Q4 2024 Carriage Services Inc Earnings Call
Please standby we're about to begin.
Speaker Change: Good day, and thank you for standing by and welcome to the carriage services fourth quarter 'twenty 'twenty four earnings conference call.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Steve Metzger President. Please go ahead Sir.
Speaker Change: Good morning, everyone. Thank you for joining us to discuss our fourth quarter and year end results for 2024. In addition to myself on the call. This morning from management or Carlos Casado, Chief Executive Officer, and Vice Chairman of the board of Directors and John in Wright, Chief Financial Officer.
Speaker Change: Oh, the carriage services website, you can find our earnings press release, which was issued yesterday. After the market closed our press release is intended to supplement our remarks. This morning and include supplemental financial information, including a reconciliation of differences between GAAP and non-GAAP financial measures.
Speaker Change: Today's call will begin with formal remarks from Carlos and John will be followed by a question and answer period.
Speaker Change: Before we begin I'd like to remind everyone that during this call we will make some forward looking statements, including comments about our business projections and plans.
Speaker Change: Forward looking statements inherently involve risks and uncertainties and only reflect our views as of today.
Speaker Change: These risks and uncertainties include but are not limited to factors identified in our earnings release as well as in our SEC filings all of which can be found on our website. Thank.
Carlos: Thank you all for joining us this morning, and now I'd like to turn the call over to Carlos.
Carlos: Thank you Steve.
Carlos: And welcome to everyone, joining today's fourth quarter and full year earnings call.
Carlos: I am pleased to share the outcomes ofa transformative year at carriage services.
Carlos: Just a man toward dedication any strategic execution.
Carlos: Our results reflect our financial strategy and commitment to innovation and service excellence.
Carlos: Before sharing the results I want to express my deepest gratitude to every member of the carriage team.
Carlos: Your unwavering dedication is a cornerstone of our success and provides needed comfort to the families. We serve.
We truly appreciate you and your alignment with our vision and values.
Carlos: I am also thrilled to welcome Joan Enright as carriages, New Chief Financial Officer.
In just seven weeks, John has diabetes plea indoor operations embraced our culture and provided invaluable insight and leadership as we continue to grow into a best in class organization.
Carlos: Welcome to care, it's John.
Today.
Carlos: I will highlight our financial performance for the fourth quarter and the full year and update you on the progress of some of our strategic objectives.
Joe: Joe will provide additional detail focusing on overhead gasp low leverage ratio and our guidance for 2020 five.
Joe: Now, let's move on to the financial highlights.
Joe: For the fourth quarter, we reported total revenue of $97 7 million.
Joe: A decrease of one 1 million or one 1% compared to the same quarter last year.
Joe: We experienced an anticipated decline in funeral volumes against a challenging prior year comparable resulting in a seven 3% decrease.
Joe: Partially offset by a one 4% increase in our average revenue per funeral contract.
Joe: The volume decrease is primarily linked to a shift in the flu season, which usually starts late in the fall and equally says through the winter months.
Our January and February volume trends are positive, indicating that a late flu season may have shifted volume from the fourth quarter of last year through the first quarter of this year.
Joe: Additionally, we experienced an eight 4% increase in pre need in German rights sold and a four 2% increase in the average price for bringing in German rightful.
Joe: Which help offset total revenue a decrease of just one 1%.
Joe: When breaking down revenue funeral operating revenue was 58 7 million in the fourth quarter versus $61 3 million last year.
Joe: A 2.6 million decrease or four 2%.
Joe: Lower funeral volumes resulted in a reduction of 831 contracts or seven 3%.
Joe: This was partially offset by a slight increase in the average revenue per contract of $75 or one 4%.
Joe: They meet every operating revenue for the fourth quarter was $29 8 million versus $26 7 million last year.
Joe: Whole thing in a $3 1 million increase or 11, 6%.
Joe: Driven by an increase of preneed interim is sold of 263 contracts or eight 4% and an increase for preneed cemetery contract of $937 or nine 2% compared to the same period last year.
Joe: Almost offsetting the revenue loss in our funeral segment.
Joe: For the full year total revenue finished at $404 2 million, an increase of $21 7 million or five 7%.
Joe: Primarily driven by the continued growth in consolidated cemetery preneed sales as we experienced a 22, 9% increase in preneed and term its rightful and a seven 3% increase in the average price per breathing eating German rights, salt, which led to total preneed cemetery sales.
