Q2 2024 Service Corp International Earnings Call

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Operator: Good day and welcome to the SEI Second Quarter 2024 earnings conference call. All participants will be in less and only mode. Sure to need assistance, please signal a conference specialist by pressing the start key followed by here.

Operator: Good day, and welcome to the SCI Second Quarter 2024 Earnings Conference Call. All participants will be in lesson only mode.

Good day and welcome to the STI second quarter 'twenty 'twenty four earnings conference call, all participants will be in listen only mode.

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

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press TARDEN1 on your telephone keypad. To withdraw your questions, please press TARDEN2. Please note this event is being recorded.

Operator: To withdraw your questions, please press start, then choose. Please note this event is being recorded. I would now like to turn the conference over to SDI Management. Please go ahead.

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

Ali O'Connor: Good morning. This is Ali O'Connor, ABP of Investor Relations and Financial Reporting. Welcome to our second quarter Orange call. We will have prepared remarks about the quarter from Tom and Eric in just a moment.

Allie O'Connor: Good morning, this is Allie O'Connor, ABP of Investor Relations and Financial Reporting. Welcome to our second quarter earnings call. We will have prepared remarks about the quarter from Tom and Eric in just a moment, but before that, let me quickly go over the Safe Harbor language. Any comments made by our management team that state our plans, beliefs, expectations, or projections for the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include, but are not limited to, those factors identified in our earnings release and in our filings with the SEC that are available on our website.

Ali O'Connor: But before that, let me quickly go over to save Harbor language. Any comments made by our management teams that state our plans, the least expectations, or projections for the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from this contemplated and such statements. These risks and uncertainties tend to, but are not limited to, those factors identified in our earnings release and in our filing with the SEC that are available on our website.

Ali O'Connor: Today, we might also discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the tables at the end of our orange release and on our website.

Allie O'Connor: Today, we may also discuss certain non-GAAP financial measures. A reconciliation of these measures can be found in the tables at the end of our earnings release and on our website. With that out of the way, I will now turn it over to Tom Ryan, Chairman and CEO. Thank you, Allie.

Tom Ryan: With that out of the way, I will now turn it over to Tom Ryan, Chairman and CEO. Thanks, Ali. Hello, everyone, and thank you for joining us on the call today. This morning, I'm going to begin my remarks with some high-level color on our business performance for the quarter and provide some greater detail around our funeral and cemetery results. I will then close with some thoughts regarding our earnings expectations for the rest of 2024. For the second quarter, we generated adjusted earnings per share of 79 cents, which compared to 83 cents in the prior year.

Tom Ryan: Hello, everyone, and thank you for joining us on the call today. This morning, I'm going to begin my remarks with some high-level color on our business performance for the year and provide some greater detail around our funeral and cemetery business. I will then close with some thoughts regarding our earnings expectations for the rest of 2021. For the second quarter, we generated adjusted earnings per share of 79 cents, which compared to 83 cents in the prior year.

Tom Ryan: The decline of 4 cents from the prior year was attributable to lower funeral profits from a larger than anticipated decline in services performed. This decline was slightly offset by an increase in cemetery profits and better than expected results from recent acquisitions. Below the line, the favorable impact of a lower share count was offset by the negative impact of higher interest expense and a higher tax rate. Now, let's take a deeper look into the funeral results. Total comparable funeral revenues declined by $5 million, or about 1%, over the prior year.

Tom Ryan: The decline of 4 cents from the prior year was attributable to lower funeral profits from a larger than anticipated decline in services performed. This decline was slightly offset by an increase in cemetery profits in better-than-expected results from recent acquisitions. Below the line, the favorable impact of a lower share count was offset by the negative impact of higher interest expense and the higher tax rate.

Tom Ryan: Now let's take a deeper look into the funeral results for the quarter. Total comparable funeral revenues declined $5 million, or about 1% over the prior year quarter. Comparable core funeral revenues accounted for this shortfall, as it declined almost $7 million. Core funeral volume declined 2.7% versus our expectation of flat to slightly higher volume. General volumes tracked our expectations during the first 4 months of the year, and we saw an unexpected decline in May and June. We believe the COVID pull forward effect combined with lower excess deaths across our markets contributed to the decline in services for the quarter.

Speaker Change: If we look into the funeral results for the quarter.

Speaker Change: Total comparable funeral revenues declined $5 million or about 1% over the prior year quarter.

Tom Ryan: Comparable core funeral revenues accounted for this shortfall, as it declined to almost 7 million dollars. Core funeral volume declined 2.7% versus our expectation of flat to slightly higher volume. Funeral volumes tracked our expectations during the first four months of the year, and we saw an unexpected decline in May and June.

Speaker Change: Comparable core funeral revenues accounted for this shortfall is it declined almost $7 million.

Speaker Change: Core funeral volume declined two 7% versus our expectation of flat to slightly higher volume.

Speaker Change: Funeral volumes tracked our expectations during the first four months of the year and we saw an unexpected decline in May and June.

Tom Ryan: We believe the COVID pull forward effect combined with lower excess deaths across our market. SCI Direct non-funeral home pre-need sales revenue decreased by $7 million primarily due to operational changes in our California market with respect to the timing of merchandise, which we discussed with you on the first quarter call. This was offset by a $7 million increase in core General Agency commissions and other ancillary revenues that were generated by the favorable impact of higher insurance funded sales production and higher General Agency revenues, reflecting the timing of incentive compensation accrual adjustments over the prior year quarter.

Speaker Change: We believe the Covid pull forward effect combined with lower excess deaths across our markets contributed to the decline in services for the quarter.

Tom Ryan: However, we are seeing a more positive funeral volume trend in the month of July, with comparable case volume trending positively versus the prior year and our modeling expectations. Our core average revenue per service grew over the prior year quarter by 1.3 percent after absorbing the negative effects of a 60 basis point increase in the cremation next. SCI Direct, non-funeral home, pre-need sales revenue decreased by $7 million, primarily due to operational changes in our California market with respect to the timing of merchandise deliveries, which we discussed with you on the first quarter call. This was offset by a $7 million increase in core general agency commissions and other Encelerati revenues that were generated by the favorable impact from higher insurance-funded sales production and higher general agency commission rates.

Tom Ryan: From a profit perspective, funeral gross profit declined by $16 million, while the gross profit percentage declined from about 21 percent to about 18 percent. This decrease is primarily due to the decline in revenue and an increase in annual incentive compensation costs, reflecting the timing of incentive compensation accrual adjustments over the prior year quarter. Pre-need funeral sales production increased by $7 million, or about 2 percent, over the quarter of 2023, led by a $10 million, or 4 percent, increase in core pre-need funeral sales production.

Speaker Change: By a $10 million or 4% increase in core preneed funeral sales production.

Tom Ryan: Now shifting to symmetry. Comparable symmetry revenue increased $12 million, or about 3 percent, compared to the prior year second quarter. The increase was due to a $7 million increase in core revenue and a $5 million increase in other revenue. The $7 million core revenue increase was primarily the result of a $10 million or 11 percent increase in recognized pre-need merchandise and service revenue. Robust increases in contract averages being delivered out of the backlog, favorably impacted by cumulative trust earnings, were responsible for the impressive year-over-year increase. The other revenue increase was predominantly the result of a $4 million increase in endowment care fund income.

Speaker Change: Now shifting to cemetery.

Speaker Change: Comparable cemetery revenue increased $12 million or about 3% compared to the prior year's second quarter.

Tom Ryan: The increase was due to a $7 million increase in core revenue and a $5 million increase in other revenues. The $7 million core revenue increase, primarily the result of a $10 million or 11% increase. Recognized Pre-need Merchandise and Service were responsible for the impressive year-over-year Comparable Pruning Cemetery Sales Production decreased by $7 million or 2%, which was less than our flat to slightly up expectation.

Speaker Change: The increase was due to a $7 million increase in core revenue and a $5 million increase in other revenue.

Speaker Change: The $7 million core revenue increase was primarily the result of a $10 million or 11% increase in recognized preneed merchandise and service revenue.

Speaker Change: Robust increases in contract averages being delivered out of the backlog favorably impacted by cumulative trust earnings.

Speaker Change: Were responsible for the impressive year over year increase.

Speaker Change: The other revenue increase was predominantly the result of a $4 million increase in endowment care fund income.

Tom Ryan: Comparable pre-need symmetry sales production decreased by $7 million or 2 percent, which was less than our flat to slightly up expectation. While we saw a $4 million increase in core sales production, we had an offset of an $11 million decline related to large sales. We believe this is purely timing as we continue to see long-term strength in our premium symmetry inventory and sales production. On a positive note, year-to-date pre-need symmetry sales production is up $17 million, or about 3 percent.

Tom Ryan: We had an offset of an $11 million decline related to large sales. We believe this is purely timing, as we continue to see long-term strength in our premium cemetery inventory and sales production. On a positive note, year-to-date pre-need cemetery sales production is up 17 million dollars, or about 3%. Cemetery gross profits in the quarter increased by $5 million, and the gross profit percentage increased by 30 basis points.

Tom Ryan: Ltd. Dimitri Gross Profits in the Quarter increased by $5 million, and the gross profit percentage increased by 30 basis points, generating an operating margin percentage of 33%. The profit from higher revenues was slightly offset by higher maintenance costs and an increase in annual incentive compensation costs, again reflecting the timing of incentive accrual adjustment as compared to the prior year quarter.

