales and a strong funeral sales average together more than overcame the effects of the anticipated funeral volume decline resolve.

And of course, the increase in earnings per share from operations.

Below the line the 280 basis point rise in interest rates on our variable rate debt and a higher debt balance increased our interest expense reducing earnings per share by eight cents.

This higher interest rate expense was partially offset by a lower tax rate.

The favorable impact of a lower share count.

Thomas L. Ryan: As we accelerated our share purchase cycle during the fourth quarter, utilizing $204 million to repurchase some 3.6 million shares at an average price of just above $57. Now, let's take a deeper look into the funeral results from the quarter. Total Comparable Funeral Residence, We're about 2% over the prior year, primarily due to an expected decrease for Funeral Volunteers. Although core fetal volume declined 6% compared to the prior year quarters, we believe due to the COVID pull forward. All of these were in line with what we'd anticipated.

As we accelerated our share repurchase cadence during the fourth quarter utilizing $204 million to repurchase three 6 million shares at an average price of just above $57.

Now, let's take a deeper look into the funeral results for the quarter.

Total comparable funeral revenues declined $13 million or about 2% over the prior year quarter.

Primarily due to an expected decrease in core funeral volume.

Although core funeral volume declined 6% compared to the prior year quarter, we believe due to the COVID-19 pull forward effects volumes were in line with what we'd anticipated.

Thomas L. Ryan: Notably, funeral volumes were about 10% higher than fourth quarter 2019 levels. Our core average revenue per service grew over the prior year quarter by an impressive four percent. Even after absorbing the negative effects of a modest 50-basis-point increase, go to Beadaholique.com for all of your beading supply needs! From a profit perspective, funeral gross profit declined by $8 million, while the gross profit percentage decreased by 100%, to about 22

Notably funeral volumes were about 10% higher than fourth quarter 2019 levels.

Our core average revenue per service grew over the prior year quarter by an impressive 4%.

Even after absorbing the negative effects of a modest 50 basis point increase in information mix.

From a profit perspective funeral gross profit declined by $8 million, while the gross profit percentage decreased by 100 basis points to about 22%.

Thomas L. Ryan: Lower fixed costs and reduced incentive compensation expense over the prior year quarter slightly negated the negative impact from the revenue. Preemie female sales production grew an impressive $12 million, or about 4%, over the fourth quarter of 2022. Both the Corps and the SCI Direct Channels experienced impressive sales production.

Lower fixed cost and reduced incentive compensation expense over the prior year quarter slightly mitigated the negative impact from the revenue decline.

Preneed funeral sales production grew an impressive $12 million or about 4% over the fourth quarter of 2022.

Both the core and the Sci direct channels experienced impressive sales production growth.

Thomas L. Ryan: Now shifting to Summatory. Comparable cemetery revenue increased by an impressive $35 million, or about 8% compared to the prior year's fourth quarter. However, recognized pre-need revenue accounted for the preponderance of the increase, growing by $33 million for 11 months. This growth is primarily due to the growth in pre-cemetery sales production of $30 million, or more than 9% over the prior year quarter. We also saw increased free merchandise and service revenue generated from higher delivered units and contract averages as compared to the prior year quarter.

Now shifting to cemetery.

Comparable cemetery revenue increased by an impressive $35 million or about 8% compared to the prior year fourth quarter.

Recognized preneed revenue accounted for the preponderance of the increase growing by $33 million or 11%.

This growth is primarily due to the growth in preneed cemetery sales production of $30 million or more than 9% over the prior year quarter.

We also saw increased preneed merchandise and service revenue generated from higher delivered units and contract averages as compared to the prior year quarter.

Thomas L. Ryan: The $30 million increase in pre-cemetery sales production, generated from both large cells and from core symmetry production, each contributing about half of the pre-cemetery sales production growth. However, sales contract velocity was slightly down over the prior year. We are still 8% higher than 2019 levels, and production is being generated by a smaller, more effective, and efficient field. Cemetery gross profits in the quarter increased by $17 million, and the gross profit percentage grew by 110 basis points to over 34%, primarily due to the increase in cemetery revenue.

The $30 million increase in Preneed Cemetery sales production was generated from both large sales and from core cemetery production.

Each contributing about half of the Preneed cemetery sales production growth.

Well sales contract velocity was slightly down over the prior year quarter, we are still 8% higher than 2019 levels and production is being generated by smaller more effective and efficient sales team.

Cemetery gross profits in the quarter increased by $17 million and the gross profit percentage grew by 110 basis points to over 34%.

Primarily due to the increase in cemetery revenue.

Thomas L. Ryan: Now let's shift to a discussion about our outlook. As you saw in our earnings release, we provided normalized earnings-per-share guidance of $3.50 to $3.80 in 2024 for a midpoint of $3.65.

Now, let's shift to a discussion about our outlook for 2024.

As you saw in our earnings release, we provided a normalized earnings per share guidance range of $3.50 to $3.80 for 2024, where a midpoint of $3 65.

Thomas L. Ryan: As we explained last quarter, this is slightly ahead of our projection that we provided at our investor day in May 2022, after accounting for the unanticipated material increase in interest rates on unavailable-weight debt. At the time, we had assumed the 2% rate would grow to 3.5% in 2023 and continue into 2024 based on the Fed's dot plot at the time. Our current rate approximates 7.5. So, we were very wrong, but we did have a lot of... As we think about comparing 2024 expectations to our 2023 Normalized Earnings Per Share, the midpoint we are guiding to is closer to 5% growth versus the standard 10% historical midpoint expectation. The waning effect of excess deaths, including COVID, impacts not only serial volume but at-meets and immaturity revenues, and slightly reduces the normalized growth expectation, pre-cemetery till production, as we talked about last time. This, coupled with a higher year-over-year interest rate backdrop, will have a dampening effect on our annual earnings-per-share growth expectation for 2024.

As we explained last quarter. This is slightly ahead of our projections that we provided at our Investor day in May 2022.

After accounting for the unanticipated material increase in interest rates on our variable rate debt.

At the time, we had assumed a 2% rate would grow to three 5% in 2023 and continue into 2024 based on the Fed's dot plot at the time.

Our current rate approximate seven 5%.

So we're very wrong, but we did have a lot of companies.

As we think about comparing 2024 expectations through our 2023 normalized earnings per share.

The midpoint, we are guiding to is closer to 5% growth versus the standard 10% historical midpoint expectation.

The waning effect of excess deaths, including Covid.

Impacts not only funeral volume, but at need cemetery revenue is slightly reduces the normalized growth expectation in preneed cemetery sales production as we talked about last quarter.

This coupled with a higher year over your interest rate backdrop, particularly in the early part of the year.

Have a dampening effect on our annual earnings per share growth expectations for 2024.

Thomas L. Ryan: We believe that in 2025, we should return to our normal earnings-per-share growth expectation of age 12 for SNAP. We expect to capitalize on opportunities during 2024 by further utilizing our scale, which should enhance the margins in both our funeral and cemetery segments. 2025 and beyond. We're also excited about continuing to invest capital to grow our network. We're investing in our existing funeral location, renovating and modernizing our venue to create a more celebratory and contemporary setting. We're increasing our military inventory options, both for casketted and cremation consumers, to accommodate an increasingly diverse customer base that values a variety of unique memorialization. The acquisition pipeline was very good at this point, and we continue to increase new market share opportunities, and the construction of new funeral home facilities and Assertions, established new cemeteries in our existing high-growth areas across North America.

We believe that in 2025, we should return to our normalized earnings per share growth expectation of 8% to 12%.

We expect to capitalize on opportunities during 2024 by further utilizing our scale that should enhance the margins in both our funeral and cemetery segments into 2025 and beyond.

We're also excited about continuing to invest capital to grow our network.

We are investing in our existing funeral locations renovating and modernizing our venues to create a more celebratory and contemporary setting.

We're increasing our cemetery inventory options with both the caskets and cremation consumer.

Accommodate an increasingly diverse customer base that values a variety of unique memorialization offerings.

The acquisition pipeline looks very good at this point and we continue to increase new market share opportunities as the construction of new funeral home facilities in certain instances.

Stablish, new cemeteries in our existing high growth areas across North America.

