Carriage Services, Inc. (CSV) Q4 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Carriage Services Year-End 2016 Earnings Conference Call. At this time, all participants are in a 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 is being recorded. I’d like to introduce your host for today’s conference Viki Blinderman. You may begin.

Thank you, and good morning, everyone. We are so glad you are able to join us today. We would like to welcome everyone to the Carriage Services conference call. Today, we will be discussing the Company's results after the full-year 2016 which was released yesterday after the market closed. Carriage Services has posted the press release, including supplemental financial tables and information on its Investor Page of our website. The audio conference is being recorded and an audio archive will be made available on our website. Additionally, later today, the audio archive will be made available and active through February 20. Replay information for the call can be found in the press release distributed yesterday. On the call today from management are Mel Payne, Chairman and Chief Executive Officer; and Ben Brink, Chief Financial Officer. Today's call will begin with formal remarks from management, followed by a question-and-answer period. Please note that during the call we will be making 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 these statements which are more fully described in the Company's report filed on Form 10-K 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, we will reference certain non-GAAP financial performance measures. Management's opinion regarding the usefulness of such measures, together with the reconciliation of such measures to the most directly comparable GAAP measures for historical periods, are included in this press release and the Company's filings with the SEC. Now, I'd like to turn the call over to Mel.

Thank you, Vicki. In 2011 it became very apparent after several years of underperformance that we had to make a radical change. So we convened a group and figured out what to do, we did that on November 4, 2011. It was a radical management reorganization as well as Board. It became clear that if we didn't take those measures, someone else would see our Company as an opportunity to do better with it than we could and what is a wonderful industry. So we all agreed after that after reading the bookGood To Greatthat we would launch a Good To Great Journey starting January 1, 2012. I wrote a letter it was - the total letter was seven pages long. The short version of that letter is the good part of launching the Journey. The other six pages were explaining all the radical changes we had made including leadership. We sent that out on November 29, 2011 and it was explaining everything and asking our people to rise to the challenge of high and sustained performance beginning on January 1, but not just for 2012 continuing for the next five years in order that our Company would take a journey from a good company that was underperforming under the framework to one that was outperforming, everything else in the industry historically over that five-year timeframe. We went out on November 29; December was the weakest volume we had in years. As I recall the same-store volumes were down 6%. We have the highest field EBITDA margins we have had in five years. That trend continued, no matter what the variability quarter or month death rate flew for the next five years. It is been a journey unlike anything I've ever seen. And it just seems to keep getting better and better. But to put some color on the journey and the performance, I would like to turn it over to Ben Brink.