Tom Ryan: Generating an Operating Margin Percentage of 32% Slightly offset by higher maintenance costs and an increase in annual incentive compensation costs, again reflecting the timing of the incentive accrual adjustment as compared to the prior year. Now let's shift to a discussion about our Outlook for 2020, for the back half of 2024, as well as compared sequentially to the first six months of 2024 and the third quarter as compared to the prior year. And therefore, we would expect the preponderance of the earnings per share growth to occur in the fourth quarter and the positive impact of our new Global Atlantic pre-need funeral insurance program. Thank you for making a difference every day.

Tom Ryan: Now let's shift to discussion about our outlook for 2024. As you saw in our earnings release, we now believe our full year results will be in the lower end of our adjusted earnings per share guidance range of $3.50 to $3.80 for 2024. For the back half of 2024, we would expect growth in revenues and margins for both the funeral and cemetery segments, resulting in impressive earnings per share growth versus the prior year six-month period, as well as compared to sequentially to the first six months of 2024. We would anticipate a more challenging funeral volume comparison in lower revenue recognized from completed cemetery construction projects in the third quarter, as compared to the prior year, and therefore we would expect the preponderance of the earnings per share growth to occur in the fourth quarter.

Speaker Change: Six month period, as well as compared to sequentially to the first six months of 2024.

Speaker Change: We would anticipate a more challenging funeral volume comparison and lower revenue recognized from completed cemetery construction projects in the third quarter as compared to the prior year and therefore would expect the preponderance of the earnings per share growth to occur in the fourth quarter.

Tom Ryan: As we think about 2025, we would expect to return to earnings per share growth towards the higher end of our historical annual guidance range of 8 to 12%. As the negative effects of comparably higher interest rates and SEI direct operational changes subside, and the positive impact of our new Global Atlantic pre-need funeral insurance agreement takes effect. Beyond that is where I truly get excited. With our vast North American network containing market leading brands and businesses, a world-class workforce, and a robust pre-need backlog, we are poised to capture incremental value for our shareholders as the demographic trends impact our industry.

Speaker Change: As we think about 2025, we would expect to return to earnings per share growth towards the higher end of our historical annual guidance range of 8% to 12% as.

Speaker Change: As the negative effects of comparably higher interest rates and Sci direct operational changes subside and the positive impact of our new Global Atlantic Preneed funeral insurance agreement takes effect.

Speaker Change: Beyond that is we're actually get excited with our vast north American network, maintaining market, leading brands and businesses.

Tom Ryan: In conclusion, I want to acknowledge and thank the entire SEI team for their daily commitment to our customers, our communities, and one another. Your dedication is the foundation of our success.

Eric Tanzberger: Thank you for making the difference every day, and with that operator, I'll now turn the call over to Eric.

Eric Tanzberger: With that operator, I'll now turn the call over to Eric. So with that important thing mentioned, today I'm going to first discuss our cash flow results before moving to capital investments during the quarter. I'll end by providing some commentary on our outlook, similar to what Tom just did, and I'll also talk a little bit about our financial performance, which was primarily aided by strong cash receipts from not only premium installment sales but our underlying funeral and cemetery at-needs operations.

Eric Tanzberger: Thank you, Tom.

Eric Tanzberger: Good morning, everybody on the call. I guess I'll start off the same way you just ended your comments, Tom, and really just start by thanking all of our 25,000 associates here at SEI for the dedication to the communities, the client families, especially those client families during the greatest times of need. Again, your inspiring commitment and exceptional efforts do not go unnoticed, and most importantly, we say thank you for everything that you do for our company. So, with that important thing mentioned, today I'm going to first discuss our cashflow results before moving to capital investments during the quarter.

Eric Tanzberger: I'll end with providing some commentary on our outlook, similar to what Tom just did, and I'll also talk a little bit about our financial. Position. Our cash flow remained resilient in the quarter, despite lower than anticipated funeral services performed that we've mentioned this morning and yesterday, and was primarily aided by strong cash receipts from not only pre-need installment sales, but our underlying funeral and cemetery operations. So specifically for the second quarter, we reported adjusted operating cash flow of 220 million, which is an increase of 62 million over the prior year. Let's talk about that. The primary contributor of that increase was expected in the form of lower cash tax payments of about $60 million.

Eric Tanzberger: So specifically for the second quarter, we reported an adjusted operating cash flow of $220 million, which is an increase of $62 million over the prior year. And as a reminder, this tax accounting method change will result in the deferral of cash taxes in future years when these installment payments for the cemetery property are received. We've talked about that now for several quarters, but as we look forward to 2025 and perhaps beyond 2025, we expect cash taxes to revert toward a more normalized trend that you'd expect from us, with an anticipated increase of $150 million in cash tax payments going forward compared to 2024 levels.

Eric Tanzberger: That's due to the tax accounting method change related to the timing of recognition of cemetery property revenue for tax purposes. And as a reminder, this tax accounting method change will result in the deferral of cash taxes in the future years when these installment payments for the cemetery property are received. We've talked about that now for several quarters. But as we look forward to 2025, and perhaps beyond 2025, we expect cash taxes to revert toward a more normalized trend that you'd expect from us, with an anticipated increase of $150 million in cash tax payments going forward compared to 2024 levels.

Eric Tanzberger: So if you get outside of these cash taxes, though, in terms of cash flow, cash flow is generally flat to the prior year with net favorable working capital. And that was primarily associated with pre-need installment sales. There were more than offsetting the operating income decline that we've talked about and slightly higher cash interest payments. And while we're on the topic of cash interest, assuming the rates remain at the current levels, we continue to expect an increase in cash interest in the second half of this year of about $5 to $10 million. And that really relates to higher floating rate debt balances compared to prior year.

Eric Tanzberger: So if you get outside of these cash taxes, though, in terms of cash flow, cash flow is generally flat to the prior year with net favorable working capital. And that was primarily associated with premium installment sales that were more than offsetting the operating income decline that we talked about and slightly higher cash interest. And while we're on the topic of cash interest, assuming the rates remain at the current levels, we continue to expect an increase in cash interest in the second half of this year of about $5 to $10 million, and that really relates to higher floating rate debt balances compared to the prior year. That's really not new, but I just want to remind you.

Eric Tanzberger: That's really not new, but I just want to remind you of that.

Eric Tanzberger: So shifted now to capital investment activity during the quarter, we invested just over $300 million of capital to grow our business to return value to our shareholders. Let's look at the components. First, let's start with our maintenance capital. We invested $40 million into high returning new cemetery inventory development projects, again, to benefit future pre-need sales growth. $29 million of maintenance capital into our facilities and $18 million into digital systems and initiatives. We also invested about $9 million in growth capital towards the construction of new funeral homes and expansion of some existing funeral homes and cemeteries.

Eric Tanzberger: So shifted now to capital investment activity during the quarter, we invested just over $300 million of capital to grow our business and return value to our shareholders, plus $29 million of maintenance capital into our facility. We also invested about $9 million in growth capital towards the construction of new funeral homes and the expansion of some existing funeral homes in 17 states. From an M&A perspective, we were successful in closing three transactions. One was in Illinois, one was in Kentucky, and one was in Western Canada for a total spend of about $23 million.

Eric Tanzberger: From an M&A perspective, we're successful and closed in three transactions. One was in Illinois, one was in Kentucky, and one was in Western Canada, for a total spend of about $23 million. That brings our first half acquisition spend to about $38 million. And as kind of how I alluded to last quarter, we continue to remain very optimistic about our momentum here and investment opportunities that are expected to end the year above our targeted range of $75 to $125 million of capital invested in mergers and acquisitions. In addition to acquiring this... Services. We also spent $15 million purchase and real estate, including $8 million for expansionary cemetery land in the western United States.

Speaker Change: For a total spend of about $23 million that brings our first half acquisition spend to about $38 million and is kind of how I alluded to last quarter.

Eric Tanzberger: That brings our first half acquisition spend to about $38 million. And that's kind of how I alluded to last quarter, through 43 million of dividends and just under 130 million of share purchases. This resulted in just over 144 million shares outstanding for our company as of June 30. This consists of $185 million of cash on hand, plus just over $600 million available on our long-term bank credit facility. Cash flow continues to be our strength, and together with our solid balance sheet position, we are well positioned to continue delivering value to our shareholders. To ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: We continue to remain very optimistic about our momentum here and investment opportunities that are expected to end the year above our targeted range of $75 million to $125 million of capital invested and mergers and acquisitions. In addition to acquiring businesses. We also spent.

Speaker Change: $15 million purchase in real estate, including $8 million for Expansionary Cemetery land in the Western United States.

Eric Tanzberger: Finally, in terms of capital invested or deployed to shareholders, we returned nearly $170 million of capital to our shareholders in the court, through $43 million of dividends and just under $130 million of share purchases. So, speaking of that, year-to-date, we have purchased about 2.4 million shares at an average price of about $70. This results in just over 144 million shares outstanding for a company as of June 30.

Speaker Change: Finally in terms of capital invested.

Speaker Change: <unk> deployed to shareholders, we returned nearly $170 million of capital to our shareholders in the quarter.

Speaker Change: Through $43 million of dividends and just under $130 million of share repurchases. So speaking of that year to date. We have we have purchased about two 4 million shares at an average price of about $70. This resulted in just over 144 million shares outstanding for our company.

Speaker Change: As of June 30.

