2023 Carriage Services Inc Earnings Call

Yeah.

Good day, and thank you for standing by.

Operator: Thank you for joining us today and thank you for standing by. Welcome to the Carriage Services 4th Quarter and Full Year 2023 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, and Mr. Metzger. President.

Welcome to the carriage services fourth quarter and full year 2023 earnings conference call. Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Steve Mexico.

Please go ahead Sir.

Operator: Please go answer it. Good morning, everyone. Thank you for joining us to discuss our fourth quarter and full year results for 2023. In addition to myself on the call this morning for management, our Carlos Quesada, Chief Executive Officer and Vice Chairman of the Board of Directors, and Keon Gramia, Executive Vice President and Chief Financial Officer. On the Carriage Services website, you can find our earnings press release, which was issued yesterday after the market. Our press release is intended to supplement our remarks this morning and include supplemental financial information, including the reconciliation of differences between GAAP and non-GAAP financial measures. Today's call will begin with formal remarks from Carlos and Keon and will be followed by a question and answer session. Before we begin, I'd like to remind everyone that during this call, we'll make some forward-looking statements, including comments about our business, projections, and plans, as well as 2024 guidance.

Good morning, everyone and thank you for joining us to discuss our fourth quarter and full year results for 2023 in.

In addition to myself on the call. This morning from management or Carlos Casado, Chief Executive Officer, and Vice Chairman of the board of Directors and key on Gray My Executive Vice President and Chief Financial Officer.

Carriage services website, you can find our earnings press release, which was issued yesterday after the market close our press release is intended to supplement our remarks. This morning and include supplemental financial information, including a reconciliation of differences between GAAP and non-GAAP financial measures.

Today's call will begin with formal remarks from Carlos in Xi'an and will be followed by a question and answer period before we begin my to remind everyone that during this call. We will make some forward looking statements, including comments about our business projections and plans as well as 2020 for guidance.

Operator: Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today. These risks and uncertainties include, but are not limited to, factors identified in our earnings release as well as in our SEC filings, all of which can be found on our website. Thank you all for joining us this morning, and now I'd like to turn the call over to Carlo.

Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today.

These risks and uncertainties include but are not limited to factors identified in our earnings release as well as in our SEC filings all of which can be found on our website. Thank.

Thank you all for joining us this morning, and now I would like to turn the call over to Carlos.

Thank you, Steve and welcome everyone to our 'twenty to 'twenty, three fourth quarter and full year earnings discussion.

Carlos: Thank you, Steve, and welcome everyone to our 2023 fourth quarter and full year earnings discussion. We're excited to dive into our achievements and plans. So let's jump right in.

We're excited to dive into our achievements and plans so let's jump right in.

First off a heartfelt. Thank you to every carrots team member.

Carlos: First off, a heartfelt thank you to every Carriage team member. Your dedication and hard work have been instrumental in providing outstanding service to countless families. Your efforts, passion, and commitment truly matter.

Your dedication and hard work have been instrumental in providing outstanding service to countless families.

Your efforts passion and commitment truly matter.

Carlos: We are grateful for your contribution. Now, let's talk about our financial highlights. We are thrilled to report significant progress in executing our focus strategies to grow revenue and reduce costs. For the fourth quarter, total revenue grew to $98.8 million, an increase of $4.9 million or $5.2 billion. And for the full year, it grew to $382.5 million, an increase of 12.3 million, or 3.3%. The very solid cemetery sales performance, our two most recent acquisitions, and our targeted efforts to better leverage our pricing power to improve average revenues per contract helped make up for approximately $13.3 million of funeral home ad-need revenues despite the pull forward from COVID that led to a modest declining volume. Looking at each of our revenue segments, we see that total funeral home operating revenue experienced a reduction of 1.6 million, or 2.4 percent, from last year's quarter and by 2.2 million, or 0.9%, for the whole year. This decline is driven by lower volumes due to the pull forward.

We are grateful for your contributions.

Now, let's talk about our financial highlights.

We are thrilled to report significant progress in executing our focused strategy is to grow revenue and reduce costs.

For the fourth quarter total revenue grew to $98 8 million, an increase of $4 9 million or five 2% and.

And for the full year it grew to $382 5 million, an increase of $12 3 million or three 3%.

They're very solid cemetery sales performance, our two most recent acquisitions in our targeted efforts to better leverage our pricing power to improve average revenue per contract help.

To help make up for approximately $13 3 million of funeral home I need revenues. Despite the pull forward from Kobe that led to a modest decline in volume.

Looking at each of our Arabian of segments, we see that total funeral home operating revenue experienced a reduction of $1 6 million or two 4% from last year's quarter and by $2 2 million or 0.9% for the whole year.

This decline is driven by lower volumes due to the pull forward effect as.

Carlos: As for total cemetery operating revenue, we ended the quarter above last year by 3.7 million, or 16.1%. And for the full year, we grew by 12.2 million, or 13.5%. This fantastic performance is due to the amazing job of our pre-need cemetery sales teams knocking it out of the park, with pre-need cemeteries self-production increasing by 3.9 million or 25% for the quarter when compared to last year, and by 12.1 million or 19.6% for the full year. Lastly, total financial revenue took off with an increase of 3.1 million or 59.5% compared to last year's quarter and 3.8 million or This boost in financial revenue is equally balanced between our investment strategy and the results of our new pre-arranged funeral sales. Regarding adjusted consolidated EBITDA for the fourth quarter, we finished with $32.4 million, an increase of $3.8 million, or 13.2%. And for the full year, we delivered $113.2 million, an increase of 3.9 million, or 3.5% compared to last year. We grew our adjusted consolidated EBITDA margin during the fourth quarter by 230 basis points to 32.8.

As for total cemetery operating revenue, we ended the quarter above last year by $3 7 million or 16, 1% and for the full year, we grew by $12 2 million or 13, 5%.

These fantastic performance is due to the amazing job of our Preneed cemetery sales team's knocking it out of the park.

With Preneed cemetery sales production, increasing by $3 9 million or 25% for the quarter when compared to last year and by $12 1 million or 19, 6% for the full year.

Lastly, total financial revenue to come up with an increase of $3 1 million or 59, 5% compared to last year's quarter, and $3 8 million or 17% for the full year.

These both in financial revenue is equally balanced between our business strategy and the results of our new pre arranged funeral sales program.

Regarding adjusted consolidated EBITDA for the fourth quarter. We finished with 32 4 million an increase of $3 8 million or 13, 2% and for the full year, we delivered $113 2 million.

Increase of $3 9 million or three 5% compared to last year.

We grew our adjusted consolidated EBITDA margin during the fourth quarter by 230 basis points to 32, 8% and for the full year, we grew by 10 basis points to 29, 6%.

Carlos: And for the full year, we grew by 10 basis points to 29.6%. Our focus on cost savings delivers excellent results, including a decrease in total overhead of $3.8 million, or 7% from last year. We saw adjusted diluted EPS in the fourth quarter grow to $0.77 per share, an increase of $0.13 or 20.3%. And for the full year, we ended at $2.19, which is $0.19 above the top end of our guidance. However, compared to the previous year, we experienced a decrease of 42 cents, or 16.1%, driven by the high interest rate environment's impact on a revolving credit facility.

Our focus on cost savings delivered excellent results, including a decrease in total overhead of $3 8 million or 7% for the year. We saw adjusted diluted EPS in the fourth quarter were 277 per share an increase of 13 or 23%.