Joe: Of $94 3 million, an increase of $19 9 million or 26, 7% when compared to the same period last year.
Joe: Moving to adjusted consolidated EBITDA for the fourth quarter. We ended at $29 3 million, a decrease of $3 1 million or nine 6%.
Joe: This decrease was driven by the lower revenue in our fuel segment combined with the unexpected 1.2 million increase in our Trinity system investment, which we don't adjust for it.
Joe: Our adjusted consolidated EBITDA margin for the fourth quarter, we finished at 30%.
Joe: A decrease of 280 basis points compared to last year.
Joe: For the full year adjusted consolidated EBITDA finished at $126 2 million, an increase of 13 million or 11, 5%.
Joe: Adjusted consolidated EBITDA margin for the full year remained strong at 31.2% an increase of 160 basis points compared to last year.
Joe: Adjusted diluted EPS for the fourth quarter was 62 cents per share down by 15 cents or 19, 5% versus the prior year quarter.
Joe: For the full year, we ended at $2 65 per share an increase of 46 cents per share or 21%.
Joe: We are pleased with our financial performance for the full year of 'twenty 'twenty four highlighted by our continued focus on execution, while optimizing our systems and approach to support organic growth.
Our strategic adjustments throughout the year paid off despite the decrease in funeral volumes in the fourth quarter influenced by the shift in a later than normal flu season.
Joe: After raising our guidance twice in 'twenty 'twenty four we're thrilled to report that we exceeded expectations across most of our financial metrics.
Joe: This achievement on their scores our management capabilities and operational excellence setting a strong precedent for continued growth.
Joe: In alignment with our ongoing commitment to excellence, we're excited to announce the expansion of our supply chain strategies through.
Joe: Through the introduction of our new earned core line.
Joe: This launch reinforces our national partnerships and aligns with our strategic objectives of continuous improvement and disciplined capital allocation.
Joe: These efforts collectively enhance our service capabilities and create additional shareholder value.
Joe: Moving into phase two of the strategy, we're focusing on leveraging our new national partnership with express federal funding for insurance assignments.
Joe: This collaboration will provide added value to the families. We serve by enhancing the financial flexibility of our offerings potentially increasing sales across our operations.
Joe: The full rollout of this program is anticipated in the second quarter of these year, marking a significant milestone in our strategic plan.
Joe: Subsequent phases will address gasket Coraline fleet management and other essential procurement needs further optimizing our operational efficiency and service excellence.
Joe: In closing as.
Joe: As we reflect on our accomplishments and insights gained in 2024.
Joe: Carriage he said the dawn of an exciting future.
With a robust foundation built over the past two years, we're ideally positioned for sustained financial growth and industry leadership.
Joe: Our strategic commitments to passion for service optimizing our supply chain and fostering continuous improvement have sharpen our competitive edge and set the stage for groundbreaking innovations.
Joe: As we move forward our culture of excellence through our teams are more equipped than ever to deliver superior service.
Joe: Driven by your unwavering commitment to creating premier experiences, we are eager to expand our horizons deepened our connections with the community and become a best in class organization.
Joe: Carriage, we don't just set up the change we need it.
Joe: Thank you and I will now pass the call onto Jon.
Jon: Thank you Carlos I would like to welcome everyone to the call and share a brief update on my first couple of months with the company.
Jon: I've now been at carriage for seven weeks and in that time have become even more excited about the opportunity that lays ahead for me in the company.
Jon: The vision has been laid out and executed upon over the last two years is exciting and I feel fortunate to join the company at a time when there are so many opportunities in front of us.
Jon: It's important to me are the people and the culture.
Jon: The team that Carlos has built is impressive and I look forward to working with everyone in the organization to continue to drive value for all stakeholders.
Jon: Now onto fourth quarter results.
Jon: Cash provided by operating activities for the quarter was $9 3 million, which was down $4 4 million from prior year quarter of $13 7 million adjusted.
Jon: Adjusted free cash flow for the fourth quarter was $8 9 million.
Jon: Which was down $3 9 million from the prior year quarter of $12 8 million.
