Q2 2024 Carriage Services Inc Earnings Call

Good day and thank you for standing by. Welcome to the Carriage Services second quarter 2024 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 Metzger, President. Please go ahead, sir.

Operator: 2nd quarter, 2024 earnings conference call. Please be advised that today's conference is being recorded.

Steve Metzger: I would now like to hand the conference over to your speaker today, Steve Metzger, President. Please go ahead, sir. Good morning, everyone, and thank you for joining us to discuss our 2nd quarter results. In addition to myself, on the call this morning for management, our Carlos Quezada, Chief Executive Officer and Vice Chairman of the Board of Directors, and Kathy Shanley, Chief Accounting Officer.

Speaker Change: Good morning everyone, and thank you for joining us to discuss our second quarter results. In addition to myself, on the call this morning for management are Carlos Quezada, Chief Executive Officer and Vice Chairman of the Board of Directors, and Kathy Shanley, Chief Accounting Officer.

Steve Metzger: On the Carriage Services website, you can find our earnings press release, which was issued yesterday after the market closed. 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.

Speaker Change: On the Carriage Services website, you can find our earnings press release, which was issued yesterday after the market closed.

Speaker Change: 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.

Steve Metzger: Today's call will begin with formal remarks from Carlos and Kathy, and will be followed by a question-and-answer period. 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. Forward-looking statements inherently involve risks and uncertainties and only reflect our views as of today. These risks and uncertainties include, but are not limited to, factors identified in our earnings press release as well as in our SEC filings, all of which can be found on our website.

Speaker Change: Today's call will begin with formal remarks from Carlos and Kathy, and will be followed by a question and answer period.

Speaker Change: 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.

Carlos Quezada: Forward-looking statements inherently involve risks and uncertainties, and only reflect our views as of today. These risks and uncertainties include, but are not limited to, factors identified in our earnings press 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 Carlos.

Steve Metzger: Thank you all for joining us this morning, and now I'd like to turn the call over to Carlos.

Carlos Quezada: Thank you, Steve, and thank you all for joining our second quarter earnings call. We're excited to share our progress in executing our five-year strategic objectives, which delivered another outstanding financial performance this quarter. But before we do, I want to express my heartfelt gratitude to every carriage employee for their continuous commitment to excellence and never settling for less. Your dedication makes a real difference for the families we serve in our company. We sincerely appreciate your support and commitment to our shared goals.

Mel Payne: Thank you, Steve, and thank you all for joining our second quarter earnings call. We're excited to share our progress in executing our five-year strategic objective. On today's call, I will share some of our key financial metrics and provide an update on our most relevant initiatives. Cathy will focus on overhead, cash flow, and our leverage ratio, a significant increase of 4.6 million, or 4.8 percent. This revenue decrease is driven by the expected slight decline in volume resulting from the pull-forward effect we have discussed in prior calls.

Mel Payne: However, we were able to make up a bit over $2 million in revenue through our increased average revenue per contract, which has delivered an increase in total funeral feel EBITDA of $1.8 million, or 8.4%, and 340 basis points in total funeral fee EBITDA margin to 39.5% compared to 36.1% last year. For total cemetery fill EBITDA, we finished at $17.1 million, an increase of $4.2 million, or 32.6%, and a total cemetery field EBITDA margin of 49.1%. We delivered great success, demonstrated by our adjusted consolidated EBITDA margin of 31.9%. With plenty of opportunities yet to materialize, we're excited about where we are on our journey, and with that, I will hand it over to Kathy.

Carlos Quezada: Thank you, Steve, and thank you all for joining our second quarter earnings call. We're excited to share our progress in executing our five-year strategic objectives.

Carlos Quezada: which delivered another outstanding financial performance this quarter.

Carlos Quezada: But before we do, I want to express my heartfelt gratitude to every Carriage employee for their continuous commitment to excellence and never settling for less.

Carlos Quezada: Your dedication makes a real difference for the families we serve and our company. We sincerely appreciate your support and commitment to our shared goals.

Carlos Quezada: I want to thank Kathy Shelley, our superstar Chief Accounting Officer, for participating in this call as a search for a new CFL continues. On today's call, I will share some of our key financial metrics and provide an update on our most relevant initiatives. Kathy will focus on overhead cash flow in our leverage ratio. Now on to our financial results. For the second quarter, our total revenue was 102.3 million, a significant increase of 4.6 million or 4.8%. This quarter marks another remarkable milestone in carriage history. As it is the second time, we have surpassed the 100 million mark in a single quarter.

Speaker Change: I want to thank Kathy Shanley, our Superstar Chief Accounting Officer, for participating in this call as the search for a new CFO continues.

Speaker Change: For the second quarter, our total revenue was $102.3 million, a significant increase of $4.6 million or 4.8%.

Speaker Change: This quarter marks another remarkable milestone in Carriage history, as it is the second time we have surpassed the 100 million mark in a single quarter, the first being the first quarter of this year.

Carlos Quezada: The first been the first quarter of this year. This deception of results were primarily driven by a phenomenal 31.1% increase in pre-need cemetery sales compared to last year and the continued execution of our funeral home pricing strategy, which boosted our funeral average revenue per contract by $212 or 4%. This financial success is a testament to our strategic planning, which has positioned us for continued growth and success, as well as the dedication of our team. As we look at each of our revenue segments, total funeral home operating revenue decreased by $5,008,000 or 90 basis points to $59.2 million.

Speaker Change: These exceptional results were primarily driven by a phenomenal 31.1% increase in prenatal cemetery sales compared to last year.

Speaker Change: and the continued execution of our Funeral Home Pricing Strategy, which boosted our funeral average revenue per contract by $212, or 4%.

Speaker Change: This financial success is a testament to our strategic planning, which has positioned us for continued growth and success.

Speaker Change: as well as the dedication of our team.

Speaker Change: As we look at each of our revenue segments, total funeral home operating revenue decreased by 508,000 or 90 basis points to 59.2 million.

Carlos Quezada: This revenue decrease is driven by the expected slide decline in volume, resulting from the poor forward effect we have discussed in prior calls. However, we are able to make up a bit over 2 million revenue through our increased average revenue per contract, which has the lever and increase in total fee and fill EBDA of 1.8 million or 8.4%. And 340 basis points in total fee and fill EBDA margin to 39.5% compared to 36.1% last year. A comparable revenue on a lower cost base demonstrates our own wavering commitment to cost control and a strong partnership with our field leaders.

Speaker Change: This revenue decrease is driven by the expected slight decline in volume resulting from the pull-forward effect we have discussed in prior calls. However,

Speaker Change: We were able to make up a bit over $2 million in revenue through our increased average revenue per contract, which has delivered an increase in total funeral fee EBITDA of $1.8 million or 8.4%.

Speaker Change: and 340 basis points in total funeral field EBITDA margin to 39.5% compared to 36.1% last year.

Speaker Change: A comparable revenue on a lower cost base demonstrates our unwavering commitment to cost control and a strong partnership with our field leaders.

Carlos Quezada: Now let's move to cemetery operating revenue. We ended the quarter at 34.8 million, an increase of 5.9 million or 20.6% compared to the same quarter last year. For total cemetery fill EBDA, we finished at 17.1 million, an increase of 4.2 million or 32.6%, and a total cemetery fill EBDA margin of 49.1%. An increase of 450 basis points compared to 44.6% last year. This is another key achievement for carriage, and we couldn't be prouder of our entire pre-need cemetery self-steams for their determination to provide day in and day out best in class performance in pre-need sales.

Carlos Quezada: For total financial revenue, we ended the second quarter at 7.1 million, an increase of 1 million or 16.9%. This growth was driven by the continued execution of our pre-need funeral self-strategy, which delivered an increase in general agent commissions and in the quarter at 1.4 million, an increase of 1 million or 251% compared to the 406,000 during the same quarter last year. Our pre-need fuel strategy continues to yield positive results, and we're excited about our future performance as we continue to build upon our self-strategy. As we move to adjusted, consolidated EBDA for the second quarter, we finished at 32.6 million, an increase of 3.9 million or 13.6%.

Speaker Change: For total financial revenue, we ended the second quarter at $7.1 million, an increase of $1.0 million or 16.9%.

Speaker Change: This growth was driven by the continued execution of our pre-need funeral cell strategy.

Speaker Change: which delivered an increase in general agent commissions ending the quarter at $1.4 million, an increase of $1,251,000 compared to $406,000 during the same quarter last year.