And for the full year, we ended at $2 19, which is 19 cents above the top end of our guidance however, compared to the previous year, we experienced a decrease of 42 says or 16, 1% driven by the higher interest rate environments impact on our revolving credit facility.

To put things in perspective, we paid $10 $4 million more in interest expense. During 2023, then in 2022.

Carlos: To put things in perspective, we paid $10.4 million more in interest expense in 2023 than in 2022, with our debt remaining at a similar level. When converting this to EPS, the impact is approximately $0.48 per share. Debt repayment continues to be at the forefront of our near-term goals, and we intend to continue to pay down our debt with free cash flow until our leverage ratio is under 40%. Yeah, we'll share more regarding our debt and leverage later on. We are very proud of these results, especially after outperforming our guidance for EPS, EBITDA, and revenue for 2023. Even though we did revise our outlook due to a lower than expected third quarter, we made up for it in the fourth quarter. When comparing our original full-year 2023 guidance, we finished the year within our initial ranges in all categories except EPS, which was down due to the higher interest rate environment. Now that we have gone over the past, let us focus on the future.

With our debt remaining at a similar level when converting this to EPS. The impact is approximately 48 per share.

Debt repayment continues to be at the forefront of our near term goals and we intend to continue to pay down our debt with free cash flow until our leverage ratio is under four times, yes.

Yeah, we will share more regarding our debt and leverage later on this call.

We are very proud of these results, especially after outperforming our guidance for EPS EBITDA and revenue for 2023.

Even though we did revise our outlook due to a lower than expected third quarter, we made up for it in the fourth quarter.

When comparing our original full year 2023 guidance, we finished the year within our initial ranges in all categories, except EPS.

Which was down due to the higher interest rate environment.

Now that we have gone over the past, let us focus on the future.

Carlos: We are excited to announce that we are embarking on a transformative journey with our new purpose statement, creating premier experiences through innovation, empowered partnerships, and elevated. This purpose statement is our commitment to every aspect of our business. It focuses on continuous innovation, partnership, and service delivery, and is rooted in three core pillars. The first pillar is disciplined capital allocation.

We are excited to announce that we are embarking on a transformative journey with our new purpose statement.

Creating premier experiences through innovation empowered partnerships and elevated service.

This purpose statement is our commitment to every aspect of our business.

Focuses on continuous innovation partnership and service delivery and is rooted in three core pillars.

The first pillar is disciplined capital allocation, our focus is to invest our capital in a disciplined manner that identifies areas with the most significant potential for returns ensuring our resources pave the way for sustainable success.

Carlos: Our focus is to invest our capital in a disciplined manner that identifies areas with the most significant potential for returns, ensuring our resources pave the way for sustainable growth. Purposeful growth is not a mere increase in size but a deliberate journey towards enhancing our revenue and financial metrics through strategic, thoughtful, and data-driven planning. This approach sharpens our focus, enabling broader execution, and driving impactful results. It's about growing, not just in scale, but in significance, organically and inorganically.

The second pillar is purposeful growth.

Growth is not a mere increasing size, but a deliberate journey sourcing has seen our revenue and financial metrics through a strategic thoughtful and data driven planning.

This approach sharpens, our focus enabling broader execution and driving impactful results is about growing not just in scale, but insignificance organically and inorganically.

Carlos: The third pillar is relentless improvement. We understand that lasting success comes from an unwavering commitment to excellence. Every day offers a new opportunity to refine our processes, improve our systems, elevate our services, and surpass our previous. This dedication to continuous improvement is at the heart of our purpose. Together, these three pillars are not just a strategy.

The third pillar is relentless improvement.

We understand that lasting success comes from an unwavering commitment to excellence.

Everyday offers and the opportunity to refine our processes improve our systems elevate our services and surpassed our previous achievements.

This litigation to continuous improvement is at the heart of our purpose statement.

Together. These three pillars are not just strategies.

Carlos: They are pledged to relentlessly pursue excellence, to innovate with intention, and to lead with a level of service that redefines what is possible. Speaking of possibilities, we hope you have the chance to explore our newly revamped website, Visual Identity. We have brought our purpose statement to life, giving our carriage logo a fresh, innovative look and signaling our focus on driving an exciting new. We are also excited to share a new role focused on leading our Continuous Improvement Lean Management Program. The data-driven approach will result in refined processes and improved systems that will enhance productivity and identify potential cost savings in other opportunities.

They are a pledge to relentlessly pursue excellence to innovate with the intention and to lead with a level of service that redefine what is possible.

Speaking of possibilities, we hope you had the chance to explore our newly revamped websites and visual identity.

We have brought our purpose statement to life <unk>.

Our carriage logo afresh innovative look and signaling our focus on driving an exciting new future.

We are also excited to share our new role focused on leading our continuous improvement lean management program. These data driven approach will result in refined processes and improve systems that will enhance productivity and identify potential cost savings in other opportunities.

Carlos: It represents our commitment to becoming more efficient and effective in our operations and is aligned with the relentless improvement focus of our purpose. This approach to continuous improvement is something we're optimistic about. We believe it will pave the way for better processes and outcomes. As we continue to pursue our vision, we look forward to sharing our progress and learnings with you in future applications. It's a journey of growth and learning, and we're excited to see where it leads us. As part of our relentless improvement approach and driven by our passion for service excellence, we are pleased to introduce a new role within our team, the Director of Customer Experience. This role is pivotal to our passion for service program, focusing on training, rollout, and development of hospitality concepts within our teams, in addition to creating key performance indicators to measure customer experience in our delivery of wow moments. Our objective is clear as a company that prides itself on being driven by service and supported by a team fueled by both passion and compassion. In these service-driven times, the importance of the customer experience cannot be overstated.

<unk> represents our commitment to becoming more efficient and effective in our operations and is aligned with our relentless improvement focus of our purpose statement.

This approach to continuous improvement is something we're optimistic about we believe it will pave the way for better processes and outcomes.

As we continue to pursue our vision, we look forward to sharing our progress and learnings with you in future updates. He said journey of growth and learning and we're excited to see where it leads us.

As part of our relentless improvement approach and driven by our passion for service Excellence. We are pleased to introduce a new role within our team the director of customer experience. This role is pivotal to our passion for service program, focusing on training rollout and development of hospitality concepts within our teams.

In addition to creating <unk> performance indicators to measure customer experience in our delivery of Wow moments playbook.

Our objective is clear as a company that price itself on being driven by service and supported by a team fueled by both passion and compassion.

In the service driven times the importance of customer experience cannot be overstated. It is the cornerstone of differentiation and customer loyalty in the competitive landscape.

Carlos: It is the cornerstone of differentiation and customer loyalty in a competitive landscape. We aim to set ourselves apart by delivering a customer experience beyond expectations. This commitment to elevating our service delivery ensures we meet and exceed our industry's evolving standards and demands. It's more than a program.

We aim to set ourselves apart by delivering a customer experience beyond expectations. This commitment to elevating our service delivery ensures we meet and exceed our industry's evolving standards and the Mezz is more than a program.

It's a promise to lead with excellence and make every customer interaction and opportunity to demonstrate our match litigation to service.