Jon: The change in adjusted free cash flow was driven by lower income in the quarter, primarily the funeral segment working capital adjustments and spend for project, Terry which equated to approximately $1 2 million in expense, we paid $3 million towards our outstanding debt this quarter ending the year with a maintain that leverage ratio of 4.32.
Jon: <unk>, representing almost a full turn from five one times at the end of 2023. This reduction in leverage illustrates our commitment to disciplined capital allocation along with the impact of our strong annual performance.
Jon: We experienced a reduction in interest expense for the quarter up $2 1 million due to the major amendment of our credit facility at year end, we had paid down our credit facility by $42 1 million from $179 1 million at the end of 2023 to 137 million at the end of 2024.
Jon: Turning to capital expenditures for the full year, we have invested $8 8 million for gross capex $7.3 million for maintenance Capex and $2 9 million for Trinity.
Jon: Now shifting to overhead.
Jon: Overhead was $12 9 million for the quarter compared to $11 9 million in the prior year quarter, resulting in a $1 million increase in overhead expenses. The overhead variance was driven by $1 2 million relating to project Trinity costs as we prepare for exciting implementation of this ERP and customer experience platform early in 2002.
Jon: 25.
Jon: Overhead as a percentage of revenue was 13, 2% for the fourth quarter of 2024, which is up 120 basis points from the prior year quarter of 12%.
Jon: If you exclude costs associated with project Trinity overhead as a percentage of revenue was basically flat to prior year quarter at 12%, which is within our communicated range now let's shift to the outlook for 2025 as we review the outlook. It is important to note that all metrics include the impact of planned divestitures, but do not include any.
Jon: Potential benefits or impacts associated with acquisitions.
Jon: As we get back to growth mode, any benefits or impacts associated with acquisitions, we will adjust our forecast accordingly.
Jon: <unk> are planned to be in the $400 million to $410 million range compared to $404 2 million.
Jon: That would result in an expectation of sales being plus or minus 1%. However.
Jon: However, if we were to exclude the impact of divestitures, we are anticipating revenue growth in the low single digit range, primarily driven by preneed property sales.
Jon: Adjusted consolidated EBITDA is expected to be in the range of 128 to 133 million compared to $126 2 million.
Jon: We are anticipating slight improvement in our margins based on your investment in supply chain in 2024, coupled with normalization of certain corporate expenses.
Jon: Adjusted diluted EPS of $3.10 to $3 30.
Jon: Primarily driven by lower interest rates and a lower effective tax rate, we're expecting interest expense savings in the range of $5 million to $6 million associated with the pay down of our credit facility of about 2024, and 2000 and twenty-five coupled with a full year benefit of the major amendment, which resulted in lower fees. The adjusted tax rate is expect.
Jon: Good to be in the range of 28% to 30% down from 34, 2% in 2024.
Jon: Overhead we continue to focus on our strategic objectives, which will result in slightly elevated overhead costs in 2025, driven by project Trinity. However, in the long term, we anticipate overhead efficiencies after implementation is complete and in connection with other internal initiatives.
Jon: For the full year, we expect adjusted overhead to finish within 13% to 14% of revenue, which is within our expected range.
Jon: Based on the above assumptions, we anticipate adjusted free cash flow in the range of $40 million to $50 million.
Jon: As a reminder, we have adjusted our calculation of free cash flow to include total capital spend rather than just maintenance capital.
Jon: Total capital spending in 2025 is expected to be in the range of $19 million to $21 million.
Jon: We anticipate our leverage ratio to end in 2025 between three seven and 3.8 times right within our long term leverage ratio target of three and a half to four times.
Jon: The forecast on interest expense and a leverage ratio assumes that we do not have any acquisitions in 2025.
Jon: That concludes our prepared remarks, and I will turn it back over to the operator to open it up for questions.
Speaker Change: Thank you we will now conduct a question and answer session. If he would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to like your signal to reach our equipment.
Speaker Change: Again press Star one to ask a question.
Speaker Change: Well pause for just a moment to allow everyone an opportunity to signal for questions.
Alex Paris: And well go first to Alex Paris with Barrington Research.
Alex Paris: Hi, guys. Thanks for taking my call and congratulations on the beat versus a tough comp.
Alex Paris: Thank you for your question.
Speaker Change: Yes, my pleasure.
First question, just a point of clarification on.
Speaker Change: Funeral volumes.
