Carriage Services, Inc.

Q1 2023 Earnings Conference Call


spk01: Good day and thank you for standing by. Welcome to the Carriage Services first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. 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, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Please go ahead. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary.
spk04: Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Counsel, and Secretary. Steve Metzger, Executive Vice President, Chief Administrative Officer, General Carlos Quesada, President and Chief Operating Officer, and Keyon Gramaya, Executive Vice President and Chief Financial Officer. On the Carriage Services website, you can find our earnings press release, which was issued yesterday after the market closed. Our press release is intended to supplement our remarks this morning and include supplemental financial information, including the reconciliation of differences between GAAP and non-GAAP financial measures. Today's call will begin with formal remarks from Mel, Carlos, Keyon, and me, and will be followed by a question and answer period. Before we begin, I'd like to remind everyone that during this call, we'll make some forward-looking statements, including comments about our business and plans, as well as 2023 guidance. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today. These risks and uncertainties include, but are not limited to, factors identified in our earnings release, as well as in our SEC filings, all of which can be found on our website. Thank you all for joining us this morning, and now I'd like to turn the call over to Mel.
spk06: Good morning, everyone. It brings me immense joy to join you all today following weeks of rigorous rehabilitation. The support and thoughtful prayers and wishes I have received from so many people across our company during my recovery have been nothing short of heartwarming, even humbling, and I will be forever grateful for each and every one of them. Although my rehab journey to full recovery continues, I am fueled with unwavering motivation and optimism. by the overwhelming encouragement from everyone at Carriage, but especially from our senior executive team, Carlos, Steve, and Kian, who together with me comprise our strategic vision and principles group. I formed this group of senior leaders almost three years ago as part of my succession plan to serve as a vehicle from which I would develop and mentor the future executive leaders of Carriage. and after working with Carlos, Steve, and Kian intimately over the last two months on various issues for Carriage, I am delighted to report that the future executive leadership at Carriage is indeed in great hands. Nearly 33 years ago, i embarked on a journey to build a great company in this industry not to be the biggest but to be the best today i am proud to see that dream come to fruition his carriage has evolved into a high-performance culture company and despite our challenges which we view as opportunities our progress is a testament to our unyielding commitment to excellence in our vision and mission of being the best Thank all of you for your interest in our company, and I will now pass it on to Carlos for more color on the first quarter performance.
spk07: Thank you, Mel. Good morning, everyone. We are pleased to announce that our first quarter financial performance exceeded our expectations. As we mentioned during our last earnings call on February 23rd, we anticipated a challenging first quarter compared to the record-breaking first quarter of 2022, which was highly driven by the spike in COVID-19 cases. To put things into perspective, our first quarter of 2022 had 10.5% or 1,409 of our ad need funeral volume attributed to COVID-19 cases. In contrast, this year, only 2% or 242 cases were attributed to COVID-19, representing a swing of 8.5% for 1,167 cases. With this in mind, let's review our operating performance For the first quarter, our total funeral operating revenue was 66.5 million, a decrease of 3.7 million or 5.3%. However, when we offset the COVID-19 volume in the first quarter of both 2022 and 2023, we saw an increase of 1.2% in funeral volume over 2022. As a result, our total funeral field EBITDA was 26.6 million, a decrease of 4.6 million, or 14.9%, with a total funeral field EBITDA margin of 40.1%, a decrease of 440 basis points. In the first quarter of 2022, we had a record year with record margins, so the bar was very high. Additionally, inflationary costs put some pressure on our margins. mainly from salary and benefits and general administration expenses. However, we continue to work to adapt and pass on these cost increases to the consumer. Moving on to our cemetery portfolio, after overhauling our whole cemetery sales strategy over the last two years, we are very excited at all the hard work starting to pay off. For our total cemetery operating revenue for the quarter was $21.6 