Thomas L. Ryan: Finally, we expect to continue to enhance shareholder value through growing our dividends and continuing our opportunistic approach to strengthening our equity, while protecting our strong balance, by managing the debt and maturity profile and leverage ratio. In conclusion, I'd like to thank the entire SDI team for all that you continue to do every day for our customers, of Community. Thank you. Thank you.

Finally, we expect to continue to enhance shareholder value through growing our dividend and continuing our opportunistic approach to shrinking our equity base.

While protecting our strong balance sheet by managing the debt maturity profile and leverage ratios.

In conclusion I'd like to thank the entire SDI team for all that you continue to do every day for our customers our communities and each other.

Eric D. Tanzberger: You are what makes our company great. With that operator, I'll now turn the call over to Eric. Thanks, Tom.

You are what makes our company great.

With that operator, I'll now turn the call over to Eric.

Eric D. Tanzberger: I'm going to start where you just left off and begin my remarks, as I usually do, by expressing my gratitude and all of our gratitude to each of our 25,000 plus associates. Thank you for all that you do to provide outstanding service to our over 600,000 client family that our company served in 2023 during our customers' most difficult and trying times in these situations. Thank you for providing superior service for both our customers and our community. So, with that, I'd like to say good morning to everyone on the call.

Thanks, Tom I'm going to start really where you just left off and begin my remarks as I, usually do by expressing my gratitude to all of our gratitude to each of our 25000 plus associates.

Thank you for all that you do to provide outstanding service to our over 600000 clients families that are company served in 2023 during the customers most difficult and trying times in these situations. Thank you for providing superior service to both our customers and our community.

So with that I'd like to say good morning to everyone on the call today as usual I'll first discuss our cash flow results and capital investments for the quarter and the full year of 2023 I will then provide details of our 2020 for cash flow and capital investment outlook and will include some common.

Eric D. Tanzberger: Today, as usual, I'll first discuss our cash flow results and capital investments for the quarter and the full year of 2023. I'll then provide details of our 2024 cash flow and capital investment outlook, and we'll include some comments on our financial position as we conclude our preparation. So in the fourth quarter, we generated as strong as just an operating cash flow of $278 million.

Our financial position as we conclude our prepared remarks.

So in the fourth quarter, we generated strong adjusted operating cash flow of $278 million. This was a $107 million higher than the prior year.

Eric D. Tanzberger: This is $107 million higher than the prior year, which exceeded our expectations for the quarter and enabled us to finish the year just above the high end of our most recent annual guidance range of $225 to $275 million. The largest factors driving this year-over-year increase include About $75 million of favorable working capital, primarily associated with stronger cash receipts on prior period installment sales and the timing of certain payers. Also included, though, in the $75 million is the timing of a payroll tax payment that occurred last year, if you remember, related to the CARES Act of 2020, which resulted in just over a $20 million benefit this year to cash flow. Cash tax payments of $4 million during the quarter were also lower than the prior year by about $33 million.

This exceeded our expectations for the quarter and enabled us to finish the year just above the high end of our most recent annual guidance range of $225 million to $275 million.

The largest factor driving this year over year increase in clip.

About 75 million of favorable working capital primarily associated with stronger cash receipts on prior period installment sales and the timing of certain payables also included though in the 75 million is the timing of a payroll tax payment that occurred last year. If you remember.

<unk> to the cares act of 2020, which resulted in just over $20 million benefit this year free cash flow.

Cash tax payments of $4 million during the quarter were also lower than the prior year by about $33 million, we expected that and again thats due to a tax accounting method change that I have discussed in prior quarters, the sources of cash flow more than offset $16 million.

Eric D. Tanzberger: We expected that, and again, that's due to the tax accounting method change that I've discussed in prior quarters. These sources of cash flow more than offset $60 million of higher interest rates, primarily caused by higher interest rates on the floating rate portion of our total debt. So I want to close. Thank you.

With higher interest payments, primarily caused by higher interest rates on the floating rate portion of our total debt.

So on a full year basis, we ended 2023 with adjusted operating cash flow of $882 million at 7% or $57 million higher than the prior year.

Eric D. Tanzberger: We ended 2023 with adjusted operating cash flow of $882 million, 7% or $57 million higher than the prior year. This additional cash flow was reinvested into our company and also returned to our shareholders, and now... So in the fourth quarter, we invested a total of $109 million into our current facilities, new growth opportunities, and real estate. Let's go ahead and break this down.

This additional cash flow was reinvested into our company and also returned to our shareholders, which now I'll touch on.

So in the fourth quarter, we invested a total of 109 million into our current facilities new growth opportunities and real estate. So let's go ahead and break this down.

Eric D. Tanzberger: We invested $82 million of maintenance capital in our current businesses, with $41 million in cemetery development, $31 million for a funeral and cemetery location, and $9 million into our digital strategies and other corporate investments for the full year. We invested a total of $324 million, which was down $10 million from the prior year but about $14 million or so above the high end of the guidance range we talked about last quarter. This really occurred because our cemetery development spend was higher than expected in this fourth quarter as we accelerated some spend during the fourth quarter to position our cemeteries with relevant high return inventory as we enter 2024. We also invested $27 million of growth capital in the quarter towards the purchase of real estate, the construction of new funeral homes, and the expansion of existing funeral homes and cemeteries.

We invested $82 million of maintenance capital back into our current businesses with $41 million of cemetery development $31 million into our funeral and cemetery locations and 9 million into our digital strategies and other corporate investments.

For the full year.

We invested a total of $324 million, which was down $10 million from the prior year, but about $14 million or so above the high end of the guidance range that we talked about last quarter.

Thomas L. Ryan: And this really occurred because our cemetery development spend was higher than expected in this fourth quarter as we accelerated some spend during the fourth quarter to position our cemeteries with relevant high return inventory as we enter 2024.

We also invested $27 million of growth capital in the quarter towards the purchase of real estate construction of new funeral homes and the expansion of existing funeral homes and cemeteries. This brought our total 2023 growth capital spend to about $94 million, which was up 40.

Eric D. Tanzberger: This brought our total 2023 growth capital spend to about $94 million, which was up $40 million from 2022 as we identified meaningful opportunities to invest in future greenfield cemeteries as well as funeral projects for the future. Turning to acquisitions, while we did not make any investments in the fourth quarter, we believe the pipeline, again, remains robust. We have been actively investing already this year in the first quarter, with $14 million of acquisition investments in January, and we anticipate more investments in the coming months. In total, we ended 2023 with $72 million in acquisition spend, and we're very pleased with the quality of these businesses that have joined SDI and, more importantly, have welcomed many new associates to our SDI family. In addition to the investments in CapEx and acquisitions that we just talked about, we returned $247 million of capital to shareholders in the quarter through $42 million of dividends and just over 200 million shares. This brought the number of shares outstanding to just above 146 million.

From 2022, as we identified meaningful opportunities to invest in future Greenfield cemetery as well as funeral projects for the future.

Turning to acquisitions, while we did not make any investments in the fourth quarter. We believe the pipeline again remains robust we have been actively invest in already this year in the first quarter with $14 million of acquisition investments in January.

And we anticipate more investments in the coming months.

In total we ended 2023 was $72 million in acquisition spend and we're very pleased with the quality of these businesses that have joined Sci and more importantly have welcomed many new associates to our Sci family.

In addition to the investments in Capex and acquisitions that we just talked about we returned $247 million of capital to shareholders in the quarter through $42 million of dividends and just over $200 million of share repurchases.

This brought the number of shares outstanding to just above a 146 million shares as Tom just already mentioned, we purchased three 6 million shares at an average price of about $57 during the quarter.

Eric D. Tanzberger: As Tom just mentioned, we purchased 3.6 million shares at an average price of about $57 during the quarter. So before I switch to the 2024 outlook, I want to make a brief comment about our corporate G&A expenditure in the quarter of about $45 million. This is higher than our expected range of $38 to $40 million, driven primarily by higher incentive compensation expense, which is specifically tied to our long-term compensation plans that are again based on total shareholder returns relative to designated period rates. So, shifting to 2024, and you saw this in the press release, our 2024 adjusted operating cash flow guidance range is $900 to $960 million, with a midpoint of $930 million. The midpoint of this range assumes the following.