Speaker Change: On the last conference call you said that October was kind of weak versus your experience in the third quarter.
Speaker Change: And it sounds like November and December were weak due to the shift of the flu season from fourth quarter to first quarter.
Speaker Change: Said simply.
You said that the trends improved in January and February are you, saying January and February volume was up year over year, that's the point of clarification.
Speaker Change: I'm happy to address your question. It's a great question by the way. So yes are in October we noticed a little decline on on volume on a year over year basis and wasn't expected because I have mentioned in the past that the pull forward effect will wind off through you know the fourth quarter no later than the first quarter of <unk>.
Speaker Change: 25, and so it caught us by surprise to see that you know a negative volume on an NAV basis in October and as you remember we updated our guidance in in October as we release, our Q3, and we were being very very thoughtful and conservative because some of that trend that trend can.
Speaker Change: <unk> in November and December meeting to the negative that we just disclosed for the first quarter.
Speaker Change: However, you know as we look into what happened we did some research we see D. C. It seems pretty clear that there is a shift of the flu season that came late winter season, and it started really more into the end of December beginning of January and of course continues as we speak today and consequence of that is that.
Speaker Change: Today, we do have greater volume for both January and February that we had in Q1 of 'twenty 'twenty four.
Speaker Change: Right.
Speaker Change: Thank you for that and then.
Speaker Change: Your revenue guidance of 405 million at the midpoint.
Speaker Change: For 2025 again, excluding those divestitures that you've called out to be more like 413.
Speaker Change: Which is.
Speaker Change: Very close to my estimate of 415 million.
Speaker Change: On the divestitures specifically.
Speaker Change: Yes.
Speaker Change: But what did you do on that front in 2024, I think that there were some divestitures in 2024. The question is how much revenue did those divestitures that were completed account for how much adjusted EBITDA did they account for and what were the proceeds of whatever you sold in 2024 and just to prepare you I'm going to ask you the same.
Speaker Change: Question about 2025.
Steve Metzger: Hey, Good morning, Alex This is Steve so for 'twenty 'twenty four.
Roughly.
Speaker Change: We sold about five and a half million dollars worth of revenue.
Speaker Change: Which represented around 1.8 million and EBITDA.
Speaker Change: Proceeds were just over $12 million for the year. So again just to highlight these are noncore assets for us so not really our premier performing assets.
Speaker Change: As we look ahead I'll I'll skip to your next question anticipating five as we look at 2025 right now.
Speaker Change: Some of this is what we're targeting we have a couple of things under contract that have not closed.
Speaker Change: But we're looking at roughly.
Speaker Change: Call it $25 million worth of proceeds.
Speaker Change: And there's a there's a mix here of certain noncore assets and then some real estate.
Speaker Change: Got him out accounts for around $9 5 million of revenue.
Speaker Change: And about $3 3 million of EBITDA kind of rough numbers on trailing 12.
Speaker Change: Gotcha, but the impact you said would be $7 9 million in revenue and $2 3 million in EBITDA. You just quoted a last 12 month number for or 'twenty 'twenty four number for those.
Speaker Change: Kras instead of being sold.
Speaker Change: Yes, that's correct, because where we're seeing some of that benefit are seeing some of that revenue and EBITDA benefit in 2025 until we divest.
Speaker Change: And then after completing these divestitures how.
Speaker Change: How many funeral homes will you have a remaining in terms of core funeral homes.
Speaker Change: Confirm that number.
Speaker Change: Should result.
Speaker Change: Yeah.
Speaker Change: Or fewer funeral homes.
Speaker Change: And then what did you finish 'twenty 'twenty four with Zillow homes Wise I don't think it was in the press release.
Speaker Change: I believe and I'd have to confirm I believe it was 217.
Speaker Change: That includes the cemeteries.
Speaker Change: Which is fine.
Speaker Change:
Speaker Change: Okay and then.
Speaker Change: Moving on again on the guidance front $130 million $130 5 million in EBITDA at the midpoint up three 4% year over year, you're getting some leverage out of Opex and so on.
Speaker Change: But then your guidance for adjusted EPS is up 21% at the midpoint three three 'twenty is that being driven by I think you touched on it in the overview comments, a lower interest rate expense assumption.
Speaker Change: The lower tax rate assumption does that explain the difference.
Speaker Change: That's correct Alex.