Speaker Change: Our pre-need fueling strategy continues to yield positive results, and we're excited about our future performance as we continue to build upon our sales strategy.

Speaker Change: As we move to Adjusted Consolidated EBITDA for the second quarter, we finish at $32.6 million, an increase of $3.9 million or 13.6%.

Carlos Quezada: The combination of a higher average revenue per contract and the continued execution of our cost management initiatives delivered great success, demonstrated by our adjusted, consolidated EBDA margin of 31.9%. An increase of 250 basis points compared to the same period last year. From a gap perspective, net income ended at 6.3 million, a decrease of 2 million compared to the previous year. This decrease was driven by non-recording expenses related to our strategic review process in our prior CFO separation agreement. When adjusting net income for these two items, we ended at 9.9 million, an increase of 1.7 million or 20.1%.

Speaker Change: The combination of a higher average revenue per contract and the continued execution of our cost management initiatives

Speaker Change: delivered great success demonstrated by our adjusted consolidated EBITDA margin of 31.9% an increase of 250 basis points compared to the same period last year

Speaker Change: From a gap perspective, net income ended at $6.3 million, a decrease of $2 million compared to the previous year.

Speaker Change: This decrease was driven by non-recurring expenses related to our strategic review process in our prior CFO separation agreement. When adjusting net income for these two items, we ended at $9.9 million, an increase of $1.7 million or 20.1%.

Carlos Quezada: Kathy will share more details on overhead later on the call. Adjusted deluded EPS in the second quarter ended at 63 cents per share, an increase of 10 cents or 18.9%. With the execution of the amendment to our credit facility, we are very well positioned to unlock additional value for shareholders due to the reduction of near-term interest.

Speaker Change: Kathy will share more details on overhead later on the call.

Kathy Shanley: Adjusted diluted EPS in the second quarter ended at 63 cents per share.

Kathy Shanley: an increase of $0.10 or 18.9%. And with the execution of the amendment to our credit facility, we are very well positioned to unlock additional value for shareholders due to the reduction of near-term interest expense.

Carlos Quezada: We are very proud of these results, and after reviewing our key operational metric trends and forecast, we're excited to share that we're increasing our guidance for 2024 to the following ranges. Our second quarter performance marks six out of the last seven quarters in which we outperform expectations, as we continue to deliver on what we have previously communicated to our shareholders. We are filled with joy and excitement that our focus on our dream main strategic objectives, discipline, capital location, purposeful growth, and relentless improvement is yielding solid and consistent results. We will remain diligent through the execution of these strategic objectives, and we will continue to find opportunities to maximize our platform and allow value for our shareholders.

Speaker Change: We are very proud of these results and after reviewing our key operational metric trends and forecast we're excited to share that we're increasing our guidance for 2024 to the following ranges 390 to 400 million in total revenue

Speaker Change: Adjusted Consolidated EBITDA of $117,000,000 to $123,000,000 and Adjusted Diluted EPS of $2.30 to $2.40

Speaker Change: Adjusted free cash flow remains at $55 to $65 million. Kathy will share more details about our revised guidance.

Kathy Shanley: Our second quarter performance marks six out of the last seven quarters in which we outperform expectations as we continue to deliver on what we have previously communicated to our shareholders.

Kathy Shanley: We are filled with joy and excitement that our focus on our three main strategic objectives, discipline capital allocation, purposeful growth, and relentless improvement, is yielding solid and consistent results.

Speaker Change: We will remain diligent through the execution of these strategic objectives.

Kathy Shanley: and we will continue to find opportunities to maximize our platform and unlock value for our shareholders. For example, through relentless improvement, we are re-engineering our approach to our supply chain strategy. The first phase of this strategy will broadly impact all merchandise options.

Carlos Quezada: For example, through relentless improvement, we are re-engineering our approach to our supply chain strategy. The first phase of this strategy will broadly impact all merchandise options, resulting in elevated service delivery for our client families and increased savings from leverage during our scale. We expect to recognize some savings this year in a full phase one impact in 2025. Faces 2 and 3 will follow, and additional savings are expected.

Kathy Shanley: Resulting in elevated service delivery for our client families and increased savings from leveraging our scale. We expect to recognize some savings this year and a full Phase 1 impact in 2025. Phases 2 and 3 will follow and additional savings are expected.

Carlos Quezada: As a quick update, we continue searching for a CFO to help drive our long-term strategic growth plan forward. While we have conducted multiple interviews, we have a very clear vision of what we need at this stage of our journey. As this critical role will be a catalyst towards value creation and investing class financial planning.

Kathy Shanley: As a quick update, we continue searching for a CFO to help drive our long-term strategic growth plan forward.

Kathy Shanley: While we have conducted multiple interviews, we have a very clear vision of what we need at this stage of our journey, as this critical role will be a catalyst towards value creation and best-in-class financial planning.

Carlos Quezada: We look forward to reporting back once we feel this key position.

Carlos Quezada: In closing, we are pleased with our second quarter performance and progress in executing our five-year strategic objectives plan.

Kathy Shanley: We look forward to reporting back once we fill this key position.

Kathy Shanley: In closing, we are pleased with our second quarter performance and progress in executing our five-year strategic objectives plan.

Kathy Shanley: We have plenty of opportunities yet to materialize; we are excited about where we are in our journey, and with that, I will hand it over to Kathy.

Kathy Shanley: With plenty of opportunities yet to materialize, we're excited about where we are in our journey, and with that, I will hand it over to Kathy.

Kathy Shanley: Thank you, Carlos. Thank you to all who are joining us on the call today. As Carlos mentioned, we increased our full-year guidance given our strong operational performance per several quarters in a row.

Kathy Shanley: Thank you, Carlos. Thank you to all who are joining us on the call today.

Kathy Shanley: As Carlos mentioned, we increased our full year guidance given our strong operational performance for several quarters in a row. I will start by providing the cash flow and overhead highlights, then talk about what we can expect for the full year.

Kathy Shanley: I will start by providing the cash flow and overhead highlights, then talk about what we can expect for the full-year. Results for the quarter and year-to-date included adjusted free cash flow of 1.7 million, which was down slightly from the prior year quarter of 3.8 million. However, we are ahead of prior year on a year-to-date basis at 22.6 million versus 20.9 million, or 1.7 million ahead. We recently amended our credit agreement, which shifted us from Busby to Sofer. We retained our credit facility capacity and will also have a more favorable fee schedule, resulting in near-term interest expense reduction.

Kathy Shanley: Results for the quarter and year-to-date included adjusted free cash flow of $1.7 million, which was down slightly from the prior year quarter of $3.8 million.

Cathy: However, we are ahead of the prior year on a year-to-date basis at $22.6 million vs. $20.9 million, or $1.7 million ahead. We retained our credit facility capacity and will also have a more favorable fee schedule resulting in near-term interest expense reduction. The new agreement will also align the bank and financial leverage ratios, resulting in a 4.58 times leverage ratio for the second quarter of 2024. This amendment demonstrates the strong partnership with our banks and their confidence in our performance and the opportunities that lie ahead for Carriage.

Kathy Shanley: However, we are ahead of prior year on a year-to-date basis at $22.6 million vs. $20.9 million or $1.7 million ahead.

Kathy Shanley: We recently amended our credit agreement, which shifted us from Bisbee to SOFR.

Kathy Shanley: We retained our credit facility capacity.

Kathy Shanley: and will also have a more favorable fee schedule, resulting in near-term interest expense reduction. The new agreement will also align the bank and financial leverage ratios, resulting in a 4.58 times leverage ratio for the second quarter of 2024.

Kathy Shanley: The new agreement will also align the bank and financial leverage ratios, resulting in a 4.58 times leverage ratio for the second quarter of 2024. This amendment demonstrates the strong partnership with our banks and their competence in our performance and the opportunities that lie ahead for Karen.

Kathy Shanley: This amendment demonstrates the strong partnership with our banks and their competence in our performance and the opportunities that lie ahead for Carriage.

Kathy Shanley: Turning to our progress this year, as it relates to capital expenditures, we continue to demonstrate our focus on disciplined capital allocation. Year-to-date, we have invested 7.1 million back into our businesses through capital expenditures. Growth CapEx was 4.4 million and maintenance CapEx was 2.7 million year-to-date. Now shifting to overhead, overhead was 20.4 million for the quarter versus 12.1 million in the prior year quarter, resulting in just over an 8 million dollar increase in overhead. The overhead variance was driven by a 1 time 5 million dollar expense related to the company's review of strategic alternatives. This is a notable GNA expense item driven by the last of the anticipated expenses relating to this review, which concluded earlier this year.