million, an increase of $1.1 million or 5.5%. Our total cemetery fill EBITDA was $8.4 million, a decrease of 202,000 or 2.4%, with a total cemetery field even margin of 38.8%, a decrease of 320 basis points. Our pre-need teams were instrumental in driving the total cemetery revenue performance. In the first quarter of this year, we ended at $14.5 million in pre-need cemetery sales production, reflecting an increase of 4.8%. Even after a record high comparison, our pre-need teams executed very well, and we see the positive impact the sales edge and our pre-need cemetery strategy is making broadly. Additionally, I mentioned in our last call that we have been working on recruiting new self-counselors and strategically upgrading a few self-leadership positions. I am excited to report that we have achieved these goals. Just in March alone, we experienced year-over-year growth of 17.3%. With these positive trends against challenging comps, I feel very positive about delivering high performance in pre-need cemetery sales. As I mentioned in another call, this is only the beginning for pre-need cemetery sales at Carriage, and we have many opportunities to grow over the next three to five years. Consequently, we confirm our previously communicated 2023 target of low double-digit year-over-year growth in pre-need cemetery sales. Regarding total revenue, We ended the quarter at 95.5 million, a decrease of 2.6 million or 2.7%. And our total field EBITDA was 41 million, a decrease of 4.4 million or 9.7%. This variance is driven by the record first quarter during COVID-19 pandemic spike that led to higher volumes and margins. In addition to these years' inflationary costs, however, When we compare the first quarter results of this year to our 2019 base year, we have grown at an 8.4% CAGR in total revenue and 9.7% CAGR in total field EBITDA. Furthermore, the total EBITDA margin in the first quarter of 2019 was 41% compared to 43% in the first quarter of this year, representing 200 basis points of improvement. Now let me share an update on the progress of our new system, Trinity. We are pleased to announce that Trinity has achieved a significant milestone over the past quarter by completing the discovery phase, which involved documenting requirements that will inform the product's final design. This work involved more than 150 hours of workshops with internal experts who provided details on critical processes within Carriage Services' accounting, finance, and operations. Information gathered will be used to finalize the functionality of Trinity during the design and build phase, which is expected to conclude in the third quarter of this year. This project is currently tracking to its original plan and will begin testing later this year. A full-scale deployment is anticipated to commence at the beginning of the first quarter of 2024. Upon deployment, Trinity will provide exceptional value by enabling unique digital experiences for families, enhancing efficiency through highly automated processes, and supporting carriage ambition 10-year growth plan through scalability and improved productivity. Moving on to other great news, I am thrilled to share exciting updates. Firstly, I hope you had a chance to peruse our 2022 sharehold letter, which is packed with valuable insights and outlines our bold 10-year goal. If you haven't had an opportunity to dive in yet, I encourage you to do so at your earliest convenience. Now to the news that are sure to pique your interest. As communicated on our last call, we have been working tirelessly on our new prearranged funeral strategy, and I am delighted to announce that it came down to the wire with two finalists. As a result, we're ready to make the final evaluation, and we will announce the new partnership that will work alongside us and bring this vision to fruition before the end of this month. With this new partnership, we're going to revolutionize the way we serve and protect families through the power of pre-planning while also creating substantial financial value for our shareholders. The possibilities are endless, and we cannot wait to share more information. So stay tuned for updates as we embark on this new exciting journey. As I close my prepared remarks, I am thrilled to share that we are pleased with our first quarter performance. We remain fully committed to maintaining our consistency and discipline in executing with excellence to achieve our goals. With the COVID-19 pandemic high comparables now behind us, We have a clear path to delivering high performance through market share gains, delivering exceptional results through seamless acquisition integrations, driving growth in our printing cemetery sales, and optimizing financial performance in each of our portfolio of businesses. I want to express my gratitude for our entire team's hard work and dedication, without whom none of this would be possible. And with that, I'll pass it over to Kian. Thank you.
