Carriage Services Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 27, 2025

There are 8 speakers on the call.

Operator

day and thank you for standing by. Welcome to the Carriage Services Fourth Quarter twenty twenty four 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.

Speaker 1

Good morning, everyone, and thank you for joining us to discuss our fourth quarter and year end results for 2024. In addition to myself, on the call this morning from management are Carlos Quezada, Chief Executive Officer and Vice Chairman of the Board of Directors and John Enright, 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.

Speaker 1

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 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

Speaker 2

the call over to Carlos. Thank you, Steve, and welcome to everyone joining today's fourth quarter and full year earnings call. I am pleased to share the outcomes of a transformative year at Carriage Services, a testament to our dedication and strategic execution. Our results reflect our financial strategy and commitment to innovation and service excellence. Before sharing the results, I want to express my deepest gratitude to every member of the Ceredigion.

Speaker 2

Your unwavering dedication is a cornerstone of our success and provides needed comfort to the families we serve. We truly appreciate you and your alignment with our vision and values. I am also thrilled to welcome John Enright as Carriage's new Chief Financial Officer. In just seven weeks, John has dived deeply into our operations, embraced our culture and provided invaluable insights and leadership as we continue to grow into a best in class organization. Welcome to Carriage, John.

Speaker 2

Today, I will highlight our financial performance for the fourth quarter and the full year and update you on the progress of some of our strategic objectives. John will provide additional detail focusing on overhead, cash flow, leverage ratio and our guidance for 2025. Now let's move on to the financial highlights. For the fourth quarter, we reported total revenue of $97,700,000 a decrease of $1,100,000 or 1.1% compared to the same quarter last year. We experienced an anticipated decline in funeral volumes against a challenging prior year comparable, resulting in a 7.3% decrease, partially offset by a 1.4% increase in our average revenue per funeral contract.

Speaker 2

The volume decrease is primarily linked to a shift in the flu season, which usually starts late in the fall and increases through the winter months. Our January and February volume trends are positive, indicating that a late flu season may have shifted volume from the fourth quarter of last year to the first quarter of this year. Additionally, we experienced an 8.4% increase in preneed interim rights sold and a 4.2% increase in the average price per preneed interim rights sold, which helped offset total revenue to a decrease of just 1.1%. When breaking down revenue, funeral operating revenue was $58,700,000 in the fourth quarter versus $61,300,000 last year, a $2,600,000 decrease or 4.2%. Lower funeral home volumes resulted in a reduction of eight thirty one contracts or 7.3%.

Speaker 2

This was partially offset by a slight increase in average revenue per contract of $75 or 1.4%. Cemetery operating revenue for the fourth quarter was $29,800,000 versus $26,700,000 last year, resulting in a $3,100,000 increase or 11.6%, driven by an increase of preneed interim sold of two sixty three contracts or 8.4% and an increase per preneed cemetery contract of $937 or 9.2% compared to the same period last year, almost offsetting the revenue loss in our Funnel segment. For the full year, total revenue finished at $404,200,000 an increase of $21,700,000 or 5.7%, primarily driven by the continued growth in consolidated cemetery preneed sales as we experienced a 22.9% increase in preneed interim rights sold and a 7.3% increase in the average price per preneed interim rights sold, which led to total preneed cemetery sales of $94,300,000 an increase of 19,900,000 or 26.7% when compared to the same period last year. Moving to adjusted consolidated EBITDA. For the fourth quarter, we ended at $29,300,000 a decrease of $3,100,000 or 9.6%.

Speaker 2

This decrease was driven by the lower revenue in our Funnel segment combined with an expected $1,200,000,000 increase in our Trinity system investment, which we don't adjust for. For adjusted consolidated EBITDA margin for the fourth quarter, we finished at 30%, a decrease of two eighty basis points compared to last year. For the full year, adjusted consolidated EBITDA finished at $126,200,000 an increase of $13,000,000 or 11.5%. Adjusted consolidated EBITDA margin for the full year remained strong at 31.2% an increase of 160 basis points compared to last year. Adjusted diluted EPS for the fourth quarter was $0.62 per share, down by $0.15 or 19.5% versus the prior year quarter.

