Good day, ladies and gentlemen, and welcome to the Carriage Services First Quarter 2015 Earnings webcast. At this time all participants are in listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to Chris Jones, representing Carriage Services. Please go ahead sir.

Thank you Candice, and good morning, everyone. We're glad you could join us. We'd like to welcome you to the Carriage Services conference call. Today, we will be discussing the Company's 2015 first quarter results, which were released yesterday after the market closed. Carriage Services has posted a press release, including supplemental financial tables and information on its website at carriageservices.com. This audio conference is being recorded, and an archive will be made available on Carriage's website. Additionally, later today, a telephone replay of this call will be made available and active through May 10. Replay information for the call can be found in the press release which was distributed yesterday. On the call today from management are Mel Payne; Bill Heiligbrodt; and Dave DeCarlo. Today's call will begin with formal remarks from management, followed by a question-and-answer period. Please note that during the call, management will make forward-looking statements in accordance with the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. I'd like to call your attention to the risks associated with the statements, which are more fully described in the Company's financial report filed on Form 10-Q and other filings with the Securities and Exchange Commission. Forward-looking statements, assumptions or factors stated or referred to on this conference call are based on information available to Carriage Services as of today. Carriage Services expressly disclaims any duty to provide updates to these forward-looking statements, assumptions or other factors after the date of this call to reflect the occurrence of events, circumstances or changes in expectations. In addition, during the course of this morning's call, management will reference certain non-GAAP financial performance measures. Management's opinion regarding the usefulness of such measures, together with the reconciliations of such measures to the most directly comparable GAAP measures for historical period, are included in the press release and the Company's filings with the SEC. Now I'd like to turn the call over to Mel Payne Chairman and Chief Executive Officer.

Thank you, Chris. After compounding Carriage in ‘91 I wrote down five guiding principles that would guide the growth and development of our Company. The second one was work hard, have fun and share the success. I'll later hesitate to have fun out because our people started hanging these guidance principals in our funeral homes and cemeteries and I didn’t think that was a good idea for greeting families. But I will tell you right now I should have the title of two funs ups talking about this quarter and our people did a lot of fun. It was one quarter that I will never forget. We've had good wins before. We've had some really good ones before. But this one was gooder than any other one. And with that I would like to turn it over to Bill to give you some color on the quarter.

Thank you Mel and thank all of you for joining us on the call today. We are pleased to report a solid start for 2015 in this first quarter. Carriage achieved outstanding first quarter adjusted diluted earnings per share of $0.42, an increase of almost 36% over 2014. Likewise our adjusted free cash flow followed our earnings and increased over four times from $2.3 million in 2014 to $10.8 million in 2015. Looking behind these numbers, let's look first at revenue. Total revenue increased just under 14% in the quarter. All segments of our business reported strong revenue growth. Total funeral operating revenue increased 14.7% with same store funeral revenue up 6.4%. Cemetery operating revenue increased 13.5%. Financial revenue followed with a good 4% increase. We have long said that if Carriage produces high single digit revenue growth or higher, we will produce solid earnings per share growth, and that in summary again is the case in the first quarter. 13.7% growth in revenue 35.5% growth in adjusted diluted earnings per share. Second, even better were our operating results with total field EBITDA up 20.7% for the quarter at a margin of 43.5%. Comprising these numbers, both funeral and cemetery field EBITDA growth was well than excess of the revenue growth and field margins of 41% for funeral and almost 35% for cemetery. Third point, with our previously discussed performance increases we continue to control our expenses. Total overhead for the quarter was down $1.6 million and $8.6 million almost a 16% decrease and as a percentage of revenue is now at 13.5%. Summarizing quality results such as these we are reporting to you today are not easy to accomplish and represent the combined effort of all the employees of Carriage. For you, the shareholders of our Company, you can see the high performance culture and our team approach working in collaboration using our operating models to produce real results. We're off to a very good start in 2015 and we look forward to reporting to you as we move throughout this year. Mel?

Thank you, Bill. After we finalized a major board and senior management reorganization on November 1st 2011, we then launched what we have called a five-year Carriage Good to Great Journey. Starting in 2012 was a thing Carriage Services 2012 a new beginning. We then challenged all of our field and home office leaders and employees to boldly seize the moment with high and sustainable operating and financial performance over the entire five-year period. We explained to each of our people that the market value of Carriage, i.e. our stock price would follow their sustained high performance over this five-year period complemented by acquisitions of the best remaining independents and the best strategic markets in the country. We also explained how each business and each employee in each business and each employee in each home office support department was important to the success of our Good to Great Journey as it only took $314,000 of incremental field EBITDA to equal $0.01 per Carriage share. Now that we finished the first quarter of the fourth year of our five year Good to Great Journey and I'm extraordinarily proud and genuinely humbled to report that all of our leaders and employees across the Company have responded to the challenge at the end of 2011 with high and sustainable performance. That has led to our stock price rising from $5.60 per share at December 31, 2011 to over $24 as we now speak. I want to emphasize the major components of our earning power, growth over the last three and a quarter years have been broad and continuing throughout the three and a quarter years, not just this most recently unbelievable first quarter. We publish a five-year trend report that will be updated after this quarter in what we call our company and…

(Operator Instructions) And our first question comes from James Fonda of Sidoti & Company. Your line is now open.