Speaker Change: Tax rate.
Speaker Change: It was about five to six points lower expected to be as well as you know about $5 million to $6 million worth of savings in interest expense.
Speaker Change: Got you some savings.
Speaker Change: It appears from our our our supply chain that strategies as well.
Speaker Change: Great.
Speaker Change: And then I guess my last ones real quick our.
Speaker Change: Right.
Speaker Change: D and E and Capex, both up you know our DNA up 10% I'm, assuming that's related to the Trinity rollout.
Speaker Change: A portion of that will be associated with trading because trading won't go hunt accept live in 2000 and.
Speaker Change: 25, so we'll see a point it won't be a full year's worth of trading so that'll be a portion of that and a portion of that would be the amortization of call. It I'll say a prayer.
Speaker Change: And funeral preneed property.
Speaker Change: Got you and then on the Capex front, our total capex of $21 million this year up from around $16 million last year up 30%.
I'm, assuming that's still 50 50 maintenance growth and what explains the increase or what are you spending the incremental money on in 2025 versus 'twenty 'twenty four.
Speaker Change: There are some larger projects, we're doing in certain cemeteries ultimately, it's driving that he's not inconsistent or different than what we did in 2024, which is really kind of the main driver of the increase.
Speaker Change: The only thing Alex is.
Speaker Change: I remember the last two years and by that I mean 2023 in 2024, our focus was to drive as much as we could in organic revenue.
Speaker Change: We were pretty much in the backseat of acquisitions. The last acquisition was in March of 2023 without greenlaw.
Speaker Change: And then we focus on paying down our debt. So part of that effort was to allocate capital to.
Speaker Change: Two high growth projects, which was basically a preneed cemetery.
Speaker Change: Hello, getting you know maintenance are you know needs really that's required in the field is so as a consequence to that we had a lower capex number for 'twenty three 'twenty four but we have traditionally done I remember 2022 was around 26 million.
Speaker Change: And so 'twenty 'twenty four 'twenty five allow us to now since we are in a range there where we feel comfortable with the leverage ratio to allocate more capital to growth opportunities on the cemetery side for preneed property and also some of those businesses that we did not all but.
Speaker Change: But some maintenance capex to work due to be part to go back to work on 2035.
Speaker Change: One more thought.
Speaker Change: Wanted to address this one on a revenue well what do you see that guidance on revenue a little lower than expected because you see the improvement on that and of course the P. S.
Speaker Change: You know what.
Speaker Change: We wouldnt divest from those businesses our guidance would have been or are there.
Speaker Change: And intend to file during 20 million of revenue for this year.
Because you wanted to point that out.
Speaker Change: No I appreciate that.
Speaker Change: Last question I promise.
Speaker Change: With your yearend capex or our net leverage ratio target of three.
Speaker Change: Three seven to three 8% in line with that long term goal of 3.5% to 4%.
Speaker Change: Rooming that you'll be perhaps in the second half.
Speaker Change: Evaluating acquisitions again, you'll get more active in that on that front.
Speaker Change: Yes, Alexander So we're excited to get back to growth I think for us.
Speaker Change: We have some as we just mentioned some divestiture proceeds coming in that are not insignificant and so we would look to redeploy some of those bonds towards higher quality assets talking to a number of owners right now.
Speaker Change: Some really premier properties don't know how those are going to progress, but we do think it's indicative of what will be available in 2025.
Speaker Change: So as Carlos and John mentioned, while the revenue number does not contemplate growth through acquisition. We do expect to have more of an update in Q2, and we do expect to grow through acquisition. This year.
Speaker Change: Great, but just to be clear that the revenue guidance does not assume any incremental inorganic growth.
Speaker Change: That's right that's right we want to get a better feel on what that's going to look like here in Q2, So I think it'll be a better update then yeah. So.
Speaker Change: Think about it from the perspective right. The organic growth continues to be a focus of carriage. However, this is the year that we're able to go back to growth mode, but we have been able to get the structure that we need it over the last few years get the team in place to get the systems right.
Speaker Change: Being able to launch in 2025 is a really big deal for us are busier.
Speaker Change: And these enable us with a better margin than we ever had before I mean, our margins are probably second to the highest one between 'twenty one as a result of COVID-19.
Speaker Change: So now we're able to focus on growth and our submission we have a we have really good plans for that and have not paid in Q2.