So before I shift to the 2024 outlook I want to make a brief comment about our corporate G&A expense during the quarter of about $45 million. This was higher than our expected range of $38 million to $40 million driven primarily by higher incentive compensation expense, which was specifically tied to our law.

Long term compensation plans that again are based on total shareholder returns relative to a designated peer group.

So shifting to 2024 and you saw this in the press release, our 2024 adjusted operating cash flow guidance range is $900 million to $960 million with a midpoint of $930 million.

The midpoint of this range assumes the following.

Eric D. Tanzberger: We expect our base case cash flows at the midpoint of our guidance to grow about $35 million, comprising about $55 million of cash flow growth from our underlying fuel and symmetry operations, offset by an anticipated $20 million headwind or increase from interest expense as higher rates and balances continue to impact earnings and cash flows. We anticipate having a more normalized use of working capital of $30-$50 million, driven by growth in pre-chemistry sales, timing of payables, partially offset by reduced incentive compensation payments, www.ebic.com. We expect cash taxes to range between $25 and $35 million, which is a decrease of just over $40 million from 2023, but about $150 million lower than normalized levels. This, again, is a result of the tax accounting change I've discussed over the last couple of quarters. We also anticipate an effective tax rate between 24% and 25% in 2024, to shift into capital investments during the coming year. We expect maintenance capex to remain flat at about $325 million.

We expect our base case cash flows at the mid point of our guidance to grow about $35 million comprised of about $55 million of cash flow growth from our underlying funeral and cemetery operations offset by an anticipated $20 million headwind or increase from interest expense.

As higher rates and balances continue to impact earnings and cash flows.

We anticipate having a more normalized use of working capital of $30 million to $50 million of use driven by growth in preneed cemetery sales timing of payables, partially offset by reduced incentive compensation payments in 2024.

We expect cash taxes to range between 25% to $35 million, which is a decrease of just over $40 million from 2023, but about $150 million lower than normalized levels. This again. This is a result of the tax accounting change I've discussed over the last.

Couple of quarters.

We also anticipate an effective tax rate between 24 and 25% in 2024.

So shifting to capital investments during the oncoming year.

We expect maintenance capex to remain flat at about $325 million to break that down and give you a little bit more color, we expect to invest $125 million in our funeral and cemetery facilities.

Eric D. Tanzberger: To break that down and give you a little bit more color, we expect to invest $125 million in our funeral and cemetery facilities, $165 million into high return and cemetery development projects, and $35 million into our digital strategy investments and some other corporate investments, in addition to this maintenance cafe. We expect to invest $75 to $125 million in the acquisition and roughly $45 to $50 million in new fuel home construction and real estate opportunities, which together, to remind you, drive low to mid-team, after-tax internal rates of return, which again is well in excess of our cost of capital. Finally, absent other high-return investment opportunities. We will continue returning capital to our shareholders through our Share Buy Back program in a consistent and disciplined manner, as you've seen us do over the years. So I'll now conclude by making a few comments on our financial position. We have a very favorable debt maturity profile and have liquidity of around $900 million at the end of the quarter, consisting of approximately $220 million of cash on hand, plus approximately $670 million available on our long-term bank credit system.

$165 million into high return into cemetery development projects and $35 million into our digital strategy investments and some other corporate investments.

In addition to this maintenance capex.

We expect to invest $75 million to $125 million towards acquisitions, and roughly $45 million to $50 million and new funeral home construction and real estate opportunities, which together to remind you drive low to mid teen after tax internal rates of return, which again is well in excess.

<unk> of our cost of capital.

Finally absent other high return investment opportunities, we will continue returning capital to our shareholders through our share buyback program and a consistent and disciplined manner as you've seen us do over the years.

Speaker Change: So I'll now conclude by making a few comments on our financial position.

Speaker Change: We have a very favorable debt maturity profile and liquidity you have right now around $900 million at the end of the quarter consisted of approximately $220 million of cash on hand.

Approximately $670 million available on our long term bank credit facility.

Eric D. Tanzberger: Our leverage at the end of the quarter remained somewhat consistent for the third quarter at 3.58 times, and that's the net that feeds us. We continue to have a bias towards the lower end of our usual target range of 3.5-4 times, and I call that in the near term until we have more clarity as to exactly where interest rates will go from here. So in closing, our strong balance sheet continues to underpin our capital deployment approach, which gives us flexibility to execute on high-return investment opportunities. We are very proud of our team, and especially of the way we finished 2023.

Our leverage at the end of the quarter remains somewhat consistent with the third quarter at 358 times net.

Net debt to EBITDA.

We continue to have a bias towards the lower end of our usual target range of $3 five four times and I call that in the near term until we have more clarity as to exactly where interest rates will go from here.

So in closing our strong balance sheet continues to underpin our capital deployment approach, which gives us flexibility to execute on high return investment opportunities. We are very proud of our team most importantly, and the way we finished 2023.

Operator: As we enter 2024, our solid balance sheet, great liquidity, and strong and predictable cash flows will again provide opportunities to invest capital to the highest and best use and, ultimately, maximize shareholder value. So with that operator, that concludes our prepared remarks, and I'll now turn it back to you and open it all up to questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

As we enter 2024, our solid balance sheet, great liquidity and strong and predictable cash flows will again provide opportunities to invest capital to the highest and best use and ultimately to maximize shareholder of that.

So with that operator that concludes our prepared remarks, and I'll now turn it back to you.

The call up to questions.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset handset before pressing the keys.

A.J. Rice: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. The first question comes from A.J. Rice of UBS; please go ahead.

Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: The first question comes from AJ Rice of UBS. Please go ahead.

Eric D. Tanzberger: Thanks to everybody. I made a couple quick questions here. First of all, I think you guys were mentioning that you see sort of a skew in earnings, quarterly progression, maybe some of that seasonality, maybe some other factors. I just want to make sure we leave the call knowing exactly what you... We've been looking at maybe first half, second half, first quarter. Any comments specifically on how the progression would play out over the year? I think for the most part, when you get out to the last three quarters of the year, our expectations would be that you'd see historically impressive growth. The most challenging quarter is going to probably be the first quarter, and there are two reasons for that.

Thanks, Hi, everybody maybe a couple of quick questions here first of all I think you guys are mentioning that you see sort of a skew to the earnings.

Quarterly progression, maybe some of that seasonality maybe some other factors I just wanted to make sure we leave the call knowing exactly what you.

What you are looking at.

Maybe first half second half first quarter any comments, specifically on on how that progression would play out over the year.

Sure Jay.

Speaker Change: I think the most for the most part when you get out to the last three quarters of the year.

Speaker Change: Our expectations would be that you'd see historically impressive growth the challenging quarter is going to probably be the first quarter and there's two reasons for that it's one of the most challenging as you think about from an interest rate comparison, I think it's somewhere around that again depends on the lead.

Eric D. Tanzberger: It's one of the most challenging as you think about an interest rate comparison. I think it's somewhere around, and again, it depends on the level, but somewhere called the six, seven cents of headwind as you think about interest expense year over year that you must overcome. I think it's going to be the most challenging quarter. The other thing that we would anticipate, and you'll recall, is completing construction projects on cemeteries. And when you think of the comparison of this first quarter versus last year's first quarter, that should be a negative effect because we're going to have less completed project revenue. So those are the two things that I think are going to cause a more challenging first quarter comparison. And as you get to the last three quarters, I think it looks really good, quarter over quarter. And again, for the year, I think some impressive growth, factoring in some of the things we mentioned before, which are slightly higher interest expense, and this kind of continues, and most likely both funerals and cemeteries. Okay, thanks.

But somewhere call. It six seven cents of headwinds as you think about interest expense year over year that you must overcome.

The other thing that we would anticipate and Youll recall that completed construction projects on cemetery.

And when you think of the comparison is this first quarter versus last year's first quarter that should be a negative effect, because we're going to have less completed.

Project.

Revenue. So those are the two things that I think are going to cause more challenging first quarter comparison.

And as you get to the last three quarters I think it looks really good quarter over quarter.

For the year I think some impressive growth factoring in.

Some of the things, we mentioned before which are slightly higher interest expense.