Carlos: It's a promise to lead with excellence and make every customer interaction an opportunity to demonstrate our unmatched dedication to service. This program, paired with our ERP and customer-facing system, called Trinity, along with our customer-centric approach, will deliver an enhanced experience that we believe will drive organic growth and increase market share. We are truly excited about the future at Carriage; the dedication and hard work we have invested over the past year, coupled with the strategies outlined today, position us for a future marked by innovation and continuous progress. This isn't just about near-term achievement. It's about establishing a foundation that will deliver lasting value to our shareholders for years to come. Thank you for your attention and support.

This program here with our ERP and customer facing system called Trinity along with our customer centric approach will deliver an enhanced experience that we believe will drive organic growth and increase market share.

We are truly excited about the future of courage dedication and hard work, we have invested over the past year, coupled with the strategies outlined today.

Thus far our future Mark by innovation and continuous progress this isn't just about near term achievements.

About Stablish Ing, a foundation that will deliver lasting value to our shareholders for years to come.

For your attention and support with that I will now turn things over to Ken.

Keon: With that, I will now turn things over to Carlos. Thank you, Carlos, and good morning to everyone on the call. Since Carlos provided an overview of our key financial metrics for this quarter and for the full year 2023, I will review a few additional financial highlights for the same periods, and I will also provide color around our 2024 outlook and guidance ranges provided in our earnings release yesterday. First, I will start off with corporate overhead. We are very proud of our downward trend in corporate overhead throughout the year.

Thank you Carlos and good morning to everyone on the call since Carlos provided an overview of our key financial metrics for this quarter and for the full year 2023, I will review a few additional financial highlights for the same periods and I will also provide color around our 2020 for outlook and guidance ranges provided in our earnings release yesterday first.

I will start off with corporate overhead we are very proud of our downward trend in corporate overhead throughout the year this quarter when adjusting our special items related to the review of strategic alternatives, our overhead costs total approximately $10 7 million and for the full year similar overhead costs would amount to $47 9 million or approximately <unk> 12.

Keon: This quarter, when adjusting out special items related to the review of strategic alternatives, our overhead costs total approximately $10.7 million, and for the full year, similar overhead costs would amount to $47.9 million, or approximately 12.5% of revenue, which is lower than our previously stated 13% target for the full year 2020. The general decrease in overhead expense we experienced is primarily a result of lower incentive compensation relative to prior quarters in previous years, but also our relentless focus throughout 2023 on discipline spending, which included optimizing and reducing overhead. Second, I would like to discuss our cash flow from operations, which increased to $13.7 million this quarter, up from $11 million the same quarter last year. This increase is a direct result of our fourth quarter outperformance that Carlos discussed earlier, and ultimately, how those results flowed down to netting. For the year, cash flow from operations increased by $14.6 million, or 24%, from the previous year to $75.6 million.

5% of revenue, which is lower than our previously stated 13% target for the full year 2020 for the general decrease in overhead expense. We experienced is primarily a result of lower incentive compensation relative to prior quarters in previous years, but also our relentless focus throughout 2023 on disciplined spending.

Which included optimizing and reducing overhead costs.

Second I would like to discuss our cash flow from operations, which increased to $13 7 million this quarter up from $11 million in the same quarter last year. This increase is a direct result of our fourth quarter outperformance that Carlos discussed earlier and ultimately how those results flowed down to net income for the year cash flow from operations increased by.

<unk> $14 6 million or 24% from the previous year to $75 6 million. Additionally, our solid cash flow from operations translated into robust adjusted free cash flow for the quarter with maintenance capex more or less in line with the prior year quarter, our calculation for adjusted free cash flow increased by $2 7 million or <unk>, 44%.

Keon: Additionally, our solid cash flow from operations translated into robust adjusted, For the quarter with maintenance capex more or less in line with the prior year quarter, our calculation for adjusted free cash will increase by 2.7 million or 44% after adding back special items. In the future, we look to align our adjusted free cash flow calculation with a standard view of free cash flow, inclusive of all capital expenditures, not simply isolating maintenance capex. Which brings me to my last note on the cash flow statement. Our capital expenditures for the year decreased by $8 million, down to $18 million when compared to the previous year.

Sent after adding back special items.

In the future, we look to align our adjusted free cash flow calculation with a standard view of free cash flow inclusive all capital expenditures now simply isolating maintenance Capex, which brings me to my last note on the cash flow statement, our capital expenditures for the year decreased by $8 million down to $18 million when compared to the previous year. This is a direct result of our capital allocation strategy.

Keon: This is a direct result of our capital allocation strategy. The strong cash flow generation, along with our well-defined capital allocation strategy, brings me to my third highlight, the reduction in outstanding borrowings under our variable rate credit facility. This quarter, we were able to pay down an additional $8.2 million on our credit facility, reducing the outstanding borrowings to $179.1 million by year end.

Disciplined the.

The strong cash flow generation, along with our well defined capital allocation strategy brings me to my third highlight the reduction in outstanding borrowings under our variable rate credit facility. This quarter, we were able to pay down an additional $8 $2 million on our credit facility, reducing the outstanding borrowings to $179 1 million by year end, though.

Keon: Though this amounts to a $11.6 million year-over-year decrease in the amount drawn under the credit facility, we have to take into consideration that the Greenlawn acquisition, which closed at the end of the first quarter of 2023, resulted in a peak amount drawn under the credit facility of $213.6 million at quarter end. Therefore, over the next three quarters through year end, we paid down $34.5 million on the credit facility, a considerable amount to pay down the facility with our cash flow generation and capital. Looking at leverage, by using our Bank Covenant compliance ratio, as defined by our credit agreement, we have steadily lowered our leverage ratio, ending the year at 5.13 times net debt to EBITDA. Despite the paydown, interest rates continue to hover around the same weighted average interest rate of 9% on our credit facility for the quarter, as compared to 6.3% in the same quarter last year.

This amounts to a $11 $6 million year over year decrease in the amount drawn under the credit facility, we have to take into consideration that the Greenland acquisition, which closed at the end of the first quarter of 2023 resulted in a peak amount drawn under the credit facility of $213 6 million at quarter end.

Therefore over the next three quarters through year end, we paid down $34 $5 million on our credit facility a considerable amount to pay down the supported with our cash flow generation and capital discipline looking at leverage by using our bank covenant compliance ratio as defined by our credit agreement, we have steadily lowered our leverage ratio ending the year at five one.

Three times net debt to EBITDA. Despite the pay down interest rates continue to hover around the same weighted average interest rate of 9% on our credit facility for the quarter as compared to six 3% in the same quarter last year for the year, our weighted average interest rate for our credit facility was eight 6% compared to 4% in 2022.

Keon: For the year, our weighted average interest rate for our credit facility was 8.6% compared to 4% in 2022, a primary driver behind the $10.3 million of additional interest expense year-over-year that Carlos mentioned earlier. Now, I will conclude my remarks by turning to our full-year 2024 outlook that we provided in our earnings release yesterday. Before I dive into our guidance ranges, I would like to highlight that our 2024 outlook is pro forma for divestitures of non-core businesses that we have line of sight to a potential close in the first quarter of the year. This includes two separate transactions that would remove approximately $5.5 million of revenue and $1.5 million of field-level EBITDA in 2025. The sale proceeds, in turn, would be used towards paying down our debt.

Primary driver behind the $10 3 million of additional interest expense year over year that Carlos mentioned earlier.

Now I will conclude my remarks by turning to our full year 2024 outlook that we provided in our earnings release yesterday.

Before I dive into our guidance ranges I would like to highlight that our 2024 outlook is pro forma for divestitures of noncore businesses that we have line of sight to a potential close in the first quarter of the year.