Speaker 2

And for the full year, we ended at $2.65 per share, an increase of $0.46 per share or 21%. We are pleased with our financial performance for the full year of 2024, highlighted by a continued focus on execution, while optimizing our systems and approach to support organic growth. Our strategic adjustments throughout the year paid off despite a decrease in funeral volumes in the fourth quarter, influenced by the shift in a later than normal flu season. After raising our guidance twice in 2024, we're thrilled to report that we exceeded expectations across most of our financial metrics. This achievement underscores our management capabilities and operational excellence, setting a strong precedent for continued growth.

Speaker 2

In alignment with our ongoing commitment to excellence, we're excited to announce the expansion of our supply chain strategies through the introduction of our new Earn core line. This launch reinforces our national partnerships and aligns with our strategic objectives of continuous improvement and disciplined capital allocation. These efforts collectively enhance our service capabilities and create additional shareholder value. Moving into Phase II of this strategy, we're focusing on leveraging our new national partnership with Express Funnel Funding for insurance assignments. This collaboration will provide added value to the families we serve by enhancing the financial flexibility of our offerings, potentially increasing sales across our operations.

Speaker 2

The full rollout of this program is anticipated in the second quarter of this year, marking a significant milestone in our strategic plan. Subsequent phases will address casket core line, fleet management and other essential procurement needs, further optimizing our operational efficiency and service excellence. In closing, as we reflect on our accomplishments and insights gained in 2024, Carriage is at the dawn of an exciting future. With a robust foundation built over the past two years, we're ideally positioned for sustained financial growth and industry leadership. Our strategic commitments to passion for service, optimizing our supply chain and fostering continuous improvement have sharpened our competitive edge and set the stage for groundbreaking innovations.

Speaker 2

As we move forward, our culture of excellence through our teams are more equipped than ever to deliver superior service. Driven by our unwavering commitment to creating premier experiences, we are eager to expand our horizons, deepen our connections with the community and become a best in class organization. At Carriage, we don't just adapt to change, we lead it. Thank you. And I will now pass the call on to John.

Speaker 3

Thank you, Carlos. I would like to welcome everyone to the call and share a brief update on my first couple of months with the company. I have now been at Carriage for seven weeks and in that time, I've become even more excited about the opportunity that lays ahead for me and the company. The vision has been laid out and executed upon over the last two years is exciting and I feel fortunate to join the company at a time when there are so many opportunities in front of us. As important to me are the people and the culture.

Speaker 3

The team that Carlisle has built is impressive and I look forward to working with everyone in the organization to continue to drive value for all stakeholders. Now, on to fourth quarter results. Cash provided by operating activities for the quarter was $9,300,000 which was down $4,400,000 from prior year quarter of $13,700,000 Adjusted free cash flow for the fourth quarter was $8,900,000 which was down $3,900,000 from the prior year quarter of $12,800,000 The change in adjusted free cash flow was driven by lower income in the quarter, primarily the Funeral segment, working capital adjustments and spend for Project Trinity, which equated to approximately 1,200,000 in expense. We paid $3,000,000 towards our outstanding debt this quarter, ending the year with a maintained leverage ratio of 4.3 times, representing almost a full turn from 5.1 times at the end of twenty twenty three. This reduction in leverage illustrates our commitment to disciplined capital allocation along with the impact of our strong annual performance.

Speaker 3

We experienced a reduction in interest expense for the quarter of $2,100,000 due to the midyear amendment of our credit facility. At year end, we had paid down our credit facility by $42,100,000 from $179,100,000 at the end of twenty twenty three to $137,000,000 at the end of twenty twenty four. Turning to capital expenditures for the full year, we have invested $8,800,000 for growth CapEx, $7,300,000 for maintenance CapEx and $2,900,000 for Trinity. Now shifting to overhead. Overhead was $12,900,000 for the quarter compared to $11,900,000 in the prior year quarter, resulting in a $1,000,000 increase in overhead expenses.

Speaker 3

The overhead variance was driven by $1,200,000 relating to Project Trinity costs as we prepare for exciting implementation of this ERP and customer experience platform early in 2025. Overhead as a percentage of revenue was 13.2% for the fourth quarter of twenty twenty four, which is up 120 basis points from the prior year quarter of 12%. If you exclude the costs associated with Project Trinity, overhead as a percentage of revenue was basically flat to prior year quarter at 12%, which is within our communicated range. Now let's shift to the outlook for 2025. As we review the outlook, it is important to note that all metrics include the impact of planned divestitures, but do not include any potential benefits or impacts associated with acquisitions.