Just kind of continued.

Pull forward effect that that impacts.

Slightly both the funeral and cemetery segments.

Okay. Thanks.

Eric D. Tanzberger: I wanted to just ask as well, if I'm looking at the trend year-to-year in the at-need funeral versus pre-need maturing, it looks like pre-need maturing is hanging in there even better in volumes than at-need. Is that, do you think, some indication that maybe some of this lengthy investment you've been doing in pre-need over the last decade is starting to drive market share, and you're getting an increasing percentage of people that are coming in that have these pre-need arranged contracts in hand? We do, A.J.

Wanted to just ask.

As well if I'm looking at.

The trend year to year in the at need funeral versus preneed maturing it looks like pre need maturing it's hanging in there.

Better on volumes, then add need is that you think some indication that maybe some of his lengthy investment you've been doing over the last decade is starting to drive market share and you're getting an increasing percentage of people that are coming in that have these pre need arranged.

Contracts in hand.

We do Ajay exactly we want to that same metric.

Eric D. Tanzberger: Exactly. We believe that represents your exact thoughts. Okay, maybe one last question then.

We believe that represents.

Ajay: Your exact thoughts.

Okay.

Speaker Change: Maybe one last question then.

Eric D. Tanzberger: I know it sounds like you're going to start out with some deals on the acquisition front. I understand that the 10-year standstill arrangement that you did with the FTC when you closed the Stewart deal years ago is going to expire in the spring. I wonder, can you sort of size what that creates as an opportunity?

I know it sounds like you start out with some deals on the acquisition front.

I understand that.

10 year standstill arrangement that you did with the FTC when you closed the Stewart deal.

Years ago.

It's going to expire in the spring I Wonder can you sort of size what that grades as an opportunity in <unk>.

Eric D. Tanzberger: And do you think we'll see a pickup in pacing on deals when that FTC standstill agreement expires? Thank you. I think it's hard to size this, you know, but it is a significant number of markets that, you know, we've been really precluded from participating in for the last few years by those prior notice agreements, which expire in May. So, it's very difficult to predict when or what, but we're excited about it. We do think it kind of allows us to be a little more active as it relates to acquisitions Get back involved in some of those markets.

Do you think we'll see a pickup in pacing on deals when you when that FTC standstill agreement expires.

We do Ajay I think.

It's hard to size it.

Speaker Change: But it is a significant amount of markets that we.

We've been really precluded from participating in for the last two years by those prior notice agreements, which expire in may so, it's very difficult to predict when or what.

But we're excited about it we do think it kind of allows.

Allows us to be a little more active as it relates to acquisitions.

Back involved in some of those markets.

Eric D. Tanzberger: So we're excited about it, and we think it will create some momentum. Again, I think deals come when deals come, so it's hard to predict the timing and the size. But we're glad it's coming. Can you just remind us how many markets it involves or how much of a constraint it's been? And then can you have discussions in those markets prior to the expiration, or do you have to wait for the expiration to have discussions?

So we're excited about it we think it will create some momentum, but again I think deals come when deals come. So so it is hard to predict the timing and the size, but but.

We're glad it's coming to an end.

Can you just remind us how many markets it evolves and our house yeah, how much of a constraint it's been and then can you.

Have discussions in those markets prior to the.

Exploration, where you have to wait for the exploration to have discussions.

Eric D. Tanzberger: Well, I think you're always having discussions about when you could possibly, you know, go to closing a contract. So again, we've always been active in these markets in the sense of developing relationships and not so much around. We all have a field, but getting to know people, getting to know what their plans are, so it is like we are going to, for the first time, begin to talk to people. We have been out there, being a good neighbor. So again, as far as numbers of markets go, I don't have them in front of me, but think of them as being mainly in some major markets.

Well I think you can always have discussions just about when when you could possibly.

Go to.

Closing a contract. So so again, we've always been active in these markets in the sense of developing relationships that not so much around the deal, but getting to know people getting to know what their plans are.

So it isn't like we're going to for the first time to begin to talk to people. We've been out there just being a good neighbor. So so again.

Far as numbers of markets I don't have them in front of me, but you can think of them as being in mainly in some major markets and my guess is probably somewhere that we'd be interested in 15 to 25 type of markets that are out there.

Eric D. Tanzberger: My guess is probably somewhere that we'd be interested in, you know, the 15 to 25 type of markets that are out there. We've not had the ability really to think too heavily as it relates to growing through academia. Okay, great. Thanks so much. The next question comes from Tobey Sommer of Truist. Please go ahead.

We've not had the ability really to think too heavily as it relates to growing through acquisition.

Okay, great. Thanks, so much.

Okay.

The next question comes from Tobey Sommer of Jewish. Please go ahead.

Speaker Change: Thanks.

Eric D. Tanzberger: Thanks. I wanted to ask you about the rate of at-need activity and how you think about it having, you know, sort of mostly but not entirely normalized post-COVID and maybe characterize what, if any, kind of headwind you think remains in the business. Hi Tobey, this is Eric.

Wanted to ask you about.

The rate of.

At need activity.

And how you think about it having sort of mostly but not entirely normalized.

Post Covid and.

Maybe characterize.

What if any kind of headwind.

Eric D. Tanzberger: You know, there continues to be, you know, a headwind as it relates to COVID, but it's getting better every year. And you can see that, in fact, that the total funeral volumes, you know, are down a good single digit, and now we're really calling it relatively flat. Official Guide to SLAC, down one or two percent, but let's just call it SLAC for purposes of this explanation. What you're seeing in the positive is the actual growth that's occurring in North America. You can call that one percent or so per year in terms of just the growth of the population and that population aging and that population needing services. Specific to our company, you have to also take into account acquisition.

You think remains in the business.

Hey, Tobey this is Eric.

There continues to be a headwind as it relates to as it relates to Covid is getting better every year and you can see that in the fact that the total funeral volumes were down mid single digits and now we're really calling it relatively flat I mean, I think the official guidance is flat to down 1% 2%.

Let's just call it flat for purposes of this of this explanation what youre seeing in the positive. This is a natural growth that's occurring.

In North America.

You can call that 1% or so per year in terms of just the growth of the population and that population aging and that population needing services of this particular industry specific to our company you have to also take into account acquisitions.

Eric D. Tanzberger: You know, in acquisitions, it depends on the particular year, whether our acquisitions are heavy funeral or heavy cemetery, but ultimately, you could add, you know, call it 2,000 to 4,000 funeral services and a particular year related to the full amount of acquisitions. So you have that natural effect; you have the acquisition effect, which is specific to our company, and what is being diluted in this situation, specifically in 2024, is the pull-forward effect related to COVID. And remember, you had some noise the last couple years with excess deaths coming out of COVID. And that's impossible at this point to differentiate, really.

And acquisitions.

Hands on to protect their year, whether our acquisitions are heavy funeral or having heavy cemetery, but ultimately you could add call. It 2000 to 4000 funeral services in a particular year related to a full amount of of acquisitions. So you have that natural effect the acquisition.

In effect, which is specific to our company and what is Stan Washington. This situation specifically in 2024 is the pull forward effect related to Covid and remember you had some noise. The last couple of years with excess deaths as well coming out of Covid and that's impossible at this point.

Differentiate really theres not the data out there to make any further comment on that but the COVID-19 pull forward effect excess that pull forward effect as kind of a wash in the natural progression of the baby boomers, coupled with our acquisitions and calling us kind of flattish I think thats better those particularly.

Eric D. Tanzberger: There's not the data out there to make any further comment on that. But the COVID pull-forward effect, the excess death pull-forward effect, is kind of washing the natural progression of the baby boomers, coupled with our acquisitions, and calling us kind of flattish. I think that's better, those particular factors than they were last year, which drove us down to the single digits.

Other factors than they were last year that drove us down mid single digits, and we hope and we will give you better have a comment as the year progresses that youll start sand.

Eric D. Tanzberger: And we hope, and we'll give you better comments as the year progresses, that you'll start seeing a little bit of an uptick in net volumes, as I described it to you this morning, as we move forward in future years. If you are able to be a little bit more active on the acquisition front after the Standstill Agreement, and you mentioned some markets that you would find attractive but haven't really been focusing on recently, what would entrance into those markets and sort of fleshing those out do to the contours of profitability at the firm? Is that something that would be observable or so small as to not really have an impact?