This includes two separate transactions that would remove approximately $5 $5 million of revenue and $1 $5 million of field level EBITDA in 2024, the sale proceeds in turn would be used towards paying down our credit facility with that disclaimer behind us let US review the 2024 guidance ranges for total revenue.

Keon: With that disclaimer behind us, let us review the 2024 guidance. For total revenue, our range is $380 to $390 million; for Adjusted Consolidated EBITDA, our range is 112 to 118 million; and for adjusted diluted earnings per share, our range is $2.20 to $2.30. And lastly, for adjusted free cash flow, our range is $55 to $65 million. Overall, we expect 2024 to be a continuation and extension of our performance in 2023, focused on organic growth driven by our key strategic initiatives around pre-need sales, both on the funeral and cemetery sides, continued integration and optimization of recent acquisitions, alongside continued capital and spending discipline. Through the course of the year, we will continue to be laser focused on reducing our leverage to a level that positions Carriage to pursue acquisitions opportunistically again in 2025.

<unk>, our range is $380 to $390 million for.

Our adjusted consolidated EBITDA, our range is $112 million to $118 million for adjusted diluted earnings per share our range is $2 22.

Two $2 30.

And lastly for adjusted free cash flow, our range is $55 million to $65 million.

Overall, we expect 2024 to be a continuation and extension of our performance in 2023 focus on organic growth driven by our key strategic initiatives around preneed sales both on the funeral and cemetery side continued integration and optimization of recent acquisitions alongside continued capital spending.

Through the course of the year, we will continue to be laser focused on reducing our leverage to a level that positions carriers to pursue acquisitions Opportunistically again in 2025.

Keon: As a management team, we have been deliberate in our disciplined approach around capital allocation decisions and executing on our strategic initiatives, and we are pleased to see how those decisions led to positive financial results in the fourth quarter and for the year. We are excited to continue that momentum into 2020. With that, I'll pass it back to the operator. Thank you. We will now conduct a question for more information. Call 1-866-424-9333. For more information, visit www. FEMA.gov. If you would like to ask a question, please signal by pressing star 1 on your telephone call. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach us. Again, press star 1 to ask a question.

As a management team we have been deliberate in our disciplined approach around capital allocation decisions and executing on our strategic initiatives and we are pleased to see how those decisions led to positive financial results in the fourth quarter and for the year. We are excited to continue that momentum into 2024 with that I'll pass it back to the operator for questions.

Thank you we will now conduct a question and answer session.

If you would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.

You can press star one to ask a question, we'll pause for a moment to allow everyone the opportunity to signal for questions.

Alexander Paris: We'll pause for a moment to allow everyone the opportunity, and we'll take our first question from Alex Paris with Bering. Thank you. Good morning, guys, and thanks for taking my questions. I want to first start off by congratulating you on the strong finish to the year and then separately give my congratulations to Mel Payne on his transition from Executive Chairman to Special Advisor, i.e. semi-retirement. That's about as close as you'll see him get to retirement, I think.

And we will take our first question from Alex Paris with Barrington Research.

Please go ahead.

Thank you good morning, guys and thanks for taking my questions.

I wanted to first start off by congratulating you on the strong finish to the year and then a separate congratulations to no pain on his.

Transition from executive Chairman to special advisor.

E semi retirement, that's about as close as you'll you'll see you get to retirement I think.

Alexander Paris: Thanks, Alex. Sure, I think I'd like to start with the strategic review. You talked about it in the press release. I'm wondering what additional color you can add.

Thanks, Alex.

Sure I think I'd like to start with the strategic review.

You talked about it in the press release I'm wondering what additional color you can add it started nearly eight months ago, you've gone through a process and the board is obviously decided.

Steve: It started nearly eight months ago, you've gone through a process, and the board has obviously decided that the shareholders will be best rewarded through an independent publicly traded company, which I would agree with. So, any additional color you can get on that strategic review process to start. Sure, Alex. This is Steve.

The the shareholders will be.

Best rewarded through an independent publicly traded company, which I would agree.

So just any additional color you can get in that strategic review process to start.

Sure Alex This is Steve I.

Steve: You know, I think first and foremost, we're very proud of our board and our outside advisors on the financial and the legal side. It's been a very thorough process over the past eight months, a very thoughtful process. We were obviously flattered as a company by the interest. But ultimately, I think the board did not believe that the offers presented offered the same value to shareholders as the current strategy and opportunities that lie ahead for us as an independent publicly held company. So we put a little extra color in the 8K just to kind of highlight the amount of time and effort that went into the process. But, you know, the board is as excited as management is about the prospects that lay ahead for us that were outlined in the press release. Great, that's very helpful.

I think first and foremost.

Very proud of our board and our outside advisors on the financial and the legal side.

Been a very thorough process over the past eight months very thoughtful process. We were obviously flattered is accompanied by the interest, but ultimately I think the board did not believe that the offers presented offered the same value to shareholders as the current strategy and opportunities that lie ahead for us as an independent publicly held company.

So we put a little extra color in the 8-K, just to kind of highlight the amount of time and effort that went through the process but.

The board is as excited as management is about the prospects that lay ahead for us that were outlined in the press release.

Great that's helpful.

Steve: So, referring to the strategic plan going forward, new purpose, statement, and things like that. And this includes the strategic plan. I'm presuming that we're talking about the high performance and credit profile restructuring plan that was originally announced in December of 2022 that focuses on organic growth, debt reduction, et cetera. What would you call it out there?

So.

Referring to the strategic plan going forward new purpose.

Statements and things like that.

And this includes the strategic plan.

I am presuming that we're talking about the high performance and credit profile restructuring plan that was originally announced in December of 2022 that focuses on organic growth debt reduction et cetera, what would you call out there or what additional color you can give us.

Alexander Paris: What additional color can you give us as to a going forward strategic plan? Yeah, thank you, Alex. And good morning.

As to our growing forward strategic plan.

Yes. It is.

Thank you Alex and good morning. It is a combination of that program with some additional concepts that I actually mentioned on my prepared remarks.

Carlos: It is a continuation of that program with some additional concepts that I actually mentioned in my previous remarks. We are going into this journey of trying to improve a lot of the processes and systems that we have, not just to accelerate bringing transport to a level of innovation and through technology and the way we, you know, approach things that will deliver better performance than before, but also should deliver productivity improvements and a reduction in cost over time. That's one aspect of it that's here at the support center as well as in the field.

We are going into this journey to trying to improve a lot of the processes and systems that we have not just to accelerate.

Bringing carriage to a level of innovation and through technology and the way we.

Approach things.

That will deliver better performance it before but also should deliver productivity improvements and a reduction on cost over time.

That's one aspect of it that's here at the support center as well as in the field. However, we also included in the remarks.

Carlos: However, we also included in the remarks a significant focus on customer experience as the demands of the industry continue to change from the dynamics of customers changing, you know, their preferences for final placement or choices for funeral services and cemetery. We also want to adapt and get ahead, you know, for the most part as it relates to the customer experience. We have been working probably for a little bit over a year and a half to build that. You have heard me talk about passion for service while, you know, playing the playbook.

Significant focus on customer experience.

The demand so if the industry continues to change from.

The dynamics of customer changing you know their preferences for final placement or choices for.

And the service funeral services and cemetery.

We also want to adapt and get a hit.