Speaker Change: Turning to our progress this year, as it relates to capital expenditures, we continue to demonstrate our focus on disciplined capital allocation. Year-to-date, we have invested $7.1 million back into our businesses through capital expenditures.

Kathy Shanley: Growth capex was $4.4 million and maintenance capex was $2.7 million year-to-date.

Kathy Shanley: Now shifting to overhead.

Kathy Shanley: Overhead was $20.4 million for the quarter versus $12.1 million in the prior year quarter, resulting in just over an $8 million increase in overhead. The overhead variance was driven by a one-time $5 million expense related to the company's review of strategic alternatives.

Kathy Shanley: This is a notable GNA expense item driven by the last of the anticipated expenses relating to this review which concluded earlier this year.

Kathy Shanley: You will note that it is a non-recurring item and is reflected in our non-GAAP addbacks for adjusted EPS and adjusted consolidated EBITDA. However, for cashflow purposes, we anticipate the payment of the 5 million to be spread evenly over the course of the next 12 months. Additionally, we had 1 million relating to project Trinity costs and 800,000 for executive severant, which was also a non-GAAP addback in the period. And lastly, 400,000 of corporate short-term incentive compensation expense driven by our strong performance. Overhead as a percent of revenue was 20% for the quarter.

Kathy Shanley: You will note that it is a non-recurring item and is reflected in our non-GAAP add-backs for adjusted EPS and adjusted consolidated EBITDA. However, for cash flow purposes,

Kathy Shanley: We anticipate the payment of the $5 million to be spread evenly over the course of the next 12 months. Additionally, we had $1 million relating to Project Trinity costs.

Kathy Shanley: and $800,000 for Executive Severance, which was also a non-GAAP add-back in the period. And lastly, $400,000 of corporate short-term incentive compensation expense, driven by our strong performance.

Kathy Shanley: However, excluding strategic review costs and executive severance overhead, as a percent of revenue was 14.3 versus 12.4 in the prior year quarter.

Kathy Shanley: Overhead as a percent of revenue was 20% for the quarter. However, excluding strategic review costs and executive severance, overhead as a percent of revenue was 14.3 versus 12.4 in the prior year quarter.

Kathy Shanley: Now let's shift to what we can expect for the full year. Adjusted free cashflow for the full year will remain in a range of 55 million to 65 million. Although we have increased revenue guidance as we grow our business organically, the growth is projected to be primarily driven by cemetery pre-need sales, which are collected over time. We are expecting capital expenditures to land about 18 million for the year, 9 million for growth capex and 9 million for maintenance capex, which is slightly lower than our initial expectation. For overhead, as we continue to execute on our strategic objectives, we expect to experience slightly elevated overhead costs driven by Project Trinity.

Kathy Shanley: Now let's shift to what we can expect for the full year. Adjusted free cash flow for the full year will remain in the range of $55 million to $65 million.

Kathy Shanley: Although we have increased revenue guidance as we grow our business organically, the growth is projected to be primarily driven by cemetery pre-need sales.

Kathy Shanley: which are collected over time. We are expecting capital expenditures to land about 18 million for the year, 9 million for growth capex and 9 million for maintenance capex.

Kathy Shanley: which is slightly lower than our initial expectation. For overhead, as we continue to execute on our strategic objectives,

Kathy Shanley: We expect to experience slightly elevated overhead costs driven by Project Trinity. However, in the long term, as previously communicated, we anticipate overhead efficiencies after implementation is complete and after completion of other internal initiatives.

Kathy Shanley: However, in the long term, as previously communicated, we anticipate overhead efficiencies after implementation is complete and after completion of other internal initiatives. We are targeting a leverage ratio of 4.5 times to 4.75 times for year end. And as I mentioned earlier, we are expecting to experience a reduction in interest expense of 400,000 to 600,000 for the rest of the year as a result of a more favorable fee schedule provided by the new credit facility amendment.

Kathy Shanley: We are targeting a leverage ratio of 4.5 times to 4.75 times for year-end.

Kathy Shanley: And as I mentioned earlier, we are expecting to experience a reduction in interest expense of $400,000 to $600,000 for the rest of the year as a result of a more favorable fee schedule provided by the new credit facility amendment.

Kathy Shanley: That concludes my prepared remarks, and I will turn it back over to the operator to open for questions.

Speaker Change: That concludes my prepared remarks and I will turn it back over to the operator to open for questions.

Operator: Thank you.

Operator: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We'll pause for just a moment to allow everyone an opportunity to signal.

Operator: We will now conduct a question and answer session. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We will pause for just a moment to allow everyone an opportunity to signal.

Speaker Change: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad.

Speaker Change: If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment.

Kathy Shanley: Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal.

Liam Burke: We'll take our first question from Alex Paris with Barrington Research. Your line is now open. Please go ahead. Thank you, and good morning, everybody.

Speaker Change: We'll take our first question from Alex Paris with Barrington Research. Your line is now open. Please go ahead.

Liam Burke: Good morning, Alex. I just wanted to congratulate you on another beat and the guidance raise, which we've been anticipating. So, I have a couple of questions here that come to mind. First, on funeral services, volumes were down 4.5% in the quarter as expected, generally because of the pull forward effect of COVID, largely offset by an increase in the average revenue per contract. Not too different than what the Industry Leaders Service Corps pronounced last night: they had an unexpected decline in volume, offset partially, at least, by average revenue per contract. So, as I said, not a surprise, but particularly because you said on the last call that March and April were a little weaker than January and February.

Alexander Paris: Good morning, Oggs. I wanted to congratulate you on another beat and the guidance raise which we've been anticipating, which was terminated per contract. Resuming that we're still going to have the effect of pull forward and maybe some growth next year. Your thoughts?

Alex Paris: Thank you and good morning everybody.

Speaker Change: Good morning, Alex. I just wanted to congratulate you on another beat and the guidance raise, which we've been anticipating.

Speaker Change: So, I have a couple of questions here that come to mind. First, on funeral services,

Speaker Change: Volumes were down 4.5% in the quarter as expected generally because of the pull-forward effect of COVID.

Speaker Change: largely offset by an increase in the average revenue per contract. Not too different than what the Industry Leader Service Corp announced last night. They had an unexpected decline in volume, offset partially at least by

Carlos Quezada: How should we think about funeral volumes in the second half? I'm resuming that we're still going to have the effect of pull forward and maybe some growth next year. Your thoughts?

Speaker Change: How should we think about funeral volumes in the second half?

Speaker Change: presuming that we're still going to have the effect of pull forward and maybe some growth next year. Your thoughts?

Carlos Quezada: Absolutely. Alex, as we have shared in past calls, we still feel pretty strong about the trends. We believe third quarter and fourth quarter will continue to show us light decrease on volume from prior year, but to watch out pretty much by Q1 of 2025, the decrease will be slight. We should be able to continue to make up a big chunk of that volume loss through revenue increase through self-average. So, we feel pretty confident based on our current trends that we should be able to have a previous and third quarter and fourth quarter related to volume decrease.

Speaker Change: Absolutely, Alex. As we have shared in past calls, we still feel pretty strong about the trends.

Speaker Change: We believe third quarter and fourth quarter will continue to show a slight decrease in volume from prior year.

Speaker Change: But to wash out pretty much by Q1 of 2025, the decrease will be slight. We should be able to continue to make up a big chunk of that volume loss through revenue increase through sales average.

Speaker Change: And so we feel pretty pretty confident based on our current trends that we should be able to have a you know Pretty decent third quarter and fourth quarter related to to volume decrease

Carlos Quezada: Gotcha. How did July go at this point, or set it down the way? What was the trend during the monthly trend during the quarter in terms of funeral volumes? Was it worsening, was it lessening, and then the first month of the quarter?

Speaker Change: Gotcha. How did July go at this point? Or said it another way, what was the monthly trend during the quarter in terms of funeral volumes? Was it worsening? Was it lessening? And then the first month of this quarter?

Carlos Quezada: No. Slightly above last year on volume for July. Gotcha. So, as you can see, Alex from July alone, we feel pretty encouraged that, well, we will still stack the light decrease overall for the third quarter? We do see the balance of the year starting to level up from a comparable perspective on funeral volume. So, in keeping with that trend, that maybe the fourth quarter volume decline would be less than the third quarter volume decline. Is that reasonable?