Eric Tanzberger: Now moving on to our cash flow outlook for the full year. Even with the lower than anticipated volumes, impacted our earnings during this quarter, our cash flows have proved proven resilient, as I've already mentioned, due to the continued support of cash receipts on both printing and installment sales and the underlying cash receipts from our funeral and cemetery at need businesses. Accordingly, as reflected in our press release yesterday, it is important to note that we are reiterating today our adjusted cash flow from operation guidance range of $960 million, with a midpoint of $930 million.

Eric Tanzberger: So, in closing our prepared remarks, I'd like to just do a couple more items and highlight about our solid financial position. We continue to have a favorable debt maturity profile and liquidity of just under $800 million at the end of the quarter. This consists of $185 million of cash on hand plus just over $600 million available on our long-term bank credit facility. Our leverage at the end of the quarter increased slightly to about 3.7 times. Again, that's on a net debt to EBITDA basis. And cash flow continues to be our strength. And together with our solid balance sheet position, we are well positioned to continue delivering value to our shareholders.

Eric Tanzberger: Once again, I want to express my gratitude to our entire SEIT team for their valuable contributions each and every day to the communities and the client families we're so lucky to serve.

Speaker Change: It's our entire SDI team for their invaluable contributions each and every day to the communities and the clients families. We're so lucky to serve.

Eric Tanzberger: So, with that, this concludes our prepared remarks.

Speaker Change: So with that this concludes our prepared remarks and with that operator, I'd now like to turn this call over to questions.

Operator: And with that operator, I'd now like to turn this call over to questions. We will now begin the question and inter-session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speaker phone, please pick up your handchat before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Speaker Change: We'll now begin the question and answer session.

Speaker Change: I ask a question you May press Star then one on your telephone keypad.

Joanna Gajuk: If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star then choose. The first question comes from Joanna Gajuk from Bank of America. Please, go ahead. Yeah, they're predominantly the same, Joanna. We do believe that, and again, you never know with volume; it's very difficult to predict. We did say July is a positive trend.

Speaker Change: If youre using a speakerphone, please pick up their handset before pressing the key.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: At this time, we'll pause momentarily to assemble a roster.

Speaker Change: At this time, we'll pause momentarily to assemble our roster.

Joanna Gajuk: The first question comes from Joanna Gadgett from Bank of America. Please, go ahead. So much for taking the question here. So I guess, on your comment, if I may, around next year's outlook. So sounds like you think this June weakness in the funeral was sort of, you know, temporary drop because you alluded to July, it's working better. So just to confirm, I guess first, you're reducing your guidance since you're for the Q2 results, right? And your expectations for the second half of this year aren't changed, right? Yeah, they're predominantly the same, Joanna. We do believe, and again, you never know with volume; it's very difficult to predict.

Joanna <unk>: The first question comes from Joanna <unk> from Bank of America.

Speaker Change: Please go ahead.

Speaker Change: So much for taking the question here so.

Joanna: So I guess Hum on your comment if I may a around next year outlook. So sounds like you think this June weakness in the funeral, what's sort of temporary drop because you alluded to July trucking butter, just so just to confirm I guess first you're reducing your guidance since you put a Q2.

Tom Ryan: We did say July is a positive trend, but again, you know, we've got many things we can do to execute in the back after the year and then as we get into 2025. So we'll be ready. Both, you know, delivering the revenue and managing expenses in the back after. Okay, great. And then, yeah, that leads me to the question. I was thinking about when next year comment that you just made us. So if Q2 was, you know, sort of viewed as a temporary issue, so to speak, and you expect to grow right at the higher end of a typical range.

Joanna Gajuk: But again, you know, we've got many things we can do to execute in the back half of the year and then as we get into 2025. So we'll be ready, both, you know, delivering the revenue and managing the expense. Yeah, so as you think about, you know, as I mentioned before, when you think about the 24 number, two things stand out as going away. One is that we have an unfavorable interest rate comparison as you think about 23 to 24.

Tom Ryan: So I guess, yeah, we'll give you confidence in ability to grow towards, you know, 12% I guess off of maybe, you know, some of the press 24 number. Yes, so as you think about, you know, as I mentioned before, when you think about the 24 number, two things stand out as going away. One is we have a unfavorable interest rate comparison. As you think about 23 to 24, we believe that will subside in 2025. The other thing is, Joanna, you remember in the first quarter, we talked about some operational changes. We made the SCI direct that we thought these were very favorable for the long term business, but we're going to cause some temporary pain.

Eric Tanzberger: We believe that will subside in 2025. The other thing is, Joanna, you'll remember in the first quarter we talked about some operational changes we made to SCI Direct that we thought were very favorable for the long-term business but were going to cause some temporary pain. And in the first half of the year, we had, you know, essentially $20 million of revenue that were not recorded because of changes in the way we deliver merchandise on the SCI Direct side and some changes that relate to selling away from home insurance.

Tom Ryan: And the first half of the year, we had, you know, essentially $20 million of revenue that were not recorded because of changes in the way we deliver merchandise on the SCI direct side and some changes that relate to selling away from home insurance. So those two negative effects kind of go away the back half of the year and also go away in 2025. So, out of the gate, you have two, you know, negative trends that kind of disappear. The other positive thing, and there's been an announcement: you know, we switched partners as it relates to our general agency agreement, the insurance company that funds our premium insurance.

Eric Tanzberger: So those two negative effects kind of go away in the back half of the year and also go away in 2025. So out of the gate, you have two, you know, negative trends that kind of disappear. The other positive thing, and there's been an announcement, we switched partners as it relates to our general agency agreement with the insurance company that funds our premium insurance. Great, thank you.

Tom Ryan: And with this new agreement and some of the terms that are in it, we believe we can generate higher general agency commissions. So we would anticipate the positive effects of that to lift us up in 2025. And then, having said that, you know, the core business itself, we feel again very good about. We feel like, you know, volume should stabilize in 25 from the funeral side. We feel good about our cemetery prospects as we look out into 2025. And again, I think as you see, inflation subsiding, you'll begin to see, you know, our expenses. We have a lot of people; we have a lot of great people; we need to pay them appropriately, and we have.

Tom Ryan: But I think we're seeing wage inflation subside a bit, and all the other pieces that go into it. So we're excited about 25. I think it could be a really exciting year for the company. So if I may follow up on this new contract with the Global Authentic Insurance, so you set up commissions will be higher. But when you negotiated this, did you also adjust your sort of, you know, the predetermined returns that you expect to get on this contract? This is largely kind of reflective and in the commissions being higher. Well, it's predominantly going to be in the commissions.

Tom Ryan: And then it's also in the product mix. You get real technical in some of these terms, but to give you an example, we'll have a better ability to write for our customers, you know, guaranteed insurance product. The way we had to do it under our old agreement, it was more difficult to get people underwritten and therefore give more protection to our customer, which also happens to generate a higher commission for us. And we worked really well with Global Atlantic and finding ways to onboard more people; you know, it won't get into all the technical aspects of that.

Speaker Change: So on some of these terms, but to give you. An example, we'll have a better ability to right for our customers.

Speaker Change: Guaranteed insurance product the way, we had to do it under our old agreement. It was more difficult to get people underwritten and therefore get more protection to our customer, which also happens to generate a higher commission for us and we worked really well with global Atlantic and finding ways to onboard more people.

Speaker Change: And I won't get into all the technical aspects of that so we really think we will have a higher percentage of underwritten product as you think about our customer base, which is better for them better for our commissions better for global Atlantic quite honestly. So so it's allowed us to kind of think through a better way to serve our customers.

Joanna Gajuk: So we really think we'll have a higher percentage of underwritten product as you think about our customer base, which is better for them, better for our commissions, better for Global Atlantic quite honestly. So, so it's allowed us to kind of think through a better way to serve our customers, which also should, again, if we execute correctly, generate higher commission rates. Great. Thank you. If I may, a very last one on the quarter itself, because clearly the funeral segment laid across margin there was very low. So, sounds like the revenue essentially was a surprise to you, right?

Speaker Change: Which also should again, if we execute correctly generate a higher commission rates.

Joanna Gajuk: If I may, a very last one on the quarter itself, because Chloe, the funeral segment, right, the cross margin there was very low. So it sounds like the revenue essentially was surprised to you, right? So sounds like you kind of were heading into the quarter with a different kind of cost structure, and then things surprised you in June, right? So there was sort of a so-called mismatch between cost and revenue. That's hard to think about this quarter and funeral. Thank you, back average. Hey, good morning.

Speaker Change: Great. Thank you if I may have very last one on the quarter itself, because clearly that that's piano segment made the gross margin there was very low.

Speaker Change: So it sounds like the revenue essentially what's surprising you right. So it sounds like you kind of were heading into the quarter with different kind of cost structure and then things surprise you in June right. So if there was sort of you know call. It a mismatch between the cartoon Rabbit, that's how to think about this quarter in general Thank you.

Tom Ryan: So, sounds like you kind of were heading into the quarter with a different kind of cost structure, and then things surprised you in June, right? So there was sort of, you know, called mismatch between the cost and revenue. That's how to think about this quarter, and, you know, thank you. Yeah, I think, you know, sometimes doing it, I think if you, because quarters are such short periods of time and you have adjustments to a cruel things that can happen, maybe a better way to look at funeral is step back and look at the six months. You know, for the six months period, our funeral margins were 19.9%, which are, I think, you know, about 280 basis points below last year, when you think about gross margin percentages.

Speaker Change: Yeah, I think you know, sometimes Joanna I think if you because quarters are such short periods of time and you have adjustments to accruals things that can happen, maybe a better way to look at funeral is step back and look at the six months.

