Carriage Services, Inc.

Good day and thank you for standing by. Welcome to the Carriage Services Second Quarter 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Metzger, President. Please go ahead, sir.

Good morning, everyone, and thank you for joining us to discuss our second quarter results. In addition to myself, on the call this morning from management, are Carlos Quesada, Chief Executive Officer and Vice Chairman of the Board of Directors, and Kathy Shanley, Chief Accounting 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 Carlos and Kathy and will be followed by a question and answer period. Before we begin, I'd like to remind everyone that during this call we'll make some forward-looking statements, including comments about our business, projections, and plans. Forward-looking statements inherently involve risks and uncertainties and only reflect our views as of today. These risks and uncertainties include, but are not limited to, factors identified in our earnings press release as well as in our SEC filings, all of which can be found on our website. Thank you all for joining us this morning, and now I'd like to turn the call over to Carlos.

Thank you, Steve, and thank you all for joining our second quarter earnings call. We're excited to share our progress in executing our five-year strategic objectives, which delivered another outstanding financial performance this quarter. But before we do, I want to express my heartfelt gratitude to every Carriage employee for their continuous commitment to excellence and never settling for less. Your dedication makes a real difference for the families we serve and our company. We sincerely appreciate your support and commitment to our shared goals. I want to thank Kathy Shanley, our superstar Chief Accounting Officer, for participating in this call as the search for a new CFO continues. On today's call, I will share some of our key financial metrics and provide an update on our most relevant initiatives. Kathy will focus on overhead, cash flow, and our leverage ratio. Now, on to our financial results. For the second quarter, our total revenue was $102.3 million, a significant increase of $4.6 million, or 4.8%. This quarter marks another remarkable milestone in Carriage history, as it is the second time we have surpassed the $100 million mark in a single quarter, the first being the first quarter of this year. These exceptional results were primarily driven by a phenomenal 31.1% increase in pre-need cemetery sales compared to last year and the continued execution of our funeral home pricing strategy, which boosted our funeral average revenue per contract by $212, or 4%. This financial success is a testament to our strategic planning which has positioned us for continued growth and success, as well as the dedication of our team. As we look at each of our revenue segments, total funeral home operating revenue decreased by $508,000 or 90 basis points to $59.2 million. This revenue decrease is driven by the expected slight decline in volume resulting from the pull-forward effect we have discussed in prior calls. However, we are able to make up a bit over $2 million in revenue through our increased average revenue per contract, which has delivered an increase in total funeral field EBITDA of 1.8 million or 8.4% and 340 basis points in total funeral field EBITDA margin to 39.5% compared to 36.1% last year. A comparable revenue on a lower cost base demonstrates our unwavering commitment to cost control and a strong partnership with our field leaders. Now let's move to cemetery operating revenue. We ended the quarter at $34.8 million, an increase of $5.9 million or 20.6% compared to the same quarter last year. For total cemetery field EBITDA, We finished at $17.1 million, an increase of $4.2 million, or 32.6%, and a total cemetery field EBITDA margin of 49.1%, an increase of 450 basis points compared to 44.6% last year. This is another key achievement for Carriage, and we couldn't be prouder of our entire Breening Cemetery sales teams for their determination to provide day-in and day-out best-in-class performance in pre-need sales. For total financial revenue, we ended the second quarter at $7.1 million, an increase of $1 million or 16.9%. This growth was driven by the continued execution of our pre-need funeral sales strategy, which delivered an increase in general agent commissions ending the quarter at $1.4 million, an increase of 1 million or 251% compared to the 406,000 during the same quarter last year. Our pre-need fuel strategy continues to yield positive results, and we're excited about our future performance as we continue to build upon our sales strategy. As we moved to adjusted consolidated EBITDA for the second quarter, we finished at $32.6 million, an increase of $3.9 million, or 13.6%. The combination of a higher average revenue per contract and the continued execution of our cost management initiatives delivered great success, demonstrated by our adjusted consolidated EBITDA margin of 31.9%. an increase of 250 basis points compared to the same period last year. From a GAAP perspective, net income ended at $6.3 million, a decrease of $2 million compared to the previous year. This decrease was driven by non-recruiting expenses related to our strategic review process in our prior CFO separation agreement. When adjusting net income for these two items, we ended at $9.9 million, an increase of $1.7 million, or 20.1%. Kathy will share more details on overhead later on the call. Adjusted diluted EPS in the second quarter ended at $0.63 per share, an increase of $0.10 or 18.9%. And, with the execution of the amendment to our credit facility, we are very well positioned to unlock additional value for shareholders due to the reduction of near-term interest expense. We are very proud of these results, and after reviewing our key operational metric trends and forecasts, we're excited to share that we're increasing our guidance for 2024 to the following ranges. $390 to $400 million in total revenue. adjusted consolidated EBITDA of $117 million to $123 million, and adjusted diluted EPS of $2.30 to $2.40. Adjusted free cash flow remains at $55 to $65 million. Kathy will share more details about our revised guidance. Our second quarter performance marks six out of the last seven quarters in which we outperformed expectations as we continue to deliver on what we have previously communicated to our shareholders. We are filled with joy and excitement that our focus on our three main strategic objectives, disciplined capital allocation, purposeful growth, and relentless improvement is yielding solid and consistent results. We will remain diligent through the execution of these strategic objectives, and we will continue to find opportunities to maximize our platform and unlock value for our shareholders. For example, through relentless improvement, we are re-engineering our approach to our supply chain strategy. The first phase of this strategy will broadly impact all merchandise options, resulting in elevated service delivery for our client families and increased savings from leveraging our scale. We expect to recognize some savings this year and a full Phase 1 impact in 2025. Phases 2 and 3 will follow and additional savings are expected. As a quick update, we continue searching for a CFO to help drive our long-term strategic growth plan forward. While we have conducted multiple interviews, we have a very clear vision of what we need at this stage of our journey. As this critical role will be a catalyst towards value creation, investing class financial planning. We look forward to reporting back once we fill this key position. In closing, we are pleased with our second quarter performance and progress in executing our five-year strategic objectives plan. With plenty of opportunities yet to materialize, we are excited about where we are in our journey, and with that, I will hand it over to Kathy.