Speaker 3

As we get back to growth mode, any benefits or impacts associated with acquisitions, we will adjust our forecast accordingly. Revenues are planned to be in the $400,000,000 to $410,000,000 range compared to $404,200,000 That would result in an expectation of sales being plus or minus 1%. However, if we were to exclude the impact of divestitures, we are anticipating revenue growth in the low single digit range, primarily driven by pre need property sales. Adjusted consolidated EBITDA is expected to be in the range of $128,000,000 to $133,000,000 compared to $126,200,000 We are anticipating slight improvement in our margins based on our investment in supply chain in 2024, coupled with normalization of certain corporate expenses. Adjusted diluted EPS of $3.1 to $3.3 primarily driven by lower interest rates and a lower effective tax rate.

Speaker 3

We are expecting interest expense savings in

Speaker 4

the range of $5,000,000

Speaker 3

to $6,000,000 associated with the pay down of our credit facility in both 2024 and 2025, coupled with a full year benefit of the midyear amendment, which resulted in lower fees. The adjusted tax rate is expected to be in the range of 28% to 30%, down from 34.2% in 2024. For overhead, we continue to focus on our strategic objectives, which will result in slightly elevated overhead costs in 2025, driven by Project Trinity. However, in the long term, we anticipate overhead efficiencies after implementation is complete and in connection with other internal initiatives. For the full year, we expect adjusted overhead to finish within 13% to 14% of revenue, which is within our expected range.

Speaker 3

Based on the above assumptions, we anticipate adjusted free cash flow in the range of $40,000,000 to $50,000,000 As a reminder, we have adjusted our calculation of free cash flow to include total capital spend rather than just maintenance capital. Total capital spending in 2025 is expected to be in the range of $19,000,000 to $21,000,000 We anticipate our leverage ratio to end 2025 between three point seven and three point eight times, right within our long term leverage ratio target of 3.5 times to four times. The forecast on interest expense and the leverage ratio assumes that we do not have any acquisitions in 2025. That concludes our prepared remarks, and I will turn it back over to the operator to open it up for questions.

Operator

Thank you. We will now conduct a question and answer session. And we'll go first to Alex Paris with Barrington Research.

Speaker 5

Hi guys. Thanks for taking my call and congratulations on the beat versus a tough comp.

Speaker 2

Thank you, Ray. Yes,

Speaker 5

my pleasure. First question, just a point of clarification on funeral volumes. On the last conference call, you said that October was kind of weak versus your experience in the third quarter. And it sounds like November and December were weak due to the shift of the flu season from fourth quarter to first quarter, said simply. You said that the trends improved in January and February.

Speaker 5

Are you saying January and February volume was up year over year? That's the point of clarification.

Speaker 2

Happy to address your question. It's a great question, by the way. So yes, in October, we noticed a little decline on volume on a year over year basis. It wasn't expected because I have mentioned in the past that the pull forward effect will wind up through the fourth quarter no later than the first quarter of twenty twenty five. And so we got us by surprise to see that negative volume on an ad need basis in October.

Speaker 2

And as you remember, we updated our guidance in October as we release Q3. And we were being very, very thoughtful and conservative because of that trend. That trend continued in November and December, leading to the negative that we just disclosed for the fourth quarter. However, as we look into what happened, we did some research with CDC. It seems pretty clear that there is a shift of the flu season that came late this winter season and started really more into the December, beginning of January and of course continues as we speak today.

Speaker 2

And consequence of that, it is that today we do have greater volume for both January and February that we had in Q1 of twenty twenty four.

Speaker 5

Great. Thank you for that. And then your revenue guidance, $4.00 $5,000,000 at the midpoint for $2,025,000,000 dollars again excluding those divestitures that you called out to be more like $413,000,000 which is very close to my estimate of $415,000,000 On the divestiture specifically, what did you do on that front in 2024? I think that there were some divestitures in 2024. The question is, how much revenue did those divestitures that were completed account for?