Speaker Change: slightly above last year on volume for July.

Carlos Quezada: So, as you can see, Alex, from July alone, we feel pretty encouraged that while we'll still expect a slight decrease overall for the third quarter, we do see the balance of the year starting to level off from a comfortable perspective on funeral home volume.

Speaker Change: So as you can see, Alex, from July alone, we feel pretty encouraged that while we'll still expect a slight decrease overall for the third quarter, we do see the balance of the year starting to level up from a comfortable perspective on funeral home budget.

Alex Paris: So in keeping with that trend that maybe the fourth quarter volume decline would be less than the third quarter volume decline.

Carlos Quezada: Is that reasonable? That's our expectation.

Carlos Quezada: That's right. Yes.

Liam Burke: Gotcha. Okay. And then specifically with regard to the interest rate on the variable debt, what was it in the quarter versus the year-ago quarter? Specifically to our current facility? Yes. I think you gave it last quarter. A hundred years lower. In Q1, you had said it was 8.9% versus 7.9% a year ago. I'm wondering those same numbers on a second quarter basis. Only a hundred basis points difference between second quarter of 2023 and second quarter of 2024. Okay, so a similar increase, or was it a different increase? A very slight increase. And it's not coming just to put some point of clarification.

Carlos Quezada: Gotcha. Okay. And then.

Alex Paris: Is that reasonable? That's our expectation, yes.

Alex Paris: gotcha okay and then

Speaker Change: Specifically, with regard to the interest rate on the variable debt, what was it in the quarter versus the year-ago quarter?

Carlos Quezada: specifically to our

Speaker Change: ...specifically to our credit facility.

Carlos Quezada: I think you gave it last quarter.

Speaker Change: Yes.

Speaker Change: Are you having a yearly year or...

Speaker Change: Put it to order right here.

Speaker Change: In Q1, you had said it was 8.9% versus 7.9% a year ago. I'm wondering those same numbers on a second quarter basis.

Carlos Quezada: Only a 100 basis point difference is expected between the second quarter of 2023 and the second quarter of 2020.

Speaker Change: Only 100 basis point difference between second quarter of 2023 and second quarter of 2024.

Carlos Quezada: Okay, so a similar situation with a similar increase. Exactly.

Speaker Change: Okay, so it's similar.

Speaker Change: with a similar increase.

Speaker Change: Similar increase, very slight increase. And it's not coming, Alex, just to put some point of clarification, it's not coming from the rate itself, it's because we have decreased the size of our usage of the facility comparison to last year.

Liam Burke: It's not coming from the rate itself. It's because we have decreased the size of our usage of the facility compared to last year. Exactly, so interest expense was lower because you had less revolver debt outstanding, less variable rate debt outstanding. I think 154 million at the end of the quarter versus 189 million last year because you paid down that there. That is correct.

Carlos Quezada: So interest expense was lower because you had less revolver debt outstanding and less variable rate debt outstanding. I think $154 million at the end of the quarter versus $189 million last year because you paid down the bet there. That is correct. Okay, great. And then last and related question regarding the credit agreement. I think Kathy just mentioned that we would have $400,000 to $600,000 less in interest expense over Q3 and Q4.

Alex Paris: Exactly. So interest expense was lower because you had less revolver debt outstanding, less variable rate debt outstanding. I think 154 million at the end of the quarter versus 189 million last year because you paid down debt there.

Liam Burke: Okay, great.

Liam Burke: And then last and related question regarding the credit agreement. I think Kathy just mentioned that we would have four to $600,000 less in interest expense over Q3 and Q4. I think you extended the term. What other color can you give us on the amendment to the credit agreement? I have to be sure what a color on that. We achieved basically five things from our amendment to the credit facility. Number one was the allowance of up to 20% of EBDA adjustments that resulted in aligning our financial and bank leverage ratios calculations. Number two is extending the term of the facility through 2029.

Speaker Change: That is correct.

Speaker Change: I think Kathy just mentioned that we would have $400,000 to $600,000 less in interest expense over Q3 and Q4.

Speaker Change: I think you extended the term. What other color can you give us on the amendment to the credit agreement?

Speaker Change: Happy to share a lot of color on that. You know, we achieved basically five things from our amendment to the current facility. Number one was the allowance of up to 20% of EBITDA adjustments that resulted in aligning our financial and bank leverage ratios calculations.

Carlos Quezada: Number three was a decrease of the rates by pretty much about 5.8 on tiers of about 4.2 times, which we expect will be riding over the next probably year and a half. That will result in savings in short-term interest expense. Also allows for M&A flexibility with a raise to the cap. As you remember, 4 was 4.25. Now it's 4.5. So we have that flexibility moving forward. And it really rates the high level of confidence that the bank's passing carriage. So we're pretty excited about where we are with our pretty facility amendments. So very positive result from that.

Speaker Change: Number two is extending the term of the facility through 2029.

Speaker Change: Number three was a decrease of the rates by pretty much about five-eighths on tiers above 4.2 times, which we expect will be riding over the next probably year and a half. That will result in savings in short-term interest expense.

Carlos Quezada: Also allows for M&A flexibility with a raise to the cap. As you remember, it was 4.25; now it's 4.5. So we have that flexibility moving forward. And it really reiterates the high level of confidence that the banks have in Carriage. So we're pretty excited about where we are with our priority facility amendments, so very positive results.

Speaker Change: Also allows for M&A flexibility with a raise to the cap. As you remember, it was 4.25. Now it's 4.5, so we have that flexibility moving forward.

Speaker Change: And it really reiterates the high level of confidence that the banks have in Carriage. And so we're pretty excited about where we are with our priority facility amendments. So a very positive result from that.

Liam Burke: Great. I appreciate those answers to my questions.

Alexander Paris: Great. I appreciate those answers to my questions. I'll get back in the queue. That's all I have for now.

Liam Burke: I'll get back in the queue.

Liam Burke: That's all I have for now.

Speaker Change: Great. I appreciate those answers to my questions. I'll get back in the queue. That's all I have for now.

John Franzreb: We'll move to our next question from Liam Burke with B. Riley. Your line is now open. Please go ahead. Thank you.

Operator: We'll move to our next question from Liam Burke with B. Reilly. Your line is now open, please go ahead.

Speaker Change: We'll move to our next question from Liam Burke with B. Reilly. Your line is now open. Please go ahead.

Liam Burke: Thank you. Good morning, Carlos. Good morning, Liam, very high vis-a-vis even when in the past when they were, you know, mid 40s, and you posted a high 40s number here.

Carlos Quezada: Good morning, Carlos. Good morning, Liam. Carlos, the cremation margins were very high. Vis-a-vis even when the past where they were mid-40s. And you posted a high-40s number here.

Liam Burke: Thank you. Good morning, Carlos.

Carlos Quezada: Good morning, Liam.

Speaker Change: Carlos, the cremation margins were...

Speaker Change: Very high vis-a-vis even when the past where they were you know mid-40s and you posted a high 40s number here.

Speaker Change: Understanding the quarter-to-quarter, these margins bounce around, but what created that significant leap?

Carlos Quezada: We have a launch strategy for our cremation families, and basically it has two fronts. One is an educational component to show all options to all families that are choosing cremation. This is related to, let’s call them packages, but it is really a walk through or was truly possible in cremation. So as somebody walks in with a direct cremation idea, they may walk out with a reclamation with service, reclamation with increased merchandise, reclamation with a live celebration, or some sort of gathering. And that, of course, is increasing our sales average contract on the cremation side. Our goal is to decrease the direct cremation impact from last year between three to five percent.

Carlos Quezada: Well, we have a launch strategy for our cremation, you know, families. And basically, it has two fronts.

Speaker Change: Well, we have a launch strategy for our cremation, you know, families and basically it has two fronts. One is an educational component to show all options to all families that are choosing cremation.

Carlos Quezada: One is an educational component to show all the options to all families that are choosing cremation. This is related to, let's call them packages, but it is really a walkthrough of what's truly possible in cremation. So as somebody walks in with a direct cremation idea, they may walk out with a direct cremation with service, direct cremation with, you know, increased merchandise, direct cremation with a life celebration, or some sort of gathering. And that, of course, is increasing our sales average per contract on the cremation side.

Carlos Quezada: This is related to, let's call them packages, but it is really a walkthrough of what's truly possible information.