I guess could you just talk a little bit about the gross margin improvement and I guess if you think that expansion is sustainable going forward.

I don't look at the SEC format. So I can't even comment on that. I look at our trading format.

But in general, the answer to the question is James that once our revenues go up we get a leveraging effect. I may have commented on that in my comments. So you would expect that our margins are going to go up as our revenues expand. So I think that's really the answer to the question. It's better reflected as Mel says if you kind of look through the trend report. For example like I reported that funeral operating revenue was up 14.7% but then when you look at funeral EBITDA, it was up 23%. So we get a tremendous leverage off of that. Also for the Company as the whole – again, I’ll emphasize that, like we were 13.7% growth in revenue and 35.5% growth in adjusted diluted earnings per share. The combination of that and other expense control on operating businesses create good margins when you run your business.

Let me comment, James. You're talking about the SEC reporting format. I don’t follow that. We run from that. I personally don’t think that’s the thing to be looking at. That’s why we created the kind of transparent reporting trend reports. That’s what we look at. That’s what I look at. But it does translate into a gross margin. Now this is seasonal business. This throughout the year. It doesn’t mean every quarter will be this good, either on the field margin level, but I will point out, Bill had mentioned this. But for the first time in history the acquisition portfolio, which this businesses we've owned since January 1, 2011 had a higher field EBITDA margin then our same store portfolio. What I said is over time we're buying bigger businesses and bigger markets and those will by definition have more margins in them and more leverage of revenues that you get through the business. So over the next five years you’re going to see more of that. So that translates into a higher gross margin on the funeral side. On the cemetery side we've been getting better for four years. But we continue to get better at premium property sales and that translates into higher margin. So the good news is we’re keeping our cost down at the overhead level although we've got better in every support department.

(Operator Instructions) And our next question comes from Joe Janssen of Barrington Research. Your line is now open.

Just on the rolling four quarter guidance, the adjusted EPS of $1.55 to $1.59 -- excuse me, outlook, not guidance. I'm just curious at this point given the operational efficiencies that you're getting out of the business, the new properties that are coming online as well some of the recently acquired businesses, is there any embedded assumption in there for additional acquisitions through the end of the year.

Yes there is.

And then I guess that leads me my next question. In your prepared remarks you didn’t talk much about this in terms of pipeline and the acquisition. And your general comments are it’s usually robust and solid and the pipeline is full. Are you -- anything near maybe in the finish line and I know a lot can change between now and then but any terms of announcements on the acquisition front maybe in the next three to six months?

This is Mel, and I've been out there. I just got back from hunting big deer and maybe an elephant or two. That’s what we call a big business. Dave DeCarlo and I are involved in hunting elephants and big deer and Dave finished his team, which is an awesome team and they’re doing awesome work. We're very focused on the right areas of the Country that -- I just gave you a few examples; Texas, Carolina's and around New York City down through there or other places, Pittsburgh, other major markets. And I've never felt better about quality of the activity. I've never felt better about over the next few years what that will mean to the Company. But by definition when you start romancing the best of the remaining independents in the country, it takes a while to fall in love and to get engaged and to have a happy marriage. And it’s not kind of thing you can easily plan by quarter. I know that creates challenges for our analyst. I feel your pain but I am 100% confident about where we're headed with our acquisition. Dave is here and he can comment on his own.

Yes, we are comfortable with the pipeline and the relationships that we’re developing, especially in these major markets.

I'm sending more and more of my time there because look, 60 operations, how am I going help there? I'll just mess it up.

I'm just curious your average transaction in terms of sales has been between $2 million to $3 million. You used the term elephant. I'm just curious, maybe quantify what an elephant would look like in terms of sales.

It's a multiple of that, many.

Hi guys its Alex I'm standing here over Joe’s shoulder. I just have a question or two also about the lowly four quarter outlook. A lot of commentary in the press release about what you're doing on the operation side, which is great. You're improving the profitability within cemetery, improving the profitability within funeral homes, you're green fielding funeral homes and you're looking to add cemeteries where you're in a strong funeral home operation. So all those things add together to improve internal growth above what the industry grows and we all know the industry is a slow growth industry. We also know that embedded in your guidance is some assumption for acquisitions not yet announced. I'm just wondering, with the outperformance of the organic operation, does that sort of by -- because you didn't change your guidance, does that sort of by definition then say that you have a lower assumption from the number of -- on the number of acquisitions within that rolling four quarters or the dollars -- the sale dollars you bring in through acquisition.

No. It does not mean that.

Okay.