Speaker Change: For the six month period, our funeral margins were 19, 9% which are.

Speaker Change: Thank you know about 280 basis points below last year, when you think about gross margin percentages.

Tom Ryan: One thing to keep in mind is that, you know, anticipated and forecasted SCI direct change, you know, we're missing about $20 million of not delivering merchandise predominantly on the SCI direct side. So if you add back 20 million in the profits associated with it, it takes that 19.9 back up to around, I think it's 20.7, 20.8. So I think your explanation of, you know, margin throughput is about 200 basis points, and, you know, 150 would explain it. We've got a little bit of, I'd say, cost-create associated with a couple of categories, but nothing material. So it's kind of where we thought it would be, not to say we can't do a better job of managing expenses; we will.

Speaker Change: One thing to keep in mind is that anticipated and forecasted Sci direct change and we're missing about $20 million of not delivering merchandise predominantly on the Sci direct side. So if you add back $20 million in the profits associated with it it takes that 19 nine backups.

Joanna Gajuk: But as I think about the funeral margins in the back half of the year, I would expect them to be higher. So we feel better about getting our arms around that. We're going to lose the negative comparison on SCI Direct, so that's going to help us. And again, you know, I feel a lot more positive about the funeral margins than I think about the back half of 2024. Thank you so much. Thank you.

Parker Snure: The next question comes from Parker's North, which Raymond James. Please go ahead. Hey, good morning. This is Parker on for John Ransom. Maybe you talked about the pre-need cemetery sales. I know you mentioned lower high in sales, but the core actually improved. That seems to be a divergence from what you guys have noted in recent quarters. So maybe just kind of pull and that's read a little bit more. Are there any common themes that you're seeing that that's driving a trend, or is that purely just kind of timing related, or someone off in certain markets?

Parker: This is Parker speaking on behalf of John Ransom. Maybe just talk about the pre-need cemetery sales. I know you mentioned lower high-end sales, but the core actually improved. That seems to be a divergence from what you guys have noted in recent quarters. So maybe just kind of pull on that thread a little bit more.

Speaker Change: In recent quarters, so maybe just kind of pull on that thread a little bit more.

Tom Ryan: Are there any common themes that you're seeing that's driving that trend? Or is it purely just kind of timing-related or some one-off in certain markets? And then, generally, how are you thinking about the lower-end consumer? Has that changed at all? And then also, maybe just remind us the percent of your pre-need cemetery sales that comes from the kind of core consumer versus that high-end consumer. Here, Parker.

Speaker Change: Are there any common themes that you're seeing that that's driving that trend or is it purely just kind of timing related or some one off in certain markets.

Tom Ryan: And then generally, how are you thinking about the lower end consumer as that has that changed at all? And then also, maybe just remind us the percent of your pre-need cemetery sales that comes from the core consumer versus that high end. Thank you, Parker.

Speaker Change: And then generally how are you thinking about the lower end consumer is that has that changed at all or and then also maybe just remind us the percent of your preneed cemetery sales that comes from that kind of core consumer versus that high end consumer.

Tom Ryan: So first of all, I think you hit the nail on the head. It is a reversal, we feel very good about the core, we saw growth in the core. And that's different.

Speaker Change: Sure Parker So first of all I think you hit the nail on the head.

Tom Ryan: So, first of all, I think you know, you hit the nail on the head. It is a reversal. We feel very good about the core. We saw growth in the core, and that's different. It's been a while since we've seen, you know, the high-end sales dip down. But, you know, as I think we've tried to explain over and over, the high-end sales are just very hard to predict when they fall. I would tell you that we were having a lot of conversations with people at the high end. And they probably didn't close at the end of June.

Speaker Change: It is a reversal we should feel very good about the core or we saw growth in the core and that's different it's been awhile. Since we've seen you know the high end sales dipped down, but you know as I think we've tried to explain over and over the high end sales are just very hard to predict when they fall I would tell you that we were having a lot of.

Tom Ryan: It's been a while since we've seen, you know, the high-end sales dip down. But you know, as I think we've tried to explain over and over, high-end sales are just very hard to predict when they fall. I would tell you that we were having a lot of conversations with people at the high end that probably didn't close at the end of June. We feel like there's still a lot of interest, and a lot of ability to execute in the back half of the year, so I wouldn't get too excited about that; we're not worried about that, we're going to continue to work hard.

Speaker Change: Issues with people at the high end it probably didn't close at the end of June.

Tom Ryan: We feel like there's still a lot of interest, a lot of ability to execute in the back after the year. So I wouldn't get to, we're not worried about that. We're going to continue to work hard. If you step back and look at the whole year, actually high-end sales are about flat. And so, so I think you got to, again, as you move out periods of time, it probably normalizes. So we feel very good about the back after the year. And I think the reminder is that from a pre-need symmetry perspective, high-end sales generate, I believe, 15 to 20%.

Speaker Change: We feel like Theres still a lot of interest a lot of ability to execute in the back half of the year. So I wouldn't get too we're not worried about that we're going to continue to work hard if you step back and look at the whole year actually high end sales are about flat and so I think you've got a again as you move out periods of time.

Tom Ryan: If you step back and look at the whole year, actually high-end sales are about flat, and so I think you've got to, again, as you move out periods of time, it probably normalizes. So we feel very good about the back half of the year, and I think the reminder is that from a pre-need cemetery perspective, high-end sales generate, I believe, 15 to 20%. Okay and then if maybe I can just do one more just kind of higher level question as you just talk about just managing the pre-need selling you know cemetery in an environment where you have maybe tougher funeral volumes which is typically a lead source for the pre-need cemetery you know selling maybe just talk about some of the tools that you have in your in your kit for kind of driving more pre-need cemeteries in an environment where you're kind of having to maybe work a little bit harder.

Speaker Change: It probably normalizes, so we feel very good about the back half of the year.

Speaker Change: And I think the reminder is that from a preneed cemetery perspective high end sales generate I believe.

Speaker Change: 15% to 20%.

Parker Snure: That's probably right. It's probably 13 to 15 in that fall part. So that's the, but again, I think that's the piece that's always going to be a little more volatile as you try to predict core to quarter. Okay.

Speaker Change: That's probably right, it's probably 13 to 15.

Speaker Change: Ballpark. So so that's the but again I think that's the piece, that's always going to be a little more volatile.

Speaker Change: As you try to predict quarter to quarter.

Speaker Change: Okay, and then if maybe I could just do one more just kind of higher level question. If you can just talk about just managing the preneed selling you know cemetery in an environment, where you have maybe tougher funeral volumes, which is typically a lead source for the preneed cemetery selling can you just talk about some of the tools that you have in your in your care.

Tom Ryan: And then maybe I can just do one more just kind of higher level question. As you just talk about dismantling the pre-need selling, you know, cemetery and environment. Where you have maybe tougher funeral volumes, which is typically a lead source for the pre-need cemetery, you know, selling. Maybe just talk about some of the tools that you have in your kit for kind of driving more pre-need cemetery in an environment where you're kind of having to maybe work a little bit harder. Yeah, I think a lot of the tools, you know, that we've talked about before, a lot more of our leads now are coming from outside the location.

Speaker Change: We're kind of driving more preneed cemetery in an environment, where you're kind of having to maybe work a little bit harder.

Tom Ryan: Yeah, I think a lot of the tools that we've talked about before; a lot more of our leads now are coming from outside the building. So from a digital perspective, when you think about seminars that we put on, when you think about, you know, digital leads that we'll generate through the website and other means, those are where we're seeing a lot more leads, Parker, and so we're executing on those very differently.

Speaker Change: Yeah, I think a lot of the tools that we've talked about before a lot more of our leads now are coming from outside of the location. So from a digital perspective. When you think about seminars that we put on when you think about digital leads that will generate through the website and other means to them.

Tom Ryan: So, from a digital perspective, when you think about seminars that we put on, when you think about, you know, digital leads that we'll generate through the website and other means. So those are where we're seeing a lot more leads, Parker. And so we're executing on those very differently. But you correctly say, I mean, if you look at our core volume, we generally write, you know, 55% of our funeral volume is the percentage that you can almost predict within a band of, you know, between 53 and 56. So that's the number of contracts core that we'll write in any given.

Tom Ryan: But you correctly say, I mean, if you look at our core volume, we generally write, you know, 55% of our funeral volume is the percentage that you can almost predict within a band of, you know, between 53 and 57, that's the number of contracts that we'll write in any given. So it shows you that there's still a high correlation of people that are coming through. I do think that, over time, we'll trend more towards other sources. And that's where we're working really hard at, you know, how can we do better at identifying people that are ready to purchase a cemetery.

Tom Ryan: So it shows you that there's still a high correlation of people that are coming through our funeral homes are a tremendous lead source for pre-need cemetery. I do think that over time, we'll trend more towards other sources. And that's where we're working really hard at, you know, how can we do better at identifying people that are ready to purchase cemetery. And again, from a digital perspective, there's a lot of data out there that we're mining and understanding and getting in front of those customers. So it feels very good about the trends in that business. But you can't, you know, it's still such a core reason for cemetery sales.

Tom Ryan: And again, from a digital perspective, there's a lot of data out there that we're mining and understanding and getting in front of those customers. So I feel very good about the trends in that business. But you can't, you know, it's still such a core reason for cemetery sales; funeral volume still has a material impact on our ability to generate those leads and then turn them into sales.