Thank you, Mel. 2016 marked a strong finish to the first five-year phase of Carriage’s Good To Great Journey that never ends. Over the past five years, Carriage has demonstrated the ability to leverage a revenue compound annual growth rate of 6.4% into an 8.7% growth rate in adjusted consolidated EBITDA and 20.4% compound annual growth rate of adjusted diluted earnings per share. We have increased our adjusted consolidated EBITDA margin by 310 basis points and increase the pro forma adjusted consolidated EBITDA margin by 550 basis points when you exclude our previously reported Withdrawable Trust Income. All of this extraordinary performance led to a total shareholder return of 417% over the past five years. At Carriage, we believe that qualitative factors always proceed quantitative results. In fact, our Third Guiding Principles states our belief in the power of people through individual initiative and teamwork. To that end, the quantitative results we have achieved during the first phase of our Good To Great Journey, our direct correlation to the 4E managing partners and their teams at each of our businesses who embody our high performance culture each and every day by providing high value personal service to each family we have the opportunity to serve. Underneath the Carriage covers over the past five years, we have seen an upgrade in entrepreneurial talent across our organization as evidenced by the continual improvement in field level profitability, improvements across all of our Houston support department that has allowed us to better leverage our consolidation platform and better alignment of our operations and strategic growth leadership team. These qualitative improvements will allow us to further accelerate our Good To Great Journey over the course of the next five years. Turning to our 2016 annual results which mark the eighth consecutive year of record performance, revenue grew 2.3% to $248.2 million, adjusted consolidated EBITDA grew 3.6% to $73.7 million, adjusted diluted earnings per share grew 9.5% to $1.62, and adjusted free cash flow grew 7.8% to $47 million. We also achieved an adjusted consolidated EBITDA margin of 29.7% and improvement of 30 basis points over the prior year and a level of those never been achieved in the history of consolidation in our industry by mature, public company using current accounting methodology. On Pages 2 through 4 of our press release, we provided a detailed discussion on how we view the achievements of an adjusted consolidated EBITDA margin of 29.7% along with the investment merits to current and prospective long-term shareholders of the improvement in the cash earning power of Carriage over the past five years. This improvement has a lot of Carriage to increase our debt leverage capacity by approximately 23% on the same revenue base has increased by 111% our ability to self-finance from free cash flow and more rapid pace of acquisitions substantially increase the returns on invested capital of both our existing same-store and acquisition funeral and cemetery portfolios. The increasing margin trends will materially benefit long-term investment returns on future acquisitions and the increase in adjusted consolidated EBITDA margin has allowed us to substantially increase our financial flexibility to pursue additional opportunistic value creation capital allocation decisions. We expect incremental margin improvement in the coming year as we continue the high performance execution of our three core models. Our fourth quarter results were negatively impacted by weaker than expected funeral volumes and cemetery sales and discrete tax items that all been eliminated the additional tax benefit we booked in the third quarter. Total same-store funeral contract decreased 1.9% in 2016 from the previous year and decreased 2.2% in the fourth quarter. This unexpected volume decline in the fourth quarter was primarily attributable to lower funeral volumes on our central and western regions. At this point in time, we have no reason to believe that these volume trends will continue into 2017 due to the decrease in funeral volumes. Revenue in our same-store Funeral segment fell 1.6% from 2015, while our same-store field EBITDA increased slightly from the prior year. A critical investment takeaway is that the EBITDA margin improvement in a lower revenue environment not only shows the quality of our entrepreneurial managing partners and their teams, but also demonstrates the inherent discipline and consistency of the operating and financial results produced from the high performance execution of our innovative and unique standards operating model. Our acquisition funeral portfolio continued to perform at a very high level as almost all of the businesses we acquired over the past five years have outperformed our expectations prior to these first class businesses partnering with Carriage. As shown in the operating results, we continue to execute on our strategic acquisition model to acquire larger, higher margin funeral homes in larger strategic markets that fit our profile for higher future revenue once they partnered with Carriage. While the acquired Field EBITDA margin increased by 50 basis points for the year, it was lower by 250 basis points in the fourth quarter, which was entirely due to the timing of acquisitions that closed in the third and fourth quarter. Our Cemetery segment continues the trend of strong annual performance with revenue increasing 4.9% and Cemetery Field EBITDA increasing 3.2%. This performance capped a five year period, while we made significant improvement on the quality of leadership of cemeteries and we completed the series of growth capital projects through our cemetery portfolio. Over the past five years, revenue in our same store Cemetery segment compound annually of 4.5%, while Field EBITDA grew 9.1% annually and margins improved and incredible 630 basis points in our overall cemetery portfolio. The discrete tax items in the fourth quarter equated to EPS reduction of $0.10. The additional discrete tax items we booked for the quarter were related to a calculation methodology change we implemented after reengage two different tax consulting firms to perform an in-depth review during the fourth quarter. We expect additional benefits from this review particularly regard to cast taxes paid to materialize in 2017. Diluted shares rose approximately 500,000 for the year and $1.4 million for the fourth quarter, due to the dilution from our 2.75% convertible notes. As a reminder to investors, the notes have a conversion price of $22.50 and reported