StoneMor Inc.

Greetings and thank you for standing by. Welcome to the Stone Moor third quarter earnings release. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. This conference is being recorded Thursday, November 11, 2021. And now I'd like to turn the conference over to Keith Trost, Vice President, Financial Planning and Analysis. Please go ahead.

Thank you. Good afternoon, everyone. And thank you again for joining us on the Stonemaier Inc. conference call to discuss our 2021 third quarter financial results. You should all have a copy of the press release we issued earlier today. If anyone does not have a copy, you can find the full release on our website at www.stonemaier.com. Additionally, a copy of the presentation can also be found on our website. With us on the call this afternoon are Joe Redling, President and Chief Executive Officer, and Jeffrey DiGiovanni, Senior Vice President and Chief Financial Officer. Before we begin, as usual, I would like to remind everyone that this conference call will include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address operating performance, events, or developments that we expect or anticipate to occur in the future are forward-looking statements. These forward-looking statements are based on management's good faith beliefs and assumptions. Our management believes that these forward-looking statements are reasonable. However, we should not place any undue reliance on such forward-looking statements because such statements speak only as of today's date. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events, and developments to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include but are not limited to those described in the reports which we file with the SEC. During the call, we will reference certain non-GAAP financial measures, such as EBITDA, field EBITDA, adjusted EBITDA, and unlevered free cash flow. A reconciliation of these measurements to the most directly comparable measures calculated in accordance with GAAP is provided in the press release and presentation. With that, I'll now turn the call over to Joe Redling, who will take it from here.