A little bit of an uptick in net volumes as I described it to you. This morning, as we move forward in future years.

If you are able to.

Be a little bit more active on the acquisition front after.

After the standstill agreement.

And you mentioned some markets that you.

Speaker Change: I would find attractive but haven't they haven't really been focusing on recently.

That entrance into those markets and sort of fleshing those out what would that do to the contours of profitability at the firm and said is that something that would be.

Observable or so small as to not really have an influence.

Eric D. Tanzberger: Well, I think it's built into the growth framework. When you think of the 8-12% earnings per share growth, you know, you're looking at some acquisitions, and share purchases could be up to, you know, maybe half of that growth. The rest being organic, currently being driven by better average sales at the funeral homes and, most importantly, the significant pre-cemetery growth that we've seen lately and over the years that we've talked about, you know, at length. I've already kind of given you, you know, a statistic that said, you know, that any time we're growing, depends on the year, you could add 2,000 to 4,000 cases of funeral Volumes per So is it material?

Well I think it's built into the growth framework. When you think of the 8% to 12% earnings per share growth Youre looking at some acquisitions and share repurchases could be up to maybe half of that growth the recipe and organic currently being driven by better average for sales.

The funeral.

Our homes and most importantly.

Significant preneed cemetery growth that we've seen lately and over and over the years that we've talked about at length I've already kind of giving you.

As statistic that said.

That anytime we're growing depends on the year you could add two to 4000 cases of.

Funeral volumes per year for the full load of acquisitions and such so is it material of course of course this material, but we don't think that the new markets. After the Sci.

Eric D. Tanzberger: Of course, it's material, but we don't think that the new market after the FBI with Stuart's situation expires is going to be an absolute game changer. I mean, this is a situation where we have very long-term relationships. Our field operations, our management here, has done a very good job having long-term relationships with independents that certainly we would love to talk to. And as Tom said, just to reiterate, we talk to them now. It just is going to be their decision when they want the liquidity event for their generational planning and for their particular family. And trust me, they don't have any idea, in my opinion, that whether a FTC mandate is coming due or not coming due for us and Joe Rabe.

With Stuart situation.

Speaker Change: Expires, it's going to be an absolute game changer I mean, this is a situation where.

We have very long term relationships our field operations. Our management here has done a very good job, having long term relationships with.

Independence that that certainly we would love to talk to and what Tom said just to reiterate we talk to them now it just is going to be their decision when they want the liquidity event for their generational planning and for their particular family and Trust me. They don't have any idea.

My opinion is that whether a FTC.

Mandate is as coming due are not coming due for Sci.

Eric D. Tanzberger: What's happened in the past is that it was a competitive situation where we would be asked to look at a business. We were at a competitive disadvantage because the seller would know that we'd have to get prior permission.

So maybe the better way to think about it.

What's happened in the past is it was a competitive situation, where we would be asked to look at our business. We were at a competitive disadvantage because the seller would know that we'd have to get prior permission.

Speaker Change: Maybe that's the better way to think about it as we were kind of behind the ball because we.

Eric D. Tanzberger: So, maybe that's the better way to think about it is that we were kind of behind Gayball because we introduced RISC into a transaction that our competitors didn't have to deal with. Images, Photos FAQ 4, become more competitive. Very helpful.

We introduced risk into our <unk>.

Transaction that our competitors didn't have to deal with.

And that should become more competitive as.

We move through this date.

Eric D. Tanzberger: And the last thing for me, is there any change in the increasing pace of adoption of cremation? Anything to think about? Or is that sort of steady state? I just thought I'd touch base on that. I think it's steady state. We saw a contraction of the rate, but again, I think if you look over long periods of time, you're going to have quarterly fluctuations, but we still stick by the 100 to 150 baby boomers. Thank you very much. The next question comes from John Ransom of Raymond. Dane, please go ahead. Hey, good morning.

That's very helpful. And then last thing for me is there any change in.

The increasing pace of adoption.

Cremation anything to think about or is that sort of steady state just thought I'd touch touch based on that.

Yes, I think at steady state, we saw contraction of the rate, but again I think if you look over long periods of time youre going to have quarterly fluctuations, but we still stick by the 100 to 150 basis points.

Expectations. Thank.

Thank you very much.

The next question comes from John Ransom of Raymond James. Please go ahead.

John Ransom: Hey, good morning, guys.

Eric D. Tanzberger: According to your data... Let's talk about your expectations for Green East Cemetery production and recognition rate compared to 2020. Yeah, so, I think on the projection side, yarn... We think back, you know, we historically have said we could grow cemeteries and pre-cemetery sales production in the tall 3 to 6 percent range. That's kind of steady state things to work. Obviously, there's times that we went above that range.

Just turning to your guidance.

Could you talk about.

Your expectations for.

Preneed cemetery production and recognition rate compared to 2023.

Yes, so I think on the projection side, John if you think back.

We historically have said, we think we could grow cemetery Preneed cemetery sales production in the call it 3% to 6% range, that's kind of a steady state same store.

Obviously theres times, when we went above that range Theres times, we've been below that range I think the way to think about next year is instead of a three to six where does dial it down a tiny bit call. It two to five and the reason for that is we get a lot of leads through.

Eric D. Tanzberger: There are times when we've been below that range. I think the way to think about next year is, instead of a 3 to 6, we're just dialing it down a tiny bit and calling it 2 to 5. And the reason for that is we get a lot of leads through funeral volume traffic and traffic through the cemeteries. So if you think about the full forward effect, we're going to have slightly fewer leads to follow up on, and that's what we're factoring into our numbers. Now again, should we be surprised to see that size?

Funeral volume traffic and traffic through the cemetery. So as you think about the pull forward effect, we're going to have slightly less leads to follow up on and that's what we're factoring into our numbers now again two weeks surprise to the upside I think so.

Eric D. Tanzberger: I think so, but we need to get through the year to understand better where we are. And John, from a recognition rate perspective, you know, we talked about that on the last call as well, and we thought it would be, you know, in the upper 90s for the fourth quarter, and it was. You know, generally, you know, we look at a full year right now, kind of in the mid-90s from a recognition rate perspective, so the 95% ZIP Code from that. Remember that they can move over the quarters, though.

But we need to get through the year to understand better where we are because that makes sense and John from a recognition rate perspective, as you know we've talked about that on the last call as well and we thought it would be on the upper <unk> for the fourth quarter and it was.

Generally we look at our full year right now kind of in the mid Ninety's from a recognition rate. So the 95% ZIP code from that remember that can move over the quarter. So it usually.

Eric D. Tanzberger: It usually, you know, starts off somewhat light in the low 90s and works its way up as we complete projects during the summer months and towards the end of the fall, where it could be as high as what you saw in the fourth quarter, 98 or even 100. But generally, we think that we're to the point now where I think it's somewhat stabilized, and you know when you're modeling, I think it's about 95%-ish of what should come through the income statement in a four-year period for sentencing. Right? And just another, this may be a little too wonky, but you talked about the 10% CAGR in funeral volumes since 2019. What do you think? What's the M&A effect of that? So, if you hadn't had any M&A, what do you think the funeral CAGR would have been from 2019 to 2023? Is that about a point a year? Is that an easy way to think about it?

John Ransom: It starts off somewhat light in the low nineties.

And works its way as we complete projects during the summer months.

And towards into the fall, where it could be as high as what you saw in the fourth quarter 98, or even 100.

But generally we think it's we're to the point now where I think it's somewhat stabilized in <unk>.

We're modeling I think it's about 95% ish of the production.

Should come through the income statement and a full year period for cemetery.

Great.

And.

This may be a little too wonky.

But you talked about the 10% CAGR in funeral volume since 2019.

What do you think what's the M&A effect of that so if you hadn't done any M&A. What do you think that funeral CAGR would've been from 2019 to 2023 that's.

That's about a point a year is that the easy way to think about it.

Eric D. Tanzberger: Yeah, I think it's fair to say that, you know, maybe 3-4% of that is acquisition of the resume. Right. So therefore, 6% growth, so a little over a percent a year CAGR. So that's not crazy.