Speaker Change: I'm pretty sure it will be good.
Speaker Change: The excitement across the board from from what we have planned for in 2025.
Awesome. Thank you very much I appreciate you taking my questions I'll get back in the queue.
John: We'll move next to John <unk> with Sidoti <unk> Company.
John: Good morning, everyone and thanks for taking the questions.
Speaker Change: I'd like to start with the fourth quarter results and what you'd green from maybe a seasonally somewhat weaker fourth Q with you changing the pricing strategy.
Speaker Change: On a more regionalized basis in light of maybe some of that weakness you know call. It anything you can share about the pricing strategy and how it's playing out when you have maybe some unexpected curves into volume.
Speaker Change: Yeah. That's a great question John Good morning, So as we recognized back in October that you know we were struggling with some of the guys in volume, but that were not normalized you'll remember this when the normal seasonal.
Speaker Change: Year or is this in the last year, you will have Q1 being the largest order of the Q4 being the second largest and again Q2 will be the third in Q3 will be the fourth.
Speaker Change: Or if you look at 2024 Q4 is actually the last quarter of the year, which is very abnormal.
Speaker Change: Because of that and we were able to recognize that early we fought for any call that was the year, where the west formation of barrel that you didn't allow us to be as competitive as we were in terms of keeping the price up because we wanted to keep as much volume as we wanted so you didn't see that the continuous trends on our pricing capacity.
Speaker Change: Over the last three months of the year. However are so Jacob pricing review strategy continues in place we are holding our strategic pricing review meetings for January February and March to update our pricing for 2024 and that will continue to be an ongoing basis for 2025 quarter to quarter.
Speaker Change: Fair enough and this has been a fair amount of commentary in the media about this being the worst flu season. In 15 years, you mentioned that January and February off to good starts can you kind of put it in context of how good of a start it is in light of some of the full numbers and also do you.
Speaker Change: That flu seasons spillover into the second quarter.
Speaker Change: I wouldn't know about the second quarter, you know it really depends how the weather plays out you know in India.
Speaker Change: Spring months us getting warm belgravia at least here in Houston and it seems like you may not last as long as we thought.
Speaker Change: But as it relates to your question for you know for our volumes.
Speaker Change: Whereabouts.
Speaker Change: I'll just give you some ranges about 1% to 3% year over year volume for January and about the same for February.
Speaker Change: Got it got it.
Speaker Change: Just to shift a little bit about some of the cost side of equation here.
Speaker Change: Oh, he's done adding personnel and it's hard to supply chain initiatives in 2025, it is still additive.
Speaker Change: Boston is going to the SG&A line.
Speaker Change: And just to clarify Josh you're asking if we're going to add personnel to support the supply chain focus.
Speaker Change: Correct.
Speaker Change: We do have plans, we think theres a lot of opportunity. There. So we do have plans to add another individual to help drive and accelerate those opportunities. So at some point 2025, we expect that to be the case.
Speaker Change: Okay. So are we going to see some increase in SG&A costs, and so I guess one last question.
Speaker Change: Maybe a little bit on the debt expected pay down is that going to versus debt pay down post the sale of the acquisition are you going to do steady state of debt repayments and about the balance of the year.
Speaker Change: Okay.
Speaker Change: I'm struggling a hearing your question I think you're asking if we're going to allocate the proceeds from the divestitures easier to paying down debt because that's what you're asking.
Speaker Change: Yeah, just looking at the timing of debt repayments and how we should think about it now because the balance of the year.
Speaker Change: Yes, we have we have queued over the last two years that our long term range for leverage ratio is three five to four times when I keep it like that.
Speaker Change: Short term you know, we do have a nice pipeline of opportunities for for acquisitions, but until we have something you know that it is in the books any proceeds from divestitures goes down to save interest expense to our facility and then we'll use some of those proceeds are.
Speaker Change: Once we're ready to go to close so some of those deals.
Jon: And Jon just to circle back on your question regarding <unk>.
Jon: Just to circle back to your question regarding Opex, we built all the you know the additions into kind of our expectation. So in our commentary in regards to Opex guidance already includes any additions that we're contemplating.
Jon: Understood. Thanks, guys I'll get back in school.
Jon: Thank you John.
Speaker Change: We'll go next to Liam Burke with B Riley.