dilution occur slowly, other stock price raises with the full amount of dilution occurring at $53 per share and amounts to 3.6 million. Carriage retains the option to settle any conversion in cash or shares. During 2016, we performed an in-depth review of our capital structure and a variety of options available to Carriage when we execute our next capital structure transaction. Any contemplated transaction will be consistent with our objective to grow intrinsic value per share for long-term shareholders. In the meantime, we will continue to enjoy the low cash interest costs and the financial flexibility of the convertible subordinate notes. Throughout the year, we continue to make progress in improving our overhead structure and cost as a percentage of revenue, absent one time large severance and retirement costs overhead as a percentage of revenue would have fallen 140 basis points to 12.9%. We expect this trend to continue in 2017, as we improve and leverage our operating and consolidation platform. We were also very excited to announce the achievement by 12 of our managing partners of our long-term five year Good To Great incentive award in 2016. The Good To Great incentive award is a unique opportunity for great entrepreneur leaders to share in the long term value creation they create in their businesses. This was the first group that was eligible to receive this award and as a group the compounded revenue at 5% and feel the EBITDA 10% over the past five years, a truly remarkable performance. Carriage has completed four acquisitions in 2016, including two in the fourth quarter. Becker Ritter Funeral Home in the Greater Milwaukee market and Rich & Thompson Funeral Services in Burlington and Graham North Carolina. All six of the funeral homes acquired in 2016 scored high in our city granting criteria and we are honored to partner with these first class operators, who share with us a vision of continued success of their businesses in their local market. Together these four transactions had a total purchase price of 3$7.4 million with $23.9 million paid a closing, the remaining $13.5 million in future consideration. As noted in our release, we are excited that Shawn Phillips will be leading our corporate development department going forward. Shawn will be joined by another longtime member of our operating strategic growth leadership team. Gabriel know and accelerating the evolution of our corporate development function. These two leaders are uniquely qualified to engage with the best independent funeral home and cemetery owners to explain how carriers have differentiated ourselves within the industry and why we believe that we offer the best discussion planning solution. We are excited by their progress in only a few short months and look forward to reporting our progress going forward. As we view the next 10 years of the greatest strategic opportunity for value creation due to an acceleration of consolidation within our industry. We completed approximately $17 million of capital expenditures in the past year, which was down significantly from 2015 and we expect to spend between $16 million and $18 million in capital expenditures during 2017, which will be split evenly between maintenance and growth CapEx. This will include the completion and opening of one new funeral home that we had originally planned to complete in 2016 and we have previously stated that we are comfortable operating our business with a total debt-to-EBITDA ratio between four and five times given the revenue and free cash flow characteristics of our industry along with our improving adjusted consolidate EBITDA margin. Using the midpoint of our Adjusted Consolidated EBITDA rolling four quarter forecast of $81 million, our pro forma leverage ratio currently stands at 4.5 times which demonstrates our progress and reaching our previously stated expectation to leverage or fall to 4 times over time. Our preneed trust investment for the total return of 19.7% for the year and outpaced our benchmark by 3.8%. The performance of our trust funds continued our long-term track record since the fall of 2008 at the depths of the financial crisis when we took control of all investment decisions in the trusts. We took a number of steps in early 2016 to reposition the portfolio and take advantage of dislocations within the high yield fixed income markets. There's a lot of to increase the amount of recurring income within our trust fund portfolio and improve the overall credit quality. Our trust fund performance in the fourth quarter benefit from the significant outperformance of our long-term positions in regional banking insurance company TARP warrants, energy infrastructure companies and other core equity positions. Given our current outlook we have for our business we are raising our rolling four quarter outlook for revenue and adjusted consolidated EBITDA. This outlook does not include any acquisition activity as we currently have no signed letters of intent. The outlook for our adjusted diluted EPS of lower than our previous outlook, entirely due to the increase from reported share count from the convertible notes as I discussed earlier. I’ve shown in the press release we have updated our five-year roughly right scenario through year end 2021. Is important to note that we do not intend for this to be a formal management forecast for instead a roughly right range of future performance the scenarios in line with previous scenarios we've out outlined and unlike our own corporate outlook include estimates for acquisition activity based on his our historical average of allocating 90% to 95% of free cash flow to acquisitions. We made the decision to exclude the scenario for adjusted net income and diluted earnings per share due to the unknowable nature of any future capital structure activities. We will pursue over the next five years. Rest assured that all of us here, Carriage are working hard to ensure this roughly right scenario if completely wrong to the upside of course. We also remaining incredibly excited for the opportunities there are before us and recognize the best days of Carriage are ahead. We appreciate everyone for taking the time to join our call this morning and we look for the reporting results throughout the year. For those wishing to ask questions we would ask that any questions on the call pertain to Carriage’s long-term value creation dynamics that were discussed in detail in our press release. Any questions related to financial models or forecasts. Please address with here I after the call. And with that, I will turn it back over to Mel.