spk09: Thank you, Carlos. Before I dive into the review of our quarterly financials, I wanted to express my gratitude to Mel, Carlos, and Steve. as well as the broader Carriage family on welcoming me to the Carriage team and to the company's strategic vision and principles group. This week marks my sixth week in the seat, and as you can imagine, I've been drinking through the fire hose as I work my way up the learning curve. I'm fortunate to have assumed the leadership of a hardworking first-class team within my CFO organization and working with my stellar colleagues across Carriage. I am super excited to have joined Carriage at such a pivotal time, and I look forward to being a part of the company's continued success to drive long-term shareholder value and performance. Now, turning to a review of the quarterly financial results. For the first quarter of 2023, under generally accepted accounting principles, CARES reported total revenue of $95.5 million and net income of $8.8 million, or $0.57 per diluted share. This compares to total revenue of $98.2 million and net income of $16.4 million, or $1 per diluted share, in the same period in 2022. Now looking at our adjusted financials, which are reconciled in the appendix tables of our press release, this quarter we reported adjusted consolidated EBITDA of $27.8 million, adjusted consolidated EBITDA margin of 29.1%, and adjusted free cash flow of $17 million. This compares to adjusted consolidated EBITDA of $32.5 million, adjusted consolidated EBITDA margin of 33.1%, and adjusted free cash flow of $12.4 million in the first quarter of 2022. As you can see, a comparison of financial results for the first quarter of this year to last year reinforces the point Carlos made earlier that an elevated first quarter 2022 performance was driven by a spike in COVID-19 cases. Nonetheless, we are excited with how the first quarter of this year turned out relative to expectations. Taking a look at this quarter's income statement compared to the same period last year, Carlos already touched on field-level revenue and EBITDA, so I will focus on the other corporate expenses. First, I'll start off with total G&A, which includes regional and other corporate costs. In the first quarter of 2023, total G&A increased approximately 0.7 million, primarily related to an increase in salaries, benefits, and incentive compensation. Second, interest expense increased nearly 3 million, mainly driven by the average interest rate for our credit facility increasing from 2.1% in the first quarter 2022 to 7.9% this quarter. Lastly, income tax expense decreased 1.6 million as a result of our lower taxable income for the quarter. Turning back to adjusted free cash flow, we saw an increase of 4.7 million or 37.8% this quarter over the same quarter last year. This increase was attributed to favorable working capital changes and lower maintenance capital expenditures through our disciplined approach to capital outweighs. From a leverage perspective, as the team signaled on the fourth quarter call back in February, the first quarter of 2023 would hit a peak leverage ratio with the Greenlawn acquisition. Despite a $44 million cash outlay for Greenlawn in the quarter, we only borrowed an additional net $23 million from our credit facility. Using our bank covenant compliance ratio as defined by our credit agreement, we ended the quarter with five and a half times leverage. Our expectation, which is aligned with our 2023 guidance, is that the quarter end leverage ratio will continue to steadily decrease throughout the year. With all the positive momentum in the first quarter, we are reaffirming 2023 guidance of 375 to 385 million in total revenue, adjusted consolidated EBITDA of 110 million to 115 million, adjusted diluted earnings per share of $2.25 to $2.40, and adjusted free cash flow of $50 to $60 million. As we continue to realize our results and deliver on our plan through the year, we will tighten up or update our guidance ranges. With that, I'll pass it over to Steve.
spk04: Thank you, Keon. As it relates to our growth through acquisition strategy, we were excited to enter the Bakersfield, California market in the first quarter by closing on the purchase of green lawn funeral homes and cemeteries. Greenlawn is a significant addition for us as it generated roughly $18 million in revenue last year and is the market leader in Bakersfield with an approximately 40% market share. In addition to our recent acquisitions in Charlotte and Orlando, Greenlawn continues our strategic focus of acquiring premier businesses in large growing markets. Our team will continue to focus on the integration of Greenlawn throughout the year as we maximize the growth potential that continues to make this such a unique and attractive opportunity for us. As Mel referenced during our December release outlining our high performance credit profile restoration plan, we've identified a few potential divestiture opportunities that involve businesses that no longer align with our long term strategy. in which we believe can potentially generate a premium valuation. As we grow through acquisition of larger businesses and bigger markets, we will also look to prune our portfolio, when and where it makes sense. Our intent is to then use those proceeds to support our efforts to pay down debt. We expect to have more to share in this area in the upcoming quarters. Finally, as Carlos mentioned earlier, we included a comprehensive outline of our long-term growth plan in our annual shareholder letter. In that letter, we noted that a key focus for this year is adding new talent to our board of directors. As we pay down debt and reposition ourselves for continued significant growth opportunities in the future, we want to ensure that we have the right expertise and experience supporting those efforts at the board level. To that end, we've engaged Russell Reynolds to assist with our search, and we are committed to strengthening our board this year through further diversification of our directors, including gender, experience, and skill set. We look forward to identifying and welcoming at least two new directors within the next six months. We'll continue to keep our shareholders apprised of our board refreshment efforts in the coming quarters. And with that, we'll open it up for questions.
