Carriage Services, Inc.

Good day and thank you for standing by. Welcome to the Carriage Services First Quarter 2025 Earnings Webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Steve Metzger, President. Please go ahead, sir.

Good morning, everyone, and thank you for joining us to discuss our first quarter results. In addition to myself, on the call this morning for management are Carlos Quesada, Chief Executive Officer and Vice Chairman of the Board of Directors, and John Enright, Senior 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 Carlos and John 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 welcome to everyone joining us for today's first quarter earnings call. It is an exciting time at Carriage. As we turn the page on a strong 2024, I am proud to share that our momentum continues. We delivered another strong performance in the first quarter of this year, which reflects the strength of our financial strategy and our focus on discipline Before diving into the numbers, I want to recognize the incredible dedication of our carriage team. Their passion and purpose allow us to consistently deliver comfort and care to our client families, delivering premier experiences during very difficult times. They are the heartbeat of our performance and the reason why we continue to turn vision into value. Thank you to everyone for all that you do. Today, I will walk you through key financial highlights and the progress of some of our most important initiatives. Then John will provide additional insight into our cost structure, cash flow, and gap numbers, focusing on this year's tax benefit and leverage ratio. Let's begin with the financial results. For the first quarter, we reported total revenue of $107.1 million, an increase of $3.6 million or 3.5% compared to the same quarter last year. The breakdown of total revenue is as follows. Total funeral operating revenue ended at $69.1 million, an increase of $3 million or 4.6% over the same period last year. This growth was driven by an increase in funeral home average revenue per contract of 1.8%, or $103 per contract, and an increase in funeral home ad need volume of 2.4%, or 282 contracts. As previously communicated, we observed a shift in the flu season, moving some of the volume we would typically expect to see in the fourth quarter to the first quarter. If we look back, On a comparable basis, the fourth quarter of 2024 was down 5.3% in volume compared to 2023, effectively creating a positive variance of 7.7% compared to the first quarter of 2025. Moreover, comparing funeral home ad need volumes of the fourth quarter of 2024 to the first quarter of 2025 on a same-store basis, we saw an increase of 1,435 calls or 13.5% in the first quarter of this year. We estimate that only a portion of the first quarter's volume is related to the flu season shift. Typically, the first quarter of the year represents our highest funeral home volume. We ended the quarter with total cemetery revenue of $27.9 million, an increase of $1.5 million or 5.8%. While this performance represents strong growth for cemeteries, we expect our year-over-year greening cemetery growth rate to be between 10 and 20% for this segment of our business. During our last call, I mentioned that we have been working through several strategic cemetery development projects involving a handful of our top-performing cemeteries. We expect these projects to be fully completed shortly and return to a respected growth rate range during the second quarter. We generated total financial revenue of $7.4 million during the first quarter, an increase of $613,000, or 9.1%. This increase was primarily driven by our strong pre-need insurance funeral sales strategy and the pre-need funeral commissions income that is generated from these sales. To showcase this growth, we finished the quarter with 2,541 net pre-need insurance contracts, an increase of 332 contracts, or 15%, compared to the same quarter last year. We are excited about the progress made through our insurance pre-need funeral strategy, and we look forward to continued execution this year. Moving to adjusted consolidated EBITDA. we ended at $32.9 million for the first quarter, a decrease of $653,000, or 1.9%. Adjusted consolidated EBITDA margin was 30.8%, a decrease of 170 basis points compared to last year. This decrease was primarily driven by the planned investment in our Trinity system, which for this quarter was $800,000, and an additional $800,000 from our field leadership development efforts invested in our Managing Partners Forum aimed at elevating the skills and performance of these outstanding leaders. We do not adjust for either of these two expenses. However, the good news is that adjusted diluted EPS for the first quarter was 96 cents per share, an increase of 21 cents or 28% compared to the prior year quarter. We are excited about the progress made during the first quarter, and as we reflect on our strong financial results, it is natural to consider whether an update to our full-year guidance is warranted. Our results certainly point in a positive direction and showcase the strength of our strategy and disciplined execution across Carriage. However, while we are encouraged by our momentum, we also recognize that the broader economic environment continues to be uncertain. The US economy continues to send mixed signals regarding market volatility, inflation, and recession concerns. This reminds us to stay focused, disciplined, and forward-thinking. With that in mind, we believe the most responsible course of action is to maintain our current guidance for now. This does not reflect any lack of confidence in our performance. It is quite the opposite. It demonstrates our commitment to being thoughtful and prudent stewards of the company, ensuring we remain agile and prepared in this dynamic economic environment. While April trends have remained strong, we continue to closely monitor our performance. If our current momentum holds throughout the second quarter, we expect to raise guidance accordingly. As always, Our commitment remains to execute with the same strategic discipline and operational excellence that drove our strong first quarter results. We will continue to build on this foundation and create lasting value for our shareholders. Moving to updates on our strategic objectives. Our Trinity system is in phase one of implementation, which is primarily related to back office systems. Phase 2 should begin in the third quarter. We're in the final stages of testing and are excited about the benefits and synergies Trinity will deliver. We will report more on our progress throughout the year. On the supply chain front, we have successfully launched our new Earned Coreline, a key step in optimizing procurement, improving margins, and strengthening our national partnerships while delivering a better experience for our families through better offerings and a more thoughtful presentation of options. As we enter the next phase, we are excited about the rollout of our Express Funeral Funding Partnership, which will simplify insurance assignment processes, improve families' financial flexibility, and unlock new sales potential across all funeral homes. Future supply chain phases will focus on our casket core line, fleet management, and other essential procurement categories, which will help us reduce complexity, drive cost efficiency, and elevate service delivery across all businesses. These initiatives are part of our broader continuous improvement strategy, which is now embedded into our daily operations. If you have not had the chance yet, I strongly encourage you to read our 2024 shareholder letter. It captures the foundation we have built over the past two years, outlines our current strategic focus, and most importantly, charts a clear path forward to our ambitious 2030 vision. It positions courage for sustainable growth and long-term value creation. You can find our shareholder letter on the Courage website. In closing, we are proud of our strong first quarter results that reflect the strength of our strategy, the power of our culture, and the relentless execution of our high-performance teams. This momentum results from a clear vision, disciplined leadership, and an unwavering commitment to excellence. We are redefining how value is created in our profession Operational excellence, innovation, and a deep passion for service are not aspirations. They are the actions that consistently deliver premier experiences to the families we serve and unlock sustainable value for our shareholders. As we move forward, we do so with confidence, focus, and a bold vision of the future. Thank you for your continued trust and believing courage. I will now turn the call over to John.