Tom Ryan: Funeral volume still has a material impact; our ability to generate those leads and then turn them into... Sales.

Tom Ryan: All right, great. Thank you so much. Thank you.

Tobey Sommer: The next question comes from Tobey Sommer, with Trust Security. Please go ahead.

Toby Sommer: The next question comes from Toby Sommer with Trust Security; please go ahead. But what we're doing now is that just to refresh everybody's memory, as you asked, when you look back four or five years, and again, you referenced the May 22 Investor Day, so I'm doing this by memory, but we had about 4,300 to 4,400 counselors to produce total pre-need sales of somewhere around $1.7 to $1.8 billion at the time. And that's funeral and cemetery when I say that, okay?

Jasper Bibb: Say good morning guys, this is Jasper Bibb, I'm from Tobey. I want to ask how you managing the sales force in the current demand environment. I think it's the investor that two years ago he shows how you've been able to drive pretty impressive productivity gains even with lower hand counts, so curious if you've seen less productivity levels hold up this year. Sales force. What we're doing now is that just to refresh everybody's memory, as you asked, when you look back four or five years and again you referenced the May 22 investor day. So I'm doing this by memory, but we had about 4,300 to 4,400 counselors to produce total pre-need sales of somewhere around $1.7, $1.8 billion at the time.

Speaker Change: Yesterday two years ago. He started how you've been if it would drive pretty impressive productivity gains even with lower head count. So curious if you'd give us productivity levels hold up here.

Speaker Change: Sales force.

Tom Ryan: So that's the entire pre-need sales function. Today, fast forward, and now you're looking at, you know, a 2.7 to 2.8-ish area in terms of billing for the Pretty Salesforce, and we're doing that with 3,700 counselors as opposed to 4,300 counselors. Not to get repetitive, but that's kind of what Tom had already answered in the call today.

Speaker Change: What we are doing now is that just to refresh everybody's memory.

Speaker Change: As you asked when you look back four or five years and again you referenced a may 22 investor day, some visits by memory.

Speaker Change: We had about 4300 4400 counselors to produce total preneed sales of somewhere around 171 $8 billion at the time and Thats funeral and cemetery when I say that okay. So that's the entire preneed sales function today fast forward now now youre looking at $2 72.

Tom Ryan: And that's funeral and cemetery when I say that, so that's the entire pre-need sales function. Today, best for now, now you're looking at 272A-ish area in terms of billion for the pre-need sales force, and we're doing that with 3,700 counselors as opposed to the 4,300 counselors. Not to get repetitive, but it's kind of what Tom had already answered during the call today. You're talking about better technology in terms of what we're using in front of the customer that's helping us be more efficient. Tom already mentioned the quality and quality of the leads. That's not just digital leads, although that's a big piece to that improvement, but it's also how we're handling direct mail and seminars differently than before.

Speaker Change: Eight ish area in terms of 1 billion for the prettiest Salesforce and we're doing that.

Speaker Change: With 3700 counselors as opposed to the 4300 counters.

Speaker Change: Not to get repetitive, but its kind of what Tom had already answered during the call today, you're talking about better technology in terms of what were using in terms of in front of the customer and that's helping us be more efficient Tom already mentioned the quantity and quality of the leads that's not just digital leaves, although that's a big piece to that and.

Tom Ryan: You're talking about, you know, better technology in terms of what we're using, in terms of being in front of the customer that's helping us be more efficient. Tom already mentioned the quantity and quality of the leads. That's not just digital leads, although that's a big piece to that improvement, but it's also how we're handling direct mail and seminars differently than before. We're getting a lot more effective and productive in terms of utilizing the CRM system, which is helping us reduce turnover, which we can all talk about, you know, has a huge benefit and less distraction in recruiting and such.

Speaker Change: <unk>, but it's also how we're handling direct mail and seminars differently than before we're getting a lot more effective and productive in terms of utilizing the CRM system.

Tom Ryan: We're getting a lot more effective and productive in terms of utilizing the CRN system, and which is helping us reduce turnover, which we can all talk about as a huge benefit and a less distraction on recruiting. And then, don't forget that we're continuing to invest capital into our cemetery. I mean, if you do use the same timeframe back to 2018, you're not spending $165 million of capital to build inventory. It would be much, much less than that. It'd probably be $80 to $100 million if I remember correctly. But we are going in there with the tiering strategy that we have led the industry in doing, and putting in our money or our math is and spending the capital, which has wonderful returns to those capitals for those high-end projects all the way down to the mid-tier projects all the way down to that beginning entry level price points in these cemeteries.

Speaker Change: And which is helping us reduce turnover, which we can all talk about as a huge benefit and a less distraction on recruiting and such and then let's don't forget that we're continuing to invest capital into our cemeteries. I mean, if you do use the same timeframe back to 2018.

Tom Ryan: And then let's, don't forget that we're continuing to invest capital in our cemeteries. I mean, if you do use the same timeframe back to 2018, you're not spending $165 million on capital to build inventory. It would be much, much less than that. It'd probably be $80 to $100 million, if I remember correctly.

Speaker Change: Not spending $165 million of capital to build inventory it would be much much less than that would probably be $80 million to $100 million, if I remember correctly.

Tom Ryan: We are going in there with the tiering strategy that we have led the industry in doing and putting our money where our mouth is and spending capital, which has wonderful returns on those capitals for those high-end projects all the way down to the mid-tier projects all the way down to the beginning entry-level type price points of these cemeteries. So it's not one magic bullet, it's kind of all of the above that we talked about back in 22 that continues to come to fruition as we speak today. I think, no, I think your negative comparison should begin to flatten out at 25.

Speaker Change: So we are going in there with the with the cheering strategy that we have led the industry is doing and putting our money, where our mouth is and spending the capital which has wonderful returns to those capitals for those high end projects all the way down to the mid tier projects, all the way down to that.

Speaker Change: Beginning entry level type price points of the cemeteries. So it's not one magic bullet.

Tom Ryan: So it's not one magic bullet. Out of all of the above that we talked about, Act 22, which continues to kind of fruition, you know, as we speak today. Thanks. And I think earlier you mentioned 150-based points had won this year on the SEAI direct changes for staff, you know, Smartgen, and that's going to help you next year. It's a great way to think about that and seeing, let's say, like 70 to 80 bits, if you know, we're a smartgen talent for 25 versus 24. I think, no, I think your negative comparison should begin to flatten out in 25.

Speaker Change: And all of the above that we talked about.

Speaker Change: Back in 'twenty, two which continues to come to fruition.

Speaker Change: As we speak today.

Speaker Change: Thanks.

Speaker Change: I think earlier, you mentioned 150 basis points.

Speaker Change: When this year on the S E T I direct changes for first half gross margin.

Speaker Change: That's gonna help you next year is the right way to think about that.

Speaker Change: Let's say like.

Speaker Change: 70 to 80 bps gross margin tailwind for 25 versus 24.

Speaker Change: I think no I think you're you're negative comparisons should begin to flatten out 25, so I wouldn't anticipate it to have any kind of material effect on margins in 'twenty five just 24.

Tom Ryan: So, I wouldn't anticipate it to have any kind of material effect on margins. Okay, understood. Thanks.

Speaker Change: Okay understood. Thanks.

Joanna Gajuk: So, I wouldn't have just Hi everybody, just a couple of things maybe. I think you're saying you expect a little more challenging comparison in the third quarter in the pre-need cemetery related to lower revenue recognized from completed cemetery construction projects in Q3 versus prior year. I, they're overall comments seem to be for more at least flat in the second half. I just want to make sure we walk away with the right assumption about what you're thinking of for the pre-need cemetery production in the third quarter. Yes, I think my comment was more about not production but about completed contract.

Speaker Change: Yeah.

AJ Rice: The next question comes from AJ Rice with UBS. Please go ahead. Hi everybody, just a couple of things maybe. I think you're saying you expect a little more challenging comparison in the third quarter in the pre-need cemetery related to lower revenue recognized from completed cemetery construction projects in Q3 versus the prior year. However, their overall comments seem to be for more or at least flat in the second half. I just want to make sure we walk away with the right assumption about what you're thinking of for pre-need production in the third quarter.

Speaker Change: The next question comes from AJ Rice with UBS. Please go ahead.

Speaker Change: Yes.

AJ Rice: Oh, Hi, everybody just a couple of things maybe.

AJ Rice: Think you're saying you expect a little more challenging comparison in the third quarter and the pre need.

Speaker Change: Cemetery, Oh related to lower revenue recognized from completed cemetery construction projects in Q3 versus prior year Hum.

Speaker Change: The overall comments seem to be for more at least flat in the second half of what I just wanted to make sure we walk away with the right assumption about what you're thinking of for the preneed.

Speaker Change: Cemetery.

Speaker Change: Production in the in the third quarter.

Tom Ryan: And yeah, I think my comment was more about not production but about completing contracts. Remember, we're I think our sales production will be fine in the third quarter and good in the fourth quarter and not a lot of, you know, big differentiation. What I was referencing more was the timing of completed construction projects that have already been sold. So if you think about cemetery revenue recognized for the third quarter, you're going to have a little bit of a hill to climb just because of that. But we still feel very good about production for the third quarter.

Speaker Change: Yeah, Angie I think my comment was more about not production, but about completed contract remember where I think our sale of <unk> production will be fine in the third quarter and good in the fourth quarter and not a lot of big differentiation, what I was referencing more too is.