spk01: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press R11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Alex Paris of Barrington Research. Alex, your line is live.
spk02: Thank you. Thanks for taking the time to answer my questions. First of all, congrats on the better than expected first quarter results. Second, I wanted to welcome Mel back to the call. It's so good to hear your voice. And lastly, welcome Kian in general, his first call, and look forward to working with you. So as for my questions, I have a couple. starting first with the acquisition activity, since you did a pretty good overview of the organic results in the quarter. So you made three acquisitions over the last 12 months, significant, including Greenlawn. Could you give us sort of an order of magnitude on those three acquisitions, what they ought to contribute to 2023 revenue? either actual or since Greenlawn was just closed recently on a pro forma basis. If you added the revenue of the three up and the adjusted EBITDA contribution from the three for 2023. Good morning, Alex.
spk04: This is Steve. So I think, you know, in terms of order of magnitude, Greenlawn obviously Not only the largest of the three, but quite frankly, I think we were talking about this the other day, the largest from a revenue perspective that we've added in the history of Carriage. So that $18 million that they did last year, we're looking to hopefully grow upon this year. So that one is going to take a lot of our focus on integration. So that would be at the top of the list. And then in Charlotte with Heritage, which we talked about on the last call, that's another one that has a lot of opportunity for us. It's a little bit larger than Carriage. San Juan and Orlando, which we did in August. They have the potential on the cemetery side. They have multiple funeral homes. So that's probably number two on the list. And then San Juan, which is just a very different business for us, very high call rate. They do a ton of business out of two smaller locations in Orlando. They focus on a very particular demographic that we're really about. And so their growth opportunities are a little bit different from the two that have the cemeteries attached to it. From a pro forma revenue perspective, roughly speaking, we're looking at $25 to $30 million this year in pro forma revenue. Still working on what that EBITDA will look like as we're taking some opportunities to work on prices in both Charlotte and in Bakersfield. So we'll have some more detailed information on that as we go through that price change.
spk02: Great. That's helpful, Steve. Thank you. Carlos, you gave us a little bit of an update on Trinity. This is the new ERP system that's going to be part of funeral services going forward, and I believe it's integrated, in fact, into or will be integrated into Sales Edge on the cemetery side. What is it that you hope to accomplish with these two new technology platforms on the funeral services and cemetery sides going forward, and to what extent are they rolled out? I believe... Trinity is nearly rolled out. So just an update there on those two technology platforms.
spk07: Yeah, so Alex, we're still in the process. So the rollout itself will be somewhere around the first quarter of 2024. Right now, we're in the process of finding what our processes are here compared to those to the ERP that we call Trinity. And then closing that gap, you know, over programming and actually the development itself is very, very broad in terms of its capacity. But at the end of the day, we really believe Trinity will enhance how we service families in the front of the house, let's just call it that, as well as being able to be more efficient and productive on our reporting accounting processes and overall how we work and how we serve families in general terms. We will be able to do cemetery contracts digitally, which right now is still in a manual basis. That will be a huge driver because then we will be able to close pinning cemetery cells on site at the moment, whether that's a family home, an event, and things of that nature. From a reporting perspective, it will enable us to have very tight reporting more than anything live because right now we work based on batches from how CIFAS delivers or gets information from the field. And we certainly are going to get some benefits from a productivity perspective. So it is very broad, but we're not close to pilot. The pilot is program sometime around the last quarter of this year and start deployment in 2024.