Speaker 5

How much adjusted EBITDA did they account for? And what were the proceeds of whatever you sold in 2024? And just to prepare you, I'm going to ask you the same question about 2025.

Speaker 3

Hey, good morning, Alex. This is Steve. So for 2024, roughly, we sold about $5,500,000 worth of revenue, which represented around $1,800,000 in EBITDA. Proceeds were just over $12,000,000 for the year. So again, just to highlight, these are non core assets for us, so not really our premier performing assets.

Speaker 2

As we look ahead, I'll skip to

Speaker 3

your next question, anticipating 2025. As we look at 2025 right now and some of this is what we're targeting, we have a couple of things under contract that have not closed. But we're looking at roughly, call it, dollars 25,000,000 worth of proceeds. And there's a mix here of certain non core assets and then some real estate. That amount accounts for around $9,500,000 of revenue and about $3,300,000 of EBITDA, kind of rough numbers on trailing 12.

Speaker 5

Got you. But the impact you said would be $7,900,000 in revenue and $2,300,000 in EBITDA. You just quoted a last twelve month number for or 2024 number for those non core assets that are being sold. Yes,

Speaker 2

that's correct, because we're seeing some

Speaker 3

of that benefit or seeing some of that revenue and EBITDA benefit in 2025 until we divest.

Speaker 5

And then after completing these divestitures, how many funeral homes will you have remaining in terms of core funeral homes?

Speaker 3

Confirm the number, this should result in more fewer funeral homes.

Speaker 5

And then what did you finish 2024 with funeral homes? I don't think it was in the press release.

Speaker 3

I believe, and I'd have to confirm, I believe it's two seventeen.

Speaker 5

That includes the cemeteries, which is fine. Okay. And then moving on again on the guidance front, $130,000,000 1 hundred and 30 point 5 million dollars in EBITDA at the midpoint, up 3.4% year over year. You're getting some leverage out of OpEx and so on. But then your guidance for adjusted EPS is up 21 at the midpoint, 3.2%.

Speaker 5

Is that being driven by, I think you touched on it in the overview comments, a lower interest rate expense assumption and a lower tax rate assumption. Does that explain the difference?

Speaker 3

That's correct, Alex. Ultimately, the tax rate is about, call it, five, six points lower expected to be, as well as about $5,000,000 to $6,000,000 worth of savings and interest expense.

Speaker 5

Got you.

Speaker 2

We also bring some savings that will contribute to EPS from our supply chain strategies as well.

Speaker 5

Great. And then I guess my last one is real quick. Are D and A and CapEx both up D and A up 10%? I'm assuming that's related to the Trinity rollout?

Speaker 3

A portion of that will be associated with Trinity because the training won't go 100% live in 2025. So we'll see it won't be a full year's worth of Trinity. So So that'll be a portion of that. And a portion of that will be the amortization of the preneed funeral preneed property.

Speaker 5

Got you. And then on the CapEx front, total CapEx of $21,000,000 this year, up from around $16,000,000 last year, up 30%. I'm assuming that's still fiftyfifty maintenance growth. And what explains the increase? What are you spending incremental money on in 2025 versus 2024?

Speaker 3

There are some larger projects we're doing in certain cemeteries ultimately that is driving is inconsistent or different than what we did in 2024, which is really kind of the main driver of the increase.

Speaker 2

The other thing, Alex, is as you remember, the last two years, and by that I mean 2023 and 2024, our focus was to drive as much as we could organic revenue. We were pretty much in the backseat of acquisitions. Our last acquisition was in March of twenty twenty three with Greenlot. And then we focused on paying down our debt. So part of that effort was to allocate capital to high growth projects, which was basically preneed cemetery and allocating maintenance needs really that were required in the field.

Speaker 2

And so as a consequence to that, we had a lower CapEx number for $23,000,000 and $24,000,000 what we have traditionally done. I remember 2022 was around $26,000,000 And so $2,025,000,000 dollars allow us to now, since we are in a range where we feel comfortable with the leverage ratio to allocate more capital to growth opportunities on the cemetery side for preneed property and also some of those businesses that we did not put some maintenance CapEx to work to go back to work on 2025. One more thought as I wanted to address this one on revenue. When you see that guidance on revenue a little lower than expected because you see the improvement on EBITDA and of course EPS, we wouldn't divest from those businesses. Our guidance would have been $410,000,000 to $520,000,000 of revenue for this year.