Tom Ryan: Remember, I think our sale of sales production will be fine in the third quarter and good in the fourth quarter and not a lot of big differentiation. What I was referencing more to is the timing of completed construction projects that have already been sold into. And last year we had a pretty decent size number in the third quarter, and I think what we're trying to highlight a little bit is that it could be as big as, you know, let's say a $20 million difference of revenue recognized from completing those contracts; think of a mausoleum. So, it has nothing to do with production but more about when the revenue gets recognized, and that comparison is much more favorable when you think about the fourth quarter.

Speaker Change: Timing of completed construction projects that have already been sold into and last year, we had a pretty decent size number.

Speaker Change: In the third quarter and I think what we're trying to highlight a little bit that it could be as big as you know, let's say a $20 million difference of revenue recognized from completing those contracts think of a mazo Liam.

Speaker Change: So it has nothing to do with production, but more about when the revenue gets recognized in that comparison is much more favorable when you think about the fourth quarter. So as you think about cemetery revenue recognized for the third quarter Youre going to have a little bit of a hill to climb just because of that we still feel very good about production for the third quarter.

Tom Ryan: So, you think about the cemetery revenue recognized for the third quarter, you're going to have a little bit of a hill to climb just because of that. We still feel very good about production for the third quarter. Okay, and the larger are higher in properties. I know sometimes it can be just when the construction is completed, and then you can recognize it, and sometimes there's consumer behavior. Are you saying the softness a little bit in the high end that you saw in the second quarter is more about projects and when they got completed? Are you actually saying that you've seen a little softness in the consumer behavior in the high end.

Tom Ryan: Okay, and the larger, higher-end property, I know sometimes it can be just when the construction is completed, and then you can recognize it, and sometimes there's consumer behavior. Are you saying the softness a little bit, the high-end that you saw in the second quarter is more about... You know, the high-end inventory will see large sales in both the back half of the year and then again in 2025. Okay, and then on the funeral side, I know the core funeral rate per service was up about 1.3% in a quarter where you didn't have very much growth in cremation rates, which can put some pressure on that Anything as you drill down there? It just seemed like that might have been a little stronger in a normal environment.

Speaker Change: Okay, and Oh, the larger or higher end properties.

Speaker Change: Sometimes it can be just when the construction is completed and then you can recognize it and sometimes there is consumer behavior.

Speaker Change: Are you seeing the softness a little bit in the high end as you saw in the second quarter is more about <unk>.

Speaker Change: Projects and when they got completed are you actually saying that you've seen a little softness in the consumer behavior.

Speaker Change: Behavior and the high end.

Tom Ryan: Yeah, when we talk about production, that's just consumer behavior. So, yeah, we saw less contracts closed in the second quarter as it relates to last year's second quarter. But again, I'd kind of highlight you too. The first quarter was a really nice upside surprise. We had a very strong high-end sale. So, again, looking at the six months, it's kind of flat. I think as we think of the back half of the year, we see no reason. We can't generate high-end sales. We're not seeing pushback from consumers or anything like that. Sometimes it's just getting in front of people.

Speaker Change: Yeah. So when we talk about production, that's just consumer behavior. So so yeah, we saw less contracts close in the second quarter as it relates to last year's second quarter, but again I would kind of highlight due to the first quarter was a was a really nice upside surprise, we had a very strong high end sale.

Speaker Change: So again looking at the six months, it's kind of flat I think as we think of the back half of the year. We see no reason, we can't generate high end sales were not seeing pushback from consumers or anything like that sometimes as you know it's just it's just getting in front of people.

Tom Ryan: Somebody deciding they want to pull the trigger or not pull the trigger. So, we still feel very positive about our ability to sell. You know, the highest inventory, large sales in both the back after the year and then again in 2025. Okay, and then on the funeral side, I know the core funeral rate per service was up about 1.3% in a quarter where you didn't have very much growth in cremation rates, which can put some pressure on that. But anything, as you drill down there, it just seemed like that might have been a little stronger in a normal environment; anything you see.

Speaker Change: Deciding they want to pull the trigger or not pull the trigger so we still feel very positive about our ability to sell.

Speaker Change: The highest inventory large sales and in both the back half of the year and then again in 2025.

Speaker Change: Okay, and then on the funeral side I know the core funeral.

Speaker Change: Our rate per service was up about one 3% in a quarter, where you didn't have very much growth in cremation rates, which can put some pressure on that.

Speaker Change: Thing as you drill down there.

Speaker Change: It just seemed like that might have been a little stronger in a normal environment any any anything you see.

Tom Ryan: Anything you see? And so again, that's going to vary from time to time, depending on when those contracts come in. So at the customer level, we're still seeing kind of 3% increases, which, you know, may not be for, but some of that 1.3 is because of the mix and because of, you know, trust income from the contracts that are coming out of the back. Okay, and then just the last question on the deal pipeline. I know you said in the prepared remarks that you'd be above the high end of your target normal target range.

Tom Ryan: Really not, you know, I think at the at need level, if it was closer to 3% from a contractual year over year. Remember you got the cremation mix change, which negates some of that. And then lastly, I think it was more of a tougher comparison as it relates to the pretty backlog of comparison versus the at need walk-in. And so again, that's going to vary from time to time depending when those contracts come in. So, at the customer level, we're still seeing kind of 3% increases, which, you know, may not be four. But some of that, you know, 1.3 is because of the mix and because of, you know, trusting him from the contracts that are coming out of the backlog.

Speaker Change: Really not you know I think it's the at the at need level. It was closer to 3% from a contractual year over year remember you've got the cremation mix change with some negate some of that and then lastly, I think it was more of a tougher comparison as it relates to the preneed backlog.

Speaker Change: Comparison versus the added need walk in and.

Speaker Change: And so again, that's going to vary from time to time, depending on when those contracts come in so at the customer level, we're still seeing kind of 3% increases, which you know may not be four but.

Speaker Change: Some of that.

Speaker Change: 1.3 is because of the mix and because of you know trust income from the contracts that are coming out of the backlog.

Tom Ryan: OK, and then just the last question on the deal pipeline. I know you said the prepare marks; you'd be above the high end of your target normal target range. Do you think you're just seeing more properties? Is it the competitive landscape has gotten better? Some of the smaller competitors are having their own financial issues? Is it the consent decree going away, or is there deals in those markets? Is that what we're seeing? I would give us a little more on that. Is there anything new about the economics of the deals you're seeing? Sure. I think first of all, probably all the above, but the predominant reason I think we feel is, you know, interest rates spiking up, and again I'm just using history as a gauge.

Speaker Change: Okay, and then just a last question on the deal pipeline I know you said in the prepared remarks you'd be above the high end of your target normal target range do you think you're just seeing more properties is it the competitive landscape has gotten better as some of the smaller competitors are having their own financial issues.

Tom Ryan: Do you think you're just seeing more properties? Is the competitive landscape getting better? Some of the smaller competitors are having their own financial issues? Is the consent decree going away?

Speaker Change: Is it the consent degree going away or either deals are in those markets is that what we're seeing I would give us a little more on that and is there anything new about the economics of the deals you're seeing.

Tom Ryan: Are there deals in those markets? Is that what we're seeing? Give us a little more on that. And is there anything new about the economics of the deals you're seeing? Sure, I think first of all, probably all of the above, but the predominant reason I think we feel is interest rates spiking up, and again, I'm just using history as a gauge. A lot of our competitors had variable rate debt, you know. The next question comes from Scott Schneeberger with Oppenheimer. Please go ahead.

Speaker Change: Sure I think first of all probably all the above but the predominant reason I think we feel is interest rates spiking up and again I'm just using history as a gauge.

Tom Ryan: A lot of our competitors had variable rate debt, you know, structures, and we've got a little bit of that, but very little. And so I think back to Eric's point: our financial stability, our cost of borrowing, is very different. So I think if those went up, those competitors really had to pull back, and I think it's allowed us to, you know, more deals to flow directly to us and not be in the competitive stage. I think I don't see a drastic difference in pricing. No, I mean, I think it's pretty much the same. It's just we're the choice.

Speaker Change: A lot of our competitors had variable rate debt.

Speaker Change: You know.

Speaker Change: Structures and you know, we've got a little bit of that but very little and so I think our back to Eric's point, our financial stability.

Eric: Our cost of borrowings is very different so I would say.

Speaker Change: Those went up those competitors really had to pull back and I think has allowed us to two more deals to flow directly to us and not be as in the competitive stage Ah I.

Speaker Change: I think I don't see a drastic difference in pricing now I mean, I think it's pretty much the same it's just.

Speaker Change: Where the where the choice and we've got a lot of stuff work into the pipeline.

Tom Ryan: And we've got, you know, a lot of stuff work into the pipeline. And like Eric said, I think we feel highly confident. You never want to, you know, declare something till the time they're done. But there's enough out there, and sizable deals that we're really excited about. So great opportunities. It's a pleasant capital and creates a future profitability and growth for SDI. OK.

Speaker Change: He said I think we feel highly confident you never want to you know.

Speaker Change: I declare something until it's signed and done but there's enough out there and sizable deals.

Speaker Change: We're really excited about so great great opportunities to deploy some capital and creates and future profitability.

Speaker Change: And growth for us yet.

Speaker Change: Okay. Thanks, a lot.

Scott Schneeberger: Thanks a lot. Thank you.

Speaker Change: Yeah.