I think it's fair to say that maybe 3% to 4% of that is acquisition and the rest of it is organic.

Right.

Therefore, 6% growth so yeah, a little over a percent a year CAGR. So that's not crazy. So I guess that underscores we probably are at the tag end of the covered pull forward.

Eric D. Tanzberger: So I guess that underscores that we probably are at the tag end of the COVID pull forward. So you think that 25, you'll get some. Erin Margeris, Pendrager from Navy Ed, minus a low single digit in 24 to a low single digit in 25, for a few.

Think that 25, you'll get some.

<unk> growth kind of go from maybe.

Modest low single digit in 2004 to up low single digit in 'twenty five for funeral is that a fair way to think about it.

Eric D. Tanzberger: Is that a fair way to think about it? That's kind of our expectation right now, John. Okay, and then just two last ones. Any early read on Qingming? the weather.

That's kind of our expectation right now John Yes.

Okay, and then just two last ones any early read on the chimney.

The weather.

Eric D. Tanzberger: Well, I think one of the things to understand about the weather from last year. Last year, the real problem was that we basically had inventory that was destroyed, and by destroying potential inventory, it delayed any possibility of sale for a matter of months until you could get that inventory repurposed. As bad as the rains were again this year, to our knowledge, we have not had any kind of event like that. So while you may have a few days out of the market, I think it's our belief that the customers are there, and we'll get in front of them. And we've got great inventory to show our customer base. So, yeah, we don't we don't anticipate and Pronounce and Effect as we had last week. Do you guys want to put tarps in the CapEx budget this year, the blue tarps?

And about the oil again, but I think one of the things to understand about the weather from last year.

Last year, the real problem was we had.

Basically add inventory there was destroyed.

By destroying potential inventory did delayed any possibility of sale for a matter of months until you could get that inventory.

Purpose.

And that is a range where again this year to our knowledge, we have not had any kind of event like that so while you may have had a few days out of the market I think it's our belief that the customers are there and we will get in front of them and we've got great inventory to show.

Our customer base.

So yes, we don't we don't anticipate.

As pronounced effect as we had last year because of the weather.

Do you guys what tarps in the Capex budget this year, so blue tarps.

Yes.

[laughter] alright.

Eric D. Tanzberger: All right, um... And then lastly, we correlated your pre-need cemeteries with a basket of consumer stocks, and it was pretty close in the third quarter, but you definitely outperformed the kind of basket of comps that we thought correlated, so we've got to go back to work on that. You know, even in the face of not great consumer comps and not great funeral volume, what do you think led to the outperformance in Cemetery Freedy during the fourth quarter? Yeah, sometimes, John, it's a matter of timing, but I think, again, I give the credit to our sales force. We give the credit to our inventory. We've got fabulous inventory to sell and the best sales force in the world. I give credit where credit is due.

And then lastly.

We correlated your preneed cemetery to a basket of consumer stocks and it was pretty close in the third quarter, but she definitely outperformed kind of the basket of comps that we thought correlated so we've got to get back to work on that but why do you think.

You know even in the face of.

Not great consumer comps and not great funeral volume what do you think led to the <unk>.

Outperformance in cemetery pre need in the fourth quarter.

Yes, sometimes Jon it's a matter of timing, but but I think again I give the credit to our salesforce to give the credit to our inventory teams, we've got fabulous inventory to sell the best Salesforce in the world.

I'll give I'll give their credit where credit is due.

Eric D. Tanzberger: What's the size of your sales force now? We're about 3,700, 3,800 salespeople down from, I think, pre-COVID, 4,300. So, you know, we're able to... You're up off the bottom. Are you up off the bottom of, you had the people from the bottom, the post-COVID bottom? You know, actually, we're about the same. I mean, maybe up slightly, but we kind of adapted during COVID to 15% less headcount. And you will see the results.

What's the what's the size of your Salesforce now.

We're about now 3700, 3800 salespeople down from that phase III covered 4300.

So you know we're able to gear up off the bottom are you up off the bottom of your other people from the bottom the.

<unk> got the bottom.

Actually were about the same maybe up slightly but we kind of adapted during COVID-19 to 15% less head count and you see the results we've got compounded growth rates at around 10%, so very efficient throughput great use of technology great leadership.

Eric D. Tanzberger: We got compounded growth rates of around 10%. So, very efficient throughput, great use of technology, great leadership. Okay, thanks so much. Thank you. The next question comes from Scott Schneeberger of Oppenheimer. Please go ahead. Thanks very much. Good morning.

Okay. Thanks, so much.

Thanks, John.

The next question comes from Scott Schneeberger of Oppenheimer. Please go ahead.

Thanks, very much good morning.

Scott Schneeberger: Guys, on the pre-need cemetery, it sounds like you're getting a lot of nice pricing, you've developed a lot of nice products, and it seems like that's going to be the growth driver. I'm curious about contract velocity; is that going to remain negative in 2024? And to what magnitude? And, and I'll follow up with something on that. But, just to be direct. I think if you take a year as an example, our velocity, again, is slightly flat for the fourth quarter of this year, but if you go back to 2019 levels, on a year-over-year basis, we're actually up in velocity 11%. I think sometimes we get so caught up in...

Guys on on Preneed Cemetery.

It sounds like Youre getting a lot of nice pricing developed a lot of nice.

Product.

And it seems like that's going to be the growth driver I'm curious about contract velocity is that going to remain negative in 2024.

And to what magnitude and I'll follow up with something on that but just if you can address that please.

Scott I think if you if you take a year as an example.

Our velocity again is slightly flat for the fourth quarter of this year, but if you go back to 2019 levels on a year over year basis, we're actually up in velocity, 11%. So think sometimes we get so caught up in this velocity Scott.

Eric D. Tanzberger: This is Velocity, Scott. I believe we've flattened out. I think Velocity should now correlate a little better to flat, to slightly grow as we think about the future. And so if you've got 1-2% in Velocity and you've got 4-5% in pricing, that's probably the way to think about what we can do in cemetery sales as we move forward over the next few years. So yeah, I wouldn't anticipate that that stabilizes from here and continues to grow off this. You know, 11% growth from 2019 levels that we are operating at today. Thanks, and still on pre-need cemetery, kind of a two-parter, just how would you qualify consumer behavior, kind of low-end, mid, and high-end of the range, and then the follow-up question on that is cemetery margin in 2024, just your thoughts there.

I believe we flattened out I think velocity should now correlate a little better so flat to slightly grow as we think about future and so if you got 1% to 2% and velocity and you got 4% to 5% in pricing, yes, that's probably the way to think about what we can do in cemetery sales.

As we March toward over the next few years, so, yes, I would anticipate that that.

Stabilizes from here and it continues to grow outfits.

11% growth from 2019 levels that we are operating on today.

And still on Preneed cemetery kind of a two parter.

How would you qualify consumer behavior kind of.

Low end made high end of the range.

John Ransom: Then the follow up question on that is it.

Cemetery margin in 2020 for just your thoughts there. Thanks.

Eric D. Tanzberger: Yes, so I think on consumer behavior, you know, if you take the high end, and we continue to see the high end going strong, and some of that's averaged price, and remember these are over $80,000 sales, but to give you some perspective, we probably had about 400 of those that averaged around, call it, you know, $200,000 sales back in 2019, you know, around that era, we've almost doubled the number of contracts, they're going from 400 contracts at that level to 800, slightly up on the average too, and so that seems a pretty significant growth and continues to look strong, and again, we've always said that probably correlates best with housing and stock market, and I'd say if there's anywhere we're not seeing as robust an activity as we'd like, it is at that lower end, and again, I think that correlates with a lot of other discretionary retailers out there that are seeing a little bit of a stall when you think about that consumer that may or may not be dipping into their savings a little harder, may or may not have the same access to credit, particularly not at attractive rates. So that's where we are, and I think as far as margins, I think yes, about Scott, our margins continue to grow.

Yes, so I think on consumer behavior, if you take.

The high end, we continue to see the high and going strong.

And some of Thats average price and remember these are over 80000 dollar sales.

John Ransom: But to give you some perspective, we probably had about 400 of those that averaged around call it $200000 sale.