So for the most part than anybody else as it relates to customer experience, we have been working probably leave it over a year and a half to build out you have heard me talk about passion for serve as well playbook and this is the time to finalize that approach to formally launch it in to start capitalizing on that opportunity. So we do believe.

Carlos: And this is the time to finalize that approach, to formally launch it, and to start capitalizing on that opportunity. So we do believe that, in addition to what we have on what we call the HPCPRP plan, this addition to the plan is accretive and significant from a revenue growth opportunity, as well as cost savings, you know. Great, that's helpful.

In addition to what we have on what we call the hps.

<unk> plan.

This item is shown to the plan are accretive and significant from a revenue growth opportunity as well as cost savings opportunity.

Great that's helpful.

And then.

Alexander Paris: And then Before I get into it, I've got a couple questions about guidance. Guidance at the midpoint calls for revenue growth of 1%, adjusted EBITDA growth of 2%, and adjusted EPS growth of 3%. But you said in the prepared comments that the guidance is pro forma for the divestiture of the two transactions you expect to execute in the first quarter. Uh, my related question is, are there any other non-core businesses that are excluded from the guidance that you think you might sell this year, and, just in general, are there other non-core businesses that you have identified for potential divestiture in 2024? On our guidance, Alex, only the ones that Kian mentioned in his prepared remarks are pro forma to the guidance.

Before I get into they've got a couple of questions about guidance.

Got you guidance at the midpoint calls for revenue growth of.

1% adjusted EBITDA growth of 2% and adjusted EPS growth of 3%.

But you said in the prepared comments that it's that guidance is pro forma for the divestiture for the two transactions you expect to execute in the first quarter.

Sure.

Hi.

My related question is are there any other noncore businesses that are excluded from the guidance that you think you might sell this year and and just in general are there other non core businesses that you have identified for potential divestiture.

2024.

On our guidance Alex only the are the ones that Ken mentioned on his prepared remarks are pro forma to the guidance.

Carlos: We don't have, however, identified other non-corp businesses that we may, you know, see if we want to divest from over the next few months. I wouldn't have any offers or specific plans for that, but we do have a list, a target list, let's just call it, of businesses that we believe no longer fit the criteria of the high-performance nature culture of carriage, and we'll work hard to make that happen And of course, all the proceeds from that will be to pay down our debt and continue to lower our leverage ratio. What is the approximate gross proceeds on these two transactions anticipated? It was $5.5 million in revenue and $1.5 million in EBIT. Approximately, you know, 11, 12 million.

We do have however, identify other noncore businesses that we may.

See if we want to divest from over the next few months I wouldn't have any offers or specific plans to do that but we do have a list of target lease. They just call. It a businesses that we believe no longer fit the criteria of the high performance nature culture of carriage and we'll work hard to make that happen and of course, all the proceedings from that.

We will be to pay down our debt and continue to lower our leverage ratio.

What is the approximate gross proceeds on these two transactions anticipated it was $5 5 million in revenue.

And a half in EBITDA.

Approximately $11 million to $12 million.

And then related question of the other.

Alexander Paris: And then, related question, of the other non-core businesses on the target list that may or may not be divested, what sort of gross proceeds can come out of that portfolio, do you think? Or, said another way, what sort of revenues and electricity are we talking about? Yeah, I think Carlos's point, so we haven't identified any offers yet. You know, what we look at, we have that list, but what we really focus on when we're talking with other people about potential divestitures is, you know, what are the tax implications? What are the multiples of?

Noncore businesses on the target list that may or may not be divested.

What sort of gross proceeds can come out of that portfolio do you think or said another way.

What sort of revenues and adjusted EBITDA are we talking about.

Yes, I think the Carlos this point so we haven't identified any offers yet what we look at we have that list identified but what we really focus on when were talking with other people about potential divestitures. As you know what are the tax implications what are the multiples and does it make sense for us obviously you'd be losing some EBITDA, but youre going to get cash to pay down debt. So until we have those <unk>.

Steve: And does it make sense for us? You know, obviously, you'd be losing some EBITDA, but you're going to get cash in to pay down debt. So until we have those numbers in front of us, it's a little bit tough to say that we have targeted proceeds that we're looking to close on this year. It really has to be the right deal that's presented for these businesses. Those conversations are ongoing, so we may have some more color in the quarters to come. But at this point, they're not far enough along to really be able to pinpoint that.

In front of us a little bit tough to say that we have targeted proceeds that we're looking to to close on this year. It really has to be the right deal. That's presented on these businesses. Those conversations are ongoing. So we may have some more color in the quarters to come but at this point, they're not far enough along to really be able to pinpoint that.

Carlos: But to confirm also, Alex, we would not divest from assets where the valuation multiple of the sale is lower post-tax than the leverage ratio we're getting to make sure that we find a way to really make a dent on our debt. Gotcha. So between the $11 or $12 million in gross proceeds, I'm sure there's some tax implications there.

But to confirm also Alex we wouldn't not divest from assets where the valuation.

Valuation multiple of the sale is lower post tax than the leverage ratio, where we're getting to make sure that we find a way to really make a dent in our debt.

Gotcha, so between the $11 million to $12 million in gross proceeds I'm sure. There's some tax implications there and then your expectations for free.

Alexander Paris: And then your expectations for free cash flow in 2024. Do you have a net leverage target for year end? I know you have in the past with the high performance and credit restoration plan.

Free cash flow in 2024 do you have a net leverage target for year end I know you had in the past.

With the high.

High performance in credit restoration plan.

Yeah.

Alexander Paris: Where would you think that we finished out the year in terms of that based on current guidance for revenue and EBITDA? Yeah, Alex, on that point, what we were focused on was, you know, capital discipline and continuing to, you know, lower our leverage and our leverage ratio as a whole. A lot of that is dependent on kind of how things look for the course of the year on the EBITDA side. But, you know, right now, using our bank coverage, our bank leverage ratio, we're at 5.13 to end the year. We look to continue that strength and that pay down through the year, looking to get sub five, you know, through, let's call it, the second half of the year, and then looking to make more progress as we get to the end of the year. Gotcha.

Where would you think that we finished out the year in terms of debt based on current guidance for revenue and EBITDA.

Yeah, Alex on that point.

We're focused on is the capital discipline and continuing to lower our leverage and our leverage ratio as a whole.

A lot of that is dependent on kind of how things look for the course of the year on the EBITDA side, but right now we're at using our bank coverage our bank leverage ratio. We're at 513 to end the year.

We look to continue that that strengthen that pay down through the year are looking to get sub five.

<unk>.

To let's call it in the second half of the year.

Then looking to make more progress as we get to the end of the year.

Got you and then I guess my last question I'm going to ask you and ill, let somebody else ask questions.

Alexander Paris: And then I guess my last question I'm going to ask you, and I'll let somebody else ask questions, is, Keon, any color as to the cadence of the quarters? This year, we have full-year guidance. I think Service Corp said on their conference call last week that, for them, Q1 is going to be the last of the tough comps, and Q2, Q3, and Q4 should be more normalized growth for them, and they're taking into account the pull-forward effect of COVID, as well as maybe interest rates peaking and coming down over time. And then again, specific to them, the end of certain capital projects. So thoughts about maybe the first half versus the second half?

Is Ken.

Any color as to the cadence of the quarters. This year, we have full year guidance.

I think service Corp said on their conference call last week.