Tom Ryan: The next question comes from Scott Schmink Derger with Open Himer. Please go ahead. Thank you, good morning. Just going back on the funeral segment, a profit on the performance in the quarter, Tom, could you kind of break out what the drivers are there in magnitude and maybe mixed, because the revenue, I know there was maybe some timing in the quarter. And this was discussed on an earlier question, but it was not much of a difference on revenue year over year; yet, this significant drop. And you'd mention in that prior answer, some cost creep. So I heard some SCI directs, incentive comp, just the leverage, and then this cost creep.

Speaker Change: The next question comes from Scott.

Scott: They're there with Oppenheimer. Please go ahead.

Scott: Thank you and good morning, I'm, just coming back on on the the funeral segment.

Scott Schneeberger: Thank you, good morning. Just going back to the funeral segment. If you do the volume throughput, it would tell you that I would have expected, based upon your volumes, to go down 150 bases.

Scott:

Speaker Change: Profit underperformance in the quarter.

Scott: Could you could you kind of break out what the drivers are there.

Speaker Change: And then you know and in magnitude and and maybe mix because you know that the revenue I know there was maybe some timing in the quarter and and this was discussed on an earlier question, but it wasn't you know not much of a difference on on revenue year over year. Yet. This is a significant drop and you had mentioned in the.

Speaker Change: In my prior answer some cost creep, so I've heard some sci direct incentive comp just elaborate and then and then it's costly and I think that maybe has people concerned is that something that's going to persist in the back half I'm, even though you did talk about some stabilization. So if you could if you could.

Tom Ryan: And I think that maybe has people concerned. Is that something that's going to persist in the back half, even though you did talk about some stabilization? So if you could break that out a little bit more, be appreciated. Thanks. Sure. And it's got something; what I was trying to say is, in the quarter sometimes, and you guys know how these things work, you adjust estimates in a cruel. So I'll give you an example. If you had an AR reserve in one period and you decided, hey, I'm over-reserved or under-reserved, I'm going to hit that a cruel on the second quarter.

Speaker Change: With that out a little bit more would be appreciated. Thanks.

Speaker Change: Sure It is.

Speaker Change: It's got a tough and what I was trying to say is in the corner, sometimes and you guys know how these things work you adjust estimates and accruals. So I'll give you. An example, if you had an AR reserve.

Speaker Change: In one period, and you decided hey, I'm over reserved are under reserved I'm going to hit that accrual in the second quarter and it may or may not have began to show its head in the first so it's really hard you know, sometimes you gotta credit gone a long way in a debit gone another way and that's why I say it quarter can have noise and if you step back and look at the <unk>.

Tom Ryan: And it may or may not have begun to show its head in the first. So it's really hard. Sometimes you got a credit going one way and a debit going another way. And that's why I say a quarter can have noise. And if you step back and look at the six months, we went from 19.9%; we're at 19.9% funeral margin for the six months versus 22.7% in the six months of last year. That's 280 basis points. If you do the volume throughput, it would tell you that I would have expected, based upon your volumes, to go down to 150 basis points.

Speaker Change: Six months.

Speaker Change: We went from.

Speaker Change: 19, 9% were 19, 9% funeral margin for the six months versus 22 seven in the six months of last year. It's 280 basis points. If you do the volume throughput. It would tell you that I would've expected based upon your volumes continue to go down 150 basis points.

Tom Ryan: That's just pure volume calculation at the core. Then you take SCI directly and say, okay, I knew that I was going to stop delivering merchandise and a couple of other items. That's 20 million, which would have dropped, you know, say 14 million to the bottom line. So now I've explained another 150, and now I've explained another 80. So 230 basis points of my 270, whatever it is, the difference is explained by SCI direct and the throughput, and the 0.4% is higher expenses, and we don't have the drag of SDI direct.

Tom Ryan: That's just pure volume calculation of the core. Then you take SCI Direct and say, okay, I knew that I was going to stop delivering merchandise and a couple of other items. That's 20 million, which would have dropped, you know, say 14 million to the bottom line. So now I've explained another 150 and not only another 80. So 230 basis points of my 270, whatever it is, difference is explained by SCI direct and the throughput. And the 0.4% is higher expenses. And again, I think you can take away some of the quarter-quarter noise if you do it that way.

Speaker Change: That's just pure volume calculation on the core then you take Sci direct and say, okay. I knew that I was going to stop delivering merchandise.

Speaker Change: And a couple of other items, that's $20 million, which would've dropped you know say $14 million to the bottom line. So now I've explained another 150 inoculate. Another 80, so 230 basis points of my 270 or whatever it is difference is explained by Sci.

Speaker Change: Correct and the throughput and the 4% is higher expenses and again I think you can take away some of the quarter to quarter noise. If you do it that way and when I look at those numbers and say, okay, I've got slightly higher incentive comp because again back to timing.

Tom Ryan: And I look at those numbers and say, okay, I've got slightly higher incentive comp, because again, back to timing of when you adjusted those incentive comp of rules, which recall or not just based on EDS, they're based on production, they're based on cash flows. So we don't think there's any big boogie man in the cost, I guess what I'm saying. Having said that, there are things we can do. We clearly have, you know, had wage inflation for the last couple of years, rightfully so. And so we're seeing that subside in some of those trends. So that think about 2025, we'll have less wage inflation.

Speaker Change: When you adjusted those incentive comp accruals, which recall or not just based on EPS or based on production there based on cash flows so.

Speaker Change: We don't think there's any big bogeyman in and the cost I guess, what I'm, saying, having said that there are things we can do we clearly have.

Speaker Change: Had wage inflation for the last couple of years rightfully, so and and so we're seeing that subside and some of those trends. So as I think about 2025, we will have less wage inflation.

Tom Ryan: We'll be more efficient in how we are running the operations. And we don't have to drag us to direct on top of that; we've got a better general agency agreement. We should generate higher commissions, which are going to enhance the funeral heart as many think about 2025. So that's why I feel better is, you know, we're going to manage this tighter. We've got a good GNA revenue story coming in 2025. And we don't have the drag of SCI Direct operational changes on a year-over-year base. Services. And remember, the thing that should get exciting about SCI Direct: we're deferring a lot of revenue that we're still selling.

Speaker Change: We'll be more efficient in how we are running the operations and we don't have the drag of Sci direct.

Tom Ryan: On top of that, we've got a better general agency agreement, which should generate higher commissions, which are going to enhance the funeral margins when you think about 2025. So that's why I feel better is that we're going to manage this tighter. We've got a good G&A revenue story coming in 2025, and we don't have the drag of SDI operational changes on a year over year basis.

Speaker Change: On top of that we've got a better General agency agreement, which should generate higher commissions, which are going to enhance the funeral margins. When you think about 2025. So that's why I feel better as you know we're going to manage this tighter we've got a good G&A revenue story coming in 2020 five.

Speaker Change: And we don't have the drag of Sci direct operational changes on a year over year basis, and remember the thing that should get exciting about Sci direct we're deferring a lot of revenue that we're still selling them.

Tom Ryan: And one day, that money's going to come out of trust. And the margins on SCI Direct's, you know, operational business are going to go way out. So, this is a timing thing. And the business itself is very healthy. The consumer is very healthy. And so, long term, I love our trends. Short term, we're having to stomach. We're having a little bit of earnings in discussion. Thanks, Tom.

Speaker Change: And one day that money is going to come out of trust and the margins on Sci direct.

Speaker Change: Operational business are going to go way up so this.

Speaker Change: This is a timing thing and the business itself is very healthy the consumer is very healthy.

Tom Ryan: Consumers Very healthy. So long term, I love our trend. Thanks, Tom. And just on the new partner, the new insurance company partner, you know, you alluded to 25. So it sounds like you think that maybe you get some better fee flow. By that time, could it come as early as the second half?

Speaker Change: So long term I love our trends.

Speaker Change: Short term, we're having to stomach a little bit of earnings.

Speaker Change: Indigestion.

Tom Ryan: Or is it going to take a few quarters before it's discernible? Yeah, we will get some in the second half for sure. I think the full effects are going to, you know, come in 2025. Because again, remember, there's a lot of operational change here as it relates to, you know, what type of products we're selling, the most robust commission rates get around, you know, underwritten insurance. And we believe we now have the right type of products to put in front of our customers.

Speaker Change: Thanks, Tom and Ed just on the on the new partner are the new insurance company partner.

Tom Ryan: And just on the new partner, the new insurance company partner, you know, you'll move to 25. So, it sounds like you think that maybe you get some better fee flow by that time. It couldn't come as early as the second half. Or is it going to take a few quarters before it's discernible? We will get some of the second half for sure. I think the full effects are going to, you know, come in 2025. Because again, remember, there's a lot of operational change here as it relates to, you know, what type of products we're selling.

Speaker Change: Moving to 25, so it sounds like you think that maybe you get some better see flow by that time he couldn't comedy as early as the second half or is it going to take a few quarters before it's discernible.

Tom Ryan: So that is getting people, you know, insurance licenses. So as you transition to this new agreement and the real opportunities in insurance, we have to make sure that our salespeople have insurance licenses. So, you know, they sound simple, but they're not.

Speaker Change: So we will get some in the second half for sure I think the the full effects are going to.

Speaker Change: Come in 2025, because again remember there's a lot of operational change here as it relates to you know what type of products. We're selling you know the most robust.