Back in 2019 to around that era, we've almost doubled the number of contracts so going from 400 contracts at that level to 800 slightly up on the average too and so that things are pretty significant growth and continues to look strong.

We've always said that probably correlates best with housing and stock market.

I'd say, there's anywhere we're not seeing.

As robust and activities, we like it is at that lower end and again I think that correlates with a lot of other.

Discretionary retailers out there that are seeing a little bit of a stall. When you think about that consumer that may or may not be dipping into their savings a little higher may or may not have the same access to credit, particularly not at attractive rates.

John Ransom: So.

That's where we are in.

As far as margins I think you asked about Scott.

Our margins continue to grow I think.

Eric D. Tanzberger: I think we've been operating in this kind of mid-30% range, and I think we'll continue to expect those to push up slightly year-over-year when you think about 2024 in the 33-35% range. Okay, thanks, one last one from me, just on digital investment, the CapEx a little bit lower this year than last, if you could maybe Eric speak to what these investments have been and the benefits you may have garnered, is that going to start to wane, has the brunt of that occurred, and just curious what you're realizing regarding benefits on the tail end. You know, Scott, we've said all along that we're huge believers in digital investment, especially customer-facing technology. We've also been making some investments that are not customer-facing. Technology that is going to help us become better, more effective, and more efficient at our funeral homes and cemeteries. So what you really saw us do is really push that through the last couple of years.

We've been operating in this kind of.

Mid 30% range and I think we will continue to expect those to push up slightly year over year.

When you think about 2024.

I think it's $33 to 35% range somewhere in there.

Okay. Thanks, one last one from me just on the on Digi.

Digital investment the Capex, a little bit lower this year than last.

Just if you could if you did and maybe Eric I speak too.

What these investments have been and the benefits you may have garnered in now.

Is that going to start to wane has had the brunt of that occurred in just curious how what you're realizing now regarding benefit on the on the tail indexed.

Scott We've said all along that we're huge believers in digital investment, especially customer facing technology. We've also been making some investments that are not customer facing technologies that are going to help us become better more effective and more efficient at our funeral homes and cemetery. So.

John Ransom: What you really saw us as really push that through the last couple of years and that's what pushed that digital capex.

Eric D. Tanzberger: And that's what pushed that digital capex, you know, up into the $50, $60 million range. I think this $35 million range, you know, it could have been funded, but I think it's a better number as we move forward. You know, you're always offsetting that with what the funeral homes and cemeteries need from a banker's capital perspective, because that's going to come first, and what do the cemeteries need from a cemetery development CapEx perspective, because our great sales force that Tom just mentioned needs inventory, you know, to sell. So that will always come first, but I do think that this is a combination of some non-customer make-us-more-efficient CapEx in terms of systems and processes that probably will wane a little bit as we move forward, and that will be replaced with better customer-facing technology and digital investments that way. But I think it's going to end up being around $30-$40 million as we move forward. I got it.

Up into the $50 million to $60 million range I think this $35 million range.

It could ebb and flow, but I think it's a better number as we move forward.

Youre always offsetting that with what do the funeral homes in cemetery need from a maintenance capital perspective, because thats going to come first and what to the cemetery need from our cemetery development Capex perspective, because our great Salesforce that Tom just mentioned needs inventory.

To sell so that will always come first but I do think that this is both a combination of some non customer make us more efficient capex in terms of systems and processes that probably will wane, a little bit as we move forward and that will be replaced with better customer facing technology.

<unk> and digital investments that way, but I think it's going to end up being around this 30% to $40 million as we move forward.

Eric D. Tanzberger: Thank you both. The next question comes from Joanna Gajuk of Bank of America. Please go ahead. Good morning, thanks for taking the questions here. So I guess I'll start with the follow-up on some numbers. So, GNA, this quarter, higher. How do you think about, you know, the 24 GNA progression? Is this 45 kind of an elevated number that's going to come down?

Okay got it thank you both.

The next question comes from Joanna <unk> of Bank of America. Please go ahead.

Good morning, Thanks for taking our questions here. So I guess the first the follow up with some numbers. So G&A this quarter higher how should we think about that.

With 24.

Next question.

This 45 kind of elevated numbers, it's going to come down.

Eric D. Tanzberger: Yeah, I think 45 is a little elevated, as well as what I was trying to imply in a conference call remark, Joanna. You know, we had some movement, obviously, in the share price during the last few months of the year, and that affects more of the long-term compensation plans, which are based on total shareholder return, or TCR, versus the peer group. And so we had to catch up on some accruals, so to speak, related to those in the fourth quarter, and that made the G&A, which normally should be $38 to $40 million-ish a quarter, into the mid-40s for the particular fourth quarter, but absent any other new information, I think from a framework perspective, we still like the call it $37 to $38 to $40 million a quarter for the corporate G&A expense.

I think 45 is a little elevated its what I was trying to imply in the conference call remarks Joanna.

We had some movement obviously in the share price.

During the last few months of the year and that adjust more of the long term compensation plans, which are based on total shareholder return our TCR versus our peer group.

And so we had to catch up some accruals so to speak.

Related to those in the fourth quarter and that made the G&A, which normally should be $38 million to $40 million ish a quarter into that mid forty's further particular fourth quarter, but absent any other new information I think from a framework perspective, we still like they call. It <unk>.

37% to $38 million to $40 million a quarter for the corporate G&A expense.

Eric D. Tanzberger: Thank you. And another follow-up, I guess, on pre-seminary self-production, right, so this quarter, Q4, was much better than expectations, and you're talking about... transactions that were pulled forward, so to speak, from Q1 into Q4, or is that it's going to still, you know, the look for the year maybe seems conservative based on that growth that you experienced in Q4? Yeah, I think it's so hard to predict, and I think all we're noticing is that a lot of our lead sources come from activity. So when you have less activity on the funeral home side and in the burials and the cemeteries, it can put some pressure on the number of leads that you have to generate and give to our sales force. So we're just acknowledging the fact that if we believe there's a little bit still of a pull-forward effect, it may have a somewhat dampening effect on that lead source.

Thank you and another follow up I guess on the cemetery sales production rates for this quarter Q4 much.

Much better than expectations and you're talking about.

We've only I guess 24 for the full year low single digits. So just wanted to make sure that.

I understand you're still was there any sort of.

Because actually they were pulled forward from Q1 into Q4 or is that kind of still.

Look for the year, maybe seems conservative based on that growth that you experienced in Q4.

Speaker Change: Yeah, I think it's still hard to predict Joanne I think all we're noticing is that.

A lot of our lead sources come from activity. So when you have less activity on the funeral home side and the variables and the cemeteries.

Speaker Change: You can put some pressure on the number of leads that you have to generate it gives our salesforce. So we're just acknowledging the fact that if we believe theres a little bit still of a pull forward effect that it may have a somewhat dampening effect on that lead source, having said that the rates that were closing at are going up we're.

Thomas L. Ryan: Having said that, you know, the rates that we're closing at are going up. We're getting leads, a big growth in digital leads that are very different, not coming off that traffic in the funeral homes and cemeteries. So again, I want to be, you know, optimistic. It's very possible that we could have a very strong pre-cemetery sale.

Getting leads.

Big growth in digital leads that are very different not coming off that traffic in the funeral and cemetery, so again I want to be.

Optimistic it's very possible that we could have a very strong preneed cemetery sales I think we're just acknowledging the fact that.

Thomas L. Ryan: I think we're just acknowledging the fact that traditional leads have come from this activity, and we expect that activity to be slightly down. But we feel great about the sales force, we feel great about our digital lead growth, and we've got inventory in the cemeteries to sell. So we're optimistic about 24 and even more so as we get into 25 and 26.

Traditional ways of come from this activity and we expect that activity to be slightly down.

We feel great about the Salesforce, we feel great about our digitally growth and we've got inventory in the cemetery is to sell.

Joanna Gajuk: Thank you. And on a different topic, you know, we're still waiting, I guess, to hear from the FTC on those potential changes to the funeral rule. And I guess on that front, can you kind of give us a sense of, you know, over the last few years, how, you know, your locations have been faring when it comes to compliance with those requirements of the funeral rule? You know, on average, how many locations have been found to be compliant, and has there been a chance where you've seen, you know, fewer or more of a time, these locations found uncompliant?