Speaker Change: So as somebody walks in with a direct cremation idea, they may walk out with a direct cremation with service, direct cremation with increased merchandise, direct cremation with a life celebration, or some sort of gathering. And that, of course, is increasing our sales average per contract on the cremation side. Our goal is to decrease the direct cremation impact from last year between 3% to 5%, so we'll have less direct cremation and more direct cremation with service.

Carlos Quezada: Our goal is to decrease the direct cremation impact from last year between 3% to 5%, so we'll have less direct cremation and more direct cremation with service as an ultimate goal. That has been a strategy rolled out pretty much throughout Q1 and really executed formally in Q2 across the field home portfolio, and it's making some significant impact. That's the biggest piece. The second part to that has been a strategic review of pricing on all of our, you know, merchandise and services products.

Carlos Quezada: So we'll have less reclamation and more reclamation with service, so not too much goal.

Carlos Quezada: That has been a strategy rolled out pretty much throughout Q1 and really executed formally in Q2 across the field home portfolio and is making some significant impact. That's the biggest piece.

Jonathan Bacall: and Jonathan Bacall. That has been a strategy rolled out pretty much throughout Q1 and really executed formally in Q2 across the field home portfolio and is making some significant impact.

Carlos Quezada: The second part to that, it has been a strategic review to pricing on all of our merchandise and services product. That doesn't mean that we do increase across the company. It only means that we sit down with the managing partner with a lot of data analytics, so they can decide based on the trends on a five-year basis, what is the best option to make up for pricing, including market share gains, including pricing of the competition, pricing for the businesses on the different categories for five years. And as a CEO of those trends, they make the most of the kind of decision that is more convenient for their business.

Jonathan Bacall: That's the biggest piece. The second part to that, it has been a strategic review to pricing on all of our, you know, merchandise and services products. That doesn't mean that we do...

Carlos Quezada: That doesn't mean that we do... The big increase across the company; it only means that we sit down with the managing partner and do a lot of data analysis so they can decide based on the trends on a five-year basis what is the best option to make up for pricing, including market share gains, including pricing of the competition, and pricing for the businesses in the different categories for five years. And as they see all those trends, they make the most educated decision that is more convenient for their business.

Speaker Change: Big increase across the company. It only means that we sit down with the managing partner with a lot of data analytics So they can decide based on the trends on a five-year basis. What is the best option to to make up for for pricing?

Speaker Change: including market share gains, including pricing of the competition, pricing for the businesses on the different categories for five years. And as they see all those trends, they make the most educated decision that is more convenient for their business.

Carlos Quezada: On that note, did you see growth in both traditional burial and cremation contracts or just cremation? on self-sabotage. No, just on the actual contracts.

Carlos Quezada: On that note, did you see growth in both traditional burial and cremation contracts, or just cremation? On sales average? Yep. No, just on the actual contract. No, so burial rate is down a little bit, right? For the quarter, 1.8 percent. However, the cremation rate is at 1.4 percent. And so we've to continue to see that, you know, 1 to 2 percent trend that goes up and down to the quarters on an annual basis, typically stays between 1 to 1.2 percent.

Speaker Change: On that note, did you see growth in both traditional burial and cremation contracts or just cremation?

Speaker Change: on self-average.

Speaker Change: No, just on the actual contracts.

Carlos Quezada: Well, no, so the barrel rate is down a little bit, right? For the quarter, 1.8%, and, however, the cremation rate is at 1.4%. And so we do continue to see that, you know, 1 to 2% trend that goes up and down through the quarters on an annual basis and typically stays between 1 to 1.2%. But the strategy we're using to make up the loss of a higher average on the barrel side to a higher average on the cremation side is actually working really well, as seen by our Q1 and Q2 performance.

Speaker Change: Well, no, so burial rate is down a little bit, right? For the quarter, 1.8% and, however, cremation rate is at 1.4%. And so we do continue to see that, you know, 1 to 2% trend that goes up and down to the quarters on an annual basis typically stays between 1 to 1.2%.

Carlos Quezada: But the strategy we're using to make up the loss of a higher average on the burial side to a higher average on the cremation side is actually working really well, as seen by our Q1 and Q2 performance. Great.

Carlos Quezada: but the strategy we're using to make up the loss of a higher average on the barrel side to a higher average on the cremation side is actually working really well as seen by our Q1 and Q2 performance.

Carlos Quezada: And then lastly, on cemetery margins, they were high 40s, which is pretty darn good. Again, quarter, quarter basis, they do vary, but why were they so significantly higher? Or can you keep building it, I guess, a better question? That's a great question. I wouldn't say they're sustainable over time. They're going to be on the high side between our first quarter and second quarter. But we didn't have a spectacular second quarter. And when you think about that, we did about $9 million for large sales. We had Qingming, which in the specific case of rolling hills, are a reorganization, you know, driven pre-need property marketing out of California, had a spectacular, you know, Qingming season.

Speaker Change: Great. And then lastly, on cemetery margins, they were high 40s, which is pretty darn good. Again, quarter-quarter bases, they do vary, but...

Speaker Change: why were they so significantly higher or can you keep doing it I guess the better way better question

Carlos Quezada: That's a great question, but I wouldn't say they're sustainable over time. They're going to be on the high side between our first quarter and second quarter, but we did have a spectacular second quarter, and when you think about that, we did about $9 million in large sales. We had Ching Ming, which in the specific case of Rolling Hills, a really nice Asian-driven painting property marketing out of California, had a spectacular Ching Ming season, and that really helped us drive these margins and this performance for the quarter

Carlos Quezada: That's a great question. I wouldn't say they're sustainable over time. They're going to be on the high side.

Speaker Change: between our first quarter and second quarter.

Jonathan Bacall: but we did have a spectacular second quarter and when you think about that we did about nine million dollars for large sales

Speaker Change: We have Ching Ming, which in the specific case of Ronnie Hills

Carlos Quezada: P&E Property Marketing out of California.

Carlos Quezada: And that really helped us drive, you know, these margins and these performance for the quarter.

Carlos Quezada: had a spectacular, you know, Ching Ming season.

Carlos Quezada: We do believe that because where we are in our sales painting cemetery journey or painting sales journey, we still have a lot of upside because we have not been close to maximizing our platform and our communities and the opportunities that we have out there. And Shane Pudenz, our senior vice president of sales and marketing, has done, with the support of marketing, an incredible job generating the leads that are giving these results. So while I don't expect the margins to stay close to the 50% number, I do expect them to stay pretty high and for this continuation of performance probably over the next two to three years.

Carlos Quezada: We do believe that because where we are on our sales pre-need cemetery journey or pre-need sales journey, we still have a lot of upside. Because we have not been close to maximizing our platform and our communities and the opportunities that we have out there. And Shane Pudens, our senior vice president of sales and marketing, has done, with the support of marketing, an incredible job generating the leads that are, you know, giving these results. So, while I respect the margins to stay close to the 50% number, I do respect for them to keep pretty high. And for this continuation of performance, probably over the next, you know, too.

Speaker Change: And that really helped us drive, you know, these margins and this performance for the quarter. We do believe that because where we are in our sales...

Carlos Quezada: upside, because we have not been close to maximize our platform and our communities and the opportunities that we have out there. And Shane Pudenz, our Senior Vice President of Sales and Marketing, has done, with the support of marketing, incredible job generating the leads.

Speaker Change: that are you know giving these results. So while I don't expect the margins to stay you know close to the 50% number, I do expect to for them to keep pretty high and for this continuation of performance probably over the next you know two to three years at least.

Carlos Quezada: Thank you, Carlos. Thank you so much, Liam.

Carlos Quezada: You bet. Thank you so much, Liam.

Carlos Quezada: Thank you, Carlos.

John Franzreb: We'll move to our next question from John Franzreb with Sidoti and Company. Please go ahead. Good morning. Thanks for taking the questions.

Operator: We'll move to our next question from John Franzreb with Sidoti and Company. Please go ahead.

Operator: You bet. Thank you so much, Neil.

Speaker Change: We'll move to our next question from John Franzrup with Sidoti & Company. Please go ahead.

John Franzreb: I have to start with your response to the previous question about pre-nation. I'm curious; how much of that is the acceptance of other services? And how much of that is it's maybe because commission has a lower ASP that it's easier to raise prices in regards to increasing the value of those contracts? That's a great question. I appreciate that, John. So we just started to track, when I said just about, you know, 20,500 months at the beginning of the quarter week, to really understand, you know, we have this switch from our current ERP system called CFAS to Trinity.

John Franzreb: Good morning, everyone, and thanks for taking the questions.