Liam Burke: Yes. Thank you good morning, Carlos Good morning, John morning, Steve.
Jon: Yeah.
Jon: Okay.
Jon:
Call US you had a higher average revenue per funeral contract in the quarter, but also a higher percentage of cremations.
Jon: As.
Jon: And the mix.
Jon: Typically cremations are a lower revenue per contract how are you able to have more cremation customers, but higher revenue per contract.
Jon: That's a great question, Yeah look we've been focusing on over the last Oh, it's probably about a year, maybe 10 months is Waco conversion ratio right. It is those families that come in with the idea of having information and perhaps for that for them that means a direct cremation.
Jon: And through a process of indicating to families or what it is available to them.
Jon: Able to to have them choose something that is not just a reclamation that could be a.
Jon: A cremation with service full service that could be a cremation with just a you know upgrades earn if perhaps a small gathering to say a final goodbye that could be sold mineralization options for the family could be also a full blown visitation followed by a lifestyle ratio and so now we're really in a.
Jon: Working on team development and are helping our.
Jon: It seems so far field directors across our businesses. So they can really percent all options to all families. Because we believe that perhaps some of those families have come in the coming without idea of automation, but don't really know what it means and what is actually available to them, but that's been the strategy over the last 10 months.
Jon: Casinos will be for 2025.
Speaker Change: Thanks, Carlos and John on your free cash flow guidance I know you mentioned that all cat, it's an all in Capex estimate.
Speaker Change: But how much influence the pre need cemetery sales have on that on that cash flow guidance.
Speaker Change: So it includes kind of a similar kind of ratio.
Speaker Change: You would think from prior years at preneed is going to kind of turn a little bit slower than in kind of funeral business. So ultimately you could you could.
Speaker Change: Think about it it is.
Speaker Change: Discounting kind of kind of a transition problem.
Speaker Change: Into our free cash flow.
Speaker Change: Okay. So the preneed sales rate is.
Speaker Change: It would be above or below this year's cadence.
Speaker Change: 20th for kids hear it well.
Speaker Change: And the expectation it will be a kind of a below this year's cadence, but it's still a higher higher than if you know our revenue expectation.
Speaker Change: Great. Okay. Thank you.
Speaker Change: Once again it was star one if you had a question we will go next to George Kelly with Roth Capital Partners.
Everybody. Thank you just a couple of questions for me first on Trinity I was curious if you could.
Speaker Change:
Speaker Change: Go through the expected timing of the various sort of functionality what what Trinity is bringing can you just walk us through when when you expect to turn on that functionality.
Yes, absolutely happy to do that.
Speaker Change: George So over the last year as you know we've been working mostly on programming, but the last few months have been now work on the testing side.
Speaker Change: In parallel testing, making sure that everything that's been done on the programming will work once we go live.
Speaker Change: Several iterations of that to make sure as you know any ERP implementation, it's very involved.
Speaker Change: So quite challenging and you find some prices along the way I don't think I've heard the one that goes out of a cent successful plan. However, we're pretty much at that point, where we're going to go to a pilot of the program in the second quarter of this year.
Speaker Change: And then a 30 to 60 days.
Speaker Change: After that depending on how that pilot goes a full launch to a rollout throughout the remaining of 2025 in every business is specifically funeral homes.
Speaker Change: And then we'll move into cemetery in the first quarter of 2026, we do believe that Trinity will be quite a significant.
Speaker Change: Opportunity to maximize to become more efficient improve our systems and it is not just any ERP I do want to emphasize that it is it will give us all the back office that we currently have with our with our legacy system, which we call surface, which is a pretty outdated today.
Speaker Change: But he will enable us to do analytics it will allow us to bring AI into our accounting you know our procedures and.
Speaker Change: Become more efficient on that are reporting will become dramatically better but most importantly in addition, zoro our compliance items is it contains a family portal that's how we call. It the family portal what that is is a way to engage families from the moment they called the business there.
Speaker Change: The moment they leave the funeral home or cemetery, both services and it is a way where they can continuously see where they are and each step of the stage of the funeral and cemetery, but thats, how we are going to be able to submit paperwork documentation and they can track every single item within their services.
Speaker Change: You provided a very exciting we're very very I'm happy about that because I don't believe that's an option that that's currently available out there for families today.