spk02: Great, thank you for that. And then my last question, I'll direct this one at Kian. And understanding fully that you've only been in the city for six weeks, but given the outperformance of the first quarter, you reaffirm guidance for the full year and again that could be related to your tenure in the seat as well as some element of conservatism but just wondering what sort of color you can give me there and is it safe or is it aggressive is it safe or aggressive to say that you'd more likely be at the higher end of full year guidance ranges
spk08: Thanks, Alex. Really appreciate that. I think you've somewhat answered your question or your question with your question. So, yes, the conservativism and also me being kind of new to the seat, you know, as I mentioned, I'm six weeks here. And, you know, for us, what I would prefer is that we have a little more visibility in kind of how we're performing in the second quarter and kind of how the forecast looks for the rest of the year before we tighten up guidance. So, you know, look for us to, as we get more visibility, for us to either tighten up guidance or update guidance. Now, for us to guide today as to whether we're, you know, tracking towards the high end of the range, again, that's not something that we have, you know, full visibility on or, you know, I just want to make sure that we have that, you know, confidence level of meeting that guidance range. So, right now, we're just not comfortable providing that update.
spk02: That's fair enough. I appreciate the extra color. Thank you very much, and that's my questions for now.
spk01: One moment for our next question. Our next question comes from Liam Burke from B Reilly Financial. Liam, your line is live.
spk03: Thank you. Mel, it's great hearing you back on the call. Great to be here, Liam. First question I had was on the funeral home business. Could you give some sense as to how cremation sales were either on a year-over-year or a percent of revenue basis and how that contributed in terms of relative margins?
spk07: Yeah, absolutely. As you know, the information mix continues to change somewhat consistently, you know, over the last few years. For this quarter, we got a little update on our information mix, you know, around 2%. The pocket side, we lost a lot of that with $134, you know, increase in our average. That's 2.5% improvement year over year. This is comparing Q1 to Q1. That's for total. As it relates to same-store, 2.2% of our cremation mix went up, but our average went even higher, about 189%. That's 3.5% offset from a self-average perspective. We're not, you know, really, really concerned. We do have, you know, a very good strategy as it relates to cremation conversion. That means families that are going to a funeral home that want to have pre-cremation, how we, you know, present them with all of the options they can choose, a cremation with service or a different type of celebration of life, allow us to then, you know, make up some of that cremation exchange. So, pretty much where we thought it would be and have a good strategy to continue to tackle on that front.
spk03: So, I just want to make sure I have it straight. You saw year-over-year growth in cremation sales and then higher per sale That is correct. Okay. Now, how about on the EBITDA margin side? Have they been better than traditional burials or the same, or how has that contributed to the EBITDA margin?
spk07: So, we don't really look at the EBITDA contribution by business in each category, right? We don't look at cremation EBITDA, burial EBITDA, or funeral with service EBITDA. We just look at EBITDA in general terms, business by business. You know, I can tell you that the margins, they're really, really strong, right? So, you know, ending up where we ended up, which is 40.1%. Those are very strong margins. When compared to Q1 of 2022, yeah, there was 440 basis points dropped. But those margins, you know, to say those are sustainable are very, very difficult. I actually feel very proud of the margins we have. as you might have been on, are probably some of the highest in the industry by far. And so we feel pretty strong. There's opportunities, nevertheless, to continue to maximize that on both funerals and cemetery businesses to continue to pass down some of those infrastructure costs to the families that we serve. But we're keeping pretty good track. Now, always I explain, you know, Liam, that It's a fine balance, right? We never want to just push prices up. This is a managing partner decision, and they're really, really wise as to how they do it because they never want to lose volume for the sake of improving, you know, margins, right, by raising prices. So we keep managing this delicately, keeping observing business opinions on a monthly basis, and we're pretty satisfied with progress so far.