For them Q1 is going to be the last of the tough comps in Q2, Q3, and Q4 should be more normalized growth for them and theyre taking into account the pull forward effect of Covid.

As well as maybe interest rates, peaking and coming down over the time, and then again specific to them and certain capital.

Projects.

So thoughts about maybe first half versus second half.

Keon: Yeah, Alex, I know you asked me that question, but you know, when it comes to kind of a long-term seasonality, I think Carlos is better equipped for that, so let me kind of pass it over to him and let him give you some context, if that's okay. Sure. Thank you, Kian. So, I'll break it up into a couple of parts. When it comes to pull forward, we believe it will probably take at least three more quarters, if not four, for the pull forward effect to fully wash off.

Alexander.

Yes, I know you had you asked me that question, but you know when it comes to kind of a long term seasonality I think Carlos is better equipped for that so let me kind of pass it over to him and let him give you some context if that's okay.

Sure. Thank you Ken So I'll break it in a couple of parts when it comes to pull forward. We believe it will take probably at least three more quarters, if not four or fully.

Why shelf that pull forward. The fact, we have been experiencing a continuous decline year on year on volume throughout 2023, and we think it's going to take a little bit of time to get to a level, where it's flat and then start to grow on a year over year basis.

Carlos: We have been experiencing a continuous decline year-over-year in volume throughout 2023, and we think it's going to take a little bit of time to get to a level where it's flat and then start to grow on a year-over-year basis. We have been able to then account for, and I'm happy to talk about later on a little bit more on that, as it relates to our average revenue per contract. We believe we can sustain that to 2024, making up for some, if not most, of that volume drop. And so that's the one piece on pull forward.

We have been able to then accounted for and are happy to talk about later on I'll leave us more on that.

It relates to our average revenue per contract. We believe we can sustain that 2020 for making up for some if not most of that volume drop and so that's one piece on pull forward I do believe seasonality, meaning the typical.

Carlos: I do believe systemality, meaning the typical, you know, Q1 being the highest quarter of the year, Q4 being the second highest of the year, Q2 being the third highest of the year, and then Q3 being the fourth highest of the year, will come back into play in 2024. Offset, you know, here and there by the pull forward effect.

Q1, being the highest quarter of the year Q4, being the second highest of the year Q2 being the third highest of the year and then Q3 being the fourth highest of the year will be.

Pretty much the same so seasonality for this industry in my opinion will come back to play in 2024, offset here and there by the pull forward effect. So I do expect some sort of normalcy from that perspective, and our ability to compensate the strategies that we upgraded.

Carlos: So I do expect some sort of normalcy from that perspective and our ability to compensate through strategies that we have created. Two that I mentioned are continued focus on pricing power and our cremation offerings to make sure that we capitalize on every cremation opportunity that comes with the reclamation, that leaves our business with some sort of service, you know, offering merchandise, that increase that's arbitrary in the process. Great. Thanks for the additional color, everybody, and I'll get back into the queue.

Two that I mentioned is continue to focus on pricing power and our cremation offerings to make sure that we capitalize on every commission opportunity that comes out of the reclamation that leaves our business with some sort of surveys.

Offering merchandize that increase.

Arbitrary number contract.

Great. Thanks for the additional color, everybody and I'll I'll get back into the queue. Thanks.

Alexander Paris: Thanks. Thank you, Alex. Thank you for tuning in. See you next time.

Thank you Alex.

Once again, thank you.

Operator: Once again, if you would like to signal for a question, please press star 1. We'll now take our next question, and that will be from John Fransburg with Sidoti Company. Good morning, guys.

Signal for a question please press star one.

We will now take our next question.

And that will be coming from John France, Smith with Sidoti capital.

Please go ahead. Good morning, guys. Good morning, guys and congratulations on a good quarter.

John Fransburg: Good morning guys and congratulations on a good quarter. I guess I'd like to start with the pre-need sales success you're seeing in cemeteries. I'm curious what's driving that, and were there any sales incentives that were put in place that were successful?

I guess I'd like to start with.

Preneed sales success, you're seeing in cemetery.

What's driving that and were there any sales incentives that were put in place that were successful.

Absolutely John So you know our cemetery strategy, which started probably about three three and a half years ago really three years.

Carlos: Absolutely, John. So, you know, our Cemetery Strategy, which started probably about three, three and a half years ago, really three years, it's building up on its foundation, right, from the moment of recruiting more sales managers, getting the right people in the right place, creating the program, including our lead management system, or CRM, which we call Self-Edge, that we launched about a year and a half after we initiated this program. It's starting to, you know, that foundation that we worked on from the beginning as we started to ramp up our sales, our Pre-Need Cemetery sales teams are starting to really become very consistent. When you add to that also that we integrated a marketing module into our CRM, our marketing team, led by Alfred White, has done an incredible job of integrating lead generation through different sources from websites and other types of lead generation programs that is helping.

He is building up on.

Foundation right from the moment of recruiting.

Recruiting more sales managers getting the right who in the right place, creating the <unk>.

Program, including our.

Lead management system, or CRM, which we call sales edge of.

That we launched about a year and a half after we initiated this program is starting to you know that foundation that we work.

From the beginning as we started to ramp up our sales our preneed cemetery sales teams is starting to really become very consistent when you add to that also that we integrated our marketing module to our CRM our our.

Our marketing team led by Alfred White has done an incredible job in integrating lead generation through different sources from websites and other type of lead generation programs that is helping.

Carlos: But the most significant piece, just to be very transparent with all of you, is, of course, the integration of the most recent acquisitions on Cemetery. We acquired two, you know, two different businesses last year. One had a cemetery, St. Lionel's Cemetery in Charlotte, and the other two cemeteries, which are combos in Bakersfield.

But the most significant piece just to be very transparent with all of you is of course the integration of this over the most recent acquisitions in our cemeteries we acquired too.

Two different businesses last year, one has a cemetery cemetery in Charlotte and the other two cemeteries, which are combos in Bakersfield and so the integration of those three cemeteries have also help we have been able to create new inventory on one of the three.

Carlos: And so the integration of those three cemeteries has also helped. We have been able to create new inventory at one of the three cemeteries, which already started to show, you know, tremendous success last year. And we are actually creating a significant amount of new inventory on the other two. And so that also helps.

Cemeteries, which already started to show tremendous success last year, and we are actually creating significant amount of new inventory on the other two and so those also help as a side note as we.

Carlos: As a side note, as we change our same store acquisition comparison to be more fairly compared to our peers last year, Q1 will be the last year for Greenlawn as part of being a same store. And after that, really, it's all just acquisitions. Everything will be same store until we get new acquisitions.

<unk>, our same store acquisition comparison to be more fairly compared to our peers last year.

Q1 will be the last year for green loan as part of being same store and after that really is all Jos I'm, sorry acquisitions everything will be same store until we get your acquisitions. So this is also an impact of the latest integrations and we're very very excited about the performance and we believe theres a lot more to come from that in the near future.

John Fransburg: So this is also an impact of the latest integrations, and we're very, very excited about performance. And we believe there's a lot more to come from that in the near future. Great. That's very helpful.

Great that's very helpful.

Carlos: And the growth of the EBITDA and the EBITDA margin in the quarter, I think you attributed to a combination of cost savings and, I think, overhead reduction, if I heard you correctly. I'm curious where you stand on price cost recovery as you are absorbing some higher vendor costs in the previous quarters. Are you at equilibrium? Can you kind of delve down a little bit deeper into that?