Speaker Change: What have you, but know that I know of at least or familiar with <unk>.
Speaker Change: So from my point of view I think we're the first wanted to ask something like that and that will certainly.
Speaker Change: You have a better experience to their families and and that should also give you ever.
Speaker Change: So referrals and better experience better reviews, unless it goes to that potentially also with our average because we were able to present better to families our services and our products.
Speaker Change: Okay, that's really helpful.
Speaker Change: Context. Thank you and then second question on <unk>.
Speaker Change: Your guidance so on your revenue guide I'm a little confused.
Speaker Change: You mentioned in your prepared remarks that your guide reflects a low single digit organic.
Speaker Change: Gross number.
Speaker Change: But the confusion I guess, it's just why wouldn't it be higher you just mentioned that January and February.
Vault funeral volume was positive low single digits, I would imagine theres pricing on top of that.
Speaker Change: And then your cemetery preneed.
Speaker Change: I guess.
Speaker Change: Guessing would be it I don't know, maybe a double digit rate or close to it. So I'm just a little confused on what the disconnect is.
Speaker Change: What am I missing I guess on on your organic growth target.
Speaker Change: So George I mean, I know you keep it low single digits is when you.
Speaker Change: Excluding the impact of divestitures right. So that is part of the driver, but I think your question is why isn't the core business is still here growing at a greater rate given the fact that a.
Speaker Change: January and February businesses have a uptick to last year, but as Carlos indicated that was you know low single digits, you know, 1% to 3% as the information you gave.
Speaker Change: Cemetery perspective.
Speaker Change: Our numbers might be a little bit lower than kind of double digits right now as an expectation as we kind of work through the year. So I think it might be allowance if youre looking at your model associated with what you had been there for cemetery.
Okay. So maybe just to be more specific.
Speaker Change: Your organic growth assumptions in.
Speaker Change: Your funeral and cemetery business for 2025 or what.
Speaker Change: It's about 1% on the funeral side and about you know high single digits on the cemetery side.
Speaker Change: Okay, Okay and so.
Speaker Change: Not to belabor this too much but are you just saying.
Speaker Change: It's too hard to have constant you know two months doesn't make a trend and you want to watch the year develops before you get too optimistic is that is that the real issue or is there some kind of challenging comp that you'll be facing midyear.
Speaker Change: No I don't think this is a challenging comp I do feel pretty confident where where the pull forward is today for for 2025 I do think we are at the end of it but you know if if it is a fact that the flu season shifted from the Q4 of last year to Q1 of this year, that's not sustainable right. It will go away.
Speaker Change: 'twenty 'twenty you know of Q1, and so I don't think that's going to create a trend in terms of volume for the rest of the year and so well while Q1 is looking better than we expected for that reason and he is 1% to 3% better on the volume side I'm not speaking about revenue just volume.
Speaker Change: It will be difficult to assume that that's going to be the trend for the remaining of the year or so.
Speaker Change: As you have noticed our style is more around you know, making sure that we commit to something that we believe we're going to really hit hopefully we can do better than over promise, what we I'm sorry over them you better what we promise.
Speaker Change: And so.
Speaker Change: That's been pretty much our our thesis of work and why are we being somewhat due to your question conservative on the guidance organically speaking because we did have pretty good 'twenty 'twenty four organically speaking and so it will be a significant amount of growth on top of that already.
Speaker Change: Significant growth for 2024.
Speaker Change: So that's why we just we're trying to be somewhat conservative.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: Thank you George you. It appears there are no further questions at this time I would like to turn the conference back over to Carlos for any additional or closing remarks.
Speaker Change: Thank you operator.
Speaker Change: As we conclude today's call. The key takeaway is that our 'twenty 'twenty four results reflect our collective passion innovation and unwavering determination to achieve our strategic objectives are there.
Speaker Change: Administrative by the impressive organic growth and a significant debt repayment accomplished last year.
Speaker Change: Carriage is set for an exciting and promising future.
Speaker Change: Dedicated to creating premier experiences and concentrating on growth.
Speaker Change: We'll continue to reach new heights, and obtain even greater success.
Speaker Change: We look forward to speaking to you again, when we report our first quarter performance have a fantastic day.
Speaker Change: Thank you ladies and gentlemen that concludes today's call. Thank you for your participation you may now disconnect.
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