Thank you and I guess on the on a different topic.

We're still waiting I guess from the FTC on those.

Thank you Sanjay.

And I guess on that front can you kind of give us a sense of.

Over the last years.

How I guess.

Speaker Change: Youre locations when it comes to compliance with boats.

Requirement.

So on average.

There's been a trend where you see fewer or more of a time of these locations.

Eric D. Tanzberger: And I guess there's been some discussion about, you know, some other elements of the funeral rule when it comes to the fines and the training that's required. So, do you expect any changes to those other elements of the funeral rule that could potentially also happen? Because I guess the... The base case assumption is that it's going to be about, you know, the owner's size requirement, but we do expect other changes to that general rule. Thank you. Joanna, you know, I think you're right.

Brian and I guess theres been some discussion about.

Some other elements of the final rule.

When it comes to define and the training that's required to do you expect any changes to the other elements of that.

Thanks, Jill to happen because I guess.

The base case assumption is it's going to be about my price requirement.

Do you expect are there changes to that.

Thank you.

Hey, Joanna.

Eric D. Tanzberger: It's like, I think the base assumption is that it's going to create situations with online GPLs in those situations, and nothing has changed from our perspective on that. We continue to work through that. I think we have about 1,000 or 1,100 or something in that ballpark at any point in time among our 1,500 funeral homes or GPLs online. We mix and match that and test it.

I think youre right. It's like I think the base assumption is that it's going to create situations with online gpl's in those situations.

Speaker Change: Nothing has changed from our perspective on that we continue to work through that we continue to test that I think we have about.

Our 100 and something in that ballpark at any point in time of our 1500 funeral homes that Gpl's online, we mix and match that and test. It. We're tiered a lot of ways that I've described before on previous calls in terms of pricing tiers in particular markets and we're playing with that as well from <unk>.

Eric D. Tanzberger: We're tiered in a lot of ways that I've described before on previous calls in terms of pricing tiers and particular markets, and we're playing with that as well, from starting at prices to a full premium pricing experience that's now hopefully starting to pull in cemeteries as well on the digital site. So, no change there. If that's the expectation that's out there and that happens, you know, again, I think we're going to be there anyway. And we don't think that's going to have any negative effect on our business. If anything, you know, it's less, maybe even slightly positive from a premium perspective as we move forward.

Starting at prices to a full premium pricing experienced us now hopefully starting to pull in cemetery as well on the on the digital sites. So no change there.

That's the expectation that's out there and that occurs again I think we're going to be there anyway.

And we don't think that's going to have any negative effect to our business as anything it's.

Speaker Change: It's flat to maybe even slightly positive from a pretty perspective as we move forward.

Eric D. Tanzberger: You know, from a compliance perspective, we take that extremely seriously. We have really good training already in place on compliance with the funeral rule and all the intricacies of it and such, and when you give a price list to a consumer. Let's start, though, about what we do as an industry and what we do as a company. We serve families at a really desperate time in their particular lives. And so there's obviously a human element when you're first in touch with a family for the first time, and you have to take into account the caring and compassionate nature of our industry and our particular associates being second to none in that situation. So then you're starting to figure out subjectively when to introduce the GPL. And therefore, if it's subjective to start with, the compliance is going to be a little bit subjective as well. And that's where a little bit of the gray area comes into play.

From a compliance perspective.

We take that extremely seriously.

We have really good beefed up training already in place on compliance with the funeral rule and all of the intricacies of it and such and when you give up price list to the consumer.

Let's start though about what we do as an industry and what we do as a company we serve families at a real dire time in their particular lives and so theres, obviously, a human element when you first in touch with our family for the first time that you have to take into account, the Karen and compassion nature of our industry.

In our particular associates being second to none and that situation. So then youre starting to figure out subjectively when to introduce the GPL and therefore, if its objective to start with the compliance is going to be a little bit subjective as well and that's where a little bit of a gray area comes into play we're very.

Eric D. Tanzberger: We're very proud of our training. We're very proud of our compliance with the SPC. And we're very supportive of the funeral rule and want the entire industry to follow that particular part of the rule, and we will continue to do that. If anything else comes down, you know, from the SPC, we'll look at it at that particular time. But nothing new has been mentioned to us, or, more appropriately, we haven't been asked to comment on anything new recently as it relates to the compliance side of the funeral rule. Yeah, that's right. This is for a point about these questions that are opposed to the industry that asks us before we talk about changes to definitions or... or things like that, but I guess in a way to quantify, like on average, how many locations of yours get, I guess, found or found non-compliant, and others, and it has just kind of changed over the years, to your point about how this is a part of the training that you provide to your associate

As proud of our training, we're very proud of our compliance related to the FTC and we're very supportive of the funeral rule and want the entire industry. Following that particular part of the rule and we will continue to do that if something else comes down from the FTC will look at it at that particular time.

But nothing new has been has been mentioned to us or more appropriately. We havent been asked to comment on anything new recently as it relates to the compliance side of the funeral rule.

Yes, that's a fair point at this question posed to the industry did not specifically can you talk about changes to define or.

Or things like that but I guess is there any way to quantify on like on average how many.

Locations of yours.

On average and it has that kind of change over the years to your point about.

He has been part of the training that you provide to your associates.

Eric D. Tanzberger: Yeah, I mean, if you're talking about from the FTC perspective, it's very small. You know, I think we're well, well into compliance. I think when you look at the period of the rule itself, we may have 1 to 2, 2 to 3 locations out of 1,500 in any particular year that may not be in some form of compliance. Again, I'm going to emphasize that that's subjective to some degree because what our associates are trying to do first and foremost is care for and be compassionate for their families. So it can get complicated when you're doing that, and then, of course, at some point, you're introducing, or the consumer is introducing, price into the equation, and at that particular time, the funeral rule and the GCL and such kick in from that perspective.

Yeah, I mean, if youre talking about from the FTC perspective, it's very small I think we're well well into compliance I think when you look at the period of the rule itself. We may have one to two two to three locations out of 1500 in any particular year that may not be in some form.

Compliance again, I'm going to emphasize that.

Thats subject to some degree because what our associates are trying to do first and foremost is care and be compassionate for that family. So it can get complicated when youre doing that and then of course at some point, you're introducing or the consumers introducing price into the equation and at that particular.

Time is when the funeral rule of the GPL and such kicks them from that perspective, but if you take one to three locations out of 1500 at any particular time and it's a pretty long sample set and I'm talking about 30 35 years I think you should say that we are.

Joanna Gajuk: But if you take one to three locations out of 1,500 at any particular time, and it's a pretty long sample set, and I'm talking about 30, 35 years, I think you should say that we are very, very much in compliance with the funeral rule and will continue to be in our training, our culture, and our tongue-at-the-tongue operationally will continue to have those results as we move forward. I appreciate it. That's a helpful one. It's a large platform, so even if it's three locations at a high altitude, you know, you mentioned that.

Very very much.

Science with the with the funeral rule and will continue to be in our training our culture and our tone at the top.

Operationally, we will continue to have those results as we move forward.

No I appreciate that that's that's very helpful in Atlanta, Okay.

The large platforms.

Even if it's at a high enough that you mentioned that that's not even that many cool and just last one on this one and the indication of the tiny one lucky from FCC or Theres, nothing really out there.

Eric D. Tanzberger: That's not even that meaningful. And just last one on this one. Any indication of the timing going well here from FTC, or just nothing really out there? I don't have any update on their particular timing, that would be in their... Right, right.

I don't have any update on their particular timing that would that would be in their court.

Operator: No, thank you. Thank you so much. This concludes our question and answer session. I would like to turn the conference back over to SEI Management for closing remarks. Thank you everyone for being on the call today. We look forward to talking to you again with our first quarter results. Have a great week. The conference is now concluded. Thank you for attending today's presentation in the Analysis Committee. Thank you.

Alright. Thank you. Thank you so much.

This concludes our question and answer session I would like to turn the conference back over to Sci management for closing remarks.

Thank you everyone for being on the call today, we look forward to talking to you again with our first quarter results.

Have a great week.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.