StoneMor Inc.

Greetings and welcome to the Stonewall fourth quarter and full year earnings release conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will 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. As a reminder, this conference is being recorded today, Wednesday, March 30, 2022. I would now like to turn the conference over to Keith Trost, VP of Financial Planning and Analysis. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us on the Stonewall, Inc. conference call to discuss our 2021 fourth quarter and full year financial results. We shall 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.stonemore.com. With us on the call this evening 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 any 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 if we file 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 the investor presentation which is also available on our website. With that, I'll now turn the call over to Joe Redling. We'll take it from here.

Joe Redling Thank you, Keith, and thank you, everyone, for joining us this afternoon for our 2021 fourth quarter and full year earnings call. 2021 has been a truly remarkable year for our team. We've continued to execute on the initiatives that supported our transformation plan. The calendar year has also presented unique challenges And I'm proud of the work that our team has done to overcome those challenges and actually turn them into strengths. One of the key tenets of our transformation strategy was a major focus on improving sales performance. Even prior to the start of COVID-19 pandemic, we had started to see the green shoots of success as we reported same-store sales growth in the first quarter of 2020. which was a critical milestone for the company's performance. The changes that we made with our sales team, including establishing a new sales leadership structure, implementing new training and compensation programs, and new tools to support lead generation and customer relationship management, created a new sales culture that was ready to embrace the challenge. And they did just that. For the full year of 2020, we beat our prior year sales production performance by more than 15%. And the fourth quarter of 2020 delivered growth of 22% versus the fourth quarter of 2019. That level of growth set a high bar for 2021. Our expectation for this year was to continue to build on the momentum and drive double-digit sales production growth again in 2021. I'm excited to share that our team beat those targets and achieved over 19% growth in sales production for the full year of 2021 versus the full year of 2020. That level of production was consistent throughout the entire year, and the fourth quarter continued the trend. Even after the 22% growth in the fourth quarter of 2020, we also experienced another 10% year-over-year growth in the fourth quarter of 2021. A portion of this growth has been attributed to the increased death rates that we've experienced throughout the country. But even with that increased at-need activity, the team was able to grow our pre-need sales production by more than 14% for the full year of 2021. Extremely proud of the effort and work that our team has done to achieve these improvements. We set a high bar and we delivered. And as we look ahead to 2022, we still have high expectations and continue to remain focused on profitable growth. Of course, we now have tougher comparisons coming off record performances in 2021, combined with an expected decline in acne cases associated with the normalization of the COVID-19 impact. That said, we intend to mitigate that with a variety of tactics, including new inventory offerings, particularly targeting cremation memorialization, and a combination of increases in pricing, decreases in discounts, and a continued focus on driving pre-need sales production growth. With the first quarter nearly complete, we are already seeing encouraging signs that 2022 is heading in the right direction, with sales production coming in ahead of expectation. I'm encouraged by the strong sales results we've seen so far this year, and remember, Q1 of 2021 was a record sales production quarter and represents a very challenging year-over-year comp, but we are trending right on plan. A second key tenet of our transformation strategy was fixing our cost structure in order to build an organization that is sustainable for the long term. We believe that we've done exactly that with many of the initiatives that we've discussed previously on these calls. We are now focused on reinvesting back into our people and our business in order to drive improved production and results. Jeff will dive into some of those investments and cost drivers that have impacted our business this year. However, I do want to focus on one of those now. We previously discussed the outsourcing relationship for all of our maintenance and landscaping services. It was a program that we were excited about both for the operational and financial benefit that it presents. The program's initial launch was a success, and we saw immediate benefits to the process through standardization, shared services, and a significant reduction in our overall cost. Unfortunately, it became clear over the term that while the fundamentals of the program were sound, our partner was not. Eventually experiencing challenges in scaling and maintaining the business to our contracted standards, and in managing overall liquidity, which eventually culminated in that partner filing bankruptcy. As a result of those issues, we have now taken back all locations and associated employees, with the last of those locations being taken back in January of this year. In order to ensure that our locations were appropriately serviced and had continued service through this period, Stonemaier made payments directly to vendors and employees that resulted in additional costs to Stonemaier during 2021. But that being said, with these services now back under Stone Moor's direct management, we expect to retain the operational successes that were learned from the process while retaining the more efficient, lower-cost basis. The last tenet of the transformation strategy that I wanted to highlight today was fixing our balance sheet. We started that process with the divestiture program, through which we exited the West Coast and refocused our footprint on a more regionally-focused operation in the eastern half of the United States. This certainly created operational efficiency and allowed us to better focus on our performance, but it also served to reduce our debt levels by more than $66 million. That debt reduction, coupled with our improved operating performance, put us in a position to refinance our debt, which we did in April of 2021. That refinancing provided us with a new infusion of capital while reducing our interest rate and eliminating cumbersome maintenance covenants on our prior debt facility. It also provides for additional opportunities to raise new debt and capital to support our long-term growth initiatives. And that really leads us to the next step in our transformation, accelerating our growth through acquisitions. I'm excited to announce the completion of three separate acquisitions during the first quarter of 2022. Prior to these acquisitions, Stonemore had not completed any acquisitions since 2016. We needed to make sure that we were in a strong financial and operational position to successfully acquire and integrate new properties. I'm confident that our transformation has now reached that point, and we are now well positioned to be an efficient acquirer. These three recent acquisitions include four new cemeteries and three new funeral homes located in Virginia, Florida, and West Virginia, for a total purchase price of $18 million. This has been a strategic process focused on identifying high-quality operations at accretive multiples that will leverage synergies with our existing locations. We continue to seek out additional opportunities that fit the same criteria. Throughout 2021, we've been reporting on two key metrics and our progress towards the guidance that was previously provided. Collectively, these two metrics measure the value creation in terms of operating cash generated and trust appreciation. We targeted a collective $90 million in value creation based on these two metrics. And we have exceeded that target by nearly $43 million in 2021 with a total of $133 million of total value creation. Individually, The first of those two metrics was trust growth. We have provided guidance of a $50 million growth target for 2021. We've exceeded that target with $93.3 million of growth. This performance in excess of our guidance has been driven by several factors. First, the performance of our trust has exceeded our expectations and has led to a compounding effect that contributed to the growth. Secondly, we benefited from certain one-time origination fees and refinancing premiums earned. And additionally, the strong pre-need sales performance has led to contributions into both the perpetual care trust and merchandise trust that was above our initial expectations. The second metric was $40 million of unlevered free cash flow for the year. We ended the year at $39.3 million, just missing the full-year guidance due to the accelerating investment spend in the fourth quarter. During the fourth quarter, we generated unlevered free cash flow of $3.3 million as we strategically reinvested into our properties and facilities, and as previously discussed, supported the transition of our maintenance services. This was also evidenced with increases in capital expenditure spent. Specifically, we had $6.4 million of capital expenditures during the fourth quarter, compared with $5.7 million total for the first three quarters of 2021. During the fourth quarter, we also saw an increase in repairs and maintenance spend that did not meet the capitalization standards. As we look ahead to 2022, these two metrics will continue to be indicators that we manage and watch as they represent the growth of the business that's being created during the year. We are now targeting $70 million in trust asset growth for 2022, adjusting for the one-time earnings during 2021 and utilizing a more conservative return estimate which would result in growth that is less than 2021's performance. For our unlevered free cash flow, we are targeting the same $40 million number for 2022 that was targeted last year. We are continuing to reinvest in our properties and our infrastructure with a capital expenditure plan that exceeds our 2021 spend levels, which is all accounted for within our current year targets. With that, I will now turn the call over to Jeff to discuss the financial.