And the growth.

The EBITDA and EBITDA margin in the quarter I think you attributed to a combination of cost savings and I think overhead reduction if I heard you properly.

I'm curious where you stand on the on the price cost recovery.

You are.

Absorbing some higher vendor costs in previous quarters are you, adding equilibrium can you kind of did.

Delve down a little bit deeper into that.

Happy to happy to do it.

Carlos: So when you think about the structure of carriage being highly decentralized, we did talk about pricing and trying to pass on those increases we received through 2023, starting somewhere around March of last year from vendors and services and other types, including salary and benefits that were increased at the beginning of the year following all the stress from COVID-19. And so we did struggle at the beginning to pass on those increased costs to families, to the consumers, to the client families because of that decentralization.

So when you think about the structure of carriage being highly decentralized we did talk about pricing and trying to pass on those increases we received through 2023, starting somewhere around March of <unk>.

Last year from vendors and services and other types, including salary and benefits that were increase at the beginning of the year opposed to all the stress from COVID-19, and so we did struggle at the beginning to pass on those increased costs to the families to the consumers of the client family.

Yes.

Because of that the centralization. So it took us some time to figure it out what was the right approach to pricing to find a way to leverage our ability to influence that pricing through our information through the managing partners, who have and will remain to have.

Carlos: So it took us some time to figure out what was the right approach to pricing, to find a way to leverage our ability to influence that pricing through information, through the managing partners who have and will remain to have the decision-making power for the company. And so in November, we found a formula that really helped out. And we were able to make some significant changes with the support of the field leaders. They did an incredible job as a consequence of that.

The decision on the pricing power for the company.

And so in November we found a formula that really help out.

And we are able to make some significant changes with the support of <unk>.

The field leaders they did an incredible job as a consequence to that in the month of December after just a more a month of full implementation of this I will share that our total contract average.

Carlos: In the month of December, after just a month of full implementation of this, I'll share that our total contract average for all carriage increased by five percent or $275. On the burial side, our total contract average for all carriage increased by 1.6% or $155, and on the cremation side, our total contract average for all carriage increased by 4.9% or $175. We believe not only these increases are sustainable, but there's a little bit more to increase as And it is a great way to keep our costs where they should be, our cost structure, and make sure we deliver an increased customer experience, and higher value in exchange for those dollars to every family that goes to a carriage funeral or cemetery. Great, that's very helpful, in fact. And I guess one last question; I'll let somebody else get into the queue.

For all carriage increased by 5% or $274.

On the barrels side increased by one 6% or $155.

<unk> side increased by four 9% or $175.

We believe not only these increases are sustainable, but theres, a little bit more to increase as we move forward throughout 2024, and it is a great way to keep our cost we should be our cost structure and making sure we deliver with an increased customer experience higher value for that.

You know in exchange for those dollars to every family that go to encourage a funeral cemetery.

Great. That's very helpful. In fact, and I guess, one last question I'll, let somebody ask.

Going into Q.

John Fransburg: Regarding the guidance, is it safe to assume that you've embedded incentive compensation into 2024's guidance? Because it sounds like that was downsized in 2023. And what kind of assumed tax rate are you putting into that 2024 guidance? Hey John, this is Keon. So let's answer the tax question. The tax question, we're just kind of using our annual kind of our, our typical annual assumption on taxes, which is, you know, anywhere between 29 to 30%. And then there was the incentive comp.

Regarding the guidance.

Is it safe to assume that you've embedded incentive compensation into 2020 guidance because it sounds like that was.

Downsize of the in 2023, and what it kind of assumed tax rate are you putting into that 2020 for guidance.

Hey, John this chaos so.

Answer the tax question on the tax question, but just kind of using our annual kind of our typical annual assumption on the taxes, which is anywhere between.

29% to 30% and then.

On the.

Keon: So yes, we do have that embedded within our costs, which ultimately hit EBITDA. So that is embedded in our assumptions for the outlook. Great. Thanks, Ken. I'll get back into the queue.

Incentive comp so yes, we do have that embedded within our.

Our cost, which ultimately hit EBITDA, so that is embedded in our assumptions for the outlook.

Great. Thanks, Ken I will get back into queue.

Yes.

Thank you John.

Our next question is coming from Liam Burke.

John Fransburg: Yep. Thank you, John. Our next question is coming from Lynn, with Be Rownt. Good morning, Carlos. Good morning, Keon. Good morning. Good morning, Liam.

Raleigh.

Yes, good morning, Carlos good morning.

Good morning Liam.

Carlos here.

Funeral home EBITDA margins were down year over year, which is fine, but your sequential improvement was pretty dramatic I mean 200 basis points plus.

Lynn: Carlos, your funeral home EBITDA margins were down year over year, which is fine, but your sequential improvement was pretty dramatic. I mean, 200 basis points plus. If you look into some of the cost cuts, that's impressive. How do you see that momentum and that kind of staging going into 2024, that kind of improvement? We do see that as very positive momentum going into 2024. There will be, you know, our normal round of merit increases in the field and the use of support centers in February. But we're already planning for what it's going to take to make that up so we can continue the same momentum throughout the year. So we're fully ready, prepared, and determined to continue the same momentum for the next four quarters. Okay, great. And then Keon, your financial revenue on EBITDA was sort of off-trend. Could you give us some color on that? Yeah, of course, Liam. So that's really the result of three things. I'll just kind of go through them.

If you look into some of the cost cuts that's impressive.

Do you see do you see that momentum and that kind of.

Staging going into 2020 for that kind of improvement.

We do see that.

Very positive momentum going into 2024, there will be you know we have our normal round of various decreases in the field and the users are sent that in February but we're already planning of what he's going to take to make that up. So we can continue the same momentum throughout the year. So we're fully ready prepared and plan into continuing the same momentum.

The next four quarters.

Okay, Great and then can you.

Financial revenue and EBITDA was sort of off trend.

Could you give us some color on that.

Yeah of course, Liam so that's.

Really a result of three things I'll, just kind of tick through them. So one is.

Keon: So one is, embedded within the financial income, we also have what we call general agency commission fees and also PC income, which is our perpetual care income from our trust. So on the pre-need funeral side, on the insurance side, we receive commissions. We're seeing that growth. You know, if you remember, in the summer of 2023, we announced an exclusive arrangement with National Guardian Life and Procoa, and we started implementing that in different regions. Our western and central regions are fully implemented, and we're looking to finalize the eastern region. So we did see some of that come to fruition in 23, and we'll see more of that.

In.

Embedded within financial income we also have.

What we call General Agency Commission fees.

Also PC income, which is our perpetual care income from our trust.

So on the on the pre need funeral side on the insurance side, we receive commissions.

Seeing that growth.

Remember over the summer of 2023, we announced an exclusive arrangement with National Guardian life from her co op and we started implementing that in different regions, our western and central regions. How are are fully implemented and were looking to finalize the eastern region.

So we did see some of that come to fruition in 'twenty, three and we will see more of that come through in 'twenty four.

On the on another topic related you are what we call a general Agency Commission fees, which is the fees related to selling insurance policies.

We did have a change in recognition policy in 'twenty three.

It's an outdated policy, we've had for probably 15 20 years.

Thats.

Since selling.

These policies was such a small part of our business, we would just defer.

The recognition of those fees and those commissions are 100% for over 12 months period, we changed that recognition policy as a result of us signing.

Signing this.