The thing Alex is this. In going back and looking at the Company from January 1, 2012, and I have all these numbers. I just don't have time to go over them on a call. We’ve looked hard at this and we've grown the earning power of the Company about half. So I'm internal. This is both funeral homes and cemeteries and the financial side. We've grown revenue $10 million over this three and a quarter year period, and we've grown the EBITDA by $10 million. One for one, that's a lot of EPS, over $0.30 a share from internal. If you look at the acquisition side, side, it's about the same. So it's about a 50-50 contribution roughly over that period of time. We are 100% confident that we can grow at 8% a year our revenue including acquisitions. But to quantify it on a quarterly basis is in our view, I don't know how to help you with that but it's going to be there. Today’s goal is that that should be on the low side. But why go promising it on the front end, why not just go do it.

Got you, so I don't doubt that, and you're right is a challenge to model quarters in this business.

[indiscernible] Alex, and you start looking at deals and it makes you think differently and I don’t think it's the wise thing to do.

No, I hear you. My point was simply not that -- there's thousands of targets out there for you. Not that you're going to take it down over the long term. Understand, I used to always assume that you had to make six to eight acquisitions a year.

That's not true.

So, my assumption's wrong.

Yes, it's wrong.

Okay. So.

We might make one a year that's even better than the eight.

There's no doubt about it that reduces the risk for the investor if we are less reliant on acquisitions, because the timing and magnitude is difficult to predict.

Let me mention a thing here. I am a big student of Warren Buffett; huge. And I have learned that patience is a virtue. And when you are patient, and you're working on identifying the very best remaining businesses in America, and they tend to be bigger and bigger markets, when you get one of those, it allows you not only to have huge earning power from what you bought, but to deploy additional capital in that business to grow it over time. I mentioned that in this press release for a reason. That is what we want to do with this Company, is have the allocation of our capital go to businesses that we can grow at a more rapid pace than our existing portfolio of businesses, most of which was acquired in the 90s. That is not thousands of candidates. It might be a 100 candidates, and those 100 candidates are really good ones. We know who they are. We're talking to them as we speak. There will be others that are what I call bread and butter that make up the six to eight. But it's going to be a combination over time and in my view it will be more than what you could think or more than what we have said we will do. So patience is a huge asset.

No, I hear you once again. I think this is a productive conversation because we do have a revision in the acquisition methodology, your words in the press release. And I think it's great. You've always gone after the best of the best but it sounds like you're even going bester.

No. I'm sorry. We haven't explained this and the methodology has been changed. So we don't waste time on deals that don't qualify and should not ever even get to the stage of financial analysis and return on invested capital. We kick those out early and don’t waste our valuable time on that. So the methodology of the selection, that one that makes it through has not changed. But there’s a lot of stuff you get strung after you are here, is junk.

And our next question comes from Nicholas Jansen of Raymond James. Your line is now open.

Two questions from me. First regarding the convertible note instrument. I don’t believe your share count assumption for your EPS guidance reflects the potential dilution there, and with the stock where it is today it looks like we might start to into get into that phase or where they could be dilution in considering you're having pretty strong free cash flow and then maybe the cadence of M&A is going to be more selective. Is there anything that you can do to maybe minimize the level of dilution that could be coming if the stock continues to rise? Thanks.

Yes, Nick. Obviously we're looking at that. We have two forms of dilution and they are about even. One is from the convert. The other is from the options that we issue to obtain this as it bets our result from this performance to our employees. It's about even. So I think was little over 600,000 in this quarter and it's split pretty much even. So we'll be looking at that. Obviously the way the converts works -- this convert, obviously the only dilution we have is after we reach and go into the premium phase of that security. So it will only go up if the stock price goes up. The other we're looking at this point, and I had talked to Mel personally about this within the last week. So yes is the answer.

Yes we are looking at that seriously. We don’t want the share count to go up.

And then secondly regarding one of your major areas of focus for 2015 on cemetery pre need property sales; historically you haven’t really initially talked about pre-need as large part of your strategy and maybe just want to get a little bit more color on kind of your views on property sales that are kind of where we are today and where they could be two to three years from now.

I think number one in cemetery, that’s part of this capital allocation the Mel is been talking about. I really believe that what we've done and what we're going be doing over the next few years is making sure that we have enough property and the right property to sell. So we’re reinvesting back in our cemetery to get in that particular basis and we're also looking at how this revenue and how you would set it up as far as – so that the resulting sales do benefit the company the most. So when you look at a cemetery company and I look at the first quarter and after you’ve been in this business, I guess since the inception of this business, in this first quarter our cemeteries as a whole did 36.5% margin. That’s almost phenomenal that’s really unreal and when we look same store I'm just going to put this out. Actually our same store EBITDA growth exceeded our same store revenue growth. And that’s because we were able to have better products to sell in our good cemeteries. And I think that’s something that we haven’t done before, simply because we were in a different size company in a different financial phase than we are today. So I think that cemetery, and I will say this -- our people are getting very good at running cemeteries and I'm proud to be here working with in that regard. So I think you're going see some continuation in that. I don’t know whether we can hold the margins exactly where they are today. But I promise you I think will be a good performance cemetery.

(Operator Instructions) And I'm showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect.