Carriage Services, Inc.

Ladies and gentlemen, welcome to the fourth quarter and year-end 2020 results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press the star then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host today, Mr. Steve Metzger from the management. Sir, please go ahead.

Steve Metzger Thank you, operator, and good morning, everyone. This is Steve Metzger, Senior Vice President, General Counsel for the company. Today we'll be discussing our fourth quarter and year-end results for 2020. Our related earnings release was made public yesterday after the market closed. We have posted the press release, including supplemental financial tables and information, on the investors' page of our website. This audio conference is being recorded and an archive will be made available on our website later today through February 23rd. In addition to myself, on the call this morning from the management team are Mel Payne, Chairman and Chief Executive Officer, Ben Brink, Senior Vice President and Chief Financial Officer, Carlos Quesada, Senior Vice President of Sales and Marketing, Peggy Chappot, Vice President of Operations and Acquisitions Analysis, and Jason Bookbinder, Director of Talent Acquisition. Today's call will begin with formal remarks from management followed by a question and answer period. Before we begin, I'd like to remind everyone that during this call, we'll make some forward-looking statements. Any comments made by our management team that state our plans, beliefs, expectations, or projections for the future are forward-looking. 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, both factors identified in our earnings release and in our filings with the SEC, both of which are available on our website. During this call, we'll also discuss certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the appropriate GAAP measures can also be found in our earnings press release as well as on our website. Now I'd like to turn the call over to Mel. Thank you, Steve.

It's hard to describe in words what this last year has meant when the world is in crisis with a once-in-a-lifetime, hopefully pandemic, called COVID, with new variants around the world popping up, even now. And yet, the shock of that hit the world, then it hit the US, state by state, area by area. Then it hit our industry, hit our company, hit our people. And it was a year of great tragedy for many individuals, companies, families. And yet, we are in the business of death. And death has been around since the human species has been around. And so we have a mission and a vision of our company of being the best at serving families when they're most in need. And there were many more of them in 2020 than ever before in need. For that reason, this earnings release of the fourth quarter and year was not really just an earnings release. It was a story about our people. It was a story about courageous, heroic service, overcoming adversity and obstacles, both nature-made and man-made with government restrictions and mandates. And our people rose to the occasion after initial shock an adaptation period, an innovation period, an entrepreneurial period, and it is impossible to put in words what our people achieved business by business, community by community throughout 2020. In the process, they absolutely were what I call a proof of concept of how we operate and consolidate a highly fragmented industry called the funeral and cemetery industry. I wrote about this at the end of the 16 shareholder letter. It's at the end of this one. So this release is more like a shareholder letter. It's a story of love toward our people and their love toward their client families and communities. It's a story of support by those of us in the Houston office and across the country. that have the privilege and honor of supporting such courageous service by so many high-performance heroes. I've waited for this kind of moment as a co-founder almost 30 years ago to use this description that I'm about to read you. I'm a big fan. I'm a big fan of investing. After losing everything on October 19, 1987, I committed to to become a great investor. I studied all the masters available then and since, and I wound up studying the very simple but wonderful investment ideas and philosophies about human nature from Warren Buffett and Charlie Munger. So I'm going to read you a page from Snowball that could really be a page about about me and about this company. So this is a quote from Warren Buffett. I feel like I'm on my back. And there's the Sistine Chapel. He's talking about Mercer Hathaway. And I'm painting away. I like it when people say, gee, that's a pretty good looking painting. But it's my painting. And when somebody says, why don't you use red instead of blue? Goodbye, it's my painting. I don't care what they sell it for. He's talking about the share price, Berkshire Hathaway. The painting itself will never be finished. That's one of the great things about it. The big question about how people behave is whether they've got an inner scorecard or an outer scorecard. It helps if you can be satisfied with an inner scorecard. I always pose it this way. I say, look, would you rather be the world's greatest lover but have everyone think you're the world's worst lover, or would you rather be the world's worst lover but have everyone think you're the world's greatest lover? Now, that's an interesting question. Here's another one. If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record, or be thought of as the world's worst investor when you actually were the best. In teaching your kids, I think the lesson they're learning at a very, very early age is what their parents put the emphasis on. If all the emphasis is on what the world's going to think about you, forgetting about how you really behave, you'll wind up with an outer scorecard. Now, my dad, he was a 100% enter scorecard guy. He was really a maverick. But he wasn't a maverick for the sake of being a maverick. He just didn't care what other people thought. My dad taught me how life should be lived. I've never seen anybody quite like him. That's the end of my quote. But I editorialized. I use this a lot inside our company. And where he's talking about the Sistine Chapel and somebody coming along and saying, oh, you should use this or use that to make it better, I put that is a founder's view of the world, and it captures my thinking perfectly. And when it comes to finding people who have an inner versus outer scorecard, I have editorialized the following. How do we measure and quantify this behavioral characteristic? Because we need more people that have an inner scorecard. and are not looking at the scorecard rather than being on the playing field making plays to win the game. And then at the bottom I say, I finally arrived here talking about his dad didn't care what other people thought. Rather late in life, and I'm a better person and leader because of this confidence in my self-identity. So that's how I would do an analogy of carriage today. For those who don't do enough studying about how we actually are and how we actually behave, you would not want to buy our shares. For those who do, and there's a lot of meat on the bone in this release and in every release we've made, there's a lot of meat on the bone in the 16th shareholder letter and the 17th shareholder letter and the 18th shareholder letter. If you want to see what it looks like for a company to go through a transformation in a short amount of time, Put side by side the 18 shareholder letter and this release, and you will be shocked. Read the 18 one first, and then read this release. You will find that Jim Collins had it right. First who, then what? All the companies who subsequently failed to sustain greatness, and there were only 11 of them that made the cut, did it because they picked the wrong who. either the board or the CEO, sometimes both. First who, then what. You've got to get the who right most of the time to really have the what be the kind of performance this company showed in 2020 in the middle of a pandemic. Now, there are those out there, and I've heard these theories, that think this was a COVID lift only. You could not be further from wrong. And to prove it, I'm going to introduce one of the right first twos, and we've never had a first two like this in our company. Carlos Guisado.