spk03: Great. And on the cemetery side, it looks like you're getting great traction on pre-need sales, the guidances for double-digit growth. Where are you in terms of building out the marketing or the sales force or the marketing effort, however you want to couch it?
spk07: Yeah, we're actually making tremendous progress. As I mentioned in other calls, you know, when COVID-19 suddenly stopped somewhere around you know, Q3 2022, the families that will typically go in for the previous three years to ask about premiums were no longer going, right? So it was a shift of mindset and strategy and really pushing counselors and managers to go out and find the business. It took a little bit of time to realign that strategy, to provide the support, the development, the tools to make that happen. And we started to make progress as the following month's you know, came after September. And very, very happy to report that we have it very tight right now. We feel very confident to say that we have a full, you know, roster of very talented sales managers. Our recruiting capacity from a counselor perspective has been very, very good as well. We have actually new teams that we did not have the year before. For example, we now have an advanced planning team at Fairfax. which on their first month, they almost tripled their target. And so, very good strategy, very happy with the performance that Shane Putins and the whole director of support and leadership team for sales are doing. And that's why we feel confident that this trend will continue.
spk03: Great. Thank you, Carlos.
spk07: Thank you, Liam.
spk01: One moment for our next question. Our next question comes from JP Wollum of Roth MKM. JP, you are live.
spk10: Good morning, guys. Thanks for taking the question. And Mel, great to have you back on the call here. If we could maybe first start with a couple of housekeeping items. On the last quarter release, you shared the consolidated funeral contracts number. I think that was as part of a... way to simplify reporting going forward. I was just curious if you could share that number for Q1 here, and is that something that you're going to be sharing normally going forward, or is that just a one-time kind of annual number? And then the second one is just how you get to the 17 million of adjusted free cash flow. If I start at 25 of cash from ops, I'm guessing that backs out the cash from the trust and then maintenance capex. But if you could share any color there, that would be great.
spk07: I'll address the first question, and then Keon will follow up to the second one. So, what is explained on the last goal is that, you know, for pretty much many years, Carriage will have an approach of five years keeping their acquisition business separately from same store. And we thought that was a very unfair comparison to other, you know, companies where they have it on one year. Once you have an integration, you keep it for five years, you're not really being fair to year-over-year growth on your acquisition portfolio. We decided to move it to one year for reporting purposes, effectively, you know, Q4 or last slash reporting Q4 2022. The thing that we have right now is that we only, by doing so, or doing that, we only have now three businesses on our acquisition, you know, segment, which will be, you know, the recent one, Bakersfield or Belon, Charlotte with a business in North Carolina, and then San Juan. And so, what we wanted to wait for before deciding whether we wanted to speak to them for an acquisition is to see the magnitude of the numbers, right, because those are businesses. You know, given that the green loan is significant, but we just got it on the last week of March, we haven't been able to really track all of that we need in order to consider that point. If this becomes significant, then we'll probably do that. But then think about it next year, which will not be, you know, acquiring additional businesses based on our, you know, amendment to the credit facility. we'll then basically remove all those free businesses from that line. There will be zero reporting on acquisitions and we'll be all just in store. So we thought it will make sense just to keep it on total for now until we're able to get back on track aggressively on acquisitions.
spk08: All right, JP, I'll answer the second question that you had regarding the reconciliation to adjust your free cash flow. We actually have a table, it's the last table in press release. I'll just kind of just do a quick overview. When we start from cash provided by operating activities, so cash flows from operations, you know, we'll then, you know, take out maintenance capex, which is a little bit, it's about half of what we spent in the same period last year. And then you're correct in identifying that, you know, the rest of the adjustment is related to about $7 million that we withdrew from a premium cemetery trust investment.