John Franzreb: I'd like to start with your response to the previous question about cremation. I'm curious, how much of that is the acceptance of...

John Franzreb: other services, and how much of that is maybe because Commission has a lower ASP, that it's easier to raise prices in regards to increasing the value of those contracts?

John Franzreb: That's a great question. I appreciate that, John.

Speaker Change: That's a great question. I appreciate that John. So we just started to track, when I say just about, you know, two and a half months, at the beginning of the quarter really.

Carlos Quezada: So we just started to track, when I say just about, you know, two and a half months, at the beginning of the quarter, really, to really understand, you know, we have this switch from our current ERP system called CFAS to Trinity. CFAS doesn't really allow us to do much with that analytics, but we have some. So we were able to program the system to give us some data on this. Let's call them, for the purpose of this call, packages.

Carlos Quezada: to really understand, you know, we have this switch from our current ERP system called CFS to Trinity.

Carlos Quezada: So CFAS doesn't really allow us to do much information on that analytics, but we have some. So we were able to program the system to give us some data on this, this called them for purpose of this call packages. So we can know how many families that come in with AVL, you know, getting a direct information, they actually being upgraded to a information with something.

Carlos Quezada: So CFAS doesn't really allow us to do much information on data analytics, but we have some. So we were able to program the system to give us some data on this, this column for purpose of this call, packages.

Carlos Quezada: So we can know how many families that come in with the idea of, you know, getting a direct cremation are actually upgraded to a cremation with something. Not enough data to actually feel comfortable sharing on this call yet, but I will feel more comfortable as we close on the third quarter, and I'll have the second quarter and third quarter to compare, as it is a quite new strategy for a cremation consumer. We'll give you more updates on that, but it is very positive. It's a significant take-up rate That will be my expectation as per the average that we're seeing in cremation.

Carlos Quezada: So we can know how many families that come in with the idea of, you know, getting a direct cremation, they're actually being upgraded to a cremation with something.

Carlos Quezada: Not enough data to actually me feel comfortable sharing on this call yet, but I will feel more comfortable as we close on the third quarter. And I'll have second quarter and third quarter to compare as it is a quite new strategy for the information consumer. So we'll give it more update on that, but it is very positive. It's a significant take-up rate, as that will be my expectation as per the average that we're seeing on the information side.

Carlos Quezada: Not enough data to actually me feel comfortable sharing on this call yet, but I will feel more comfortable as we close on the third quarter, and I'll have second quarter and third quarter to compare as it is a quite new strategy for information consumer.

Carlos Quezada: We'll give you more update on that but it is very positive. It's a significant take-up rate as that will be my expectation as per the average that we're seeing on the information side.

Carlos Quezada: It makes sense, Carlos. Thank you. And in regards to your supply chain procurement review, you said phase one is done or near done, and you expect results by the fourth quarter, if I heard properly. What kind of magnitude do you expect in the phase one completion to impact the piano? Absolutely. So we did the pre-work to the Phase One, right? Pre-work meaning all the analytics around merchandise is specifically more around earns and caskets and other areas to discover what was the size of the opportunity. So that work was completed, and now we learn to the strategy on the first phase, which will be related to specifically diamonds upgrades on diamonds.

Carlos Quezada: and Supply Chain and Procurement Review. You said that phase 1 is done or near done, and you expect

Carlos Quezada: It makes sense, Carlos. Thank you.

Speaker Change: And in regards to your...

Speaker Change: and I'm the Director of Supply Chain Procurement Review.

Speaker Change: You said phase one is done or near done and you expect Results by the fourth quarter for her properly. What kind of magnitude you expect in the phase one completion to impact the piano

Carlos Quezada: Absolutely. So we did the pre-work to phase one, right? Pre-work meaning all the analytics around our merchandise, specifically more around urns and caskets, and other areas, too, to discover what the size of the opportunity was. So that work was completed, and now we have launched the strategy for the first phase, which will be related to specifically diamonds, upgrades on diamonds. That's the creation of diamonds from permitted remains, and the urn strategy and vendor strategy.

Carlos Quezada: What that means is vendor agreements. It means the selection of core lines. It means creating the specific alignment of caskets so our managing partners can choose to partner with those vendors at better prices than we ever have before because we are negotiating agreements with those vendors and getting some additional benefits for carriage. On that front, just wave one, or phase one of that supply chain strategy, from now to the end of the year, and we're in the execution of phase one currently, we do expect to get somewhere between $450,000 to $700,000 in savings

Carlos Quezada: Absolutely.

Carlos Quezada: So we did the pre-work to the phase one, right? Pre-work meaning all the analytics around our merchandise, specifically more around urns and caskets.

Carlos Quezada: [inaudible]

Carlos Quezada: That's the creation of diamonds from permitted remains and earned strategy and vendor strategy. What that means is vendor agreements; it means the selection of core lines; it means creating the specific alignment of caskets so our managing partners can choose to partner with those vendors at a better pricing than we ever had before, because we aren't negotiating agreements with those vendors, and get some additional benefits for carriage. On that from just way one or phase one of that supply chain strategy, from now to the end of the year, and we're an execution of phase one currently, we do expect to get somewhere between $450,000 to $700,000 in savings.

Carlos Quezada: [inaudible]

Carlos Quezada: It means vendor agreements, it means the selection of core lines, it means creating the specific alignment of caskets so our managing partners can choose to partner with those vendors at a better pricing than we ever had before because we are negotiating agreements with those vendors.

Carlos Quezada: and get some additional benefit for carriage.

Carlos Quezada: On that front, just wave one or phase one of that supply chain strategy, from now to the end of the year, and we're in execution of phase one currently, we do expect to get somewhere between $450,000 to $700,000 in savings.

Carlos Quezada: You know, it benefits from this strategy by the end of the fourth quarter, and then we do expect for just phase one somewhere around $2 million in savings throughout 2025. Now, as we go into phase two and phase three, there are other elements on the merchandise, both indirect and direct procurement, that will land somewhere around, potentially, an additional $5 million over 2025 and 2020.

Carlos Quezada: I know it benefits from this strategy by the end of the fourth quarter, and then we do expect for just phase one somewhere around $2 million in savings throughout 2025. Now as we go into phase two and phase three, there's other elements on the merchant that's both indirect and direct procurement that will land somewhere around potentially an additional $5 million over 2025 and 2026. Protentionally more to come on that front as we continue to get different dives into the data and the opportunity, but it is really longing for that is there for us to capture today, and that's really the approach to at least the first phase and then phase two and three to 2025.

Carlos Quezada: You know the benefits from this strategy by the end of the fourth quarter?

Carlos Quezada: And then we do expect for just phase one, somewhere around $2 million in savings.

John Franzreb: 36.

John Franzreb: That's certainly very impressive. And I guess one last question regarding the outlook and the expectations that the death rate is going to continue to work against you in the second half of the year. But if I recall correctly, last year we had a surprise September. So we start thinking about the comps on a year-to-year basis. We should still have a positive comp maybe in the September quarter and a negative comp in the December quarter. Am I thinking about that properly, or not? Well, so if you go back even to 2022, we had quite a big drop on September 2022, and we were not expecting a second big drop on September specifically of 2023, and we have them both.

John Franzreb: That's certainly very impressive. And I guess one last question regarding the outlook: the expectations that the death rate is going to continue to work against you in the second half of the year. But if I recall correctly, last year we had a surprise September. So when we start thinking about, you know, the comps on a year-to-year basis, we should still have a positive comp maybe in the September quarter and a negative comp in the December quarter. Am I thinking about that properly, or not?

Carlos Quezada: Well, so if you go back even to 2022, we had quite a big drop in September 2022, and we were not expecting a second big drop in September specifically of 2023. And we have them both.

John Franzreb: For some reason, September came lower than expected both years. I don't expect, again, especially out of the comment I made on July trends. For September to be such a big drop, I do expect that there would be at least comfortable, if not an increase to 2023. And so that's really where we stand. But when it was a surprise, 2022, and it was a surprise, 2023. So it could be a surprise, 24, but not expected. Thank you. Thank you for taking my questions, everyone. Thank you, John.

Carlos Quezada: For some reason, September came lower than expected both years. I don't expect, again, especially out of the comment I made on July trends, for September to be such a big drop. I do expect, you know, that there'd be at least comparable, if not an increase to 2023. And so that's really where we stand.

Operator: As a reminder, if you would like to ask a question, you may join the Q&L by pressing star one on your telephone keypad.