Speaker 2

So you want to point that out.

Speaker 5

Good. No, I appreciate that. Last question, I promise. With your year end CapEx or net leverage ratio target of 3.7% to 3.8% in line with that long term goal of 3.5% to 4%, I'm assuming that you'll be perhaps in the second half evaluating acquisitions again you'll get more active on that front?

Speaker 3

Yes, Alex. So we're excited to get back to growth. I think for us, we have some, as we just mentioned, some divestiture proceeds coming in that are not insignificant. And so we will look to redeploy some of those funds towards higher quality assets. Talking to a number of owners right now with some really premier properties, Don't know how those are going to progress, but we do think it's indicative of what will be available in 2025.

Speaker 3

So as Carlos and John mentioned, while the revenue number does not contemplate growth through acquisition, we do expect to have more of an update in Q2. We do expect it grow through acquisition this year.

Speaker 5

Great. But just to be clear, the revenue guidance does not assume any incremental inorganic growth.

Speaker 3

Correct. That's right. We want to get a better feel on what that's going to look like here in Q2, so I think there'll be a better update then.

Speaker 2

Yes. So, Alex, think about it from the perspective, right? Organic growth continues to be a focus at Carriage. However, this is the year that we're able to go back to growth mode. We have been able to get the structure that we needed over the last two years, get the team in place, get the systems right, been able to launch trade in 2025 is a really big deal for us this year.

Speaker 2

And this enabled us with a better margin than we have before. I mean, our margins are probably second to the highest one, which was '21 as a result to COVID-nineteen. And so now we're able to focus on growth. And as Steve mentioned, we have really good plans for that and an update in Q2, I'm pretty sure we'll get the excitement across the board from what we have planned for 2025.

Operator

We'll move next to John Franzreb with Sidoti and Company.

Speaker 6

Good morning everyone. Thanks for

Speaker 2

taking the

Speaker 6

questions. I'd like to start with the fourth quarter results and what you've gleaned from maybe a seasonally somewhat weaker 4Q with your changing the pricing strategy on a more regionalized basis in light of maybe some of that weakness. Carlos, anything you could share about the pricing strategy and how it's playing out when you have maybe some unexpected curves in the volume?

Speaker 2

Yes. That's a great question, John. Good morning. So as we recognized back in October that we're struggling with some declines in volume, but that were not normal. As you remember, this on a normal seasonal year or seasonalized year, you will have Q1 being the largest quarter of the year, Q4 being the second largest, and again, Q2 will be the third and Q3 will be the fourth.

Speaker 2

However, if you look at 2024, Q4 is actually the last quarter of the year, which is very abnormal. Because of that, and we were able to recognize that early, we fought for any call that was there, whether it was cremation or burial. That didn't allow us to be as competitive as we were in terms of keeping the price up because we wanted to keep as much volume as we wanted. So you didn't see that continuous trend on our pricing capacity over the last three months of the year. However, our strategic pricing review strategy continues in place.

Speaker 2

We are holding our strategic pricing review meetings for January, February and March to update our pricing for 2024, and that will continue to be an ongoing basis for 2025 quarter to quarter.

Speaker 6

Fair enough. And listen, there's been a fair amount of commentary in the media about this being the worst flu season in fifteen years. You mentioned that January and February are off to good starts. Can you kind of put it in context of how good of a start it is in light of some of the flu numbers? And also do you expect that flu season to spill over into the second quarter?

Speaker 2

I wouldn't know about the second quarter. It really depends how the weather plays out in the spring months. We're getting warmer already at least here in Houston and it seems like it may not last as long as we thought. But as it relates to your question for volume, we're about I'll just give you some ranges, about 1% to 3% year over year volume for January and about the same for February.

Speaker 6

Got it. Just to shift a little bit about some of the cost side of the equation here. Are you done adding personnel as far as the supply chain initiatives in 2025? Are there still additive costs that are going into the SG and A line?

Speaker 3

Just to clarify, Josh, you're asking if we're going to add personnel to support the supply chain focus?

Speaker 6

Correct.

Speaker 3

We do have plans. We think there's a lot of opportunity there. So we do have plans to add another individual to help drive and accelerate those opportunities. So at some point 2025, we expect that to be the case.