spk10: Great. Thank you on that. And I must have missed that. That is laid out there. So apologies for that. Second question, just on a comment from the prepared remarks regarding the inflationary costs. And I know the comment was something about being able to push some of the pricing onto customers, but just curious kind of where you're seeing the biggest cost pressure and and if that has normalized at all in the most recent months or if it's lingering throughout the year in your expectations. Yeah, absolutely.
spk07: So when you think about the increases, right, so as the Fed continues to do increases, there will be a catch-up because we did that throughout the year, right? So as they improve, you know, or increase the rates, also people increase prices. Consequence to that, we have pressure on that side. As it relates to Q1, we have just about shy of half a million dollars on insurance increase, about $750,000 on salary and benefits, and about $500,000 on G&A, general and administrative. That adds to $1.7 million increase, and when you divide that to our revenue, that's about 1.8% of the margin that's lost on that front. We continue to keep, you know, very close eye on what's going on. There is a competition out there in terms of your employees. And we want to keep our employees that are loyal to our company. You have to be able to satisfy their needs because there's pressure on their pockets as well. But we try as much as we can to continue to be, you know, passing those additional costs to families. As I mentioned earlier, we want to do that carefully and thoughtfully. with some strategy so that we can definitely not lose volume, right? I mean, you can increase your prices a little bit, but then you lose a few calls, and then your watch are down to your full revenue. So we'll continue to keep track. We have this on a very close eye, month-to-month, business-by-business basis, and we're also confident we will continue to progress. Last thought I'll share on that is that even with the margins where they're right now, from a total field user perspective on both, Field and cemetery, those are very high margins standard for the industry. Above, like I said, most of the competition, and I'm confident we can continue to keep them every year.
spk06: Okay, this is Mel. Coming out of 21, we had record lift from COVID in the revenues and volumes. In our industry, which has high, lovely fixed costs, So the operating leverage is a big deal. So if you have lift in your revenues, whether it's from a pandemic, a market share, your margins go up and your profits go up. We suffered when the pandemic started to phase out on our revenue and our margins in 22. And a lot of that was volume driven in ways that we couldn't deliver change. Some of it was cost driven. Questionary costs like Carlos mentioned and what we've seen if we lay this out in our high performance and credit profile restoration plan We we call ourselves being in the high high value personal services business and sales And when you're in that business, you won't pricing power be better than your competition I think over the last six or seven months our people in the field have been raising their prices and without losing market share. And what we started to see in March and now in April is year-over-year volumes are good other than expected in a post-COVID environment. But the average revenue per contract has also been going up. And that's because of pricing power on what they were doing before, but also new services being offered and accepted. So we began to see year-over-year positive variances in revenue in both our funeral portfolio and our cemetery portfolio, which is also translating into higher margins at the field level. That's a really good trend, makes my day, and we hope that continues in May, June, and the rest of the year.
spk05: Great. Thank you, and best of luck. Well, take luck if it shows up. But so far, I've never counted on luck.
spk06: A lot of hard work, and you've got to work smarter and harder to get lucky.
spk01: All right. I would now like to turn it back over to Mel Payne for today's closing remarks.
spk06: As we end today's call, I am more excited than ever about where we are as a company in what we call our good to great journey that never ends. To get some sense of why I'm so excited about where we are, I think Carlos touched on it. You should refer to the 2022 shareholder letter. It was a beautiful collaboration between Carlos, Steve, and me. And as much as I was so impressed with the content they laid out, it captured the essence of CARES, both past, present, and future. The presentation of the shareholder letter was all done in-house by A.J. White and his marketing team, and I wanted to congratulate them and thank them today. It was a first class all the way. The graphics, the design, and the layout. First class, and it told quite a story of our people and the company.
spk05: So, A.J., thank you so much. And to close,
spk06: I'd like to mention we have outlined our financial goals and a plan to restore our high performance and credit profile by the end of 2024. And this plan has been executed with excellence by Carlos and his operating and sales teams. So for KERES, for sure the best is yet to come. And we look forward to keeping you updated as we make that progress on our journey. So thank you all of you for tuning in today, and I'm just so happy to be back. That concludes our call today. Thank you.
spk01: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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