Speaker Change: As a reminder, if you would like to ask a question you may join the queue now by pressing star one on your telephone keypad will move to our next question from George Kelly with Roth Capital Partners. Your line is now open.

George Kelly: We'll move to our next question from George Kelly with Roth Capital Partners.

Carlos Quezada: But it was a surprise 22. And it was a surprise 23. So it could be a surprise 24.

George Kelly: Your line is now open. Hey, everyone. Thanks for taking my questions. Hi, George.

Operator: We'll move to our next question from George Kelly with Roth Capital Partners. Your line is now open. Hey, everyone.

John Franzreb: But it is not expected to be surprised. Okay. All right. Fair enough. Thank you. Thank you for taking my questions, everyone.

Speaker Change: Hey, everyone. Thanks for taking my questions.

Paul: Paul and George.

Carlos Quezada: Morning, Carlos. Maybe if we could start as kind of a follow-up to that previous answer that you gave on the merchandise, the different phases of opportunity that you see over the next two or three years. I guess the question is, are there other areas beyond merchandise sourcing? I don't know if it's potentially labor or other significant areas that you're also targeting, or does merchandise kind of represent the biggest by far area of efficiency as you look out over the next two to three years? So merchandise is really the biggest bucket, but there are other opportunities we're looking at as of today.

George Kelly: Hey, everyone. Thanks for taking my question. Good morning, Carlos. Maybe as kind of a follow-up to that previous answer that you gave on the merchandise, the different phases of opportunity that you see over the next two or three years.

Carlos Quezada: Good morning Carlos.

George Kelly: Maybe if we could start as kind of a follow up to that.

Speaker Change: Previous answer that you gave.

Carlos Quezada: On the merchandise the different phases.

George Kelly: Opportunity that you see over the next two or three years.

Speaker Change: I guess the question is are there other areas beyond.

Speaker Change: Merchandise sourcing I don't know if its potentially labor or.

Speaker Change: Other significant areas that you are also targeting or this merchandise kind of represent.

Carlos Quezada: The biggest by far area of efficiency as you look out over the next call. It two to three years.

Carlos Quezada: So merchandise is really the biggest bucket, but they're all opportunities. We're looking at as of today I'll give you. An example, we already moved from an internal audit team to an external audit team that is going to help us on that.

Carlos Quezada: I'll give an example. We already move from an internal added team to an external added team that is going to help us conduct when we're not big savings, but these are top of strategies we're implementing.

Speaker Change: Big savings, but the startup of the strategies. We're implementing additionally, we are actually going to a fully centralized accounts payable through our new system Trinity effectively January one a 2025, which should result in some additional savings.

Carlos Quezada: Additionally, we are actually going to fully centralize accounts payable to our new system, Trinity, effectively a January 1st of 2025, which would result in some additional savings. We are leveraging our scale on all technology, telephony, mobile phones, that type of thing. So it's a very, very holistic approach. We have not been able to put a specific number to every single category, but we're close to. We have enough data; we just don't want to commit to it just yet. We need to do a little bit more work on cleaning up that data to make sure that it is in a reasonable and achievable.

Carlos Quezada: We are.

Speaker Change: Leveraging our scale on all technology telephony.

Speaker Change: <unk> phones.

Speaker Change: That type of thing. So it is very very holistic approach, we have not been able to.

Carlos Quezada: with a specific number for every single category. And if we're close to, we have enough data; we just don't want to commit to it just yet. We need to do a little bit more work on cleaning up that data to make sure that it is, you know, reasonable and achievable. But there is significant opportunity that will come out of this supply chain procurement strategy as we move into the rest of the year and then over the next two years.

Speaker Change: Put a specific number to every single category on whether we close to we have enough data. We just don't want to commit to it just yet we need to do a little bit more work on cleaning up the data to make sure that it is.

Carlos Quezada: In a reasonable and achievable, but there is there is significant opportunity on that will come out of this supply chain procurement strategy as we move into the rest of the year and then over the next few years through 2026.

Carlos Quezada: But there's significant opportunity on that will come out of this supply chain procurement strategy as we move into the rest of the year, and then over the next few years through the 20th. 26.

Carlos Quezada: So is it fair to say then that getting back to a consistent 40 plus, maybe call it a low 40% funeral EBITDA margin, is a very realistic situation as you look out over the next two years?

Carlos Quezada: So is it fair to say them that getting back to a consistent 40 plus per maybe call it low 40% funeral EBITDA margin is a very realistic situation, just as you look out over the next two years? Well, so really great question. As you know, we're close to that right now, and but that's been a result of a couple of things catching up to the inflation cost of specifically on utilities, you know, labor, transportation that we have experience of the last couple of years, and we're still doing some catching up on that front. So that gets us closer to that goal.

Speaker Change: So is it fair to say then that.

Carlos Quezada: Getting back to a consistent 40, plus maybe call. It low 40% funeral EBITDA margin is a very realistic.

Carlos Quezada:

Speaker Change: Situation and just as you look out over the next two years.

Carlos Quezada: Well, so, a really great question. As you know, we're close to that right now, right? But that's been the result of a couple of things. Catching up to inflation costs, specifically on utilities, labor, and transportation, that we have experienced over the last couple of years. And we're still doing some catching up on that front, so that gets us closer to that goal. Additionally, from the revenue side, the sales average per contract made a significant impact, making up for that slight loss of volume.

Speaker Change: Well so.

Carlos Quezada: Really great question as you know, we're close to that right now right and but that's been a result of a couple of things catching up to the inflation cost, though specifically on utilities labor transportation that we have experienced over the last couple of years and we're still doing some catching up on that front, so that get us closer to that goal. Additionally.

Carlos Quezada: Additionally, from the revenue side, the sales average per contract making a significant impact, making up for that slight loss of volume. But where we encourage is once we get the volume back on track, right? But once we wash off of this before the fact, and we're able to be on a comfortable basis, and we continue to deliver the strategies on supply chain that I just mentioned, continue to work on our pricing strategy, and on the recommendation, you know, improvement for upgrading that consumer. We do feel pretty strong that the revenue will continue to grow, and that the margin should be expanding to that 40%.

Carlos Quezada: From the revenue side, the cell salvage per contract, making a significant impact they are making up for it for that loss of volume, but we're really encouraged is once we get the volume back on track right. Whilst we watch all of this pull forward effect and we're able to be on a comparable basis and we continue to deliver the strategies on supply chain that I just made.

Carlos Quezada: But where we're really encouraged is once we get the volume back on track, right? Once we get over this pull-forward effect and we're able to be on a comfortable basis, and we continue to deliver the strategies for the supply chain that I just mentioned, continue to work on our pricing strategy, and on the direct commission, you know, improvement for upgrading that consumer, we do feel pretty strong that revenue will continue to grow and that the margin should be expanding to that 40%. But that will probably be 2025. I don't expect to get us to 40, right, you know, through maybe Q4, but there's not an expectation.

Carlos Quezada: <unk> continued to work on our pricing strategy and on the reclamation.

Carlos Quezada: Improvement for upgrading that consumer we do feel pretty strong there's revenue will continue to grow and that the margins should be expanding to that 40%, but that'll be probably 2025, I don't expect to get us to 40 right through maybe Q4, but does not that expectation just yet.

Carlos Quezada: But that will be probably not 2025. I don't expect to get us to 40 right, you know, through maybe Q4, but there's not no expectation just yet.

George Kelly: Okay, that's helpful.

Speaker Change: Okay. That's helpful. And then two two last quick ones for me.

Carlos Quezada: Okay, that's helpful. And then I have two last quick ones for me. Are there still more non-core assets that are under consideration for sale? And then, second question: Thinking about next year, your commentary about volumes was helpful, just, you know, about your anticipation for volumes to turn positive, maybe this year, at the end of the year, but most likely early next year. And I guess the question is just on pricing. Are you anticipating, you know, continuing to take pricing, or do you think you're getting kind of close to hitting a ceiling there and it'll go back to kind of flattish or just slightly positive for next year?

George Kelly: And then two less quick ones for me. Are there still more non-core assets that are under consideration for sale? And then second question is on pricing back to your funeral business. This is about next year. Your commentary about volumes was helpful just, you know, about your anticipation for volumes to turn positive. Maybe this year at the end of the year, but most likely early next year. And I guess the question is just on pricing. Are you anticipating, you know, continuing to take pricing, or do you think you're getting kind of close to hitting a ceiling there, and it'll go back to kind of flatish or just slightly positive for next year?