Thank you, Ben. From the time we set off at the end of 03 then a different path, but different ideas and concepts about how to consolidate and operate this wonderful industry the funeral and cemetery industry. We have been called many names, most of them not repeatable on this call. We will continue to follow the path independent thinking and thought about how to do things differently, but always trying to get better experimenting and trying new ideas many of which come up from the bottom and bubble up to the top. We have a wonderful framework, it's very flat, it's very entrepreneurial are reporting of five-year trends is so transparent. You can't hide anywhere and neither do we want to hide. What it does is show off the performance of the leaders and employees and our operating businesses. It also shows the overhead in support of them. What we try to do is support them better and better over time. So that they can achieve more of what we call being the best standards not just annually, but over five-year periods now which we measure and reward and recognize. It has been quite a journey over the last thirteen years and especially over the last five years. Our people have responded in ways that I could not even have dreamed up it so good and we have precise winners that I'm about to announce but we also have a whole company full of winners that are yet to show up as winners and we seem to be attracting more and more talent that is competitive entrepreneurial and wants to win. So with that, I want to say what an honor it is to announce our first class of Good To Great high performance heroes over a full five-year period. This means they’ve achieved high levels of standards achievement on an annual basis and then sustained that high level achievement over a full five years. And all the while growing revenues is I think then mentioned well above 2% and Field EBITDA compound that around 10%. The winners are Kristi Ah You, Franklin & Downs Funeral Home; Modesto, California; James Bass, Twin Cities Cremation Services and Funeral Home; Niceville, Florida; Emerald Coast Funeral Home/McLaughlin Mortuary; Fort Walton Beach, Florida; Kyle Incardona, Hillier Funeral Homes; Bryan, Texas; Steve Mora, Conejo Mountain Funeral Home; Camarillo, California; Ken Summers, P.L. Fry & Son Funeral Home; Manteca, California; Robert Maclary, Kent-Forest Lawn Funeral Home; Panama City, Florida; Chad Woody, Watson-King Funeral Homes; Rockingham, North Carolina; Brad Shemwell, Latham Funeral Home; Elkton, Kentucky; Michael Page, Allison Funeral Home; Liberty, Texas; Patty Drake, Drake Whaley McCarty Funeral Home; Cynthiana, Kentucky; Andy Shemwell, Maddux-Fuqua-Hinton Funeral Homes; Hopkinsville, Kentucky; and Tim Hauck, Cape Coral Group; Cape Coral, Florida. We will see you soon in Costa Rica and it will be the trip of a lifetime I promise. The Annual Pinnacle of Service Award winners for 2016 we had 35. They are as follows; James Terry, James Terry Funeral Home; Downingtown, Pennsylvania; James Bass, McLaughlin Twin Cities Funeral Home; Niceville, Florida; and Emerald Coast/McLaughlin Mortuary; Ft. Walton Beach, Florida; Bill Martinez, Stanfill Funeral Home; Miami, Florida; Richard Munoz, Connolly & Taylor Funeral Directors; Martinez, California; Benjamin Friberg, Heritage Funeral Home and Crematory; Ft. Oglethorpe, Georgia; Brad Shemwell, Latham Funeral Home; Elkton, Kentucky; Joseph Waterwash, Baird-Case Jordan-Fannin Funeral Home & Cremation Service; Ft. Lauderdale, Florida; Jason