This exclusive agreement in summer 2023, and now our policies and 80%, 20% recognition. So 20% will differ in 80% will recognize so that adjustment is also reflected in there for 2023, and then all the perpetual care income side.

Our our trust funds just in general have generated.

From the fixed income side have generated a considerable amount of income and also from the dividend payers. So that income flows through our income statement. So we saw some growth there as well as we continue to rotate into income paying securities.

Yeah.

And I guess my question is just to follow up on that is that typically a trend we can expect for in 2024.

Okay.

I mean understanding we will understand that you can't predict your income from the trust that's fine, but yes, I mean, there are other things embedded in that number that are pretty much a little more consistent.

And so I'll talk about the PC income side and I'll pass it over to Carlos when it comes to the pre need funeral strategy side.

What to expect in 2024.

On the perpetual care income, but we do continue to we do have line of sight on what dividends look like for securities that we own in our portfolio and also from the dividend payers.

So we do expect with a slight rotation in our portfolio that we will continue to grow our perpetual care income. So you will see slight growth on the perpetual care income side.

With that I'll pass it to Carlos on the Preneed funeral. Thank you Liam on the funeral side as you know for the most part Gary just never had a very specific focus to drive be arranged funeral sales to insurance, even though we did sell them individually based on each <unk> managing partner of deciding to sell some through some local or national based partnerships.

After we partner with <unk> and the National Guardian Life Insurance company.

We created a whole very holistic plan is just one insurance companies reporting them back encouraged for this.

This paper and with because it relates to our ability to then display sales through all of these and then through the different funeral homes across India.

The states, where we operate and so the problem we have the schedule of integration that we have led to a significant improvement. In addition to the 80% recognition from what Ken just mission, but it is just the beginning because our scheduled started really in September for integrating.

The west being the first region from Gary it's been integrated into this new program.

December had some of the central is starting to roll in and then really finalizing in Q1 of these year with East region. So it will be on until the second quarter of this year. When we will have full integration of all of our businesses within the <unk>.

The partnership so I highly respect we will be able to continue to grow on a year over year basis from our general agent Commission are reflected on financial income was <unk>.

For years to come until we catch up to a point where year over year comparison will be more.

More on the <unk>.

<unk>.

Single digits, but in the meantime, we will be in my opinion, probably somewhere around 10% to 15% year over year.

Great.

Thank you Carlos Thank you Keith.

Thanks Liam.

Our next question is coming from George Kelly with Ralph.

Alan.

Hey, everybody thanks for taking my questions.

So first on accounting question, Ken just.

Maybe to follow up on the prior question about.

The change in accounting recognition and financial income.

Our financial revenue this quarter I'm, just wondering if you could quantify it sounds like you change practices and maybe there was kind of a lump sum amount that was.

That hit <unk>, So could you quantify that.

Yeah, so for a go forward basis.

Let's call It January one 2024.

We will we will be working off of an 80% recognition and 20% deferral and that's just based off of kind of historical rates that we've used that we've seen in our data when it comes to cancellation of those policies. So that 20% is what we're going to go with in terms of the deferral.

On a.

Look back basis within our R. R.

Financial income there is a let's call it a catch up when it comes to the 'twenty three period of about $1 million that is added in that period.

Okay. Okay. That's helpful. As a result of the policy change.

Understood. Thank you and then second question for Carlos.

You mentioned in response to one of the earlier questions just about pricing and how it took a while and finally settled on.

Formula in November that worked just curious if you could give more detail.

What exactly that means what what changed in November and then second part of that question is just curious what kind of pricing you are anticipating.

In fiscal year 'twenty four.

Baked into your guidance is it fair to say that.

It's kind of a low to mid single digit pricing bump across if you were to just look at like a blended average across your businesses in fiscal year 2004.

Yes, absolutely happy to address that George So on your FERC on your first question. What we noticed is that a data driven approach to pricing brings more attention to our managing partners. So what we are doing is creating a framework where it shows.

Market share trends.

For a few years for the for each business then we have the pricing over the last three years to see what pricing impact has been increased or not over the last three years out as much competitive pricing as we can and that information is available. So we can get that up and then have a normal market share also.

As a percentage of the market and then we have a normal seat down.

<unk> financial debt, including EBITDA margins and things of that nature to come to conclusion was that based on the data become quite evident to you know to.

The site right.

So those conversations that the director of support.

Regional partners and our <unk> here at the user Sports center are having are bringing significant awareness and understanding of how our pricing matters and how we cannot absorb increases coming from inflation or merchandize closer or whatever it is from from.

Our vendors and others and so it is making a significant impact and nothing other than awareness through a very specific pricing review process.

However, we do not lead the final decision to the MP because it is very sensitive right. We do not want to price ourselves out of the market and so we listen to what they say how they're thinking about their business. How what is the value proposition, which is something all of them are working on and defining what it is that there's a few of them make.

Is it different than others from a value perception perspective, and it is making a significant impact. So that's on your on your number one question number two I.

I do believe that for 2024, we will be right in the middle.

Of a single digits for year over year increase on our average revenue per contract.

Maybe a little bit higher on the cremation side, because we have a very specific approach to cremation, maybe between 7% to 8% on the commission side and the approach the formation is very simple when.

When you think about our burial makes information makes up carriage, we have about 70% cremation over that 70% information 69, almost 70% too is the reclamation the reclamation being the lowest average per contract that we have and so our focus is going to be on that.

Reclamation.

<unk> and see how many families can we convert to what we call cremation offerings. We have created a very specific strategy to educate families with the literature and offerings that include reclamation with a survey reclamation without a pool visitation or IV or merchandising.

Current approaches customized by business through the support of the managing partner and we believe this will lead to a.

Significant increase on.

Conversion ratio between cremation with something sort of service.

And so we're very excited about that this has started officially in the month of January and we believe we will see the benefits of that as we reported in Q1.

Helpful. Thank you very much.

Thank you George.

And this concludes today's question and answer session I'll now turn the floor back to Carlos Casado for any additional or closing remarks.

Thank you everybody for attending the call today, we're super excited about the future of carriage.

Our ability to now manage pricing power, our continuous improvement program, a problem on customer experience and being able to gain market share and better pricing from our perceived value from families is very very exciting our brand new purpose statement as the driver and the three supporting pillars on there the purpose statement he drives that.

Focus and a way to continue to grow over the next years and provide shareholder value. We're very excited also about our focus on continued to pay down our debt and really deliver on a promise we made to our high performance grade profile restoration plan to deliver on the leverage ratio that is ideal for carriage.

In closing I would like to say something regarding Mel Payne.

Mel retirements marks the culmination of over 33 years of exceptional leadership since founding carriage services, a journey categorized by Bishop Murray foresight, a steadfast commitment to invest in our hartsville dedication to these noble profession.

On their mills guidance. The company has become one of the industry leaders setting high performance standards and fostering a culture of honesty integrity and quality in all we do this.

This transition to retirement signifies not in <unk>, but the onset of a new chapter for milk to explore.

The legacy left behind is a testament to our career dedicated to excellence inspiring those who followed to continue building on this foundation.

<unk> steps into the next chapter the hope is for it to be filled with joy peace and fulfillment, reflecting the reach lead the serve rewards of a remarkable career with that we thank you and we're happy to report our Q1 results as we continued to grow in 2024.

Thank you.

Today's webcast. We thank you for your participation you may now disconnect your lines at this time.

Yes.

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Okay.

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