Speaker 6

Okay. So we're going to see some increase in SG and A plus. And I guess one last question, maybe a little bit on the debt expected pay down. Is that going to most of that debt pay down come post the sale of the acquisition? Are you going to do steady state debt repayments for the balance of the year?

Speaker 2

I'm struggling hearing your question. I think you're asking if we're going to allocate the proceeds from the debenture trade this year to pay down our debt. Is that what you're asking?

Speaker 6

Yes. Just looking at the timing of debt repayments and how it should take about it for the balance of the year.

Speaker 2

Yes. We have queued over the last two years that our long term range for leverage ratio is 3.5 times to four times. We want to keep it like that. Short term, we do have a nice pipeline of opportunities for acquisitions. But until we have something that it is in the books, any proceeds from divestitures goes down to save interest expense to our facility.

Speaker 2

And then we'll use some of those proceeds once we're ready to close some of those deals.

Speaker 3

And John, just to circle back on your question regarding OpEx. We've built all the additions into kind of our expectations. So our commentary in regards to OpEx or guidance already includes any additions that we're contemplating.

Speaker 6

Understood. Thanks guys. I'll get back in the queue.

Operator

We'll go next to Liam Burke with B. Riley.

Speaker 7

Carlos, you had a higher average revenue per funeral contract in the quarter, but also a higher percentage of cremations in the mix. Typically, cremations are a lower revenue per contract. How are you able to have more cremation customers but higher revenue per contract?

Speaker 2

That's a great question, Bien. What we've been focusing on over the last, I would say probably about a year, maybe ten months, is what we call conversion ratio, right? It is those families that come in with the idea of having a cremation and perhaps for them, that means a direct cremation. And through a process of educating the families on what it is available to them, we're able to have them choose something that is not just a direct cremation. That could be a cremation with a service, full service, that could be a cremation with just an upgraded urn and perhaps a small gathering to say a final goodbye.

Speaker 2

That could be some memorialization options for the family. Could be also a full blown visitation followed by a life celebration. And so now we're really working on team development and helping our teams of field directors across our businesses so they can really present all options to all families because we believe that perhaps some of those families that come in, they come in with that idea of information, but don't really know what it means and what is actually available to them. And that's been the strategy over the last ten months will continue to be for 2025.

Speaker 7

Thanks, Carlos. And John, on your free cash flow guidance, I know you mentioned that all it's an all in CapEx estimate. But how much influence does the preneed cemetery sales have on that cash flow guidance?

Speaker 2

So it includes kind of

Speaker 3

the similar kind of ratio as you would think from prior years that preneed is going to kind of turn a little bit slower than in kind of funeral business. So ultimately, you could think about it as it is a discounting kind of the transition from revenue into free cash flow.

Speaker 7

Okay. So the pre made sales rate is going to be above or below this year's cadence for 2024 cadence?

Speaker 3

The expectation, it will be kind of below this year's cadence, but it's still a higher than funeral revenue expectation.

Operator

We will go next to George Kelly with Roth Capital Partners.

Speaker 4

Just a couple of questions for me. First on Trinity, I was curious if you could go through the expected timing of the various sort of functionality, what Trinity is bringing? Can you just walk us through when you expect to turn on that functionality?

Speaker 2

Yes, absolutely. Happy to do that, George. So over the last year, as you know, we've been working mostly on programming, but the last few months have been now working on the testing side, doing parallel testing, making sure that everything that's been done on the programming will work once we go live. There's been several iterations of that to make sure, as you know, any ERP implementation, it's very involved, it's quite challenging and you find surprises along the way. I don't think I've heard of one that goes 100% successful to plan.

Speaker 2

However, we're pretty much at that point where we're going to go to a pilot of the program in the second quarter of this year and then thirty to sixty days after that, depending on how that pilot goes, full launch to a rollout throughout the remaining of 2025 in every business, specifically funeral homes, and then we'll move into cemetery in the first quarter of twenty twenty six. We do believe that Trinity will be quite a significant opportunity to maximize, to become more efficient, to improve our systems. And it is not just an ERP, I do want to emphasize that. It is it will give us all the back office that we currently have with our legacy system, which we call CIPIS, which is pretty outdated today. But it will enable us to do analytics.