Higginbotham, Lakeland Funeral Home; Lakeland, Florida; Jeff Moore, Sterling-White Funeral Home; Crosby, Texas; Kristi AhYou, Franklin & Downs Funeral Homes; Modesto, California; Kyle Incardona, Hillier Funeral Home; Bryan, Texas; Jason Cox, Lane Funeral Home - South Crest Chapel; Rossville, Georgia; Michael Nicosia, Chapel of San Ramon Valley, Danville, California; and Ouimet Brothers Concord Funeral Directors; Concord, California; Robert Maclary, Kent-Forest Funeral Home; Panama City, Tim Hauck, Cape Coral Group; Cape Coral, Florida; Andrew Cumby, Cumby Family Funeral Homes; High Point, North Carolina; Chris Duhaime, Funk Funeral Home; Bristol, Connecticut; Chris Chetsas, Cataudella Funeral Home; Methuen, Massachusetts; John Fitzpatrick, Donohue Cecere Funeral Directors; Westbury, New York; Chad Woody, Richmond County Memorial Park; Rockingham, North Carolina; Ken Summers, P.L. Fry & Son Funeral Home; Manteca, California; Matthew Simpson, Fry Memorial Chapel; Tracy, California; Justin Luyben; Evans-Brown Mortuaries & Crematory; Sun City, California; Curtis Ottinger, Heritage Funeral Home; Chattanooga, Tennessee; Verdo Were, McNary-Moore Funeral Service; Colusa, California; Andy Shemwell, Maddux-Fuqua-Hinton Funeral Home; Hopkinsville, Kentucky; Steve Mora, Conejo Mountain Memorial Park; Camarillo, California; and Conejo Mountain Funeral Home; Camarillo, California; Patty Drake, Drake Whaley McCarty Funeral Home; Cynthiana, Kentucky; Brian Binion, Steen Funeral Homes; Ashland, Kentucky; Roger Allen, LaGrone-Blackburn-Shaw Funeral Directors; Amarillo, Texas; Jeff Seaman, Dwayne Spence Funeral Home; Canal Winchester, Ohio; Ashley Vella, Deegan Funeral Chapels; Escalon, California; Mike Conner, Conner-Westbury Funeral Home; Griffin, Georgia; Tim Miller, Fuller Funeral Home & Cremation Service East; Naples, Florida; and Kim Borselli, Fuller Funeral Home & Cremation Service Pine Ridge; Naples, Florida. We will see all these whiners and their spouses significant others are a guest and Playa del Carmen in Mexico in May. And it takes a little time to go through this group and name them, but I want to make a point. From the time we began our journey really 13 years ago and especially five years ago. People have told us don't do this and don't do that and every time they tell us that it makes me realize we should have done it sooner and louder. These are the people that I just name that are the wonderful leaders of our wonderful businesses creating a performance that somebody gets the benefit of owning over time. These are indeed the owners of the Company, along with their employees because if they didn't produce high and sustainable performance, we wouldn't have a reason economically and financially to continue to exist. And therefore we would have no reason to continue a good to great journey that never ends to a point that where a Carriage becomes so highly value that it is determined to be a Company that was built to last. The only way that happens is to get the best talent in your businesses, let them do what they can and don’t put limits on them, and then support them to be successful forever. This is who we are, it will continue to be who we are because it works in the power of really highly motivated and talented people is beyond what you could do if you had a budget in control environment. So I'm proud to have announced all these names and will be more than proud to be with them in the next month or two. And with that, I’d like to turn it over to questions.