Speaker Change: Are there still more noncore assets.

Speaker Change: Assets that are under consideration for for sale and then second question.

Carlos Quezada:

Speaker Change: Yes on pricing back to your funeral.

Carlos Quezada: Business.

Carlos Quezada: Thinking about next year your commentary about volumes was helpful. Just.

Carlos Quezada: But your anticipation for volumes to turn positive maybe this year at the end of the year, but most likely early next year and I guess the question is just on pricing are you anticipating.

Speaker Change: <unk> to take pricing or do you think youre getting kind of close to two.

Carlos Quezada: Paying a ceiling there and it will go back to kind of flattish or slightly positive for next year.

Carlos Quezada: I feel confident that we will continue our pricing strategy throughout Q3 and Q4. We have 40 meetings through our regional partners and the Director of Operations with our managing partners to review where we are. You know, we can't suddenly just go 10% increase across the board. So it's been slowly but surely because we want to balance the price increase with volume, right? We don't want to have this volume and lose, you know, our ability to compete. And so we're kind of like trying to see where the demand means that perfect pricing to continue to increase volume and gain market share, if possible, which is what we've been doing.

Carlos Quezada: I feel confident that we will continue our pricing strategy throughout Q3 and Q4. We have 40 meetings with our regional partners and the directors of operations with our managing partners to review where we are.

Speaker Change: I feel confident that we will continue our pricing strategy throughout Q3, and Q4, we have quarterly meetings through our regional partners and the directors of operations with our managing partners to review, where we are that we can suddenly just go 10% increase across the board. So he has been slowly but surely because we.

Carlos Quezada: You know, we can't suddenly just go 10% increase across the board, so it's been slowly but surely because we want to balance the price increase with volume, right? We don't want to lose volume and lose, you know, our ability to compete. And so we're kind of like trying to see where the demand meets that perfect...

Carlos Quezada: Want to balance the price increase with volume right, we don't want others volume in lithium.

Carlos Quezada: Our ability to compete.

Carlos Quezada: So we're kind of like trying to see where the demand means that the perfect pricing to continue to increase volume and gain market share.

Carlos Quezada: As possible, which is what we've been doing.

Carlos Quezada: But I do expect for those meetings to continue Q3, Q4 with some improvements, maybe not as big as we have done so far on pricing, but continue to be up, you know, maybe 100 to 200 basis points, you know, by Q4.

Carlos Quezada: But I do expect for those meetings to continue Q3 Q4 with some <unk>.

Carlos Quezada: <unk>, maybe not as big as we have done so far on pricing, but continue to be up maybe 100 to 200 basis points.

Carlos Quezada: Q4.

Steve Metzger: And as it relates to your question on the debatitors, you know, I'm going to ask Steve to answer the question. Yeah, good morning, George. So for the rest of the chairs, we've already closed a couple of deals earlier this year for a little more than 11 million. and Proceeds. We're looking at a couple of other opportunities. You know, the good news for us is, while they are non-core assets, they're still profitable businesses. So, you know, really kind of making sure that the premium we get is significant enough to where it makes sense for us, but we have several opportunities we're looking at.

Carlos Quezada: And as it relates to your question on the.

Carlos Quezada: Divestitures I'm going to ask Steve to answer other questions. Yes. Good morning, George So for divestitures, we've already closed a couple of deals earlier this year for a little more than $11 million in proceeds now we're looking at a couple of other opportunities. The good news for US is while they are non core assets, but they are still profitable businesses.

George Kelly: Good morning, George.

George Kelly: So really kind of making sure that the premium we get is significant enough to where it makes sense for us, but we have several opportunities we're looking at secondary category.

Steve Metzger: Secondary category where we've got some momentum is excess real estate. We like that because we're not losing any EBITDA, but we do have some excess land that is not in our plans for the future. So, as we look ahead to the end of the year, we think there's a good opportunity potentially to get, you know, between 20 and 30 million dollars with relatively low EBITDA lost on that.

George Kelly: We've got some momentum as excess real estate.

George Kelly: We like that because we're not losing any EBITDA, but we do have some excess land that is not in our plans for future development and some.

George Kelly: Prime locations. So as we look ahead to the end of the year, we think theres, a good opportunity potentially to get between $20 million to $30 million with <unk>.

George Kelly: Relatively low EBITDA loss on that so we'll have more to report next quarter, but it's progressing well so Florida.

Carlos Quezada: So, what more do report next quarter, but it's progressing well so far.

Carlos Quezada: Wow, that's significant. Okay, appreciate all the color. Have a good one. George, just to add a little bit more on that one, our plan is, as we continue to work on those investors, and we do feel we'll be able to execute on some before the end of the year. It is important to highlight that we have paid down $16 million compared to a year ago from the peak of our credit facility, and that's very significant. That's about, you know, 0.79 turns in just about a year right on our plan with the neighboring. And as we find this type of opportunities from an investor front, we'll continue to accelerate that commitment to paying down our debt.

George Kelly: Well that's significant.

George Kelly: Okay I appreciate all the color I have a good one.

George Kelly: Okay.

Carlos Quezada: George, just to add a little bit more on that one, our plan is, as we continue to work on those investigators, and we do feel we'll be able to execute on some before the end of the year, it is important to highlight that we have paid down $60 million compared to a year ago from the peak of our credit facility, and that's very significant. That's about, you know,.79 turns in just about a year, right on our plan with Denevring.

George Kelly: And George just to add a little bit more on that one our plan is as we continue to work on those divestitures and we do feel we will be able to execute on some before the end of the year. It is important to highlight that we have paid down $16 million compared to a year ago from the peak of our credit facility and Thats.

Carlos Quezada: Significant that's about <unk> 79 turns in just about a year right on our plan with Delevering and.

Carlos Quezada: And as we find this type of opportunity from a divestiture front, we'll continue to accelerate that commitment to paying down our debt. And as you have seen, we'll see some savings from our credit facility amendment and potentially some expected savings as, you know, the Fed does execute in September. Very excited about our journey, about our financial position, about the execution of our plan as of right now.

Carlos Quezada: As we find these type of opportunities from a divestiture fronts will continue to accelerate that a commitment to paying down our debt.

Carlos Quezada: And you have seen, we'll see some savings from our credit facility amendment, and potentially some expected savings as, you know, the Fed does execute on September, potentially. So, very excited about our journey, about our financial position, about the execution of our plan as of right now.

Carlos Quezada: And us.

Carlos Quezada: You have seen we will see some savings from our.

Carlos Quezada: Credit facility amendment and potentially some expected savings.

Carlos Quezada: The fed execute on September potentially so very excited about our journey of about our financial position about the execution of our plan.

Carlos Quezada: As of right now.

Carlos Quezada: It appears there are no further questions at this time. I'd like to turn the conference back over for any additional or closing remarks. Thank you, everybody, for joining our call. The future carriage is full of opportunity and excitement, and we are filled with great enthusiasm. Our ongoing strategic initiatives and progress over the past year places us in a strong position for continued innovation and financial growth. Our focus extends beyond immediate successes. We are laying the foundation for enduring values that benefits our shareholders for the long term. Thank you for your interest and support, and we look forward to reporting a progress on Mexico.

Operator: It appears there are no further questions at this time. I'd like to turn the conference back over to you for any additional or closing remarks.

Speaker Change: It appears there are no further questions at this time I'd like to turn the conference back over for any additional or closing remarks.

Mel Payne: Thank you, everybody, for joining us on this call. The future at Carriage is full of opportunity and excitement, and we are filled with great enthusiasm. Our ongoing strategic initiatives and progress over the past year place us in a strong position for continued innovation and financial growth. Our focus extends beyond immediate success.

Gary: Thank you everybody for joining our call the future Gary achieved full of opportunity and excitement and we're feel with great enthusiasm.

Mel Payne: Our ongoing strategic initiatives and progress over the past year places us in a strong position for continued innovation and financial growth our focus extends beyond immediate successes we.

Mel Payne: We are laying the foundation for enduring value that benefits our shareholders for the long term. Thank you for your interest and support and we look forward to reporting our progress on our next call.

Operator: This concludes today's call. Thank you again for your participation. You may now disconnect and have a great day. Thank you.

Mel Payne: This concludes today's call. Thank you again for your participation you may now disconnect and have a great day.

Mel Payne: [music].

Mel Payne: Yes.

Mel Payne: [music].

Mel Payne: Yes.

Mel Payne: [music].

Mel Payne: Yeah.