Speaker 2

It will allow us to bring AI into our accounting procedures and become more efficient on that. Reporting will become tremendously better. But most importantly, in addition to our compliance items, is it contains a family portal. That's how we call it, the family portal. What that is, is a way to engage families from the moment they call the business to the moment they leave the funeral home or cemetery post services.

Speaker 2

And it is a way where they can continuously see where they are in each step of the stage of the funeral or the cemetery. That's how we're going to be able to submit paperwork, documentation and they can track every single item within their services that are being provided. Very exciting. We're very, very happy about that because I don't believe that's an option that's currently available out there for families today, probably, but no that I know of at least or familiar with. And so from my point of view, I think we're the first one to have something like that and that will certainly deliver better experience to the families and that should also deliver referrals and better experience, better reviews and as a consequence of that, potentially also better average because we'll be able to present better to families our services and our products.

Speaker 4

Okay. That's really helpful context. And then second question on your guidance. So on your revenue guide, I'm a little confused. You mentioned in your prepared remarks that your guide reflects a low single digit organic growth number.

Speaker 4

But the confusion I guess is just why wouldn't it be higher? You just mentioned that January and February funeral volume was positive low single digits. I would imagine there's pricing on top of that. And then your cemetery pre need, I'm guessing would be at, I don't know, maybe a double digit rate or close to it. So I'm just a little confused on what the disconnect is.

Speaker 4

What am I missing, I guess, on your organic growth target?

Speaker 3

So, George, I mean, I know the low single digit is when you excluded the impact of the divestitures, right? So that is part of the driver. But I think your question is why isn't the core business that is still here growing at a greater rate given the fact that January and February businesses have uptick to last year. But as Carlos indicated, that was low single digits, 1% to 3% is the information he gave. And from a Cemetery perspective, our numbers might be a little bit lower than kind of double digits right now as an expectation as we kind of work through the year.

Speaker 3

So I think it might be a lounge if you're looking at your model associated with what you have in there for cemetery.

Speaker 4

Okay. So maybe just to be more specific, your organic growth assumptions in your funeral and cemetery business for 2025 are what?

Speaker 2

It's about 1% on the funeral side and about high single digits on the cemetery side. Okay.

Speaker 4

And so not to belabor this too much, but are you just saying on the funeral side, it's too hard to have comps two months doesn't make a trend and you want to watch the year develop before you get too optimistic, is that the real issue or is there some kind of challenging comp that you'll be facing mid year?

Speaker 2

No, I don't think it's a challenging comp. I do feel pretty confident where the pull forward is today for 2025. I do think we are at the end of it. But if it is a fact that the flu season shifted from the Q4 of last year to Q1 of this year, that's sustainable, right? It will go away of 2020 Q1.

Speaker 2

And so I don't think that's going to create a trend in terms of volume for the rest of the year. And so while Q1 is looking better than we expected for that reason and it's 1% to 3% better on the volume side, I'm not speaking about revenue, just volume. It will be difficult to assume that that's going to be the trend for the remaining of the year or so. As you have noticed, our style is more around making sure that we commit to something that we believe we're going to really hit. Hopefully, we can do better and overpromise what we I'm sorry, overdeliver what we promised.

Speaker 2

And so that's been pretty much our thesis of work and why we've been somewhat, to your question, conservative on the guidance organically speaking because we did have pretty good 2024 organically speaking. And so it will be a significant amount of growth on top of that already pretty significant growth for 2024. So that's why we're trying to be somewhat conservative.

Operator

It appears there are no further questions at this time. I'd like to turn the conference back over to Carlos for any additional or closing remarks.

Speaker 2

Thank you, operator. As we conclude today's call, the key takeaway is that our 2024 results reflect our collective passion, innovation and unwavering determination to achieve our strategic objectives, as demonstrated by the impressive organic growth and a significant debt repayment accomplished last year. Carriage is set for an exciting and promising future. We are dedicated to creating premier experiences and concentrating on growth. We will continue to reach new heights and attain even greater success.

Speaker 2

Thank you. We look forward to speaking to you again when we report our first quarter performance. Have a fantastic day.

Operator

Thank you. Ladies and gentlemen, that concludes today's call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
Carriage Services Q4 2024
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