[Operator Instructions] And our first question comes from the line of Scott Schneeberger from Oppenheimer. Your line is now open.

Good morning everyone. This is Greg on for Scott.

Good morning, Greg.

I was hoping you could elaborate on the reorganization of your corporate development function and how this evolved take advantage of an expected acceleration of an industry consolidation?

Yes, it's very difficult to explain the standards operating model and I've seen really smart people come into the Company and look at it. See a disguised, but really what we call here a concept of getting through the other side. They never get to the other side, where the rest of us poor and play and live on a daily basis. It's really difficult for people to comprehend the profoundly simple nature of the high performance standards like in the funeral business we own as eight. And in order to go out and explain this, concept to owners are really first class businesses, we finally got to a place where we needed to have operating people do that. Shawn Phillips has 10 years within our Company. He came from other companies. He earned unlearned what he had learned was the right way to do things in terms of operations and consolidation. It took him a while to get to the other side. He got to the other side and he is right. He ran our west. He ran our central as a regional partner. And so we asked him rather than to go outside to step into this position because we realized having him discuss with owners, how we operate and how this framework works will ring bells and when they hear it from an operator, they honestly don't believe it's true, but when he explains it, and then says you can call anybody here do it. We puts us in a competitive advantage where you have no competition because no one has ever done this before this way and it didn't work when we had other people out trying to explain it with other backgrounds. It just simply didn't work, no matter how much. They tried or the good intentions or their efforts. So we reorganized and put Shawn in-charge of it. Dave knows the support side of our Company, all parts of it. He's been in all parts of it. So if you have Shawn and Dave paired up as a team. Believe me they're already out there making ways. This is not going to take long and we're all shocked, how simple and how quick it happens now versus in the past and so we're very excited. We want to accelerate the growth, we don't want to just do deals, we want to be highly selective bigger better higher margins, we had a Board meeting yesterday we talked about some people they're talking too and it's an exciting time for our Company. How you model it out? Don't have [indiscernible].

Great. Thanks for that color Mel. I just wondering continued strong performance in trust portfolios could you touch upon your positioning them in 2017?

Yes, I think will be pretty consistent with what our strategy has been over the past couple years, we ended the year and we still have kind of a larger portion of cash and then we normally have which we've been selectively putting to work more so on the - in our core equity a new core equity positions versus high yield fixed income market that spreads or are pretty narrow right now. So we feel pretty good about the portfolio we think there will be opportunity we're excited about the investment landscape over the next four years and so yes.

Look he is off to a great start. He's beingveryimmodest. If you had to dream up a portfolio that was a Trump portfolio. I don’t know he was going to win or something. The thing took off and it's still taking off so far this year. So we're looking really good.

Great. Thanks for that. I’ll hop back in the queue.

Thank you. And our next question comes from the line Chris McGinnis from Sidoti & Company. Your line is open.

Good morning. Thanks for taking my questions and congrats on the first phase and if you look on the second here. Just a follow-up on the acquisition side of the business of consolidation, you mentioned living longer in cremation is kind of maybe spots where sellers might be inclined maybe a little more so now to sell are you seeing a bigger opportunity in the marketplace and that's why you kind of did the reorg?

I mean I just explained at a minute ago. We repositioned so that we could have better explanations of who we are, when we get in front of people, but it's not like we just said 50 candidates show up on a lists, willing to sell their business, so we reorganized. That’s not it. We're much more strategic in that we're looking at 10 years. And we hear this from independents I've been around at different conferences been on the speaking circuit, which I won't do anymore because it didn't make a difference. We got no deals out of me going to conferences and speaking and but we've been up one on one and we've been having key industry owners come here to look under our covers. And frankly, what we see is the industry itself is struggling with revenue challenges. And I don't care who you talk about you know people are living longer that's not a secret and when I started the company 25 plus years ago everybody was talking about the baby boomers beginning to die the next year or two. Thank god that didn't happen and so we had to learn how to be great operating company and produce performance without the benefit of those demographic baby boomers dying and even with cremation mix changes, all the bad stuff you could have dreamt up has already happened. And when you look at our Company, you see we don't talk about that stuff and our performance is what it is. Now the independents talk about it. They talk about it and they're out of ideas about what to do about it. We have lots of ideas here. One way to think about it and one way we're explaining it to independents is Carriage is a laboratory, an experimental lab of ideas how to deal with these trends creatively and innovatively, but most of all looking at the people in your business their mindset and their skill. The industry is notorious and not dealing with the brutal honesty of people. We don't have that issue here and we think that is the solution, and we have lots of ideas and lots of people working on all the ideas all the time. It's not tied down, it's across the board and it's a brain trust and of the best. And it is what it is that's what being produced, that's why I call these names out. So we reorganized because we see the industry struggling while our Carriage is thriving, that’s why.