Tom Ryan: You know, the most robust commission rates get around, you know, underwritten insurance. And we believe we now have the right type of products to put in front of our customers. So, if it is getting people, you know, insurance licenses. So, as you transition to this new agreement, and, you know, the real opportunities and insurance, we have to make sure that our salespeople have an insurance license. So, you know, the sound simple; they're not. And we need to get more people licensed. We need to get people understanding the product mix. And like I said, what I'm excited about is we're going to have more of our customers that are protected by under an insurance than we ever historically have.

Speaker Change: Bus commission rates get around.

Speaker Change: Underwriting venture and we believe.

Speaker Change: We now have the right type of products to put in front of our customers.

Speaker Change: So that is getting people insurance licenses. So as you transition to this new agreement and you know the real opportunities in insurance, we have to make sure that our our salespeople have a insurance license. So you know these sounds simple theyre not and we need to give people more people license, we need to get people.

Speaker Change: Understanding the product mix and.

Tom Ryan: And we need to get more people licensed; we need to get people understanding the product mix. And like I said, what I'm excited about is that we're going to have more of our customers that are protected by underwritten insurance than we ever have. So it's a better product for the consumer, so our counselors can feel really good about providing that protection, and if we do it right, we're going to generate higher commissions.

Speaker Change: Like I said, what I'm excited about is we're going to have more of our customers that are protected by under an insurance than we ever historically have so it's a better product for the consumer so our counter and feel really good about providing that protection.

Tom Ryan: So, it's a better product for the consumer. So, our counselors can feel really good about providing that protection. And if we do, right, we're going to generate, you know, higher commissions. Thanks.

Speaker Change: And if we do it right, we're going to generate higher commissions.

Speaker Change: Yeah.

Speaker Change: Thanks, I just have I just have two more in there they're separate but I'll ask them both upfront and we can wrap thank you the.

Unknown Attendee: I just have two more in there. They're separate, but I'll ask them both upfront. We can wrap. Thank you.

Tom Ryan: Thanks. I just have two more, and they're separate, but I'll ask them both up front, and we can wrap. Thank you. One is consumer behavior in the lower-priced tiers. If you could just delve into that a little bit, are you seeing inflection better? Is it inflecting a little worse? Just curious about the contract velocity volume.

Unknown Attendee: The one is consumer behavior and the lower price tiers. If you could just delve into that a little bit. Are you seeing inflection better? Is it inflecting little worse? Just curious about the contract velocity volume. So, that's question number one, just that trend, and how you think about that.

Speaker Change: One is consumer behavior, and the lower priced tiers.

Speaker Change: If you could just delve into that a little bit are you seeing inflection better it did inflect and little worse, just curious about the contract velocity volume. So that's question number one just that trend.

Tom Ryan: So that's question number one, just that trend and how you think about that. And number two is the funeral rule update, FEC, anything on that. Thanks so much. According to the tier of customer spend that we are dealing with at one particular funeral home and one particular market, and we will go from there. Great, thanks.

Speaker Change: And and how you think about that and number two is our is the the funeral rule update FTC anything on that thanks, so much.

Tom Ryan: And number two is the funeral update, FEC, anything on that. Thanks so much. I'm going to let Eric talk about the Funeral Rule. But, as a relation to the consumer, I think I would say this: you know, we saw a while back that I think the lower-end consumers were being challenged. Again, I think it correlates with a lot of other retailers that are out there, with inflation impacting other pieces of their lives. It's harder at the lower end. And we made some adjustments through our sales leadership to say, let's get people on board by having better financing terms for them to be able to get that first down payment and get them started.

Speaker Change: I'm going to let Eric talk about the funeral rule, but.

Speaker Change: As it relates to the consumer I think I would say this you know we started a while back that I think.

Speaker Change: Lower end consumers, we're being challenged and again I think it correlates with a lot of other retailers that are out there with inflation impacting other pieces of their lives. It's harder at the lower end and we made some adjustments to our sales leadership to say, let's give people onboard by having better fit.

Speaker Change: Dancing terms for them to be able to get that first down payment and get them started and so we saw a little bit of a positive reaction to that and I think we continue to do so we've not really seen any further deterioration I do believe that consumers still challenged.

Tom Ryan: And so we saw a little bit of positive reaction to that. And I think we continue to. So we've not really seen any further deterioration. I do believe that consumer still challenged mainly because of what I see another. Again, retailers as opposed to ours. So we want to do what we can to make sure we can accommodate them. And that means, you know, stretching out terms a little bit, making the payments a little easier. We're going to try to do that to accommodate.

Speaker Change: Mainly because of what I see in other.

Speaker Change: Again retailers as opposed to ours.

Speaker Change: So so we want to do we can to make sure. We can accommodate them. If that means you know stretching out terms, a little bit making the payments a little easier we're going to try to do that to accommodate that concerned with.

Tom Ryan: on the FTC. I guess the short answer is there's really no update to give to you. So I'll just remind everybody where we are. We continue to work with the staff. We have a very good relationship with the staff of the FTC. We're ready to go at any point in time to adopt anything that we have. We're not expecting anything to surprise us. And ultimately we don't think anything that's coming down the pipe that we know about. But, such as pricing online, we do not expect that to have any material effect to our company. And as you know, we have a tremendous amount of our funeral homes already that have pricing online in different forms and fashions, whether it's starting at prices or just complete full premium pricing experiences, digitally, where you can really dive deep into that particular funeral home's offering and kind of everywhere in between.

Speaker Change: Scott on the FTC I guess the short answer is there's really no update to give to you. So I'll just remind everybody where we are you know we continue to to work with the staff. We have a very good relationship with the staff of the FTC.

Speaker Change: We're ready to go at any point in time to adopt to anything that we have we're not expecting anything to surprise us and ultimately we don't think anything that's coming down the pipe that we know about such as pricing online. We do not expect that to have any material effect to our to our company and as you know we have a tremendous.

Speaker Change: This amount of our funeral homes already that have pricing online and different forms and fashions, whether it's starting at prices or just complete full premium pricing and experiences are digitally where you can really dive deep into that particular funeral homes offering and kind of everywhere in between ultimately we.

Tom Ryan: Ultimately, we think we will continue to go down that path. We'll continue to test. We'll continue, most importantly, to optimize. So the website, according to the tier of customers fan that we are dealing with at one particular funeral home and one particular market. And we will, we'll go from there.

Speaker Change: Think.

Speaker Change: We will continue to go down that path will continue to test will continue most importantly to optimize the web sites.

Speaker Change: According to the tier of customer spend that we are dealing with at one particular funeral home in one particular market and we will we'll go from there.

Unknown Attendee: All right. Great. Thanks. Thank you both. Thanks.

Speaker Change: Hi, great. Thanks, Thank you both.

Tom Ryan: Thank you both. Thanks guys. The next question comes from Joanna Gajuk with Bank of America. Please go ahead. Yes, Joanna, we do expect to end the year in the low single digits and again as we think about the outer years 25-26, I think we feel better about getting back to that low to mid single digit.

Scott: Thanks Scott.

Joanna Gajuk: The next question comes from Joanna Gadjik with Bank of America. Please go ahead. Yes. Hi. Thanks for the follow up.

Speaker Change: The next question comes from Darren and Todd Yes.

Speaker Change: With Bank of America. Please go ahead.

Speaker Change: Hi, Thanks for the follow up I, just wanted to clarify on the cemetery preneed sales production commentary. So do you still expect to grow low single digits for the year and then has anything changed in your kind of long term P. L. Gross put a preneed cemetery sales production. Thank you.

Tom Ryan: I just want to clarify on the cemetery pre-need sales production commentary. So do you still expect to grow low single digits for the year, and then has anything changed in your kind of long term view of growth for the pre-need. So cemetery sales production. Thank you. Yes, Joanna. We do expect to in the year and the low single digits. And again, as we think about the outer year is 2526. I think we feel better about getting back to that, you know, low to mid single digit. Because again, with the stabilization of funeral volume anticipated stabilization, we expect to be able to get there.

Speaker Change: Yes, Joanna we do expect to end the year in the low single digits and again.

Speaker Change: Again, as we think about the outer years 'twenty five 'twenty six I think we feel better about getting back to that low to mid single digit.

Speaker Change: Because again with the stabilization of funeral volume anticipated stipulations beer volume, we'd expect to be able to get there.

Tom Ryan: Great.

Operator: Thank you. This concludes our question and answer session.

Joanna <unk>: Great. Thank you.

Speaker Change: Yeah.

Speaker Change: This concludes our question and answer your question I would like to turn the conference back over to Sci management for any closing remarks.

Tom Ryan: I would like to turn the conference back over to SCI management for any closing remarks. All right. Thanks, everybody. Thank you for, thank you for joining us.

Tom Ryan: Thanks, everybody. Thank you for thank you for joining us. And we will see you again at the end of October. Thanks, everybody. BF-WATCH TV 2021, Unknown Attendee, Larry Bland, Aaron Foley, John Ransom, Scott Schneeberger, Larry Bland, Aaron Foley, Unknown Attendee, Debbie Young, Joanna Gajuk, Service Corporation International

Speaker Change: Thanks, everybody. Thank you for thank you for joining us and we will see you again at the end of October thanks, everybody.

Tom Ryan: And we will see you again at the end of October. Thanks, everybody.

Speaker Change: Yeah.

Operator: The conference has now concluded. Thank you for us and into base presentation.

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

Unknown Attendee: You may now disconnect. Thank you. © © St.

Speaker Change: [music].

Tom Ryan: Okay.

Louis, John Ransom, John Ransom, John Ransom, John Ransom, John Ransom.