Thank you, Keith. And thank you, everyone, for joining us this afternoon for our 2021 third quarter earnings call. I'm very pleased to report that our third quarter results have continued to build on the positive performance trends of the past year, year and a half. Our at-need business continues to outperform the death rates in our markets, and our sales team continues to reach new heights on a pre-need basis. And as our sales production grows, we continue to stay focused on tight management of our expenses and are driving strong EBITDA results. We're also continuing to drive very strong trust performance results, delivering asset value growth that far exceeds our guidance and internal projections. Unlevered free cash flow continues to trend ahead of expectations as well, So now let's dive into some of the specifics of the key drivers of our results. From a pre-need perspective, sales production for the third quarter for 2021 increased 9% versus the third quarter of 2020 on a comparable location basis. This 9% growth in the third quarter is on top of the 32% year over year growth that we reported in the third quarter of last year in 2020 compared to the third quarter of 2019. We continue to grow our pre-need sales production even as we face the record comps from the second half of 2020. This is truly a testament to our highly productive sales team, the culture that we've established, and the ongoing training regimen that has been implemented. Our team continues to strive to beat historical highs And we're very excited to build upon this foundation and even supplement it with new inventory opportunities for our sales team as we look ahead. For the first three quarters of 2021, we've seen our pre-need sales production grow 21% versus the first three quarters of 2020, as we continue to build on the impressive pre-need sales gains established last year. In fact, we have seen an increase in overall sales production of 40%, when comparing the first three quarters of 2021 to the first three quarters of 2019. Looking at our current at-need production, we continue to experience growth in excess of the mortality rates in the states where we operate. We believe this performance is indicative of improving market share as we continue to focus on improving community outreach while reinvesting in our properties. Our at-need production for the first quarter of 2021 was up 10% versus the third quarter of 2020. And again, that is on top of the 29% growth reported for the third quarter of 2020 versus 2019. While COVID continued to impact the death rates during the third quarter, we're well below the volume highs we experienced in the first quarter of this year. Importantly, according to data obtained from the CDC, the death rates when benchmarks against a 2017 to 2019 base are exceeding even the impact of COVID. We are now in the early stages of the baby boomer generation reaching their life expectancy, which we can reasonably expect to have a positive impact on acne volume moving forward. For the first three quarters of 2021, our acne production has grown 20% versus the comparable period in 2020. Again, this growth has been positively impacted by the impact of COVID, which really started to drive our attitudes during the second quarter. The growth in our production metrics, coupled with a strong focus on expense controls, has led to strong financial results. We focus our analysis on several key measurable metrics. First is EBITDA, which captures our net income, less interest expense, taxes, depreciation, and amortization. We also exclude costs of lots sold, non-cash stock compensation, and certain one-time gains and losses from this metric in order to benchmark our performance based upon normalized business operations. For the third quarter of 2021, we recorded EBITDA of $8.9 million, which represented a growth of $2.2 million, or 34%, versus the third quarter of 2020. For the first three quarters of 2021, we recorded EBITDA of $27.6 million, compared with $12.2 million for the comparable period in 2020. Note that one of the adjustments for the 2021 period was the one-time loss of $40.1 million that was recorded in conjunction with our refinancing activities, which negatively impacted our net income results. but does not accurately reflect our current business operations. We also look at field EBITDA as a metric to understand the efficiency of our locations. It's calculated by stripping corporate overhead out of the EBITDA calculation to isolate the operational performance of our properties. During the third quarter of 2021, we generated field EBITDA of $18.4 million, or 22.4% of total revenue. This compared to $16.1 million in the third quarter of 2020, which was 22.1% of total revenues. For the first three quarters of 2021, we generated $55.1 million of field EBITDA. This represents a significant improvement against the comparable period in 2020, where we generated $38.1 million of field EBITDA. The third key metric that we utilize is adjusted EBITDA. That metric utilizes the EBITDA calculation and further adjusts for the changes in deferred revenues and deferred selling. While the EBITDA calculation measures our performance and expense efficiency levels against GAAP revenue, this additional adjustment allows us to analyze our business based upon current sales production levels, matching all of our fixed expenses with current business operations that they support. This is the metric that management utilizes most frequently to manage our business and locations. During the third quarter of 2021, we generated $38.5 million of adjusted EBITDA, which represents 14.3 million or 59% growth compared to the 24.3 million for the third quarter of 2020. And for the first three quarters of 2021, we've generated $98.6 million of adjusted EBITDA compared with $46.4 million for the comparable period in 2020. That remarkable growth is a culmination of both our sales production gains and trust performance, coupled with the expense savings initiatives that have generated savings across all of our line items. Note that each of these metrics are considered non-GAAP metrics, and the reconciliation has been included within our press release. At the beginning of this year, we issued guidance on two key metrics. The first metric was $40 million of unlevered free cash flow. Unlevered cash provided by operating activities is calculated by subtracting capital expenditures from cash flow from operations. Cash paid for interest expenses then added back to derive unlevered free cash flow. During the third quarter of 2021, we drove unlevered free cash flow of $9.8 million, bringing our unlevered free cash flow for the first three quarters of 2021 to $36 million, which is well on pace to exceed our full-year target. I also want to note that the full-year adjustment to derive unlevered free cash flow included $18.1 million paid with the refinancing to satisfy the PIC interest payment on our old note. For accounting purposes, that was treated as cash interest paid and included in operating cash flow and not with financing activities, as you might expect. This performance compares very favorable to our performance in 2020, when we achieved $8.3 million and $19.4 million a month of free cash flow for the comparable three and nine month periods, respectively. driven largely by the increased EBITDA and adjusted EBITDA levels previously discussed. The second metric was $50 million of trust growth. Even through the second quarter, we were exceeding that full-year target, having reported $57.5 million worth of growth. We continued to add to that growth during the third quarter with another $12.4 million of growth, bringing the year-to-date growth to $69.9 million. This has been driven by strong trust asset management, coupled with strong sales production that drove new contributions into the trust. We also benefited from one-time transactions on our investments, including refinancing premiums and origination fees that helped drive this growth during 2021. We highlighted and provided guidance on these two metrics as we feel that collectively they provide insight into the true value created during the period. particularly in terms of the strength of our balance sheet. Collectively, we've generated value creation, i.e., unlevered free cash flow plus trust growth of $105.9 million through the first three quarters of 2021. Before I turn the call over to Jeff for a more detailed review of our financial performance during the third quarter, there are two other items I'd like to discuss. We're currently considering sitting with $100 million of cash on our balance sheet, not including restricted cash. As we look ahead to 2022, we see a year of reinvestment and growth. We expect to utilize a portion of those funds on organic growth, including reinvesting in our current assets to upgrade the overall aesthetics of the locations and through addition of new inventory projects that can substantially improve the performance across key locations. and I've discussed this a few times previously, we're actively engaging in the pursuit of acquisition opportunities. We see a tremendous opportunity to grow our business through strategic acquisitions within our current operational footprint. With the operational and financial improvements that we've made over the last two-plus years, we are in a good position to integrate new properties into our business and drive even greater performance through synergies with our current operations. We continue to monitor our cash and capital position against our project and acquisition pipeline. And as appropriate, we will consider making a partial repayment of our debt to reduce the cash interest expense and improve our debt to EBITDA leverage ratio. The second item was the recent letter received from our majority shareholder, Axon, regarding strategic opportunities. As a quick update, Upon receipt of the letter, the Board of Directors delegated to the Conflicts Committee of our board the responsibility to address and review potential strategic options. Conflicts Committee is comprised of three independent board members who are best equipped to review and evaluate those strategic options and how they might impact all of our shareholders. The Conflicts Committee has engaged both legal counsel and a financial advisor as they pursue this analysis and evaluation. We will provide further updates as required. With that, I'll turn the call over to Jeff to further review the financial performance.