Great. I appreciate that. Second question just on the Roughly Right Scenario, the increase in the EBITDA margin at least in the model itself, is that driven more off SG&A leverage or benefits on the gross margin line and I appreciate it.

So it's really two parts. Continued improvement in our existing portfolio of businesses incrementally over the next five years along with like I said leveraging the consolidation platform, so that we had acquired EBITDA and revenue at a faster rate than increases in overhead and that's where the leverage comes in on the consolidation platform.

I would suggest a very comprehensive study of our Company and investment profile. That’s what I would suggest. I would study it.

Thank you very much. Have a good day. Appreciated.

You bet.

Thank you. [Operator Instructions] And your next question comes from the line of Alex Paris from Barrington Research. Your line is now open.

Good morning, everyone.

Good morning, Alex.

So I have a number of smaller questions to follow-up with Ben and Viki, but I’ll stick to the longer term here. Following on the last question, the next five years building on the success of the last five years you're looking for 7.5% growth in revenues that differs from the rolling four quarters because that includes acquisition. I'm just wondering do you have a target for organic revenue growth within that revenue number excluding acquisitions, what would it be?

Yes. I think as we've historically said the - in the long-term scenarios we put out publicly 60% to 70% of the topline growth comes from acquisition activity. So you're at 30% to 40% of any growth is going to come from organic and that's kind of how we look at it.

On that point Alex that is - 7.5% is the midpoint of what we consider a roughly right range over a full five years, it’s not a target and it's not an estimate, it's not a specific plan. It is a roughly right range midpoint now, if the market gets in a black swan mood and goes way south and our stock goes with it and the Company's getting better in producing more pretty cash flow. We won't do any growth other than grow our value per share about buying shares in. So we're not stuck like some companies seem to be with some specific scene. They have to do to get bigger. We want the thing to gets bigger to be the intrinsic value per share. How we get there might vary at different points because of our capital allocation decisions. We will always make capital allocation decisions with intrinsic share maximization in mind. That's how we look at the long-term and the short-term.

Makes sense, thank you. And then within an organic growth, in the last few years, you've opened up several new locations in particularly strong market. So I think we had opportunities from time-to-time to expand existing funeral homes. What your thoughts on that going forward do opportunities like that exist today where you have certain really strong markets, where you're at or near capacity opportunities to Greenfield do operations in existing territories?

Yes, we're opening two of those this year. Right two - and we expect both of those to show good organic growth. One is a completely new business and in a different sub market of a major city. And we always bet on the winning horses. Those are the managing partners that have shown that they are where we should allocate more capital if the opportunity is good enough and in this case it's good enough in both cases there is one more that might be something to seriously consider along those lines in one of the newer businesses where you acquired. So we were always looking for opportunities to the easiest investments to make or with the people locally, who know their markets and have ideas about where to deploy capital and high rates of return because they already have the brand. They have the community knowledge. You know where the demographics are moving, these are the easiest investment decisions to make.

Make sense well, thank you much. I appreciate that congratulations on the last five years and we're looking forward to more good things for me going forward and I'll follow-up with Ben and Viki on some of the smaller questions that I had?

Thanks, Alex.

Thank you, Alex.

Thank you. And I’m showing no further questions at this time. I would like to turn the call back Mel Payne, CEO for closing remarks.

Thank you very much. It's been quite a ride over the last five years. It's been the most fun I've ever had in my career. My I speak for my team as well and to see the excitement around the company and in our managing partners and our sales managers and our employees is really enjoyable and I thank you all.

Ladies and gentlemen, thank you for participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a great day.